-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MuR5Tl4VtcvYmaip4zcRAjhWtOxRYW/JF2IzX2Im9SbyIVcTJorL/JGknDoLKx37 Lqaor63VMN9Ezr3pPBzxuw== 0000906477-94-000023.txt : 19940826 0000906477-94-000023.hdr.sgml : 19940826 ACCESSION NUMBER: 0000906477-94-000023 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940708 ITEM INFORMATION: Other events FILED AS OF DATE: 19940822 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOWBOAT INC CENTRAL INDEX KEY: 0000089966 STANDARD INDUSTRIAL CLASSIFICATION: 7990 IRS NUMBER: 880090766 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07123 FILM NUMBER: 94545382 BUSINESS ADDRESS: STREET 1: 2800 FREMONT ST CITY: LAS VEGAS STATE: NV ZIP: 89104 BUSINESS PHONE: 7023859123 FORMER COMPANY: FORMER CONFORMED NAME: NEW HOTEL SHOWBOAT INC DATE OF NAME CHANGE: 19690122 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported)AUGUST 10, 1994 SHOWBOAT, INC. (Exact name of registrant as specified in charter) NEVADA 1-7123 88-0090766 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2800 FREMONT STREET, LAS VEGAS, NEVADA 89104 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code(702) 385-9123 NOT APPLICABLE (Former name or former address, if changed since last report) Item 5. OTHER EVENTS On August 10, 1994, Showboat, Inc., a Nevada corporation (the "Company"), completed its underwritten public offering of 13% Senior Subordinated Notes due 2009 (the "Notes") in the principal aggregate amount of $120,000,000 (the "Note Offering"). The Notes are unsecured general obligations of the Company, subordinated in right of payment to all senior indebtedness of the Company. The Notes are jointly and severally guaranteed on an unsecured, senior subordinated basis by Ocean Showboat, Inc., a New Jersey corporation and wholly owned subsidiary of the Company ("OSI"), Atlantic City Showboat, Inc., a New Jersey corporation and wholly owned subsidiary of OSI ("ACSI") and Showboat Operating Company, a Nevada corporation and wholly owned subsidiary of the Company ("SBOC"). Pursuant to the indenture for the Notes (the "Note Indenture") among the Company, OSI, ACSI, SBOC and Marine Midland Bank, as trustee, the Notes are not redeemable by the Company prior to August 1, 2001 unless otherwise required by the gaming laws of Nevada, New Jersey, or any other state or country in which the Company or one of its subsidiaries conducts gaming operations or unless otherwise permitted pursuant to the terms of the Note Indenture. On or after August 1, 2001, the Notes are redeemable at the option of the Company, in whole or in part, at the redemption price provided for in the Note Indenture, together with accrued and unpaid interest, if any, to the redemption date. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. The Note Indenture contains certain covenants restricting or limiting the ability of the Company and its subsidiaries to, among other things, (i) pay dividends or make other restricted payments, (ii) incur additional indebtedness and issue preferred stock, (iii) create liens, (iv) create dividend and other payment restrictions affecting any subsidiary of the Company, (v) enter into mergers, consolidations or make sales of all or substantially all assets, (vi) enter into transactions with affiliates and (vii) engage in other lines of business. The net proceeds from the Note Offering, after deducting underwriting discounts and commissions and estimated offering expenses, were approximately $116.5 million. The Company intends to apply such net proceeds to (i) invest approximately $100.0 million in Sydney Harbour Casino Holdings Limited ("SHCL"), which has been selected as the preferred applicant to build, manage and operate the sole full-service casino in New South Wales, Australia (the "Sydney Harbour Casino") for an approximately 27% equity interest in SHCL and (ii) renovate the Las Vegas Showboat in order to upgrade the facility to current building codes, replace the existing power plant facility and add up to a 900- space parking garage at a cost of approximately $15.0 million. The Company has placed $100.0 million of the net proceeds into an escrow account, which may only be used to fund the Company's investment in SHCL. In the event that (i) SHCL or a subsidiary of SHCL has not been selected as the sole licensee of the Sydney Harbour Casino; or (ii) the Company or a subsidiary of the Company has not entered into an agreement with SHCL for the management of the gaming operations of Sydney Harbour Casino for a term of not less than 12 years, within one year of the issuance of the Notes, then the Company will be obligated to make an offer to repurchase an amount of Notes and certain other indebtedness of the Company equal to the amount in the escrow account at a purchase price equal to 100.0% of the principal amount thereof, together with accrued and unpaid interest thereon. In the event that the Company determines not to pursue any portion of the Las Vegas Showboat renovation, the Company will use any remaining net proceeds for other expansion opportunities, capital improvements to existing properties or general corporate purposes. In connection with providing certain financial services the Company issued as of May 6, 1994, warrants to purchase 150,000 shares of common stock, $1.00 par value, of the Company, issuable at an exercise price per share equal to the lesser of (i) $15.50, or (ii) the exercise price of the Takedown Warrants (as defined in the Warrant Agreement) to DLJ Bridge Finance, Inc. DLJ Bridge Finance, Inc. is an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation, the underwriter of the Note Offering. EXHIBIT NO. DESCRIPTION 4.01 Indenture dated August 10, 1994, for the 13% Senior Subordinated Notes due 2009 by and among the Company, OSI, ACSI, SBOC, and Trustee; Guaranty in favor of the Trustee issued by OSI, ACSI and SBOC; Form of Note Certificate for the 13% Senior Subordinated Notes due 2009 99.01 Warrant Agreement dated as of May 6, 1994, by and between the Company and DLJ Bridge Finance, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SHOWBOAT, INC. (Registrant) Dated: August 22, 1994 By: /S/ Schneider Leann Schneider Vice President-Finance and Chief Financial Officer EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO. 4.01 Indenture dated August 10, 1994, for the 6 13% Senior Subordinated Notes due 2009 by and among the Company, OSI, ACSI, SBOC, and Trustee; Guaranty in favor of the Trustee issued by OSI, ACSI and SBOC; Form of Note Certificate for the 13% Senior Subordinated Notes due 2009 99.01 Warrant Agreement dated as of May 6, 1994, by and between the Company and DLJ Bridge Finance, Inc.
EX-4.01 2 INDENTURE EXECUTION COPY SHOWBOAT, INC. 13% SENIOR SUBORDINATED NOTES DUE 2009 INDENTURE Dated as of August 10, 1994 MARINE MIDLAND BANK Trustee CROSS-REFERENCE TABLE*
TRUST INDENTURE ACT SECTION INDENTURE SECTION 310 (a)(1)..............................7.10 (a)(2)...............................7.10 (a)(3) ..............................N.A. (a)(4)...............................N.A. (a)(5).............................. 7.10 (b) .................................7.10 (c) ............................... N.A. 311 (a) .............................. 7.11 (b) ............................... 7.11 (c) ............................... N.A. 312 (a)............................... 2.05 (b).................................12.03 (c) ............................... 12.03 313 (a) .............................. 7.06 (b)(1) ..............................7.06 (b)(2) ........................ 7.06;7.07 (c) ......................... 7.06;12.02 (d)................................. 7.06 314 (a) ..........................4.03;12.02 (b) ............................. N.A. (c)(1) ............................ 12.04 (c)(2) ............................ 12.04 (c)(3) ..............................N.A. (d)..................................N.A. (e) ...............................12.05 (f)..................................N.A. 315 (a).................................7.01 (b)............................7.05,12.02 (c) ................................7.01 (d)..................................7.01 (e)..................................6.11 316 (a)(last sentence) ............... 2.09 (a)(1)(A)............................6.05 (a)(1)(B) ...........................6.04 (a)(2) ..............................N.A. (b) ................................ 6.07 (c) ............................... 2.13 317 (a)(1) .............................6.08 (a)(2)...............................6.09 (b) .................................2.04 318 (a)............................... 12.01 (b)................................. N.A. (c).................................12.01
N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture. TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01.Definitions.......................1 Section 1.02.Other Definitions.................13 Section 1.03.Incorporation by Reference of Trust Indenture Act..................13 Section 1.04.Rules of Construction.............14 ARTICLE 2 THE NOTES Section 2.01.Form and Dating...................14 Section 2.02.Execution and Authentication......15 Section 2.03.Registrar and Paying Agent........15 Section 2.04.Paying Agent to Hold Money in Trust................................16 Section 2.05.Lists of Holders..................16 Section 2.06.Transfer and Exchange.............16 Section 2.07.Replacement Notes.................17 Section 2.08.Outstanding Notes.................17 Section 2.09.Treasury Notes....................17 Section 2.10.Temporary Notes...................18 Section 2.11.Cancellation......................18 Section 2.12.Defaulted Interest................18 Section 2.13.Record Date.......................19 Section 2.14.CUSIP Number......................19 ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE Section 3.01.Notices to Trustee................19 Section 3.02.Selection of Notes to Be Purchased or Redeemed................19 Section 3.03.Notice of Redemption..............20 Section 3.04.Effect of Notice of Redemption....21 Section 3.05.Deposit of Redemption or Purchase Price.......................21 Section 3.06.Notes Redeemed or Purchased in Part.................................21 Section 3.07.Optional Redemption...............21 Section 3.08.Mandatory Redemption..............22 Section 3.09.Offers to Purchase................23 ARTICLE 4 COVENANTS Section 4.01.Payment of Notes..................24 Section 4.02.Maintenance of Office or Agency...25 Section 4.03.Reports...........................25 Section 4.04.Compliance Certificate............25 Section 4.05.Taxes.............................26 Section 4.06.Stay, Extension and Usury Laws....26 Section 4.07.Restricted Payments...............26 Section 4.08.Dividend and Other Payment Restrictions Affecting Subsidiaries..29 Section 4.09.Incurrence of Indebtedness and Issuance of Disqualified Stock.......30 Section 4.10.Asset Sales.......................31 Section 4.11.Transactions with Affiliates......32 Section 4.12.Liens.............................34 Section 4.13.Additional Subsidiary Guarantees..34 Section 4.14.Redesignation of Non-Recourse Subsidiary...........................34 Section 4.15.Offer to Purchase Upon Change of Control..............................34 Section 4.16.Corporate Existence...............35 Section 4.17.Line of Business..................35 Section 4.18.No Senior Subordinated Indebtedness.........................35 Section 4.19.Escrow Agent......................35 ARTICLE 5 SUCCESSORS Section 5.01.Merger, Consolidation, or Sale of Assets............................36 Section 5.02.Successor Corporation Substituted..........................37 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01.Events of Default.................37 Section 6.02.Acceleration......................39 Section 6.03.Other Remedies....................40 Section 6.04.Waiver of Past Defaults...........40 Section 6.05.Control by Majority...............40 Section 6.06.Limitation on Suits...............40 Section 6.07.Rights of Holders of Notes to Receive Payment......................41 Section 6.08.Collection Suit by Trustee........41 Section 6.09.Trustee May File Proofs of Claim..41 Section 6.10.Priorities........................42 Section 6.11.Undertaking for Costs.............42 ARTICLE 7 TRUSTEE Section 7.01.Duties of Trustee.................42 Section 7.02.Rights of Trustee.................43 Section 7.03.Individual Rights of Trustee......44 Section 7.04.Trustee's Disclaimer..............44 Section 7.05.Notice of Defaults................44 Section 7.06.Reports by Trustee to Holders.....44 Section 7.07.Compensation and Indemnity........45 Section 7.08.Replacement of Trustee............46 Section 7.09.Successor Trustee by Merger, etc..47 Section 7.10.Eligibility; Disqualification.....47 Section 7.11.Preferential Collection of Claims Against Company...............47 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01.Option to Effect Legal Defeasance or Covenant Defeasance....47 Section 8.02.Legal Defeasance and Discharge....47 Section 8.03.Covenant Defeasance...............48 Section 8.04.Conditions to Legal or Covenant Defeasance...........................48 Section 8.05.Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions...........................49 Section 8.06.Repayment to Company..............50 Section 8.07.Reinstatement.....................50 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01.Without Consent of Holders of Notes................................51 Section 9.02.With Consent of Holders of Notes..51 Section 9.03.Compliance with Trust Indenture Act..................................53 Section 9.04.Revocation and Effect of Consents.............................53 Section 9.05.Notation on or Exchange of Notes..53 Section 9.06.Trustee to Sign Amendments, etc...53 ARTICLE 10 SUBSIDIARY GUARANTEES Section 10.01.Subsidiary Guarantee.............53 Section 10.02.Subordination....................55 Section 10.03.Liquidation; Dissolution; Bankruptcy...........................55 Section 10.04.Default on Senior Debt of the Guarantor............................55 Section 10.05.Acceleration of Notes............56 Section 10.06.When Distribution Must Be Paid Over.................................56 Section 10.07.Notice by a Guarantor............57 Section 10.08.Subrogation......................57 Section 10.09.Relative Rights..................57 Section 10.10.Subordination May Not Be Impaired By Any Guarantor............58 Section 10.11.Distribution or Notice to Representative.......................58 Section 10.12.Rights of Trustee and Paying Agent................................58 Section 10.13.Authorization to Effect Subordination........................58 Section 10.14.Limitation of Guarantor's Liability............................59 Section 10.15.Releases Following Sale of Assets...............................59 ARTICLE 11 SUBORDINATION Section 11.01.Subordination....................59 Section 11.02.Liquidation; Dissolution; Bankruptcy...........................59 Section 11.03.Default on Senior Debt...........60 Section 11.04.Acceleration of Notes............61 Section 11.05.When Distribution Must Be Paid Over.................................61 Section 11.06.Notice by Company................61 Section 11.07.Subrogation......................62 Section 11.08.Relative Rights..................62 Section 11.09.Subordination May Not Be Impaired By Company..................62 Section 11.10.Distribution or Notice to Representative.......................62 Section 11.11.Rights of Trustee and Paying Agent................................63 Section 11.12.Authorization to Effect Subordination........................63 ARTICLE 12 MISCELLANEOUS Section 12.01.Trust Indenture Act Controls.....63 Section 12.02.Notices..........................63 Section 12.03.Communication by Holders of Notes with Other Holders of Notes....64 Section 12.04.Certificate and Opinion as to Conditions Precedent.................65 Section 12.05.Statements Required in Certificate or Opinion...............65 Section 12.06.Rules by Trustee and Agents......65 Section 12.07.No Personal Liability of Directors, Officers, Employees and Stockholders.........................65 Section 12.08.Governing Law....................66 Section 12.09.No Adverse Interpretation of Other Agreements.....................66 Section 12.10.Successors.......................66 Section 12.11.Severability.....................66 Section 12.12.Counterpart Originals............66 Section 12.13.Table of Contents, Headings, etc..................................66
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF SUPPLEMENTAL INDENTURE Exhibit C FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO NOTE GUARANTEE Exhibit D FORM OF ESCROW AGREEMENT INDENTURE dated as of August 10, 1994 between Showboat, Inc. a Nevada corporation (the "Company"), Atlantic City Showboat, Inc., a New Jersey corporation ("ACSI"), Ocean Showboat, Inc., a New Jersey corporation ("OSI") and Showboat Operating Company, a Nevada corporation ("SBOC") and Marine Midland Bank, a New York corporation, as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 13% Senior Subordinated Notes due 2009: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "AFFILIATE" of any specified Person means any other individual, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government or other entity of any kind directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "ASSET SALE" means (i) the sale, lease, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of a sale and leaseback) of the Company or any Restricted Subsidiary (each referred to in this definition as a "disposition") or (ii) the issuance or sale of Equity Interests of any Restricted Subsidiary (whether in a single transaction or a series of related transactions) in each case, other than (a) a disposition of inventory in the ordinary course of business, (b) the disposition of all or substantially all of the assets of the Company in a manner permitted pursuant to the provisions described below under "Merger, Consolidation or Sale of Assets" and "Offer to Purchase Upon Change of Control," (c) any disposition that is a Restricted Payment or that is a dividend or distribution permitted under the covenant described below under "Restricted Payments" or any Investment that is not prohibited thereunder or any disposition of cash or Cash Equivalents, and (d) any single disposition, or related series of dispositions, of assets with an aggregate fair market value of less than $3.0 million. "ATLANTIC CITY SHOWBOAT" means (i) all of ACSI's interest in its hotel casino and related properties located at 801 Boardwalk, Atlantic City, New Jersey and any Project Expansion relating thereto and (ii) any contiguous property acquired by the Company or any of its Subsidiaries and any Project Expansion relating thereto. "AUSTRALIAN GAMING APPROVAL" means the official selection of SHCL (or a Subsidiary of SHCL) as the sole licensee or operator of a casino gaming operation in Sydney, Australia. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "BOARD OF DIRECTORS" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL STOCK" means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, including, without limitation, partnership interests. "CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months from the date of acquisition and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having a rating of P-2 or the equivalent thereof by Moody's Investors Service, Inc. or A-2 or the equivalent thereof by Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition. "CHANGE OF CONTROL" means the occurrence of any of the following events: (i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole; (ii) the liquidation or dissolution of the Company; (iii) the Company becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy vote, written notice or otherwise) the acquisition by any "person" or related group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision to either of the foregoing, including any "group" acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Company's Existing Management, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 30% or more of the total voting power entitled to vote in the election of the Board of Directors of the Company or such other Person surviving the transaction; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "COMPANY" means the party named as such in the recitals to this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person and its Restricted Subsidiaries for such period plus (a) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing Consolidated Net Income), plus (b) provision for taxes based on income or profits to the extent such provision for taxes was included in computing Consolidated Net Income, plus (c) consolidated interest expense of such Person for such period, whether paid or accrued (including amortization of original issue discount, non-cash interest payments, amortization of deferred financing charges and the interest component of capital lease obligations), to the extent such expense was deducted in computing Consolidated Net Income, plus (d) depreciation, amortization (including amortization of goodwill and other intangibles) and other non-cash charges (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period and excluding any such non-cash charge that is included in consolidated interest expense or consolidated tax expense) of such Person for such period to the extent such depreciation, amortization and other non-cash charges were deducted in computing Consolidated Net Income, in each case, on a consolidated basis for such Person and its Restricted Subsidiaries and determined in accordance with GAAP. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP, PROVIDED, that (i) the Net Income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting or that is a Non-Recourse Subsidiary shall be included only to the extent of the amount of dividends or distributions paid to the referent Person or a Wholly Owned Subsidiary, (ii) the Net Income of any Person that is a Subsidiary (other than a Subsidiary of which at least 80% of the Capital Stock having ordinary voting power for the election of directors or other governing body of such Subsidiary is owned by the referent Person directly or indirectly through one or more Subsidiaries) shall be included only to the extent of the amount of dividends or distributions paid to the referent Person, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries plus (ii) the respective amounts reported on such Person's most recent balance sheet with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges, all of the foregoing determined in accordance with GAAP. "CONTROLLED ENTITY" means any of (a) SHCL, (b) any Non-Recourse Subsidiary of the Company, including Showboat Star Partnership and Showboat Marina Partnership, provided that the Company or a Subsidiary of the Company owns at least 50% of the outstanding Capital Stock of such Non-Recourse Subsidiary, and which is designated by the Company as a Controlled Entity or (c) any Qualified Native American Gaming Project, including the Qualified Native American Project to be managed by Showboat Mohawk Investment Limited Partnership, provided that in each case: (i) each Subsidiary of the Company that owns, directly or indirectly (through one or more Subsidiaries), any Capital Stock of such Controlled Entity shall become a Guarantor of the Notes by executing a Subsidiary Guarantee; and (ii) such Controlled Entity is a Managed Entity or a Subsidiary of such Controlled Entity which is engaged in gaming activities is a Managed Entity. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "DESIGNATED SENIOR DEBT" means, with respect to any Person, (i) the First Mortgage Bonds and (ii) any other Senior Debt of such Person permitted under the Indenture the principal amount of which is $50.0 million or more or which is pari passu in right of payment to the First Mortgage Bonds and is secured by substantially the same collateral. "DISQUALIFIED STOCK" means any Capital Stock which, 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 redeemable at the option of the holder thereof, in whole or in part, on or prior to August 1, 2009. "DISTRIBUTION" means, for purposes of Articles 10 and 11, a distribution consisting of cash, securities or other property, by set-off or otherwise. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "ESCROW AGREEMENT" means the Escrow Agreement between the Company, the Trustee and National Westminster Bank NJ, as escrow agent, substantially in the form of Exhibit D hereto. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCESS NON-RECOURSE SUBSIDIARY CASH PROCEEDS" means 50% of all cash received by the Company or any Restricted Subsidiary from any Non-Recourse Subsidiary (other than cash that is or may be required to be returned or repaid to such Non-Recourse Subsidiary) in excess of $125 million in the aggregate. "EXISTING HOTEL CASINOS" means the Las Vegas Showboat and the Atlantic City Showboat. "EXISTING INDEBTEDNESS" means Indebtedness of the Company or its Restricted Subsidiaries (other than under the Working Capital Credit Agreement) in existence on the date of the Indenture, until such amounts are repaid, including without limitation, the First Mortgage Bonds. "EXISTING MANAGEMENT" means J. K. Houssels, members of his family and his estate. "FIRST MORTGAGE BOND INDENTURE" means the Indenture, dated as of May 18, 1993, among the Company, the Guarantors and IBJ Schroeder Bank & Trust Company, as amended, pursuant to which the First Mortgage Bonds were issued. "FIXED CHARGES" means, with respect to any Person for any period, the sum of (a) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, to the extent such expense was deducted in computing Consolidated Net Income (including amortization of original issue discount, non-cash interest payments and the interest component of capital leases but excluding amortization of deferred financing fees and excluding capitalized interest) and (b) the product of (i) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Subsidiary) on any series of preferred stock of such Person, times (ii) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis for such Person and its Restricted Subsidiaries and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period; PROVIDED that (a) in the event that the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable period, (b) in making such computation, the Fixed Charges of such Person attributable to interest on any Indebtedness bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation had been the applicable rate for the entire period, (c) in making such computation, the Fixed Charges of such Person attributable to interest on any Indebtedness under a revolving credit facility shall be computed on a pro forma basis based upon the average daily balance of such Indebtedness outstanding during the applicable period, (d) in the event that the Company or any of its Restricted Subsidiaries consummates a Material Acquisition or an Asset Sale subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such material acquisition or Asset Sale (including the incurrence of any Indebtedness in connection therewith), as if the same had occurred at the beginning of the applicable period and in the event that the Company or any of its Restricted Subsidiaries purchases any assets or property (including the real property on which the Atlantic City Showboat is situated) which was previously leased by the Company or any of its Restricted Subsidiaries subsequent to the commencement of the period for which the calculation of the Fixed Charge Coverage Ratio is being calculated but prior to the event for which the calculation of the Fixed Charge Coverage Ratio is made, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such purchase as if the same had occurred at the beginning of the applicable period. "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 or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect from time to time. "GAMING AUTHORITY" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States federal 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, including, without limitation, the Nevada Gaming Commission, the Nevada State Gaming Control Board, the City Council of the City of Las Vegas, and the New Jersey Casino Control Commission with authority to regulate any gaming operation (or proposed gaming operation) owned, managed or operated by the Company or any of its Subsidiaries. "GAMING RELATED BUSINESS" means the gaming business and other businesses necessary for, incident to, connected with or arising out of the gaming business (including developing and operating lodging facilities, sports or entertainment facilities, transportation services or other related activities or enterprises and any additions or improvements thereto). "GUARANTORS" means each of (i) SBOC, OSI and ACSI and (ii) any other Subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns until any of them shall be released from their obligations as a Guarantor pursuant to the terms of this Indenture. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates. "HOLDER" means a Person in whose name a Note is registered. "INDEBTEDNESS" of any Person means, without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all capitalized lease obligations of such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (i), (ii) and (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (but excluding any accrued distributions or dividends); (vi) all obligations existing at the time under Hedging Obligations, foreign currency hedges and similar agreements; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons and all dividends and distributions of other Persons for the payment of which, in either case, such Person is responsible or liable as obligor, guarantor or otherwise; and (viii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured. "INDENTURE" means this Indenture, as amended or supplemented from time to time. "INVESTMENT GRADE SECURITIES" means (i) Marketable Securities, (ii) any other debt securities or debt instruments with a rating of "BBB-" (the lowest investment grade rating by S&P) or higher by S&P, "Baa- 3" (the lowest investment grade rating by Moody's) or higher by Moody's or the equivalent of such rating by any other nationally recognized securities rating agency, and (iii) any fund investing exclusively in investments of the types described in clauses (i) and (ii) above. "INVESTMENT GUARANTEE" means, with respect to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness of another Person, including, without limitation, any Indebtedness directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, or any other obligation under which any contract which, in economic effect, is substantially equivalent to a guarantee, including, without limitation, any Indebtedness of a partnership in which such Person is a general partner or of a joint venture in which such Person is a joint venturer, and any Indebtedness in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such Indebtedness or any security therefor, or to provide funds for the payment or discharge of such Indebtedness (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain the solvency or any balance sheet or other financial condition of the obligor of such Indebtedness, or to make payment for any products, materials or supplies or for any transportation or services regardless of the non-delivery or nonfurnishing thereof, in any such case if the purpose or intent of such agreement is to provide assurance that such Indebtedness will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such Indebtedness will be protected against loss in respect thereof. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of loans, Investment Guarantees, advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "ISSUE DATE" means August 10, 1994, the date on which the Notes are first authenticated and issued. "LAS VEGAS SHOWBOAT" means (i) the Company's hotel casino and related properties at 2800 Fremont Street, Las Vegas, Nevada and any Project Expansion relating thereto and (ii) any contiguous property acquired by the Company or any of its Subsidiaries and any Project Expansion relating thereto. "LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "MANAGED ENTITY" mean either (i) any Person that is not under Third-Party Management, so long as such Person is not under Third-Party Management or (ii) a Person that the Company or any Subsidiary has a contract to manage the day-to-day gaming operations and affairs, so long as such contract remains in effect. "MANAGEMENT CONTRACT APPROVAL" means, with respect to the Sydney Harbour Casino, a binding agreement with SHCL that provides that the Company or a Person at least 80% of whose equity interests are owned by the Company or a wholly-owned Subsidiary (other than a Non-Recourse Subsidiary) will manage the gaming operations of the Sydney Harbour Casino for a period of not less than 12 years. "MARKETABLE SECURITIES" means (1) U.S. Government Obligations; (2) any certificate of deposit, maturing not more than 270 days after the date of acquisition, issued by, or time deposit of, a commercial banking institution that has combined capital and surplus of not less than $100,000,000 or its equivalent in foreign currency, whose debt is rated at the time as of which any investment is made, of "A" (or higher) according to S&P or Moody's, or if none of S&P or Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency; (3) commercial paper, maturing not more than 270 days after the date of acquisition, issued by a corporation (other than an Affiliate or Subsidiary of the Company) with a rating, at the time as of which any investment therein is made, of "A-1" (indicating that the degree of timely payment is strong) (or higher) according to S&P or "P-1" (having a superior capacity for punctual repayment of short-term promissory obligations) (or higher) according to Moody's, or if neither of S&P and Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities ratings agency; (4) any bankers acceptances or any money market deposit accounts, in each case, issued or offered by any commercial bank having capital and surplus in excess of $100,000,000 or its equivalent in foreign currency, whose debt is rated at the time as of which any investment there is made of "A" (an upper medium grade bond obligation) (or higher) according to S&P or Moody's, or if none of S&P or Moody's shall then exist, the equivalent of such rating by any other nationally recognized securities rating agency and (5) any fund investing exclusively in investments of the types described in clauses (1) through (4) above, and if such fund has at least $500,000,000 under management, including investments in repurchase obligations of the foregoing investments. "MATERIAL ACQUISITION" means any acquisition of a business, including the acquisition of operating commercial real estate, that has a fair market value in excess of $3.0 million and which the Company intends to continue to operate. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions), (ii) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss), and (iii) any loss on the retirement of the 11 3/8 % Mortgage-Backed Bonds Due 2002 of Ocean Showboat Finance Corporation (including write off of associated deferred financing charges). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including insurance proceeds), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness secured by a Lien on the asset or assets which are the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets. "NON-RECOURSE DEBT" means Indebtedness or that portion of Indebtedness (a) as to which none of the Company, the Guarantors and any of their respective Restricted Subsidiaries: (i) provides credit support (including any undertaking, agreement or instrument which would constitute Indebtedness); (ii) is directly or indirectly liable; and (iii) constitutes the lender; and (b) no default with respect to which (including any rights which the holders thereof may have to take enforcement action against a Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of the Company, the Guarantors or any of their respective Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "NON-RECOURSE SUBSIDIARY" means any Non- Recourse Subsidiary under the First Mortgage Bonds on the Issue Date and (i) a Subsidiary or (ii) any entity in which the Company or any of its Subsidiaries has an equity investment and pursuant to a contract or otherwise has the right to direct the day-to-day operation of such entity that, in the case of (i) or (ii), (a) at the time of its designation as a Non- Recourse Subsidiary has not acquired any assets (other than as specifically permitted by the "Restricted Payments" covenant), at any previous time, directly or indirectly from the Company, any of the Guarantors, or any of their respective Subsidiaries, (b) does not own, operate or manage any portion or any Existing Hotel Casino on the Issue Date, and (c) has no Indebtedness other than Non-Recourse Indebtedness, PROVIDED that at the time of such designation, after giving pro forma effect to such designation as if it occurred at the beginning of the applicable four-quarter period, the Company's Fixed Charge Coverage Ratio is not less than 70% of the Company's Fixed Charge Coverage Ratio immediately prior to such designation. "NOTES" means the 13% Senior Subordinated Notes due 2009, as amended or supplemented from time to time pursuant to the terms of this Indenture, that are issued under this Indenture (whether issued on or after the date of the Indenture). "OBLIGATIONS" means any principal, premium, interest (including post-petition interest), penalties, fees, indemnifications, reimbursements, damages and other monetary liabilities payable under the documentation governing any Indebtedness. "OFFICER" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, Assistant Secretary or any Vice President of such Person. "OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "PARI PASSU INDEBTEDNESS" means senior subordinated Indebtedness of the Company or its Restricted Subsidiaries permitted by the covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock," other than the Notes which is pari passu in right of payment with the Notes or the Subsidiary Guarantees. "PERMITTED INVESTMENTS" means (a) any Investments in the Company, in a Wholly Owned Restricted Subsidiary of the Company or in a Guarantor; (b) any Investments in Marketable Securities; and (c) Investments by the Company or any Subsidiary of the Company in any Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the Company or a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company or a Guarantor. "PERMITTED LIENS" means (a) Liens in favor of the Company; (b) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; PROVIDED, that such Liens were in existence prior to the contemplation of such merger or consolidation and less than one year prior to such Person becoming merged into or consolidated with the Company or any of its Subsidiaries; (c) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company; PROVIDED, that such Liens were in existence prior to the contemplation of such acquisition and less than one year prior to such acquisition; (d) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (e) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; PROVIDED, that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (f) ground leases in respect of the real property on which facilities owned or leased by the Company or any of its Subsidiaries are located; (g) Liens arising from UCC financing statements regarding property leased by the Company or any of its Subsidiaries; (h) 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; (i) Liens securing purchase money obligations incurred or assumed in connection with the purchase of real or Personal property to be used in the business of the Company or any of its Restricted Subsidiaries within 180 days of such incurrence or assumption and (j) Liens on the real property underlying the Atlantic City Showboat securing the Resorts Bonds PROVIDED that the obligations under the Resorts Bonds can be assumed under the "Incurrence of Indebtedness and Issuance of Disqualified Stock" covenant at the time that real property is acquired by the Company or any of its Subsidiaries. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PROJECT EXPANSION" means any addition, improvement, extension or capital repair to the Las Vegas Showboat or the Atlantic City Showboat or any contiguous or adjacent property, including the purchases of real estate or improvements thereon; but excluding separable furniture. "QUALIFIED NATIVE AMERICAN GAMING PROJECT" means any Gaming Related Business in the United States owned by a tribe or band of Native Americans in which the Company or a Subsidiary holds a management contract to manage or operate the day-to-day casino or gaming operations. "REFINANCING DISQUALIFIED STOCK" means Disqualified Stock issued in exchange for, or the proceeds of which are used, to extend, refinance, renew, replace, defease or refund Disqualified Stock permitted to be issued pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof or Disqualified Stock referred to in clause (c) of the second paragraph of Section 4.09 hereof. "REFINANCING INDEBTEDNESS" means Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace, defease or refund Indebtedness permitted to be incurred pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof or Indebtedness referred to in clause (vi) of the second paragraph of Section 4.09 hereof. "REGULAR QUARTERLY DIVIDEND" means the quarterly dividend determined by the Board of Directors of the Company in its reasonable judgment to be its regular and normal quarterly dividend and paid by the Company in accordance with the Company's prior business practices in an amount per share not to exceed $0.10 per fiscal year (or the equivalent thereof after giving effect to any stock splits, stock dividends or recapitalizations of the Common Stock after June 17, 1994). "REPRESENTATIVE" means, for purposes of Articles 10 and 11, the indenture trustee or other trustee, agent or representative for any Senior Indebtedness or, with respect to any Guarantor, for any Senior Indebtedness of such Guarantor. "RESORTS BONDS" means, the First Mortgage Non-Recourse Pass-Through Notes due June 30, 2000 of Resorts. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) 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 INVESTMENT" means an Investment other than a Permitted Investment. "RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not a Non-Recourse Subsidiary. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHCL" means Sydney Harbour Casino Holdings Limited, a New South Wales corporation. "SENIOR DEBT" means (a) with respect to the Company, (i) the Obligations of the Company with respect to the Working Capital Credit Agreement and First Mortgage Bonds and (ii) any other Indebtedness permitted to be incurred by the Company under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is pari passu with or subordinated in right of payment to the Notes, and (b) with respect to any Guarantor, (i) the Obligations of such Guarantor with respect to the Working Capital Credit Agreement and First Mortgage Bonds, (ii) any Guarantee by such Guarantor of any Senior Debt of the Company and (iii) any other Indebtedness permitted to be incurred by such Guarantor under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is pari passu with or subordinated in right of payment to the Subsidiary Guarantee of such Guarantor. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (v) any obligation of the Company or any Guarantor to, in respect of or imposed by any environmental, landfill, waste management or other regulatory or governmental agency, statute, law or court order, (w) any liability for federal, state, local or other taxes owed or owing by the Company or any Guarantor, (x) any Indebtedness of the Company or any Guarantor to any of the Company's Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture on or after the date of the Indenture. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof and (ii) any Non-Recourse Subsidiary. "SUBSIDIARY GUARANTEE" means each guarantee of the Notes by a Guarantor pursuant to Article 10 hereof. "SYDNEY HARBOUR CASINO" means all of SHCL's interest in its proposed casino and related properties located in Sydney, Australia. "TAX SHARING AGREEMENT" means the Tax Sharing Agreement, substantially in the form attached as an exhibit to the Indenture, as amended, supplemented or modified from time to time as permitted by the Indenture. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA, except as provided in Section 9.03 hereof. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "THIRD-PARTY MANAGEMENT" with respect to any Person means that the day-to-day affairs or business operations of such Person are managed by a third party that is not the Company or any of its Subsidiaries. "U.S. GOVERNMENT OBLIGATIONS" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) 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. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (b) the then outstanding principal amount of such Indebtedness; PROVIDED, HOWEVER, that with respect to any revolving Indebtedness, the foregoing calculation of Weighted Average Life to Maturity shall be determined based upon the total available commitments and the required reductions of commitments in lieu of the outstanding principal amount and the required payments of principal, respectively. "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. "WORKING CAPITAL CREDIT AGREEMENT" means that certain Credit Agreement, dated as of September 30, 1992, by and among ACSI and National Westminster Bank, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time.
SECTION 1.02. OTHER DEFINITIONS. Defined in Term Section "Affiliate Transaction" 4.11 "Benefitted Party" 10.01 "Commencement Date" 3.09 "Covenant Defeasance" 8.03 "Custodian" 4.13 "Event of Default" 6.01 "Excess Proceeds" 4.10 "Guarantor" 10.01 "Guarantor Payment Blockage Notice" 10.04 "incur" 4.09 "Legal Defeasance" 8.02 "Offer Amount" 3.09 "Offer Period" 3.09 "Paying Agent" 2.03 "Payment Blockage Notice" 11.03 "Payment Default" 6.01 "Purchase Date" 3.09 "Purchase Offer" 3.09 "Registrar" 2.03 "Restricted Payments" 4.07
SECTION 1.03.INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture, other than those provisions of the TIA that may be excluded herein, which provision shall be excluded to the extent specifically excluded in this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes and the Subsidiary Guarantees, if any; "INDENTURE SECURITY HOLDER" means a Holder of a Note; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the Notes means the Company, the Guarantors and any successor obligor upon the Notes or any Subsidiary Guarantee, as the case may be. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule or regulation promulgated by the SEC under the TIA have the meanings so assigned to them. SECTION 1.04.RULES OF CONSTRUCTION. Unless the context otherwise requires: (1)a term has the meaning assigned to it; (2)an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3)"or" is not exclusive; (4)words in the singular include the plural, and words in the plural include the singular; (5)provisions apply to successive events and transactions; and (6)references to sections of or rules under the Securities Act or the Exchange Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES SECTION 2.01.FORM AND DATING. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. The notation on each Note relating to any Subsidiary Guarantee shall be substantially in the form set forth on Exhibit C, which is part of this Indenture. The Notes may have notations, legends or endorsements approved as to form by the Company and required by law, stock exchange rule, agreements to which the Company or any Guarantor is subject, or usage. Each Note shall be dated the date of its authentication. The Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. SECTION 2.02.EXECUTION AND AUTHENTICATION. Two Officers of the Company shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. An Officer of each Guarantor shall sign any Subsidiary Guarantee for such Guarantor by manual or facsimile signature. If an Officer of the Company or any Guarantor whose signature is on a Note or a Subsidiary Guarantee, as the case may be, no longer holds that office at the time the Note is authenticated, the Note or the Subsidiary Guarantee, as the case may be, shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature of the Trustee shall be conclusive evidence that the Note has been authenticated under this Indenture. The form of Trustee's certificate of authentication to be borne by the Notes shall be substantially as set forth in Exhibit A hereto. The Trustee shall, upon a written order of the Company signed by two Officers of the Company, authenticate Notes for original issue up to an aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time shall not exceed the amount set forth in paragraph 4 of the Notes, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or any Guarantor or an Affiliate of the Company or any Guarantor. SECTION 2.03.REGISTRAR AND PAYING AGENT. The Company shall maintain (i) an office or agency where Notes may be presented for registration of trans- fer or for exchange (including any co-registrar, the "REGISTRAR") and (ii) an office or agency where Notes may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder of a Note. The Company shall notify the Trustee and the Trustee shall notify the Holders of the name and address of any Agent not a party to this Indenture. The Company or any Guarantor may act as Paying Agent, Registrar or co-registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall be subject to any obligations imposed by the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation and indemnity in accordance with Section 7.07 hereof. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes. SECTION 2.04.PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes, and shall notify the Trustee of any Default by the Company or any Guarantor in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Guarantor, if any) shall have no further liability for the money delivered to the Trustee. If the Company or any Guarantor acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceeding relating to the Company or any Guarantor, the Trustee shall serve as Paying Agent for the Notes and the Company shall forward to the Trustee all money for the benefit of the Holders. SECTION 2.05.LISTS OF HOLDERS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company and/or any Guarantor shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, including the aggregate principal amount of the Notes held by each thereof, and the Company and each Guarantor, if any, shall otherwise comply with TIA Section 312(a). SECTION 2.06.TRANSFER AND EXCHANGE. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other denominations, the Registrar shall register the trans- fer or make the exchange if its requirements for such transactions are met; PROVIDED, HOWEVER, that any Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by the Holder thereof or by his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall issue and the Trustee shall authenticate Notes at the Registrar's request, subject to such rules as the Trustee may reasonably require. Neither the Company nor the Registrar shall be required to (i) issue, register the transfer of or exchange Notes during a period beginning at the opening of business on a Business Day 15 days before the day of any selection of Notes for redemption or purchase under Sections 3.02 or 3.09 hereof or (ii) register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. No service charge shall be made to any Holder of a Note for any registration of transfer or exchange (except as otherwise expressly permitted herein), but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than such transfer tax or similar governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by the Company). Prior to due presentment to the Trustee for registration of the transfer of any Note, the Trustee, any Agent, the Company and any Guarantor may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of, premium, if any, and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Trustee, any Agent, the Company or any Guarantor shall be affected by notice to the contrary. SECTION 2.07.REPLACEMENT NOTES. If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) if the Trustee's requirements for replacements of Notes are met. If required by the Trustee, the Company or the Guarantors an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee, the Company and the Guarantors to protect the Company, the Guarantors, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. Each of the Company, the Guarantors and the Trustee may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and the Guarantors and shall be entitled to all of the benefits of this Indenture equally and ratably with all other Notes duly issued hereunder. SECTION 2.08.OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.08 as not outstanding. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. Subject to Section 2.09 hereof, a Note does not cease to be outstanding because the Company, a Subsidiary of the Company or an Affiliate of the Company holds the Note. SECTION 2.09.TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Guarantor, any of their respective Subsidiaries or any Affiliate of the Company or any Guarantor shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Responsible Officer knows to be so owned shall be so considered. Notwithstanding the foregoing, Notes that are to be acquired by the Company, any Guarantor, any Subsidiary of the Company or any Affiliate of the Company pursuant to an exchange offer, tender offer or other agreement shall not be deemed to be owned by the Company, such Guarantor, such Subsidiary of the Company or such Affiliate of the Company until legal title to such Notes passes to the Company, such Guarantor, such Subsidiary of the Company or such Affiliate of the Company as the case may be. With respect to any Notes beneficially owned by the Company or any of its Wholly Owned Subsidiaries (other than any Non-Recourse Subsidiary), any accrued interest due and payable on such Notes shall be deemed to have been paid by the Company to itself or to its Wholly Owned Subsidiary (other than any Non-Recourse Subsidiary) on the date on which such interest payment is due and the Company may deduct from the interest payment payable to the other Holders all accrued interest payments on such Notes; PROVIDED that (i) such Notes are registered in the name of the Company or such Wholly Owned Subsidiary at the close of business on the applicable record date and (ii) at least ten Business Days prior to the date on which such interest payment is to be made, the Company delivers to the Trustee an Officers' Certificate certifying that such Notes were registered in the name of the Company or such Wholly Owned Subsidiary at the close of business on the applicable record date. SECTION 2.10.TEMPORARY NOTES. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable). Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company and the Trustee consider appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee, upon receipt of the written order of the Company signed by two Officers of the Company, shall authenticate definitive Notes (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) in exchange for temporary Notes. Until such exchange, temporary Notes shall be entitled to the same rights, benefits and privileges as definitive Notes. SECTION 2.11.CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surren- dered to them for registration of transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act), unless the Company directs cancelled Notes to be returned to it. The Company may not issue new Notes to replace Notes that it has redeemed or paid or that have been delivered to the Trustee for cancellation. All cancelled Notes held by the Trustee shall be destroyed and certification of their destruction delivered to the Company, unless by a written order, signed by two Officers of the Company, the Company shall direct that cancelled Notes be returned to it. SECTION 2.12.DEFAULTED INTEREST. If the Company or any Guarantor defaults in a payment of interest on the Notes, the Company or such Guarantor (to the extent of their obligations under the Subsidiary Guarantees) shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the payment date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall fix or cause to be fixed each such special record date and payment date, and shall, promptly thereafter, notify the Trustee of any such date. At least 15 days before the special record date, the Company (or the Trustee, in the name of and at the expense of the Company) shall mail to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13.RECORD DATE. The record date for purposes of determining the identity of Holders entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture shall be determined as provided for in TIA Section 316(c). SECTION 2.14.CUSIP NUMBER. The Company in issuing the Notes may use a "CUSIP" number and, if it does so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; PROVIDED that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in the CUSIP number. ARTICLE 3 REDEMPTION AND OFFERS TO PURCHASE SECTION 3.01.NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. If the Company is required to make an offer to purchase Notes pursuant to the provisions of Sections 4.10, 4.15 or 4.19 it shall furnish to the Trustee, at least 30 days before the scheduled purchase date, an Officers' Certificate setting forth (i) the Section of this Indenture pursuant to which the offer to purchase shall occur, (ii) the offer's terms, (iii) the purchase price, (iv) the principal amount of the Notes that may be purchased, and (v) further setting forth a statement to the effect that (a) the Company or one of its Subsidiaries has made an Asset Sale and there are Excess Proceeds aggregating more than $10.0 million and the amount of such Excess Proceeds, (b) a Change of Control has occurred or (c) that Australian Gaming Approval and Management Contract Approval had not been obtained by the first anniversary of the Issue Date. SECTION 3.02.SELECTION OF NOTES TO BE PURCHASED OR REDEEMED. If less than all of the Notes are to be purchased in an Asset Sale Offer or redeemed at any time, the Trustee shall select the Notes to be purchased or redeemed among the applicable Holders in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis by lot or by such method as the Trustee considers fair and appropriate. In the event of partial redemption in the manner provided above, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. In the event that less than all of the Notes properly tendered in an Asset Sale Offer are to be purchased, the particular Notes to be purchased shall be selected promptly upon the expiration of such Asset Sale Offer. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial purchase or redemption, the principal amount thereof to be purchased or redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be purchased or redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be purchased or redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. In the event the Company is required to make an Asset Sale Offer pursuant to Sections 3.09 and 4.10 hereof and the amount of Excess Proceeds to be applied to such purchase would result in the purchase of a principal amount of Notes which is not evenly divisible by $1,000, the Trustee shall promptly refund to the Company the portion of such Excess Proceeds that is not necessary to purchase the immediately lesser principal amount of Notes that is so divisible. SECTION 3.03.NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a purchase or redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a)the redemption date; (b)the redemption price; (c)if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d)the name and address of the Paying Agent; (e)that Notes called for redemption must be surrendered to the Paying Agent to collect the redemp- tion price; (f)that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g)the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h)that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; PROVIDED, HOWEVER, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. SECTION 3.04.EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05.DEPOSIT OF REDEMPTION OR PURCHASE PRICE. On or prior to any redemption date or purchase date with respect to an offer to purchase the Notes required hereunder, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest on, all Notes to be redeemed or purchased. If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption, whether or not such Notes are presented for payment or on the Notes or the portions of Notes tendered on any offer to purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If a redemption or purchase date is a Legal Holiday, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such redemption date to such succeeding Business Day. If any Note called for redemption or tendered for purchase shall not be so paid upon surrender for redemption or such tender because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06.NOTES REDEEMED OR PURCHASED IN PART. Upon surrender of a Note that is redeemed or purchased in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. SECTION 3.07.OPTIONAL REDEMPTION. (a) Except as set forth in clause (b) of this Section 3.07, the Company shall not have the option to redeem the Notes pursuant to this Section 3.07 prior to August 1, 2001. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 1 of the years indicated below: PERCENTAGE YEAR ........................................2001 103.900% ........................................2002 102.600% ........................................2003 101.300% ........................................2004 and thereafter................................... 100.000%
(b)Notwithstanding any other provision hereof, if any Gaming Authority requires that a Holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable gaming law and such Holder or beneficial owner fails to apply for a license, qualification or a finding of suitability within 30 days after being requested to do so by the Gaming Authority (or such lesser period that may be required by such Gaming Authority), or if such Holder or such beneficial owner is not so licensed, qualified or found suitable, the Company shall have the right, at its option (i) to require such Holder or beneficial owner to dispose of such Holder's or beneficial owner's Notes within 30 days of receipt of such notice of such finding by the applicable Gaming Authority or such earlier date as may be ordered by such Gaming Authority or (ii) to call for the redemption of the Notes of such Holder or beneficial owner at the lesser of the principal amount thereof or the price at which such Holder or beneficial owner acquired the Notes, together with, in either case, accrued interest to the earlier of the date of redemption or such earlier date as may be required by such Gaming Authority or the date of the finding of unsuitability by such Gaming Authority, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority. Notwithstanding the foregoing, upon receipt of notice from a Gaming Authority that any Holder is disqualified or unsuitable, it shall be unlawful for any such disqualified or unsuitable Holder: (i) to receive any dividends or interest upon the Notes; (ii) to exercise, directly or through any trustee or nominee, any right conferred by the Notes; or (iii) to receive any remuneration in any form from the Company or its Subsidiaries for services rendered or otherwise. The Company shall notify the Trustee in writing of any such redemption as soon as practicable and the redemption price of each Note to be redeemed. The Trustee shall not be deemed to have knowledge of the existence of any disqualified Holder unless and until it receives written notice thereof from the Company. The Holder of Notes or beneficial owner applying for a license, qualification or a finding of suitability shall pay all costs of the licensure or investigation for such qualification or finding of suitability. The Company shall not be required to pay or reimburse any Holder of the Notes or beneficial owner who is required to apply for such license, qualification or finding of suitability for the costs of the licensure or investigation for such qualification or finding of suitability. Such expense shall be the obligation of such Holder or beneficial owner. (c)Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. SECTION 3.08.MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes prior to the maturity of the Notes (whether at final maturity or upon acceleration thereof). SECTION 3.09.OFFERS TO PURCHASE. (a)In the event that, pursuant to Sections 4.10, 4.15 or 4.19 hereof, the Company shall be required to commence an offer to all Holders to purchase some or all of the Notes (each, a "PURCHASE OFFER"), it shall follow the procedures specified in this Section 3.09. (b)The Purchase Offer shall commence on the date (the "COMMENCEMENT DATE") specified in Sections 4.10, 4.15 or 4.19 hereof, as the case may be, remain open for a period specified by the Company, which shall be in accordance with Sections 4.10, 4.15 or 4.19 hereof, as the case may be, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Sections 4.10, 4.15 or 4.19 hereof (the "OFFER AMOUNT") or, if less than the Offer Amount has been tendered, all Notes tendered in response to such Purchase Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to such Purchase Offer. Upon the commencement of a Purchase Offer, the Company shall send, by first class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to such Purchase Offer. The Purchase Offer shall be made to all Holders. The notice, which shall govern the terms of the Purchase Offer, shall state: (i)that the Purchase Offer is being made pursuant to Sections 4.10, 4.15 or 4.19 hereof, as the case may be, the Offer Period, and the expiration date of the Offer Period; (ii)the Offer Amount, the purchase price and the Purchase Date; (iii)that any Note not tendered and accepted for payment shall continue to accrue interest; (iv)that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Purchase Offer shall cease to accrue interest after the Purchase Date; (v)that Holders electing to have a Note purchased pursuant to any Purchase Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of the Offer Period; (vi)that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the close of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (vii) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Notes shall be selected for purchase pursuant to the terms of Section 3.02 hereof, and that Holders whose Notes were purchased only in part shall be issued new Notes (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) equal in principal amount to the unpurchased portion of the Notes surrendered; and (viii) (x) if such Purchase Offer was pursuant to Section 4.15, the circumstances and material facts regarding such Change of Control, including but not limited to, information with respect to pro forma and historical financial information after giving effect to such Change of Control, and information regarding the Person or Persons acquiring control, (y) if such Purchase Offer was pursuant to Section 4.10, the circumstances and material facts regarding the Asset Sale or Asset Sales giving rise to such Purchase Offer, including but not limited to, information with respect to pro forma and historical financial information if material operations of the Company or any Restricted Subsidiary were divested in such Asset Sale or Asset Sales and (z) if such Purchase Offer was pursuant to the terms of Section 4.19, the circumstances and material facts regarding the failure to obtain Australian Gaming Approval or Management Contract Approval and the then current plans, if any, of SHCL with respect to the Sydney Harbour Casino. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer Amount of Notes or portions thereof tendered pursuant to the Purchase Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors, if applicable) to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of such Purchase Offer on the Purchase Date. Other than as specifically provided in this Sec- tion 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof to the extent applicable. ARTICLE 4 COVENANTS SECTION 4.01.PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Other than pursuant to Section 3.05, principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Guarantor, holds as of Noon New York City time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. Such Paying Agent shall return to the Company no later than two days following the date of payment, any money (including accrued interest) that exceeds such amount of principal, premium, if any, and interest paid on the Notes. SECTION 4.02.MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company or the Guarantors in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03.REPORTS. Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall (i) furnish to the Trustee and to all Holders all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) file a copy of all such information with the SEC for public availability (unless the SEC will not accept such a filing) and file such information with the Trustee and make such information available to investors and securities analysts who request it in writing. The Company shall at all times comply with TIA Section 314(a). SECTION 4.04.COMPLIANCE CERTIFICATE. (a)The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company and each obligor on the Notes and this Indenture has kept, observed, performed and fulfilled its obligations under this Indenture (including with respect to any Restricted Payments made during such year, the basis upon which the calculations required by Section 4.07 were computed, which calculations may be based on the Company's latest available financial statements), and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company and each such obligor, has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company or such Guarantor, as the case may be, is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company or any obligor, as the case may be, is taking or proposes to take with respect thereto. (b)So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03 above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated the provisions contained in Sections 4.01, 4.05, 4.07, 4.09, 4.10, 4.17, 4.18 or 5.01 hereof or (to the extent such provisions relate to accounting matters), if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c)The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, within five Business Days upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05.TAXES. The Company shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders. SECTION 4.06.STAY, EXTENSION AND USURY LAWS. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.07.RESTRICTED PAYMENTS. (a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests other than dividends or distributions payable in Equity Interests (other than Disqualified Stock of the Company or such Restricted Subsidiary or dividends or distributions by a Restricted Subsidiary of the Company PROVIDED, that to the extent that a portion of such dividend or distribution is paid to a Holder other than the Company or a Restricted Subsidiary, such portion of such dividend or distribution is not greater than such Holder's pro rata aggregate common equity interest in such Restricted Subsidiary; (ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any Subsidiary or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Restricted Subsidiary of the Company); (iii) voluntarily purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is PARI PASSU with or subordinated to the Notes; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of such Restricted Payment: (1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (2) with respect to a Restricted Payment other than a Regular Quarterly Dividend or a Restricted Investment in a Subsidiary engaged in a Gaming Related Business, the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four- quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant entitled "Incurrence of Indebtedness and Issuance of Disqualified Stock"; and (3) such Restricted Payment, together with the aggregate of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (including Restricted Payments permitted by clauses (i) and (ii) of the next succeeding paragraph but excluding any Restricted Payments permitted by clauses (iii)-(ix) of the next succeeding paragraph), is less than the sum of (x) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from April 1, 1993 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, 100% of such deficit), plus (y) 100% of the aggregate net cash proceeds received by the Company from the issuance or sale of Equity Interests of the Company (other than Equity Interests sold to a Restricted Subsidiary of the Company and other than Disqualified Stock) from and including the date of the First Mortgage Bond Indenture (including any such Equity Interests issued concurrently with the issuance of the Notes), plus (z) Excess Non-Recourse Subsidiary Cash Proceeds received after the date of the First Mortgage Bond Indenture. (b)The foregoing provisions of this Section 4.07 shall not prohibit: (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Company in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of other Equity Interests of the Company (other than any Disqualified Stock); (iii) Investments by the Company or any Restricted Subsidiary in an amount not to exceed $75 million in the aggregate (measured as of the date such Investments were made) in any Non-Recourse Subsidiaries engaged in a Gaming Related Business; PROVIDED that any loan to, or Investment Guarantee in favor of, a Non-Recourse Subsidiary that is not a Restricted Subsidiary shall mature prior to the earlier of (x) the termination of the management contract pursuant to which the Company or any of its Restricted Subsidiaries manages such Non-Recourse Subsidiary and (y) the Company or any of its Restricted Subsidiaries otherwise ceasing to have control over the direction of the day-to-day operations of such Non-Recourse Subsidiary; (iv) Investments by the Company or any Restricted Subsidiary in any Non-Recourse Subsidiary engaged in a Gaming Related Business in an amount (measured as of the date such Investments were made) not to exceed in the aggregate 100% of all cash received by the Company or any Restricted Subsidiary from any Non-Recourse Subsidiary (other than cash which is or may be required to be repaid or returned to such Non-Recourse Subsidiary) up to $75.0 million in the aggregate and thereafter 50% of all cash received by the Company or any Restricted Subsidiary from any Non-Recourse Subsidiary (other than cash which is or may be required to be repaid or returned to such Non-Recourse Subsidiary); PROVIDED that the aggregate amount of Investments pursuant to this clause does not exceed $125.0 million in the aggregate; (v) the purchase, redemption, defeasance, or other acquisition or retirement for value of any PARI PASSU Indebtedness with the substantially concurrent purchase, redemption, defeasance, or other acquisition or retirement for value of the Notes (on a pro rata basis in relation to the outstanding aggregate principal amount of such Indebtedness and the aggregate principal amount of the outstanding Notes or which was on a basis offered pro rata to the Holders of the Notes); (vi) any voluntary purchase, redemption, defeasance or other acquisition or retirement for value of any PARI PASSU Indebtedness with the proceeds of the substantially concurrent issuance of Refinancing Indebtedness relating to such PARI PASSU Indebtedness in accordance with Section 4.09 hereof; (vii) dividends or distributions from a Non- Recourse Subsidiary or dividends or distributions from a Controlled Entity; (viii) any purchase, redemption, defeasance or other acquisition or retirement for value of any PARI PASSU Indebtedness (other than pursuant to clause (v) or (vi) above) up to $30.0 million in aggregate principal amount; and (ix) Investments by the Company or any Guarantor in Controlled Entities, so long as such Persons remain Controlled Entities, PROVIDED that (A) any Investment in SHCL exceeding $110.0 million shall be a Restricted Payment pursuant to the proceeding paragraph, (B) neither the Company nor any Guarantor shall invest any portion of the Las Vegas Showboat or the Atlantic City Showboat in, or contribute any such assets to, a Controlled Entity and (C) the Company would have at the time of such Investment and after giving effect thereto as if such Investment had been made at the beginning of the applicable four-quarter period, a Fixed Charge Coverage Ratio of at least 1.5 to 1 if such Investment is made prior to December 31, 1996 and at least 1.75 to 1 if such Investment is made thereafter; PROVIDED that, with respect to clauses (iii)-(ix) above, immediately after giving effect to the transaction contemplated therein, no Default or Event of Default would occur as a consequence thereof. (c)Any Investment in a Restricted Subsidiary that becomes a Non-Recourse Subsidiary or any Investment in a Wholly Owned Subsidiary that becomes a Non-Wholly Owned Restricted Subsidiary that is not a Guarantor shall become a Restricted Payment made on such date in the amount of the greater of (x) the book value of the Investment in such Subsidiary on such date and (y) the fair market value of the Investment in such Subsidiary on such date as determined (A) in good faith by the Board of Directors of the Company if such fair market value is determined to be less than $10.0 million and (B) by an investment banking firm of national standing with high yield underwriting expertise if such fair market value is determined to be in excess of $10.0 million. (d)Any Guarantee that is an Investment in a Non- Recourse Subsidiary shall cease to be deemed an Investment (and shall be deemed to have not been made) to the extent that the Guarantee is released without payment on the obligations guaranteed by the Company or any Restricted Subsidiary. (e)If any Controlled Entity ceases to be a Controlled Entity, then all Investments owned by the Company or any Restricted Subsidiary in such Controlled Entity shall be deemed to be a Restricted Investment made on such date, unless such former Controlled Entity purchases or redeems all such Investments for a price at least equal to the greater of the book value of such Investments on the date such entity ceases to be a Controlled Entity or the original amount of such Investments. SECTION 4.08.DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary, other than a Guarantor, to: (i) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (x) on its Capital Stock or (y) with respect to any other interest or participation in, or measured by, its profits; (ii) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries; (iii) make loans or advances to the Company or any of its Restricted Subsidiaries; or (iv) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reasons of: (1) Existing Indebtedness as in effect on the Issue Date; (2) the Working Capital Credit Agreement as in effect as of the Issue Date; (3) this Indenture and the Notes; (4) applicable law; (5) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that the Consolidated Cash Flow of such Person is not taken into account in determining whether such acquisition was permitted by the terms of this Indenture; (6) by reason of customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (7) with respect to clause (iii) above, purchase money obligations for property acquired in the ordinary course of business; or (8) permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Refinancing Indebtedness are substantially not more restrictive taken as a whole than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.09.INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK. (a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to or become responsible for (collectively, "INCUR"), any Indebtedness and the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company or any Restricted Subsidiary may incur Indebtedness if: (i) the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred is greater than 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional Indebtedness had been incurred at the beginning of such four-quarter period; and (ii) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof. (b)The foregoing limitations in this Section 4.09 shall not apply to: (i) the incurrence by the Company or any Restricted Subsidiary of up to $25.0 million in aggregate principal amount of Indebtedness outstanding at any one time, the proceeds of which are used to acquire or lease tangible assets; (ii) the incurrence by the Company or any Restricted Subsidiary of Indebtedness pursuant to the Working Capital Credit Agreement for working capital purposes in an aggregate principal amount not to exceed $25.0 million outstanding at any one time; PROVIDED that there shall be no such Indebtedness outstanding for a period of 14 consecutive days in each calendar year (other than in respect of standby letters of credit); (iii) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (iv) the incurrence by the Company of Indebtedness represented by the Notes (including any Notes issued after the date of this Indenture) and the incurrence by the Guarantors of the Subsidiary Guarantees; (v) Indebtedness incurred in connection with Hedging Obligations with respect to Indebtedness otherwise permitted under this paragraph; (vi) the incurrence by the Company of Indebtedness issued in exchange for, or the proceeds of which are used to extend, refinance, renew, replace or refund Indebtedness referred to in the first paragraph of this covenant or in clauses (i) through (v) above and clause (viii) below (the "Refinancing Indebtedness"); PROVIDED, HOWEVER, that: (1) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of Indebtedness so extended, refinanced, renewed, replaced, substituted or refunded (plus the amount of reasonable expenses incurred in connection therewith); (2) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of the Indebtedness being extended, refinanced, renewed, replaced or refunded; (3) the Refinancing Indebtedness shall be subordinated in right of payment to the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced or refunded; and (4) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (vii) Indebtedness between the Company and any Restricted Subsidiary; and (viii) the incurrence by the Company or any Restricted Subsidiary of Indebtedness that is not otherwise permitted under this covenant not to exceed an aggregate principal amount of $10.0 million outstanding at any one time under this clause (viii). (c)The Company shall not permit any of its Non- Recourse Subsidiaries to incur any Indebtedness or issue any shares of Disqualified Stock, other than Non- Recourse Indebtedness; PROVIDED, HOWEVER, that if any such Non-Recourse Subsidiary ceases to remain a Non- Recourse Subsidiary, such event shall be deemed to constitute the incurrence of the Indebtedness in such Subsidiary by a Restricted Subsidiary. SECTION 4.10.ASSET SALES. (a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist any Asset Sale unless: (i) no Default exists or is continuing immediately prior to and after giving effect to such Asset Sale; (ii) the Company (or such Restricted Subsidiary, as the case may be) receives consideration at the time of each such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or equity securities sold or otherwise disposed of; and (iii) at least 90% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash; PROVIDED, HOWEVER, that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash, shall be deemed to be cash (to the extent of the cash received) for purposes of this provision. (b)Within 360 days after any Asset Sale, the Company (or the Subsidiary, as the case may be) may apply the Net Proceeds from such Asset Sale, at its option, either: (i) to permanently reduce Senior Debt of the Company or (ii) to reinvest or cause to be reinvested the Net Proceeds from such Asset Sale in another asset or business in a Gaming Related Business. Pending the final application of any such Net Proceeds, the Company may temporarily reduce Senior Debt of the Company, including under the Working Capital Credit Agreement, or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from any Asset Sale that are not applied as provided in clauses (i) and (ii) of this paragraph constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an offer (an "ASSET SALE OFFER") to (a) all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds or (b) at the Company's option, make an Asset Sale Offer to redeem outstanding Notes and PARI PASSU Indebtedness, on a pro rata basis in relation to the outstanding aggregate principal amount of such Indebtedness and the aggregate principal amount of the Notes then outstanding, in each case at an offer 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 fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. To the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale Offer to purchase is less than the Excess Proceeds, the Company may use such deficiency for general corporate purposes. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee will select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds will be reset at zero. SECTION 4.11.TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or maintain any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE TRANSACTION"), unless: (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; (ii) with respect to any Affiliate Transaction with a Non-Recourse Subsidiary, which, either individually or when combined with all other Affiliate Transactions with Non-Recourse Subsidiaries during the past year, involves aggregate payments in excess of $1.0 million, a majority of the Board of Directors approves each such transaction; (iii) with respect to any Affiliate Transaction (other than with any Non-Recourse Subsidiary) involving aggregate payments in excess of $1.0 million, or with respect to any Affiliate Transaction with all Non-Recourse Subsidiaries, which, either individually or when combined with all other Affiliate Transactions with Non-Recourse Subsidiaries during the past year, involves aggregate payments in excess of $3.0 million, the Company delivers to the Trustee a resolution of the Board of Directors set forth in an Officers' Certificate certifying that any such Affiliate Transaction complies with clause (i) above and such Affiliate Transaction is approved by a majority of the Board of Directors; and (iv) with respect to any Affiliate Transaction involving aggregate payments in excess of $10.0 million, the Company delivers to the Trustee an opinion as to the fairness to the Company or such Restricted Subsidiary from a financial point of view issued by an investment banking firm of national standing with expertise in high yield debt offerings or in the case of a transaction involving the sale or transfer of assets subject to valuation, such as real estate, an appraisal by a nationally recognized appraisal firm; PROVIDED, HOWEVER, that the following shall not be deemed Affiliate Transactions: (1) any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Restricted Subsidiary; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) payments made pursuant to the Tax Sharing Agreement; (4) Restricted Payments, dividends, distributions or Investments permitted by the provisions of Section 4.07 hereof; (5) payments to an Affiliate of ACSI in respect of the leasing of land from such Affiliate; PROVIDED that the terms of clause (i) above are complied with; (6) payments by the Company pursuant to the indemnification agreement with its directors and officers in such director's or officer's capacity as a director or officer of the Company or a Restricted Subsidiary; (7) the engagement of Kummer Kaempfer Bonner & Renshaw (or any successor firm) for legal services in connection with the business of the Company or its Subsidiaries; PROVIDED that the payment for such services does not exceed $1.0 million in any fiscal year; (8) loans to employees of the Company or any Restricted Subsidiary, other than relocation loans, in an amount not to exceed $500,000 in aggregate principal amount outstanding at any one time; (9) loans to employees of the Company or any Restricted Subsidiary in connection with the relocation of such employee in an amount not to exceed $2.0 million in aggregate principal amount outstanding at any one time; (10) transactions pursuant to any management agreement or trademark license agreement between the Company and any of its Restricted Subsidiaries; (11) the engagement of International Insurance Services, Ltd. for insurance adjustment services in the ordinary course of business of the Company or its Subsidiaries, PROVIDED that the payments for such services do not exceed $1.0 million in any fiscal year; and (12) the lease of a gift shop in the Atlantic City Showboat to Ocean 11, a sole proprietorship, PROVIDED that the payments for such lease do not exceed $1.0 million in any fiscal year. SECTION 4.12.LIENS. Neither the Company nor any of its Restricted Subsidiaries shall directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except: (i) Liens securing Obligations under Senior Debt permitted to be incurred under this Indenture or (ii) Permitted Liens. SECTION 4.13.ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any of its Restricted Subsidiaries shall transfer or cause to be transferred, in one or a series of related transactions, any assets, businesses, divisions, real property or equipment having a book value in excess of $5.0 million to any Restricted Subsidiary that is not a Guarantor (other than any such transfer that is a Restricted Payment permitted by this Indenture), then such transferee or acquired Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of this Indenture. The Subsidiary Guarantee shall be released if the Company or its Restricted Subsidiaries cease to own any Equity Interests in such Restricted Subsidiary or if such Restricted Subsidiary becomes a Non-Recourse Subsidiary in accordance with the terms of this Indenture. SECTION 4.14.REDESIGNATION OF NON-RECOURSE SUBSIDIARY. The Board of Directors of the Company may redesignate any Non-Recourse Subsidiary as a Restricted Subsidiary, PROVIDED that at the time of such designation after giving pro forma effect to such designation as if it occurred at the beginning of the applicable four-quarter period, the Company could incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof and no Default or Event of Default then exists and is continuing. SECTION 4.15.OFFER TO PURCHASE UPON CHANGE OF CONTROL. (a)Upon the occurrence of a Change of Control, the Company shall make a Purchase Offer to each Holder to repurchase all or any part of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Such Purchase Offer shall be made in accordance with the procedures set forth in Article 3 hereof. The Company shall commence such Purchase Offer within 30 Business Days following any Change of Control by mailing the notice set forth in Section 3.09 to the Holders. The Offer Period shall be not less than 30 Business Days nor more than 40 Business Days from the date such notice is mailed, unless a longer period is required by law. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with such Purchase Offer. (b)Prior to making the Change of Control Payment, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the payment date for such Purchase Offer. SECTION 4.16.CORPORATE EXISTENCE. Subject to Article 5 and Article 10 hereof, as the case may be, the Company and each of the Guarantors shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company, any such Guarantor or any such Subsidiary, as the case may be, and (ii) the rights (charter and statutory), licenses and franchises of the Company, the Guarantors and their respective Subsidiaries; PROVIDED, HOWEVER, that the Company and the Guarantors shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of their respective Subsidiaries, if an officer of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company, the Guarantors and their Subsidiaries, taken as a whole. SECTION 4.17.LINE OF BUSINESS. The Company shall not, and shall not permit any Subsidiary to, engage in any business other than (i) those necessary for, incident to, connected with or arising out of the gaming business (including developing and operating hotel casinos, sports or entertainment facilities, transportation services or other related activities or enterprises and any additions or improvements thereto) and (ii) such other businesses as the Company or its Restricted Subsidiaries are engaged in on the Issue Date. The Company or its Subsidiaries may not enter into any gaming jurisdictions in which the Company or its Subsidiaries are not presently licensed if all of the Holders of Notes will be required to be licensed, PROVIDED that this sentence shall not prohibit the Company or any of its Subsidiaries from entering any jurisdiction that does not require the licensing or qualification of all of the Holders of the Notes, but reserves the discretionary right to license or qualify any Holder of Notes. SECTION 4.18.NO SENIOR SUBORDINATED INDEBTEDNESS. Notwithstanding the provisions of Section 4.09 hereof, (i) the Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Subsidiary Guarantee. SECTION 4.19.ESCROW AGENT The Company shall place $100 million of net proceeds from the offering of the Notes into an escrow account pursuant to the terms of the Escrow Agreement. The escrow agent for such escrow account may apply the amount in the escrow account only to fund the Company's investment in SHCL as provided for in the Escrow Agreement. In the event that Australian Gaming Approval or Management Contract Approval (as defined herein) has not occurred on or prior to the first anniversary of the Issue Date, the Company shall apply the amount in the escrow account to an offer to all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased with such amount 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 in accordance with the procedures set forth in Article 3 hereof. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount in the escrow account, the Trustee will select the Notes to be purchased on a pro rata basis. If the amount in the escrow account exceeds the amount necessary to purchase all Notes surrendered in such offer, the Company will be obligated to apply such excess amount to an offer to purchase the First Mortgage Bonds. Any funds remaining in the escrow account after the Company has fully funded its investment in SHCL or after the required offers to purchase shall be released to the Company and may be used for general corporate purposes. ARTICLE 5 SUCCESSORS SECTION 5.01.MERGER, CONSOLIDATION, OR SALE OF ASSETS. (a) The Company shall not consolidate or merge with or into (whether or not the Company is the surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another Person unless (i) the Company is the surviving Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Notes and this Indenture; (iii) immediately after such transaction no Default or Event of Default exists; (iv) the Company or any Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth (immediately after the transaction but prior to any purchase accounting adjustments resulting from the transaction) equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; (v) such transactions would not require any Holder of Notes to obtain a gaming license or be qualified under the laws of any applicable gaming jurisdiction, PROVIDED that such Holder would not have been required to obtain a gaming license or be qualified under the laws of any applicable gaming jurisdiction in the absence of such transactions; and (vi) such transactions would not result in the loss of any qualification or any material license of the Company or its Subsidiaries necessary for any Gaming Related Business then operated by the Company or its Subsidiaries. (b)(i) A Guarantor shall not consolidate with or merge with or into the Company unless the surviving corporation (if other than the Company) shall expressly assume by supplemental indenture complying with the requirements of this Indenture, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company and (ii) a Guarantor may consolidate with or merge with or into any other Guarantor. SECTION 5.02.SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company or the Company and its Subsidiaries on a consolidated basis in accordance with Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" or the "Guarantor," as the case may be, shall refer instead to the successor corporation and not to the Company or the Guarantor, as the case may be), and may exercise every right and power of the Company or the Guarantors, as the case may be, under this Indenture with the same effect as if such successor Person had been named as the Company or Guarantor, as the case may be, herein; PROVIDED, HOWEVER, that the predecessor Company and the predecessor Subsidiaries that are Guarantors shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01.EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company or the Guarantors default in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) and such default continues for a period of 30 days; (b) the Company or the Guarantors default in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of Article 10 or Article 11 hereof, as the case may be) when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise; (c) the Company or the Guarantors fail to comply with any of the provisions of Sections 4.07, 4.09, 4.10, 4.11, 4.12 or 4.15 hereof for 30 days after notice to the Company by the Trustee or to the Company and the Trustee from Holders of at least 25% in principal amount of the Notes then outstanding; (d) the Company or the Guarantors fail to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or to the Company and the Trustee from Holders of at least 25% in principal amount of the Notes then outstanding; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Guarantor or any of their respective Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any Guarantor or any of their respective Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, which default (i) is caused by a failure to pay when due principal or interest on such Indebtedness within the grace period provided in such Indebtedness (which failure continues beyond any applicable grace period) (a "PAYMENT DEFAULT") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated aggregates $10.0 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any Guarantor or any of their respective Restricted Subsidiaries and such judgments are not paid, discharged or stayed for a period of 60 days, PROVIDED that the aggregate of all such undischarged judgments exceeds $5.0 million; (g) except as permitted by this Indenture, any Subsidiary Guarantee with respect to the Notes shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor (or its successors or assigns), or any Person acting on behalf of such Guarantor (or its successors or assigns), shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Subsidiary Guarantee; (h) the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (1)commences a voluntary case, (2)consents to the entry of an order for relief against it in an involuntary case, (3) consents to the appointment of a Custodian of it or for all or substantially all of its property, (4)makes a general assignment for the benefit of its creditors, or (5) generally is not paying its debts as they become due; or (i) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1)is for relief against the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary in an involuntary case; (2)appoints a Custodian of the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary or for all or substantially all of the property of the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary; or (3) orders the liquidation of the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary ; and the order or decree remains unstayed and in effect for 60 consecutive days. SECTION 6.02.ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (h) or (i) of Section 6.01 hereof with respect to the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes Significant Subsidiary ) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in case an Event of Default specified in clause (h) or (i) of Section 6.01 hereof occurs with respect to the Company, any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any acceleration with respect to the Notes and its consequences. Holders may not enforce this Indenture or the Notes except as provided herein. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. If an Event of Default occurs by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to August 1, 2001 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to August 1, 2001 then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on August 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount that would otherwise be due but for the provisions of this sentence):
PERCENTAGE YEAR .....................................1994 113.000%.............................1995 111.700%.............................1996 110.400%.............................1997 109.100%.............................1998 107.800%.............................1999 106.500%.............................2000 105.200%
SECTION 6.03.OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04.Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on, the Notes (including in connection with an offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05.CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in Personal liability. SECTION 6.06.LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a)the Holder of a Note gives to the Trustee written notice of a continuing Event of Default or the Trustee receives such notice from the Company; (b)the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c)such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d)the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e)during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request; PROVIDED, HOWEVER, that such provision does not effect the right of a Holder of a Note to sue for enforcement of any overdue payment thereon. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07.RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with a Purchase Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08.COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and 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. SECTION 6.09.TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and 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 the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes, including the Guarantors- ), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to 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 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. 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 Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10.PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: FIRST: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof; SECOND: to the holders of Senior Debt of the Company or the Guarantors, as the case may be, to the extent required by Article 10 or Article 11 hereof, as applicable; THIRD: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and FOURTH: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11.UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01.DUTIES OF TRUSTEE. (a)If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b)Except during the continuance of an Event of Default: (i)the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii)in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c)The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i)this paragraph (c) does not limit the effect of paragraph (b) of this Section; (ii)the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii)the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d)Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e)No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f)The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g)The Trustee shall not be responsible for having knowledge of any defaults, except for monetary defaults, unless specifically notified in writing by the Holders. (h)The Trustee acknowledges that the Company and the Guarantors are subject to regulation by the New Jersey Casino Control Commission and the Trustee shall cooperate with requests from the New Jersey Casino Control Commission and New Jersey Division of Gaming Enforcement for information and documents relating to the Notes. SECTION 7.02.RIGHTS OF TRUSTEE. (a)The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b)Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. 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 from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c)The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d)The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e)Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f)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 unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.03.INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may other- wise deal with the Company, the Guarantors or any Affiliate of the Company or the Guarantors with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04.TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05.NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders. SECTION 7.06.REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07.COMPENSATION AND INDEMNITY. The Company and the Guarantors shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and the Guarantors shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company and the Guarantors shall indemnify the Trustee and its directors, officers and employees against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07), and defending itself against any claim (whether asserted by the Company, any Guarantor or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence, willful misconduct, bad faith or breach of its duties under this Indenture. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Unless the position of the Company or the Guarantors is prejudiced by such failure, failure by the Trustee to so notify the Company shall not relieve the Company and the Guarantors, of their obligations hereunder. The Company and the Guarantors shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel if the Trustee shall have been reasonably advised by such counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the Company and in the reasonable judgment of such counsel it is advisable for the Trustee to employ separate counsel, and the Company and the Guarantors shall pay the reasonable fees and expenses of such counsel. The Company and the Guarantors need not pay for any settlement made without their consent, which consent shall not be unreasonably withheld. The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's and the Guarantors', if any, payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08.REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a)the Trustee fails to comply with Section 7.10 hereof; (b)the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c)a Custodian or public officer takes charge of the Trustee or its property; or (d)the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, any Guarantor, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written accept- ance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's and the Guarantors', if any, obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09.SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee; PROVIDED such corporation shall be otherwise eligible and qualified under this Article. SECTION 7.10.ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). SECTION 7.11.PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01.OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate delivered to the Trustee, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. SECTION 8.02.LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, each of the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes and Subsidiary Guarantees on the date the conditions set forth below are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due, (b) the Company's and Guarantors' obligations with respect to such Notes under Article 2 (except those obligations set forth in Sections 2.08, 2.09 and 2.12 hereof) and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. SECTION 8.03.COVENANT DEFEASANCE. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, each of the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, and 4.19 and Articles 5, 10 and 11 hereof and the operation of the provisions contained in Subsections (e) and (f) of Article 6 with respect to the outstanding Notes and Subsidiary Guarantees on and after the date the conditions set forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Notes shall thereafter be deemed not "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 (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, 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 6.01 hereof, but, except as specified above, the remainder of this Indenture, such Notes and the Subsidiary Guarantees, if any, shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(h) hereof shall not constitute Events of Default. SECTION 8.04.CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, U.S. Governmental Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants as evidenced by a certificate delivered to the Trustee, to pay the principal of, premium, if any, and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of, premium, if any, or interest on the outstanding Notes; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit (or greater period of time in which any such deposit of trust funds may remain subject to Bankruptcy Law insofar as those apply to the deposit by the Company) or the Company provides an Opinion of Counsel to the effect that as of the effective date of such Opinion of Counsel, the deposited trust funds are not subject to any claim by any other creditor of the Company under any Bankruptcy Law as a preferential payment; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or the Guarantors, or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or the Guarantors; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an opinion of counsel to the effect that the Holders of Notes shall have a perfected security interest under applicable law in the U.S. Government Obligations so deposited. SECTION 8.05.DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 8.06 hereof, all money and non- callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non- callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof 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 Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.06.REPAYMENT TO COMPANY. 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, premium, if any, or interest, if any, on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest, if any, have become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note 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 the New York Times and The Wall Street Journal (national edition), 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 notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07.REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors', if any, obligations under this Indenture, the Notes and the Subsidiary Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; PROVIDED, HOWEVER, that, if the Company and the Guarantors make any payment of principal of, premium, if any, or interest, if any, on any Note following the reinstatement of its obligations, the Company and the Guarantors shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01.WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a)to cure any ambiguity, defect or inconsistency; (b)to provide for uncertificated Notes in addition to or in place of certificated Notes; (c)to provide for the assumption of the Company's or any Guarantor's obligations to the Holders in the case of a merger or consolidation pursuant to Article 5 or Article 10 hereof, as the case may be; (d)to make any change that would provide any additional rights or benefits to the Holders (including providing for Subsidiary Guarantees pursuant to Section 4.13 hereof) or that does not adversely affect the legal rights hereunder of any such Holder; or (e)to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02.WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including any Notes issued after the date of this Indenture) then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company or any Guarantor with any provision of this Indenture, the Note or the Subsidiary Guarantees, if any. However, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held at the time of such consent by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes (other than the provisions of Sections 4.10 or 4.15); (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required under Sections 4.10 or 4.15); (h) make any change to the subordination provisions of Section 10.02 or Article 11 hereof that adversely affects Holders; (i) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. The right of any Holder to participate in any consent required or sought pursuant to any provision of this Indenture (and the obligations of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirements that such Holder shall have been the Holder of record of any Notes with respect to which such consent is required to be sought as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of this Indenture. SECTION 9.03.COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04.REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05.NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes (accompanied by a notation of the Subsidiary Guarantee duly endorsed by the Guarantors) that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06.TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company and the Guarantors may not sign an amendment or supplemental Indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01) shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBSIDIARY GUARANTEES SECTION 10.01. SUBSIDIARY GUARANTEE. Each Guarantor hereby jointly and severally unconditionally guarantees (each such guarantee being a "SUBSIDIARY GUARANTEE") to each Holder of a Note authenticated and delivered by the Trustee irrespective of the validity or enforceability of this Indenture, the Notes or the Obligations of the Company under this Indenture or the Notes, that: (i) the principal of and interest on the Notes will be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal of and interest, if any, is lawful on the Notes and all other obligations of the Company to the Holders or the Trustee under this Indenture or the Notes will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Notes; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, they will be paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor will be obligated to pay the same whether or not such failure to pay has become an Event of Default which could cause acceleration pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. Each Guarantor hereby agrees that its Obligations with regard to this Subsidiary Guarantee shall be joint and several, unconditional, irrespective of the validity or enforceability of the Notes or the obligations of the Company under this Indenture, the absence of any action to enforce the same, the recovery of any judgment against the Company or any other obligor with respect to this Indenture, the Notes or the obligations of the Company under this Indenture or the Notes, any action to enforce the same or any other circumstances (other than complete performance) which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor further, to the extent permitted by law, waives and relinquishes all claims, rights and remedies accorded by applicable law to guarantors and agrees not to assert or take advantage of any such claims, rights or remedies, including but not limited to: (a) any right to require the Trustee, the Holders or the Company (each, a "BENEFITTED PARTY") to proceed against the Company or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any Benefitted Party's power before proceeding against such Guarantor; (b) the defense of the statute of limitations in any action hereunder or in any action for the collection of any Indebtedness or the performance of any obligation hereby guaranteed; (c) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person; (d) demand, protest and notice of any kind including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or Obligation or of any action or non-action on the part of such Guarantor, the Company, any Benefitted Party, any creditor of such Guarantor, the Company or on the part of any other Person whomsoever in connection with any Indebtedness or obligations hereby guaranteed; (e) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against such Guarantor for reimbursement; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (g) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code; or (h) any defense based on any borrowing or grant of a security interest under Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in its Subsidiary Guarantee and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian acting in relation to either the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, the applicable Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Section 6.02 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company or any other obligor on the Notes of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 6.02 hereof, those Obligations (whether or not due and payable) will forthwith become due and payable by such Guarantor for the purpose of this Subsidiary Guarantee. SECTION 10.02. SUBORDINATION. Each Guarantor, the Trustee, and each Holder by accepting a Note agrees, that the Obligations of such Guarantor hereunder shall be subordinated in right of payment to the prior irrevocable and indefeasible payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of all Senior Debt of such Guarantor and of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of any Guarantor in a liquidation or dissolution of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its property, in an assignment for the benefit of creditors or any marshalling of such Guarantor's assets and liabilities: (1) Holders of Senior Debt of such Guarantor shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt of such Guarantor (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt of such Guarantor) before the Trustee or any Holder shall be entitled to receive any payment from the Guarantor under or pursuant to this Subsidiary Guarantee with respect to the Notes; and (2) until all Obligations with respect to Senior Debt of such Guarantor (as provided in subsection (1) above) are paid in full, any distribution to which the Trustee or any Holder would be entitled but for this Article shall be made to holders of Senior Debt of such Guarantor (except that Holders may receive securities that are subordinated in right and priority of payment to at least the same extent as the Subsidiary Guarantee to (a) Senior Debt of such Guarantor and (b) any securities issued in exchange for Senior Debt of such Guarantor). SECTION 10.04. DEFAULT ON SENIOR DEBT OF THE GUARANTOR. No Guarantor shall make any payment or distribution to the Trustee or any Holder upon or in respect of its Subsidiary Guarantee or the Notes, or any obligation with respect thereto, and no Guarantor shall acquire or purchase from the Trustee or any Holder any Notes for cash or property (other than securities that are subordinated in right and priority of payment to at least the same extent as its Subsidiary Guarantee to (a) Senior Debt of such Guarantor and (b) any securities issued in exchange for Senior Debt of such Guarantor) until all principal and other obligations with respect to the Senior Debt of such Guarantor have been paid in full if: (i) a default in the payment when due, whether upon acceleration or otherwise, of any principal, premium, if any, or interest on Designated Senior Debt of such Guarantor occurs and is continuing beyond any applicable grace period; or (ii) any other default on Designated Senior Debt of such Guarantor occurs and is continuing and the Trustee receives a notice of the default from such Guarantor, or the holders of any such Designated Senior Debt of such Guarantor, stating that such Guarantor or holders are invoking a payment blockage under this Section 10.04(ii) (a "GUARANTOR PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. Each Guarantor may and shall resume payments on and distributions in respect of its Subsidiary Guarantee and all obligations with respect thereto, and may acquire obligations for value when: (1) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and (2) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which a Guarantor Payment Blockage Notice is received unless the maturity of such Designated Senior Debt of such Guarantor has been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 10.05. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, each Guarantor shall promptly notify the Representative of the holders of Senior Debt of such Guarantor of the acceleration. SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives from a Guarantor any payment of any Obligations with respect to the Notes or any other obligation guaranteed hereby at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by Section 10.03 or Section 10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt of such Guarantor (to the extent necessary to pay in full all such Senior Debt, whether or not due) as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of such Guarantor. If a distribution is made to the Trustee or any Holder that because of this Article 10 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Debt of such Guarantor as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of such Guarantor may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of such Guarantor remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of such Guarantor. With respect to the holders of Senior Debt of any Guarantor, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt of any such Guarantor shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of such Guarantor, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt of such Guarantor shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 10.07. NOTICE BY A GUARANTOR. Each Guarantor shall promptly notify the Trustee and the Paying Agent of any facts known to such Guarantor that would cause a payment of any Obligations with respect to the Notes or its Subsidiary Guarantee to violate this Article, but failure to give such notice shall not affect the subordination of its Subsidiary Guarantee or of the Notes to the Senior Debt of such Guarantor as provided in this Article. SECTION 10.08. SUBROGATION. With respect to any Guarantor, after all Senior Debt of such Guarantor is paid in full (whether or not due) and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Debt of such Guarantor to receive distributions applicable to Senior Debt of such Guarantor to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt of such Guarantor. A distribution made under this Article to holders of Senior Debt of such Guarantor that otherwise would have been made to Holders is not, as between such Guarantor and Holders, a payment by such Guarantor on the Senior Debt of such Guarantor. SECTION 10.09. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Debt of such Guarantor. Nothing in this Indenture shall: (1)impair, as between such Guarantor and the Holders, the obligation of such Guarantor, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2)affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Senior Debt of such Guarantor; or (3)prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Debt of such Guarantor set forth herein to receive distributions and payments otherwise payable to Holders. SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR. With respect to any Guarantor, no right of any holder of Senior Debt of such Guarantor to enforce the subordination of the Subsidiary Guarantee shall be impaired by any act or failure to act by such Guarantor or any Holder or by failure of such Guarantor or any Holder to comply with this Indenture. SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. With respect to any Guarantor, whenever a distribution is to be made or a notice given to holders of Senior Debt of such Guarantor, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets referred to in this Article 10, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Subsidiary Guarantee to violate this Article. Only a Guarantor, the Company, the holder of any Senior Debt of such Guarantor, or the Representative of holders of Senior Debt of such Guarantor may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. With respect to any Guarantor, the Trustee in its individual or any other capacity may hold Senior Debt of such Guarantor with the same rights it would have if it were not Trustee. SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding relative to any Guarantor referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Debt of each Guarantor are hereby authorized to file an appropriate claim for and on behalf of the Holders. SECTION 10.14. LIMITATION OF GUARANTOR'S LIABILITY. Each Guarantor and by its acceptance hereof, each beneficiary hereof, hereby confirm that it is its intention that the Subsidiary Guarantee by such Guarantor not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantees. To effectuate the foregoing intention, each such Person hereby irrevocably agrees that the obligation of such Guarantor under its Subsidiary Guarantee under this Article 10 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other (contingent or otherwise) liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 10, result in the obligations of such Guarantor in respect of such maximum amount not constituting a fraudulent conveyance. Each beneficiary under the Subsidiary Guarantees, by accepting the benefits hereof, confirms its intention that, in the event of a bankruptcy, reorganization or other similar proceeding of the Company or any Guarantor in which concurrent claims are made upon such Guarantor hereunder, to the extent such claims will not be fully satisfied, each such claimant with a valid claim against the Company shall be entitled to a ratable share of all payments by such Guarantor in respect of such concurrent claims. SECTION 10.15. RELEASES FOLLOWING SALE OF ASSETS. Upon (i) a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, (ii) a sale or other disposition of all of the capital stock of any Guarantor or (iii) a Restricted Subsidiary becoming an Unrestricted Subsidiary pursuant to the provisions of this Indenture, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) shall be released and relieved of its obligations under its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with Section 4.10 hereof. ARTICLE 11 SUBORDINATION SECTION 11.01. SUBORDINATION. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes shall be subordinated in right of payment to the prior irrevocable and indefeasible payment in full of all Obligations of every type whatsoever, contingent or otherwise due in respect of Senior Debt of the Company (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed). SECTION 11.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Debt of the Company shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt of the Company (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt of the Company) before the Holders shall be entitled to receive any payment with respect to the Notes; and (2) until all Obligations with respect to Senior Debt of the Company (as provided in subsection (1) above) are paid in full, any distribution to which Holders would be entitled but for this Article shall be made to holders of Senior Debt of the Company (except that Holders may receive securities that are subordinated in right and priority of payment to at least the same extent as the Notes to (a) Senior Debt of the Company and (b) any securities issued in exchange for any such Senior Debt of the Company). SECTION 11.03. DEFAULT ON SENIOR DEBT. The Company may not make any payment or distribution to the Trustee or any Holder upon or in respect of the Notes, or any Obligation with respect thereto, and may not acquire or purchase from the Trustee or any Holder any Notes for cash or property (other than securities that are subordinated in right and priority of payment to at least the same extent as the Notes to (a) Senior Debt of the Company and (b) any securities issued in exchange for Senior Debt of the Company) until all principal and other Obligations with respect to the Senior Debt of the Company have been paid in full if: (i) a default in the payment when due, whether upon acceleration or otherwise, of any principal, premium, if any, or interest on Designated Senior Debt of the Company occurs and is continuing beyond any applicable grace period; or (ii) any other default on Designated Senior Debt of the Company occurs and is continuing and the Trustee receives a notice of the default from the Company, or the holders of any such Designated Senior Debt of the Company, stating that it is or such holders are invoking a payment blockage under this Section 11.03(ii) (a "PAYMENT BLOCKAGE NOTICE"). If the Trustee receives any such notice, a subsequent notice received within 365 days thereafter shall not be effective for purposes of this Section. The Company may and shall resume payments on and distributions in respect of the Notes, and all Obligations with respect thereto, and may acquire them when: (1) in the case of a payment default as described in (i) above, upon the date on which such default is cured or waived, and (2) in the case of a nonpayment default as described in (ii) above, on the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless the maturity of any such Designated Senior Debt of the Company has been accelerated, and this Article otherwise permits the payment at the time of such payment. SECTION 11.04. ACCELERATION OF NOTES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify the Representative of the holders of Senior Debt of the Company of the acceleration. SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder has actual knowledge that such payment is prohibited by Section 11.02 or Section 11.03 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt of the Company (to the extent necessary to pay in full all such Senior Debt, whether or not due) as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Company. If a distribution is made to the Trustee or any Holder that because of this Article 11 should not have been made to it at a time when the Trustee or such Holder has actual knowledge that such distribution should not have been made to it, the Trustee or such Holder who receives the distribution shall hold it in trust for the benefit of, and, upon written request, pay it over to, the holders of Senior Debt of the Company as their interests may appear, or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt of the Company may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt of the Company remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt of the Company. With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Debt of the Company shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt of the Company, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt of the Company shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. SECTION 11.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt of the Company as provided in this Article. SECTION 11.07. SUBROGATION. After all Senior Debt of the Company is paid in full (whether or not due) and until the Notes are paid in full, Holders shall, without duplication, be subrogated to the rights of holders of Senior Debt of the Company to receive distributions applicable to Senior Debt of the Company to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt of the Company. A distribution made under this Article to holders of Senior Debt of the Company that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on Senior Debt of the Company. SECTION 11.08. RELATIVE RIGHTS. This Article defines the relative rights of Holders and holders of Senior Debt of the Company. Nothing in this Indenture shall: (1)impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2)affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt of the Company; or (3)prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Debt of the Company set forth herein to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt of the Company to enforce the subordination of the Indebtedness with respect to the Notes shall be impaired by any act or failure to act by the Company or any Holder or by failure of the Company or any Holder to comply with this Indenture. SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of Senior Debt of the Company, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets referred to in this Article 11, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company, the holder of any Senior Debt of the Company, or the Representative of holders of Senior Debt of the Company may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt of the Company with the same rights it would have if it were not Trustee. SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the holders (or their Representative) of Senior Debt of the Company are hereby authorized to file an appropriate claim for and on behalf of the Holders. ARTICLE 12 MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, quali- fies or conflicts with the duties imposed by TIA Section318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, the Guarantors or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company or any Guarantor: Showboat, Inc. 2800 Fremont Street Las Vegas, Nevada 89104 Telecopier No.: (702) 385-9678 Attention: Chief Financial Officer With a copy to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Pkwy Las Vegas, Nevada 89109 Telecopier No.: (702) 796-7181 Attention: John N. Brewer If to the Trustee: Marine Midland Bank 140 Broadway New York, New York 10005-1180 Telecopier No.: (212) 658-6425 Attention: Corporate Trust Department The Company, the Guarantors or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if Personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company or any Guarantor mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company or the Guarantors to the Trustee to take any action under this Indenture, the Company or the Guarantors shall furnish to the Trustee: (a)an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, pro- vided for in this Indenture relating to the proposed action have been satisfied; and (b)an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a)a statement that the Person making such certi- ficate or opinion has read such covenant or condition; (b)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; (c)a statement that, in the opinion of such Person, he or she 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 satisfied; and (d)a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied; PROVIDED, HOWEVER, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of Public Officials. SECTION 12.06.RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, or any successor Person as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note and the Subsidiary Guarantees, if any, waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF ANY. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidi- aries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company and the Guarantors in this Indenture and the Notes and the Subsidiary Guarantees, as the case may be, shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 12.11. SEVERABILITY. In case any provision in this Indenture, in the Notes or in the Subsidiary Guarantees, if any, 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 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] SIGNATURES Dated as of August 10, 1994 SHOWBOAT, INC. By: /s/ J. Kell Houssels, III Name: J. Kell Houssels, III Title: President and Chief Executive Officer Attest: /s/ John N. Brewer (SEAL) Dated as of August 10, 1994 MARINE MIDLAND BANK, TRUSTEE By: /s/ Carmela Ehret Name: Carmela Ehret Title: Vice President Attest: /s/ Eillen M. Hughes (SEAL) Guarantors: Dated as of August 10, 1994 OCEAN SHOWBOAT, INC. By: /s/ Frank A. Modica Name: Frank A. Modica Title: President and Chief Executive Officer Attest: /s/John N. Brewer(SEAL) Dated as of August 10, 1994 ATLANTIC CITY SHOWBOAT, INC. By: /s/ Mark J. Miller Name: Mark J. Miller Title: President and Chief Executive Officer Attest: /s/ John N. Brewer(SEAL) Dated as of August 10, 1994 SHOWBOAT OPERATING COMPANY By: /s/ Frank A. Modica Name: Frank A. Modica Title: President and Chief Executive Officer Attest: /s/ John N. Brewer(SEAL) Exhibit A (Face of Note) 13% Senior Subordinated Note due 2009 No. $__________ SHOWBOAT, INC., or any successor thereto, promises to pay to or registered assigns, the principal sum of Dollars on August 1, 2009. Interest Payment Dates: February 1 and August 1 Record Dates: January 15 and July 15 Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, Showboat, Inc. has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. Dated: _______________ __, _____ Trustee's Certificate of Authentication This is one of the 13% Senior Subordinated Notes due August 1, 2009 referred to in the within-mentioned Indenture: Marine Midland Bank, Showboat, Inc. as Trustee Chairman of the Board Authorized Signature Secretary A-1 (Back of Security) SHOWBOAT, INC. 13% SENIOR SUBORDINATED NOTE DUE AUGUST 1, 2009 Capitalized terms used herein have the meanings assigned to them in the Indenture (as defined below) unless otherwise indicated. 1. INTEREST. Showboat, Inc., a Nevada corporation (or any successor thereto as provided in the Indenture, the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below. The Company shall pay interest on the principal amount of this Note at the rate per annum of 13%. The Company will pay interest semi-annually on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. To the extent lawful, the Company shall pay interest on overdue principal (including post-petition interest in any proceeding under any Bankruptcy Law) at the rate of 1% per annum in excess of the then applicable interest rate on the Notes; it shall pay interest, (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) at the same rate to the extent lawful. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. The Holder hereof must surrender this Note to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. The Company, however, may pay principal, premium, if any, and interest by check payable in such money. It may mail an interest check to a Holder's registered address. 3. PAYING AGENT AND REGISTRAR. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-registrar without notice to any Holder. The Company or any Guarantor may act in any such capacity. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of August 10, 1994 (as it may be amended from time to time, the "Indenture") between the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, certain of which are summarized herein, and Holders are referred to the Indenture and such act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. The Notes are unsecured general obliga- tions of the Company limited to $150,000,000 in aggregate principal amount, of which $120,000,000 in principal amount of Notes will be issued on the Issue Date, and up to an additional $30,000,000 in principal amount of Notes may be issued from time to time by the Company. Regardless of the time of issuance, the Notes will constitute a single series or class of securities for all purposes under the Indenture, including in connection with any vote or consent. 5. OPTIONAL REDEMPTION. Except as set forth below, the Company shall not have the option to redeem the Notes pursuant to Section 3.07 of the Indenture prior to August 1, 2001. Thereafter, the Company shall have the option to redeem the Notes, in whole or in part, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the 12 month period beginning on August 1 of the years indicated below: YEAR PERCENTAGE 2001 103.900% 2002 102.600% 2003 101.300% 2004 and thereafter 100.000%
6. MANDATORY REDEMPTION. The Company shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REDEMPTION OR REPURCHASE AT OPTION OF HOLDER. Under certain circumstances, as provided in the Indenture, the Company may be required to make an offer to purchase all or a portion of the Notes. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its address of record. Notes may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. 9. SUBORDINATION. The Notes are subordinated to Senior Debt (as defined in the Indenture) (whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed) and all Obligations (as defined in the Indenture) with respect thereto. To the extent provided in the Indenture, Senior Debt must be paid before the Notes may be paid. The Company agrees, and each Holder by accepting a Note agrees, to the subordination and authorizes the Trustee to give it effect. 10. TRANSFER REQUIRED BY THE GAMING AUTHORITIES. Notwithstanding the foregoing, each Holder, by accepting a Note, agrees that it any Gaming Authority requires that the Holder or beneficial owner of a Note must be licensed, qualified, or found suitable under the Gaming Control Act or other applicable laws, and such Holder or beneficial owner fails to apply for a license, qualification, or finding of suitable within 30 days after being requested to do so by the Gaming Authority, or if such Holder or beneficial owner is not so license, qualified or found suitable, the Company shall have the right, at its option, (i) to require such Holder or beneficial owner to dispose of such Holder's or beneficial owner's Notes within 30 days of receipt of such notice of such finding by the applicable Gaming Authority, or such earlier date as may be ordered by such Gaming Authority, or (ii) to call for the redemption of the Notes of such Holder or beneficial owner at the lesser of the principal amount thereof, or the price at which such Holder beneficial owner acquired the Notes, together with, in either case accrued interest to the earlier of the date of redemption of the date of the finding of unsuitability or disqualification by such Gaming Authority, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority, Commencing on the date such Gaming Authority serves notice upon the Company that any Holder or beneficial owner is unsuitable or disqualified, it shall be unlawful for any such unsuitable or disqualified Holder or beneficial owner: (i) to receive any dividends or interest upon this Note; (ii) to exercise, directly or through any trustee or nominee, any right conferred by this Note; or (iii) to receive any remuneration in any form from the Company for services rendered or otherwise. The Company shall notify the Trustee in writing of any such redemption or finding or unsuitability or disqualification as soon as practicable, and the Trustee shall rely on such notice until it receives instructions from the Company to the contrary. The Holder or beneficial owner applying for a license, qualification or a finding of suitability must pay all costs of the licensure or investigation for such finding of suitability or qualification. 11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Note or portion of a Note se- lected for redemption. Also, it need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed, during the period between a record date and the corresponding Interest Payment Date. 12. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent, the Company and the Guarantors may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of and interest on this Note and for all other purposes whatsoever, whether or not this Note is overdue, and neither the Trustee, any Agent, the Company nor any Guarantor shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 13. UNCLAIMED MONEY. If the money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money back to the Company at its written request. After that, Holders of the Notes entitled to the money must look to the Company for payment unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 14. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or the Notes may be amended with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes) however, without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held at the time of such consent by a non-consenting Holder): (a) reduce the principal amount of the Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; (g) waive a redemption payment with respect to any Note; (h) make any change to the subordination provisions of Section 10.02 or Article 11 of the Indenture that adversely affects Holders; (i) make any change in Section 6.07 of the Indenture or in the foregoing amendment and waiver provisions. The right of any Holder to participate in any consent required or sought pursuant to any provision of the Indenture (and the obligations of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirements that such Holder shall have been the Holder of record of any Notes with respect to which such consent is required to be sought as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of the Indenture. Without the consent of any Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for assumption of the Company's obligations to Holders in the case of a merger or consolidation or to make any change that would provide any additional rights or benefits to the Holders (including providing for Subsidiary Guarantees pursuant to Section 4.13 of the Indenture) or that does not adversely affect the rights of any Holder under the Indenture or to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 15. DEFAULTS AND REMEDIES. Events of Default include (as more fully described, and subject to, the terms and conditions of the Indenture): default for 30 days in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of the Indenture) by the Company or the Guarantors; default in payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture) by the Company or the Guarantors; failure by the Company or the Guarantors for 30 days after notice to comply with Sections 4.07, 4.09, 4.10, 4.11, 4.12 or 4.15 of the Indenture; failure by the Company or the Guarantors for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Guarantor or any of their respective Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any Guarantor or any of their respective Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; failure by the Company or any Guarantor or any of their respective Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations or shall fail to comply with any obligations under its Subsidiary Guarantee; and certain events of bankruptcy or insolvency with respect to the Company, any Guarantor or any of their respective Restricted Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any of its Restricted Subsidiaries or any Guarantor which individually or as a group constitutes a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Company must furnish an annual compliance certificate to the Trustee. 16. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of Capital Stock, merge or consolidate with or into any Person or sell, lease, transfer, convey or otherwise dispose of all or substantially all of its properties or assets, and engage in certain transactions with Affiliates. The limitations are subject to a number of important qualifications and exceptions. 17. GUARANTEES. Payment of principal and interest (including interest on overdue principal and overdue interest, if lawful) on the Notes is unconditionally guaranteed by the Guarantors pursuant to Article 10 of the Indenture. 18. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company, any Guarantor or their respective Affiliates, and may otherwise deal with the Company, any Guarantor or their respective Affiliates, as if it were not Trustee. 19. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder, as such, of the Company, any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Subsidiary Guarantees or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note and the Subsidiary Guarantees, if any, waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 20. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 21. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 23. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES, IF ANY. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Request may be made to: Showboat, Inc. 2800 Fremont Street Las Vegas, Nevada 89104 Telecopier No.: (702) 385-9678 Attention: Chief Financial Officer A-2 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to _________________________________________________________________ (Insert assignee's social security or tax identification no.) _______________________________________________________________ ___________________________________________________________________ __________________________________________________________________ ____________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint______________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ______________________ Your Signature:_________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee: A-3 Option of Holder to Elect Purchase If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: | | Section 4.10 | | Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ Date:___________________ Your Signature:_____________________ (Sign exactly as your name appears on the Note) Tax Identification No.:________ Signature Guarantee. EXHIBIT B Form of Supplemental Indenture to Be Delivered by Guarantors Supplemental Indenture (this "SUPPLEMENTAL INDENTURE"), dated as of ________________, between __________________ (the "GUARANTOR"), a subsidiary of Showboat, Inc. (or its successor), a Nevada corporation (the "COMPANY"), and Marine Midland Bank, a New York corporation, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, Showboat, Inc., a Nevada corporation has heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"), dated as of August 10, 1994, providing for the issuance of an aggregate principal amount of $150,000,000 of 13% Senior Subordinated Notes due 2009 (the "NOTES"); WHEREAS, Section 4.13 of the Indenture provides that under certain circumstances the Company is required to cause the Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the Guarantor shall unconditionally guarantee all of the Company's obligations under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein; and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guarantor hereby agrees that its obligations to the Holder and the Trustee pursuant to this Subsidiary Guarantee shall be as expressly set forth in Article 10 of the Indenture and in such other provisions of the Indenture as are applicable to Guarantors, and reference is made to the Indenture for the precise terms of this Supplemental Indenture. The terms of Article 10 of the Indenture and such other provisions of the Indenture as are applicable to Guarantors are incorporated herein by reference. 3. Execution and Delivery of Subsidiary Guarantees. (a)To evidence its Subsidiary Guarantee set forth in this Supplemental Indenture, the Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form of Exhibit C to the Indenture shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee after the date hereof. (b)Notwithstanding the foregoing, the Guarantor hereby agrees that its Subsidiary Guarantee set forth herein shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. (c)If an Officer whose signature is on this Supplemental Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. (d)The delivery of any Note by the Trustee, after the authentication thereof under the Indenture, shall constitute due delivery of the Subsidiary Guarantee set forth in this Supplemental Indenture on behalf of the Guarantor. 4. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, stockholder of the Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 5. New York Law to Govern. The internal law of the State of New York shall govern and be used to construe this Supplemental Indenture and the Subsidiary Guarantee. 6. Counterparts The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: ____________ ___, ____[Guarantor] By: ___________________________ Name: Title: Dated: ____________ ___, ____ Marine Midland Bank, as Trustee By: ___________________________ Name: Title: A-4 EXHIBIT C [FORM OF NOTATION ON SENIOR SUBORDINATED NOTE RELATING TO SUBSIDIARY GUARANTEE] Each of the Guarantors listed below (hereinafter referred to as the "Guarantors", which term includes any successor or assign under the indenture (the "Indenture")), jointly and severally unconditionally guarantees that (i) the principal of and interest on the 13% Senior Subordinated Notes due August 1, 2009 (the "Notes") will be paid in full when due, whether at the maturity or interest payment or mandatory redemption date, by acceleration, call for redemption or otherwise, and interest on the overdue principal of and interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee under the indenture or the Notes will be promptly paid in full when due or performed, all in accordance with the terms of the Indenture and the Notes and (ii) in case of any extension of time of payment or renewal of any Notes 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 maturity, by acceleration or otherwise. The obligations of each Guarantor to the Holder and to the Trustee pursuant to this Guaranty and the Indenture are as expressly set forth in Article 10 of the Indenture and in such other provisions of the Indenture as are applicable to Guarantors, and reference is hereby made to such Indenture for the precise terms of this Guaranty. This is a continuing guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and the Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a guarantee of payment and not a guarantee of collection. This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guaranty is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. THE TERMS OF ARTICLE 10 OF THE INDENTURE AND OTHER PROVISIONS OF THE INDENTURE AS ARE APPLICABLE TO THE GUARANTORS ARE INCORPORATED HEREIN BY REFERENCE. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. EXHIBIT D FORM OF ESCROW AGREEMENT This ESCROW AGREEMENT (the "AGREEMENT"), dated as of August 10, 1994, by and among National Westminster Bank of New Jersey (the "ESCROW AGENT"), Marine Midland Bank, as trustee for the benefit of the Holders of the Notes under the Indenture (the "Trustee") and Showboat, Inc., a Nevada corporation (the "COMPANY"). RECITALS (a)Pursuant to that certain Indenture dated as of August 10, 1994, by and between the Company and the Trustee (the "INDENTURE"), the Company has issued $120,000,000 aggregate principal amount of its 13% Senior Subordinated Notes due 2009 (the "NOTES"). (b)The Indenture requires the Company to deposit $100 million of the net proceeds from the offering of the Notes in the Escrow Account in order for the Company to meet its investment obligations with respect to Sydney Harbour Casino Holdings Limited ("SHCL"). (c)The parties have entered into this Agreement to set forth the conditions upon which, and the manner in which, funds will be disbursed from the Escrow Account to permit, among other things, the Company to fund its investment obligations with respect to SHCL. AGREEMENT NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Capitalized terms used herein but not otherwise defined shall have the meaning given to them in the Indenture. In addition to any other defined terms used herein, the following terms shall constitute defined terms for purposes of this Agreement and shall have the meanings set forth below: "ACCEPTABLE REPLACEMENT ESCROW AGENT" means a corporation organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee power, subject to supervision or examination by federal or state authority and having combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. "ELIGIBLE INSTITUTION" means a commercial banking institution (which may include Escrow Agent and its affiliates) that has combined capital and surplus of not less than $500 million or its equivalent in foreign currency, whose debt is rated "A" (or higher) according to Standard & Poor's Corporation ("S&P) or Moody's Investors Service, Inc. ("Moody's) at the time as of which any investment or rollover therein is made. "ESCROW ACCOUNT" means the escrow account established pursuant to Section 2(b) hereof. "GOVERNMENT SECURITIES" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged. "MARKETABLE SECURITIES" means (i) Government Securities, (ii) any certificate of deposit maturing not more than 270 days after the date of acquisition issued by, or time deposit of, an Eligible Institution, (iii) commercial paper maturing not more than 270 days after the date of acquisition issued by a corporation (other than an affiliate of the Company) with a rating, at the time as of which any investment therein is made, of "A-1" (or higher) according to S&P or "P-1" (or higher) according to Moody's, (iv) any banker's acceptances or money market deposit accounts issued or offered by an Eligible Institution, and (v) any fund investing exclusively in investments of the types described in clauses (i) through (iv) above. "OFFERING" means the public offering of the Notes. "PROSPECTUS" means the prospectus in the form first used to confirm sales of the Notes. 2. ESCROW ACCOUNT; ESCROW AGENT (a)APPOINTMENT OF ESCROW AGENT. The Company hereby appoints Escrow Agent, and Escrow Agent hereby accepts appointment, as escrow agent under the terms and conditions of this Agreement. (b)ESTABLISHMENT OF ESCROW ACCOUNT. Concurrently with the execution and delivery hereof, Escrow Agent shall establish the Escrow Account at its office at 2 Montgomery Street, Jersey City, NJ 07302. Immediately upon receipt, the Company shall deliver $100 million of the proceeds of the offering of the Notes to Escrow Agent for deposit into the Escrow Account. Escrow Agent shall issue a receipt, or an initial account statement as described in Section 2(g), evidencing and acknowledging Escrow Agent's receipt of the Deposit. Subject to the other terms and conditions of this Agreement, the Deposit shall be held for the benefit of the Company in the Escrow Account until disbursed in accordance with the terms hereof. (c)ESCROW AGENT COMPENSATION. Escrow Agent and any Acceptable Replacement Escrow Agent shall be compensated pursuant to a separate agreement between the Company and Escrow Agent or such Acceptable Replacement Escrow Agent. Such compensation shall not be chargeable against the Escrow Account. (d)INVESTMENT OF THE DEPOSIT. The Deposit shall be invested and reinvested upon the following terms and conditions: (i) ACCEPTABLE INVESTMENTS. The Deposit shall be invested and reinvested in Marketable Securities in accordance with the Company's written instructions to Escrow Agent. Escrow Agent shall invest the Deposit in Marketable Securities designated by the Company from time to time. All such Marketable Securities shall be assigned to Escrow Agent, for the benefit of the Company. (ii) INTEREST. All interest earned on the Deposit invested in such Marketable Securities shall be paid to the Company. (e) LIMITATION ON ESCROW AGENT'S RESPONSIBILITIES (i) Escrow Agent's duties and responsibilities shall be limited to those expressly set froth in this Agreement and are purely ministerial in nature. Escrow Agent shall not be subject to, or obligated to recognize, any other agreement to which the Company, the Trustee, or either of them may be a party. References in this Agreement to any such agreement are for identification and definitional purposes only. (ii) Escrow Agent shall have no obligation with respect to the Escrow Account other than to follow faithfully instructions contained in this Agreement or deliver to Escrow Agent in accordance with this Agreement. Escrow Agent may rely and act upon any written notice, instruction, direction, request, waiver, consent, receipt, or other paper or document (the "Instructions") which it believes in good faith to be genuine and what it purports to be. Escrow Agent shall not be subject to any liability with respect to the form, execution, or validity of any such Instruction. The Escrow Agent shall not be liable for verifying the accuracy of any certifications made by the Company in connection with this Agreement. (iii) Escrow Agent shall not be liable for any error of judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for doing anything which, in good faith, it may do or refrain from doing in connection with the Escrow Account, except in each case in the event of Escrow Agent's gross negligence or wilful misconduct. (f) SUBSTITUTION OF ESCROW AGENT (i) The Company shall have the right to cause Escrow Agent to be relieved of its duties hereunder and to select a substitute escrow agent to serve hereunder (provided such substitute escrow agent is an Acceptable Replacement Escrow Agent), upon the expiration of 30 days following delivery of written notice of substitution to Escrow Agent and the Trustee. Upon selection of such substitute escrow agent, such substitute escrow agent and the parties hereto other than the substituted escrow agent shall enter into an agreement substantially identical to this Agreement and, thereafter, Escrow Agent shall be relieved of its duties and obligations to perform hereunder, except that Escrow Agent shall transfer to the substitute escrow agent upon request therefor all funds and marketable Securities maintained by Escrow Agent hereunder and copies of all books, records, plans and other documents in Escrow Agent's possession relating to such funds or Marketable Securities or this Agreement. (ii) Escrow Agent, or any substitute escrow agent, may at any time resign and be discharged of its duties and obligations under this Agreement by giving at least 30 days' notice to the Company and the Trustee. The Company shall appoint an Acceptable Replacement Escrow Agent as substitute escrow agent within such thirty day period. (iii) If the Company fails to appoint a substitute escrow agent as required under paragraph (ii) above, Escrow Agent shall deliver all assets held in the Escrow Account to an Acceptable Replacement Escrow Agent of either its choosing or as appointed by a court upon application therefor. (iv) Escrow Agent shall be discharged from any further duties under this Agreement upon its transfer of the assets held in the Escrow Account to an Acceptable Replacement Escrow Agent. (g) ESCROW ACCOUNT STATEMENT. Upon receipt of the initial escrow funds and upon the request of the Company from time to time thereafter (but not less frequently than monthly), Escrow Agent shall deliver to the Company a statement setting forth with reasonable particularity the balance of funds then in the Escrow Account (including all investments) and the manner in which such funds are invested. The parties hereto irrevocably instruct Escrow Agent that on the first date upon which the balance in the Escrow Account (including the holdings of all Marketable Securities) is reduced to zero, Escrow Agent shall deliver to the Trustee a notice that the balance in the Escrow Account has been reduced to zero. (h) OTHER POWERS OF ESCROW AGENT (i) Escrow Agent may register any investments held by the Escrow Account in its nominee name without increase or decrease of liability. (ii) Escrow Agent may consult with and obtain advice from legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Agreement or any of Escrow Agent's duties under this Agreement, and Escrow Agent shall incur no liability in acting in good faith in accordance with the advice of such counsel. (i) INCUMBENCY CERTIFICATE. The Company and the Trustee each shall provide a certificate to Escrow Agent as to the incumbency and signatures of those individuals authorized to provide instructions relating to the Escrow Account or to execute documents to be provided to Escrow Agent. The Company and the Trustee also shall promptly notify Escrow Agent of any changes to such a certificate. Escrow Agent may rely on the accuracy and completeness of any such certificate unless and until it has received an acceptable replacement certificate. All certificates provided under this Section 2(i) shall be executed by the applicable party's corporate secretary or assistant secretary or, if the party does not have a corporate secretary or assistant secretary, by a comparable officer. 3. DISBURSEMENTS (a) FUNDING OF INVESTMENT IN SHCL. Upon receiving certification from the Company that SHCL, or a Subsidiary of SHCL, has received Australian Gaming Approval and Management Contract Approval, Escrow Agent shall release the Deposit and any interest accrued thereon to the Company, or any other Subsidiary or Affiliate of the Company, as the Company may direct; provided, however, that the Company may use the Deposit released to it only to make its investment in SHCL, or as otherwise provided by the terms of the Indenture. Such certification from the Company to Escrow Agent shall contain a certification by a duly elected and authorized officer of the Company to the effect that Australian Gaming Approval and Management Contract Approval have occurred, a copy of notification to that effect from the New South Wales Casino Control Authority (if such notification is in writing), and a representation by the Company that the Deposit being released to it is being used to fund the Company's investment obligations with respect to SHCL. (b) OFFERS TO PURCHASE. In the event that Escrow Agent has not received notification from the Company in the manner specified above that Australian Gaming Approval and Management Contract Approval have occurred on or prior to the first anniversary of the offering of the Notes, then, subsequent to the Company's offer to Holders to purchase the Notes as required by the Indenture, Escrow Agent shall release the funds in the Escrow Account in an amount and in a manner as specified in a joint written notice to Escrow Agent from the Company and the Trustee. Such joint notice shall be executed by a duly elected and authorized officer of each of the Company and the Trustee. (c) Any funds remaining in the Escrow Account after the release of the Deposit in accordance with Sections 3(a) and (b) hereof shall be released to the Company upon request and may be used for general corporate purposes. (d) Any funds in the Escrow Account to be released pursuant to the terms of this Section 3 shall only be released if Escrow Agent shall not have received any notice from the Trustee that as a result of an Event of Default, the indebtedness represented by the Notes has been accelerated and has become due and payable. 4. INDEMNITY. The Company shall indemnify, hold harmless and defend Escrow Agent and its respective directors, officers, agents and employees, from and against any and all claims, actions, obligations, liabilities and expenses, including reasonable defense costs, investigative fees and costs, reasonable legal fees, and claims for damages, arising from Escrow Agent's performance under this Agreement, except to the extent that such liability, expense or claim is directly attributable to the gross negligence or wilful misconduct of such indemnified person. In connection with any claim, action, obligation, liability or expense for which indemnification is sought by Escrow Agent hereunder, Escrow Agent shall be entitled to recover its costs as incurred from funds available in the Escrow Account. 5. TERMINATION. This Agreement shall terminate automatically following disbursement of all funds remaining in the Escrow Account, unless sooner terminated by agreement of the parties hereto. 6. MISCELLANEOUS (a) WAIVER. Any party hereto may specifically waive any breach of this Agreement by any other party, but no such waiver shall be deemed to have been given unless such waiver is in writing, signed by the waiving party and specifically designating the breach waived, nor shall any such waiver constitute a continuing waiver of similar or other breaches. (b) INVALIDITY. If, for any reason whatsoever, any one or more of the provisions of this Agreement shall be held or deemed to be inoperative, unenforceable or invalid in a particular case or in all cases, such circumstances shall not have the effect of rendering any of the other provisions of this Agreement inoperative, unenforceable or invalid, and the inoperative, unenforceable or invalid provision shall be construed as if it were written so as to effectuate, to the maximum extent possible, the parties' intent. (c) ASSIGNMENT. This Agreement is personal to the parties hereto, and the rights and duties of any party hereunder shall not be assignable except with the prior written consent of the other parties. In any event, this Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. (d) BENEFIT. The parties hereto, the Holders of the Notes and their respective permitted assigns, but no others, shall be bound hereby and entitled to the benefits hereof. (e) TIME. Time is of the essence of each provision of this Agreement. (f) CHOICE OF LAW. The existence, validity, construction, operation and effect of any and all terms and provisions of this Agreement shall be determined in accordance with and governed by the laws of the State of New York. (g) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof and supersedes any and all prior agreements, understandings and commitments, whether oral or written. This Agreement may be amended only by a writing signed by duly authorized representatives of all parties. (h) NOTICES. All notices and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been duly given and received, regardless of when and whether received, either: (a) on the day of hand delivery; or (b) three business days following the day sent, when sent by United States certified mail, postage and certification fee prepaid, return receipt requested, addressed as follows: To Escrow Agent: National Westminster Bank of New Jersey 2 Montgomery Street Jersey City, NJ 07302 Attention: Francine Asselta To the Trustee: Marine Midland Bank 140 Broadway New York, NY 10005-1180 Telecopier No: 212/658-6425 Attention: Eileen M. Hughes To the Company: Showboat, Inc. 2800 Fremont Street Las Vegas, NV 89104 Telecopier No: 702/385-9678 Attention: Leann Schneider or at such other address as the specified entity most recently may have designated in writing in accordance with this section to the others. (ii) COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (iii)CAPTIONS. Captions in this Agreement are for convenience only and shall not be considered or referred to in resolving questions of interpretation of this Agreement A-5 IN WITNESS WHEREOF, the parties have executed and delivered this Escrow Agreement as of the day first above written. ESCROW AGENT: NATIONAL WESTMINSTER BANK OF NEW JERSEY By: ___________________________________ Name: Title: TRUSTEE: MARINE MIDLAND BANK By: ___________________________________ Name: Title: COMPANY: SHOWBOAT, INC. By: ___________________________________ Name: Title: Acknowledged: OCEAN SHOWBOAT, INC. By: _________________________________ Name: Title: ATLANTIC CITY SHOWBOAT, INC. By: _________________________________ Name: Title: SHOWBOAT OPERATING COMPANY By: _________________________________ Name: Title: A-6 EX-99.01 3 WARRANT A-7 Execution Copy WARRANT AGREEMENT Dated as of May 6, 1994 by and between SHOWBOAT, INC. and DLJ BRIDGE FINANCE, INC. A-8 WARRANT AGREEMENT TABLE OF CONTENTS
Page SECTION 1. Warrant Certificates............................1 SECTION 2. Execution of Warrant Certificates...............1 SECTION 3. Registration....................................2 SECTION 4. Registration of Transfers and Exchanges.........2 SECTION 5. Terms of Warrants; Exercise of Warrants.........3 SECTION 6. Payment of Taxes................................4 SECTION 7. Mutilated or Missing Warrant Certificates.......4 SECTION 8. Reservation of Warrant Shares...................5 SECTION 9. Obtaining Stock Exchange Listings...............5 SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable.............. 5
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK.........5 (b) ADJUSTMENT FOR RIGHTS ISSUE....................6 (c) ADJUSTMENT FOR OTHER DISTRIBUTIONS.............7 (d) ADJUSTMENT FOR COMMON STOCK ISSUE..............7 (e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE....9 (f) CURRENT MARKET PRICE...........................10 (g) CONSIDERATION RECEIVED.........................10 (h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED.....11 (i) WHEN NO ADJUSTMENT REQUIRED....................11 (j) NOTICE OF ADJUSTMENT...........................11 (k) VOLUNTARY REDUCTION............................11 (l) NOTICE OF CERTAIN TRANSACTIONS.................12 (m) REORGANIZATION OF SHOWBOAT.....................12 (n) SHOWBOAT DETERMINATION FINAL...................12 (o) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED.......12 (p) ADJUSTMENT IN NUMBER OF SHARES.................13 (q) FORM OF WARRANTS...............................13
SECTION 11. Fractional Interests...........................13 SECTION 12. Notices to Warrant Holders.....................13 SECTION 13. Registration...................................15 SECTION 14. Regulatory Redemption of Warrants..............24 SECTION 15. Representations and Warranties of Showboat.....25 SECTION 16. Notices to Showboat and Warrant Holder.........26 SECTION 17. Supplements and Amendments.....................27 SECTION 18. Successors.....................................27 SECTION 19. Termination....................................27 SECTION 20. Governing Law..................................27 SECTION 21. Benefits of This Agreement.....................27 SECTION 22. Counterparts...................................27
EXHIBIT A EXHIBIT B *This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. A-9 WARRANT AGREEMENT (the "Agreement") dated as of May 6, 1994 between Showboat, Inc., a Nevada corporation ("Showboat"), and DLJ Bridge Finance, Inc., a Delaware corporation ("DLJ Bridge"). (DLJ Bridge and any subsequent assignee or transferee of any or all of the Warrants is sometimes referred to herein as the Warrant holder(s).) WHEREAS, Showboat has executed a commitment letter along with an attached Summary of Terms and Conditions (the "Bridge Commitment Letter") dated as of April 20, 1994 with DLJ Bridge whereby DLJ Bridge has committed to purchase, subject expressly to the execution of certain definitive documentation satisfactory to DLJ Bridge, up to $60,000,000 in aggregate amount of senior increasing rate preferred stock (the "Senior Bridge Preferred") to be issued by Showboat for purposes of financing in part the development of the exclusive casino gaming establishment to be located in Sydney, Australia (the "Sydney Casino") by Sydney Harbor Casino Holdings Limited ("SHCL"), an Australian Corporation owned collectively by Showboat Australia Pty Limited, a wholly-owned Australian subsidiary of Showboat, Leighton Properties Pty Limited, an Australian subsidiary of Leighton Holdings Limited, an Australian corporation, and certain institutional investors. WHEREAS, Showboat has agreed, pursuant to the Bridge Commitment Letter, that upon the granting of preferred applicant status to develop the Sydney Casino to SHCL or any of Showboat's other affiliates by the Casino Control Authority of New South Wales, Australia, Showboat will issue to DLJ Bridge common stock purchase warrants, as hereinafter described (the "Warrants") to purchase 150,000 shares of common stock, par value $1.00 per share (the "Common Stock") of Showboat (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), at an exercise price per share equal to the lesser of (i) $15.50 (which was the closing share price of the Company's common stock on the New York Stock Exchange on the date of the Bridge Commitment Letter) or (ii) the exercise price of the Takedown Warrants (as defined in the Bridge Commitment Letter) (the "Exercise Price"), and such preferred applicant status was granted to Showboat on May 6, 1994; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Warrant Certificates. The certificates evidencing the Warrants (the "Warrant Certificates") to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto. With respect to any Warrant Shares issued upon the exercise of such Warrants, such Warrant Certificates and certificates representing such Warrant Shares shall bear the legend set forth in Exhibit B attached hereto. SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of Showboat by its Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer or President and Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer or President and Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose Showboat may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, President and Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be delivered or disposed of he shall have ceased to hold such office. The seal of Showboat may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of Showboat who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by Showboat, such Warrant Certificates nevertheless may be disposed of as though such person had not ceased to be such officer of Showboat; and any Warrant Certificate may be signed on behalf of Showboat by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of Showboat to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such officer. Warrant Certificates shall be dated the date of signature by an officer of Showboat. SECTION 3. Registration. Showboat shall number and register the Warrant Certificates in a register as they are issued. Showboat may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and shall not be affected by any notice to the contrary, except as provided in Section 4 hereof. Showboat shall, upon written instructions of its Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, or President and Secretary or Assistant Secretary, initially sign and deliver Warrants entitling the holders thereof to purchase not more than the number of Warrant Shares referred to above in the second recital hereof and shall sign and deliver Warrants as otherwise provided in this Agreement. SECTION 4. Registration of Transfers and Exchanges. Showboat shall from time to time register the transfer of any outstanding Warrant Certificates in a Warrant register to be maintained by it for that purpose, upon surrender thereof accompanied by a written instrument or instruments of transfer in form satisfactory to Showboat, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by Showboat. Cancelled Warrant Certificates shall thereafter be disposed of by Showboat in accordance with applicable law. The Warrant holders agree that prior to any proposed transfer of the Warrants or of the Warrant Shares, if such transfer is not made pursuant to an effective Registration Statement under the Securities Act of 1933, as amended (the "Act"), or an opinion of counsel, reasonably satisfactory in form and substance to Showboat, that the Warrants or Warrant Shares may be sold publicly without registration under the Act, the Warrant holder will deliver to Showboat: (1) an investment covenant reasonably satisfactory to Showboat signed by the proposed transferee; (2) an agreement by such transferee to the impression of the restrictive investment legend set forth below on the Warrants or the Warrant Shares; (3) an agreement by such transferee that Showboat may place a notation in the stock books of Showboat or a "stop transfer order" with any transfer agent or registrar with respect to the Warrant Shares; (4) an agreement by such transferee to be bound by the provisions of this Section 4 relating to the transfer of such Warrants or Warrant Shares; and (5) an opinion of counsel that such transfer is being made pursuant to an exemption from the Act. Notwithstanding the foregoing paragraph, DLJ Bridge may transfer any Warrants to (i) one or more affiliates (as that term is defined in the Act) of DLJ Bridge, (ii) any managing director, general partner, director, individual limited partner, officer or employee of Donaldson, Lufkin & Jenrette, Inc. or any of their affiliates (collectively, the "DLJ Associates"), (iii) the heirs, executors, administrators, testamentary trustees, legatees, custodians or beneficiaries of any DLJ Associates and (iv) a trust, the beneficiaries of which, or a corporation or partnership, the stockholders or general or limited partners of which, include only the DLJ Associates, their spouses or their lineal descendants. The Warrant holders agree that each certificate representing Warrant Shares will bear the legend set forth in Exhibit B. Additional legends may be added as required by Nevada and New Jersey gaming authorities or other gaming authorities having jurisdiction over the Company. Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to Showboat at its office for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Warrant Certificates surrendered for exchange shall be cancelled by Showboat. Such cancelled Warrant certificates shall then be disposed of by Showboat in accordance with applicable law. No service charge shall be made for any transfer or exchange of Warrant Certificates or any issuance of Warrant Certificates, but Showboat may require payment of a sum sufficient to cover any stamp or other governmental charge or tax that may be imposed in connection with any such transfer or exchange. SECTION 5. Terms of Warrants; Exercise of Warrants. Subject to the terms of this Agreement, each Warrant holder shall have the right, which may be exercised commencing at the opening of business on May 6, 1994 and until 5:00 p.m., New York City time on May 6, 1999, to receive from Showboat the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares. In the alternative, each Warrant holder may exercise its right, during the Exercise Period, to receive Warrant Shares on a net basis, such that, without the exchange of any funds, the Warrant holder receives that number of Warrant Shares otherwise issuable (or payable) upon exercise of its Warrants less that number of Warrant Shares having an aggregate Quoted Price (as defined in Section 10(f) hereof) at the time of exercise equal to the aggregate Exercise Price that would otherwise have been paid by the holder of the Warrant Shares. Each Warrant not exercised prior to 5:00 p.m., New York City time, on May 6, 1999 shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. Except as provided in Section 10 hereof, no adjustments will be made upon exercise of the Warrants with respect to any dividends declared as of any record date prior to the exercise of the Warrants. A Warrant may be exercised upon surrender to Showboat at its office designated for such purpose of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase on the reverse thereof duly filled in and signed, which signature shall be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc. and upon payment to Showboat of the Exercise Price, as adjusted as herein provided, for the number of Warrant Shares in respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be made (i) in cash or (ii) by certified or official bank check payable to the order of Showboat or (iii) through the surrender of debt or preferred equity securities of Showboat having a principal amount or liquidation preference, as the case may be, equal to the aggregate Exercise Price to be paid (Showboat will pay the accrued interest or dividends on such surrendered debt or preferred equity securities in cash at the time of surrender notwithstanding the stated terms thereof). Subject to the provisions of Section 6 hereof, upon such surrender of Warrants and payment of the Exercise Price, Showboat shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 11 hereof; PROVIDED, HOWEVER, that if any consolidation, merger or lease or sale of assets is proposed to be effected by Showboat as described in subsection (m) of Section 10 hereof, or a tender offer or an exchange offer for shares of Common Stock of Showboat shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, Showboat shall, as soon as possible, but in any event not later than two business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 11 hereof. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. No fractional shares shall be issued upon exercise of any Warrants in accordance with Section 11 hereof. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part (in whole shares) and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued and delivered in accordance with the terms of this Agreement. All Warrant Certificates surrendered upon exercise of Warrants shall be cancelled by Showboat and disposed of in accordance with applicable law. SECTION 6. Payment of Taxes. Showboat will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; PROVIDED, HOWEVER, that Showboat shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and Showboat shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to Showboat the amount of such tax or shall have established to the satisfaction of Showboat that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. If any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, Showboat may in its discretion issue in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to Showboat of such loss, theft or destruction of such Warrant Certificate and indemnity therefor, if requested, also satisfactory to it. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as Showboat may prescribe. SECTION 8. Reservation of Warrant Shares. Showboat will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. Showboat or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of Showboat's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. Showboat will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of Showboat's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. Showboat will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 16 hereof. Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, Showboat will take any corporate action which may, in the opinion of its counsel (which may be counsel employed by Showboat), be necessary in order that Showboat may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. Showboat covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof. SECTION 9. Obtaining Stock Exchange Listings. Showboat will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of the Warrants, will be listed on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 10. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of Showboat and any other stock of Showboat, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of Showboat without limit as to per share amount. (a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If Showboat: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; (3) combines its outstanding shares of Common Stock into a smaller number of shares; (4) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (5) issues by reclassification of its Common Stock any shares of its capital stock; then the Exercise Price in effect immediately prior to such action shall be proportionately adjusted so that the holder of any Warrant thereafter exercised may receive the aggregate number and kind of shares of capital stock of Showboat which he would have owned immediately following such action if such Warrant had been exercised immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a holder of a Warrant upon exercise of such Warrant may receive shares of two or more classes of capital stock of Showboat, the allocation of the adjusted Exercise Price between the classes of capital stock shall be determined pro rata among such classes in accordance with the fair market value of the respective classes as determined in reasonable good faith by the board of directors of Showboat. After such allocation, the exercise privilege and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 10. Such adjustment shall be made successively whenever any event listed above shall occur. (b) ADJUSTMENT FOR RIGHTS ISSUE. If Showboat distributes any rights, options or warrants to all holders of its Common Stock entitling them to purchase shares of Common Stock at a price per share less than the current market price per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P ___________ E' = E x M ___________ O + N where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock offered. P = the offering price per share of the additional shares. M = the current market price per share of Common Stock on the record date. The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) ADJUSTMENT FOR OTHER DISTRIBUTIONS. If Showboat distributes to all holders of its Common Stock any of its assets (including but not limited to cash), debt securities, preferred stock, or any rights or warrants to purchase debt securities, preferred stock, assets or other securities of Showboat, the Exercise Price shall be adjusted in accordance with the formula: E' = E x M - F ______ M where: E' = the adjusted Exercise Price. E = the current Exercise Price. M = the current market price per share of Common Stock on the record date mentioned below. F = the fair market value on the record date of the assets, securities, rights or warrants applicable to one share of Common Stock. The Board of Directors shall determine the fair market value. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection (c) does not apply to rights, options or warrants referred to in subsection (b) of this Section 10. This subsection (c) does not apply to cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of Showboat prepared in accordance with generally accepted accounting principles other than any Extraordinary Cash Dividend (as defined below). An "Extraordinary Cash Dividend" shall be that portion, if any, of the aggregate amount of all cash dividends paid in any fiscal year which exceeds Showboat's net income for such fiscal year. In all cases, Showboat shall give the Warrant holders at least 30 days notice of a record date for any dividend payment on the Common Shares. (d) ADJUSTMENT FOR COMMON STOCK ISSUE. If Showboat issues shares of Common Stock for a consideration per share less than the current market price per share on the date Showboat fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: P ______ E' = E x O + M ______ A where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. M = the current market price per share on the date of issuance of such additional shares. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to: (1) any of the transactions described in subsections (b), (c) or (e) of this Section 10 or any shares of Common Stock issuable pursuant to an option, right, warrant or security described thereunder, (2) the exercise of Warrants, or the conversion or exchange of other securities convertible or exchangeable for Common Stock, (3) Common Stock issued to Showboat's employees under bona fide employee benefit plans or stock option plans adopted by the Board of Directors and approved by the holders of Common Stock when required by law, and Common Stock issued to the non-employee directors of Showboat upon the exercise of options granted to such persons, if such Common Stock would otherwise be covered by this subsection (d) (but only to the extent that the aggregate number of shares excluded hereby and issued after the date of this Agreement shall not exceed 20% of the Common Stock outstanding at the time of the adoption of each such plan, exclusive of antidilution adjustments thereunder), (4) Common Stock issuable upon the exercise of rights or warrants issued to the holders of Common Stock, (5) Common Stock issued to shareholders of any person which merges into Showboat in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, (6) Common Stock issued in a bona fide public offering pursuant to a firm commitment underwriting, or (7) Common Stock issued in a bona fide private placement through a placement agent which is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of the Common Stock, as determined in good faith by the Board of Directors and described in a Board resolution which shall be provided to the Warrant holder(s), shall exceed 20%). (e) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE. If Showboat issues any securities, options or warrants convertible into, exchangeable for or exercisable for Common Stock ("Convertible Securities") (other than securities issued in transactions described in subsections (b) and (c) of this Section 10) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: P ___ E' = E x O + M ______ O + D where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such Convertible Securities. P = the aggregate consideration received for the issuance of such Convertible Securities. M = the current market price per share on the date of issuance of such Convertible Securities. D = the maximum number of shares deliverable upon conversion or in exchange for such Convertible Securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion or exchange of such Convertible Securities has not been issued when such Convertible Securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such Convertible Securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such Convertible Securities. This subsection (e) does not apply to: (1) Convertible Securities issued to shareholders of any person which merges into Showboat, or with a subsidiary of Showboat, in proportion to their stock holdings of such person immediately prior to such merger, upon such merger, (2) Convertible Securities issued in a bona fide public offering pursuant to a firm commitment underwriting, or (3) Convertible Securities issued in a bona fide private placement through a placement agent which is a member firm of the National Association of Securities Dealers, Inc. (except to the extent that any discount from the current market price attributable to restrictions on transferability of Common Stock issuable upon conversion, as determined in good faith by the Board of Directors and described in a Board resolution which shall be filed with the Trustee, shall exceed 20% of the then current market price). (f) CURRENT MARKET PRICE. In subsections (b), (c), (d) and (e) of this Section 10 the current market price per share of Common Stock on any date is the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by the New York Stock Exchange, or if the Common Stock is listed on another securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or as reported by NASDAQ, National Market System, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of one or more such quotations, the Board of Directors of Showboat shall determine the current market price on the basis of such quotations as it in reasonable good faith considers appropriate. (g) CONSIDERATION RECEIVED. For purposes of any computation respecting consideration received pursuant to subsections (d) and (e) of this Section 10, the following shall apply: (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by Showboat for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Board resolution which shall be provided to the Warrant holder(s); and (3) in the case of the issuance of securities convertible into or exchangeable for shares, the aggregate consideration received therefor shall be deemed to be the consideration received by Showboat for the issuance of such securities plus the additional minimum consideration, if any, to be received by Showboat upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection). (h) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 10 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (i) WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made for a transaction referred to in subsections (a), (b), (c), (d) or (e) of this Section 10 if Warrant holders agree to participate in the transaction on a basis and with notice that the Board of Directors determines to be fair and appropriate in light of the basis and notice on which holders of Common Stock participate in the transaction. No adjustment need be made for rights to purchase Common Stock pursuant to a Showboat plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (j) NOTICE OF ADJUSTMENT. Whenever the Exercise Price is adjusted, Showboat shall provide the notices required by Section 16 hereof. (k) VOLUNTARY REDUCTION. Showboat from time to time may reduce the Exercise Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period; PROVIDED, HOWEVER, that in no event may the Exercise Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is reduced, Showboat shall mail to Warrant holders a notice of the reduction. Showboat shall mail the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. A reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of subsections (a), (b), (c), (d) and (e) of this Section 10. (l) NOTICE OF CERTAIN TRANSACTIONS. If: (1) Showboat takes any action that would require an adjustment in the Exercise Price pursuant to subsections (a), (b), (c), (d) or (e) of this Section 10 and if Showboat does not arrange for Warrant holders to participate pursuant to subsection (i) of this Section 10; (2) Showboat takes any action that would require a supplemental Warrant Agreement pursuant to subsection (m) of this Section 10; or (3) there is a liquidation or dissolution of Showboat, Showboat shall mail to Warrant holders a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, transfer, lease, liquidation or dissolution. Showboat shall mail the notice at least 15 days before such date. Failure to mail the notice or any defect in it shall not affect the validity of the transaction. (m) REORGANIZATION OF SHOWBOAT. If Showboat consolidates or merges with or into, or transfers or leases all or substantially all its assets to, any person, upon consummation of such transaction the Warrants shall automatically become exercisable for the kind and amount of securities, cash or other assets which the holder of a Warrant would have owned immediately after the consolidation, merger, transfer or lease if the holder had exercised the Warrant immediately before the effective date of the transaction. Concurrently with the consummation of such transaction, the corporation formed by or surviving any such consolidation or merger if other than Showboat, or the person to which such sale or conveyance shall have been made, shall enter into a supplemental Warrant Agreement so providing and further providing for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Section 10. The successor shall mail to Warrant holders a notice describing the supplemental Warrant Agreement. If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (m) applies, subsections (a), (b), (c), (d) and (e) of this Section 10 do not apply. (n) SHOWBOAT DETERMINATION FINAL. Any determination that Showboat or the Board of Directors must make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this Section 10 is conclusive. (o) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case in which this Section 10 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, Showboat may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of Showboat, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of Showboat, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 11 hereof; PROVIDED, HOWEVER, that Showboat shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (p) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the Exercise Price pursuant to this Section 10, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: N'= N x E ___ E' where: N' = the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N = the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the Exercise Price prior to adjustment. E' = the adjusted Exercise Price (prior to rounding to the nearest cent as provided in the second paragraph of subsection (h)). E = the Exercise Price prior to adjustment. (q) FORM OF WARRANTS. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 11. Fractional Interests. Showboat shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), Showboat shall pay to the Warrant holder an amount in cash equal to the Exercise Price on the day immediately preceding the date the Warrant is presented for exercise, multiplied by such fraction. SECTION 12. Notices to Warrant Holders. Upon any adjustment of the Exercise Price pursuant to Section 10 hereof, Showboat shall promptly thereafter (i) cause to be filed with Showboat a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors of Showboat (who may be the regular auditors of Showboat) setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 12. In case: (a) Showboat shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares of Common Stock or of any other subscription rights or warrants; or (b) Showboat shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in shares of Common Stock or distributions referred to in subsection (a) of Section 10 hereof); or (c) of any consolidation or merger to which Showboat is a party and for which approval of any shareholders of Showboat is required, or of the conveyance or transfer of the properties and assets of Showboat substantially as an entirety, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of Showboat; or (e) Showboat proposes to take any action (other than actions of the character described in Section 10(a)) which would require an adjustment of the Exercise Price pursuant to Section 10; then Showboat shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (a) or (b) above) prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 12 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of Showboat or any other matter, or any rights whatsoever as shareholders of Showboat. SECTION 13. Registration. (a) SHELF REGISTRATION OF WARRANTS AND WARRANT SHARES. Showboat shall cause to be filed pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"), a shelf registration statement on Form S-3 (the "Warrant Shelf Registration Statement") covering the issuance of the Warrant Shares and any resale of the Warrants and Warrant Shares (the Warrants and Warrant Shares included in the Warrant Shelf Registration Statement, and any shares registered pursuant to any Piggy-Back Registration ((as defined below)), shall collectively be referred to herein as the "Registered Securities") and shall use its best efforts to cause such Warrant Shelf Registration Statement to become effective within 30 days of the execution of this Agreement. Showboat shall use its best efforts to keep such Warrant Shelf Registration Statement continuously effective until 30 days after the expiration of the Warrants. (b) PIGGY-BACK REGISTRATION. (i) If Showboat proposes to file a registration statement under the Securities Act with respect to an offering by Showboat for its own account or for the account of any of its security holders of any class of equity security (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission), any shelf registration, or offering of securities solely to Showboat's existing security holders, and other than the offering of 3,100,000 shares of Common Stock contemplated by the Registration Statement filed on form S-3 with the Commission on June 28, 1994), then the Company shall give written notice of such proposed filing to the holders of the Warrants as soon as practicable (but in no event less than ten days before the anticipated filing date), and such notice shall offer such holders the opportunity to register such amount of Registered Securities as each such holder may request (a "Piggy-Back Registration") (For purposes of this agreement, the Warrant Shelf Registration Statement and any registration statement pursuant to which shares in any Piggy-Back Registration are registered, shall be collectively referred to herein as a "Registration Statement."); (ii) Showboat shall use its best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registered Securities requested to be included in the registration statement for such offering to be included on the same terms and conditions as any similar securities of Showboat or of such other security holders included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering deliver a written opinion to the holders of such Registered Securities that either (i) the kind or combination of securities which the holders, Showboat and any other persons or entities intend to include in such offering or (ii) the size of the offering which the holders, Showboat and such other persons or entities intend to make, are such that the success of the offering would be materially and adversely affected by inclusion of the Registered Securities requested to be included, then (a) in the event that the size of the offering is the basis of such managing underwriter's or underwriters' opinion, the amount of securities to be offered for the accounts of holders of the Warrant shall be reduced pro rata (according to the Registered Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters; provided that if securities are being offered for the account of other persons or entities as well as Showboat, then with respect to the Registered Securities intended to be offered by holders, the proportion by which the amount of such class of securities intended to be offered by holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other persons or entities is reduced; and (b) in the event that the kind (or combination) of securities to be offered is the basis of such managing underwriter's or underwriters' opinion, (x) the Registered Securities to be included in such offering shall be reduced as described in clause (a) above (subject to the proviso in clause (a)) or, (y) if the actions described in clause (x) would, in the judgment of the managing underwriter or underwriters, be insufficient to substantially eliminate the adverse effect that inclusion of the Registered Securities requested to be included would have on such offering, such Registered Securities will be excluded from such offering. (c) WARRANT SHELF REGISTRATION STATEMENT. In connection with the Warrant Shelf Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Registered Securities, Showboat shall: (i) use its best efforts to keep such Warrant Shelf Registration Statement continuously effective until 30 days after the expiration of the Warrants; upon the occurrence of any event that would cause any such Warrant Shelf Registration Statement or the Prospectus (which means the prospectus first filed with the Commission pursuant to Rule 424(b) under the Act or, if no prospectus is required to be filed pursuant to said Rule 424(b), such term means the prospectus included in the Warrant Shelf Registration Statement, as amended when it is or was declared effective) (A) to contain a material misstatement or omission or (B) not to be effective and usable for sale or resale of Registered Securities during the period required by this Agreement; Showboat shall file promptly an appropriate amendment to such Warrant Shelf Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Warrant Shelf Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Securities and Exchange Commission (the "Commission") such amendments and post-effective amendments to the Warrant Shelf Registration Statement as may be necessary to keep the Warrant Shelf Registration Statement effective and usable for purposes stated in Section 13(a) until 30 days after the expiration of the Warrants; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Warrant Shelf Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Warrant Shelf Registration Statement or supplement to the Prospectus; (iii) advise the holders of the Warrants and selling holders, if any, promptly and, if requested by such persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Warrant Shelf Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Warrant Shelf Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Warrant Shelf Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Registered Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Warrant Shelf Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Warrant Shelf Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Warrant Shelf Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Registered Securities under state securities or Blue Sky laws, Showboat shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling holders before filing with the Commission, copies of any Warrant Shelf Registration Statement or any Prospectus included therein or any amendments or supplements to any such Warrant Shelf Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Warrant Shelf Registration Statement), which documents will be subject to the review of such holders for a period of at least five business days, and Showboat will not file any such Warrant Shelf Registration Statement or Prospectus or any amendment or supplement to any such Warrant Shelf Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling holder of Registered Securities covered by such Warrant Shelf Registration Statement shall reasonably object within five business days after the receipt thereof. A selling holder shall be deemed to have reasonably objected to such filing if such Warrant Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly provide, prior to the filing of any document that is to be incorporated by reference into a Warrant Shelf Registration Statement or Prospectus, copies of such document to the selling holders and make Showboat's representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling holders reasonably may request; (vi) make available at reasonable times for inspection by the selling holders and any attorney or accountant retained by such selling holders, all financial and other records, pertinent corporate documents and properties of Showboat and cause Showboat's officers, directors and employees to supply all information reasonably requested by any such holder, attorney or accountant in connection with such Warrant Shelf Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling holders promptly incorporate in any Warrant Shelf Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Registered Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after Showboat is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) upon request, furnish to each holder of Warrants and selling holder, without charge, at least one copy of the Warrant Shelf Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (ix) deliver to each holder of Warrants and selling holder, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such persons reasonably may request; Showboat hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling holders in connection with the offering and the sale or resale of the Registered Securities covered by the Prospectus or any amendment or supplement thereto; (x) enter into such agreements, and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Registered Securities pursuant to the Warrant Shelf Registration Statement, all to such extent as may be reasonably requested by any selling holder of Registered Securities in connection with any sale or resale pursuant to the Warrant Shelf Registration Statement; and Showboat shall: (A) upon request, furnish to each selling holder in such substance and scope as they reasonably may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the effectiveness of the Warrant Shelf Registration Statement, as amended: (1) a certificate, dated the date of effectiveness of the Warrant Shelf Registration Statement, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of Showboat confirming, as of the date thereof any matters as such selling holders may reasonably request; (2) an opinion, dated the date of effectiveness of the Warrant Shelf Registration Statement as amended, of counsel for Showboat, covering such matters as such selling holders may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of Showboat, and representatives of the independent public accountants for Showboat in connection with the preparation of such Warrant Shelf Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of Showboat without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the Warrant Shelf Registration Statement, at the time such Warrant Shelf Registration Statement or any post-effective amendment thereto became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Warrant Shelf Registration Statement as of its date contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial or statistical data included in any Warrant Shelf Registration Statement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of effectiveness of the Warrant Shelf Registration Statement from Showboat's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings; (B) deliver such other documents and certificates as may be reasonably requested by the selling holders to evidence compliance with clause (A) above and with any customary conditions contained in any agreement entered into by Showboat pursuant to this clause (x). The provisions of this clause (x) shall be applicable at each closing of a resale transaction, and if at any time the representations and warranties of Showboat contemplated in (A)(1) above cease to be true and correct, Showboat shall so advise the selling holders promptly and if requested by such persons, shall confirm such advice in writing; (xi) prior to any public offering of the Registered Securities, cooperate with the selling holders and their counsel in connection with the registration and qualification of the Registered Securities under the securities or Blue Sky laws of such jurisdictions as the selling holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registered Securities covered by the Warrant Shelf Registration Statement; PROVIDED, HOWEVER, that Showboat shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Warrant Shelf Registration Statement, in any jurisdiction where it is not now so subject; (xii) cooperate with the holders of the Warrants and the selling holders to facilitate the timely preparation and delivery of certificates representing the Registered Securities to be sold and not bearing any restrictive legends; and enable such Registered Securities to be in such denominations and registered in such names as such holders may request at least two business days prior to any sale or resale of the Registered Securities; (xiii) use its best efforts to cause the Registered Securities covered by the Warrant Shelf Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the selling holders to consummate the disposition of such Registered Securities, subject to the proviso contained in clause (xi) above; (xiv) if any fact or event contemplated by clause (b)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Warrant Shelf Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Registered Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xv) provide a CUSIP number for all Warrant Shares not later than the effective date of the Warrant Shelf Registration Statement and provide the Warrant holders with printed certificates for the Warrant Shares which are in a form eligible for deposit with the Depositary Trust Company; (xvi) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any selling holder or any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Warrant Shelf Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the consummation of the disposition of such Registered Securities; (xvii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period beginning with the first month of Showboat's first fiscal quarter commencing after the effective date of the Warrant Shelf Registration Statement; (xviii) provide promptly to each holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each selling holder agrees by acquisition of a Registered Security that, upon receipt of any notice from Showboat of the existence of any fact of the kind described in Section 13(b)(iii)(D), such holder will forthwith discontinue disposition of Registered Securities pursuant to the applicable Warrant Shelf Registration Statement until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 13(b)(xiv), or until it is advised in writing (the "Advice") by Showboat that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by Showboat, each such holder will deliver to Showboat (at Showboat's expense) all copies, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registered Securities that was current at the time of receipt of such notice. If Showboat shall give any such notice, the time period regarding the effectiveness of such Warrant Shelf Registration Statement set forth above shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 13(b)(iii)(D) to and including the date when each selling holder covered by such Warrant Shelf Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 13(b)(xiv) or shall have received the Advice. (d) REGISTRATION EXPENSES. All expenses incident to Showboat's performance of or compliance with this Agreement will be borne by Showboat, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings, if any, made with the NASD (including, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel, as may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Warrants, Warrant Shares and printing of Prospectuses), messenger and delivery services and telephone calls; (iv) all fees and disbursements of counsel for Showboat and the selling holders of Registered Securities (which, in the case of such selling holders, shall be limited to one firm of attorneys); (v) all application and filing fees in connection with listing Warrants or Warrant Shares on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed pursuant to the requirements hereof; (vi) all fees and disbursements of independent certified public accountants of Showboat (including the expenses of any special audit and comfort letters required by or incident to such performance) and (vii) Showboat's internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal or accounting duties), the expenses of any annual audit, rating agency fees and the fees and expenses of any person, including special experts, retained by Showboat. (e) INDEMNIFICATION. (i) Showboat shall indemnify and hold harmless each selling holder, its directors, officers, and each person, if any, who controls such selling holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, and each such person's officers and directors against any losses, claims, damages or liabilities, joint or several, to which each such person may become subject under the Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (1) any untrue statement or alleged untrue statement of any material fact contained in (A) any Registration Statement, or any amendment thereto or any preliminary prospectus or the Prospectus or any amendment or supplement thereto or (B) any application or other document, or any amendment or supplement thereto, executed by or on behalf of Showboat or based upon information furnished by or on behalf of Showboat by its counsel or counsel to such selling holders specifically for the purpose of having same filed in any jurisdiction in order to qualify the Registered Securities under the securities or "Blue Sky" laws thereof or filed with any securities association or securities exchange (each an "Application"); or (2) the omission or alleged omission to state, in any Registration Statement or any amendment thereto, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or any Application, a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, such selling holder and each such other person for any reasonable legal or other reasonable expenses incurred by such selling holder or such person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, Showboat will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement or any amendment thereto, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or any Application in reliance upon and in conformity with written information furnished to Showboat by the selling holder specifically for use therein; and PROVIDED, FURTHER, that the indemnity agreement contained in this Section 13(d) with respect to any preliminary prospectus shall not inure to the selling holder's benefit or to the benefit of any such other person in respect of any loss, claim, damage or liability asserted by a person who purchased the Registered Securities from the selling holder if a copy of the Prospectus (as the same may be amended or supplemented) was not sent or given to such person with or prior to written confirmation of the sale to such person and if the untrue statement or omission or alleged untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the Prospectus (as the same may be amended or supplemented prior to such sale) and if the selling holder would not have been liable had a copy of the Prospectus (as the same may be amended or supplemented prior to such sale) been so sent or given, unless such failure to send or give the Prospectus is a result of non-compliance by Showboat with Section 13(b)(ix) hereof. This indemnity agreement will be in addition to any liability that Showboat may otherwise have to the indemnified parties. Showboat will not, without the prior written consent of the selling holders, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification by the selling holders may be sought hereunder (whether or not the selling holder or any person who controls the selling holders within the meaning of Section 15 of the Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding), unless such settlement, compromise or consent to the entry of any judgment includes an unconditional release of the selling holders and each such other person from all liability arising out of such claim, action, suit or proceeding. (ii)Each selling holder will severally and not jointly indemnify and hold harmless Showboat and each of its directors and officers who signed any Registration Statement each person, if any, who controls Showboat within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which Showboat or any such director, officer or controlling person may become subject under the Act, the Exchange Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or any amendment thereto, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or any Application or (ii) the omission or the alleged omission to state therein a material fact required to be stated in any Registration Statement or any amendment thereto, any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or any Application, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to Showboat by such selling holder specifically for use therein; and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any reasonable legal or other reasonable expenses incurred by Showboat or any such director, officer or controlling person in connection with investigating or defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability that the such selling holder may otherwise have to the indemnified parties. Such selling holder shall not be liable under this Section 13(d) for any settlement of any claim or action effected without its consent, which shall not be unreasonably withheld. In no event shall the liability of any selling holder hereunder be greater in amount than the dollar amount of the proceeds received by such holder upon the sale of the Registered Securities giving rise to such indemnification obligation. (iii)Promptly after receipt by an indemnified party under this Section 13(d) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 13(d), notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party (1) will not relieve it from any liability under paragraph (i) or (ii) above unless it did not otherwise learn of such action and only if and to the extent that such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (2) will not, in any event, relieve the indemni- fying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (i) and (ii) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be enti- tled to participate therein and, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; PROVIDED, HOWEVER, that if (1) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (2) the parties in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (3) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or par- ties at the cost and expense of the indemnifying party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 13(d) for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (1) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the selling holders in the case of paragraph (i) of this Section 13(d) or Showboat in the case of paragraph (ii) of this Section 13(d), representing the indemnified parties under such paragraph (i) or paragraph (ii), as the case may be, who are parties to such action or actions) or (2) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the consent of the indemnifying party, which consent shall not be unreasonably withheld. (iv)In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 13(d) is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabili- ties (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Registered Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Showboat on the one hand, or any selling holder on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. Showboat and the selling holders agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the selling holders were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (iv). Notwithstanding any other provision of this paragraph (iv), none of the selling holders shall be obligated to make contributions hereunder that in the aggregate exceed the net proceeds received by such holder with respect to such holder's Registered Securities, less the aggregate amount of any damages that such holder has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (iv), each person, if any, who controls any selling holder within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as each selling holder, and each director of Showboat, each officer of Showboat who signed any Registration Statement each person, if any, who controls Showboat within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as Showboat. SECTION 14. Regulatory Redemption of Warrants. (a) Notwithstanding any other provision of this Warrant Agreement, each holder, by accepting the Warrants, shall be deemed to have agreed (to the extent permitted by applicable law) that if the Nevada Gaming Authorities or Gaming Authorities of any other jurisdiction into which Showboat or any of its subsidiaries may in the future expand (except as provided below in (e)) require that a person who is a holder or a beneficial owner of any of the Warrants must be licensed or found suitable under applicable gaming laws, such holder shall apply for a license or a finding of suitability within the required time period. The applicant for a license or finding of suitability must pay all costs of licensure or investigation for such finding of suitability. If such holder fails to apply or become licensed or is found unsuitable (a "Disqualified Holder"), Showboat has the right, at its option, (i) to require such holder to dispose of its Warrants or beneficial interest therein within 30 days of receipt of notice of Showboat's election or such earlier date as may be ordered by such Gaming Authorities or (ii) to redeem that holder's Warrants (the "Redemption"). The terms and conditions of such Redemption shall be as follows: (i) the redemption price (the "Redemption Price") of the Warrants to be redeemed shall be determined as of a date not more than 10 days prior to the Commencement Date (as defined below) in accordance with subsection (c) below; (ii) Showboat shall give notice (the "Redemption Notice") on a date (the "Commencement Date") that is at least 30 days (or such shorter period of time as may be required by the appropriate gaming authority) and not more than 60 days prior to the date of the Redemption (the "Redemption Date"); (iii) Showboat shall provide the Warrant holder with notice of the Redemption at least 10 days before the Commencement Date; and (iv) Showboat shall send, by first class mail, a notice of Redemption to each Disqualified Holder (as defined below), stating: (A)that the Redemption is being made pursuant to Section 14 of the Warrant Agreement; (B)the number of Warrants held by such Disqualified Holder to be redeemed, the Redemption Price and the Redemption Date; (C)that the Disqualified Holder whose Warrants are to be redeemed pursuant to the Redemption will be required to surrender such Warrants to Showboat at the principal office of Showboat specified in the notice in order to be paid the Redemption Price therefor; and (D)that, on the Redemption Date and payment of the Redemption Price by Showboat as provided in paragraph (b) of this Section 14, the Warrants of the Disqualified Holder to be redeemed shall be cancelled and thereafter the holder shall have none of the rights afforded to holders of Warrants. (b) On or prior to the Redemption Date, Showboat, upon receipt of the Warrant Certificates for the Warrants to be redeemed from a Disqualified Holder, shall promptly mail or deliver to such Disqualified Holder a check in an amount equal to the aggregate Redemption Price of the Warrants redeemed by Showboat from such holder. Such Warrants shall be cancelled by Showboat and may not be reissued. (c) Except as may otherwise be required by a Gaming Authority (as defined below), the Redemption Price for each Warrant to be redeemed shall be the Current Market Price (as defined below) of the Warrant Shares into which such Warrant is exercisable, less the Exercise Price. The "Current Market Price" of a Warrant Share on any date is the average of the Quoted Prices of the Common Stock for 30 consecutive trading days commencing 45 trading days before the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by NASDAQ National Market System, or if the Common Stock is listed on a securities exchange, the last reported sales price of the Common Stock on such exchange which shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of one or more such quotations, the Current Market Price shall be the fair market value of each Warrant Share on the date in question as determined in good faith by an investment banking firm of national standing. (d) "Gaming Authority" shall mean any agency of Nevada or any other jurisdiction that has, or may at any time after the date of this Warrant Agreement have, jurisdiction over all or a portion of the gaming activities of Showboat or any of its subsidiaries, direct or indirect, or any successor to such authority. "Gaming License" shall mean any material license, material franchise or other material approval or authorization on the date hereof or hereafter required to own, lease, operate or otherwise conduct gaming in the State of Nevada or any other jurisdiction in which Showboat or its subsidiaries, direct or indirect, conducts or proposes in good faith to conduct material gaming business, including any applicable liquor licenses. (e) Showboat shall have no redemption rights whether under this Section 14 or otherwise with respect to the Warrants, in the event that Showboat or any of its subsidiaries enters into a jurisdiction, other than Nevada, which requires holders or beneficial owners of equity securities such as the Warrants generally to be licensed or found suitable. This subsection (e) shall not effect the right of Showboat to effect a Redemption where such Redemption is triggered by Nevada licensing or suitability requirements, as described in subsection (a) of this Section 14. SECTION 15. Representations and Warranties of Showboat. Showboat represents and warrants exclusively to DLJ Bridge that the statements contained in this Section 15 are true, correct and complete as of the date of this Agreement: (1) Each of Showboat and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (2) Each of Showboat and its subsidiaries is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required; (3) Showboat has full corporate power and authority to execute and deliver each of this Agreement and any Warrants and Warrant Shares issued pursuant to this Agreement and to perform its obligations thereunder. This Agreement and any Warrants issued pursuant to this Agreement are duly authorized and constitute valid and legally binding obligations of Showboat, enforceable in accordance with their terms and conditions. Upon payment of the Exercise Price in accordance with the terms of this Agreement, the Warrant Shares will be duly authorized, validly issued, fully paid and nonassessable. (4) Showboat will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants; (5) DLJ Bridge, upon receipt of this Agreement, will not be required to be licensed, qualify, or file any applications for suitability in any jurisdiction in which Showboat is currently, or may at any time in the future be, doing business, as the result of being the owner of any Warrant Shares. SECTION 16. Notices to Showboat and Warrant Holder. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on Showboat shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed to the office of Showboat expressly designated by Showboat as its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by Showboat), as follows: Showboat, Inc. 2800 Fremont Street Las Vegas, Nevada 89104 Attention: Corporate Secretary Telephone: (702) 385-9141 Telecopier: (702) 385-9163 with a copy to: Kummer Kaempfer Bonner & Renshaw 3800 Howard Hughes Parkway, 7th Fl. Las Vegas, Nevada 89109 Attention: John N. Brewer, Esq. Telephone: (702) 792-7000 Telecopier: (702) 796-7181 Any notice pursuant to this Agreement to be given by Showboat to the registered holder(s) of any Warrant Certificate shall be sufficiently given or made when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until Showboat is otherwise notified in accordance with this Section by such holder) to such holder at the address appearing on the Warrant register of the Company: Notice may also be given by either party by facsimile transmission (effective when receipt is acknowledged), by hand (effective at the time of delivery) or by overnight delivery service (effective the next business day). SECTION 17. Supplements and Amendments. Showboat may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which Showboat may deem necessary or desirable and which shall not in any way adversely affect the interests of the holders of Warrant Certificates. SECTION 18. Successors. All covenants and provisions of this Agreement by or for the benefit of Showboat and any Warrant holder(s) shall bind and inure to the benefit of its respective successors and assigns, including any subsequent holder of any Warrant, hereunder. SECTION 19. Termination. This Agreement shall terminate at 5:00 p.m., New York City time on May 6, 1999. Notwithstanding the foregoing, this Agreement will terminate on any earlier date on which all Warrants have been exercised. SECTION 20. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF NEVADA OR NEW JERSEY LAW, INCLUDING WITHOUT LIMITATION, THE NEVADA GAMING CONTROL ACT AND THE NEW JERSEY CASINO CONTROL ACT, AND THE REGULATIONS PROMULGATED THEREUNDER. SECTION 21. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than Showboat and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of Showboat and the registered holders of the Warrant Certificates. SECTION 22. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A-10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. DLJ Bridge Finance, Inc. By: /s/ Robert Grien Name: Robert Grien Title: Vice President Showboat, Inc. By:/s/ J. Kell Houssels, III Name: J. Kell Houssels, III Title: President and Chief Executive Officer A-11 EXHIBIT A Form of Warrant Certificate [Face] No. _____ Warrants Warrant Certificate SHOWBOAT, INC. This Warrant Certificate certifies that DLJ Bridge Finance, Inc., or its registered assigns, is the registered holder of 150,000 Warrants (the "Warrants") expiring May 6, 1999 to purchase shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Showboat, Inc., a Nevada corporation (the "Company"). Each Warrant entitles the holder upon exercise to receive from the Company on or before 5:00 p.m. New York City time on May 6, 1994, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $15.50 payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement referred to on the reverse hereof. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., New York City time on May 6, 1999, and to the extent not exercised by such time, such Warrants shall become void. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of New York. EXERCISABLE ON OR BEFORE May 6, 1999 A-12 IN WITNESS WHEREOF, Showboat, Inc. has caused this Warrant Certificate to be signed by its President and by its Secretary, each by a facsimile of his signature, and has caused a facsimile of its corporate seal to be affixed hereunto or imprinted hereon. Dated: __________ ___, 1994. Showboat, Inc. By: President By: Secretary (seal) Countersigned: DLJ Bridge Finance, Inc. By: Its: A-13 Form of Warrant Certificate [Reverse] The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring May 6, 1999 entitling the holder on exercise to receive shares of Common Stock of the Company (the "Common Stock"), and are issued or to be issued pursuant to a Warrant Agreement dated as of May 6, 1994 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or before May 6, 1999. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price in lawful money of the United States of America at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights with respect to the Common Stock purchasable upon exercise thereof. Said registration rights are set forth in full in the Warrant Agreement. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem and treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-14 Form of Election to Purchase (To Be Executed Upon Exercise Of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive __________ shares of Common Stock and herewith tenders payment for such shares (in lawful money of the United States of America) to the order of Showboat, Inc. in the amount of $_____ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of ___________________________, whose address is ______________________________________, and that such shares be delivered to _______________________, whose address is _____________________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of __________________________, whose address is _______________________________, and that such Warrant Certificate be delivered to ________________________________, whose address is __________________________________________. ____________________________ Signature: Date: ____________________ _____________________________ Signature Guaranteed: EXHIBIT B THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND IT MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE ARTICLES OF INCORPORATION OF THE COMPANY AND PROVISIONS OF THE NEVADA GAMING CONTROL ACT, THE NEW JERSEY CASINO CONTROL ACT AND OTHER STATUTES IN JURISDICTIONS IN WHICH THE COMPANY IS DOING BUSINESS AND THE REGULATIONS PROMULGATED THEREUNDER, IMPOSE CERTAIN RESTRICTIONS ON REPORTING OR APPLICATION RESPONSIBILITIES ON THE OWNERS OF FIVE PERCENT OR MORE OF THE CAPITAL STOCK OF THE COMPANY AND EMPOWER THE BOARD OF DIRECTORS TO REDEEM CAPITAL STOCK UNDER CERTAIN CIRCUMSTANCES. THE COMPANY WILL FURNISH ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A COPY OF THE ARTICLES OF INCORPORATION AND A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF ARE SUBJECT TO THE NEVADA GAMING CONTROL ACT AND THE REGULATIONS OF THE NEVADA GAMING COMMISSION, THE NEW JERSEY CASINO CONTROL ACT AND THE REGULATIONS OF THE NEW JERSEY CASINO CONTROL COMMISSION, AND OTHER STATUTES AND REGULATIONS OF STATE REGULATORY AGENCIES IN JURISDICTIONS IN WHICH THE COMPANY IS DOING BUSINESS AND THE HOLDERS OF SUCH SECURITIES ARE, THEREFORE, SUBJECT TO THE JURISDICTION OF SUCH REGULATORY AGENCIES. THE EXERCISE OF SUCH SECURITIES MAY RESULT IN THE HOLDER OF SUCH SECURITIES BEING REQUIRED TO REPORT THEIR OWNERSHIP TO THE NEVADA GAMING COMMISSION, THE NEW JERSEY CASINO CONTROL COMMISSION OR OTHER REGULATORY AGENCIES OR THE COMPLETION OF APPLICATIONS FOR FINDINGS OF SUITABILITY. -----END PRIVACY-ENHANCED MESSAGE-----