-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AsJNks/R3zNTByU2ALnaeesZWrtkjlYWhsgIe6qvXQwH9pgm6qtHBl+p0arOz+70 8RaAyJHd61lBZ2McmRHCdg== 0000912057-96-024490.txt : 19961104 0000912057-96-024490.hdr.sgml : 19961104 ACCESSION NUMBER: 0000912057-96-024490 CONFORMED SUBMISSION TYPE: F-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19961101 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN INTERNATIONAL HOTELS LTD CENTRAL INDEX KEY: 0000914444 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 980136554 STATE OF INCORPORATION: C5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-15409 FILM NUMBER: 96652993 BUSINESS ADDRESS: STREET 1: EXECUTIVE OFFICES CORAL TOWERS CITY: PARADISE ISLAND BAHA STATE: C5 ZIP: 9547132500 BUSINESS PHONE: 8093632516 MAIL ADDRESS: STREET 1: 1414 EAST SUNRISE BLVD CITY: FORT LAUDERDALE STATE: FL ZIP: 33304 F-4 1 F-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM F-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- SUN INTERNATIONAL HOTELS LIMITED (Exact name of registrant as specified in its charter) COMMONWEALTH OF THE BAHAMAS 7011 98-0136554 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or organization) Classification Code Number) Identification No.)
-------------------------- CORAL TOWERS PARADISE ISLAND, THE BAHAMAS (809) 363-2516 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) -------------------------- JOHN CORBISHLEY SUN INTERNATIONAL HOTELS LIMITED 10TH FLOOR, 1415 E. SUNRISE BLVD. FT. LAUDERDALE, FLORIDA 33304 (954) 713-2500 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES TO: CHARLES D. ADAMO, ESQ. JAMES M. EDWARDS, ESQ. STEVEN R. FINLEY, ESQ. SUN INTERNATIONAL HOTELS LIMITED CRAVATH, SWAINE & MOORE GIBSON, DUNN & CRUTCHER, LLP EXECUTIVE OFFICES WORLDWIDE PLAZA 200 PARK AVENUE CORAL TOWERS 825 EIGHTH AVENUE NEW YORK, NEW YORK 10166 PARADISE ISLAND NEW YORK, NEW YORK 10019 THE BAHAMAS
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement which relates to the Merger (as defined herein) of Sun Merger Corp., a wholly owned subsidiary of Sun International Hotels Limited, with and into Griffin Gaming & Entertainment, Inc., pursuant to the Merger Agreement described herein. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE Ordinary Shares, par value $.001 per share..... 4,684,356 shares(1) Not Applicable $189,953,990(2) $26,387(3)
(1) Based on the maximum number of shares of Ordinary Shares of Sun International Hotels Limited issuable upon consummation of the Merger. (2) Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended (the "Securities Act"), and computed pursuant to Rule 457(f) under the Securities Act by adding (i) the product of $20.00, the average of the high and low sales prices of Griffin Gaming & Entertainment, Inc. Common Stock on October 29, 1996, as reported on the American Stock Exchange, and 9,497,682, the number of shares of Griffin Gaming & Entertainment, Inc. Common Stock outstanding at the close of business on October 31, 1996 (including shares issuable upon the exercise of outstanding options and warrants, whether or not currently exerciseable) and (ii) the product of $.01, the par value of Griffin Gaming & Entertainment, Inc. Class B Stock, and 35,000, the number of shares of Griffin Gaming & Entertainment, Inc. Class B Stock outstanding at the close of business on October 31, 1996. (3) Pursuant to Rule 457(b) under the Securities Act, $31,175 of the registration fee was paid on September 24, 1996 in connection with the filing of preliminary joint proxy material. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUN INTERNATIONAL HOTELS LIMITED ------------------ CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM F-4 AND PROSPECTUS PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM NO. FORM F-4 ITEM LOCATION IN PROSPECTUS - ---------- -------------------------------------------------- -------------------------------------------------- A. INFORMATION ABOUT THE TRANSACTION Item 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus.................. OUTSIDE FRONT COVER PAGE Item 2. Inside Front and Outside Back Cover Pages of Prospectus...................................... TABLE OF CONTENTS; AVAILABLE INFORMATION; INCORPORATION OF DOCUMENTS BY REFERENCE Item 3. Risk Factors, Ratio of Earnings to Fixed Charges, and Other Information........................... SUMMARY; RISK FACTORS Item 4. Terms of the Transaction.......................... SUMMARY; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING; COMPARISON OF THE RIGHTS OF SUN SHAREHOLDERS AND GGE STOCKHOLDERS Item 5. Pro Forma Financial Information................... SUMMARY; UNAUDITED PRO FORMA FINANCIAL INFORMATION Item 6. Material Contacts with the Company Being Acquired........................................ THE MERGER Item 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters... NOT APPLICABLE Item 8. Interests of Named Experts and Counsel............ EXPERTS; LEGAL MATTERS Item 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities..................................... NOT APPLICABLE B. INFORMATION ABOUT THE REGISTRANT Item 10. Information With Respect to F-3 Companies....................................... AVAILABLE INFORMATION; ENFORCEABILITY OF CIVIL LIABILITIES; INCORPORATION OF DOCUMENTS BY REFERENCE; SUMMARY; THE MERGER; COMPARATIVE PER SHARE MARKET INFORMATION; DESCRIPTION OF SUN CAPITAL STOCK Item 11. Incorporation of Certain Information by Reference....................................... INCORPORATION OF DOCUMENTS BY REFERENCE Item 12. Information With Respect to F-2 or F-3 Registrants..................................... NOT APPLICABLE
ITEM NO. FORM F-4 ITEM LOCATION IN PROSPECTUS - ---------- -------------------------------------------------- -------------------------------------------------- Item 13. Incorporation of Certain Information by Reference....................................... NOT APPLICABLE Item 14. Information With Respect to Foreign Registrants Other Than F-2 or F-3 Registrants............... NOT APPLICABLE C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED Item 15. Information With Respect to F-3 Companies......... AVAILABLE INFORMATION; INCORPORATION OF DOCUMENTS BY REFERENCE; SUMMARY; THE MERGER; COMPARATIVE PER SHARE MARKET INFORMATION; BUSINESS OF GGE Item 16. Information With Respect to F-2 or F-3 Companies....................................... NOT APPLICABLE Item 17. Information With Respect to Foreign Companies Other Than F-2 or F-3 Companies................. NOT APPLICABLE D. VOTING AND MANAGEMENT INFORMATION Item 18. Information if Proxies, Consents or Authorizations Are to be Solicited............................. SUMMARY; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING; THE MERGER 1. Date, Time and Place Information............. OUTSIDE FRONT COVER PAGE; SUMMARY; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING 2. Revocability of Proxy........................ SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING 3. Dissenters' Rights of Appraisal.............. SUMMARY; THE MERGER; COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF SUN AND STOCKHOLDERS OF GGE 4. Persons Making the Solicitation.............. SUMMARY; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING 5. Interest of Certain Persons in Matters to be Acted Upon and Voting Securities and Principal Holders Thereof............................... INCORPORATION OF DOCUMENTS BY REFERENCE; SUMMARY; RISK FACTORS; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING; THE STOCKHOLDER AGREEMENTS; THE MERGER; THE MERGER AGREEMENT; PRINCIPAL SHAREHOLDER OF SUN 6. Vote Required for Approval................... SUMMARY; SUN EXTRAORDINARY GENERAL MEETING; GGE SPECIAL MEETING; THE MERGER
ITEM NO. FORM F-4 ITEM LOCATION IN PROSPECTUS - ---------- -------------------------------------------------- -------------------------------------------------- 7. Directors and Executive Officers, Executive Compensation and Certain Relationships and Related Transactions.................................. INCORPORATION OF DOCUMENTS BY REFERENCE; MANAGEMENT OF SUN Item 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited in an Exchange Offer.... NOT APPLICABLE
SUN INTERNATIONAL HOTELS LIMITED CORAL TOWERS PARADISE ISLAND, THE BAHAMAS November 1, 1996 Dear Shareholder: You are cordially invited to attend an extraordinary general meeting of shareholders (the "Extraordinary General Meeting") of Sun International Hotels Limited ("Sun"). The meeting will be held in Room 501 of the Holiday Inn Crowne Plaza, 1605 Broadway, New York, NY 10019 on December 10, 1996 beginning at 8:30 a.m., local time. The purpose of the Extraordinary General Meeting is set forth below and described in detail in the accompanying Joint Proxy Statement/Prospectus. On August 19, 1996, Sun entered into an Agreement and Plan of Merger, as amended (the "Merger Agreement"), with Griffin Gaming & Entertainment, Inc. ("GGE") pursuant to which Sun Merger Corp., a wholly owned subsidiary of Sun, will be merged (the "Merger") with and into GGE, with GGE surviving as a wholly owned subsidiary of Sun. Subject to the terms and conditions of the Merger Agreement, each share of GGE common stock, par value $.01 per share, outstanding immediately prior to the effective time (the "Effective Time") of the Merger will be converted into the right to receive the Conversion Number (as defined in the accompanying Joint Proxy Statement/Prospectus) of a fully paid and nonassessable ordinary share, $.001 par value per share, of Sun ("Ordinary Shares"). Cash will be paid in lieu of any fractional Ordinary Shares. Also subject to the terms of the Merger Agreement, each issued and outstanding share of Class B common stock, par value $.01 per share, of GGE ("GGE Class B Stock") will be converted into the right to receive .1928 of a fully paid and nonassessable Ordinary Share. In order to accomplish the Merger, shareholders of Sun are being asked to approve an amendment to the Restated Articles of Association of Sun to add certain provisions relating to the New Jersey Casino Control Act required in connection with the Merger (the "Charter Amendment"). Approval of the Charter Amendment will require the affirmative vote of a majority of the outstanding Ordinary Shares with each Ordinary Share entitled to one vote at the Extraordinary General Meeting. Sun International Investments Limited, which as of October 28, 1996 (the record date for the Extraordinary General Meeting) controlled approximately 55% of the then outstanding Ordinary Shares, has agreed, subject to certain conditions, to vote its Ordinary Shares in favor of the Charter Amendment. This agreement effectively ensures the approval of the Charter Amendment. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE CHARTER AMENDMENT. THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE CHARTER AMENDMENT. YOU SHOULD READ THE "RISK FACTORS" SECTION IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS THAT YOU SHOULD CONSIDER BEFORE VOTING. Bear, Stearns & Co. Inc. acted as financial advisor to Sun in connection with the Merger and delivered a written opinion dated August 18, 1996 to the Board of Directors of Sun that the Merger is fair to Sun from a financial point of view. Consummation of the Merger is subject to certain conditions, including adoption of the Merger Agreement by stockholders of GGE, approval of the Charter Amendment by shareholders of Sun and the review by, and receipt of certain approvals from, regulatory authorities including the New Jersey Casino Control Commission. You are urged to read the accompanying Joint Proxy Statement/Prospectus, which provides you with a description of the terms of the proposed transaction. A copy of the Merger Agreement is included as Annex I to the accompanying Joint Proxy Statement/Prospectus. It is important that your shares be represented at the Extraordinary General Meeting. Whether or not you plan to attend the Extraordinary General Meeting, you are requested to complete, date, sign and return the proxy card in the enclosed postage paid envelope. Thank you for your time and attention to the accompanying Joint Proxy Statement/Prospectus. Very truly yours, /s/ Solomon Kerzner Solomon Kerzner Chairman of the Board SUN INTERNATIONAL HOTELS LIMITED CORAL TOWERS PARADISE ISLAND, THE BAHAMAS NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON DECEMBER 10, 1996 NOTICE IS HEREBY GIVEN that an extraordinary general meeting of shareholders (the "Extraordinary General Meeting") of Sun International Hotels Limited ("Sun") will be held on December 10, 1996 at 8:30 a.m., local time, in Room 501 of the Holiday Inn Crowne Plaza, 1605 Broadway, New York, NY 10019, for the following purposes: (i) To consider and vote upon a proposal to approve an amendment to the Restated Articles of Association of Sun to add certain provisions relating to the New Jersey Casino Control Act (the "Charter Amendment") required in connection with the merger (the "Merger") in accordance with the terms of the Agreement and Plan of Merger (the "Merger Agreement") dated as of August 19, 1996, as amended, among Sun, Sun Merger Corp. and Griffin Gaming & Entertainment, Inc. ("GGE"); and (ii) To transact such other business as may properly come before the Extraordinary General Meeting or any adjournments or postponements thereof. The Board of Directors of Sun has fixed the close of business on October 28, 1996 as the record date for determining the shareholders entitled to notice of and to vote at the Extraordinary General Meeting or any adjournments or postponements thereof (the "Record Date"). Approval of the Charter Amendment will require the affirmative vote of a majority of the outstanding ordinary shares, $.001 par value per share, of Sun ("Ordinary Shares") with each Ordinary Share entitled to one vote at the Extraordinary General Meeting. Sun International Investments Limited ("SIIL"), which on the Record Date controlled approximately 55% of the Ordinary Shares then outstanding, has entered into a Stockholder Agreement dated as of August 19, 1996, as amended (the "Sun Stockholder Agreement"), with GGE, pursuant to which SIIL has agreed, subject to certain conditions, to vote all Ordinary Shares controlled by it in favor of the Charter Amendment. The effect of the Sun Stockholder Agreement is to guarantee enough votes at the Extraordinary General Meeting in favor of the Charter Amendment to ensure its approval. The Sun Stockholder Agreement is described in greater detail in, and a copy is attached as Annex III to, the accompanying Joint Proxy Statement/Prospectus. The accompanying Joint Proxy Statement/Prospectus describes the Merger Agreement and certain actions to be taken in connection with the Merger. The vote of each shareholder is important. In order to obtain the maximum representation, we urge you to complete, sign, date and return your proxy card as promptly as possible. In this way, if you are unable to attend in person, your shares can nevertheless be voted at the Extraordinary General Meeting. A return envelope is enclosed for your convenience. Your proxy may be revoked by delivering written notice of revocation to the Corporate Secretary prior to the time voting is declared closed or by attending the Extraordinary General Meeting and voting your shares in person. By Order of the Board of Directors /s/ Charles D. Adamo Charles D. Adamo Executive Vice President and General Counsel Paradise Island, The Bahamas November 1, 1996 GRIFFIN GAMING & ENTERTAINMENT, INC. 1133 BOARDWALK ATLANTIC CITY, NEW JERSEY 08401 November 1, 1996 Dear Stockholder: You are cordially invited to attend a Special Meeting (the "Special Meeting") of holders of common stock, par value $.01 per share (the "GGE Common Stock"), of Griffin Gaming & Entertainment, Inc. ("GGE"). The Special Meeting will be held at Merv Griffin's Resorts Casino Hotel, located at 1133 Boardwalk, Atlantic City, NJ 08401, on December 10, 1996, beginning at 9:30 a.m., local time. The purpose of the Special Meeting is set forth below and in the accompanying Notice of Special Meeting of Holders of GGE Common Stock and described in detail in the accompanying Joint Proxy Statement/Prospectus. On August 19, 1996, GGE entered into an Agreement and Plan of Merger, as amended (the "Merger Agreement"), with Sun International Hotels Limited ("Sun") and Sun Merger Corp., a wholly owned subsidiary of Sun ("Sub"), pursuant to which Sub will be merged with and into GGE (the "Merger"), with GGE surviving as a wholly owned subsidiary of Sun. Subject to the terms and conditions of the Merger Agreement, each share of GGE Common Stock outstanding immediately prior to the effective time (the "Effective Time") of the Merger will be converted into the right to receive the Conversion Number (as defined in the accompanying Joint Proxy Statement/ Prospectus) of a fully paid and nonassessable ordinary share, $.001 par value per share of Sun ("Ordinary Shares"). Cash will be paid in lieu of any fractional Ordinary Shares. Also subject to the terms of the Merger Agreement, each issued and outstanding share of Class B common stock, par value $.01 per share, of GGE ("GGE Class B Stock") will be converted into the right to receive .1928 of a fully paid and nonassessable Ordinary Share. As of the Effective Time, the fraction of an Ordinary Share into which a share of GGE Class B Stock is converted will trade as part of a unit with $1,000 principal amount of Resorts International Hotel Financing, Inc. 11.375% Junior Mortgage Notes due 2004. In order to accomplish the Merger, holders of GGE Common Stock are being asked to adopt the Merger Agreement. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF GGE AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT. THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT. YOU SHOULD READ THE "RISK FACTORS" SECTION IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS FOR A DESCRIPTION OF CERTAIN MATTERS THAT YOU SHOULD CONSIDER BEFORE VOTING. Morgan Stanley & Co. Incorporated acted as financial advisor to GGE in connection with the Merger and rendered an opinion to the Board of Directors of GGE that, as of August 19, 1996 and based upon and subject to the various considerations set forth therein, the consideration to be received by holders of GGE Common Stock pursuant to the Merger Agreement is fair to such holders from a financial point of view. Consummation of the Merger is subject to certain conditions, including the adoption of the Merger Agreement by the holders of GGE Common Stock, approval of an amendment to the Restated Articles of Association of Sun by the shareholders of Sun, and the review by, and receipt of certain approvals from, regulatory authorities including the New Jersey Casino Control Commission. You are urged to read the accompanying Joint Proxy Statement/Prospectus, which provides you with a description of the terms of the proposed transaction. A copy of the Merger Agreement is included as Annex I to the Joint Proxy Statement/Prospectus. It is important that your shares be represented at the Special Meeting. Whether or not you plan to attend the Special Meeting in person, you are requested to complete, date and sign the enclosed proxy card and return it in the enclosed postage-paid envelope as promptly as possible. Thank you for your time and attention to the accompanying Notice of Special Meeting and Joint Proxy Statement/Prospectus. Very truly yours, Merv Griffin Thomas E. Gallagher CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
GRIFFIN GAMING & ENTERTAINMENT, INC. 1133 BOARDWALK ATLANTIC CITY, NEW JERSEY 08401 NOTICE OF SPECIAL MEETING OF HOLDERS OF GGE COMMON STOCK TO BE HELD ON DECEMBER 10, 1996 NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of holders of common stock, par value $.01 per share (the "GGE Common Stock"), of Griffin Gaming & Entertainment, Inc. ("GGE"), will be held at Merv Griffin's Resorts Casino Hotel, located at 1133 Boardwalk, Atlantic City, NJ 08401, on December 10, 1996, beginning at 9:30 a.m., local time, for the following purposes: 1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of August 19, 1996, as amended (the "Merger Agreement"), among GGE, Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Sun"), and Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Sun ("Sub"), providing for the merger (the "Merger") of Sub with and into GGE, and the conversion of each share of GGE Common Stock into the right to receive the Conversion Number (as defined in the accompanying Joint Proxy Statement/Prospectus) of a fully paid and nonassessable ordinary share, $.001 par value per share, of Sun ("Ordinary Shares"). Cash will be paid in lieu of any fractional Ordinary Shares. Also subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of Class B common stock, par value $.01 per share, of GGE ("GGE Class B Stock") shall be converted into the right to receive .1928 of a fully paid and nonassessable Ordinary Share (the "Class B Consideration"). As of the Effective Time, all such shares of GGE Common Stock and GGE Class B Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of GGE Common Stock or GGE Class B Stock shall cease to have any rights with respect thereto, except the right to receive the Conversion Number of an Ordinary Share plus cash in lieu of fractional Ordinary Shares or the Class B Consideration, as the case may be, to be issued in consideration therefor upon surrender of such certificate in accordance with the terms of the Merger Agreement, without interest. 2. To transact such other business as may properly come before the Special Meeting or any adjournments or postponements thereof. As a result of the Merger, GGE will become a wholly owned subsidiary of Sun. The Merger and related matters are described in greater detail in, and a copy of the Merger Agreement is attached as Annex I to, the accompanying Joint Proxy Statement/ Prospectus. Holders of record of GGE Common Stock at the close of business on November 1, 1996, (the "GGE Record Date"), are entitled to notice of and to vote at the Special Meeting and any adjournments or postponements thereof. Holders of shares of GGE Class B Stock are not entitled to vote on the proposal to adopt the Merger Agreement. Approval of the proposal described in item 1 above requires the affirmative vote of the holders of a majority of the outstanding shares of GGE Common Stock. The holders of 2,125,108 shares of GGE Common Stock (representing approximately 27% of the outstanding shares as of the close of business on the GGE Record Date) have entered into a Stockholder Agreement, dated as of August 19, 1996, as amended, with Sun (the "GGE Stockholder Agreement"), pursuant to which such holders have agreed to vote their shares of GGE Common Stock in favor of adoption of the Merger Agreement and the transactions contemplated thereby (subject to certain conditions set forth in the GGE Stockholder Agreement) and to refrain from exercising their warrants until after the effective time of the Merger. The GGE Stockholder Agreement is described in greater detail in, and a copy is attached as Annex II to, the accompanying Joint Proxy Statement/Prospectus. IT IS IMPORTANT THAT ALL SHARES OF GGE COMMON STOCK BE REPRESENTED AT THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS PROMPTLY AS POSSIBLE. THE ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. Any stockholder who signs and mails a proxy may revoke such proxy by delivering written notice of such revocation to the Secretary of GGE prior to the time voting is declared closed or by attending the Special Meeting and voting in person. Please see the accompanying Joint Proxy Statement/Prospectus for further details regarding the treatment of proxies at the Special Meeting. In the event that there are not sufficient votes to approve and adopt the Merger Agreement, it is expected that the Special Meeting will be postponed or adjourned in order to permit further solicitation of proxies by or on behalf of GGE. Please do not mail any stock certificates at this time. By Order of the Board of Directors, David G. Bowden SECRETARY November 1, 1996 SUN INTERNATIONAL HOTELS LIMITED AND GRIFFIN GAMING & ENTERTAINMENT, INC. JOINT PROXY STATEMENT ------------------------ SUN INTERNATIONAL HOTELS LIMITED PROSPECTUS ------------------------ This Joint Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being furnished to (i) the holders of ordinary shares, $.001 par value per share ("Ordinary Shares"), of Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Sun"), in connection with the solicitation of proxies by the Board of Directors of Sun (the "Sun Board") for use at an extraordinary general meeting of shareholders of Sun to be held on December 10, 1996, and at any and all adjournments or postponements thereof (the "Sun Extraordinary General Meeting"), and (ii) the holders of common stock, par value $.01 per share ("GGE Common Stock"), of Griffin Gaming & Entertainment, Inc., a Delaware corporation ("GGE"), in connection with the solicitation of proxies by the Board of Directors of GGE (the "GGE Board") for use at a Special Meeting of holders of GGE Common Stock to be held on December 10, 1996, and at any and all adjournments or postponements thereof (the "GGE Special Meeting" and, together with the Sun Extraordinary General Meeting, the "Special Meetings"). The holders of Class B common stock, par value $.01 per share, of GGE ("GGE Class B Stock") are entitled to notice of, but are not entitled to vote at, the GGE Special Meeting. This Proxy Statement/Prospectus relates to the Agreement and Plan of Merger dated as of August 19, 1996, as amended (the "Merger Agreement") among Sun, Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Sun ("Sub"), and GGE, which provides for the merger (the "Merger") of Sub with and into GGE, with GGE surviving as a wholly owned subsidiary of Sun. Subject to the terms and conditions of the Merger Agreement, each share of GGE Common Stock outstanding immediately prior to the effective time of the Merger (the "Effective Time") (other than shares owned directly or indirectly by Sun or GGE, which will be canceled) will be converted into the right to receive the Conversion Number (as defined under "SUMMARY--The Merger and the Merger Agreement") of a fully paid and nonassessable Ordinary Share. Cash will be paid to holders of GGE Common Stock in lieu of any fractional Ordinary Shares. Also subject to the terms and conditions of the Merger Agreement, each share of GGE Class B Stock outstanding immediately prior to the Effective Time will be converted into the right to receive .1928 of a fully paid and nonassessable Ordinary Share (the "Class B Consideration"). As of the Effective Time, the fraction of an Ordinary Share into which a share of GGE Class B Stock is converted shall trade as part of a unit (a "Unit") with $1,000 principal amount of Resorts International Hotel Financing, Inc. 11.375% Junior Mortgage Notes due 2004 (the "Junior Mortgage Notes"). At the Sun Extraordinary General Meeting, holders of Ordinary Shares are being asked to approve an amendment to the Restated Articles of Association of Sun (the "Sun Charter") to add certain provisions relating to the New Jersey Casino Control Act and regulations promulgated thereunder (the "NJCCA") required in connection with the Merger (the "Charter Amendment"). Approval of the Charter Amendment will require the affirmative vote of the holders of a majority of the Ordinary Shares outstanding as of the close of business on October 28, 1996 (the "Sun Record Date"). As used herein, approval of the Charter Amendment is referred to as the "Sun Shareholder Approval." Sun International Investments Limited ("SIIL") controlled approximately 55% of the Ordinary Shares outstanding on the Sun Record Date and has entered into a Stockholder Agreement dated as of August 19, 1996, as amended (the "Sun Stockholder Agreement"), with GGE, pursuant to which SIIL has agreed, subject to certain conditions, to vote all Ordinary Shares owned by it in favor of the Charter Amendment. The effect of the Sun Stockholder Agreement is that SIIL, because of its ownership of a majority of the outstanding Ordinary Shares, has agreed to cast enough votes in favor of the Charter Amendment to 1 ensure its approval. The Sun Stockholder Agreement is described in greater detail in, and a copy is attached as Annex III to, this Proxy Statement/Prospectus. At the GGE Special Meeting, holders of GGE Common Stock are being asked to adopt the Merger Agreement (the "GGE Stockholder Approval", and together with the Sun Shareholder Approval, the "Stockholder Approvals"). Adoption of the Merger Agreement will require the affirmative vote of the holders of a majority of the outstanding shares of GGE Common Stock as of the close of business on November 1, 1996 (the "GGE Record Date"), with each share of GGE Common Stock entitling the holder thereof to one vote at the GGE Special Meeting. The holders of 2,125,108 shares of GGE Common Stock (representing approximately 27% of the outstanding shares as of the close of business on the GGE Record Date) have entered into a Stockholder Agreement, dated as of August 19, 1996, as amended, with Sun (the "GGE Stockholder Agreement" and together with the Sun Stockholder Agreement, the "Stockholder Agreements"), pursuant to which such holders have agreed to vote their shares of GGE Common Stock in favor of the adoption of the Merger Agreement (subject to certain conditions set forth in the GGE Stockholder Agreement) and to refrain from exercising their warrants until after the Effective Time. The GGE Stockholder Agreement is described in greater detail in, and a copy is attached as Annex II to, this Proxy Statement/Prospectus. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." The consummation of the Merger is subject, among other things, to the Stockholder Approvals and the receipt of certain regulatory approvals including approval of the New Jersey Casino Control Commission (the "NJCC"). SEE "RISK FACTORS" COMMENCING ON PAGE 25 FOR A DESCRIPTION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BEFORE VOTING. A COPY OF THE MERGER AGREEMENT IS ATTACHED HERETO AS ANNEX I. This Proxy Statement/Prospectus also constitutes the Prospectus of Sun filed as part of a Registration Statement on Form F-4 (the "Form F-4") with the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"), relating to the registration of Ordinary Shares issuable upon consummation of the Merger (including Ordinary Shares issuable upon the exercise of options and warrants for GGE Common Stock to the extent exercised prior to the Effective Time). The Ordinary Shares are listed for trading under the symbol "SIH" on the New York Stock Exchange (the "NYSE"). The GGE Common Stock is listed for trading under the symbol "GGE" on the American Stock Exchange (the "ASE"). On August 16, 1996, the last full trading day prior to the execution of the Merger Agreement, the last reported sale prices of Ordinary Shares and GGE Common Stock, on the NYSE Composite Transactions Tape and ASE Transactions List, respectively, were $51.875 per share and $11.875 per share, respectively. On October 31, 1996, the last full trading day prior to the date of this Proxy Statement/Prospectus, the last reported sale prices of Ordinary Shares and GGE Common Stock, as reported on the NYSE Composite Transactions Tape and the ASE Transactions List, respectively, were $47.25 per share and $20.75 per share, respectively. This Proxy Statement/Prospectus and the enclosed forms of proxy are first being mailed to shareholders of Sun and stockholders of GGE on or about November 4, 1996. ------------------------ THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. NO GAMING REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. The date of this Proxy Statement/Prospectus is November 1, 1996. 2 TABLE OF CONTENTS
PAGE --------- AVAILABLE INFORMATION.......................... 5 ENFORCEABILITY OF CIVIL LIABILITIES............ 5 INCORPORATION OF DOCUMENTS BY REFERENCE........ 6 SUMMARY........................................ 7 RISK FACTORS................................... 25 Cautionary Statement....................... 25 Risk Factors Related to the Merger......... 25 Fixed Range of Exchange Ratios Despite Possible Change in Stock Prices...... 25 Necessity of Receiving Governmental Approvals Prior to the Merger........ 25 Consummation of the Merger Prior to Receipt of Plenary License........... 26 Interests of Certain Persons in the Merger............................... 26 Divestiture Risk of Proposed Charter Amendment............................ 26 Risk Factors Related to Sun................ 27 Risks Associated with New Projects and Expansion of Sun..................... 27 GENERAL............................... 27 DEVELOPMENT, CONSTRUCTION AND RELATED RISKS............................... 27 ABILITY TO COMPLETE PROJECTS ON TIME AND WITHIN BUDGET................... 27 NEED FOR ADDITIONAL FINANCING......... 28 MOHEGAN SUN PROJECT COSTS............. 28 Competition............................ 28 GENERAL............................... 28 PARADISE ISLAND....................... 29 THE MOHEGAN SUN CASINO................ 29 OTHER EXISTING OPERATIONS............. 29 Control by Principal Shareholder....... 30 Regulatory and Political Factors....... 30 Certain Matters Pertaining to Chairman............................. 31 TCA Management Agreement............... 31 Limited Recourse against Tribal Assets............................... 32 Possible Environmental Liabilities..... 32 Shares Eligible for Future Sale........ 33 Dividends and Dividend Policy.......... 33 Volatility of Price of Securities...... 33 Dependence on Key Personnel............ 33 Dependence on Air Service.............. 34 Seasonality and Weather................ 34 Risk Factors Related to GGE................ 34 Recent Operating Results............... 34 Competition............................ 34 Possible Environmental Liabilities..... 35 PAGE --------- SUN EXTRAORDINARY GENERAL MEETING.............. 36 Purpose................................ 36 Record Date; Voting Rights............. 36 Share Ownership of Management and SIIL................................. 36 Quorum................................. 36 Proxies................................ 36 Solicitation of Proxies................ 37 Required Vote.......................... 37 PROPOSED SUN CHARTER AMENDMENT................. 37 GGE SPECIAL MEETING............................ 39 Purpose................................ 39 Record Date; Voting Rights............. 39 Share Ownership of Management and Significant Stockholders............. 39 Quorum................................. 39 Proxies................................ 40 Solicitation of Proxies................ 40 Required Vote.......................... 40 THE STOCKHOLDER AGREEMENTS..................... 41 GGE Stockholder Agreement.............. 41 Sun Stockholder Agreement.............. 42 THE MERGER..................................... 43 General................................ 43 Background of the Merger............... 43 Sun's Reasons for the Merger; Recommendation of its Board of Directors............................ 45 Opinion of Sun's Financial Advisor..... 45 GGE's Reasons for the Merger; Recommendation of its Board of Directors............................ 49 Opinion of GGE's Financial Advisor..... 50 Interests of Certain Persons in the Merger............................... 54 Resale of Ordinary Shares Issued in the Merger; Affiliates................... 57 Certain Federal Income Tax Consequences......................... 57 Anticipated Accounting Treatment....... 58 Regulatory Approvals................... 58 NEW JERSEY CASINO CONTROL COMMISSION APPROVAL............................ 58 ANTITRUST............................. 59 Appraisal and Dissenters' Rights....... 59 Stock Exchange Listing................. 60 Delisting and Deregistration of GGE Common Stock......................... 60 THE MERGER AGREEMENT........................... 61 COMPARATIVE PER SHARE MARKET INFORMATION....... 73 UNAUDITED PRO FORMA FINANCIAL INFORMATION...... 75 DESCRIPTION OF GGE CAPITAL STOCK............... 81
3
PAGE --------- GGE Common Stock....................... 81 GGE Class B Stock...................... 81 GGE Preferred Stock.................... 81 DESCRIPTION OF SUN CAPITAL STOCK............... 82 Ordinary Shares........................ 82 Preference Shares...................... 82 COMPARISON OF THE RIGHTS OF SUN SHAREHOLDERS AND GGE STOCKHOLDERS.......................... 83 Dividend Rights........................ 83 Voting Rights.......................... 83 Directors.............................. 84 Call of Extraordinary General Meetings/Special Meetings............ 85 Action by Stockholders or Shareholders Without a Meeting.................... 85 Amendment to Sun Memorandum/ GGE Charter.............................. 86 Amendment to Sun Charter/GGE By-Laws... 86 Approval of Mergers and Asset Sales.... 86 Restricted Transactions................ 87 Amendment to Terms of Ordinary Shares............................... 87 Rights of Appraisal.................... 87 Indemnification of Directors and Officers............................. 88 Anti-Takeover Provisions............... 88 Rights of Inspection................... 89 Liquidation Rights..................... 89 Case Law and Court Systems............. 89 BUSINESS OF SUN................................ 90 General................................ 90 The Properties and Current Expansion Projects............................. 90 THE BAHAMAS........................... 90 CONNECTICUT........................... 92 INDIAN OCEAN.......................... 94 FRANCE................................ 95 Competition............................ 95 PARADISE ISLAND....................... 95 THE MOHEGAN SUN CASINO................ 96 OTHER EXISTING OPERATIONS............. 96 Certain Matters Affecting Sun's Paradise Island Operations........... 96 PAGE --------- AIRLINE ARRANGEMENTS.................. 96 UNION CONTRACT ARRANGEMENTS........... 97 CASINO LICENSE........................ 97 GAMING TAXES AND FEES................. 97 ATLANTIS CASINO LEASE................. 97 MANAGEMENT AGREEMENT.................. 97 CERTAIN ARRANGEMENTS WITH THE BAHAMIAN GOVERNMENT.......................... 98 New Agreement with the Bahamian Government........................... 98 CASINO LICENSE FEES AND WIN TAXES..... 98 STAMP TAX AND IMPORT DUTY............. 99 JOINT MARKETING ARRANGEMENTS.......... 99 INFRASTRUCTURE........................ 99 Certain Matters Affecting the Mohegan Sun Casino........................... 99 THE MOHEGAN TRIBE..................... 99 TCA MANAGEMENT AGREEMENT.............. 99 Revolving Credit Facility.............. 101 MANAGEMENT OF SUN.............................. 104 PRINCIPAL SHAREHOLDER OF SUN................... 107 BUSINESS OF GGE................................ 108 General................................ 108 The Properties and Current Expansion Project.............................. 108 RESORTS CASINO HOTEL.................. 108 SHOWBOAT LEASE........................ 109 OTHER PROPERTIES...................... 109 Competition............................ 109 Certain Matters Affecting GGE's Operations........................... 109 NEW CONVENTION CENTER AND CASINO/HOTEL EXPANSION........................... 109 MARKETING............................. 110 SEASONAL FACTORS...................... 111 REGULATION AND GAMING TAXES AND FEES................................ 111 LEGAL MATTERS.................................. 113 EXPERTS........................................ 113
Annex I Merger Agreement, as amended Annex II GGE Stockholder Agreement, as amended Annex III Sun Stockholder Agreement, as amended Annex IV Opinion of Bear, Stearns & Co. Inc. Annex V Opinion of Morgan Stanley & Co. Incorporated Annex VI Form of License and Services Agreement
4 AVAILABLE INFORMATION Sun is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), applicable to foreign issuers, and in accordance therewith files reports, including annual reports on Form 20-F, and other information with the SEC. Sun makes available to its shareholders annual reports containing audited financial statements within 105 days of the end of each fiscal year and publishes quarterly reports containing selected financial data for the first three quarters of the fiscal year within 60 days of the end of such fiscal quarter (in each case prepared in accordance with generally accepted accounting principals in the United States ("U.S. GAAP")). Sun is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders. However, Sun furnishes shareholders with statements with respect to annual or extraordinary meetings of shareholders, as well as such other reports as may from time to time be authorized by the Sun Board or be required under law. GGE is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices of the SEC: Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such reports, proxy statements and other information may be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The SEC maintains a Web site at http://www.sec.gov that contains such reports, proxy statements and other information. Copies of such materials filed by Sun can be inspected at the NYSE, 20 Broad Street, New York, New York 10005. Copies of such materials filed by GGE can be inspected at the offices of the ASE at 86 Trinity Place, New York, New York 10006. This Proxy Statement/Prospectus does not contain all of the information set forth in the Form F-4, certain parts of which are omitted in accordance with the rules and regulations of the SEC. Reference is made to the Form F-4 and the exhibits thereto for further information. Statements contained or incorporated by reference herein concerning the provisions of any agreement or other document filed as an exhibit to the Form F-4 or otherwise filed with the SEC are not necessarily complete and reference is hereby made to the copy thereof so filed for more detailed information, each such statement being qualified in its entirety by such reference. THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) ARE AVAILABLE UPON REQUEST FROM, IN THE CASE OF DOCUMENTS RELATING TO SUN, SUN INTERNATIONAL HOTELS LIMITED, CORAL TOWERS, PARADISE ISLAND, THE BAHAMAS (TELEPHONE: (809) 363-2516), AND, IN THE CASE OF DOCUMENTS RELATING TO GGE, GRIFFIN GAMING & ENTERTAINMENT, INC., 1133 BOARDWALK, ATLANTIC CITY, NEW JERSEY 08401, ATTENTION: SECRETARY (TELEPHONE: (609) 344-6000). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY DECEMBER 3, 1996. ENFORCEABILITY OF CIVIL LIABILITIES Sun is a Bahamian international business company incorporated under the International Business Companies Act, 1989 of the Commonwealth of The Bahamas (the "IBCA"). Certain of the directors and executive officers of Sun reside outside the United States. A substantial portion of the assets of such persons and of Sun are located outside the United States. As a result, in the opinion of Harry B. Sands & Company, Bahamian counsel to Sun, it may be difficult or impossible to effect service of process within the United States upon such persons, to bring suit in the United States or to enforce, in the United States courts, any judgment obtained there against such persons predicated upon any civil liability provisions of the United States federal securities laws. It is unlikely that Bahamian courts would entertain original actions against Bahamian companies, their directors or officers predicated solely upon United States federal securities laws. Furthermore, judgments predicated upon any civil liability provisions of the United States federal securities laws are not directly enforceable in The Bahamas. Rather, a lawsuit must be brought in The Bahamas on any such judgment. Subject to consideration of private international law, in general, a judgment obtained after due trial by a court of competent jurisdiction, which is final and conclusive as to the issues in contention, is actionable in Bahamian courts and is impeachable only upon the grounds of (i) fraud, (ii) public policy and (iii) natural justice. 5 INCORPORATION OF DOCUMENTS BY REFERENCE The following documents heretofore filed with the SEC pursuant to the Exchange Act are incorporated herein by reference: 1. Sun's Annual Report on Form 20-F for the fiscal year ended December 31, 1995 (the "1995 Sun 20-F"); 2. Sun's Reports on Form 6-K dated January 30, 1996, February 2, 1996, March 21, 1996, May 2, 1996, June 4, 1996, July 25, 1996, August 19, 1996, August 22, 1996, September 6, 1996, and October 1, 1996. 3. The description of Ordinary Shares set forth in Sun's Registration Statements filed pursuant to Section 12 of the Exchange Act, and any amendment or report filed for the purpose of updating such description. 4. GGE's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the "1995 GGE 10-K"); 5. The portions of GGE's Proxy Statement dated April 5, 1996 that have been incorporated by reference in the 1995 GGE 10-K; 6. GGE's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1996 and June 30, 1996; and 7. GGE's Current Report on Form 8-K reporting an event on August 19, 1996. All reports and other documents filed by either Sun or GGE pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy Statement/Prospectus and prior to the date of its respective Special Meeting shall be deemed to be incorporated by reference herein and to be a part hereof from the dates of filing such reports and documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Proxy Statement/Prospectus to the extent that a statement contained herein, or in any other subsequently filed document which also is incorporated or deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement/Prospectus. ------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER SUN OR GGE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SUN OR GGE SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------------ AS USED HEREIN, UNLESS THE CONTEXT OTHERWISE CLEARLY REQUIRES: "SUN" REFERS TO SUN INTERNATIONAL HOTELS LIMITED AND ITS CONSOLIDATED SUBSIDIARIES AND "GGE" REFERS TO GRIFFIN GAMING & ENTERTAINMENT, INC. AND ITS CONSOLIDATED SUBSIDIARIES. CAPITALIZED TERMS NOT DEFINED IN THIS PROXY STATEMENT/PROSPECTUS HAVE THE RESPECTIVE MEANINGS SPECIFIED IN THE MERGER AGREEMENT. ------------------------ ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO SUN AND SUB HAS BEEN PROVIDED BY SUN. ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WITH RESPECT TO GGE HAS BEEN PROVIDED BY GGE. 6 SUMMARY THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO. THIS PROXY STATEMENT/PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT, AND SUCH STATEMENTS ARE SUBJECT TO THE SAFE-HARBOR CREATED BY SUCH SECTION. ------------------------ SHAREHOLDERS OF SUN AND STOCKHOLDERS OF GGE ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS AND THE ANNEXES HERETO IN THEIR ENTIRETY AND SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS." ------------------------ SUN INTERNATIONAL HOTELS LIMITED GENERAL Sun is an international resort and gaming company which develops and manages premier resort and casino properties. Sun currently operates resort hotels and casinos in Connecticut, The Bahamas, the Indian Ocean and France and has several properties under development. Sun's largest property is the Atlantis Resort & Casino ("Atlantis"), a 1,147-room resort and casino located on Paradise Island, The Bahamas. Following its acquisition by Sun, Atlantis was redeveloped into an ocean-themed destination resort through a $140 million capital expenditure program (the "Initial Development Program"). Seeking to capitalize on the success of Atlantis, Sun expects to commence construction of an approximately $375 million expansion project (the "Paradise Island Expansion") in the fourth quarter of 1996. The Paradise Island Expansion will substantially increase Sun's room base on Paradise Island with the construction of a new 1,200-room deluxe hotel, significantly increase its casino capacity and convention space and expand Atlantis' ocean-themed adventure attractions. As part of its continued development of Paradise Island, Sun recently acquired the 562-room Holiday Inn Pirate's Cove Resort (the "Pirate's Cove Hotel") adjacent to Atlantis for approximately $12 million in cash plus the assumption of approximately $22.6 million of indebtedness. In addition to the Paradise Island Expansion, Sun is planning an approximately $16 million renovation of Pirate's Cove Hotel to create a moderately-priced hotel within the Atlantis complex (the "Pirate's Cove Renovation"). Sun expects to complete the Paradise Island Expansion by the second quarter of 1998, and the Pirate's Cove Renovation by the fourth quarter of 1998, thus creating an integrated 3,000-room resort complex appealing to all market segments which will include approximately 1,200 deluxe rooms, 1,100 mid-market rooms and 700 moderately priced rooms. After completion of these projects, Sun will continue to own approximately 190 acres of undeveloped land on Paradise Island with extensive beach and golf course frontage. The Mohegan Sun Casino in Montville, Connecticut (the "Mohegan Sun Casino"), which was developed for the Mohegan Tribe of Indians of Connecticut (the "Mohegan Tribe") by a partnership in which Sun owns a 50% interest, was opened on October 12, 1996. The Mohegan Sun Casino consists of approximately 150,000 square feet of gaming space and features approximately 2,670 slot machines (with capacity for approximately 3,000 slot machines), 180 table games and parking for 7,500 cars. Sun currently manages 10 hotels containing approximately 3,200 rooms and six casinos with an aggregate of over 200,000 square feet of gaming space containing more than 4,000 slot machines and 300 table games. Sun anticipates that by the fourth quarter of 1998 it will manage 11 hotels containing in excess of 4,400 rooms and six casinos with an aggregate of approximately 220,000 square feet of gaming space containing approximately 5,000 slot machines and 350 table games. 7 PARADISE ISLAND REDEVELOPMENT Following the acquisition of its Paradise Island operations on May 3, 1994, Sun embarked upon the Initial Development Program, which included the refurbishment of all 1,147 guest rooms at Atlantis, the construction of new specialty food and beverage facilities, an upgrading of the 30,000-square foot casino (the "Atlantis Casino") and the creation of a 14-acre saltwater marine life habitat which runs through Atlantis. The marine life habitat features the world's largest open air aquarium, showcasing over 100 species of marine life, waterfalls, lagoons, adventure walks and clear tunnels submerged in a predator lagoon through which visitors can walk and be surrounded by sharks, sea turtles, stingrays and other marine life. The Initial Development Program was substantially completed by December 1994, after only seven months of construction. Results of Atlantis since completion of the Initial Development Program have exceeded management's expectations. For the year ended December 31, 1995, Atlantis achieved average occupancy and average daily room rates of 85% and $122, respectively, which Sun believes are the highest the property has achieved during the last ten years. For the six months ended June 30, 1996, Atlantis achieved average occupancy and average daily room rates of 92% and $162, respectively. THE PROPERTIES AND CURRENT EXPANSION PROJECTS THE BAHAMAS PROPERTIES Sun, through its wholly owned Bahamian subsidiary, Sun International Bahamas Limited ("Sun Bahamas"), owns approximately 562 acres constituting almost 70% of Paradise Island. Approximately 220 acres are currently available for future development, of which 30 acres will be used for the Paradise Island Expansion. In addition to Atlantis, Sun's Paradise Island operations include the Ocean Club Golf & Tennis Resort (the "Ocean Club"), a luxury resort hotel with 59 guest rooms, the Paradise Paradise Beach Resort ("Paradise Paradise"), a 100-room beachfront resort hotel catering to value-conscious tourists and a championship 18-hole golf course (the "Paradise Island Golf Course"). The Atlantis Casino features approximately 830 slot machines and 70 table games in 30,000 square feet of gaming space. Paradise Island has extensive existing infrastructure and is easily accessible from the densely populated eastern United States. There are regularly scheduled airline flights from south Florida and New York City to either Paradise Island or neighboring Nassau, having flight times of approximately 50 minutes and three hours, respectively. THE PARADISE ISLAND EXPANSION, PIRATE'S COVE RENOVATION The further development of Paradise Island is the cornerstone of Sun's expansion plans, and its approximately 220 acres of undeveloped property provide Sun with an opportunity to expand Paradise Island into a master planned and highly themed destination resort centered around spectacular Bahamian beaches and the wonders of the ocean. Sun expects to begin construction of the Paradise Island Expansion during the fourth quarter of 1996 and to complete construction during the second quarter of 1998 at a cost of approximately $375 million. Sun does not expect the construction of the Paradise Island Expansion to interfere materially with its operations at Atlantis. The Paradise Island Expansion will include the construction of a 1,200-room deluxe hotel. It is also intended to significantly increase gaming space and convention and meeting facilities and to expand the ocean-themed attractions of Atlantis with the addition of numerous marine attractions. Upon completion of the Paradise Island Expansion, guests will be able to explore a significantly expanded ocean-themed adventure environment containing lagoons, waterfalls, watersports and exotic marine life exhibits. Consistent with Sun's strategy of offering accomodations that appeal to broad market segments within a single master planned destination resort, Sun has acquired the Pirate's Cove Hotel on Paradise Island located adjacent to Atlantis. Sun intends to use this property to house many of the construction laborers during the Paradise Island Expansion. In addition, Sun intends to implement the approximately $16 million Pirate's Cove Renovation, which is expected to be completed during the fourth quarter of 1998, to position 8 the Pirate's Cove Hotel as Atlantis' moderately priced unit. Assuming completion of the Paradise Island Expansion and the Pirate's Cove Renovation, Sun will operate five hotels on Paradise Island with an aggregate of approximately 3,000 hotel rooms. Sun continues to explore additional development opportunities on Paradise Island. Following the completion of the Paradise Island Expansion and the Pirate's Cove Renovation, management's long-term growth plan includes the potential development of additional resort properties on Paradise Island, each appealing to a distinct target market. For example, management anticipates that additional expansion opportunities will exist to develop room capacity that caters to budget-oriented customers at lower price points than those currently offered at Atlantis. In addition, management believes that similar expansion opportunities exist in the luxury end of the market with a further build-out of the Ocean Club. Other potential development projects may include residential villas, timeshare developments, marinas and golf course communities. Any further development projects on Paradise Island will be constructed on the approximately 190 acres of undeveloped land remaining after the Paradise Island Expansion, which includes extensive beach and golf course frontage, or on additional tracts of land that may be acquired from time to time. ARRANGEMENTS WITH BAHAMIAN GOVERNMENT In connection with the Paradise Island Expansion and in order to stimulate Sun's further investment in The Bahamas, the Government of the Commonwealth of The Bahamas and Sun have reached an agreement granting Sun certain tax relief and investment credits. See "BUSINESS OF SUN -- New Agreement with the Bahamian Government." CONNECTICUT Sun has a 50% interest in, and is a managing partner of, Trading Cove Associates, a Connecticut general partnership ("TCA"), which developed and manages the Mohegan Sun Casino for the Mohegan Tribe in Montville, Connecticut. Under a seven-year management agreement between TCA and the Mohegan Tribe (the "TCA Management Agreement"), TCA manages the Mohegan Sun Casino in exchange for payments ranging from 30% to 40% of pretax income (as defined in the TCA Management Agreement), depending upon profitability thresholds. Sun estimates the total cost of developing, constructing, equiping and opening the Mohegan Sun Casino to be approximately $305 million, exclusive of $13 million in initial working capital. The source of funds consists of (i) $175 million from the sale by the Mohegan Tribal Gaming Authority (the "Mohegan Gaming Authority") of Senior Secured Notes due 2002 (the "Mohegan Senior Notes") to certain institutional investors in a private placement (the "Mohegan Offering"), (ii) $40 million from the sale by the Mohegan Gaming Authority of Subordinated Notes due 2003 (the "Subordinated Notes") in connection with the Mohegan Offering (specifically, $38.3 million to Sun and $1.7 million to TCA), (iii) $50 million committed by Sun pursuant to a completion guarantee (the "Secured Completion Guarantee"), for which Sun received certain subordinated indebtedness (the "Secured Completion Guarantee Notes"), and (iv) $40 million of equipment financing. In addition, $13 million of initial working capital has been provided by a bank working capital facility. Construction of the Mohegan Sun Casino began in early October 1995, and the facility commenced operations on October 12, 1996. Sun believes that the demographics of the area surrounding the Mohegan Sun Casino are extremely favorable, with 10.2 million adults residing within 100 miles and 21.8 million adults residing within 150 miles of the Mohegan Sun Casino. The Mohegan Sun Casino is located approximately ten miles west of Foxwoods Resort & Casino ("Foxwoods"), which Sun believes to be one of the most profitable casinos in the world. Foxwoods, which is operated by the Mashantucket Pequot Tribe of Indians (the "Pequot Tribe"), reported approximately $595 million of revenues from slot machines for the 12 months ended June 30, 1996, an average of approximately $405 per slot machine per day. 9 The Mohegan Sun Casino is readily accessable from the interstate highway systems through its own four-lane access road with a direct exit from Connecticut Route 2A (a four-lane expressway), which connects to I-395, approximately one mile from the Mohegan Sun Casino. I-395 connects to I-95, the main highway that connects Boston, Providence and New York City, approximately five miles further away. Sun believes that the location, ease of access and distinctive northeastern Indian theme of the Mohegan Sun Casino should enable it to capture a significant share of the gaming market in the northeastern United States. INDIAN OCEAN Sun owns 22.8% of Sun Resorts Limited, a Mauritian company which is publicly traded on the Mauritius Stock Exchange ("Sun Indian Ocean"). Sun manages each of Sun Indian Ocean's six resort hotels pursuant to management contracts for which it receives management fees calculated as a percentage of revenue, adjusted operating income and development expenditures. Sun Indian Ocean is regarded as one of the premier resort operators in the Indian Ocean and owns five beach resort hotels in Mauritius and one in the Comoros, with a total of approximately 1,400 rooms. Mauritius and the Comoros are tropical islands located in the Indian Ocean approximately 1,200 miles and 200 miles, respectively, from the east coast of mainland Africa. The resorts in Mauritius and the Comoros are marketed primarily to tourists from Europe and South Africa. Two of the five Mauritian resorts offer deluxe accommodations and are acknowledged by the European travel trade to be among the finest resorts in the world. The other three Mauritian resorts and the hotel in the Comoros cater to mid-market travellers. Sun Indian Ocean owns five of the 16 major hotels in Mauritius, representing approximately 36% of the room inventory among properties with more than 80 rooms. FRANCE Sun owns an effective 25% interest in Societe de Participation et d'Investissements dans les Casinos, a private French company ("Sun France"), which owns four locals-oriented casinos in France, located in Nice, Chamonix and in the Marseilles districts of Cassis and Carry-le-Rouet. Sun provides various services to Sun France's four casinos under a technical assistance agreement pursuant to which Sun receives a fixed fee equivalent to approximately $800,000 per year (at current exchange rates). Sun's principal partners in Sun France are Chargeurs, S.A., Accor S.A. and the Barriere Family, the latter two of which have broad experience in the French domestic gaming and international lodging industries. Sun France operates in excess of 20,000 square feet of gaming space containing approximately 530 slot machines and 60 table games. HISTORY AND OWNERSHIP Sun was established in 1993 in order to acquire the Paradise Island Resort & Casino and related operations from Resorts International, Inc. (predecessor to GGE), which acquisition was completed in May 1994. In May 1995, Sun acquired from SIIL its equity interests in Sun Indian Ocean and Sun France and SIIL's project development and management businesses. SIIL, which controls approximately 55% of Sun's Ordinary Shares (approximately 48% assuming consummation of the Merger at a Conversion Number of .4324), is a private holding company in which each of Caledonia Investments plc, a United Kingdom company publicly traded on the London Stock Exchange ("Caledonia"), Safmarine & Rennies Holdings Limited, a South African company publicly traded on the Johannesburg Stock Exchange ("Safren"), and a trust for the family of Mr. Solomon Kerzner (Chairman of Sun) controls approximately a one-third equity interest. Additional information concerning Sun is included in the documents incorporated by reference in this Proxy Statement/ Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE." Sun's principal executive offices are located at Coral Towers, Paradise Island, The Bahamas and its telephone number is (809) 363-2516. See "BUSINESS OF SUN." 10 GRIFFIN GAMING & ENTERTAINMENT, INC. GGE is a holding company which, through its indirect wholly owned subsidiary Resorts International Hotel, Inc. ("RIH"), is principally engaged in the ownership and operation of Merv Griffin's Resorts Casino Hotel (the "Resorts Casino Hotel") in Atlantic City, New Jersey. The Resorts Casino Hotel has approximately 660 guest rooms, a 70,000 square foot casino, an 8,000 square foot simulcast parimutuel betting and poker area and related facilities and is located on the Boardwalk. In 1995 GGE purchased a 4.4 acre tract on the Boardwalk (the "Chalfonte Site") adjacent to the Resorts Casino Hotel on which it planned to construct up to 700 new hotel rooms, 70,000 square feet of casino space and a 2,000 space parking garage and transportation center (the "Chalfonte Project"). Subject to the receipt of regulatory approvals, GGE planned to break ground in the fall of 1996 on the infrastructure necessary to support the full expansion. The first phase of construction was expected to consist of 500 new hotel rooms, 50,000 square feet of casino space and the new garage. Construction costs for this phase were estimated at approximately $200 million. GGE also recently entered into a five year lease with an option to purchase approximately 3 acres to the north of the Resorts Casino Hotel, purchased an adjacent parcel of land and was successful in vacating the portion of North Carolina Avenue that lies between the Chalfonte Site and the Resorts Casino Hotel. These parcels together with the Chalfonte Site total more than 9 acres, all of which would play a role in GGE's expansion plans. Although the Merger Agreement limits the amount of capital expenditures that GGE can make on this project prior to consummation of the Merger or termination of the Merger Agreement, GGE is continuing with the process of obtaining permits and limited design activities. Sun has advised GGE that if and when the Merger is consummated, Sun expects to proceed with development of the Chalfonte Site, although it expects to reconsider the type of facility and significantly increase the amount to be invested (the "Revised Chalfont Project"). Approximately 10 acres of Boardwalk property owned by GGE are leased to Atlantic City Showboat, Inc. ("ACS") under a 99-year net lease expiring in 2082 (the "Showboat Lease"). All lease payments due under the Showboat Lease directly service GGE's interest obligations under GGE's $105,333,000 principal amount of First Mortgage Non-Recourse Pass-Through Notes (the "Showboat Notes"). The leased acreage is the site of the Showboat Casino Hotel ("Showboat") which is operated by ACS. GGE also owns approximately 7.7 acres in the South Inlet area and other real estate in the Atlantic City area, most of which is vacant land. Additional information concerning GGE is included in the documents incorporated by reference in this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE." GGE's principal executive offices are located at 1133 Boardwalk, Atlantic City, New Jersey 08401 and its telephone number is (609) 344-6000. See "BUSINESS OF GGE." SUN MERGER CORP. Sub was incorporated in Delaware on August 12, 1996, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has engaged in no other business other than incident to its creation and the Merger Agreement and the transactions contemplated by the Merger Agreement. Its principal executive offices are located at Coral Towers, Paradise Island, The Bahamas and its telephone number is (809) 363-2516. 11 THE SPECIAL MEETINGS SUN PURPOSE. The Sun Extraordinary General Meeting will be held in Room 501 of the Holiday Inn Crowne Plaza, 1605 Broadway, New York, NY 10019, on December 10, 1996, at 8:30 a.m., local time, to consider and vote upon a proposal to approve the Charter Amendment. See "SUN EXTRAORDINARY GENERAL MEETING--Purpose." RECORD DATE. Only holders of record of Ordinary Shares at the Sun Record Date are entitled to receive notice of and to vote at the Sun Extraordinary General Meeting. At the Sun Record Date, there were 29,245,184 Ordinary Shares outstanding, each of which entitles the registered holder thereof to one vote. See "SUN EXTRAORDINARY GENERAL MEETING--Record Date; Voting Rights." SHARE OWNERSHIP OF MANAGEMENT AND SIIL. At the close of business on the Sun Record Date, SIIL controlled approximately 55% of the Ordinary Shares then outstanding and directors and executive officers of Sun, as a group, were the owners of an aggregate of less than 1% of the Ordinary Shares then outstanding, excluding Ordinary Shares issuable upon exercise of options. See "SUN EXTRAORDINARY GENERAL MEETING--Share Ownership of Management and SIIL" and "PRINCIPAL SHAREHOLDER OF SUN." REQUIRED VOTE. Approval of the Charter Amendment will require the affirmative vote of the holders of a majority of the Ordinary Shares outstanding as of the Sun Record Date. SIIL has entered into the Sun Stockholder Agreement, the effect of which is to ensure approval of the Charter Amendment. See "THE STOCKHOLDER AGREEMENTS--Sun Stockholder Agreement." An abstention with respect to the Charter Amendment will have the effect of a vote cast against such proposal. The Ordinary Shares represented by valid proxies received will be voted in the manner specified on the proxies. Where a specific choice is not indicated, the Ordinary Shares represented by valid proxies received will be voted "FOR" approval of the Charter Amendment. Brokers who hold Ordinary Shares as nominees will not have discretionary authority to vote such Ordinary Shares on the Charter Amendment in the absence of instructions from the beneficial owners thereof. Any shares which are not voted because the nominee-broker lacks such discretionary authority will have the effect of votes cast against the Charter Amendment. See "SUN EXTRAORDINARY GENERAL MEETING--Required Vote." GGE PURPOSE. The GGE Special Meeting will be held at Merv Griffin's Resorts Casino Hotel, located at 1133 Boardwalk, Atlantic City, NJ 08401, on December 10, 1996, at 9:30 a.m., local time, to consider and vote upon a proposal to adopt the Merger Agreement, which provides for the Merger of Sub with and into GGE, with GGE surviving as a wholly owned subsidiary of Sun. See "GGE SPECIAL MEETING-- Purpose." RECORD DATE. Only holders of record of GGE Common Stock at the close of business on the GGE Record Date are entitled to receive notice of and to vote at the GGE Special Meeting. At the GGE Record Date, there were 7,942,785 shares of GGE Common Stock outstanding. Each share of GGE Common Stock entitles the registered holder thereof to one vote at the GGE Special Meeting. See "GGE SPECIAL MEETING--Record Date; Voting Rights." SHARE OWNERSHIP OF MANAGEMENT AND SIGNIFICIANT GGE STOCKHOLDERS. On the GGE Record Date, directors and executive officers of GGE, as a group, were the beneficial owners of an aggregate of 2,241,528 shares (approximately 28% of the GGE Common Stock then outstanding), excluding shares issuable upon exercise of their options and warrants. Of these shares, 2,125,108 were beneficially owned by Merv Griffin, Chairman of the Board of GGE, through Atlantic Resorts Holdings, Inc. ("Atlantic"), a corporation controlled by Mr. Griffin (each of Atlantic and Merv Griffin, a "Significant GGE Stockholder" and, together, the "Significant GGE Stockholders"). See "GGE SPECIAL MEETING--Share Ownership of Management and Significant Stockholders." 12 REQUIRED VOTE. Adoption of the Merger Agreement will require the affirmative vote of the holders of a majority of the outstanding shares of GGE Common Stock. The shares of GGE Common Stock represented by valid proxies received will be voted in the manner specified on the proxies. Where a specific choice is not indicated, the shares represented by valid proxies received will be voted "FOR" the adoption of the Merger Agreement. An abstention will have the effect of a vote cast against adoption of the Merger Agreement. Brokers who hold shares of GGE Common Stock as nominees will not have discretionary authority to vote such shares in the absence of instructions from the beneficial owners thereof. Any shares which are not voted because the nominee-broker lacks such discretionary authority will have the effect of votes cast against adoption of the Merger Agreement. See "GGE SPECIAL MEETING--Required Vote." Pursuant to the terms of the GGE Stockholder Agreement, the Significant GGE Stockholders have agreed, among other things, subject to certain conditions set forth therein, to vote their shares of GGE Common Stock in favor of the adoption of the Merger Agreement at the GGE Special Meeting (or alternatively, upon Sun's request, to grant Sun a proxy to so vote such shares, provided Sun has obtained all necessary approvals in connection with such proxy). The general effect of the GGE Stockholder Agreement is to ensure the affirmative vote at the GGE Special Meeting of a significant number of shares of GGE Common Stock. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." PROPOSED SUN CHARTER AMENDMENT The proposed Charter Amendment, if approved, will add provisions to the Sun Charter which would require any holder of debt or equity securities of Sun (including Ordinary Shares) who was determined by the NJCC to be a Disqualified Holder (as defined in the NJCCA) (the date on which such determination was made, the "Notice Date") to dispose of such securities within 120 days of the determination of such holder's disqualification. The provisions would also allow Sun to redeem any securities held by a Disqualified Holder beyond the 120 day time limit at the lesser of the lowest closing sale price of such securities between the Notice Date and 120 days after the Notice Date and the price paid for such securities when acquired. The effect of the Charter Amendment and Sun holding a New Jersey casino license would be to give the NJCC the ability to prevent certain people from owning Sun's debt or equity securities. THE MERGER AND THE MERGER AGREEMENT GENERAL. At the Effective Time of the Merger, Sub will be merged with and into GGE, with GGE continuing as the surviving corporation and a wholly owned subsidiary of Sun. As a result of the Merger, the separate corporate existence of Sub will cease and GGE will succeed to all the rights and be responsible for all the obligations of Sub in accordance with the Delaware General Corporation Law (the "DGCL"). Subject to the terms and conditions of the Merger Agreement, each share of GGE Common Stock outstanding immediately prior to the Effective Time (other than shares owned directly or indirectly by Sun or GGE, which will be canceled) will be converted into the right to receive the Conversion Number (as defined below) of a fully paid and nonassessable Ordinary Share. "Conversion Number" means .4324; PROVIDED, HOWEVER, that if the average of the closing sales prices of one Ordinary Share on the NYSE Composite Transactions List (as reported in the WALL STREET JOURNAL or, if not reported thereby, any other authoritative source) for each of the 15 consecutive trading days immediately preceding the fifth trading day prior to the Effective Time (the "Average Market Price") is less than $47.41, then the Conversion Number shall be the quotient, rounded to the fourth decimal place, obtained by dividing 20.5 by the Average Market Price. However, Sun may terminate the Merger Agreement and elect not to consummate the transactions contemplated thereby if the Average Market Price is less than $41.625; PROVIDED, HOWEVER, that Sun shall furnish GGE with written notice two NYSE trading days in advance of the date that it intends to terminate the Merger Agreement for this reason and, during such two trading day period, GGE 13 shall be entitled to elect to go forward with the Merger and, if GGE shall timely make such election, Sun shall not terminate the Merger Agreement for this reason and the "Conversion Number" shall mean .4925. Cash will be paid to holders of GGE Common Stock in lieu of any fractional Ordinary Shares. Also, subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of GGE Class B Stock will be converted into the right to receive the Class B Consideration. As of the Effective Time, all such shares of GGE Common Stock and GGE Class B Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of GGE Common Stock or GGE Class B Stock shall cease to have any rights with respect thereto, except the right to receive the Conversion Number of an Ordinary Share plus cash in lieu of fractional Ordinary Shares or the Class B Consideration, as the case may be, to be issued in consideration therefor upon surrender of the relevant certificates in accordance with the terms of the Merger Agreement, without interest. As of the Effective Time, the fraction of an Ordinary Share into which a share of GGE Class B Stock is converted shall trade as part of a Unit. HOLDERS OF GGE COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES REPRESENTING SHARES OF GGE COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED AS SOON AS PRACTICABLE AFTER THE MERGER TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING SHARES OF GGE COMMON STOCK IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE MERGER. HOLDERS OF GGE COMMON STOCK SHOULD SEND CERTIFICATES REPRESENTING GGE COMMON STOCK TO THE EXCHANGE AGENT (AS DEFINED) ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER OF TRANSMITTAL. SIMILARLY, IF THE MERGER IS CONSUMMATED, A LETTER OF TRANSMITTAL WILL BE MAILED AS SOON AS PRACTICABLE AFTER THE MERGER TO EACH PERSON WHO WAS A HOLDER OF OUTSTANDING SHARES OF GGE CLASS B STOCK IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE MERGER. HOLDERS OF GGE CLASS B STOCK SHOULD SEND CERTIFICATES REPRESENTING UNITS COMPRISING SHARES OF GGE CLASS B STOCK AND JUNIOR MORTGAGE NOTES TO THE EXCHANGE AGENT ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN, THE LETTER OF TRANSMITTAL. See "THE MERGER AGREEMENT--Exchange of GGE Common Stock and GGE Class B Stock." The Merger will become effective upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware unless the Certificate of Merger provides for a later time of effectiveness. The filing of the Certificate of Merger will occur as soon as practicable on or after the Closing Date (as defined in the Merger Agreement). See "THE MERGER AGREEMENT--Conditions to the Consummation of the Merger; Conditions to Each Party's Obligation to Effect the Merger." ORDINARY SHARES TO BE ISSUED. Based on the number of shares of GGE Common Stock and GGE Class B Stock outstanding at the GGE Record Date and based on an assumed Conversion Number of .4324 and Class B Consideration of .1928 of an Ordinary Share per share of GGE Class B Stock, 4,113,545 Ordinary Shares would be issued upon consummation of the Merger, assuming exercise of all outstanding options and warrants for shares of GGE Common Stock prior to the Effective Time. RECOMMENDATION OF THE SUN BOARD. The Sun Board has unanimously approved the Merger Agreement and the Charter Amendment. THE SUN BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF SUN VOTE "FOR" APPROVAL OF THE CHARTER AMENDMENT AT THE SUN EXTRAORDINARY GENERAL MEETING. See "THE MERGER--Sun's Reasons for the Merger; Recommendation of its Board of Directors" and "PROPOSED SUN CHARTER AMENDMENT." OPINION OF SUN'S FINANCIAL ADVISOR. Bear, Stearns & Co. Inc. ("Bear Stearns") has acted as financial advisor to Sun in connection with the Merger and has delivered its written opinion (the "Bear Stearns Opinion") dated August 18, 1996, to the Sun Board, to the effect that, based upon and subject to the 14 various considerations set forth therein, as of the date of such opinion, the Merger is fair, from a financial point of view, to Sun. The full text of the Bear Stearns Opinion which sets forth a description of the assumptions made, general procedures followed, factors considered and limitations on the review undertaken, is attached hereto as Annex IV and should be read carefully in its entirety. See "THE MERGER-- Opinion of Sun's Financial Advisor." RECOMMENDATION OF THE GGE BOARD. The GGE Board has unanimously determined that the Merger is advisable and fair to and in the best interests of GGE and its stockholders and has unanimously approved the Merger Agreement. THE GGE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF GGE COMMON STOCK VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AT THE GGE SPECIAL MEETING. For a discussion of the interests that certain directors and executive officers of GGE have with respect to the Merger that are different from, or in addition to, the interests of stockholders of GGE generally, see "THE MERGER--Interests of Certain Persons in the Merger." Such interests, together with other relevant factors, were considered by the GGE Board in making its recommendation and approving the Merger Agreement. See "THE MERGER--GGE's Reasons for the Merger; Recommendation of its Board of Directors." OPINION OF GGE'S FINANCIAL ADVISOR. Morgan Stanley & Co. Incorporated ("Morgan Stanley") was retained by GGE to provide its written opinion (the "Morgan Stanley Opinion") dated August 19, 1996 to the GGE Board to the effect that, based upon and subject to the various considerations set forth therein, as of the date of such opinion, the consideration to be received by the holders of shares of GGE Common Stock (other than Sun and its affiliates) pursuant to the Merger Agreement is fair to such holders from a financial point of view. The full text of the Morgan Stanley Opinion which sets forth the assumptions made, general procedures followed, factors considered and limitations on the review undertaken by Morgan Stanley in rendering its opinion, is attached hereto as Annex V and should be read carefully in its entirety. See "THE MERGER--Opinion of GGE's Financial Advisor." INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain directors and executive officers of GGE have certain interests in the Merger that are different from, or in addition to, the interests of stockholders of GGE generally. Such interests include, among other things, potential payments under severance agreements and the assumption of outstanding options and warrants to purchase GGE Common Stock by Sun and the substitution of Ordinary Shares as the underlying stock in such options and warrants. It is expected that each of Thomas E. Gallagher (President and Chief Executive Officer of GGE) and Matthew B. Kearney (Executive Vice President--Finance and Chief Financial Officer of GGE) will enter into a severance agreement with GGE. Each severance agreement is expected to provide, among other things, for the payment of certain benefits to the executive officer in the event of termination. Also, contingent upon consummation of the Merger and pursuant to the Merger Agreement, GGE has granted to its executive officers performance bonuses in the aggregate amount of $2,725,000. See "THE MERGER--Interests of Certain Persons in the Merger." In addition, subject to certain conditions, for six years from the Effective Time, Sun has agreed to maintain (i) GGE's current directors' and officers' insurance and indemnification policy, to the extent that such policy provides coverage for events occurring at or prior to the Effective Time, for all persons who were directors and officers of GGE on the date of the Merger Agreement and (ii) all rights to indemnification for all acts or omissions occurring at or prior to the Effective Time for all current and former directors and officers of GGE. See "THE MERGER--Interests of Certain Persons in the Merger" and "THE MERGER AGREEMENT--Indemnification, Exculpation and Insurance." LICENSE AND SERVICES AGREEMENT. Upon the closing of the Merger, GGE, The Griffin Group, Inc., a corporation controlled by Mr. Griffin (the "Griffin Group"), and RIH will enter into a License and Services Agreement (the "License and Services Agreement") pursuant to which (a) the current license and services agreement between such parties will be terminated and (b) the Griffin Group will provide to GGE, RIH and Sun a non-exclusive license to use the name and likeness of Merv Griffin to advertise and promote Resorts Casino Hotel, Atlantis and the Mohegan Sun Casino. The License and Services 15 Agreement is to continue to September 16, 2001, unless terminated earlier by either GGE or the Griffin Group under certain circumstances. Also, in accordance with the terms of the License and Services Agreement, total aggregate compensation of $10,973,000 is to be paid to the Griffin Group upon execution of such agreement which amount may be retained by the Griffin Group in the event of any termination. A copy of the form of License and Services Agreement is attached hereto as Annex VI. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement" and "THE MERGER--Interests of Certain Persons in the Merger." APPRAISAL AND DISSENTERS' RIGHTS. Pursuant to the IBCA, holders of Ordinary Shares who abstain from voting or who vote against a transaction or modification of their rights as shareholders (such as the Charter Amendment) have two potential remedies under Bahamian law. Such holders could allege the transaction or modification was oppressive or unfairly disregarded their rights and could apply to a Bahamian court under the IBCA for an order to restrain such transaction or modification. The burden of proving to the court that the necessary oppression or prejudice exists is onerous and rests with the holders. If any holder were successful with such a claim, a Bahamian court would have the power to issue a wide variety of orders, including an order requiring liquidation of Sun. In addition, holders of 15% or more of the Ordinary Shares who did not vote in favor of a modification of their rights as shareholders could apply to a Bahamian court to have such modification cancelled. Such an application must be made within 21 days after the date upon which the consent was given or the resolution was passed authorizing the modification of class rights. To be successful, the applicants would have to satisfy the court that the modification would unfairly prejudice them. If such an application were made, the modification in rights would not take effect until confirmed by the court and the court would have the power to cancel the modification if satisfied that the applicants would be unfairly prejudiced. A Bahamian court has the discretion to award costs and expenses in accordance with established principles, which generally results in the successful party being awarded its costs and expenses against the unsuccessful party. Under the DGCL, the stockholders of GGE are not entitled to appraisal rights with respect to the adoption of the Merger Agreement. See "THE MERGER--Appraisal and Dissenters' Rights." CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Cravath, Swaine & Moore, counsel to Sun, and Gibson, Dunn & Crutcher LLP, counsel to GGE, have delivered to Sun and GGE, respectively, opinions dated the date hereof (which will be confirmed as of the Closing Date), to the effect that the Merger will constitute a "reorganization" within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and Sun, Sub and GGE will each be a party to the reorganization within the meaning of Section 368(b) of the Code. Based upon such opinion, no gain or loss will be recognized by the stockholders of GGE upon the exchange of their GGE Common Stock or GGE Class B Stock solely for Ordinary Shares pursuant to the Merger, except with respect to cash, if any, received in lieu of fractional Ordinary Shares. See "THE MERGER--Certain Federal Income Tax Consequences" and "THE MERGER AGREEMENT--Conditions to the Consummation of the Merger; Conditions to Each Party's Obligation to Effect the Merger." GOVERNMENTAL AND REGULATORY APPROVALS. The respective obligations of Sun, Sub and GGE to consummate the Merger are subject to certain conditions, including: (i) the required approvals of the NJCC having been obtained; (ii) the absence of any statute, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order of any court or other governmental entity preventing consummation of the Merger; (iii) the approval for listing on the NYSE of the Ordinary Shares issuable pursuant to the Merger and the approval for continued listing on the ASE of the Junior Mortgage Notes and the fractional Ordinary Shares which will trade with each Unit; and (iv) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). See "THE MERGER--Regulatory Approvals" and "THE MERGER 16 AGREEMENT--Conditions to the Consummation of the Merger; Conditions to Each Party's Obligation to Effect the Merger." INTERIM CASINO AUTHORIZATION. Sun's obligation to consummate the Merger is conditioned on approval by the NJCC of Sun's application for qualification (a "Plenary License") as a Holding Company (as defined in the NJCCA). On October 30, 1996, Sun received interim casino authorization from the NJCC (an "ICA"). Receipt of an ICA gives Sun the option to close the Merger before receipt of the Plenary License. Although Sun has the option to complete the acquisition based on an ICA, pursuant to the Merger Agreement, it is not obligated to do so until its receives a Plenary License. The Division of Gaming Enforcement has stated that it expects to complete its full investigation of Sun by the spring of 1997 and the NJCC would be expected to have a hearing on Sun's Plenary License promptly thereafter. See "THE MERGER--Regulatory Approvals--New Jersey Casino Control Commission Approval" and "RISK FACTORS--Risk Factors Related to the Merger--Consummation of the Merger Prior to Receipt of Plenary License." ACCOUNTING TREATMENT. The Merger is expected to be accounted for under the "purchase" method of accounting, in accordance with generally accepted accounting principles. See "THE MERGER--Anticipated Accounting Treatment." COMPARATIVE PER SHARE MARKET INFORMATION. Set forth below are the last reported sales prices of Ordinary Shares and GGE Common Stock on August 16, 1996, the last full trading day prior to the execution of the Merger Agreement, as reported on the NYSE Composite Transactions Tape and ASE Transactions List, respectively, and the equivalent pro forma sale price of GGE Common Stock on such date, as determined by multiplying such last reported sale price of Ordinary Shares by an assumed Conversion Number of .4324: Ordinary Shares..................................................... $ 51.88 GGE Common Stock.................................................... $ 11.88 GGE equivalent...................................................... $ 22.43
On October 31, 1996, the last trading day prior to the date of this Proxy Statement/Prospectus, the last reported sales prices of Ordinary Shares and GGE Common Stock, as reported on the NYSE Composite Transactions Tape, and the ASE Transactions List, respectively, were $47.25 per share and $20.75 per share, respectively. As described under "--General", the Conversion Number is subject to adjustment if the Average Market Price of Ordinary Shares is less than $47.41. TERMINATION OF THE MERGER AGREEMENT; FEES AND EXPENSES. The Merger Agreement may be terminated prior to the Effective Time by mutual agreement of Sun, Sub and GGE. The Merger Agreement may also be terminated prior to the Effective Time by either Sun or GGE (i) if (a) the GGE Stockholder Approval is not obtained by reason of the failure to obtain the required vote at the GGE Special Meeting or any adjournment or postponement thereof; (b) the Merger is not consummated on or before June 30, 1997, subject to certain exceptions; or (c) any governmental entity has issued an order enjoining or otherwise prohibiting the Merger and such order becomes final and nonappealable; or (ii) provided that the terminating party is not then in material breach of the Merger Agreement, if the other party breaches any of the representations, warranties, covenants or other agreements made by such party and such breach has not been or cannot be cured within 30 days following written notice to the breaching party and such breach would entitle the non-breaching party not to consummate the transactions contemplated by the Merger Agreement. If, in the opinion of the GGE Board, after consultation with outside counsel, failure to do so would be inconsistent with its fiduciary duties to GGE's stockholders under applicable law, the GGE Board may terminate the Merger Agreement and enter into an agreement with respect to or consummate a transaction constituting a "competitive proposal" (as defined in the Merger Agreement) at any time after the second business day following Sun's receipt of written notice advising Sun that the GGE Board has received a competitive proposal, specifying the material terms and conditions of such competitive proposal 17 and identifying the person making such competitive proposal; PROVIDED that GGE may not enter into an agreement with respect to a competitive proposal unless (a) GGE shall have furnished Sun with written notice no later than 12:00 noon two business days in advance of any date that it intends to enter into such agreement and (b) GGE, at the time of such termination, pays certain expenses and a termination fee to Sun, as provided in the Merger Agreement. The Merger Agreement is terminable by either Sun or GGE if the NJCC denies Sun a permanent license under the NJCCA and such denial becomes final and nonappealable. Finally, the Merger Agreement may be terminated by Sun (i) if (a) the GGE Board or any committee thereof shall have withdrawn or modified in a manner adverse to Sun or Sub its approval or recommendation of the Merger or the Merger Agreement, or approved or recommended any takeover proposal, (b) GGE shall have entered into any agreement with respect to any competitive proposal in accordance with the terms of the Merger Agreement or (c) the GGE Board or any committee thereof shall have resolved to take any of the actions described in (a) or (b); (ii) if upon a vote at a duly held Sun Shareholders Meeting (as defined in the Merger Agreement) or any adjournment thereof at which the Sun Shareholder Approval shall have been voted upon, the Sun Shareholder Approval shall not have been obtained; or (iii) if the Average Market Price is less than $41.625; provided, however, that Sun shall furnish GGE with written notice two NYSE trading days in advance of the date that it intends to terminate the Merger Agreement for this reason and, during such two trading day period, GGE shall be entitled to elect to go forward with the Merger and, if GGE shall timely make such election, Sun shall not terminate the Merger Agreement for this reason (and the Conversion Number will then be .4925). See "THE MERGER AGREEMENT--Termination." The Merger Agreement also provides for the payment of a termination fee under certain circumstances. See "THE MERGER AGREEMENT--Fees and Expenses." 18 SUN INTERNATIONAL HOTELS LIMITED SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (in thousands, except per share and operating data) The selected consolidated historical financial data presented below have been derived from and should be read in conjunction with the Sun audited consolidated financial statements and unaudited interim consolidated financial statements in the 1995 Sun 20-F and in Sun's Report on Form 6-K dated September 6, 1996, which are incorporated by reference in this Proxy Statement/Prospectus. Unaudited interim data reflects, in the opinion of Sun management, all adjustments considered necessary for a fair presentation of results of such interim period. Results for unaudited interim periods are not necessarily indicative of results which may be expected for any other interim or annual period. As a result of Sun's acquisition of its Paradise Island operations in May 1994 and the Initial Development Program in 1994, the earnings and operating data of Sun for 1995 and subsequent periods are not comparable to such data for prior periods. Sun publishes its financial statements in U.S. dollars and in accordance with U.S. GAAP. In this Proxy Statement/Prospectus, references to U.S. dollars, US$ and $ are to U.S. currency.
SIX MONTHS ENDED YEAR ENDED ------------------------ DECEMBER 31, JUNE 30, JUNE 30, 1995 1995 1996 -------------- ----------- ----------- (UNAUDITED) STATEMENT OF OPERATIONS DATA: Gaming............................................ $ 79,605 $ 42,206 $ 40,826 Rooms............................................. 50,412 25,551 36,001 Food and beverage................................. 50,806 25,395 33,390 Tour operations................................... 16,338 8,339 8,752 Managmeent fee income............................. 4,858 2,382 2,338 Other revenues.................................... 21,195 10,861 12,710 Promotional allowances............................ (9,274) (5,745) (7,136) Net revenues...................................... 213,940 108,989 126,881 Income from operations............................ 22,990 15,768 19,157 Equity in earnings of associated corporations..... 2,313 900 995 Net income........................................ 18,359 13,487 23,467 Net income per share before accretion (a)......... $ 0.87 $ 0.69 $ 0.86 Weighted average number of shares outstanding..... 21,194 19,606 27,332 OTHER DATA: EBITDA (b)........................................ $ 33,226 $ 20,859 $ 24,981 Cash flows from operating activities.............. 24,560 14,263 18,820 Cash flows from investing activities.............. (45,843) (32,988) (5,485) Cash flows from financing activities.............. 1,337 1,893 136,111 PARADISE ISLAND OPERATING DATA: Average number of rooms........................... 1,318 1,318 1,306 Average occupancy................................. 83% 83% 91% Average daily room rate........................... $ 126 $ 129 $ 167 Average number of slot machines................... 811 797 827 Win per slot machine per day...................... $ 115 $ 121 $ 128 Average number of table games..................... 68 69 69 Win per table game per day........................ $ 1,851 $ 1,978 $ 1,729
19
AT JUNE 30, AT DECEMBER -------------------- 31, 1995 1995 1996 ------------- --------- --------- (UNAUDITED) BALANCE SHEET RELATED DATA: Cash and cash equivalents............................ $ 14,890 $ 18,073 $ 164,336(c) Total assets......................................... 370,427 322,096 517,467 Total debt........................................... 121,153 81,452 1,122 Shareholders' equity................................. 135,611 131,380 484,785
- ------------------------ (a) Prior to the public offering of Ordinary Shares that was consummated on March 1, 1996 (the "Equity Offering"), the holders of Sun's Series A Ordinary Shares had a put right requiring Sun to purchase any such shares tendered at a price of $17.50 per share (subject to certain adjustments). Prior to the termination of such put right concurrently with the consummation of the Equity Offering, Sun accreted the difference between the original issue price and the put right price by charging amounts to equity based on the effective interest method. (b) EBITDA represents income from operations before interest expense, taxes and depreciation and amortization. EBITDA should not be construed as an alternative to operating income or any other measure of performance determined in accordance with U.S. GAAP or as an indicator of Sun's operating performance, liquidity or cash flows generated by operating, investing and financing activities. Sun has included the information concerning EBITDA as management understands it is used by certain investors as one measure of cash flow. This line enables comparison of Sun's performance with the performance of other companies that report EBITDA. (c) Includes $15 million used by Sun to cash collateralize a letter of credit issued in connection with the Mohegan Sun Casino and $6.1 million used by Sun to cash collateralize Sun France borrowings. 20 GRIFFIN GAMING & ENTERTAINMENT, INC. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (in thousands, except per share data) The selected consolidated historical financial data presented below have been derived from and should be read in conjunction with the GGE audited consolidated financial statements and unaudited interim consolidated financial statements in the 1995 GGE 10-K and in GGE's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, which are incorporated by reference in this Proxy Statement/ Prospectus. Unaudited interim data reflect, in the opinion of GGE management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of results of such interim period. Results for unaudited interim periods are not necessarily indicative of results which may be expected for any other interim or annual period. See "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the 1995 GGE 10-K and in Forms 10-Q filed by GGE subsequent thereto.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------- -------------------- OPERATING INFORMATION (NOTE A) 1991 1992 1993 1994 1995 1995 1996 - ---------------------------------------- --------- --------- --------- --------- --------- --------- --------- Operating revenues...................... $ 418,243 $ 436,934 $ 439,564 $ 353,016 $ 301,740 $ 146,461 $ 142,973 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Earnings (loss) from operations (Note B).................................... $ 16,036 $ 21,502 $ 12,898 $ (48,570) $ 41,678 $ 18,337 $ 12,591 Recapitalization costs (Note C)......... (2,848) (8,789) (5,232) Proceeds from litigation trust (Note D).................................... 2,542 Other income (deductions), net (Note E).................................... (58,438) (73,456) (105,273) (47,631) (25,779) (12,621) (12,906) --------- --------- --------- --------- --------- --------- --------- Earnings (loss) before income taxes and extraordinary items................... (42,402) (54,802) (101,164) (98,891) 15,899 5,716 (315) Income tax benefit (expense) (Note F)... 831 1,348 (1,000) --------- --------- --------- --------- --------- --------- --------- Earnings (loss) before extraordinary items................................. (41,571) (53,454) (102,164) (98,891) 15,899 5,716 (315) Extraordinary items (Note G)............ 190,008 --------- --------- --------- --------- --------- --------- --------- Net earnings (loss)..................... $ (41,571) $ (53,454) $(102,164) $ 91,117 $ 15,899 $ 5,716 $ (315) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Per share data--primary: Earnings (loss) before extraordinary items............................... $ (10.35) $ (13.27) $ (25.34) $ (15.13) $ 1.87 $ .68 $ (.04) Extraordinary items................... 29.07 --------- --------- --------- --------- --------- --------- --------- Net earnings (loss)................... $ (10.35) $ (13.27) $ (25.34) $ 13.94 $ 1.87 $ .68 $ (.04) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Per share data--fully diluted: Net earnings (loss)................... $ 1.83 $ .66 $ (.04) --------- --------- --------- --------- --------- ---------
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AT DECEMBER 31, ----------------------------------------------------- AT JUNE 30, BALANCE SHEET INFORMATION (NOTE A) 1991 1992 1993 1994 1995 1996 - ------------------------------------------------ --------- --------- --------- --------- --------- ----------- Total assets.................................... $ 567,890 $ 568,950 $ 575,785 $ 317,248 $ 338,451 $ 342,594 Currrent maturities of long-term debt (Note H)............................................ $ 1,571 $ 828 $ 466,336 $ 5 $ 589 $ 613 Long-term debt, excluding current maturities (Note H)...................................... $ 392,667 $ 460,712 $ 85,029 $ 212,466 $ 217,356 $ 219,129 Shareholders' equity (deficit).................. $ 36,099 $ (17,262) $(113,744) $ 10,031 $ 25,947 $ 25,632
NOTES TO SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA NOTE A: As part of a prepackaged bankruptcy reorganization (the "GGE Restructuring") which was effective on May 3, 1994, GGE sold its Paradise Island subsidiaries as well as certain U.S. assets that supported the Paradise Island operations, and GGE's scheduled airline operation which serviced routes between south Florida and Paradise Island was effectively disposed of. Also as part of the GGE Restructuring, GGE exchanged $481,907,000 principal amount of publicly held debt securities (the "Series Notes") for $160,000,000 principal amount of publicly held debt securities and other consideration. See Note 2 of Notes to Consolidated Financial Statements in the 1995 GGE 10-K. 21 NOTE B: The loss from operations in 1994 includes a $72,463,000 loss on the sale of the Paradise Island operations and properties and a charge of $20,525,000 for the write-down of certain non-operating properties to net realizable value. NOTE C: Recapitalization costs incurred in 1992, 1993 and 1994 relate to the GGE Restructuring. NOTE D: Proceeds from the litigation trust represents cash distributed to GGE from a litigation trust established under a previous plan of reorganization to pursue certain claims against a former affiliate. NOTE E: This item includes interest income, interest expense and amortization of debt discounts. NOTE F: For the years 1991 and 1992 GGE accounted for income taxes in accordance with Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes." Effective January 1, 1993, GGE adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." There was no effect on the accompanying financial data nor was there a cumulative effect of adopting this statement. The income tax benefits reported in 1991 and 1992 represent federal income tax refunds. In August 1993 tax law changes were enacted which resulted in an increase in GGE's federal income tax rate. This increase resulted in a $1,000,000 increase in GGE's deferred income tax liability and a deferred income tax provision of the same amount. NOTE G: As described in Note A, as part of the GGE Restructuring, GGE exchanged its Series Notes for certain consideration. The difference between the carrying value of the Series Notes and the sum of the fair values of the items exchanged therefor resulted in a gain of $186,000,000 which is reported as an extraordinary item. In November 1994, a subsidiary of GGE purchased 12,899 Units comprising $12,899,000 principal amount of Junior Mortgage Notes and 12,899 shares of GGE Class B Stock at a price of $6,740,000. The resulting gain of $4,008,000 was recorded as an extraordinary item. NOTE H: These items are presented net of unamortized discounts. 22 SUN INTERNATIONAL HOTELS LIMITED SELECTED UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL DATA (in thousands, except per share data) The selected unaudited consolidated pro forma statement of operations data provided below have been prepared assuming that the Merger had occurred on January 1, 1995. The selected unaudited consolidated pro forma balance sheet data presented below have been prepared assuming that the Merger had been consummated on June 30, 1996. The selected unaudited consolidated pro forma financial data is presented for informational purposes only and do not purport to present what the consolidated balance sheet would have been had the Merger, in fact, occurred on June 30, 1996 or what the consolidated results of operations for the year ended December 31, 1995 or for the six months ended June 30, 1996 would have been had the Merger, in fact, occurred on January 1, 1995 or to project the results of operations for any future period. The unaudited pro forma financial data set forth below should be read in conjunction with (i) the Financial Statements and related notes thereto and the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 1995 Sun 20-F and the Forms 6-K filed by Sun subsequent thereto, each of which is incorporated by reference in this Proxy Statement/ Prospectus, and (ii) the Unaudited Pro Forma Financial Statements and the notes thereto set forth in this Proxy Statement/Prospectus.
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 ----------------- ----------------- (UNAUDITED) Statement of Operations Data: Gaming.................................................................... $ 347,829 $ 168,072 Rooms..................................................................... 66,477 43,015 Food and beverage......................................................... 78,574 46,229 Tour operations........................................................... 16,338 8,752 Management fee income..................................................... 4,858 2,338 Other revenues............................................................ 39,372 21,366 Promotional allowances.................................................... (37,768) (19,918) Net revenues.............................................................. 515,680 269,854 Depreciation and amortization............................................. 27,277 13,779 Income from operations.................................................... 61,079 29,998 Interest expense, net..................................................... 29,120 7,545 Equity in earnings of associated corporations............................. 2,313 995 Net income................................................................ 31,119 23,485 Net income per share before accretion (a)................................. $ 1.24 $ 0.75 Weighted average number of shares outstanding............................. 25,088 31,226 Other Data: EBITDA (b)................................................................ $ 88,356 $ 43,777 AT JUNE 30, 1996 ----------------- (UNAUDITED) Balance Sheet Related Data: Cash and cash equivalents (c)................................................................ $ 204,692 Total assets................................................................................. 1,062,303 Total debt................................................................................... 252,598 Shareholders' equity......................................................................... 679,609
23 SUN INTERNATIONAL HOTELS LIMITED SELECTED UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL DATA - ------------------------ (a) Prior to the public offering of Ordinary Shares that was consummated on March 1, 1996 (the "Equity Offering"), the holders of Sun's Series A Ordinary Shares had a put right requiring Sun to purchase any such shares tendered at a price of $17.50 per share (subject to certain adjustments). Prior to the termination of such put right concurrently with the consummation of the Equity Offering, Sun accreted the difference between the original issue price and the put right price by charging amounts to equity based on the effective interest method. (b) EBITDA represents income from operations before interest expense, taxes and depreciation and amortization. EBITDA should not be construed as an alternative to operating income or any other measure of performance determined in accordance with U.S. GAAP or as an indicator of Sun's operating performance, liquidity or cash flows generated by operating, investing and financing activities. Sun has included the information concerning EBITDA as management understands it is used by certain investors as one measure of cash flow. This line enables comparison of Sun's performance with the performance of other companies that report EBITDA. (c) Includes $15 million used by Sun to cash collateralize a letter of credit issued in connection with the Mohegan Sun Casino and $6.1 million used by Sun to cash collateralize Sun France borrowings. 24 RISK FACTORS In considering whether to approve the Charter Amendment or adopt the Merger Agreement, as the case may be, the shareholders of Sun and stockholders of GGE should consider the following matters. CAUTIONARY STATEMENT Sun and GGE wish to caution readers that all of their forward-looking statements in this Proxy Statement/Prospectus, which include all statements which, at the time made, speak about the future, are based upon Sun and GGE's interpretation of what they believe are significant factors affecting their businesses. Sun and GGE believe the important factors contained in this "RISK FACTORS" section, among others, in some cases have affected, and, in the future, could affect, Sun and/or GGE's actual results and could cause Sun and/or GGE's actual results for 1996, and beyond, to differ materially from those expressed in any forward-looking statements made by, or on behalf of, either Sun or GGE. RISK FACTORS RELATED TO THE MERGER FIXED RANGE OF EXCHANGE RATIOS DESPITE POSSIBLE CHANGE IN STOCK PRICES The Conversion Number is expressed in the Merger Agreement as a fixed ratio which is subject to adjustment in the event the Average Market Price is below $47.41 but which is not subject to adjustment in the event of any increase in the price of Ordinary Shares above $47.41. Furthermore, if the Average Market Price is below $41.625 and Sun seeks to terminate the Merger Agreement and GGE elects to go forward with the Merger, the Conversion Number will be fixed at .4925 and will not be subject to adjustment. The price of Ordinary Shares and the Average Market Price at the Effective Time may vary from the price of Ordinary Shares at the date of this Proxy Statement/Prospectus and at the dates of the Special Meetings, possibly by a material amount. Such variations may be the result of changes in the business, operations or prospects of Sun or GGE, market assessments of the likelihood that the Merger will be consummated and the timing thereof, regulatory considerations, general market and economic conditions and other factors. Because the Effective Time will occur at a date later than the Special Meetings, there can be no assurance that the price of Ordinary Shares on the dates of the Special Meetings will be indicative of the price of Ordinary Shares or the Average Market Price at the Effective Time. The Effective Time will occur as soon as practicable following the Special Meetings and the satisfaction or waiver of the conditions set forth in the Merger Agreement. Shareholders of Sun and stockholders of GGE are urged to obtain current market quotations for Ordinary Shares and GGE Common Stock. See "THE MERGER AGREEMENT--Exchange of GGE Common Stock and GGE Class B Stock" and "-- Conditions to the Consummation of the Merger; Conditions to Each Party's Obligation to Effect the Merger." NECESSITY OF RECEIVING GOVERNMENTAL APPROVALS PRIOR TO THE MERGER Approval of the NJCC is required for the issuance, renewal or transfer of casino licenses for New Jersey casinos. Only entities holding a casino license or determined by the NJCC to be qualified to the standards set forth in the NJCCA may own or operate New Jersey casinos or own more than 5% of the stock of any corporation that owns or operates a New Jersey casino. The NJCCA also prohibits a sale by the corporate holder of a casino license of more than 5% of its stock to an unqualified person. Sun, Sub and GGE, therefore, would be legally prohibited from effecting the Merger if Sun was not appropriately qualified at the Effective Time. While the NJCC has granted Sun an ICA, there can be no assurance that the NJCC will approve Sun's application for a Plenary License. Receipt of an ICA gives Sun the option, but not the obligation, to consummate the Merger before receipt of a Plenary License. The Division of Gaming Enforcement has stated that it expects to complete its full investigation of Sun by the spring of 1997 and the NJCC would be expected to have a hearing on Sun's Plenary License promptly thereafter. In the event Sun elects to wait to receive a Plenary License before consummating the Merger, there would be a substantial amount of time between the date of the Special Meetings and the Effective Time. See "-- Fixed Range of Exchange Ratios Despite Possible Change in Stock Prices." In addition, the consummation 25 of the Merger is conditioned upon the expiration or termination of the applicable waiting period under the HSR Act. Other filings with, notifications to and authorizations and approvals of, various governmental agencies with respect to the transactions contemplated by the Merger Agreement, relating to securities and other issues of law, must also be made and received prior to the consummation of the Merger. See "THE MERGER--Regulatory Approvals." CONSUMMATION OF THE MERGER PRIOR TO RECEIPT OF PLENARY LICENSE Sun's obligation to consummate the Merger is conditioned on approval by the NJCC of Sun's application for a Plenary License. On October 30, 1996, Sun received an ICA, which gives Sun the option, but not the obligation, to consummate the Merger before receipt of the Plenary License. In granting an ICA to Sun, the NJCC found that Sun is qualified to act as a Holding Company on a preliminary basis, pending a final determination. In addition, as part of its ICA approval, the NJCC approved Sun's selection of former New Jersey Governor Thomas H. Kean as the ICA trustee to act in accordance with the NJCCA. In the event Sun elects to consummate the Merger pursuant to an ICA, the NJCCA would require Sun to place the GGE Securities (as defined in the NJCCA) into a "stand by" trust (the "ICA Trust") with Governor Kean as trustee (the "ICA Trustee"). If after the consummation of the Merger the NJCC subsequently determines that there is reasonable cause to believe that Sun should not be granted a Plenary License, the ICA Trust would become activated and the ICA Trustee would take control of GGE pending a final determination by the NJCC with respect to Sun's application for a Plenary License, with the exception that Sun could request that the NJCC direct the ICA Trustee to dispose of the GGE Securities prior to the final qualification determination. In the event Sun's application for a Plenary License was denied, the ICA Trustee would be obligated to dispose of all GGE Securities held in the ICA Trust. Sun would then only be entitled to receive the lesser of (i) the fair market value and (ii) the price paid by Sun for the GGE Securities. Transaction costs paid by Sun in respect of the Merger would not be recoverable by Sun regardless of the price at which the GGE Securities held in the ICA Trust were sold. There can be no assurance that if Sun elects to consummate the Merger pursuant to an ICA that Sun would not sustain substantial losses from the sale of GGE Securities from an ICA Trust in the event Sun's application for a Plenary License were denied. INTERESTS OF CERTAIN PERSONS IN THE MERGER In considering the recommendation of the Merger by the GGE Board, the holders of GGE Common Stock should be aware that certain directors and executive officers of GGE have certain interests in the Merger that are different from, or in addition to, the interests of holders of GGE Common Stock generally; such interests, together with other relevant factors, were considered by the GGE Board in making its recommendation and approving the Merger Agreement. See "THE MERGER--Interests of Certain Persons in the Merger." DIVESTITURE RISK OF PROPOSED CHARTER AMENDMENT The NJCCA provides that the debt or equity securities of any corporation holding a New Jersey casino license may not be controlled by any person determined by the NJCC to be a Disqualified Holder. In order to ensure that a Disqualified Holder would be unable to control a licensed corporation's securities, the NJCCA requires the charter or by-laws of such corporation to provide that a person determined by the NJCC to be a Disqualified Holder (i) not be allowed to cast any vote in respect of any of such corporation's securities; (ii) be required to dispose of any of such corporation's securities held by him within 120 days of the NJCC determination that such holder is a Disqualified Holder; and (iii) have any of such corporation's securities held by him beyond 120 days of the NJCC determination that he is a Disqualified Holder subject to redemption by such corporation at the lesser of fair market value and the price paid for such securities less any of such corporation's legal and other expenses incurred in effecting such redemption. 26 The Charter Amendment, if approved, will add the provisions described in (i), (ii) and (iii) above to the Sun Charter and all holders of Sun's debt or equity securities (including Ordinary Shares) will become subject to such provisions when the Charter Amendment is filed with the Registrar of Companies of The Bahamas. There can be no assurance that a holder of Ordinary Shares will not be determined to be a Disqualified Holder by the NJCC nor that such holder would not incur substantial financial loss in the disposition of his/her Ordinary Shares or in the redemption of such Ordinary Shares by Sun. RISK FACTORS RELATED TO SUN RISKS ASSOCIATED WITH NEW PROJECTS AND EXPANSION OF SUN GENERAL The ability of Sun to take advantage of business opportunities and further develop existing businesses will depend upon a number of factors, including the availability of financing, terms and covenants in its credit facilities, the ability of Sun, its key employees and, in certain cases, its partners to obtain governmental licenses, approvals and permits (including gaming and liquor licenses and permits and approvals relating to land use, construction and zoning) and, in some cases, the ability to find, and maintain relationships with, suitable development and business partners. The failure to obtain required licenses, permits or approvals in a timely manner or the loss or suspension of any such license, permit or approval may delay, restrict or prevent one or more projects, including the Paradise Island Expansion and the Pirate's Cove Renovation, from opening or from opening as scheduled or Sun from being the developer, manager or operator of one or more such projects. DEVELOPMENT, CONSTRUCTION AND RELATED RISKS The Paradise Island Expansion is expected to be completed by the second quarter of 1998 and the Pirate's Cove Renovation is expected to be completed during the fourth quarter of 1998. Development projects such as these, however, are inherently subject to significant development and construction risks, including, but not limited to, labor disputes, shortages of material and skilled labor, weather interference, unforeseen engineering problems, unforeseen environmental problems, fire, natural disasters, geological problems, construction, demolition, excavation, regulatory and/or equipment problems and unanticipated cost increases, any of which could give rise to delays or cost overruns. Pre-existing environmental conditions, if any, on development sites can result in material liabilities and additional costs, as well as delays. See "--Possible Environmental Liabilities". The foregoing factors may delay or prohibit the construction or opening of one or more such projects or any future projects undertaken by Sun. ABILITY TO COMPLETE PROJECTS ON TIME AND WITHIN BUDGET The anticipated construction costs and completion dates for the Paradise Island Expansion and the Pirate's Cove Renovation are based on preliminary estimates and conceptual plans prepared by Sun. No assurances can be given that current budgets and estimates will prove to be accurate. In addition, no assurance can be given that the Paradise Island Expansion will commence construction during the fourth quarter of 1996 and will be completed during the second quarter of 1998, that the Pirate's Cove Renovation will be completed during the fourth quarter of 1998 or that construction costs for the Paradise Island Expansion or the Pirate's Cove Renovation will not exceed budgeted amounts. Failure to complete the Paradise Island Expansion or the Pirate's Cove Renovation may have a material adverse effect on the results of operations and financial condition of Sun. There can be no assurance that any development project, including the Paradise Island Expansion or the Pirate's Cove Renovation, will become operational as scheduled, or at all, or ultimately result in profitable operations. If any development project is not successful, Sun would be required to write off costs or investments associated with such project. 27 NEED FOR ADDITIONAL FINANCING The development of resorts and casinos is capital-intensive. In connection with the Paradise Island Expansion, the Pirate's Cove Renovation and any other future development projects, including the Revised Chalfonte Project, it may be necessary for Sun and, in certain cases, its partners to raise additional financing, including by accessing the capital markets through the issuance of debt or equity securities. Although Sun has in place a $250 million revolving bank credit facility (the "Revolving Credit Facility"), such facility contains certain conditions precedent to funding. No assurances can be given that Sun will be able to satisfy such conditions precedent at the time that funding under the Revolving Credit Facility is needed or that Sun will be able to comply with the covenants and other terms of the credit agreement. Additionally, there can be no assurance that Sun and its partners, if applicable, will be able to raise any additional financing which may become necessary in connection with the Paradise Island Expansion, the Pirate's Cove Renovation or any future development projects, including the Revised Chalfonte Project. See "BUSINESS OF SUN--Revolving Credit Facility." MOHEGAN SUN PROJECT COSTS Although the Mohegan Sun Casino has commenced operations, the final development cost calculations have not been finalized. The anticipated project costs for developing, constructing, equipping and opening the Mohegan Sun Casino are based on budgets prepared by the Mohegan Gaming Authority with the assistance of Sun, TCA and the contractors. The Mohegan Gaming Authority has entered into a guaranteed maximum price contract with Morse Diesel International for the construction of the Mohegan Sun Casino. The final amount of such contract, however, is subject to modification based upon the occurrence of certain events, such as design change orders and costs associated with certain types of delays. The Mohegan Gaming Authority and Morse Diesel International have certain cost matters that have not been finalized as to whether such matters are covered under the guaranteed maximum price or whether such cost increases are the result of change orders or other events that could result in an increase in the contract price. The resolution of these issues in favor of Morse Diesel International may result in the final cost of the Mohegan Sun Casino exceeding its current budget. Based upon its review of the budget and the open cost items, the Mohegan Gaming Authority believes that the final construction cost will not exceed the construction budget by an amount greater than the available contingency. There is no assurance that the construction costs for the Mohegan Sun Casino will not exceed budgeted amounts. The Mohegan Gaming Authority may not obligate itself to pay development costs in excess of $325 million without the further consent of the National Indian Gaming Commission (the "NIGC"). In the event the resolution of the issues with Morse Diesel International result in total development costs being in excess of $325 million, the Mohegan Gaming Authority would require the consent of the NIGC, and there can be no assurances such consent would be given. COMPETITION GENERAL The resort and casino industries are characterized by a high degree of competition among a large number of participants and are largely dependent on tourism. Sun competes with resorts both with and without gaming and with gaming facilities generally, including land-based casinos, riverboat, dockside and cruise ship on-board casinos and other forms of gaming, as well as other forms of entertainment. A number of Sun's competitors are larger and have greater financial and other resources than Sun. In addition, a number of jurisdictions have recently legalized gaming and other jurisdictions are considering the legalization of gaming. Sun cannot predict what effect a continued proliferation of gaming and the resulting increase in competition could have on Sun's ability to compete effectively in the future. Sun believes that the ability to compete effectively in the resort and gaming industries, particularly the destination resort and gaming industries, is based on several factors, including the scope, quality, location and accessibility of resort and gaming facilities and amenities, the effectiveness of marketing efforts, 28 customer service, the relative convenience of available transportation, service and the quality and price of rooms, food and beverages, convention facilities and entertainment. PARADISE ISLAND Sun's Paradise Island operations compete with cruise ships and other hotels and resorts, particularly those on Paradise Island and New Providence Island in The Bahamas as well as those on Grand Bahama Island and other Caribbean islands. Future casino developments in other locations are also a potential source of competition for Sun's Paradise Island operations. The introduction of additional casino gaming, particularly land-based gaming in the United States and especially the eastern regions of the United States, could reduce the number of tourists visiting The Bahamas and could be a substantial source of competition for Atlantis. THE MOHEGAN SUN CASINO Because the Mohegan Sun Casino is marketed primarily to the day-trip customer, it competes primarily with other casinos within 150 miles and, to a lesser extent, with casinos in Atlantic City, New Jersey, some of which have greater resources and name recognition than Sun or the Mohegan Tribe. Currently, Foxwoods is the only casino in operation within 150 miles of the Mohegan Sun Casino site. Foxwoods is located approximately 10 miles from the Mohegan Sun Casino site and is currently the largest gaming facility in the United States in terms of the number of slot machines. In addition, Foxwoods offers a number of amenities that the Mohegan Sun Casino does not currently plan to offer, including hotels and extensive non-gaming entertainment facilities. Foxwoods has been in operation for more than four years and the Mohegan Gaming Authority believes that Foxwoods' successful operation has enabled it to build financial resources that are currently substantially greater than those of the Mohegan Gaming Authority or the Mohegan Tribe. Currently, outside Atlantic City, New Jersey, casino gaming in the northeastern United States may be conducted only by federally recognized Indian tribes operating under the Indian Gaming Regulatory Act of 1988, as amended ("IGRA"). In addition to the Pequot Tribe, which operates Foxwoods, a federally recognized tribe in Rhode Island and a federally recognized tribe in Massachusetts are each seeking to establish gaming operations in their respective states. The Oneida Tribe, which operates a gaming facility in upstate New York, is seeking to expand its operations. In addition, a number of Indian tribes in New England are seeking federal recognition in order to establish gaming operations. Sun cannot predict whether any of these tribes will be successful in establishing gaming operations and, if established, whether such gaming operations will have a material adverse effect on the proposed operations of the Mohegan Sun Casino. In addition, a number of states, including Connecticut, have investigated legalizing casino gaming by non-Indians in one or more locations. In November 1995, the Connecticut state legislature rejected a proposal submitted by the Pequot Tribe to develop a casino in Bridgeport, Connecticut. The Pequot proposal had been submitted in response to a request for proposals made by the State of Connecticut. Under the tribal-state compact between the Mohegan Tribe and the State of Connecticut, if Connecticut were to legalize any gaming operations other than pursuant to IGRA (i.e., by an Indian tribe on Indian land) with slot machines or other commercial casino games, the Mohegan Tribe would no longer be required to make payments to the State of Connecticut related to slot machine revenues. Sun is unable to predict whether the Connecticut state legislature will accept any other casino proposal and, if such proposal results in a casino being constructed and opened, whether such casino will have a material adverse effect on the Mohegan Sun Casino. OTHER EXISTING OPERATIONS Sun Indian Ocean owns, and Sun manages, resort hotels in Mauritius and the Comoros. As vacation destinations, these resorts are in competition with other locations offering vacations to tourists from Europe, southern Africa and parts of Asia. In Mauritius, there is also competition from other resorts on 29 the island. Sun France owns, and Sun provides technical assistance to, casinos located in Nice, Chamonix, Cassis and Carry-le-Rouet. Casino licenses in France may be issued only in resort towns or locations with natural spa facilities. Currently, Sun considers there to be approximately eight casinos that are in direct competition with the Sun France casinos. If additional casino licenses were granted in the resort locations in which Sun France operates and such casinos were built, Sun France's casinos would be faced with direct competition from those casinos. CONTROL BY PRINCIPAL SHAREHOLDER SIIL controls approximately 55% of the Ordinary Shares of Sun (approximately 48% assuming the consummation of the Merger at a Conversion Number of .4324) and, accordingly, is able to control the outcome of substantially all matters requiring shareholder approval, including the election of Sun's directors, thereby controlling the management, policies and business operations of Sun. Pursuant to the terms of a new heads of agreement, dated December 13, 1995, as amended (the "New Heads of Agreement"), among Sun, SIIL and the Government of the Commonwealth of The Bahamas, SIIL has agreed, among other things, to maintain voting power in Sun of not less than 45% until six months after completion of the Paradise Island Expansion and thereafter to control a majority of the Sun Board for an additional five years. The requirement that SIIL maintains this level of voting power could have an adverse effect on Sun's ability in the future to obtain certain types of financing and could also have an adverse effect on Sun's ability to expand its business through acquisitions. In addition, this requirement could significantly restrict an entity's ability to acquire control of Sun. REGULATORY AND POLITICAL FACTORS The operation of gaming facilities is generally subject to extensive governmental regulation. Regulatory authorities typically require various registrations, licenses, findings of suitability and approvals to be held by operators of gaming facilities. The regulatory authorities in these jurisdictions generally have broad discretion in the granting, renewal, suspension and revocation of licenses and require that such registrations, licenses, findings and approvals be renewed or updated periodically. In addition, gaming debts may not be legally enforced in certain foreign jurisdictions or in certain jurisdictions within the United States and, therefore, Sun may be unable to collect gaming debts from patrons of its casinos who reside in such jurisdictions. Sun and the necessary key personnel are currently qualified to operate in all the jurisdictions in which Sun operates. In connection with the Mohegan Sun Casino, each of the partners of TCA and certain employees of the Mohegan Sun Casino must be licensed by relevant tribal and state authorities. Each of the partners of TCA has received a gaming license from the Commissioner of Revenue Services of the State of Connecticut. No assurances can be given, however, that any new or permanent licenses, permits or approvals that may be required by Sun, its key employees and its partners, if applicable, in the future will be granted or that its existing licenses, permits and approvals will be renewed or will not be suspended or revoked in the future. In addition, gaming licenses or management agreements held or subsequently acquired by Sun or its subsidiaries pursuant to applicable law and regulations, including the IGRA and NIGC regulations, may require review, approval or licensing of any person or entity directly, or indirectly possessing or acquiring 10% or more of Sun's equity securities (a "Substantial Interest"). The NIGC is required to review, and approve any such person or entity and make a finding of suitability pursuant to the IGRA and NIGC regulations. If the NIGC were to determine that a person or entity holding a Substantial Interest in a gaming management agreement was unsuitable, prior approval of the management agreement could be revoked, subsequent approvals or renewals could be blocked, and certain required gaming licenses could be suspended, rescinded or denied. See "--TCA Management Agreement". Due to the extensive regulatory environments in which Sun operates, the various countries in which it operates and its dependence on tourism, Sun's operations may be materially and adversely affected by developments with respect to inflation, interest rates, government policies, price and wage controls, exchange control regulations, exchange rates, taxation, expropriation, political and social instability and 30 other political or economic developments in or affecting the jurisdictions in which it operates and from which it draws tourists. Gaming operators generally are subject to significant taxation and fees. Such taxes and fees are subject to increase at any time. Sun pays substantial taxes and fees with respect to its gaming operations and will likely incur similar taxes and fees in any other jurisdictions in which it conducts gaming operations in the future. Any material increase or the adoption of additional taxes or fees could have a material adverse effect on Sun. As owner and manager of resort and gaming properties in a number of jurisdictions, Sun is subject to a wide range of laws and regulations with regard to such matters as taxation, exchange controls, labor relations, land use controls and environmental controls, and such laws and regulations, and governmental authorities responsible for such laws and regulations, can and do change. CERTAIN MATTERS PERTAINING TO CHAIRMAN Certain media reports have questioned the suitability of Sun's Chairman, Mr. Solomon Kerzner, and Sun to hold gaming licenses as a result of events that occurred in 1986, in the Transkei, a former "tribal homeland" that was regarded by South Africa as an independent country but not recognized as such by the international community, relating to an alleged improper payment of $450,000 made to Chief George Matanzima, then Prime Minister of the Transkei who was overthrown by a military coup in 1988. The Transkei matter had been previously disclosed to the Mohegan Tribe, the NIGC and the Connecticut State Police and, following an investigation, the Mohegan Tribe approved Mr. Kerzner and Sun as partners in TCA, the developer and manager of the Mohegan Sun Casino. The NIGC subsequently approved the contract between the Mohegan Tribe and TCA. In addition, after investigation of the Transkei matter, the State of Connecticut recently issued Mr. Kerzner a permanent gaming license. In April 1994, as part of South Africa's new constitutional process, the Transkei was reincorporated into South Africa and the Attorney General of the Transkei is now an official of the South African judicial system. In October 1995, Mr. Kerzner, although not officially notified, learned that the Attorney General of the Transkei had requested that the South African police investigate the 1986 payment. The report of the investigating police officer, made available to the attorneys for the companies involved in accordance with South African law states that, by allowing the payment to be made, Mr. Kerzner acted without any personal benefit in an effort to protect what Mr. Kerzner believed to be legitimate rights of the companies involved, which were being threatened by Chief Matanzima. Such report also describes Chief Matanzima's action as being tantamount to commercial extortion and concludes that the State will have difficulty proving that the individuals or companies involved acted with the necessary intent to commit a crime. In an August 1996 report to a parliamentary committee, the Attorney General of the Transkei indicated that a decision considering the advisability to proceed with the case may not be made by him before next year. Until the case is officially closed, there can be no assurance that Mr. Kerzner will not be charged. The Transkei events, which occurred ten years ago, have not affected the ability of Sun or Mr. Kerzner to be licensed in the jurisdictions in which Sun operates. After disclosure to all applicable licensing authorities of the facts surrounding the Transkei matter, and following investigations, Sun and Mr. Kerzner hold gaming licenses in The Bahamas and Connecticut, Sun holds gaming licenses in France, and companies in southern Africa of which Mr. Kerzner has been chairman and chief executive officer hold gaming licenses in South Africa, including the Transkei region. Although the Transkei matter has not affected the licensing qualifications of Mr. Kerzner or Sun to date, no assurances can be given that Mr. Kerzner or Sun's licensing qualifications will not be so affected in the future. TCA MANAGEMENT AGREEMENT Management fees payable to TCA pursuant to the TCA Management Agreement and payments with respect to the Subordinated Notes and Secured Completion Guarantee Notes purchased by Sun are subordinate in right to required payments on the Mohegan Senior Notes. The ability of the Mohegan 31 Gaming Authority to meet its payment obligations and its debt service requirements, including with respect to the Subordinated Notes, Secured Completion Guarantee Notes and payment of management fees to TCA will be entirely dependent upon the future performance of the Mohegan Sun Casino, which is subject to financial, economic, political, competitive, regulatory, environmental and other factors, many of which are beyond its control. The NIGC has the power to require modifications of management agreements with respect to casinos owned by Indian tribes if those agreements are at variance with applicable law, or regulations, or to void agreements if the management company fails to comply with the terms of the agreement or applicable laws or regulations. In addition, management agreements can be renewed or extended by the parties only with the approval of the NIGC. If the NIGC were to determine that a person or entity holding a Substantial Interest in a gaming management agreement was unsuitable, prior approval of the management agreement could be revoked, subsequent approvals or renewals could be blocked, and certain required gaming licenses could be suspended, rescinded or denied. The voiding or modification of the terms of the TCA Management Agreement could have a material adverse effect on the results of operations and financial condition of Sun. See "--Regulatory and Political Factors". LIMITED RECOURSE AGAINST TRIBAL ASSETS Although the Mohegan Tribe and the Mohegan Gaming Authority have sovereign immunity and may not be sued without their consent, the Mohegan Tribe and the Mohegan Gaming Authority have granted a limited waiver of sovereign immunity and consent to suit in connection with the TCA Management Agreement, the Subordinated Notes and the Secured Completion Guarantee Notes. In addition, the Mohegan Gaming Authority has granted a limited waiver of sovereign immunity and consent to suit with respect to the enforcement of the obligation to repay the Mohegan Senior Notes. In the event that such waiver of sovereign immunity is held to be ineffective, TCA and Sun could be precluded from judicially enforcing their rights and remedies. Generally, however, waivers of sovereign immunity have been held to be enforceable against Indian tribes such as the Mohegan Tribe. POSSIBLE ENVIRONMENTAL LIABILITIES The Mohegan Sun Casino site was formerly occupied by United Nuclear Corporation ("UNC"), a naval products manufacturer of, among other things, nuclear reactor fuel components. UNC's facility was officially decommissioned on June 8, 1994, when the Nuclear Regulatory Commission ("NRC") confirmed that all licensable quantities of special nuclear material ("SNM") had been removed from the Mohegan Sun Casino site and that any residual SNM contamination was remediated in accordance with the NRC approved decommissioning plan. From 1991 through 1993, UNC commissioned an environmental consultant to perform a series of environmental audits and reports on the Mohegan Sun Casino site, including an extensive Phase III Report. A Phase III Report typically includes additional soil investigations and/or groundwater monitoring based upon soil and groundwater samples gathered during the course of a previous environmental report. The environmental audits and soil sampling programs detected in the preparation of such Phase III Report, among other things, volatile organic chemicals, heavy metals and fuel hydrocarbons in the soil and groundwater. Extensive remediation of contaminated soils and additional investigations were then completed. Although the Mohegan Sun Casino site currently meets state remediation requirements, no assurance can be given that the various environmental reports or any other existing environmental studies with respect to the Mohegan Sun Casino site revealed all environmental liabilities, that any prior owners or tenants of the Mohegan Sun Casino site did not create any material environmental condition not known to the Mohegan Gaming Authority, that future laws, ordinances or regulations will not impose any material environmental liability or that a material environmental condition does not otherwise exist on the Mohegan Sun Casino site. Future remediation may be necessary if excavation and construction exposes contaminated soil which has otherwise been deemed isolated and not subject to cleanup requirements. Such remediation could adversely impact the results of operations of the Mohegan Sun Casino and the Mohegan Gaming Authority and therefore the results of operations and financial condition of Sun. 32 SHARES ELIGIBLE FOR FUTURE SALE Sales of a substantial number of Ordinary Shares in the public market could adversely affect the market price of the Ordinary Shares. SIIL controls approximately 55% of all the outstanding Ordinary Shares (approximately 48% assuming the consummation of the Merger at a Conversion Number of .4324). SIIL, by virtue of its control of Sun, could effectively cause Sun to file a registration statement and sell any and all the Ordinary Shares held by it. TCW Special Credits on behalf of certain funds and accounts ("TCW") and Fidelity Management & Research Company on behalf of certain funds and accounts managed by it and its affiliates ("Fidelity") together hold approximately 6% of the outstanding Ordinary Shares. TCW and Fidelity have certain registration rights granted to them by Sun in respect of such Ordinary Shares. At the annual general meeting held in 1995, the shareholders of Sun approved the Sun Stock Option Plan (the "Plan"). The Plan provides for options to be granted to acquire up to 2,000,000 Ordinary Shares. Currently there are options granted pursuant to the Plan to acquire 1,659,346 Ordinary Shares at option exercise prices ranging from $11.6875 to $50.00, 49,732 of which were exercisable as of the date of this Proxy Statement/Prospectus. Merv Griffin beneficially owns 2,125,108 shares (excluding shares issuable upon exercise of his warrants) of GGE Common Stock which will, assuming consummation of the Merger, be converted into the right to receive 918,896 Ordinary Shares (assuming a Conversion Number of .4324). DIVIDENDS AND DIVIDEND POLICY The declaration, payment and amount of dividends on the Ordinary Shares are determined by the Sun Board. As a holding company, Sun's ability to pay dividends on the Ordinary Shares is subject to Sun's subsidiaries having sufficient earnings and cash flows to allow Sun to receive distributions from its subsidiaries. Moreover, the Revolving Credit Facility contains certain restrictions relating to distributions from Sun's subsidiaries. See "BUSINESS OF SUN--Revolving Credit Facility." There can be no assurance that Sun will pay dividends or as to the amount or timing thereof. VOLATILITY OF PRICE OF SECURITIES The market prices of securities of companies whose future operating results are highly dependent on the passage, repeal or defeat of relevant legislation, actions of regulatory bodies and specific developments, such as the opening of new projects, are often highly volatile. Announcements concerning legislation approving, repealing or defeating gaming, regulatory actions concerning tax rates and enforcement of regulations, the granting of licenses, other governmental actions, developments in the gaming industry generally, announcements by Sun or by competitors, results of Sun's operations and financial market conditions generally may have a significant impact on the market price of the Ordinary Shares. DEPENDENCE ON KEY PERSONNEL Sun depends upon the efforts and skills of Mr. Solomon Kerzner, its Chairman and Chief Executive Officer. See "MANAGEMENT OF SUN". Mr. Kerzner is also the Chairman of World Leisure Group Limited, a British Virgin Islands corporation ("WLG"), which indirectly owns through intermediate entities approximately one-third of the outstanding equity of SIIL, and is also a beneficiary of a Kerzner family trust which owns WLG. The loss of the services of Mr. Kerzner or his inability to devote sufficient attention to the operations of Sun could have a material adverse effect on Sun's ability to develop potential business opportunities. According to Mr. Kerzner's employment contract with Sun, he is obligated to devote at least two-thirds of his working time to the operations of Sun until July 1, 1998. In addition, Mr. Kerzner has agreed, subject to certain specified exceptions, that during the term of his employment he will not directly or indirectly engage in any business competitive with the business of Sun in any part of the world outside southern Africa and that he will bring all business opportunities relevant to the business of 33 Sun to the attention of Sun and permit Sun exclusively to exploit such opportunities. There is no assurance that two-thirds of Mr. Kerzner's working time will be sufficient to enable Sun to develop its business. DEPENDENCE ON AIR SERVICE Most patrons of Sun's resorts on Paradise Island and virtually all the patrons of Sun Indian Ocean's hotels arrive by air. Although Sun considers the current level of air service to The Bahamas and Mauritius to be adequate, any interruption or reduction of air service to The Bahamas or Mauritius could have an adverse effect on Sun. SEASONALITY AND WEATHER Sun's business has historically been seasonal, with the largest number of patrons visiting The Bahamas and Mauritius during late December and the first three months of the calendar year. Accordingly, revenues and operating profits for Sun have historically been higher during the first calendar quarter than in successive quarters. In addition, The Bahamas, Mauritius and the Comoros are subject to tropical weather and storms which, if severe, can interrupt the normal operations of Sun and affect tourism. RISK FACTORS RELATED TO GGE RECENT OPERATING RESULTS Two factors negatively affected GGE's operating results in the first half of 1996 -- heightened competition for patrons in the Atlantic City market and severe weather conditions during the first quarter of 1996. As competition for patrons has intensified, promotions -- complimentary services (rooms, food and beverage provided to patrons without charge), cash giveaways and events -- have increased. In recent quarters certain competitors have increased complimentaries and cash giveaways dramatically. Although GGE did increase its promotions somewhat during the first quarter of 1996 and more significantly during the second quarter of 1996, it still has elected not to keep pace with the industry's increased promotions due to the belief that the resulting increase in gaming win would not be sufficient to justify the incremental costs incurred. Consequently, GGE's market share of revenues has suffered. Also, expansions at two competing Atlantic City properties were completed in May 1996 which, together, added approximately 1,100 hotel rooms and approximately 60,000 square feet of gaming space to the Atlantic City market. Several other companies have announced plans to expand existing or construct new casino/hotels in Atlantic City. GGE can give no assurance that the increased cost of obtaining gaming revenues will not continue in future periods. Also, the severe weather experienced during the first quarter of 1996 adversely affected operations in that period as the principal means of transportation to Atlantic City is by automobile or bus. The impact of inclement weather is more severe on the Resorts Casino Hotel than on competing properties which are more accessible from main thoroughfares and which currently have more covered parking and covered terminals for bus patrons. COMPETITION Competition in the Atlantic City casino/hotel industry is intense. Casino/hotels compete primarily on the basis of promotional allowances, entertainment, advertising, services provided to patrons, caliber of personnel, attractiveness of the hotel and casino areas and related amenities, and parking facilities. The Resorts Casino Hotel competes directly with 11 casino/hotels in Atlantic City which, in the aggregate, contain almost 1,000,000 square feet of gaming area, including simulcast betting and poker rooms, and almost 10,000 hotel rooms. Significant additional expansion is expected in the near future. The Resorts Casino Hotel is located at the eastern end of the Boardwalk adjacent to the Trump Taj Mahal Casino Resort (the "Taj Mahal"), which is next to the Showboat. These three properties have a total of approximately 2,700 hotel rooms and approximately 314,000 square feet of gaming space in close 34 proximity to each other. In 1995, the three casino/hotels combined generated approximately 30% of the gross gaming revenue of Atlantic City. A 28-foot wide enclosed pedestrian bridge between the Resorts Casino Hotel and the Taj Mahal allows patrons of both hotels and guests for events being held at the Resorts Casino Hotel and the Taj Mahal to move between the facilities without exposure to the weather. A similar enclosed pedestrian bridge connects the Showboat to the Taj Mahal, allowing patrons to walk under cover among all three casino/hotels. The remaining nine Atlantic City casino/hotels are located approximately one-half mile to one and one-half miles to the west on the Boardwalk or in the Marina area of Atlantic City. In recent years, competition for the gaming patron outside of Atlantic City has become extremely intense. In 1988, only Nevada and New Jersey had legalized casino operations. Currently, twenty four states have legalized casinos on land, water or Indian reservations. Also, The Bahamas and other destination resorts in the Caribbean and Canada have increased the competition for gaming revenue. Thus, the competition for the destination resort patron has intensified. Directly competing with Atlantic City for the day-trip patron is Foxwoods. The Mohegan Sun Casino provides additional competition for the Resorts Casino Hotel. The Oneida Indians opened a casino near Syracuse, New York in 1993 which they are now seeking to expand. Other Indian tribes in the states of New York and Rhode Island are seeking federal recognition in order to establish gaming operations which would further increase the competition for day-trip patrons. POSSIBLE ENVIRONMENTAL LIABILITIES The Environmental Protection Agency ("EPA") has named a predecessor to GGE as a potentially responsible party in the Bay Drum hazardous waste site (the "Site") in Tampa, Florida which the EPA has listed on the National Priorities List. No formal action has commenced against GGE and GGE intends to dispute any claims of this nature, if asserted. Although it may ultimately be determined that GGE is one of several hundred parties that are jointly and severally liable for the costs of Site remediation and for damages to natural resources at the Site caused by hazardous wastes, the extent of such liability, if any, cannot be determined at this time. 35 SUN EXTRAORDINARY GENERAL MEETING PURPOSE At the Sun Extraordinary General Meeting, the shareholders of Sun will consider and vote upon a proposal to approve the Charter Amendment. The Sun Board has unanimously approved the Merger Agreement and the Charter Amendment. THE SUN BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF SUN VOTE "FOR" APPROVAL OF THE CHARTER AMENDMENT AT THE SUN EXTRAORDINARY GENERAL MEETING. See "THE MERGER--Sun's Reasons for the Merger; Recommendation of its Board of Directors" and "PROPOSED SUN CHARTER AMENDMENT." RECORD DATE; VOTING RIGHTS Only holders of record of Ordinary Shares at the Sun Record Date, October 28, 1996, are entitled to receive notice of and to vote at the Sun Extraordinary General Meeting. At the Sun Record Date, there were 29,245,184 Ordinary Shares outstanding, each of which entitles the registered holder thereof to one vote. SHARE OWNERSHIP OF MANAGEMENT AND SIIL At the Sun Record Date, directors and executive officers of Sun, as a group, were the owners of an aggregate of less than 1% of the Ordinary Shares then outstanding (excluding Ordinary Shares issuable pursuant to their Stock Options) and SIIL controlled approximately 55% of the Ordinary Shares then outstanding. See "THE STOCKHOLDER AGREEMENTS--Sun Stockholder Agreement" and "PRINCIPAL SHAREHOLDER OF SUN." QUORUM Under the IBCA and the Sun Charter, the presence of a quorum is required to transact business at the Sun Extraordinary General Meeting. The presence in person or by proxy of the holders of a majority of outstanding Ordinary Shares shall constitute a quorum on all matters. Ordinary Shares represented by proxies which are marked "abstain" will be counted as shares present for purposes of determining the presence of a quorum on all matters, as will Ordinary Shares that are represented by proxies that are executed by any broker, fiduciary or other nominee on behalf of the beneficial owner(s) thereof regardless of whether authority to vote is withheld from such broker, fiduciary or nominee on one or more matters. SIIL's agreement to vote its Ordinary Shares at the Sun Extraordinary General Meeting pursuant to the Sun Stockholder Agreement ensures a quorum at the Sun Extraordinary General Meeting. See "THE STOCKHOLDER AGREEMENTS--Sun Stockholder Agreement." PROXIES All Ordinary Shares represented by properly executed proxies in the enclosed form which are received prior to or at the Sun Extraordinary General Meeting and have not been revoked will be voted in accordance with the instructions indicated in such proxies. If no instructions are indicated, such shares will be voted FOR approval of the Charter Amendment. In addition, the persons designated in such proxy will have discretion to vote upon any other matter which properly comes before the Sun Extraordinary General Meeting such as a procedural matter relating to the Sun Extraordinary General Meeting, including the right to vote for any adjournment thereof proposed to solicit additional proxies. Any proxy may be revoked by the shareholder executing it by delivering written notice thereof to the Corporate Secretary of Sun prior to the time voting is declared closed or by attending the Sun Extraordinary General Meeting and voting in person. Attendance at the Sun Extraordinary General Meeting will not in and of itself constitute the revocation of a proxy. 36 SOLICITATION OF PROXIES The solicitation of proxies for the Sun Extraordinary General Meeting is being made on behalf of the Sun Board. Pursuant to the Merger Agreement, the entire cost of proxy solicitation for the Sun Extraordinary General Meeting, including the reasonable expenses of brokers, fiduciaries and other nominees in forwarding solicitation materials to beneficial owners, will be borne by Sun, except that Sun and GGE will share equally all printing and mailing expenses and filing fees. Solicitation will be by mail, except for any personal solicitation made orally or in writing by or under the direction of directors, officers and employees of Sun. Sun may request persons, such as brokers, nominees and fiduciaries, holding Ordinary Shares in their names to forward proxy materials to the beneficial owners and it will reimburse such persons for their reasonable expenses incurred in doing so. REQUIRED VOTE Approval of the Charter Amendment will require the affirmative vote of the holders of a majority of the Ordinary Shares outstanding as of the Sun Record Date. An abstention with respect to the Charter Amendment will have the effect of a vote cast against such proposal. The Ordinary Shares represented by valid proxies received will be voted in the manner specified on the proxies. Where a specific choice is not indicated, the Ordinary Shares represented by valid proxies received will be voted "FOR" approval of the Charter Amendment. Brokers who hold Ordinary Shares as nominees will not have discretionary authority to vote such shares on the Charter Amendment in the absence of instructions from the beneficial owners thereof. Any shares which are not voted because the nominee-broker lacks such discretionary authority will have the effect of votes cast against the Charter Amendment. SIIL's agreement, pursuant to the Sun Stockholder Agreement, to vote its Ordinary Shares in favor of the Charter Amendment ensures a number of affirmative votes sufficient to approve the Charter Amendment. See "THE STOCKHOLDER AGREEMENTS--Sun Stockholder Agreement." PROPOSED SUN CHARTER AMENDMENT At the Sun Extraordinary General Meeting, the shareholders of Sun will be asked to consider and vote upon a proposal to approve and adopt the Charter Amendment which would add the following provisions to the Sun Charter required by the NJCCA as a result of the Merger: "These Articles of Association shall be subject to the New Jersey Casino Control Act, N.J.S.A. 5:12-1 et seq., and the rules and regulations of the New Jersey Casino Control Commission (the "Commission") as they currently exist or as they hereinafter may be amended (the "Act"), including without limitation the following: A. The securities (as defined in the Act) of the Corporation shall always be subject to redemption by the Corporation, by action of the Board of Directors, if, in the judgment of the Board of Directors, such action should be taken, pursuant to the International Business Companies Act of 1989 of the Commonwealth of The Bahamas or any other applicable provision of law, to the extent necessary to prevent the loss or secure the reinstatement of any government-issued license or franchise held by the Corporation or any Subsidiary (as defined in Paragraph E of this Article) to conduct any portion of the business of the Corporation or such Subsidiary, which license or franchise is conditioned upon some or all of the holders of the Corporation's securities possessing prescribed qualifications. In the event a holder of the Corporation's securities is found not to possess such prescribed qualifications by the Commission pursuant to the Act (a "Disqualified Holder"), such Disqualified Holder shall indemnify the Corporation for any and all direct or indirect costs, including attorneys' fees, incurred by the Corporation as a result of such holder's continuing ownership or failure to divest promptly. 37 B. Except as is otherwise expressly provided in instruments containing the terms of the Corporation's securities, which instruments have been approved by the Commission, so long as the Corporation shall remain a publicly traded holding company as defined in the Act, in accordance with N.J.S.A. 5:12-82(d)(7) and (9), all securities of the Corporation shall be held subject to the condition that if a holder thereof is found to be a Disqualified Holder, such holder shall dispose of his interest in the Corporation within 120 days following the Corporation's receipt of notice (the "Notice Date") of the holder's disqualification. Promptly following its receipt of notice from the Commission that a holder of securities of the Corporation has been found disqualified, the Corporation shall either deliver such written notice personally to the Disqualified Holder, mail it to such Disqualified Holder at the address shown on the Corporation's books and records, or use any other reasonable means to provide notice. Failure of the Corporation to provide notice to a Disqualified Holder after making reasonable efforts to do so shall not preclude the Corporation from exercising its rights. If any Disqualified Holder fails to dispose of his securities within 120 days of the Notice Date, the Corporation may redeem such securities at the lesser of (i) the lowest closing sale price of such securities between the Notice Date and the date 120 days after the Notice Date, or (ii) such holder's original purchase price. C. If the Corporation shall become a privately-held holding company as defined in the Act, in accordance with N.J.S.A. 5:12-82(d)(7), (8) and (10), the Commission shall have the right of prior approval with regard to transfers of securities, shares, and other interests in the Corporation and the Corporation shall have the absolute right to redeem at the market price or purchase price, whichever is the lesser, any security, share or other interest in the Corporation in accordance with the Act. D. So long as the Corporation shall remain a holding company as defined in the Act, in accordance with N.J.S.A. 5:12-105(e), commencing on the date the Commission serves notice on the Corporation that a security holder has been found disqualified, it shall be unlawful for the Disqualified Holder to (i) receive any dividends or interest upon any such securities of the Corporation held by such holder; (ii) exercise, directly or through any trustee or nominee, any right conferred by such securities; or (iii) receive any remuneration in any form, for services rendered or otherwise, from any Subsidiary of the Corporation that holds a casino license. E. For purposes of this Article, the term "Subsidiary" shall have the meaning set forth in N.J.S.A. 5:12-47." The Sun Board by resolution dated August 18, 1996 has adopted the Charter Amendment. The Charter Amendment is a necessary prerequisite to the consummation of the Merger as the NJCC will not approve the Merger and Sun would not be permitted to own a New Jersey casino without the required language being added to the Sun Charter. Approval of the Charter Amendment will require the affirmative vote of the holders of a majority of the Ordinary Shares outstanding as of the Sun Record Date. SIIL's agreement, pursuant to the Sun Stockholder Agreement, subject to certain conditions, to vote its Ordinary Shares in favor of the Charter Amendment ensures a number of affirmative votes sufficient to approve the Charter Amendment. If so approved, the Charter Amendment will be effective upon the filing thereof with the Registrar of Companies in The Bahamas. Approval of the Charter Amendment will result in all holders of Ordinary Shares being subject to the redemption provisions of the amended Sun Charter. THE SUN BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF SUN VOTE "FOR" THE APPROVAL OF THE CHARTER AMENDMENT. 38 GGE SPECIAL MEETING PURPOSE At the GGE Special Meeting, the holders of GGE Common Stock will consider and vote upon a proposal to adopt the Merger Agreement. The GGE Board has unanimously determined that the Merger is advisable and fair to and in the best interests of GGE and its stockholders and has approved the Merger Agreement. THE GGE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF GGE COMMON STOCK VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AT THE GGE SPECIAL MEETING. See "THE MERGER--GGE's Reasons for the Merger; Recommendation of its Board of Directors." For a discussion of (i) the interests that certain directors and executive officers of GGE have with respect to the Merger that are different from, or in addition to, the interests of stockholders of GGE generally and (ii) information regarding the treatment of options and warrants to purchase GGE Common Stock and other rights of certain directors and executive officers of GGE, see "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement", "THE MERGER--Interests of Certain Persons in the Merger" and "THE MERGER AGREEMENT--Effect on GGE Benefit Plans, Stock Options and Warrants." Such interests, together with other relevant factors, were considered by the GGE Board in making its recommendation and approving the Merger Agreement. RECORD DATE; VOTING RIGHTS Only holders of record of GGE Common Stock at the GGE Record Date, November 1, 1996, are entitled to receive notice of and to vote at the GGE Special Meeting. At the GGE Record Date, there were 7,942,785 shares of GGE Common Stock outstanding. Each registered holder of GGE Common Stock is entitled to one vote per share at the GGE Special Meeting. Holders of GGE Class B Stock are not entitled to vote at the GGE Special Meeting but are entitled to notice thereof. SHARE OWNERSHIP OF MANAGEMENT AND SIGNIFICANT STOCKHOLDERS At the close of business on the GGE Record Date, directors and executive officers of GGE, as a group, were the beneficial owners of an aggregate of 2,241,528 shares (approximately 28% of the GGE Common Stock then outstanding) excluding shares issuable pursuant to their options and warrants. Of these shares, 2,125,108 were beneficially owned by Merv Griffin, one of the Significant GGE Stockholders. Pursuant to the terms of the GGE Stockholder Agreement, the Significant GGE Stockholders have agreed, subject to certain conditions set forth in the GGE Stockholder Agreement, to vote their shares of GGE Common Stock in favor of the adoption of the Merger Agreement at the GGE Special Meeting. The general effect of the GGE Stockholder Agreement, subject to certain conditions set forth therein, is to ensure the affirmative vote at the GGE Special Meeting of 2,125,108 shares of GGE Common Stock representing approximately 27% of the GGE Common Stock outstanding as of the GGE Record Date. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." QUORUM Under the DGCL and GGE's Amended and Restated By-Laws (the "GGE By-Laws"), the presence of a quorum is required to transact business at the GGE Special Meeting. The presence in person or by proxy of stockholders entitled to cast a majority in number of votes upon a question to be considered constitutes a quorum. Pursuant to the terms of the GGE Stockholder Agreement, each Significant GGE Stockholder who is a party thereto has agreed to vote his or its shares in person or by proxy at the GGE Special Meeting. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." Shares of GGE Common Stock represented by proxies which are marked "abstain" will be counted as shares present for purposes of determining the presence of a quorum on all matters, as will shares that are 39 represented by proxies that are executed by any broker, fiduciary or other nominee on behalf of the beneficial owner(s) thereof regardless of whether authority to vote is withheld by such broker, fiduciary or nominee on one or more matters. In the event that a quorum is not present at the GGE Special Meeting, it is expected that such meeting will be adjourned or postponed to solicit additional proxies. PROXIES All shares of GGE Common Stock represented by properly executed proxies in the enclosed form which are received prior to or at the GGE Special Meeting and have not been revoked will be voted in accordance with the instructions indicated in such proxies. If no instructions are indicated, such shares will be voted FOR the adoption of the Merger Agreement. In addition, the persons designated in such proxy will have discretion to vote upon any other matter which properly comes before the GGE Special Meeting such as a procedural matter relating to the GGE Special Meeting, including the right to vote for any adjournment thereof proposed to solicit additional proxies. Any proxy may be revoked by the stockholder executing it by delivering written notice thereof to the Secretary of GGE prior to the time voting is declared closed or by attending the GGE Special Meeting and voting in person. Attendance at the GGE Special Meeting will not in and of itself constitute the revocation of a proxy. SOLICITATION OF PROXIES The solicitation of proxies for the GGE Special Meeting is being made on behalf of the GGE Board. Pursuant to the Merger Agreement, the entire cost of proxy solicitation for the GGE Special Meeting, including the reasonable expenses of brokers, fiduciaries and other nominees in forwarding solicitation materials to beneficial owners, will be borne by GGE, except that Sun and GGE will share equally all printing and mailing expenses and filing fees. Solicitation will be by mail, except for any personal solicitation made orally or in writing by or under the direction of directors, officers and employees of GGE. GGE may request persons, such as brokers, nominees and fiduciaries, holding GGE Common Stock in their names to forward proxy materials to the beneficial owners and it will reimburse such persons for their reasonable expenses incurred in doing so. REQUIRED VOTE Adoption of the Merger Agreement will require the affirmative vote of a majority of the outstanding shares of GGE Common Stock. An abstention will have the effect of a vote cast against such proposal. Brokers who hold GGE Common Stock as nominees will not have discretionary authority to vote such shares in the absence of instructions from the beneficial owners thereof. Any shares which are not voted because the nominee-broker lacks such discretionary authority will have the effect of votes cast against such proposal. The terms of the GGE Stockholder Agreement are intended to ensure that the shares of certain holders of GGE Common Stock will be voted at the GGE Special Meeting in favor of the adoption of the Merger Agreement. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." 40 THE STOCKHOLDER AGREEMENTS THE DESCRIPTION OF THE STOCKHOLDER AGREEMENTS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE STOCKHOLDER AGREEMENTS, COPIES OF WHICH ARE ATTACHED HERETO AS ANNEX II AND ANNEX III, AND ARE INCORPORATED HEREIN BY REFERENCE. GGE STOCKHOLDER AGREEMENT On August 19, 1996, Sun entered into the GGE Stockholder Agreement with the Significant GGE Stockholders. Together, the Significant GGE Stockholders held, on the GGE Record Date, approximately 27% of the outstanding GGE Common Stock and are therefore together able to control approximately 27% of the vote on all matters submitted to a vote of the holders of GGE Common Stock, including the adoption of the Merger Agreement. Pursuant to the terms of the GGE Stockholder Agreement, each Significant GGE Stockholder has agreed, until the GGE Stockholder Agreement is terminated by its terms, to vote (or cause to be voted) at the GGE Special Meeting or in any other circumstances upon which a vote, consent or other approval with respect to the Merger Agreement is sought, his or its shares of GGE Common Stock (together, the "Subject Shares") in favor of the adoption of the Merger Agreement (or alternatively upon Sun's request, to grant Sun a proxy to so vote the Subject Shares, provided Sun has obtained all necessary approvals in connection with such proxy). Further, each Significant GGE Stockholder has agreed: (a) to vote (or cause to be voted), at any meeting of the stockholders of GGE or in any other circumstances upon which his or its vote, consent or other approval is sought, the Subject Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by GGE or any other takeover proposal (as defined in the Merger Agreement) or (ii) any amendment of GGE's Restated Certificate of Incorporation (the "GGE Charter"), the GGE By-Laws or any other proposal or transaction involving GGE or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of any class of GGE Common Stock; and (b) not to (i) sell, transfer, pledge, assign or otherwise encumber or dispose of (including by gift) any of the Subject Shares, any option ("Option") or warrant ("Warrant") in respect of any GGE Common Stock or any shares of GGE Common Stock subject to any option or warrant other than pursuant to the Merger, (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, in connection with, directly or indirectly, any takeover proposal, (iii) exercise any Option or Warrant, in whole or in part or (iv) commit or agree to take any of the foregoing actions. Pursuant to the terms of the GGE Stockholder Agreement, each Significant GGE Stockholder is prohibited from directly or indirectly soliciting, initiating or encouraging the submission of any takeover proposal, or taking any actions to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to a takeover proposal. In addition, each Significant GGE Stockholder has agreed to use all reasonable efforts to take, until the consummation of the Merger or the termination of the Merger Agreement, all actions, and to do and cooperate in doing, all things necessary, proper and advisable, to make effective, in the most expeditious manner practicable, the Merger and the transactions contemplated thereby. In the event the Merger Agreement is terminated under circumstances where Sun is or may become entitled to receive the termination fee as described under "THE MERGER AGREEMENT--Fees and Expenses," each Significant GGE Stockholder will be obligated to pay to Sun on demand an amount equal to 50% of the profit (as determined pursuant to the terms of the GGE Stockholder Agreement) of such Significant GGE Stockholder from the consummation of any takeover proposal that is consummated within one year of such termination. In addition, in the event the Significant 41 GGE Stockholders are required to make the payment described in the preceding sentence, each Significant GGE Stockholder shall pay to Sun on demand 50% of the amount equal to the excess of (a) any consideration received by such Significant GGE Stockholder, directly or indirectly, in respect of employment, services, licenses or other agreements or arrangements over (b) the consideration, if any, that would have been received by such Significant GGE Stockholder pursuant to the License and Services Agreement (which is included as Annex VI hereto), valuing any non-cash consideration in accordance with the terms of the GGE Stockholder Agreement. The GGE Stockholder Agreement shall terminate upon the earlier of (a) July 31, 1997 and (b) the Effective Time of the Merger. In addition, subject to certain conditions, the GGE Stockholder Agreement will terminate at the time the Merger Agreement is terminated for any of certain specified reasons. SUN STOCKHOLDER AGREEMENT Pursuant to the terms of the Sun Stockholder Agreement, SIIL, the controlling Sun shareholder, has agreed, among other things, until the Sun Stockholder Agreement is terminated by its terms, to vote the Ordinary Shares then held by SIIL, or grant a consent or approval in respect of such Ordinary Shares, at any meeting of Sun shareholders or at any adjournment thereof or in any other circumstances upon which its vote, consent or other approval is sought, (i) in favor of any amendments to the Sun Charter that add such provisions as may be necessary as a result of consummation of the transactions contemplated by the Merger Agreement to comply with the NJCCA and (ii) if the Merger Agreement is amended to change the structure of the Merger, in favor of the approval and adoption of the Merger Agreement and the approval of the terms of the Merger Agreement and each of the transactions contemplated by the Merger Agreement. See "THE MERGER AGREEMENT--Termination." The Sun Stockholder Agreement shall terminate upon the earlier of (a) the termination of the Merger Agreement and (b) the Effective Time of the Merger. 42 THE MERGER GENERAL At the Effective Time of the Merger, Sub will be merged with and into GGE, with GGE continuing as the surviving corporation and a wholly owned subsidiary of Sun. As a result of the Merger, the separate corporate existence of Sub will cease and GGE will succeed to all the rights and be responsible for all the obligations of Sub in accordance with the DGCL. Subject to the terms and conditions of the Merger Agreement, each share of GGE Common Stock outstanding immediately prior to the Effective Time (other than shares owned directly or indirectly by Sun or GGE, which will be canceled) will be converted into the right to receive the Conversion Number of an Ordinary Share. Cash will be paid to holders of GGE Common Stock in lieu of any fractional Ordinary Shares. Also subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of GGE Class B Stock will be converted into the right to receive the Class B Consideration. As a result of such conversion, the holders of GGE Class B Stock will not be entitled to special rights with respect to the election of directors to which holders of GGE Class B Stock were previously entitled. As of the Effective Time, the fraction of an Ordinary Share into which a share of GGE Class B Stock is converted shall be traded as part of a Unit. See "THE MERGER AGREEMENT--Conversion of GGE Common Stock",-- "Conversion of GGE Class B Stock", "-- Fractional Shares" and "DESCRIPTION OF GGE CAPITAL STOCK." The Merger Agreement also provides for the assumption by Sun of certain GGE options and warrants. ORDINARY SHARES ISSUED IN CONNECTION WITH THE MERGER. Based on the number of shares of GGE Common Stock and GGE Class B Stock outstanding on the GGE Record Date and based on an assumed Conversion Number of .4324 and Class B Consideration of .1928 of an Ordinary Share per share of GGE Class B Stock, 4,113,545 Ordinary Shares would be issued upon consummation of the Merger, assuming exercise of all outstanding options and warrants for shares of GGE Common Stock prior to the Effective Time. The Merger will become effective upon the filing of a Certificate of Merger with the Secretary of State of the State of Delaware unless the Certificate of Merger provides for a later time of effectiveness. The filing of the Certificate of Merger will occur as soon as practicable on or after the Closing Date. See "THE MERGER AGREEMENT--Conditions to the Consummation of the Merger; Conditions to Each Party's Obligation to Effect the Merger." BACKGROUND OF THE MERGER In May 1994, Sun and GGE closed a transaction in which Sun acquired the Paradise Island businesses of Resorts International, Inc. (predecessor to GGE). In May 1996, Sun publicly expressed its interest in entering the Atlantic City market and asked Bear Stearns, its financial advisor, to review the public documents of GGE to determine the advisability of pursuing a possible acquisition. In July 1996, representatives of Sun expressed interest in acquiring some of GGE's excess real estate holdings in Atlantic City and requested a meeting with GGE executives. On July 17, 1996, GGE's Executive Vice President--Finance and Chief Financial Officer, Matthew B. Kearney, met with Sun's President, Howard B. Kerzner and Sun's Executive Vice President--General Counsel, Charles D. Adamo regarding the possible sale to Sun of GGE's excess real estate holdings in the South Inlet area of Atlantic City, an area where it had been publicly reported that MGM Grand was planning a major development. Sun indicated its interest in the Atlantic City market and in a possible casino/hotel/resort to be developed in that area. Sun stated that it intended to file an application with the NJCC for a license to own and operate a casino in Atlantic City. At this meeting, the possibility of a combination of the two companies was raised. On July 20, 1996, Mr. Kearney met again with Mr. H.B. Kerzner and with Sun's Chairman and Chief Executive Officer, Solomon Kerzner, at which time Sun's possible interest in pursuing a combination 43 transaction was further discussed. Subsequently, several telephone discussions were held between representatives of GGE and representatives of Sun resulting in a subsequent meeting between Mr. Kearney and Mr. H.B. Kerzner in Florida on July 25, 1996 at which Sun expressed its interest in a possible merger transaction with GGE. On July 30, 1996, at the invitation of Messrs. H.B. Kerzner and Adamo, the President and Chief Executive Officer of GGE, Thomas E. Gallagher, Lawrence Cohen, Executive Vice President and Chief Financial Officer of the Griffin Group, and Mr. Kearney visited Sun's joint venture development with the Mohegan Tribe then under construction in Montville, Connecticut and also visited the Foxwoods casino operated by the Pequot Tribe at Ledyard, Connecticut, approximately ten miles away. Following this visit, during the period July 30 through August 2, Mr. Gallagher consulted by telephone with individual members of the GGE Board to ascertain their preliminary views regarding a possible transaction with Sun and the process for evaluating and negotiating such a transaction, including the potential range of acceptable consideration and the possible retention of a financial advisor to GGE. On August 1, 1996, Mr. Kearney met with Mr. H.B. Kerzner in Atlantic City, and later on the same day Mr. Gallagher met with Mr. H.B. Kerzner in New York City. During these meetings, discussions continued regarding the possible terms upon which a merger transaction might be negotiated. Thereafter, on August 2 and 3, 1996, several telephone discussions took place between Messrs. Gallagher, Kearney and representatives of Sun. The principal topic was a possible merger of GGE with Sun on the basis of a stock for stock exchange at a ratio involving a significant premium over GGE's then current market price although specific prices were not agreed upon. On August 5, 1996, GGE retained Morgan Stanley to act as financial advisor to GGE in connection with further consideration of a possible business combination. On August 7, 1996, a regularly scheduled meeting of the GGE Board was held in New York City, at which GGE management reported on the status of discussions with Sun and presentations were made by GGE's outside counsel as to applicable legal issues and by Morgan Stanley regarding the diligence and valuation process. On August 9, 1996, Messrs. Gallagher and Kearney, together with Morgan Stanley, met with Sun executives and Bear Stearns at the offices of Bear Stearns and began the formal diligence process. Subsequently, Morgan Stanley and Bear Stearns continued diligence procedures directly with one another and with Sun and GGE. In addition, GGE's and Sun's respective outside auditors were respectively requested to interview Sun's and GGE's auditors with regard to the financial statements of Sun and GGE. On August 12, 1996, a regularly scheduled meeting of the Sun Board was held at Paradise Island at which Sun management reported on the status of discussions with GGE. Bear Stearns, who were retained as financial advisors, made a presentation regarding a possible transaction with GGE, and the Sun Board authorized Sun management to continue to negotiate the terms of such a transaction. During the week of August 12, 1996, additional financial and legal due diligence was conducted by GGE's and Sun's respective outside counsels and financial advisors. On August 14, 1996 a special meeting of the GGE Board was held telephonically at which further discussion of the desirability of a business combination occurred, along with extensive discussion of possible financial terms of such a merger. At such meeting, further presentations were made by GGE's outside counsel and by Morgan Stanley. Representatives of GGE and Sun and their respective counsel met at the offices of Sun's outside counsel on August 14 and 15, 1996 to continue negotiations regarding the form of merger agreement. On August 16, 17 and 18, 1996 further negotiations were conducted between Messrs. Gallagher and Kearney of GGE and Messrs. H.B. Kerzner and Adamo of Sun. On August 18, 1996, the Sun Board held a meeting at which Bear Stearns delivered an oral fairness opinion. Following presentations by key members of Sun management and a review of the terms of the 44 Merger by the Sun Board, the Sun Board approved the terms of and authorized Sun management to execute the Merger Agreement and approved the transactions contemplated thereby. On August 19, 1996, the GGE Board held a meeting in New York to consider the terms of the Merger Agreement. Following a report by management, presentations by Morgan Stanley, GGE's independent auditors and counsel, and extensive discussions of relevant considerations, including the outlook for the Atlantic City gaming market and GGE's expansion plans, financial and valuation analyses of GGE and Sun, Morgan Stanley's fairness opinion, detailed review of the Merger Agreement, regulatory matters and due diligence, the GGE Board unanimously approved the Merger and authorized the execution and delivery of the Merger Agreement. SUN'S REASONS FOR THE MERGER; RECOMMENDATION OF ITS BOARD OF DIRECTORS The Sun Board has carefully considered the terms of the Merger and has approved the Merger Agreement, the Charter Amendment and the related transactions and unanimously recommends that the Sun shareholders vote FOR the approval of the Charter Amendment at the Sun Extraordinary General Meeting. The Sun Board believes that the terms of the Merger are attractive to Sun and that the Merger would be strategically advantageous for Sun and would enhance future value for Sun shareholders. In reaching its conclusion, the Sun Board considered, among other things: (i) the judgment, advice and analyses of its management; (ii) the analysis prepared by, and the opinion of, Bear Stearns; (iii) the financial condition, results of operations and cash flows of Sun and GGE, both on an historical and a prospective basis; (iv) the synergies and operating efficiencies that should become available to the combined enterprise as a result of the Merger; (v) the strategic benefits of the Merger; (vi) the current and prospective environment in which Sun operates, including international, national and local economic conditions, the competitive environment for resort and gaming companies generally and the trend towards consolidation in the gaming industry; (vii) the express terms and conditions of the Merger Agreement, which were viewed as providing an equitable basis for the Merger from the standpoint of Sun; (viii) historical market prices and trading information with respect to Ordinary Shares and GGE Common Stock; (ix) the tax effects of the Merger on Sun; and (x) the ability of Sun and GGE to obtain the necessary regulatory approvals. The foregoing discussion of the information and factors considered and given weight by the Sun Board is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation of the Merger, the Sun Board did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual members of the Sun Board may have given different weights to different factors. THE SUN BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF ORDINARY SHARES VOTE "FOR" APPROVAL OF THE CHARTER AMENDMENT. OPINION OF SUN'S FINANCIAL ADVISOR Sun, pursuant to an engagement letter dated August 18, 1996 (the "Engagement Letter"), retained Bear Stearns as its exclusive financial advisor in connection with Sun's proposed acquisition of GGE. At the August 18, 1996 meeting of the Sun Board, Bear Stearns delivered its oral opinion, confirmed in writing as of such date, to the effect that, as of the date thereof, and subject to the assumptions and qualifications set forth therein, the Merger was fair, from a financial point of view, to Sun. As described below, Bear Stearns also performed and received a fee for certain other financial advisory services for Sun in connection with the Merger. THE FULL TEXT OF THE WRITTEN OPINION OF BEAR STEARNS, DATED AS OF AUGUST 18, 1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX IV HERETO 45 AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE BEAR STEARNS OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. HOLDERS OF ORDINARY SHARES ARE URGED TO READ THE BEAR STEARNS OPINION IN ITS ENTIRETY. The opinion of Bear Stearns is intended solely for the benefit and use of the Sun Board and does not constitute a recommendation to any holder of Ordinary Shares as to how such holder should vote in connection with the Merger. Bear Stearns' opinion is necessarily based on economic, market and other conditions, and the information made available to it, as of the date of its opinion. The Conversion Number together with the provisions for adjustment of the Conversion Number were determined by arm's-length negotiation between Sun and GGE, although Sun consulted with Bear Stearns from time to time with respect thereto. No limitations were imposed by Sun on Bear Stearns with respect to the investigations made or the procedures followed by Bear Stearns in rendering its opinion. In connection with rendering its opinion, Bear Stearns, among other things: (i) reviewed the Merger Agreement in substantially final form; (ii) reviewed Sun's Annual Report on Form 20-F for the fiscal years ended December 31, 1994 and 1995, and its Reports on Form 6-K setting forth its financial results for the periods ended March 31, 1996 and June 30, 1996; (iii) reviewed certain operating and financial information, including projections, provided to Bear Stearns by the management of Sun relating to Sun's business and prospects (the "Sun Projections"); (iv) met with certain members of Sun's senior management to discuss its operations, historical financial statements and future prospects; (v) visited Sun's facilities on Paradise Island, The Bahamas and in Montville, Connecticut; (vi) reviewed GGE's Annual Reports to Shareholders and Annual Reports on Form 10-K for the fiscal years ended December 31, 1993 through 1995, and its Quarterly Reports on Form 10-Q for the periods ended March 31, 1996 and June 30, 1996; (vii) reviewed certain operating and financial information, including projections, provided to Bear Stearns by Sun's management relating to GGE's business and prospects (the "GGE Projections" and, together with the Sun Projections, the "Projections"); (viii) met with certain members of GGE's senior management to review certain operating and financial information and to discuss its operations, historical financial statements, business and future prospects; (ix) visited GGE's facilities in Atlantic City, New Jersey; (x) reviewed the historical prices and trading volumes of Ordinary Shares and the GGE Common Stock; (xi) reviewed publicly available financial data and stock market performance data of companies that it deemed generally comparable to Sun and to GGE; (xii) reviewed the terms of recent acquisitions of companies that it deemed generally comparable to GGE; and (xiii) conducted such other studies, analyses, inquiries and investigations as it deemed appropriate. In the course of its review, Bear Stearns relied upon and assumed the accuracy and completeness of the financial and other information provided to it by Sun and GGE and representations of GGE's senior management related thereto. With respect to the Projections, Bear Stearns assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of Sun and GGE as to the expected future performance of Sun and GGE, respectively. Bear Stearns did not assume any responsibility for the information or Projections provided to it and Bear Stearns further relied upon the assurances of the management of Sun that they have no actual knowledge of any facts that would make the information or Projections provided to Bear Stearns incomplete or misleading. In arriving at its opinion, Bear Stearns did not perform or obtain any independent appraisal of the assets of Sun or GGE. Bear Stearns' opinion does not address Sun's underlying decision to effect the Merger. In connection with preparing and rendering its opinion, Bear Stearns performed a variety of valuation, financial and comparative analyses. The summary of such analyses set forth below does not purport to be a complete description of the analyses underlying Bear Stearns' opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to summary description. Bear Stearns believes that its analyses must be considered as a whole, and that selecting portions of its analyses and the factors considered by it, without considering all such factors and analyses, could create an incomplete view 46 of the processes underlying Bear Stearns' opinion. Moreover, the estimates contained in such analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Accordingly, because such estimates are inherently subject to substantial uncertainty, neither Bear Stearns nor any other person assumes responsibility for their accuracy. The following is a summary of the material valuation, financial and comparative analyses performed by Bear Stearns in arriving at its written opinion. IMPLIED ACQUISITION MULTIPLE. Bear Stearns calculated enterprise values for the acquisition of GGE based on a range of purchase prices of $20.00, $22.00 and $24.00 per share for the outstanding common stock of GGE (assuming that all outstanding options and warrants were exercised and excluding indebtedness of approximately $105 million related to the Showboat Notes) of $269.9 million, $288.9 million and $307.9 million, respectively. Based on estimated earnings before interest, taxes, depreciation and amortization of $41.5 million, Bear Stearns then calculated an implied enterprise value as a multiple of estimated fiscal year 1996 EBITDA of 6.5x, 6.9x and 7.4x for the illustrative per share prices of GGE Common Stock of $20.00, $22.00 (the price closest to the consideration to be received in the Merger based on the closing price of the Ordinary Shares on August 16, 1996) and $24.00, respectively. COMPARABLE COMPANY ANALYSIS. Bear Stearns reviewed and compared certain actual and estimated financial, operating and market information of GGE with the publicly available information of five selected publicly traded companies in the gaming industry that, in Bear Stearns' judgment, were generally comparable to GGE (the "Peer Group" or the "Comparable Companies"). The Comparable Companies consisted of Aztar Corporation ("Aztar"), Harrah's Entertainment, Inc. ("Harrah's"), Hollywood Casino Corp. ("Hollywood"), Showboat, Inc. ("Showboat Inc.") and Trump Hotels & Casino Resorts, Inc. ("Trump"). Bear Stearns calculated enterprise value (based on closing stock prices as of August 16, 1996) as a multiple of operating cash flow based on 1996 and 1997 estimates for each of the Comparable Companies. This analysis resulted in multiples of enterprise value to estimated operating cash flow (based on Bear Stearns Equity research and other Wall Street estimates) for Aztar, Harrah's, Hollywood, Showboat and Trump in a range from 5.5x to 9.3x and a mean of 7.1x for 1996 and from 5.3x to 6.7x and a mean of 5.9x for 1997, compared to the approximate 6.9x for GGE, based on the consideration to be issued in the Merger, in both 1996 and 1997 (assuming EBITDA of $41.5 million for 1996 and 1997). Bear Stearns noted that no company utilized in the above comparable company analysis is identical to GGE. Accordingly, an analysis of the foregoing is not purely mathematical and involves complex considerations and judgments concerning differences in financial and operating characteristics of the Comparable Companies and other factors that could affect their public trading value. SELECTED ACQUISITION ANALYSIS. Bear Stearns reviewed certain publicly available information regarding four transactions (the "Selected Acquisitions") involving the acquisition or proposed acquisition of all or part of certain companies in the gaming industry. The Selected Acquisitions consisted of the acquisition or proposed acquisition of all or part of Bally Entertainment Corporation by Hilton Hotels Corporation (the "Bally's Acquisition"), of Trump Castle Casino Resort by Trump Hotels & Casino Resorts, Inc. (the "Trump Acquisition"), of Gold Strike Hotel & Gambling Hall and certain other related assets by Circus Enterprises, Inc. (the "Gold Strike Acquisition") and of Caesars World, Inc. by ITT Corporation (the "Caesars Acquisition"). Bear Stearns calculated the total transaction value of the Merger (at $22.00 per share of GGE Common Stock) and the Selected Acquisitions as a multiple of projected operating cash flow. 47 This analysis resulted in multiples of total transaction value to projected operating cash flow (based on Wall Street and other publicly available estimates) for the Bally's Acquisition, the Trump Acquisition, the Gold Strike Acquisition and the Caesars Acquisition in a range from 7.7x to 9.7x with a mean of 8.7x, compared to 6.9x for the Merger. Bear Stearns noted that no transaction utilized in the above selected acquisition transaction analysis is identical to the Merger. Accordingly, an analysis of the foregoing is not purely mathematical and involves complex considerations and judgments concerning differences in financial and operating characteristics of the acquired companies in such transactions and other factors that could affect their acquisition and public trading values. RELATIVE CONTRIBUTION ANALYSIS. Bear Stearns analyzed the relative contribution by each of Sun and GGE to the post-Merger combined entity on a pro forma basis with respect to, among other things, revenues, EBITDA, earnings before interest and taxes ("EBIT"), and net income in light of their respective enterprise values (i.e., equity value plus total recourse debt less unrestricted cash and equivalents) and equity values. The results of this analysis indicated that GGE would contribute 11.5% and 17.3% of the post-Merger combined entity's equity value and enterprise value, respectively, based on the closing price for the Ordinary Shares as of August 16, 1996. Based on a variety of assumptions, this analysis indicated that for the periods 1995, 1996 and 1997, GGE would contribute, on a pro forma basis, approximately (i) 57.8%, 52.7% and 50.5%, respectively, of the post-Merger combined entity's reported revenues, (ii) 52.4%, 54.1% and 44.7%, respectively, of the post-Merger combined entity's reported EBITDA, (iii) 64.5%, 46.5% and 36.7%, respectively, of the post-Merger combined entity's reported EBIT and (iv) 46.6%, 29.2% and 20.6%, respectively, of the post-Merger combined entity's reported net income. In performing such analyses, Bear Stearns noted that (i) it did not take into account any potential revenue enhancements and operating synergies that might be realized after the Merger, (ii) revenues, EBITDA and EBIT excluded rental revenue and interest expense related to the Showboat Notes and (iii) EBITDA and EBIT excluded interest income on certain debt owned by Sun that Sun includes in EBITDA and EBIT for budget and financial reporting purposes. PRO FORMA MERGER ANALYSIS. Bear Stearns analyzed earnings per share ("EPS") estimates for 1997, 1998, 1999 and 2000 for both Sun and, on a pro forma basis, the combined entity after the Merger. These analyses were based upon projections provided by the management of Sun and publicly available research analysts estimates. Such analyses did not take into account any potential synergies or cost savings that might be realized after the Merger. Such analysis indicated that the Merger would result in accretion (dilution) in fully diluted EPS of (2.5%), (4.8%), (3.4%) and 12.8% in 1997, 1998, 1999 and 2000, respectively, as compared to the projected EPS of Sun on a stand-alone basis. HISTORICAL STOCK TRADING ANALYSIS. Bear Stearns reviewed the historical public trading prices of the GGE Common Stock over various periods of time, including, among others, the one and two year periods ended August 16, 1996. Bear Stearns also reviewed the historical performance over the same two periods of a stock price index comprised of the common shares of the Comparable Companies, excluding Harrah's in the two-year period analysis only and the S&P 400. OTHER ANALYSES. Bear Stearns conducted such other analyses as it deemed necessary, including reviewing historical and projected financial and operating data for both Sun and GGE and pro forma combined income statement and balance sheet data for the post-Merger combined entity, analyzing selected investment research reports on, and earnings and other estimates for, each of Sun and GGE and various of their business segments and analyzing available information regarding the stock ownership profiles of Sun and GGE. Pursuant to the Engagement Letter, Sun agreed to pay Bear Stearns a fee of $500,000 for rendering its opinion in connection with the Merger, which fee became payable at the time Bear Stearns delivered its opinion or, if Bear Stearns had not been asked to deliver an opinion, Bear Stearns being prepared to 48 deliver an opinion with respect to the Merger. Sun has also agreed to pay Bear Stearns an additional fee, payable upon consummation of the Merger, of $500,000. Accordingly, if the Merger is consummated, Bear Stearns will receive total fees of $1 million. In addition, Sun has also agreed to reimburse Bear Stearns, whether or not the Merger is consummated, for all reasonable out-of-pocket expenses incurred by Bear Stearns in connection with its engagement, including fees and disbursements of counsel and of other consultants and advisors retained by Bear Stearns with the consent of Sun, provided that such expense reimbursement shall not exceed $50,000. Sun has also agreed to indemnify Bear Stearns and certain related persons against certain liabilities in connection with its engagement, including certain liabilities under the federal securities laws. On September 21, 1995, Bear Stearns was the lead underwriter for a $175 million Senior Secured Note offering for the Mohegan Tribal Gaming Authority to finance the development of the Mohegan Sun Casino which will be managed by an affiliate of Sun. In addition, on February 27, 1996, Bear Stearns co-managed an offering of 8.44 million Ordinary Shares. Bear Stearns also acted as financial advisor to GGE in connection with the GGE Bankruptcy Plan and related matters. In the ordinary course of its business, Bear Stearns may actively trade the equity securities of Sun and GGE for its own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. Bear Stearns is an internationally recognized investment banking firm and was selected as financial advisor to Sun in connection with the Merger because of its substantial experience and expertise in transactions similar to the Merger. As part of its investment banking business, Bear Stearns regularly is engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. GGE'S REASONS FOR THE MERGER; RECOMMENDATION OF ITS BOARD OF DIRECTORS The GGE Board has carefully considered the terms of the proposed Merger and believes that the Merger and the related transactions are fair to and in the best interests of GGE and its stockholders. The GGE Board has approved the Merger and the related transactions and recommends that the GGE stockholders vote FOR the adoption of the Merger Agreement at the GGE Special Meeting. The GGE Board believes that the Merger would be strategically advantageous for the combined companies and would enhance future value for GGE's stockholders. In reaching its conclusion, the GGE Board considered, among other things: (i) discussions with GGE senior management beginning in the late spring of 1995 through early summer of 1996 regarding developments in the gaming industry, the competitive position of GGE in that industry and in Atlantic City, possible strategic combinations or other transactions, and the possible disposition of certain of GGE's excess real estate holdings in Atlantic City; (ii) the fact that one or more third parties had previously approached GGE about possible purchases of certain of GGE's excess real estate holdings; (iii) that GGE agreed in late 1995 to give options on a portion of its excess real estate holdings and that it at that time agreed to continue to consider other proposals for other options; (iv) the judgment, advice and analyses of its management; (v) the financial condition, results of operations and cash flows of Sun and GGE, both on an historical and a prospective basis; (vi) the synergies and operating efficiencies that should become available to the combined enterprise as a result of the Merger; (vii) the strategic benefits of the Merger to both GGE and Sun; (viii) the current and prospective environment in which GGE operates, including national and local economic conditions, the competitive environment for resort and gaming companies generally and particularly in Atlantic City and the trend towards consolidation in the gaming industry; (ix) the express terms and conditions of the Merger Agreement, which were viewed as providing an equitable basis for the Merger from the standpoint of GGE; (x) historical market prices and trading information with respect to GGE Common Stock and Ordinary Shares; (xi) the analysis prepared by, and 49 the opinion of, Morgan Stanley; (xii) the tax effects of the Merger on GGE and its stockholders; and (xiii) the ability of Sun and GGE to obtain the necessary regulatory approvals. The foregoing discussion of the information and factors considered and given weight by the GGE Board is not intended to be exhaustive. In view of the variety of factors considered in connection with its evaluation of the Merger, the GGE Board did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual members of the GGE Board may have given different weights to different factors. In considering the recommendation of the GGE Board with respect to the Merger, GGE stockholders should be aware that the interests that certain directors and executive officers of GGE have with respect to the Merger are different from, or in addition to, the interests of holders of GGE Common Stock generally. The GGE Board was aware of these interests and took these interests into account in approving the Merger Agreement and the transactions contemplated thereby. See "THE MERGER--- Interests of Certain Persons in the Merger." THE GGE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF GGE COMMON STOCK VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT. OPINION OF GGE'S FINANCIAL ADVISOR Morgan Stanley was retained by GGE to provide its opinion in connection with the Merger and related matters based upon Morgan Stanley's experience and expertise. At the August 19, 1996 meeting of the GGE Board, Morgan Stanley rendered to the GGE Board an oral opinion, confirmed in writing as of such date, to the effect that, as of such date and based on certain matters stated therein, the Conversion Number pursuant to the Merger Agreement was fair from a financial point of view to the holders of shares of GGE Common Stock (other than Sun and its affiliates). THE FULL TEXT OF MORGAN STANLEY'S OPINION DATED AS OF AUGUST 19, 1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX V TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF GGE COMMON STOCK SHOULD READ MORGAN STANLEY'S OPINION CAREFULLY IN ITS ENTIRETY. THE MORGAN STANLEY OPINION IS DIRECTED TO THE GGE BOARD AND THE FAIRNESS OF THE CONVERSION NUMBER FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF SHARES OF GGE COMMON STOCK, AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF GGE COMMON STOCK (OTHER THAN SUN AND ITS AFFILIATES) AS TO HOW TO VOTE AT THE GGE SPECIAL MEETING. THE SUMMARY OF MORGAN STANLEY'S OPINION SET FORTH IN THIS PROXY STATEMENT/ PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. In arriving at its opinion, Morgan Stanley (i) reviewed certain publicly available financial statements and other information of GGE; (ii) reviewed certain publicly available financial statements and other information of Sun; (iii) reviewed certain internal financial statements and other financial and operating data concerning GGE prepared by the management of GGE; (iv) reviewed certain internal financial statements and other financial and operating data concerning Sun prepared by the management of Sun; (v) analyzed certain 1996 budget information prepared by the management of GGE; (vi) analyzed certain financial projections prepared by Sun's financial advisor; (vii) discussed the past and current operations and financial condition and the prospects of GGE with senior executives of GGE; (viii) discussed the past and current operations and financial condition and the prospects of Sun with senior executives of Sun; (ix) reviewed the reported prices and trading activity for Ordinary Shares; (x) reviewed the reported prices and trading activity for the GGE Common Stock; (xi) compared the financial performance of GGE and the prices and trading activity of GGE Common Stock with that of certain other comparable publicly traded companies and their securities; (xii) compared the financial performance of Sun and the prices and trading activity of the Ordinary Shares with that of certain other comparable publicly traded companies and their securities; (xiii) reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions; (xiv) participated in discussions among representatives of GGE, Sun and their financial and legal advisors; (xv) reviewed the Merger Agreement and certain related documents; and (xvi) performed such other analyses and considered such other factors as it deemed appropriate. 50 In rendering its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by Morgan Stanley for purposes of its opinion. With respect to financial projections, including the 1996 budget of GGE, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of GGE or Sun, respectively. Morgan Stanley did not make an independent valuation or appraisal of the assets or liabilities of GGE or Sun, nor was Morgan Stanley furnished with any such appraisals. Morgan Stanley assumed that the Merger will qualify as a tax-free "reorganization" within the meaning of the Code. Morgan Stanley also assumed that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement. Each Morgan Stanley opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to Morgan Stanley as of, the date thereof. In arriving at its opinion, Morgan Stanley was not authorized to solicit, and did not solicit, nor did it receive any indication of, interest from any party with respect to the acquisition, business combination or other extraordinary transaction involving GGE or any of its assets. The following is a brief summary of certain analyses performed by Morgan Stanley and reviewed with the GGE Board in connection with the preparation of the Morgan Stanley Opinion dated August 19, 1996 and with its oral presentation to the GGE Board on August 19, 1996. PUBLIC MARKET OVERVIEW. Morgan Stanley reviewed certain trading information for each of GGE and Sun, including market value, market capitalization and institutional ownership. Morgan Stanley also reviewed historical and forward trading multiples for each company. This review indicated that for GGE's and Sun's last twelve months ("LTM") ended June 30, 1996, the high and low closing prices for shares of GGE Common Stock and Ordinary Shares were $17.375 and $10.00 and $54.00 and $25.00, respectively. Morgan Stanley calculated the fully-diluted aggregate value of each of GGE and Sun, $284.4 million and $1,396.9 million, respectively, as a multiple of each of their respective LTM revenues; EBITDA and EBIT. The multiples yielded by such calculation were: (i) with respect to revenues, 1.0x and 5.8x, respectively, (ii) with respect to EBITDA, 5.9x and 34.6x, respectively, and (iii) with respect to EBIT, 7.9x and 48.5x, respectively. HISTORICAL STOCK PERFORMANCE. Morgan Stanley also compared the trading price of the shares of GGE Common Stock and Ordinary Shares to (i) the S&P 400 Index, (ii) a composite index of certain large capitalization gaming companies (the "Large Cap Index Companies"), specifically Bally Entertainment Corporation, Circus Circus Enterprises, Inc., Harrah's Entertainment, Inc., Mirage Resorts Incorporated and MGM Grand, Inc. (the "Large Cap Gaming Companies") and Hilton Hotels Corporation, ITT Corporation (the "Hotel/Casino Companies"), and (iii) a composite index of certain mid-size capitalization gaming companies (the "Mid Cap Index Companies"), specifically, Argosy Gaming Co., Aztar Corporation, Boyd Gaming Corporation, Casino America, Casino Magic Corp., Grand Casinos, Inc., Hollywood Casino Corporation, Jackpot Enterprises, Inc., Players International, Inc., Pratt Hotel Corporation, Presidents Casinos, Inc., Primadonna Resorts, Inc., Rio Hotel & Casino, Showboat Incorporated, Station Casinos Inc. and Trump Hotels & Casino Resorts, Inc. COMPARABLE COMPANY TRADING ANALYSIS. Morgan Stanley performed a comparable public company trading analysis pursuant to which it compared certain publicly available financial and operating data, projections of future financial performance and market statistics (calculated based upon closing stock prices on August 16, 1996), of (i) the Large Cap Gaming Companies, (ii) the Hotel/Casino Companies, (iii) certain mid-size capitalization companies (The "Mid Cap Gaming Companies"), specifically, the Mid Cap Index Companies plus Pratt Hotel Corp. and President Casinos, Inc., (iv) a stand-alone strip property, specifically Stratosphere Corporation ("Stratosphere") and (v) certain gaming equipment manufacturers (the "Gaming Equipment Companies"), specifically Anchor Gaming, Casino Data Systems, GTech Holdings and International Game Technology. Morgan Stanley compared (i) the closing stock price as a multiple of estimated 1996 and 1997 EPS and of LTM after-tax cash flow ("OCF") and of book value, 51 (ii) the aggregate value (consisting of market capitalization and total debt) as a multiple of each of LTM revenues, EBITDA and EBIT, (iii) the projected 5 year growth rate and (iv) the ratio of price to 1996 and 1997 EPS and calculated the mean and median of each multiple by company category. For the Large Cap Gaming Companies, such analysis indicated: (i) mean and median price to estimated 1996 EPS multiples of 21.2x and 20.4x, respectively, (ii) mean and median price to estimated 1997 EPS multiples of 17.2x and 17.6x, respectively, (iii) mean and median price to LTM OCF multiples of 10.0x and 8.8x, (iv) mean and median price to book value multiples of 3.4x and 3.1x, respecively, (v) mean and median aggregate value to LTM revenue multiples of 2.6x and 2.8x, respectively, (vi) mean and median aggregate value to LTM EBITDA multiples of 9.1x and 9.2x, respectively, (vii) mean and median aggregate value to LTM EBIT multiples of 12.7x and 12.2x, respectively, (viii) mean and median dividend yield of 0.0% for each, (ix) mean and median projected 5 year growth of 19.2x and 19.0x, respectively, (x) mean and median ratio of price to 1996 EPS to EPS growth rates of 1.1x and 1.0x, respectively, and (xi) mean and median ratio of price to 1997 EPS to EPS growth rates of 0.9x for each. For the Hotel/Casino Companies, such analysis indicated: (i) mean and median price to estimated 1997 EPS multiples of 23.6x for each, (ii) mean and median price to estimated 1997 EPS multiples of 19.2x for each, (iii) mean and median price to LTM OCF multiples of 15.0x for each, (iv) mean and median price to book value multiples of 3.0x for each, (v) mean and median aggregate value to LTM revenue multiples of 2.5x for each, (vi) mean and median aggregate value to LTM EBITDA multiples of 11.5x for each, (vii) mean and median aggregate value to LTM EBIT multiples of 15.9x for each, (viii) mean and median dividend yield of 0.6% for each, (ix) mean and median projected 5 year growth of 18.5x for each, (x) mean and median ratio of price to 1996 EPS to EPS growth rates of 1.3x for each and (xi) mean and median ratio of price to 1997 EPS to EPS growth rates of 1.0x for each. For the Mid Cap Gaming Companies, such analysis indicated: (i) mean and median price to estimated 1996 EPS multiples of 15.6x and 14.4x, respectively, (ii) mean and median price to estimated 1997 EPS multiples of 11.4x and 11.7x, respectively, (iii) mean and median price to LTM OCF multiples of 6.8x and 6.5x, respectively, (iv) mean and median price to book value multiples of 1.9x and 1.5x, respectively, (v) mean and median aggregate value to LTM revenue multiples of 1.6x and 1.7x, respectively, (vi) mean and median aggregate value to LTM EBITDA multiples of 7.5x and 7.3x, respectively, (vii) mean and median aggregate value to LTM EBIT multiples of 13.4x and 11.6x, (viii) mean and median dividend yield of 0.2% and 0.0%, respectively, (ix) mean and median projected 5 year growth of 18.3x and 18.0x, respectively, (x) mean and median ratio of price to 1996 EPS of 0.8x for each and (xi) mean and median ratio of price to 1997 EPS of 0.6x and 0.7x, respectively. For Stratosphere, such analysis indicated: (i) mean price to estimated 1997 EPS multiple of 200x, (ii) mean price to book value multiple of 0.6x, (iii) mean aggregate value to LTM revenue multiple of 26.7x, (iv) mean aggregate value to LTM EBITDA multiple of 23.8x, (v) mean aggregate value of LTM EBIT multiple of 28.4x, (vi) mean dividend yield of 0.0%, (vii) mean projected 5 year growth of 17.5x and (viii) mean ratio of price to 1997 EPS of 11.4x. For the Gaming Equipment Companies, such analysis indicated: (i) mean and median price to estimated 1996 EPS multiples of 23.2x and 24.0x, respectively, (ii) mean and median price to estimated 1997 EPS multiples of 17.0x and 17.9x, respectively, (iii) mean and median price to LTM OCF multiples of 23.1x and 24.8x, respectively, (iv) mean and median price to book value multiples of 5.2x and 4.0x, respectively, (v) mean and median aggregate value to LTM revenue multiples of 4.8x and 5.2x, respectively, (vi) mean and median aggregate value to LTM EBITDA multiples of 18.3x and 18.4x, respectively, (vii) mean and median aggregate value to LTM EBIT multiples of 18.2x and 15.0x, respectively, (viii) mean and median dividend yield of 0.2% and 0.0%, respectively, (ix) mean and median projected 5 year growth of 21.0x and 21.9x, respectively, (x) mean and median ratio of price to 1996 EPS to EPS growth rates of 1.1x for each and (xi) mean and median ratio of price to 1997 EPS to EPS growth rates of 0.8x and 0.7x, respectively. 52 No company utilized as a comparison in the comparable companies analysis is identical to GGE. In evaluating the comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of GGE, such as the impact of competition on GGE and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of GGE or the industry or in the financial markets in general. COMPARABLE PRECEDENT TRANSACTION ANALYSIS. Morgan Stanley reviewed certain publicly available information regarding 14 transactions from 1993 to 1995 and for each transaction calculated (i) the equity value as a multiple of each of earnings and OCF for the last 12 months and to book value, (ii) the asset value as a multiple of sales, EBITDA and estimated EBITDA, and (iii) the premium as a percentage of unaffected price. Such analysis indicated that equity value as a multiple of earnings, OCF and book value, respectively, (i) ranged from 23.0x to 36.6x, with a mean of 29.2x and a median of 28.1x, (ii) ranged from 6.6x to 14.7x, with a mean of 12.1x and a median of 13.6x and (iii) ranged from 0.5x to 8.9x, with a mean of 3.1x and a median of 2.0x. Such analysis also indicated that asset value as a multiple of sales, EBITDA and estimated EBITDA, respectively, (i) ranged from 0.6x to 4.9x, with a mean of 2.1x and a median of 1.8x, (ii) ranged from 4.5x to 11.4x, with a mean of 8.1x and a median of 8.7x and (iii) ranged from 4.7x to 9.2x, with a mean of 6.9x and a median of 6.8x. Such analysis indicated that the premium to unaffected price ranged from 6.0% to 65.1%, with a mean of 31.9% and a median of 23.5%. No transaction utilized in the comparable transaction analysis is identical to the Merger. In evaluating the precedent transactions, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of GGE, such as the impact of competition on the business of GGE and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of GGE or the industry or in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable transaction data. DISCOUNTED CASH FLOW ANALYSIS. Morgan Stanley performed a discounted cash flow analysis, for GGE, on a stand-alone basis (the "Base Case"), and Sun, on a stand-alone basis, based upon estimates of projected financial performance prepared by the management of GGE and the financial advisor to Sun. In addition, Morgan Stanley performed an analysis adjusted to reflect GGE's contemplated expansion into the Chalfonte Site and certain variants thereof (the "Chalfonte Case"). Using these projections, Morgan Stanley calculated ranges of total equity value and total equity value per share, based upon the discounted net present value of the sum of (i) the projected stream of unlevered free cash flows from 1996 through 2006, (ii) the projected terminal value at such year based upon a range of multiples of projected EBITDA and (iii) the assumed cash value net of debt and based on several discount rates (ranging from 12.0% to 17.0%). At respective terminal EBITDA multiples of 5.0x, 5.5x and 6.0x, the analysis yielded ranges of total equity value per share for GGE assuming the Base Case of (i) $8.32 to $10.01, (ii) $8.89 to $10.68 and (iii) $9.45 to $11.34. At respective terminal EBITDA multiples of 5.5x, 6.0x and 6.5x, the analysis yielded ranges of total equity value per share for GGE assuming the Chalfonte Case of (i) $14.12 to $20.25, (ii) $15.20 to $21.53 and (iii) $16.29 to $22.81. At respective terminal EBITDA multiples of 7.0x, 8.0x and 9.0x, the analysis yielded ranges of total equity value per share for Sun of (i) $48 to $53, (ii) $50 to $56 and (iii) $53 to $60. PRO FORMA CONTRIBUTION ANALYSIS. In addition, Morgan Stanley compared the pro forma fully diluted relative equity ownership of the stockholders of GGE and shareholders of Sun in the combined company of 11.3% and 88.7%, respectively, to the pro forma relative contributions of each of GGE and Sun to the combined company for the LTM for EBITDA, EBIT and net income and for the years ending December 1996 and 1997 for net income. With respect to the years 1996 and 1997, such analysis was based on Institutional Brokers Estimated System estimates. The analysis indicated, among other things, that for 53 LTM, 1996 and 1997, respectively, GGE would have contributed (i) 54.6% of LTM EBITDA, 55.5% of LTM EBIT and 26.5% of LTM net income, (ii) 20.3% of 1996 net income and (iii) 16.6% of 1997 net income. PRO FORMA MERGER ANALYSIS. Morgan Stanley also analyzed certain pro forma effects resulting from the Merger based upon the Conversion Number, including the impact of the Merger on the EPS of GGE and Sun. Such analysis was based on the financial projections of the management of GGE and the financial advisor to Sun. The analysis indicated that, for the GGE stockholders, on an EPS basis the Merger would be slightly accretive in 1996 and 1997 and slightly dilutive in 1998, 1999 and 2000. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any particular analysis or factor considered by it. Furthermore, selecting any portion of Morgan Stanley's analyses, without considering all analyses, would create an incomplete view of the process underlying the Morgan Stanley Opinion. In addition, Morgan Stanley may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting for any particular analysis described above should not be taken to be Morgan Stanley's view of the actual value of GGE or Sun. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of GGE or Sun. The analyses performed by Morgan Stanley are not necessarily indicative of actual values, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as a part of Morgan Stanley's analysis of the fairness of the Conversion Number from a financial point of view to the holders of shares of GGE Common Stock and were provided to the GGE Board in connection with the delivery of the Morgan Stanley Opinion. The analyses do not purport to be appraisals or to reflect the prices at which GGE or Sun might actually be sold. Because such estimates are inherently subject to uncertainty, neither GGE, Sun nor Morgan Stanley nor any other person assumes responsibility for their accuracy. In addition, as described above, the Morgan Stanley Opinion, including Morgan Stanley's presentation to the GGE Board, was one of many factors taken into consideration by the GGE Board in making its determination to approve the Merger. The GGE Board retained Morgan Stanley based upon its experience and expertise. Morgan Stanley is an internationally recognized investment banking and financial advisory firm. Morgan Stanley, as part of its investment banking business, is regularly engaged in the valuation of business and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, as well as providing investment banking and financial advisory services. In the ordinary course of its trading and brokerage activities, Morgan Stanley or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in securities of GGE or Sun. In the past, Morgan Stanley and its affiliates have provided financial advisory services to GGE and Sun and have received customary fees for the rendering of these services. Pursuant to a letter agreement dated as of August 5, 1996, GGE has agreed to pay Morgan Stanley an opinion fee equal to $1.5 million, payable upon consummation of the Merger. In addition to the foregoing compensation, GGE has agreed to reimburse Morgan Stanley for its expenses, including reasonable fees and expenses of its counsel, and to indemnify Morgan Stanley for liabilities and expenses arising out of the engagement and the transactions in connection therewith, including liabilities under federal securities laws. INTERESTS OF CERTAIN PERSONS IN THE MERGER In considering the recommendation of the GGE Board with respect to the approval and adoption of the Merger Agreement and the transactions contemplated thereby, stockholders of GGE should be aware 54 that certain members of the management of GGE and the GGE Board have certain interests in the Merger that are different from, or in addition to, the interests of stockholders of GGE generally. GGE STOCKHOLDER AGREEMENT. Atlantic and Merv Griffin, Chairman of the Board of GGE, have entered into the GGE Stockholder Agreement, in their capacities as stockholders of GGE. The general effect of the GGE Stockholder Agreement, subject to certain conditions set forth therein, is to ensure the affirmative vote at the GGE Special Meeting of 2,125,108 shares of GGE Common Stock for adoption of the Merger Agreement. Because Atlantic and Mr. Griffin have agreed, pursuant to the GGE Stockholder Agreement, to pay over to Sun 50% of the profit (as determined pursuant to the terms of the GGE Stockholder Agreement) from the consummation of any takeover proposal in the event that the Merger Agreement is terminated under circumstances where Sun is entitled to receive the termination fee as described under "THE MERGER AGREEMENT--Fees and Expenses," Atlantic and Mr. Griffin would have less incentive than other stockholders of GGE to approve any competing offer for GGE. See "THE STOCKHOLDER AGREEMENTS--GGE Stockholder Agreement." LICENSE AND SERVICES AGREEMENT. In connection with the Merger, the Griffin Group (a corporation controlled by Merv Griffin), GGE and RIH will enter into the License and Services Agreement (the form of which is attached hereto as Annex VI and is incorporated herein by reference), pursuant to which (a) the current license and services agreement between the Griffin Group, GGE and RIH, dated as of September 17, 1992 (the "1992 License Agreement"), will be terminated, (b) the term of the license and services will be extended for a period of four years beyond the expiration of the 1992 License Agreement to September 16, 2001, and (c) the applicability of the license and services will be expanded to be available to certain of Sun's other properties in Connecticut and The Bahamas. As in the 1992 License Agreement, the License and Services Agreement grants to GGE a non-exclusive license to use the name and likeness of Merv Griffin to advertise and promote Casino Properties (as defined therein, including, in the case of the License and Services Agreement, the Atlantis and Mohegan Sun Casino properties as well as the Resorts Casino Hotel). GGE also has the non-exclusive right to use certain shows and gaming concepts set forth therein and the non-exclusive right to services provided by Mr. Griffin, on a pay or play basis, as marketing consultant and as host, producer, presenter and featured performer in various shows to be presented at the Casino Properties. The final payment obligation of $2,425,000 under the 1992 License Agreement was satisfied in 1994 and this prepayment was compensation for services from September 17, 1996 until the expiration of such agreement on September 16, 1997. Upon execution of the License and Services Agreement, the 1992 License Agreement will be terminated. However, the License and Services Agreement provides for the continuation of license and services for the remaining period of the 1992 License Agreement and calls for no additional compensation for the period through September 16, 1997. Accordingly, none of the amounts prepaid under the 1992 License Agreement for such period will be repaid to GGE. Pursuant to the License and Services Agreement, GGE will pay to the Griffin Group fees calculated using the same formula used in calculating fees in the 1992 License Agreement. Such compensation amounts to $2,546,000 for the period from September 17, 1997 to September 16, 1998, and $2,673,000, $2,807,000, and $2,947,000 for the respective three years thereafter until expiration on September 16, 2001. In accordance with the terms of the License and Services Agreement, such annual compensation is to be paid to the Griffin Group in the aggregate amount of $10,973,000 upon execution of such agreement. Additionally all business, travel and other expenses incurred by the Griffin Group in connection with providing requested services are to be paid by GGE as such expenses are incurred. The License and Services Agreement is to continue until September 16, 2001 and provides for earlier termination by either GGE or the Griffin Group under certain circumstances. Upon any termination of the agreement, the Griffin Group is entitled to retain all monies paid to it thus far and is entitled to be paid all amounts owing to it as of the date of termination. Additionally, in the event of any sale or other disposition 55 of any of the Casino Properties, GGE must cease the use of the name and likeness of Mr. Griffin with respect to such property. GGE also agrees to indemnify, defend and hold harmless the Griffin Group and Mr. Griffin against certain claims, losses and costs and to maintain certain insurance coverage with Mr. Griffin and the Griffin Group as named insureds. EMPLOYEE BENEFITS. Under the Merger Agreement, Sun has indicated that it intends for a period of two years following the Effective Time, to, or cause GGE to, continue to maintain employee benefit plans, programs and policies for the employees of GGE and its subsidiaries which, in the aggregate, provide benefits that are no less favorable than such benefits as are provided to such employees under those plans, programs and policies in effect on the date of the Merger Agreement. See "THE MERGER AGREEMENT--Effect on GGE Benefit Plans, Stock Options and Warrants." As a result of these arrangements, current members of GGE's management, may continue to receive employee benefits at least as favorable as those currently provided to them by GGE following the Merger. INDEMNIFICATION; DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. Under the Merger Agreement, Sun has agreed that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing as of the date of the Merger Agreement in favor of the current or former directors and officers of GGE and its subsidiaries as provided in their respective organizational documents shall survive the Merger and continue in full force and effect in accordance with their terms. In addition, subject to certain conditions, for six years after the Effective Time, Sun has agreed to maintain GGE's current directors' and officers' insurance and indemnification policy, to the extent that such policy provides coverage for events occurring prior to the Effective Time, for all persons who were directors and officers of GGE on the date of the Merger Agreement. See "THE MERGER AGREEMENT-- Indemnification, Exculpation and Insurance." GGE OPTIONS. Pursuant to the Merger Agreement each outstanding employee and director stock option to purchase shares of GGE Common Stock (an "Employee Stock Option") granted under the GGE Stock Option Plans, as amended and restated through the date of the Merger Agreement (the "Stock Plans") that is outstanding immediately prior to the Effective Time will be automatically converted at the Effective Time into an option to acquire, on the same terms and conditions as were applicable under the Employee Stock Option, including vesting (and, where applicable, accelerated vesting) and the rights of the holder under the terms of such Employee Stock Option, a number of Ordinary Shares equal to the number of shares of GGE Common Stock for which such option was exercisable, adjusted to give effect to the Conversion Number. See "THE MERGER AGREEMENT--Effect on GGE Benefit Plans, Stock Options and Warrants." As of the GGE Record Date, 189,500 shares were issuable to executive officers and directors of GGE, 76,833 of which will vest upon consummation of the Merger, and the remainder of which have previously vested. SEVERANCE AGREEMENTS. Each of Thomas E. Gallagher (President and Chief Executive Officer of GGE) and Matthew B. Kearney (Executive Vice President-Finance and Chief Financial Officer of GGE) will enter into a severance agreement wtih GGE. Although the terms of such severance agreements have not been finalized as of the date of this Proxy Statement/Prospectus, it is anticipated that each such severance agreement will be for a term of three years from the Effective Time. Each severance agreement is anticipated to provide for the payment of certain benefits to the executive officer if (i) a Change of Control (as defined therein) occurs and (ii) within a three year period of such Change of Control, the officer is discharged other than for Cause (as defined therein), or resigns due to certain stated reasons, including a reduction in compensation or responsibilities. The benefits expected to be paid under each such severance agreement consist of, among other things, (x) a lump sum payment equal to approximately 2.99 times the average annual salary (including bonuses) of the executive officer for the five preceding calendar years or for the period of employment if less than five years, (y) any amounts due to the executive officer under existing incentive compensation plans and (z) a cash payment in lieu of shares of GGE 56 Common Stock issuable upon the exercise of Employee Stock Options granted to the executive officer. Also, it is expected that if the execuitve officers become subject to the excise tax described in Section 280G of the Code, as amended, GGE may make additional payments to the executive officers to hold them harmless, on an after-tax basis, against such excise tax. The consummation of the Merger will constitute a Change in Control for purposes of the severance agreements. EMPLOYMENT ARRANGEMENTS WITH SUN. In connection with the Merger, certain officers of GGE may become directly employed or engaged as consultants by Sun after the Effective Time and would be expected to enter into employment or consultant agreements with Sun. The terms of such agreements have not been finalized as of the date of this Proxy Statement/Prospectus. BONUSES. Contingent upon consummation of the Merger and pursuant to the Merger Agreement, GGE has granted to its executive officers performance bonuses in the aggregate amount of $2,725,000. RESALE OF ORDINARY SHARES ISSUED IN THE MERGER; AFFILIATES The Ordinary Shares to be issued in the Merger will be freely transferable, except that shares issued to any GGE stockholder who may be deemed to be an "affiliate" (as defined under the Securities Act, and generally including, without limitation, directors, certain executive officers and beneficial owners of 10% or more of a class of capital stock) of GGE for purposes of Rule 145 under the Securities Act may be resold by them only in transactions permitted by the resale provisions of Rule 145 or as otherwise permitted under the Securities Act. The Merger Agreement provides that Sun's obligation to consummate the Merger is subject to Sun receiving, prior to the Closing Date, a letter agreement from each affiliate of GGE to the effect that such person will not offer or sell or otherwise dispose of any Ordinary Shares issued to such person in or pursuant to the Merger in violation of the Securities Act or the rules and regulations promulgated thereunder. This Proxy Statement/Prospectus does not cover resales of Ordinary Shares received by any person who may be deemed to be an affiliate of GGE. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion summarizes the principal Federal income tax consequences of the Merger to stockholders of GGE and does not purport to be a complete analysis or listing of all potential tax effects relevant to a decision whether to vote in favor of adoption of the Merger Agreement. The discussion does not reflect the individual tax position of any stockholder of GGE and does not address the tax consequences that may be relevant to stockholders of GGE with special tax status, including but not limited to financial institutions, dealers in securities, holders that are not citizens or residents of the United States, tax-exempt entities and holders that acquired GGE Common Stock upon the exercise of employee stock options or otherwise as compensation. Moreover, the discussion does not address any consequences arising under the laws of any state, locality or foreign jurisdiction. Finally, the tax consequences to holders of stock options or warrants are not discussed. The discussion is based on the Code, Treasury Regulations thereunder and administrative rulings and court decisions as of the date hereof. All of the foregoing are subject to change and any such change could affect the continuing validity of this discussion. Stockholders of GGE are urged to consult with their own tax advisors regarding the tax consequences of the Merger to them, including the effects of Federal, state, local, foreign and other tax laws. Cravath, Swaine & Moore, counsel to Sun, and Gibson, Dunn & Crutcher LLP, counsel to GGE, have delivered to Sun and GGE, respectively, an opinion, dated the date hereof, to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code and Sun, Sub and GGE will each be a party to the reorganization within the meaning of Section 368(b) of the Code. Such opinions assume that the Merger will take place as described in the Merger Agreement and that certain factual matters represented by Sun, Sub and GGE, which will be reconfirmed prior to the Closing Date, are true and correct. It is a condition to the obligations of Sun and GGE to consummate the Merger that each shall 57 receive an opinion, dated the Closing Date, confirming the opinion described herein. Based upon such opinions, the following will be the material Federal income tax consequences of the Merger: (i) no gain or loss will be recognized by the stockholders of GGE upon receipt of Ordinary Shares in exchange for their GGE Common Stock or GGE Class B Stock, except that a holder of GGE Common Stock who receives cash in lieu of a fractional Ordinary Share will recognize gain or loss equal to the difference between the amount of such cash and the tax basis allocated to such stockholder's fractional Ordinary Share. Such gain or loss will constitute long-term capital gain or loss if, at the Effective Time, such stockholder's GGE Common Stock or GGE Class B Stock is held as a capital asset and has been held for more than one year; (ii) the tax basis of the Ordinary Shares received by the stockholders of GGE will be the same as the tax basis of such stockholders' GGE Common Stock or GGE Class B Stock exchanged therefor; and (iii) the holding period of the Ordinary Shares in the hands of the GGE stockholders will include the holding period of such stockholders' GGE Common Stock or GGE Class B Stock exchanged therefor, provided that such GGE Common Stock or GGE Class B Stock is held as a capital asset at the Effective Time. ANTICIPATED ACCOUNTING TREATMENT The Merger is expected to be accounted for as a purchase in accordance with generally accepted accounting principles. After the Merger, the results of operations of GGE will be included in the consolidated financial statements of Sun. On the date that the Merger becomes effective, the cost of the GGE acquisition to Sun, based upon (i) the value of the Ordinary Shares exchanged for GGE Common Stock and GGE Class B Stock at the time of the consummation of the Merger and (ii) the costs incurred by Sun related to the Merger, will be allocated to the net assets acquired based upon their respective estimated fair market value. The excess of the cost over the estimated fair value of net assets will be recorded as goodwill. REGULATORY APPROVALS NEW JERSEY CASINO CONTROL COMMISSION APPROVAL The ownership and operations of hotel-casino facilities in Atlantic City, New Jersey are subject to extensive state regulation under the NJCCA. No hotel-casino facility may operate unless various licenses, qualifications and approvals are obtained from New Jersey regulatory authorities, including the NJCC. The NJCC is authorized under the NJCCA to adopt regulations covering a broad spectrum of gaming and gaming related activities and to prescribe the methods and forms of applications for licenses. In order to be granted a casino license under the NJCCA, officers and directors of a licensee and its employees who are employed in casino operations in Atlantic City are required to be licensed or qualified by the NJCC. A Holding Company (which Sun would become as a result of the Merger) is also subject to qualification by the NJCC as are its controlling shareholders (as defined in the NJCCA), directors, officers and certain employees. In addition, all contracts and leases entered into by a licensee would be subject to approval and certain enterprises which transact business with the licensee would themselves have to be licensed. The NJCCA requires prior approval from the NJCC before control of a casino licensee can be transferred. However, pursuant to an ICA, a person can take control of a New Jersey casino licensee pending the issuance of a Plenary License. On October 30, 1996, Sun received an ICA. In the event Sun elects to consummate the Merger pursuant to an ICA, the NJCCA would require Sun to place the GGE Securities into the ICA Trust. If, after the Merger is consummated, the NJCC subsequently determines that there is reasonable cause to believe that Sun should not be granted a Plenary License, the ICA Trust would become activated and the ICA Trustee would take control of GGE pending a final determination by 58 the NJCC with respect to Sun's application for a Plenary License, with the exception that Sun may request that the NJCC direct the ICA Trustee to dispose of all of the GGE Securities prior to the final qualification determination. In the event Sun's application for a Plenary License is denied, the ICA Trustee would be obligated to dispose of all of GGE Securities held in the ICA Trust to appropriately licensed or qualified persons and Sun is then only entitled to receive the lesser of (i) the fair market value and (ii) the price paid by Sun for the GGE Securities. Transaction costs paid by Sun in respect of the acquisition of the GGE Securities would not be recoverable by Sun regardless of the price at which the GGE Securities held in the ICA Trust were sold. For a more complete description of the various applicable gaming regulatory requirements under the New Jersey Gaming Laws, see "BUSINESS OF GGE--Certain Matters Affecting GGE's Operations-- Regulation and Gaming Taxes and Fees." ANTITRUST Under the HSR Act and the rules promulgated thereunder by the Federal Trade Commission ("the FTC"), the Merger may not be consummated until notifications have been given and certain information and materials have been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and specified waiting period requirements have been satisfied. On November 1, 1996, Sun and GGE filed all appropriate Notification and Report Forms with the Antitrust Division and the FTC with respect to the Merger. If either the Antitrust Division or the FTC were to open an investigation and raise substantive issues in connection with the Merger, the parties may engage in negotiations with such agency concerning possible means of addressing those issues and may agree to delay consummation of the Merger pending the resolution of such negotiations. At any time, before or after the Special Meetings, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the Merger or seeking the divestiture of certain assets of Sun or its subsidiaries or of GGE or its subsidiaries. In addition, state antitrust authorities may also bring legal action under state or Federal antitrust laws. Such action could include seeking to enjoin the consummation of the Merger or seeking divestiture of certain assets of Sun or GGE. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, with respect to the result thereof. APPRAISAL AND DISSENTERS' RIGHTS Pursuant to the IBCA, holders of Ordinary Shares who abstain from voting or who vote against a transaction or modification of their rights as shareholders (such as the Charter Amendment) have two potential remedies under Bahamian law. Such holders could allege the transaction or modification was oppressive to or unfairly disregarded their rights and could apply to a Bahamian court under the IBCA for an order to restrain such transaction or modification. The burden of proving to the court that the necessary oppression or prejudice exists is onerous and rests with the holders. If any holder were successful with such a claim, a Bahamian court would have the power to issue a wide variety of orders, including a liquidation of Sun. In addition, holders of 15% or more of the Ordinary Shares who did not vote in favor of a modification of their rights as shareholders could apply to a Bahamian court to have such modification cancelled. Such an application must be made within 21 days after the date upon which the consent was given or the resolution was passed authorizing the modification of class rights. To be successful, the applicants would have to satisfy the court that the modification would unfairly prejudice them. If such an application were made, the variations in rights would not take effect until confirmed by the court and the court would have the power to cancel the modification if satisfied that the applicants would be unfairly prejudiced. 59 A Bahamian court has the discretion to award costs and expenses in accordance with established principles, which generally results in the successful party being awarded its costs and expenses against the unsuccessful party. Under the DGCL, the stockholders of GGE are not entitled to appraisal rights with respect to the adoption of the Merger Agreement. STOCK EXCHANGE LISTING It is a condition to the consummation of the Merger that the Ordinary Shares to be issued in the Merger be authorized for listing on the NYSE, upon official notice of issuance, and that the Units continue to be listed on the ASE together with the fractional Ordinary Shares issued in connection therewith. DELISTING AND DEREGISTRATION OF GGE COMMON STOCK If the Merger is consummated, the GGE Common Stock and the GGE Class B Stock will be delisted from the ASE and will be deregistered under the Exchange Act. 60 THE MERGER AGREEMENT THE DESCRIPTION OF THE MERGER AGREEMENT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST 19, 1996, AND THE AMENDMENT THERETO DATED AS OF OCTOBER 10, 1996, COPIES OF WHICH ARE ATTACHED HERETO AS ANNEX I AND INCORPORATED HEREIN BY REFERENCE. CERTIFICATE OF INCORPORATION AND BY-LAWS. The Merger Agreement provides that the Restated Certificate of Incorporation of GGE, as in effect immediately prior to the Effective Time, will remain the certificate of incorporation of GGE until thereafter changed or amended. The By-Laws of GGE as in effect immediately before the Effective Time will remain the by-laws of GGE until thereafter changed or amended. DIRECTORS AND OFFICERS. The directors of Sub immediately prior to the Effective Time will become the directors of GGE until their successors have been duly elected and qualified or until their earlier resignation or removal. The directors of Sub currently are Howard B. Kerzner, President of Sun, Kevin DeSanctis, Chief Operating Officer, North America and the Caribbean of Sun, and Charles D. Adamo, Executive Vice President, General Counsel of Sun. The officers of GGE immediately prior to the Effective Time will remain the officers of GGE until their successors have been duly elected and qualified or until their earlier resignation or removal. See "THE MERGER--Interests of Certain Persons in the Merger." CONVERSION OF GGE COMMON STOCK. Subject to the Merger Agreement's provision that no fractional Ordinary Shares will be issued in respect of GGE Common Stock in the Merger, each issued and outstanding share of GGE Common Stock (other than shares owned directly or indirectly by GGE or Sun, which will be canceled) will be converted into the right to receive the Conversion Number of a fully paid and nonassessable Ordinary Share. The Conversion Number is .4324; PROVIDED, HOWEVER, that if the Average Market Price is less than $47.41, then the Conversion Number shall be the quotient, rounded to the fourth decimal place, obtained by dividing 20.5 by the Average Market Price. However, Sun may terminate the Merger Agreement and elect not to consummate the transactions contemplated thereby if the Average Market Price is less than $41.625; PROVIDED, HOWEVER, that Sun shall furnish GGE with written notice two NYSE trading days in advance of the date that it intends to terminate the Merger Agreement for this reason and, during such two trading day period, GGE shall be entitled to elect to go forward with the Merger and, if GGE shall timely make such election, Sun shall not terminate the Merger Agreement for this reason and the Conversion Number will be .4925. As of the Effective Time, all such shares of GGE Common Stock will no longer be outstanding and will automatically be canceled and retired and will cease to exist, and each holder of a certificate representing any such shares of GGE Common Stock will cease to have any rights with respect thereto, except the right to receive, per share, the Conversion Number of a fully paid and nonassessable Ordinary Share and any cash in lieu of any fractional Ordinary Shares to be issued or paid in consideration therefor upon surrender of such certificate in accordance with the terms of the Merger Agreement, without interest. See "SUMMARY--The Merger and the Merger Agreement." FRACTIONAL SHARES. No fractional Ordinary Shares will be issued in respect of GGE Common Stock in the Merger. Each holder of shares of GGE Common Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of an Ordinary Share (after taking into account all certificates delivered by such holder) will receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of an Ordinary Share multiplied by the closing price of an Ordinary Share on the NYSE Composite Transactions List (as reported by the WALL STREET JOURNAL or, if not reported thereby, any other authoritative source) on the Closing Date. CONVERSION OF GGE CLASS B STOCK. Each issued and outstanding share of GGE Class B Stock shall be converted into the right to receive the Class B Consideration. As a result of such conversion, the holders of GGE Class B Stock will not be entitled to special rights with respect to the election of directors to which holders of GGE Class B Stock were previously entitled. As of the Effective Time, all such shares of GGE 61 Class B Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of GGE Class B Stock shall cease to have any rights with respect thereto, except the right to receive the Class B Consideration to be issued in consideration therefor upon surrender of the relevant certificates in accordance with the terms of the Merger Agreement, without interest. As of the Effective Time, the fraction of an Ordinary Share into which a share of GGE Class B Stock is converted shall be issued, and trade, as part of a Unit. EFFECTIVE TIME OF THE MERGER. As soon as practicable on or after the Closing Date, the parties to the Merger Agreement will file a Certificate of Merger with the Secretary of State of the State of Delaware. The Merger will become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such other time as Sub and GGE shall agree to specify in the Certificate of Merger. The Merger Agreement may be terminated as discussed in "--Termination" below. SUBSTITUTION OF PARTIES. The Merger Agreement provides that at the election of Sun, any direct or indirect wholly owned subsidiary of Sun may be substituted for Sub as a constituent corporation in the Merger or, also at the election of Sun, the structure of the Merger will be changed in order to qualify the transaction as another form of tax-free incorporation transaction under Section 351 of the Code (and in the latter case the GGE Common Stock will be converted into the right to receive common stock of a newly-formed corporation of which both Sun and GGE will become wholly owned subsidiaries and the GGE Class B Stock shall remain outstanding, and otherwise on substantially the same terms as set forth in the Merger Agreement) (subject, in each case, to the parties executing an appropriate amendment to the Merger Agreement). EXCHANGE OF GGE COMMON STOCK AND GGE CLASS B STOCK. The Merger Agreement provides that the exchange of shares of GGE Common Stock and GGE Class B Stock in the Merger will be effected as follows: (i) as of the Effective Time, Sun will deposit with such bank or trust company as may be designated by Sun (the "Exchange Agent"), for the benefit of holders of shares of GGE Common Stock and GGE Class B Stock, certificates representing Ordinary Shares, together with any dividends or distributions with respect thereto with a record date after the Effective Time, and any cash payable in lieu of any fractional Ordinary Shares, issuable, in exchange for outstanding shares of GGE Common Stock; (ii) as soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of GGE Common Stock (the "Common Certificates") or GGE Class B Stock (the "Class B Certificates", and, together with the Common Certificates, the "Certificates") whose shares were converted into the right to receive, per share, the Conversion Number of a fully paid and nonassessable Ordinary Share or the Class B Consideration, as applicable, pursuant to the Merger Agreement, (a) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Sun may reasonably specify) and (b) instructions for use in effecting the surrender of the Certificates in exchange for the Conversion Number of a fully paid and nonassessable Ordinary Share or the Class B Consideration, as applicable. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Sun, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent (including, in the case of Class B Certificates, the related Junior Mortgage Notes), the holder of such Certificate shall be entitled to receive in exchange therefor (a) in the case of Common Certificates, a certificate representing that number of whole Ordinary Shares and cash, if any, which such holder has the right to receive pursuant to the provisions of the Merger Agreement, and (b) in the case of Class B Certificates, a certificate representing that number of fractional Ordinary Shares which such holder has the right to receive pursuant to the provisions of the Merger Agreement, together with the Junior Mortgage Notes surrendered with such Class B Certificates and, in each case, the Certificate so 62 surrendered shall forthwith be cancelled. In the event of a transfer of ownership of GGE Common Stock or Units which is not registered in the transfer records of GGE, a certificate representing the proper number of Ordinary Shares may be issued to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the issuance of Ordinary Shares to a person other than the registered holder of such Certificate or establish to the satisfaction of Sun that such tax has been paid or is not applicable. Until surrendered as contemplated by the Merger Agreement, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Conversion Number of a fully paid and nonassessable Ordinary Share or the Class B Consideration, as applicable, and cash, if any, which the holder thereof has the right to receive in respect of such Certificate pursuant to the provisions of the Merger Agreement. No interest will be paid or will accrue on any cash payable to holders of Certificates pursuant to the provisions of the Merger Agreement. GGE STOCKHOLDERS SHOULD NOT FORWARD CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS AND INSTRUCTIONS. All Ordinary Shares issued and cash in lieu of fractional shares paid upon surrender for exchange of Certificates will be deemed to have been issued in full satisfaction of all rights pertaining to such shares of GGE Common Stock theretofore represented by such Certificates. REPRESENTATIONS AND WARRANTIES. The Merger Agreement includes various customary representations and warranties of the parties thereto. The Merger Agreement includes representations and warranties by GGE as to, among other things: (i) the organization, standing and corporate power of GGE and its subsidiaries; (ii) GGE's capitalization; (iii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement and related matters; (iv) the Merger Agreement's noncontravention of (A) the GGE Charter or the GGE By-Laws, and (B) any agreement, judgment or law in any manner which would have a material adverse effect on GGE, materially impair GGE's ability to perform its obligations under the Merger Agreement or materially delay the Merger; (v) the absence of the need (except as specified) for governmental or other filings, consents, approvals or actions with respect to the Merger Agreement and the transactions contemplated thereby; (vi) documents filed by GGE with the SEC and the accuracy of information contained therein; (vii) the accuracy of information supplied by GGE in connection with this Proxy Statement/Prospectus and the Form F-4; (viii) the absence of certain material changes or events since the most recent audited financial statements filed with the SEC, including any material adverse change (as defined in the Merger Agreement), any declaration, setting aside or payment of any dividend, any split, reclassification or combination of any of its capital stock or any issuance or authorization of any issuance of any other securities in lieu of, or in substitution for, shares of its capital stock, any increases in compensation, severance or termination pay to its executive officers and other key employees, except as required under existing agreements or compensation increases in the ordinary course or as disclosed, any material damage or destruction and certain changes in accounting methods, principles or practices; (ix) the absence of material pending or threatened litigation, except as disclosed; (x) the absence of changes in GGE's benefit plans; (xi) the terms, existence, operations, liabilities and compliance with applicable laws of GGE's benefit plans and certain other matters relating to the Employee Retirement Income Security Act of 1974, as amended; (xii) filing of tax returns and payment of taxes; (xiii) the absence of any payments which would be characterized as an "excess parachute payment" by the Internal Revenue Service; (xiv) votes necessary to approve and adopt the Merger Agreement and the transactions contemplated thereby; (xv) approval by the GGE Board of the Merger Agreement and the Stockholder Agreements and the inapplicability of Section 203 of the DGCL, relating to business combinations with interested stockholders, to the Merger Agreement and the transactions contemplated thereby; (xvi) labor relations; (xvii) brokers' fees and expenses; (xviii) receipt of an opinion from GGE's financial advisor; (xix) 63 compliance with applicable laws; (xx) certain debt instruments and other material contracts; (xxi) intellectual property; (xxii) title to properties and assets other than real property; (xxiii) insurance and (xxiv) additional real estate matters. The Merger Agreement also includes representations and warranties by Sun and Sub as to, among other things: (i) the organization, standing and corporate power of Sun and Sub; (ii) the capitalization of Sun and Sub; (iii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement and related matters; (iv) the Merger Agreement's noncontravention of (A) their memorandum or articles of association, certificate of incorporation or by-laws, and (B) any agreement, judgment or law in any manner which would have a material adverse effect on Sun, materially impair Sun's ability to perform its obligations under the Merger Agreement or materially delay the Merger; (v) the absence of the need (except as specified) for governmental or other filings, consents, approvals or actions with respect to the Merger Agreement and the transactions contemplated thereby; (vi) documents filed by Sun with the SEC and the accuracy of information contained therein; (vii) the accuracy of information supplied by Sun in connection with this Proxy Statement/Prospectus and the Form F-4; (viii) the absence of certain material changes or events since the most recent audited financial statements filed with the SEC, including any material adverse change, setting aside or payment of any dividend, any split, reclassification or combination of Ordinary Shares or any issuance or authorization of any issuance of any other securities in lieu of, or in substitution for, shares of its capital stock or any material damage or destruction; (ix) no material pending or threatened litigation; (x) brokers' fees and expenses; (xi) operations of Sub; (xii) votes necessary to approve the Charter Amendment; (xiii) compliance with applicable laws; and (xiv) permits and license applications. NO SOLICITATION. The Merger Agreement provides that GGE shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any officer, director or employee of or any investment banker, attorney or other advisor or representative of, GGE or any of its subsidiaries to, (i) solicit, initiate or encourage the submission of any takeover proposal (the Merger Agreement defines "takeover proposal" as any proposal or offer from any person relating to any direct or indirect acquisition or purchase of a material amount of assets of GGE or any of its subsidiaries or of over 20% of any class of equity securities (other than acquisitions of stock by institutional investors in the ordinary course of business) of GGE or any of its subsidiaries or any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of GGE or any of its subsidiaries or which would require approval under any Gaming Law (as defined in the Merger Agreement), or any merger, consolidation, business combination, sale of substantially all assets, recapitalization, liquidation, dissolution or similar transaction involving GGE or any of its subsidiaries other than the transactions contemplated by the Merger Agreement, or any other transaction the consummation of which would reasonably be expected to impede, interfere with, prevent or materially delay the Merger or which would reasonably be expected to dilute materially the benefits to Sun of the transactions contemplated by the Merger Agreement) or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate the making of any proposal that constitutes, or may reasonably be expected to lead to, any takeover proposal; PROVIDED, HOWEVER, that if, at any time prior to the receipt of the GGE Stockholder Approval, in the opinion of the GGE Board after consultation with outside counsel, such failure to so act would be inconsistent with its fiduciary duties to GGE stockholders under applicable law, GGE may, in response to an unsolicited takeover proposal, and subject to certain conditions, (x) furnish information with respect to GGE pursuant to a customary confidentiality agreement to any person making such proposal and (y) participate in negotiations regarding such proposal. The Merger Agreement provides that any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of GGE or any of its subsidiaries, whether or not such person is purporting to act on behalf of GGE or any of its subsidiaries or otherwise, shall be deemed to be a breach of the Merger Agreement by GGE. 64 Except as set forth in the Merger Agreement, neither the GGE Board nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Sun or Sub, the approval or recommendation by the GGE Board or any committee thereof of the Merger Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any takeover proposal or (iii) enter into any agreement with respect to any takeover proposal. The Merger Agreement provides, however, that if in the opinion of the GGE Board, after consultation with outside counsel, failure to do so would be inconsistent with its fiduciary duties to GGE's stockholders under applicable law, the GGE Board may (subject to the terms of this and the following sentences) withdraw or modify its approval or recommendation of the Merger Agreement or the Merger, approve or recommend a competitive proposal (the Merger Agreement defines "competitive proposal" as (x) a bona fide takeover proposal to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the shares of GGE Common Stock then outstanding or all or substantially all the assets of GGE, and (y) otherwise on terms which the GGE Board determines in its good faith reasonable judgment to be more favorable to the GGE stockholders than the Merger (taking into account any improvements to the Merger proposed by Sun)), or enter into an agreement with respect to a competitive proposal, in each case at any time after the second business day following Sun's receipt of written notice (a "Notice of Competitive Proposal") advising Sun that the GGE Board has received a competitive proposal, specifying the material terms and conditions of such competitive proposal and identifying the person making such competitive proposal; PROVIDED that GGE shall not enter into an agreement with respect to a competitive proposal unless GGE shall have furnished Sun with written notice no later than 12:00 noon two business days in advance of any date that it intends to enter into such agreement. In addition, if GGE proposes to enter into an agreement with respect to any takeover proposal, it shall concurrently with entering into such agreement pay, or cause to be paid, to Sun the Expenses and the Termination Fee (each as defined below under "--Fees and Expenses"). In addition to the obligations of GGE set forth in the preceeding two paragraphs, the Merger Agreement requires that GGE promptly advise Sun of any request for information or of any takeover proposal, the identity of the person making any such request or takeover proposal and all the material terms and conditions thereof. GGE will keep Sun fully informed of the status and details (including amendments or proposed amendments) of any such request or takeover proposal. BUSINESS OF GGE PENDING THE MERGER. GGE has agreed that, from the date of the Merger Agreement to the Effective Time or earlier termination of the Merger Agreement, it will, and it will cause its subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as conducted prior to the execution of the Merger Agreement and in compliance in all material respects with all applicable laws and regulations. GGE has also agreed that from the date of the Merger Agreement to the Effective Time, unless Sun agrees in writing or as otherwise permitted by the Merger Agreement, it will not, and it will not permit any of its subsidiaries to, among other things: (i) (A) declare, set aside or pay any dividends or other distributions on shares of its capital stock, other than dividends by a wholly owned subsidiary to GGE, (B) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for shares of its capital stock, (C) purchase, redeem or otherwise acquire any shares of its capital stock; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, other than upon the exercise of outstanding GGE employee stock options in accordance with their present terms; (iii) amend the GGE Charter or the GGE By-Laws; (iv) make any material acquisition or enter into any merger; (v) sell, lease, license, mortgage or otherwise encumber or dispose of any of its property or assets other than in the ordinary course of business and consistent with past practice; (vi) except as specified in the Merger Agreement, make any loans, advances or capital contributions to, or investments in, any person, other than to GGE or any of its wholly owned subsidiaries; (vii) make any new capital expenditures other than in the ordinary course of business and, in the case of the Chalfonte Project, in amounts consistent with the schedule set forth in the Merger Agreement; (viii) make any material tax election or settle or compromise any material tax liability; (ix) except in the ordinary course of business or except as would not reasonably 65 be expected to have a material adverse effect (as defined in the Merger Agreement) on GGE, modify, amend or terminate any material contract or agreement; (x) make any material change to its accounting methods, principles or practices, except as may be required by generally accepted accounting principles; (xi) pay, discharge or satisfy any claims, liabilities or obligations other than in the ordinary course of business; (xii) except as required to comply with applicable law and as disclosed (A) adopt, enter into, terminate or amend any benefit plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (B) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or employee (except for normal increases or bonuses in the ordinary course of business consistent with past practice), (C) pay any benefit not provided for under any benefit plan, (D) except as permitted in clause (B), grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or benefit plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any benefit plans or agreement or awards made thereunder) or (E) take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or benefit plan); (xiii) issue any additional Junior Mortgage Notes; or (xiv) authorize or agree to take any of the foregoing actions. BUSINESS OF SUN PENDING THE MERGER. Sun has agreed that, from the date of the Merger Agreement to the Effective Time, unless GGE agrees in writing or as otherwise permitted by the Merger Agreement, it will not: (i) (A) declare, set aside or pay any dividends or other distributions on shares of its capital stock or (B) split, combine or reclassify any of its capital stock or, except for the creation of a holding company as described in the Merger Agreement, issue or authorize the issuance of any other securities in lieu of or in substitution for shares of its capital stock; or (ii) authorize or agree to take any of the foregoing actions. REASONABLE EFFORTS. Subject to certain conditions, each of Sun, Sub and GGE have agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by the Merger Agreement and the Stockholder Agreements, including (i) in the case of Sun, (1) the obtaining of all necessary approvals by the NJCC under the NJCCA and the rules and regulations promulgated thereunder required in connection with the Merger and the Merger Agreement, (2) promptly filing an ICA Petition requesting ICA pursuant to NJSA 5:12-95.12 et seq., and (3) not withdrawing the ICA Petition or Sun's and Sub's application to the NJCC for a permanent license under the NJCCA, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from other governmental entities and the making of all necessary registrations and filings (including filings with governmental entities and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental entity, (iii) the obtaining of all necessary consents, approvals or waivers from third parties, (iv) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the Stockholder Agreements or the consummation of the transactions contemplated by the Merger Agreement or the Stockholder Agreements, including seeking to have any stay or temporary restraining order entered by any court or other governmental entity vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Merger Agreement and the Stockholder Agreements; PROVIDED, HOWEVER,that a party shall not be obligated to take any action pursuant to the foregoing if the taking of such action or the obtaining of any waiver, consent, approval or exemption is reasonably likely (x) to be materially burdensome to such party and its subsidiaries taken as a whole or to impact in a materially adverse manner the economic or business benefits of the transactions contemplated by the Merger Agreement or the Stockholder Agreements so as to render inadvisable the consummation of the Merger or (y) in the case of Sun, to result in the imposition of certain conditions. In connection with and without limiting the foregoing, GGE and its Board of Directors shall (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Merger, the Merger 66 Agreement, the GGE Stockholder Agreement or any of the other transactions contemplated by the Merger Agreement or the GGE Stockholder Agreement and (ii) if any state takeover statute or similar statute or regulation becomes applicable to the Merger, the Merger Agreement, the GGE Stockholder Agreement or any other transaction contemplated by the Merger Agreement or the GGE Stockholder Agreement, take all action necessary to ensure that the Merger and the other transactions contemplated by the Merger Agreement and the Stockholder Agreements may be consummated as promptly as practicable on the terms contemplated by the Merger Agreement and the Stockholder Agreements and otherwise to minimize the effect of such statute or regulation on the Merger and the other transactions contemplated by the Merger Agreement and the GGE Stockholder Agreement. CLASS B OPTION. Under the Merger Agreement, Sun has an irrevocable option to purchase, at any time or from time to time during the term of the Merger Agreement, any or all of the Units that are owned by GGE or by any subsidiary of GGE at the time or times of exercise of such option by Sun at a purchase price equal to the per unit closing price of such Units on the ASE Transaction List (as reported by the WALL STREET JOURNAL or, if not reported thereby, any other authoritative source) for the trading day immediately preceding the exercise date (the "Class B Option"). The Class B Option may be exercised at any time or from time to time by Sun (or its designee which must be a direct or indirect wholly owned subsidiary of Sun), by delivery of written notice to GGE of such exercise, specifying the number of Units to be purchased and the place, time and date of the closing of such purchase. At such closing, GGE shall (or shall cause its subsidiary to) deliver to Sun or such designee a certificate or certificates evidencing all of the Units to be purchased, duly endorsed in blank or accompanied by an assignment duly endorsed in blank in proper form for transfer, against delivery by Sun or such designee of the aggregate purchase price for such Units, by wire transfer of same day funds to the account designated in writing by GGE. If Sun exercises the Class B Option and the Merger Agreement is thereafter terminated, Sun must promptly thereafter execute and deliver to GGE an agreement, in form and substance reasonably satisfactory to Sun and GGE, to vote any GGE Class B Stock directly or indirectly owned by Sun (i) in any election of directors in accordance with the recommendation of the GGE Board and (ii) at GGE's request, in favor of any proposed amendment to GGE's certificate of incorporation and by-laws necessary to eliminate GGE Class B Stock or to eliminate the Class B Directors (as defined below under "COMPARISON OF THE RIGHTS OF SUN SHAREHOLDERS AND GGE STOCKHOLDERS--Directors"). CONDITIONS TO THE CONSUMMATION OF THE MERGER; CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each of Sun, Sub and GGE are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (i) each of the GGE Stockholder Approval and Sun Shareholder Approval will have been obtained; (ii) no statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; (iii) the Form F-4 shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order; (iv) the Ordinary Shares issuable to the GGE stockholders pursuant to the Merger Agreement, upon exercise of warrants and under the stock plans shall have been approved for listing on the NYSE, subject to official notice of issuance, and the Units shall continue to be approved for listing on the ASE. CONDITIONS TO THE OBLIGATIONS OF SUN AND SUB. In addition to the foregoing conditions, the obligations of Sun and Sub to effect the Merger are further subject to satisfaction or waiver of the following conditions: (i) the representations and warranties of GGE set forth in the Merger Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of GGE set forth in the Merger Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of the Merger Agreement and as of the Closing Date as though made on and as of 67 the Closing Date, except as otherwise contemplated by the Merger Agreement, and Sun shall have received a certificate signed on behalf of GGE by the chief executive officer and the chief financial officer to such effect; (ii) GGE will have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date and Sun shall have received a certificate signed on behalf of GGE by the chief executive officer and chief financial officer of GGE to such effect; (iii) Sun will have received an executed agreement from each "affiliate" of GGE for purposes of Rule 145 under the Securities Act; (iv) there shall not be pending or threatened any suit, action or proceeding by any Governmental Entity, or any suit, action or proceeding by any other person which has a reasonable likelihood of success, in each case (A) challenging the acquisition by Sun or Sub or any shares of capital stock of GGE or the surviving corporation, seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreements or seeking to obtain from GGE, Sun or Sub any damages that are material in relation to GGE and its subsidiaries taken as a whole, (B) seeking to prohibit or limit the ownership or operation by GGE, Sun or any of their respective subsidiaries of any material portion of the business or assets of GGE, Sun or any of their respective subsidiaries, or to compel GGE, Sun or any of their respective subsidiaries to dispose of or hold separate any material portion of the business or assets of GGE, Sun or any of their respective subsidiaries, as a result of the Merger or any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreements, (C) seeking to impose limitations on the ability of Sun or Sub to acquire or hold, or exercise full rights of ownership of, any shares of capital stock of GGE or the surviving corporation, including the right to vote GGE Common Stock or GGE Class B Stock, or common stock of the surviving corporation, on all matters properly presented to the stockholders of GGE or the surviving corporation, respectively, (D) seeking to prohibit Sun or any of its subsidiaries from effectively controlling in any material respect the business or operations of GGE or its subsidiaries or (E) which otherwise could reasonably be expected to have a material adverse effect on GGE or Sun. In addition, there shall not be any statute, rule, regulation, judgment or order enacted, entered, enforced or promulgated that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (B) through (D) above; (v) all consents, approvals, orders or authorizations of any governmental entity, including approvals by the NJCC under the NJCCA and the rules and regulations promulgated thereunder and approvals under the New Jersey Industrial Site Recovery Act, required in connection with the Merger or the Merger Agreement or the Stockholder Agreements or the consummation of any of the transactions contemplated by the Merger Agreement or the Stockholder Agreements shall have been obtained and shall be in full force and effect without the imposition of any conditions or restriction of a type specified in the Merger Agreement, it being understood that receipt of the relief requested by the ICA Petition shall not satisfy this condition insofar as this condition relates to approvals under the NJCCA; (vi) Sun shall have received from Cravath, Swaine & Moore, counsel to Sun, on the date of this Proxy Statement/Prospectus and on the Closing Date opinions, in each case dated as of such respective dates and stating that the Merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that Sun, Sub and GGE will each be a party to that reorganization within the meaning of Section 368(b) of the Code; (vii) Sun shall have received all state securities or "blue sky" authorizations necessary to issue the Ordinary Shares issuable pursuant to the Merger Agreement. CONDITIONS TO THE OBLIGATIONS OF GGE. In addition to the foregoing conditions, the obligation of GGE to effect the Merger is further subject to satisfaction or waiver of the following conditions: (i) the representations and warranties of Sun and Sub set forth in the Merger Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Sun and Sub set forth in the Merger Agreement that are not so qualified shall be true and correct in all material respects, in each case as of the date of the Merger Agreement and as of the Closing Date as though made on and as of the Closing Date, except as otherwise contemplated by the Merger Agreement, and GGE shall have received a certificate signed on behalf of Sun by an executive officer of Sun to such effect; (ii) Sun and Sub will have performed in all material respects all obligations required to be performed by them under the Merger 68 Agreement at or prior to the Closing Date and GGE shall have received a certificate signed on behalf of Sun by an executive officer of Sun to such effect; and (iii) GGE will have received opinions from Gibson, Dunn & Crutcher LLP, counsel to GGE, on the date of this Proxy Statement/Prospectus and on the Closing Date, in each case dated as of such respective dates and stating that the Merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that Sun, Sub and GGE will each be a party to that reorganization within the meaning of Section 368(b) of the Code. EFFECT ON GGE BENEFIT PLANS, STOCK OPTIONS AND WARRANTS. The Merger Agreement provides that for a period of two years immediately following the Closing (as defined in the Merger Agreement), Sun intends to continue to maintain employee benefit plans, programs and policies for the employees of GGE and its subsidiaries which, in the aggregate, provide benefits that are no less favorable than those provided to them under GGE's plans, programs and policies as of the date of the Merger Agreement. The Merger Agreement also provides that, as soon as practicable after August 19, 1996, the GGE Board (or, if appropriate, any committee administering the Stock Plans (as defined below)) shall adopt such resolutions or take such other actions as may be required to effect the following: (i) adjust the terms of the Employee Stock Options granted under the Stock Plans, whether vested or unvested, as necessary to provide that, at the Effective Time, each Employee Stock Option outstanding immediately prior to the Effective Time shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Employee Stock Option, including vesting (and, where applicable under the terms of such Employee Stock Option, accelerated vesting) and the rights of the holder under the terms of such Employee Stock Option, the same number of Ordinary Shares as the holder of such Employee Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such Employee Stock Option in full immediately prior to the Effective Time (the "Deemed Sun Share Amount"), at a price per Ordinary Share equal to (A) the aggregate exercise price for the shares of GGE Common Stock otherwise purchasable pursuant to such Employee Stock Option divided by (B) the aggregate Deemed Sun Share Amount with respect to such Employee Stock Option (each, as so adjusted, an "Adjusted Option"); PROVIDED, HOWEVER, that in the case of any option to which Section 421 of the Code applies by reason of its qualification under any of Section 422 through 424 of the Code ("qualified stock options"), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option shall be determined in order to comply with Section 424 of the Code; and (ii) subject to the consent of Sun, such consent not to be unreasonably withheld, make such other changes to the Stock Plans as GGE and Sun may determine appropriate to give effect to the Merger. The Merger Agreement further provides that: (a) The provisions in the Stock Plans and any other GGE employee benefit plan providing for the issuance, transfer or grant of any capital stock of GGE or any interest in respect of any capital stock of GGE shall be deleted as of the Effective Time, and GGE shall use its best efforts to ensure that following the Effective Time no holder of an Employee Stock Option or any participant in any Stock Plan shall have any right thereunder to acquire any capital stock of GGE or Sun, except as provided in the Merger Agreement. (b) As soon as practicable after the Effective Time, Sun shall deliver to the holders of Employee Stock Options appropriate notices setting forth such holders' rights pursuant to the respective Stock Plans and the agreements evidencing the grants of such Employee Stock Options shall continue in effect on the same terms and conditions (subject to certain adjustments set forth in the Merger Agreement). Sun shall comply with the terms of the Stock Plans and ensure, to the extent required by, and subject to the provisions of, the Stock Plans, that the Employee Stock Options which qualified as 69 qualified stock options prior to the Effective Time continue to qualify as qualified stock options after the Effective Time. (c) Sun shall take such actions as are reasonably necessary for the assumption of the Stock Plans of GGE, including the reservation, issuance and listing of Ordinary Shares as is necessary to effectuate the transactions contemplated by such paragraph (a). As soon as reasonably practicable after the Effective Time, Sun shall prepare and file with the SEC a registration statement on Form S-8 with respect to Ordinary Shares subject to Employee Stock Options and shall use its best efforts to maintain the effectiveness of a registration statement or registration statements covering such Employee Stock Options (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such Employee Stock Options remain outstanding. (d) A holder of an Adjusted Option may exercise such Adjusted Option in whole or in part in accordance with its terms and the terms of the related Stock Plan by delivering a properly executed notice of exercise to Sun, together with the consideration therefor and the Federal withholding tax information, if any, required in accordance with the related Stock Plan. (e) All restrictions or limitations on transfer and vesting with respect to Employee Stock Options awarded under the Stock Plans, to the extent that such restrictions or limitations shall not have already lapsed, shall remain in full force and effect with respect to such options after giving effect to the Merger and the assumption by Sun as set forth above. (f) At the Effective Time, Sun shall assume the due and punctual observance and performance of the covenants and conditions of the GGE Warrants pursuant to Section 3.1(i) thereof (as in effect on the date of the Merger Agreement). INDEMNIFICATION, EXCULPATION AND INSURANCE. The Merger Agreement provides that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing at the date of the Merger Agreement in favor of the current or former directors and officers of GGE and its subsidiaries as provided in their respective certificates of incorporation, by-laws and indemnification agreements will continue in full force and effect in accordance with their terms for at least six years from the Effective Time. The Merger Agreement further provides that Sun will cause to be maintained for at least such six-year period GGE's current directors' and officers' insurance and indemnification policy to the extent such policy provides coverage for events occurring prior to the Effective Time for all persons who were directors and officers of GGE on the date of the Merger Agreement, provided that the annual premium for such policy does not exceed 150% of the last annual premium paid prior to the date of the Merger Agreement; PROVIDED, HOWEVER, that Sun may, in lieu of maintaining such insurance, cause coverage to be provided under any policy maintained for the benefit of Sun or any of its subsidiaries, so long as the terms thereof are no less advantageous to the intended beneficiaries than the existing insurance. TERMINATION. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the Stockholder Approvals: (i) by the mutual written consent of Sun, Sub and GGE; (ii) by either Sun or GGE (a) if (1) the GGE Stockholder Approval has not been obtained by reason of the failure to obtain the required vote at the GGE Special Meeting or any adjournment or postponement thereof; (2) the Merger has not been consummated on or before June 30, 1997, unless the failure to consummate the Merger is the result of a willful and material breach of the Merger Agreement by the party seeking to terminate the Merger Agreement; PROVIDED, HOWEVER, that the passage of such period shall be tolled for any part thereof during which any party shall be subject to a nonfinal order, injunction, decree, ruling or action restraining, enjoining or otherwise prohibiting the consummation of the Merger or the calling or holding of the GGE Special Meeting or the Sun Extraordinary General Meeting; or (3) any other governmental entity has issued an order, injunction, 70 decree or ruling, or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, injunction, decree, ruling or other action becomes final and nonappealable, or (b) provided that the terminating party is not then in material breach of the Merger Agreement, if the other party breaches any of the representations, warranties, covenants or other agreements made by such party in the Merger Agreement and such breach is not or cannot be cured within 30 days following written notice to the breaching party and such breach would entitle the non- breaching party not to consummate the transactions contemplated by the Merger Agreement; (iii) by GGE in connection with entering into a definitive agreement with respect to a competitive proposal in accordance with the Merger Agreement, provided it has complied with all provisions thereof, including the notice provisions therein, and that it makes simultaneous payment of the Termination Fee and the Expenses; (iv) by either Sun or GGE if the relief requested by the ICA Petition shall have been denied and such denial shall have become final and nonappealable; (v) by either Sun or GGE if the NJCC shall have denied Sun a permanent license under the NJCCA and such denial shall have become final and nonappealable; (vi) by Sun if (a) the GGE Board or any committee thereof shall have withdrawn or modified in a manner adverse to Sun or Sub its approval or recommendation of the Merger or the Merger Agreement, or approved or recommended any takeover proposal, (b) GGE shall have entered into any agreement with respect to any competitive proposal in accordance with the Merger Agreement, or (c) the GGE Board or any committee thereof shall have resolved to take any of the foregoing actions; (vii) by Sun if, upon a vote at the Sun Extraordinary General Meeting or any adjournment thereof at which the Sun Shareholder Approval shall have been voted upon, the Sun Shareholder Approval shall not have been obtained; (viii) by Sun if the Average Market Price is less than $41.625; PROVIDED, however, that Sun shall furnish GGE with written notice two NYSE trading days in advance of the date that it intends to terminate the Merger Agreement for this reason and, during such two trading day period, GGE shall be entitled to elect to go forward with the Merger and, if GGE shall timely make such election, Sun shall not terminate the Merger Agreement for this reason and the Conversion Number will be .4925; or (ix) by Sun if GGE shall have made the ICA Election. FEES AND EXPENSES. Except for printing and mailing expenses and filing fees relating to the Form F-4 and this Proxy Statement/Prospectus, which will be shared equally, Sun and GGE will each pay its own costs and expenses in connection with the Merger Agreement, the Stockholder Agreements and the transactions contemplated thereby, whether or not the Merger is consummated. The Merger Agreement also provides that GGE will immediately pay to Sun the sum of (x) all of Sun's reasonably documented out-of-pocket expenses in an amount up to but not to exceed $940,000.00 (the "Expenses") and (y) $9,400,000.00 (the "Termination Fee") upon demand if (i) Sun or Sub terminates the Merger Agreement in response to (A) the modification or withdrawal by the GGE Board of its recommendation of the Merger or the Merger Agreement, (B) the entering into by GGE of an agreement with respect to a competitive proposal in accordance with the Merger Agreement, or (C) the GGE Board shall have resolved to take any of the foregoing actions; PROVIDED, HOWEVER, that Sun shall be entitled to only the Expenses where Sun or Sub terminates the Merger Agreement in response to (A) or (C) above; PROVIDED FURTHER, HOWEVER, that if GGE subsequently consummates or enters into an agreement relating to a competitive proposal within 12 months of such termination, GGE shall also pay to Sun the Termination Fee, (ii) GGE terminates the Merger Agreement in connection with entering into a definitive agreement in connection with a competitive proposal or (iii) prior to any termination of the Merger Agreement, a takeover proposal shall have been made and within 12 months of such termination, a transaction constituting a takeover proposal is 71 consummated or GGE enters into an agreement with respect to, or approves or recommends a takeover proposal. The amount of Expenses so payable shall be the amount set forth in an estimate delivered by Sun, subject to upward or downward adjustment (not to be in excess of the amount set forth in clause (x) above) upon delivery of reasonable documentation therefor. Unless Sun and GGE shall have reached the agreement contemplated by the Merger Agreement in respect of the Chalfonte Project, Sun shall pay, or cause to be paid, an amount equal to the ICA Amount (as defined below), in same day funds to GGE upon demand, if GGE or Sun terminates the Merger Agreement because the relief requested by the ICA Petition shall have been denied and such denial shall have become final and non-appealable or because the NJCC shall have denied Sun a permanent license under the NJCCA and such denial shall have become final and non-appealable. "ICA Amount" shall mean $9,400,000.00 minus the aggregate capital expenditures made by GGE in respect of the Chalfonte Project from the date of the Merger Agreement to the date of such termination (other than capital expenditures for work completed on the Chalfonte Project prior to the date of the Merger Agreement but not yet paid for by GGE). AMENDMENT. The Merger Agreement may be amended by the parties thereto by an instrument in writing signed on behalf of each party at any time before or after the Stockholder Approvals; PROVIDED, that after any such approval, no amendment can be made if applicable law would require further approval by such stockholders or such shareholders, unless such further approval is obtained. WAIVER. At any time prior to the Effective Time, the Merger Agreement permits each party thereto to (in each case pursuant to a written instrument): (i) extend the time for the performance of any of the obligations or other acts of the other parties thereto; (ii) waive any inaccuracies in the representations and warranties of the other parties contained therein or in any document delivered pursuant thereto; and (iii) subject to the proviso contained in "--Amendment" above, waive compliance by the other parties with any of the agreements or conditions contained in the Merger Agreement. 72 COMPARATIVE PER SHARE MARKET INFORMATION Ordinary Shares have been traded on the NYSE since February 27, 1996, under the symbol "SIH". Prior to February 27, 1996, Sun had two series of Ordinary Shares outstanding, the Series A Ordinary Shares and the Series B Ordinary Shares. The Series A Ordinary Shares were quoted through the Nasdaq National Market System (the "Nasdaq System") from May 4, 1994 to February 26, 1996 under the symbol "SIHLF". The Series B Ordinary Shares, which traded separately from the Series A Ordinary Shares, were quoted through the Nasdaq System from May 15, 1995 to February 26, 1996 under the symbol "SIHBF". On February 27, 1996, the Series A Ordinary Shares and the Series B Ordinary Shares were redesignated as Ordinary Shares. Prior to this redesignation, the Series A Ordinary Shares had a put right associated with them pursuant to which holders of such shares had the right to have them redeemed by Sun at certain fixed prices on certain dates. GGE Common Stock is traded on the ASE, under the symbol "GGE". For the periods indicated, the table below sets forth the high and low sales prices for the Series A and B Ordinary Shares as reported on the Nasdaq System, the high and low sales prices for the Ordinary Shares as reported on the NYSE, and the high and low sales prices of GGE Common Stock as reported on the ASE. The following table also gives effect to a one-for-five reverse stock split with respect to GGE Common Stock which occurred on June 30, 1995.
SUN ---------------------------------------------------------------- SERIES A SERIES B ORDINARY ORDINARY ORDINARY GGE SHARES- SHARES- SHARES- COMMON STOCK- NASDAQ SYSTEM NASDAQ SYSTEM NYSE ASE -------------------- -------------------- -------------------- -------------------- QUARTER HIGH LOW HIGH LOW HIGH LOW HIGH LOW - ----------------------------------- --------- --------- --------- --------- --------- --------- --------- --------- 1994 First............................ -- -- -- -- -- -- $9.38 $6.56 Second*.......................... $ 15.00 $ 11.94 -- -- -- -- 8.44 3.75 Third............................ 12.88 11.38 -- -- -- -- 5.63 3.75 Fourth........................... 19.63 11.75 -- -- -- -- 5.00 3.75 1995 First............................ $ 19.63 $ 16.19 -- -- -- -- $ 12.50 $4.06 Second**......................... 22.00 16.00 $ 21.75 $ 15.50 -- -- 19.69 11.56 Third............................ 31.75 22.00 31.88 21.75 -- -- 17.25 11.88 Fourth........................... 32.00 27.00 32.00 27.00 -- -- 14.25 10.00 1996 First***......................... $ 37.25 $ 25.00 $ 37.25 $ 24.00 $ 38.75 $ 25.50 $ 15.13 $10.63 Second........................... -- -- -- -- 53.63 37.13 17.38 13.38 Third............................ -- -- -- -- 51.25 43.75 21.00 11.38 Fourth (through October 31, 1996).......................... -- -- -- -- 54.13 47.13 22.50 20.00
- ------------------------ * Beginning on May 4, 1994 with respect to the Series A Ordinary Shares. ** Beginning on May 15, 1995 with respect to the Series B Ordinary Shares. *** Through February 26, 1996 with respect to the Series A and B Ordinary Shares and beginning on February 27, 1996 with respect to the Ordinary Shares. 73 Set forth below are the last reported sales prices of Ordinary Shares and GGE Common Stock on August 16, 1996, the last full trading day prior to the execution of the Merger Agreement, as reported on the NYSE Composite Transactions Tape and the ASE Transactions List, respectively, and the equivalent pro forma sale price of GGE Common Stock on such date, as determined by multiplying such last reported sale price of Ordinary Shares by an assumed Conversion Number of .4324: Ordinary Shares..................................................... $51.88 GGE Common Stock.................................................... $ 11.88 GGE equivalent...................................................... $ 22.43
On October 31, 1996, the last trading day prior to the date of this Proxy Statement/Prospectus, the last reported sales prices of Ordinary Shares and GGE Common Stock, as reported on the NYSE Composite Transactions Tape and the ASE Transactions List, respectively, were $47.25 per share and $20.75 per share, respectively. As described under "SUMMARY--The Merger and The Merger Agreement-- General" the Conversion Number is subject to adjustment if the Average Market Price of Ordinary Shares is less than $47.41. 74 UNAUDITED PRO FORMA FINANCIAL INFORMATION The Unaudited Pro Forma Consolidated Balance Sheet of Sun as of June 30, 1996 and the Unaudited Pro Forma Consolidated Statements of Income of Sun for the year ended December 31, 1995 and for the six months ended June 30, 1996 are set forth below. The Unaudited Pro Forma Consolidated Balance Sheet has been prepared assuming that the Merger had been consummated on June 30, 1996. The Unaudited Pro Forma Consolidated Statements of Income have been prepared assuming that the Merger had occurred on January 1, 1995. The Unaudited Pro Forma Financial Statements are presented for informational purposes only and do not purport to present what the Consolidated Balance Sheet would have been had the Merger, in fact, occurred on June 30, 1996 or what the Consolidated Results of Operations for the year ended December 31, 1995 or for the six months ended June 30, 1996 would have been had the Merger, in fact, occurred on January 1, 1995 or to project the results of operations for any future period. The Unaudited Pro Forma Financial Statements should be read in conjunction with the Financial Statements and related notes thereto and the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations", each of which is incorporated by reference in this Proxy Statement/Prospectus. 75 SUN INTERNATIONAL HOTELS LIMITED UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL ---------------------------- GGE & PRO FORMA SUN SUBSIDIARIES ADJUSTMENTS PRO FORMA ----------- --------------- ------------ ------------ (UNAUDITED) (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents.......................... $ 164,336 $ 56,329 $ (5,000 (a) $ 204,692 (10,973 (l) Restricted cash.................................... 4,454 4,454 Trade receivables.................................. 15,879 7,794 23,673 Due from affiliates................................ 1,942 1,942 Inventories........................................ 3,993 2,109 6,102 Prepaid expenses................................... 1,346 6,637 7,983 ----------- --------------- ------------ ------------ Total current assets............................. 187,496 77,323 (15,973) 248,846 Property and equipment............................... 246,598 157,661 15,000(c) 453,259 34,000(d) Land held for investment, development or resale...... 93,939 60,000(e) 153,939 Subordinated notes receivable........................ 42,783 42,783 Due from affiliates.................................. 1,140 1,140 Investment in associated corporations................ 32,118 32,118 Goodwill............................................. 98,242(b) 98,242 Deferred charges and other assets.................... 7,332 13,671 10,973(l) 31,976 ----------- --------------- ------------ ------------ Total assets..................................... $ 517,467 $ 342,594 $ 202,242 $ 1,062,303 ----------- --------------- ------------ ------------ ----------- --------------- ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt............... $ 75 $ 613 $ $ 688 Accounts payable and accrued liabilities........... 31,560 43,945 11,000(a) 86,505 ----------- --------------- ------------ ------------ Total current liabilities........................ 31,635 44,558 11,000 87,193 Deferred income taxes................................ 53,275 (9,684 (f) 43,591 Long-term debt net of unamortized discount and current maturities................................. 1,047 219,129 31,734(g) 251,910 Commitments and contingencies........................ Shareholders' equity................................. 484,785 25,632 194,824(a) 679,609 (25,632 (h) ----------- --------------- ------------ ------------ Total liabilities and shareholders' equity........... $ 517,467 $ 342,594 $ 202,242 $ 1,062,303 ----------- --------------- ------------ ------------ ----------- --------------- ------------ ------------ Book value per share............................. $ 16.68 $ 3.21 $ 20.49 ----------- --------------- ------------ ----------- --------------- ------------
76 SUN INTERNATIONAL HOTELS LIMITED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL --------------------------- GGE & PRO FORMA SUN SUBSIDIARIES ADJUSTMENTS PRO FORMA ---------- --------------- ----------- ----------- Revenues: Gaming.......................................... $ 79,605 $ 268,224 $ $ 347,829 Rooms........................................... 50,412 16,065 66,477 Food and beverage............................... 50,806 27,768 78,574 Tour operations................................. 16,338 16,338 Management fee income........................... 4,858 4,858 Other revenues.................................. 21,195 18,177 39,372 ---------- --------------- ----------- Gross revenues.................................... 223,214 330,234 553,448 Promotional allowances............................ (9,274) (28,494) (37,768) ---------- --------------- ----------- Net revenues.................................... 213,940 301,740 515,680 ---------- --------------- ----------- Cost and Expenses: Gaming.......................................... 44,388 156,091 200,479 Rooms........................................... 9,696 3,698 13,394 Food and beverage............................... 34,167 14,235 48,402 Other operating expenses........................ 33,677 34,281 67,958 Selling, general and administrative............. 33,153 38,305 71,458 Tour operations................................. 16,148 16,148 Corporate expenses.............................. 9,485 9,485 Depreciation and amortization................... 10,236 13,452 2,456(i) 27,277 1,133(i) ---------- --------------- ----------- ----------- Total costs and expenses.................... 190,950 260,062 3,589 454,601 ---------- --------------- ----------- ----------- Income from Operations............................ 22,990 41,678 (3,589) 61,079 Other Income (Expenses): Interest income................................. 2,426 3,518 5,944 Interest expense................................ (9,746) (29,297) 3,979(j) (35,064) Equity in earnings of associated corporations... 2,313 2,313 Gain on sale of airline option.................. 911 911 ---------- --------------- ----------- ----------- Income before taxes............................... 18,894 15,899 390 35,183 Provision for income taxes........................ 535 3,529(k) 4,064 ---------- --------------- ----------- ----------- Net Income........................................ $ 18,359 $ 15,899 $ (3,139) $ 31,119 ---------- --------------- ----------- ----------- ---------- --------------- ----------- ----------- Net income per share of Series A and B Ordinary Shares before accretion of redemption value... $ 1.24 Net income per share of Series A and B Ordinary Shares after accretion of redemption value.... $ 1.18 Weighted average number of shares outstanding... 25,088
77 SUN INTERNATIONAL HOTELS LIMITED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
GGE & PRO FORMA SUN SUBSIDIARIES ADJUSTMENTS PRO FORMA ----------- --------------- ----------- ----------- (UNAUDITED) (UNAUDITED) Revenues: Gaming............................................ $ 40,826 $ 127,246 $ $ 168,072 Rooms............................................. 36,001 7,014 43,015 Food and beverage................................. 33,390 12,839 46,229 Tour operations................................... 8,752 8,752 Management fee income............................. 2,338 2,338 Other revenues.................................... 12,710 8,656 21,366 ----------- --------------- ----------- Gross revenues........................................ 134,017 155,755 289,772 Promotional allowances................................ (7,136) (12,782) (19,918) ----------- --------------- ----------- Net revenues...................................... 126,881 142,973 269,854 ----------- --------------- ----------- Cost and Expenses: Gaming............................................ 23,645 79,257 102,902 Rooms............................................. 5,900 1,985 7,885 Food and beverage................................. 21,038 7,176 28,214 Other operating expenses.......................... 18,175 16,722 34,897 Selling, general and administrative............... 18,526 19,037 37,563 Tour operations................................... 8,905 8,905 Corporate expenses................................ 5,711 5,711 Depreciation and amortization..................... 5,824 6,205 1,183(i) 13,779 567(i) ----------- --------------- ----------- ----------- Total costs and expenses........................ 107,724 130,382 1,750 239,856 ----------- --------------- ----------- ----------- Income from Operations................................ 19,157 12,591 (1,750) 29,998 Other Income (Expenses): Interest income................................... 5,588 1,570 7,158 Interest expense.................................. (2,310) (14,476) 2,083(j) (14,703) Gain on sale of fixed assets...................... 229 229 Equity in earnings of associated corporations..... 995 995 ----------- --------------- ----------- ----------- Income (loss) Before Taxes............................ 23,659 (315) 333 23,677 Provision for Income Taxes............................ 192 192 ----------- --------------- ----------- ----------- Net Income (loss)..................................... $ 23,467 $ (315) $ 333 $ 23,485 ----------- --------------- ----------- ----------- ----------- --------------- ----------- ----------- Net income per share.................................. $ .75 Weighted average number of shares outstanding......... 31,226
78 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) PRO FORMA ADJUSTMENTS: The Unaudited Pro Forma Financial Statements have been prepared to give effect to the Merger in a business combination to be accounted for as a purchase for accounting purposes. Based upon the respective per share values of Ordinary Shares and GGE Common Stock as of August 16, 1996, the last full trading day prior to the announcement of the Merger, each share outstanding of GGE Common Stock will be exchanged for .4324 Ordinary Shares and each share of GGE Class B Stock outstanding will be converted into .1928 Ordinary Shares. A description of the pro forma adjustments is as follows: (a) To record the issuance of 4,109,718 Ordinary Shares as consideration for the Merger and the estimate of $16,000 in transaction related costs. The aggregate purchase price of the Merger, including the related transaction costs is $210,824, which reflects merger costs of $16,000 and the value of the shares issued in the exchange of $194,824 (an average value of $50 per share of common stock based upon the price of the Ordinary Shares several days before and after the date of the Merger Agreement less the proceeds from outstanding GGE options and warrants). The pro forma financial statements assume $5,000 of transaction related costs are settled in cash at the Closing Date, while the remaining $11,000 will become accrued liabilities. (b) To record the allocation of the excess of the purchase price over the net assets acquired as follows:
Aggregate purchase price....................................... $ 210,824 Book value of net assets acquired.............................. (25,632) --------- Excess of purchase price over net assets acquired.............. $ 185,192 --------- ---------
Sun has made a preliminary allocation of the excess of the purchase price over the book value of GGE's assets and liabilities based upon information received to date on the fair values of assets and liabilities acquired. Management has allocated the excess of the purchase price over net assets acquired as follows:
Land held for investment, development or resale................... $ 60,000 Land and land rights.............................................. 15,000 Hotels and other buildings........................................ 34,000 Deferred income taxes............................................. 9,684 Long-term debt.................................................... (31,734) Goodwill.......................................................... 98,242 --------- $ 185,192 --------- ---------
(c) To reflect the land and land rights at estimated market value at June 30, 1996. (d) To reflect the hotels and other buildings at their estimated fair value at June 30, 1996. (e) To reflect the land held for investment, development or resale at estimated market value at June 30, 1996. 79 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (f) To reduce deferred income taxes payable at June 30, 1996 based upon (i) the impact of pro forma adjustments of assets and liabilities acquired and (ii) the planned utilization of built-in tax gains available to Sun as a result of the Merger. (g) To record the carrying value of GGE debt at its fair value which approximates its face value. The fair value presented for GGE's long-term debt is based upon quoted market prices. (h) To eliminate the historical book value of GGE. (i) To reflect the additional amortization and depreciation expense resulting from the allocation of the purchase price to goodwill and hotels and other buildings. Sun amortizes goodwill over a period of 40 years and depreciates hotels and other buildings over a period of 30 years. (j) To reflect the elimination of the accretion of debt discount as a result of reflecting the GGE debt at fair value at the Merger date. (k) To record a provision for income taxes based upon the pro forma income before income taxes. (l) To record prepayment of Licenses and Services Agreement on the closing date. 80 DESCRIPTION OF GGE CAPITAL STOCK GGE is currently authorized to issue (i) 100,120,000 shares of common stock, consisting of 100,000,000 shares of GGE Common Stock and 120,000 shares of GGE Class B Stock, and (ii) 10,000,000 shares of Preferred Stock, par value $.01 per share ("GGE Preferred Stock"). As of November 1, 1996, 7,942,785 shares of GGE Common Stock, 35,000 shares of GGE Class B Stock and no shares of GGE Preferred Stock were issued and outstanding. The GGE Common Stock is issued and held subject to the qualification, redemption and divestiture requirements of the NJCCA. See "BUSINESS OF GGE-- Certain Matters Affecting GGE's Operations." GGE COMMON STOCK Each holder of GGE Common Stock is entitled to one vote per share on all matters submitted to a vote of shareholders except for the election of the Class B Directors. In the election of directors, no holder of GGE Common Stock has cumulative voting rights. Each share of GGE Common Stock is entitled to share equally in dividends from sources legally available therefor when, as, and if declared by the GGE Board. Upon liquidation or dissolution of GGE, whether voluntary or involuntary, each share of GGE Common Stock is entitled to share equally in the assets of GGE available for distribution to the holders of GGE Common Stock after distribution to all holders of GGE Common Stock and GGE Class B Stock of $.01 per share. No conversion or preemptive rights or redemption or sinking fund provisions are applicable to the GGE Common Stock. ChaseMellon Shareholder Services, L.L.C. is the transfer agent for the GGE Common Stock, and is also GGE's registrar. GGE CLASS B STOCK Each share of GGE Class B Stock is issued as part of a Unit comprising $1,000 principal amount of Junior Mortgage Notes and one share of GGE Class B Stock. Shares of GGE Class B Stock may not be transferred separately from the related Junior Mortgage Notes. Except as may be prescribed by Delaware law, the holders of GGE Class B Stock are not entitled to vote on any matter except that the holders of GGE Class B Stock are entitled to vote separately as a class with respect to the election of Class B Directors, which constitute one third of the GGE Board, and with respect to certain amendments to the GGE Charter and the GGE By-Laws which affect the rights of the holders of the GGE Class B Stock. Under certain circumstances the holders of GGE Class B Stock would be entitled to elect a majority of the GGE Board. Holders of GGE Class B Stock are not entitled to the payment of dividends, except that in the event of an interest payment on the Junior Mortgage Notes which is paid in additional Junior Mortgage Notes, holders shall be entitled to a stock dividend such that one share of GGE Class B Stock shall be issued in respect of each $1,000 in principal amount of such additional Junior Mortgage Notes. The holders of the GGE Class B Stock shall not be entitled to share in the distribution of assets in the event of any voluntary or involuntary liquidation or dissolution of GGE other than a distribution of $.01 per share. Upon redemption, or cancellation following the purchase thereof, of each $1,000 principal amount of Junior Mortgage Notes, GGE will redeem, at a price of $.01 per share, the share of GGE Class B Stock issued as part of that Unit. U.S. Trust Company of California, N.A. is the transfer agent and registrar for the Units. GGE PREFERRED STOCK Shares of GGE Preferred Stock may be issued from time to time in one or more series with such designations, powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as may be stated in the resolutions providing for the issue of such series of GGE Preferred Stock adopted by the GGE Board, provided that no shares of GGE Preferred Stock may be designated or issued with any rights to vote together with the holders of the GGE Class B Stock for any purpose, and provided further that the GGE Charter prohibits the issuance of any nonvoting equity securities in compliance with section 1123 of the United States Bankruptcy Code, 11 U.S.C. section 1123, 81 so long as such section is in effect and applicable to GGE. The GGE Board is authorized, subject to certain limitations prescribed by law, to issue up to 10 million shares of preferred stock in one or more classes or series and to fix the designations, powers, preferences, rights, qualifications, limitations or restrictions, including voting rights, of those shares without any further vote or action by stockholders. The rights of the holders of GGE Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of GGE. DESCRIPTION OF SUN CAPITAL STOCK Under the Sun Charter, Sun is currently authorized to issue 250,000,000 Ordinary Shares and 100,000,000 preference shares par value $.001 per share ("Preference Shares"). As of October 28, 1996, 29,245,184 Ordinary Shares were issued and outstanding and no Preference Shares were issued and outstanding. ORDINARY SHARES Each holder of Ordinary Shares is entitled to one vote per share on all matters submitted to a vote of shareholders. In the election of directors, no shareholder has cumulative voting rights. Each Ordinary Share is entitled to share equally in dividends from sources legally available therefor when, as, and if declared by the Sun Board. Upon liquidation or dissolution of Sun, whether voluntary or involuntary, each Ordinary Share is entitled to share equally in the assets of Sun available for distribution to the holders of the Ordinary Shares. No conversion or preemptive rights or redemption or sinking fund provisions are applicable to the Ordinary Shares. The Bank of New York is the transfer agent for the Ordinary Shares, and is also Sun's registrar. PREFERENCE SHARES Preference Shares may be issued from time to time in one or more series with such designations, voting powers, dividend rights, rights of redemption, conversion rights, other special rights, preferences and limitations as may be stated in the resolutions providing for the issue of such Preference Shares adopted by the Sun Board except that the Sun Charter prohibits the issuance of any non-voting Preference Shares which are not entitled to elect at least one director of Sun in the case where an event of default in the payment of dividends has occurred and is continuing with respect to such shares. The issuance of Preference Shares with voting and conversion rights may adversely affect the voting power of the holders of Ordinary Shares. In addition, because the terms of such Preference Shares may be fixed by the Sun Board without shareholder action, the Preference Shares could be designated and issued quickly in the event Sun requires additional equity capital. The Preference Shares could also be designated and issued with terms calculated to defeat a proposed acquisition of Sun or with terms making the removal of management more difficult. Under certain circumstances, this could have the effect of decreasing the market price of the Ordinary Shares. 82 COMPARISON OF THE RIGHTS OF SUN SHAREHOLDERS AND GGE STOCKHOLDERS The statements set forth under this heading with respect to the IBCA, the DGCL, the Sun Charter, the Sun Memorandum of Association (the "Sun Memorandum"), the GGE Charter and the GGE By-Laws are brief summaries thereof and do not purport to be complete; such statements are subject to the detailed provisions of the IBCA, the DGCL, the Sun Charter, the Sun Memorandum, the GGE Charter and the GGE By-Laws. See "AVAILABLE INFORMATION." The following summary compares certain rights of the holders of Ordinary Shares to the rights of the holders of GGE Common Stock. The rights of GGE stockholders are governed principally by the DGCL, the GGE Charter and the GGE By-Laws. Upon consummation of the Merger, such stockholders will become holders of Ordinary Shares, and their rights will be governed principally by the IBCA, the Sun Charter and the Sun Memorandum. DIVIDEND RIGHTS Under the IBCA, a corporation is prohibited from making a distribution to stockholders if, after giving effect thereto: (i) such corporation would be unable to meet its liabilities as they become due in the usual course of its business; or (ii) the realizable value of the assets of such corporation would be less than the sum of its total liabilities other than deferred taxes, as shown in the books of account, and its issued and outstanding share capital. Under the DGCL, a corporation may pay dividends out of surplus (defined as the excess, if any, of net assets over capital) or, if no such surplus exists, out of its net profits for the fiscal year in which such dividends are declared and/or for its preceding fiscal year, PROVIDED, that dividends may not be paid out of net profits if the capital of such corporation is less than the aggregate amount of capital represented by the outstanding stock of all classes having a preference upon the distribution of assets. Holders of both Ordinary Shares and GGE Common Stock are entitled to receive such dividends as may be declared by the Sun Board and the GGE Board, respectively, out of funds legally available for such purpose. Neither Sun nor GGE has ever declared or paid a cash dividend on Ordinary Shares or shares of GGE Common Stock, respectively, and neither Sun nor GGE anticipates declaring or paying any dividends on Ordinary Shares or shares of GGE Common Stock, respectively, in the foreseeable future. VOTING RIGHTS Holders of Ordinary Shares vote as a single class on all matters submitted to a vote of the shareholders, with each Ordinary Share entitled to one vote. Except as otherwise provided by law, the Sun Charter or the Sun Memorandum, matters submitted to a vote of the Sun shareholders must be approved by a majority of the votes cast by the Sun shareholders. Holders of Ordinary Shares are not entitled to cumulative votes in the election of directors. Holders of GGE Common Stock are entitled to vote as a single class on all matters, other than the election of the Class B Directors, submitted to a vote of the stockholders, with each share of GGE Common Stock entitled to one vote. Except as otherwise provided by law, the GGE Charter or the GGE By-Laws, matters submitted to a vote of the holders of GGE Common Stock must be approved by a majority of the votes cast by the holders of GGE Common Stock. Holders of GGE Common Stock are not entitled to cumulative votes in the election of directors. Except as may be prescribed by Delaware law, the holders of Class B Stock are not entitled to vote on any matter except that the holders of Class B Stock are entitled to vote separately as a class with respect to the election of Class B Directors, which constitute one third of the GGE Board, and with respect to certain amendments to the GGE Charter and the GGE By-Laws which affect the rights of the holders of the 83 Class B Stock. The holders of Class B Stock would be entitled to elect a majority of the GGE Board upon the occurrence of certain events with respect to the Junior Mortgage Notes. Under the DGCL, the affirmative vote of a majority of the outstanding shares of any class of common stock is required to approve, among other things, a change in the aggregate number of authorized shares of such class, the par value of the shares of such class, or the powers, preferences or special rights of the shares of such class in a manner adversely affecting such shares. DIRECTORS NUMBER AND ELECTION OF DIRECTORS. Under both the IBCA and the DGCL, the charter document, by-laws or articles of association of a corporation may specify the number of directors. The Sun Charter currently provides that the Sun Board shall consist of five directors each serving until the 1997 annual general meeting and then, as elected at such meeting, for a term of one year. The Sun shareholders, by resolution, may fill vacancies and newly created directorships. Until May 5, 1999, two of Sun's directors must be independent directors (the "Independent Directors"). To qualify as an Independent Director, the director must not be an officer or employee of Sun or its subsidiaries and must not otherwise have a relationship which, in the opinion of the Sun Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Sun Charter provides that nominations for directors can be made by the Sun Board or by any shareholder entitled to vote for the election of directors at a general meeting. The GGE Charter currently provides that the GGE Board shall consist of six directors, four of whom shall be elected by holders of GGE Common Stock (the "Common Stock Directors") and two of whom shall be elected by holders of GGE Class B Stock (the "Class B Directors"). By resolution the GGE Board may increase or decrease the number of directors constituting the whole board, provided that at all times, prior to the occurrence of certain events, at least one-third of the GGE Board shall be composed of Class B Directors. Upon the occurrence of certain events in respect of the Junior Mortgage Notes, the number of directors constituting the whole board shall be increased, with such vacancies filled by Class B Directors, such that the Class B Directors then constitute a majority of the entire board. The GGE Board is divided into three classes, such classes to be as nearly equal in number of directors as possible. Each director serves for a term ending at the third annual stockholders' meeting following the annual meeting at which such director was elected, the elections for each class being staggered by one year intervals. Any vacancy among the Common Stock Directors may be filled by a majority of the remaining Common Stock Directors, provided that the holders of the GGE Common Stock removing any Common Stock Director may at the same meeting fill the vacancy caused by such removal. Any vacancy among the Class B Directors may be filled only by a majority of the remaining Class B Directors, provided that the holders of the GGE Class B Stock removing any Class B Director may at the same meeting fill the vacancy caused by such removal. Upon the final retirement, redemption or payment of all of the Junior Mortgage Notes, all Class B Directors shall resign and the GGE Board shall be comprised entirely of six Common Stock Directors. Two of GGE's directors must qualify as independent directors under the rules of the ASE. To qualify as independent under the ASE rules and, thus, be an independent director for purposes of the ASE rules, the director must not be an officer of GGE, must not be related to its officers or represent concentrated or family holdings of its shares, and, in the opinion of the GGE Board, must be free of any relationship that would interfere with the exercise of independent judgment. FIDUCIARY DUTIES OF DIRECTORS. Under the IBCA, directors have a duty to perform their duties honestly and in good faith, in a manner they reasonably believe to be in the best interests of the corporation on the Board of Directors of which they serve, and with such care, diligence and skill as a reasonably prudent person would use under similar circumstances. The burden of proving that a director did not discharge his duties in such a manner is on the person making the allegation. 84 Under the DGCL, the business and affairs of a corporation are managed by or under the direction of its board of directors. In exercising their powers, directors are charged with an unyielding fiduciary duty to protect the interests of the corporation and to act in the best interests of its stockholders. In recognition of the managerial prerogatives granted to the directors of a Delaware corporation, the DGCL presumes that, in making a business decision, such directors are disinterested and act on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of such corporation, which presumption is known as the "business judgment rule." A party challenging the propriety of a decision of a board of directors bears the burden of rebutting the applicability of the presumption of the business judgment rule by demonstrating that, in reaching their decision, the directors breached one or more of their fiduciary duties--good faith, loyalty and due care. If the presumption is not rebutted, the business judgment rule attaches to protect the directors and their decisions, and their business judgments will not be judicially second guessed. Where, however, the presumption is rebutted, the directors bear the burden of demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts subject directors' conduct to enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control and approval of a transaction resulting in a sale of such control. LIABILITY OF DIRECTORS. Both the IBCA and the DGCL permit a corporation to limit the personal liability of its directors, with specified exceptions. The Sun Charter provides that to the fullest extent permitted by the IBCA, no director or officer of Sun shall be liable to Sun or its shareholders for monetary damages for breach of fiduciary duty as a director or officer. The DGCL permits a corporation to include in its certificate of incorporation a provision limiting or eliminating the liability of its directors to such corporation or its stockholders for monetary damages arising from a breach of fiduciary duty, except for: (i) a breach of the duty of loyalty to the corporation, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) a declaration of a dividend or the authorization of the repurchase or redemption of stock in violation of the DGCL or (iv) any transaction from which the director derived an improper personal benefit. The GGE Charter eliminates director liability to the maximum extent permitted by the DGCL. CALL OF EXTRAORDINARY GENERAL MEETINGS/SPECIAL MEETINGS Subject to any provision in the Memorandum of Association or Articles of Association for a lesser percentage, Section 58 of the IBCA permits a meeting of shareholders to be called upon the written request of members holding more than 50% of the outstanding voting shares. The Sun Charter provides that the Sun Board may convene an extraordinary general meeting whenever it thinks fit or when requested to do so by the holders of at least 10% of the paid-up share capital of Sun pursuant to the IBCA. Under the DGCL, a special meeting of the stockholders may be called by the board of directors or such other person as may be authorized by the certificate of incorporation or by-laws. The GGE By-Laws provide that special meetings of the holders of GGE Common Stock, and of the holders of the GGE Class B Stock, may be called at any time by the Chairman of the GGE Board or by a majority of the GGE Board. ACTION BY STOCKHOLDERS OR SHAREHOLDERS WITHOUT A MEETING The Sun Charter is silent on the subject of shareholder action without a meeting. The IBCA provides for shareholder action without a meeting by the written consent of a majority of shareholders. Under the DGCL, unless otherwise provided in the certificate of incorporation, stockholder action may be taken without meeting and without a vote if written consents in respect of such action are signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted. The GGE Charter is silent as to the subject of stockholder action without a meeting. 85 AMENDMENT TO SUN MEMORANDUM/GGE CHARTER Under the IBCA, shareholders of a corporation such as Sun are entitled to amend the Memorandum of Association upon the affirmative vote of a majority of the outstanding Ordinary Shares, although the Sun Charter, rather than the Sun Memorandum, contains most of the types of provisions typically found in a certificate of incorporation under the DGCL. In addition, Section 17 of the IBCA allows the directors to amend the Memorandum of Association where permitted by the Memorandum of Association, the Articles of Association, or the IBCA. The GGE Charter may be amended upon the affirmative vote of a majority of the GGE Board and by the affirmative vote of the holders of a majority of the outstanding shares of the GGE Common Stock, provided that the holders of the GGE Class B Stock are entitled to vote separately as a class with respect to certain amendments which affect their rights. AMENDMENT TO SUN CHARTER/GGE BY-LAWS The Sun Charter may be amended upon the affirmative vote of a majority of the outstanding Ordinary Shares. In addition, Section 17 of the IBCA allows the directors to amend the Articles of Association where permitted by the Memorandum of Association, the Articles of Association or the IBCA. The GGE Board has the power without the assent or vote of the stockholders to amend the GGE By-Laws, provided that the holders of the GGE Class B Stock are entitled to vote separately as a class with respect to certain amendments which affect their rights. APPROVAL OF MERGERS AND ASSET SALES The IBCA contains certain provisions which address the subject of mergers and asset sales. The Sun Charter, however, addresses the subject in greater detail and provides that until May 5, 1999, any merger or consolidation involving Sun or any sale, lease or other direct or indirect disposition of all or substantially all of the assets of Sun and its subsidiaries in a transaction or series of related transactions that could reasonably be expected to have an adverse effect on the rights of holders of Ordinary Shares (other than SIIL and/or persons affiliated with SIIL) and, in the case of any merger or consolidation that would result in the holders of Ordinary Shares (other than SIIL and/or persons affiliated with SIIL) no longer having an interest in Sun (or the resulting entity, successor or acquiror), it shall be a condition to the consummation of such transaction that Sun shall have obtained at its own expense an opinion rendered by an internationally recognized investment banking firm selected by the Independent Directors and engaged to the holders of the Ordinary Shares. The Sun Charter also requires approval of 50% of the Independent Directors for any such sale, lease or disposition. To qualify as an Independent Director for purposes of the above provision, the director must not be an officer or employee of Sun or its subsidiaries and must not otherwise have a relationship which, in the opinion of the Sun Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Under the DGCL, unless required by its certificate of incorporation, no vote of the stockholders of a constituent corporation surviving a merger is necessary to authorize such merger if: (i) the agreement of merger does not amend the certificate of incorporation of such constituent corporation; (ii) each share of stock of such constituent corporation outstanding prior to such merger is to be an identical outstanding or treasury share of the surviving corporation after such merger; (iii) either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such common stock are to be issued under such agreement of merger, or the number of shares of common stock issued or so issuable does not exceed 20% of the number thereof outstanding immediately prior to such merger; and (iv) certain other conditions are satisfied. In addition, the DGCL provides that a parent corporation that is the record holder of at least 90% of the outstanding shares of each class of stock of a subsidiary may merge such subsidiary into such parent corporation without the approval of such subsidiary's stockholders or board of directors. Whenever the approval of the stockholders of a corporation is required for an agreement of merger or consolidation or for a sale, lease or exchange of all or substantially all of its assets, such 86 agreement, sale, lease or exchange must be approved by the affirmative vote of the holders of a majority of outstanding shares of such corporation entitled to vote thereon; PROVIDED, that under the DGCL, where a corporation's certificate of incorporation provides for more or less than one vote per share on any matter, the required vote is a majority of the combined voting power of the corporation's stock. Thus, an agreement by GGE for a merger or consolidation, or the sale, lease or exchange by GGE of all or substantially all of its assets, must be approved by the affirmative vote of a majority of the combined voting power of the outstanding shares of GGE Common Stock entitled to vote thereon. RESTRICTED TRANSACTIONS Until May 5, 1999, in addition to the restriction on mergers and asset sales described above, Sun will also be restricted from taking the following actions without the approval of 50% of the Independent Directors; PROVIDED, HOWEVER, that the actions contemplated by paragraph (b) below will not be allowed to be taken without the approval of a majority of the Independent Directors: (a) any material transaction with SIIL or any affiliate thereof, including any issuances of securities and arrangements (or any material amendment thereto) with any such affiliate for management of Sun's properties; (b) any filing, approval for filing or undertaking any bankruptcy, reorganization, recapitalization, liquidation or dissolution of Sun; (c) any repurchase by Sun or any of its subsidiaries of any Ordinary Shares held by SIIL or any of its affiliates; or (d) any consent or approval of action proposed to be taken by any of the subsidiaries of Sun if: (i) such proposed action is of a type substantially the same as any of the actions described in paragraphs (a) through and including (c) above and (ii) the articles of association or equivalent charter documents of such subsidiaries provide that the adoption of such proposed action requires the consent or approval, authorization or approval of the shareholders of such subsidiaries. To qualify as an Independent Director for purposes of the above provisions, the director must not be an officer or employee of Sun or its subsidiaries and must not otherwise have a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. AMENDMENT TO TERMS OF ORDINARY SHARES The rights attached to Ordinary Shares may only be varied or abrogated by a resolution of the Sun Board together with either (i) the consent in writing of the holders of a majority in nominal value of the issued Ordinary Shares or (ii) a resolution of members holding such Ordinary Shares passed at a separate meeting of the holders of Ordinary Shares. RIGHTS OF APPRAISAL While not using the term "Appraisal Rights", the IBCA contains a provision which may give rise to a shareholder's right that is similar to the DGCL concept of appraisal rights under certain circumstances. Pursuant to the IBCA, holders of Ordinary Shares who abstain from voting or who vote against a transaction or modification of their rights as shareholders have two potential remedies under Bahamian law. Such holders could allege the transaction or modification was oppressive to or unfairly disregarded their rights and could apply to a Bahamian court under the IBCA for an order to restrain such transaction or modification. The burden of proving to the court that the necessary oppression or prejudice exists is onerous and rests with the holders. If any holder were successful with such a claim, a Bahamian court would have the power to issue a wide variety of orders, including a liquidation of Sun. In addition, holders of 15% or more of the Ordinary Shares who did not vote in favor of a modification of their rights as 87 shareholders could apply to a Bahamian court to have such modification cancelled. Such an application must be made within 21 days after the date upon which the consent was given or the resolution was passed authorizing the modification of class rights. To be successful, the applicants would have to satisfy the court that the modification would unfairly prejudice them. If such an application were made, the variations in rights would not take effect until confirmed by the court and the court would have the power to cancel the modification if satisfied that the applicants would be unfairly prejudiced. A Bahamian court has the discretion to award costs in accordance with established principles, which generally results in the successful party being awarded its costs against the unsuccessful party. Under the DGCL, the stockholders of GGE are not entitled to appraisal rights with respect to the approval and adoption of the Merger Agreement and the transactions contemplated thereby. The DGCL provides for appraisal rights on the part of the stockholders of a corporation only in the case of certain mergers or consolidations and not (unless the certificate of incorporation of a corporation so provides, which the GGE Charter does not) in the case of other mergers, a sale or transfer of all or substantially all of such corporation's assets or an amendment to such corporation's certificate of incorporation. Moreover, the DGCL does not provide for appraisal rights in connection with a merger or consolidation (unless the certificate of incorporation so provides, which the GGE Charter does not) to the holders of shares of a constituent corporation listed on a national securities exchange (or designated as a national market system security by the National Association of Securities Dealers, Inc.) or held of record by more than 2,000 stockholders, unless the applicable agreement of merger or consolidation requires the holders of such shares to receive, in exchange for such shares, any property other than shares of stock of the resulting or surviving corporation, shares of stock of any other corporation listed on a national securities exchange (or designated as described above) or held of record by more than 2,000 holders, cash in lieu of fractional shares or any combination of the foregoing. In addition, the DGCL denies appraisal rights to the stockholders of the surviving corporation in a merger if such merger did not require for its approval the vote of the stockholders of such surviving corporation. INDEMNIFICATION OF DIRECTORS AND OFFICERS Both the IBCA and the DGCL permit a corporation to indemnify officers and directors for liability arising from performance of their duties as officers and directors with certain exceptions. The Sun Charter indemnifies officers, directors and agents of Sun to the fullest extent permitted under the IBCA provided that such officer, director or agent acted in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of Sun and with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The GGE Charter indemnifies officers and directors to the fullest extent permitted under applicable law provided that such officer or director acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of GGE, provided that, with certain exceptions, no indemnification shall be made if such person shall have been adjudged liable to the corporation with respect to actions or suits by or in the right of the corporation. ANTI-TAKEOVER PROVISIONS The IBCA and the Sun Charter do not contain any anti-takeover provisions. Section 203 of the DGCL applies to a broad range of business combinations (as defined in the DGCL) between a Delaware corporation and an interested stockholder (as defined by the DGCL). The DGCL definition of "business combination" includes mergers, sales of assets, issuance of voting stock and certain other transactions. An "interested stockholder" is defined as any person who owns, directly or indirectly, 15% or more of the outstanding voting stock of a corporation. The DGCL prohibits a corporation from engaging in a business combination with an interested stockholder for a period of three years following the 88 date on which the stockholder became an interested stockholder, unless (i) the board of directors approved the business combination before the stockholder became an interested stockholder, or the board of directors approved the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, such stockholder owned at least 85% of the voting stock outstanding when the transaction began other than shares held by directors who are also officers and by certain employee stock plans, or (iii) the board of directors approved the business combination after the stockholder became an interested stockholder and the business combination was approved at a meeting by at least two-thirds of the outstanding voting stock not owned by such stockholder. RIGHTS OF INSPECTION Under the IBCA and the DGCL, every shareholder, or stockholder, as the case may be, upon proper written demand stating the purpose thereof, may inspect the corporate books and records during usual business hours as long as such inspection is for a proper purpose and during normal business hours. Under both statutes, a "proper purpose" is any purpose reasonably related to the interest of the inspecting person as a shareholder, or stockholder, as the case may be. LIQUIDATION RIGHTS The rights of the holders of Ordinary Shares upon the liquidation or dissolution of Sun are substantially the same as the holders of GGE Common Stock, and greater than that of holders of GGE Class B Stock (who have no liquidation rights except to the extent of the par value of such stock), upon the liquidation or dissolution of GGE. See "DESCRIPTION OF GGE CAPITAL STOCK" and "DESCRIPTION OF SUN CAPITAL STOCK." CASE LAW AND COURT SYSTEMS There is a substantial body of case law in Delaware interpreting the corporation laws of that state. A comparable body of judicial interpretation does not yet exist in The Bahamas. Delaware also has established a system of Chancery Courts to adjudicate matters arising under the DGCL. In The Bahamas, matters arising under the IBCA are adjudicated by the general courts of The Bahamas. As a result of these factors, there may be less certainty as to the outcome of matters governed by the IBCA, and therefore it may be more difficult to obtain legal guidance as to such matters, than would be the case under Delaware law. See "ENFORCEABILITY OF CIVIL LIABILITIES." 89 BUSINESS OF SUN GENERAL Sun is an international resort and gaming company incorporated in The Bahamas which develops and manages premier resort and casino properties. Sun, through its subsidiaries, currently operates resort hotels and casinos in Connecticut, The Bahamas, the Indian Ocean and France. Sun's largest property is Atlantis, a 1,147-room resort and casino located on Paradise Island, The Bahamas. Following its acquisition by Sun, Atlantis was redeveloped into an ocean-themed destination resort through the $140 million Initial Development Program. Seeking to capitalize on the success of Atlantis, Sun expects to commence construction of the approximately $375 million Paradise Island Expansion in the fourth quarter of 1996. The Paradise Island Expansion will substantially increase Sun's room base on Paradise Island with the construction of a new 1,200-room deluxe hotel, significantly increase its casino capacity and convention space and expand Atlantis' ocean-themed adventure attractions. As part of its continued development of Paradise Island, Sun recently acquired the 562-room Pirate's Cove Hotel adjacent to Atlantis for approximately $12 million in cash plus the assumption of approximately $22.6 million of indebtedness. In connection with the Paradise Island Expansion, Sun is planning the Pirate's Cove Renovation to create a moderately-priced hotel within the Atlantis complex. Sun expects to complete the Paradise Island Expansion by the second quarter of 1998 and the Pirate's Cove Renovation by the fourth quarter of 1998, thus creating an integrated 3,000-room resort complex appealing to all market segments which will include approximately 1,200 deluxe rooms, 1,100 mid-market rooms and 700 moderately-priced rooms. Sun's development projects which were completed during 1996 include the Mohegan Sun Casino developed and managed for the Mohegan Tribe by TCA, a partnership in which Sun, through its wholly owned subsidiary, Sun Cove Limited ("Sun Cove"), owns a 50% interest, and two new resort hotels on the Indian Ocean island of Mauritius, for which Sun provides management services. Sun currently manages 10 hotels containing approximately 3,200 rooms and six casinos with an aggregate of over 200,000 square feet of gaming space containing more than 4,000 slot machines and 300 table games. Sun anticipates that by the fourth quarter of 1998, it will manage 11 hotels containing in excess of 4,400 rooms and six casinos with an aggregate of approximately 220,000 square feet of gaming space containing approximately 5,000 slot machines and 350 table games. Sun was established in 1993 in order to acquire the Paradise Island Resort & Casino and related operations from Resorts International, Inc. (now GGE), which acquisition closed on May 3, 1994. In May 1995, pursuant to provisions of the Combination and Restructuring Agreement, dated December 12, 1994, between Sun and SIIL, Sun acquired substantially all the operations outside southern Africa of SIIL, which is the majority shareholder of Sun. Sun is SIIL's sole investment vehicle for the development of entertainment, resort and gaming operations outside southern Africa. SIIL, which controls approximately 55% (approximately 48% assuming consummation of the Merger at a Conversion Number of .4324) of Sun's voting power, is a private holding company in which each of Caledonia, Safren and a trust for the family of Mr. Solomon Kerzner controls approximately a one-third interest. Sun has no interest in any company which operates resort and/or casino properties in southern Africa. See "PRINCIPAL SHAREHOLDER OF SUN." THE PROPERTIES AND CURRENT EXPANSION PROJECTS THE BAHAMAS Sun, through its wholly owned Bahamian subsidiary, Sun Bahamas, owns approximately 562 acres or almost 70% of Paradise Island. Approximately 220 acres are available for future development of which 30 acres will be used for the Paradise Island Expansion. Paradise Island has extensive existing infrastructure and is easily accessible from the densely populated eastern United States. There are regularly scheduled 90 airline flights from south Florida and New York City to either Paradise Island or neighboring Nassau, having flight times of approximately 50 minutes and three hours, respectively. Sun acquired its Paradise Island operations in May 1994. In December 1994, Sun completed the Initial Development Program, pursuant to which Sun reconstructed and refurbished its existing Paradise Island facilities and created the ocean-themed environment of "Atlantis". Included in the Initial Development Program was the refurbishment of all 1,147 guest rooms at Atlantis, the construction of new specialty food and beverage facilities, an upgrading of the 30,000-square foot Atlantis Casino and the creation of a 14-acre saltwater marine life habitat which runs through Atlantis. The marine life habitat features the world's largest open air aquarium, showcasing over 100 species of marine life, waterfalls, lagoons, adventure walks and clear tunnels submerged in a predator lagoon through which visitors can walk and be surrounded by sharks, sea turtles, stingrays and other marine life. The construction was substantially completed in only seven months, while the casino and substantial portions of the hotel remained open. In addition, a portion of the Initial Development Program expanded and improved the infrastructure on Paradise Island. Results of Atlantis to date have exceeded management's expectations. For the year ended December 31, 1995, Atlantis achieved average occupancy, and average daily room rates of 85% and $122, respectively, which Sun believes are the highest the property has achieved during the last ten years. For the six months ended June 30, 1996, Atlantis achieved average occupancy and average daily room rates of 92% and $162, respectively. Sun's operations on Paradise Island also include the Ocean Club, a luxury hotel resort with 59 guest rooms, which was renovated as part of the Initial Development Program, and Paradise Paradise, a 100-room beachfront resort hotel catering to value-conscious tourists. In addition, Sun Bahamas owns and operates convention facilities, shops, restaurants, bars and lounges, tennis courts, the Paradise Island Golf Course and other resort facilities on Paradise Island. Sun Bahamas also owns roads and other land improvements on Paradise Island, the Paradise Island Airport and a water and sewage system which serves, at stated charges, substantially all facilities on Paradise Island, including non-affiliated customers. The water and sewage systems, which are operated with the approval of the Bahamian Government, will require some expansion in conjunction with the Paradise Island Expansion. The Atlantis Casino is at the center of the Atlantis complex. The casino building, situated between two hotel towers, contains nearly 165,000 square feet, including the 30,000-square foot casino gaming area. It also houses seven restaurants and bars, retail space and Le Cabaret Theater. The Atlantis Casino contains approximately 830 slot machines and 70 table games. The further development of Paradise Island is the cornerstone of Sun's expansion plans, and its approximately 220 acres of currently undeveloped property provide Sun with an opportunity to expand Paradise Island into a master planned and highly themed destination resort centered around spectacular Bahamian beaches and the wonders of the ocean. Sun expects to begin construction of the Paradise Island Expansion during the fourth quarter of 1996 and to complete the construction during the second quarter of 1998 at a cost of approximately $375 million. Sun does not expect the construction of the Paradise Island Expansion to interfere materially with its operations at Atlantis. The Paradise Island Expansion will include the construction of a 1,200-room deluxe hotel. It is also intended to significantly increase gaming space and convention and meeting facilities and to expand the ocean-themed attractions of Atlantis with the addition of numerous marine attractions. Upon completion of the Paradise Island Expansion, guests will be able to explore a significantly expanded ocean-themed adventure environment containing lagoons, waterfalls, watersports and exotic marine life exhibits. Consistent with Sun's strategy of offering accommodations that appeal to broad market segments within a single master-planned destination resort, Sun has recently acquired the 562-room Pirate's Cove Hotel on Paradise Island located adjacent to Atlantis for approximately $12 million in cash plus the assumption of approximately $22.6 million of indebtedness. Sun intends to use this property to house many of the construction laborers during the Paradise Island Expansion. In addition, Sun intends to implement 91 the Pirate's Cove Renovation, which is expected to be completed during the fourth quarter of 1998, to position the property as Atlantis' moderately priced unit. Following the completion of the Paradise Island Expansion and the Pirate's Cove Renovation, Sun Bahamas will continue to own approximately 190 acres of undeveloped land on Paradise Island with extensive beach and golf course frontage. The Paradise Island Expansion and Pirate's Cove Renovation plans are in their preliminary stages and could change significantly before commencement or during construction, and there can be no assurance that the Paradise Island Expansion will be completed as planned or on schedule. See "RISK FACTORS--Risk Factors Related to Sun--Risks Associated with New Projects and Expansion of Sun." Sun intends to use borrowings under the Revolving Credit Facility to finance part of the Paradise Island Expansion. The Revolving Credit Facility contains a number of conditions precedent to funding. See "--Revolving Credit Facility." Sun continues to explore additional development opportunities on Paradise Island. Following the completion of the Paradise Island Expansion and the Pirate's Cove Renovation, management's long-term growth plan includes the potential development of additional resort properties on Paradise Island, each appealing to a distinct target market. For example, management anticipates that additional expansion opportunities will exist to develop room capacity that caters to budget-oriented customers at lower price points than those currently offered at Atlantis. In addition, management believes that similar expansion opportunities exist in the luxury end of the market with a further build-out of the Ocean Club. Other potential development projects may include residential villas, timeshare developments, marinas and golf course communities. Any further development projects on Paradise Island will be constructed on the approximately 190 acres of undeveloped land remaining after the Paradise Island Expansion, which includes extensive beach and golf course frontage, or on additional tracts of land that maybe acquired from time to time. Sun International Representation, Inc., a Florida corporation and subsidiary of Sun, together with its subsidiaries based in Florida, provides general and administrative support services, marketing services, travel reservations and wholesale tour services for Sun's Paradise Island operations. CONNECTICUT Sun, through a wholly owned subsidiary, has a 50% interest in, and is a managing partner of, TCA, a Connecticut general partnership, which developed and manages the Mohegan Sun Casino, an approximately $300 million casino and entertainment complex for the Mohegan Tribe in Montville, Connecticut. The Mohegan Gaming Authority and TCA received the requisite approvals from the NIGC and the Bureau of Indian Affairs on September 29, 1995, to commence construction of the Mohegan Sun Casino. Construction of the Mohegan Sun Casino began in early October 1995, and the facility commenced operations on October 12, 1996. The Mohegan Sun Casino incorporates a distinctive northeastern Native American Indian theme which is conveyed through architectural features and the use of natural design elements such as timber, stone and water. Guests enter the Mohegan Sun Casino through one of four major entrances, each of which is distinguished by a separate seasonal theme--winter, spring, summer and fall--emphasizing the importance of the seasonal changes to tribal life. The Mohegan Sun Casino includes approximately 150,000 square feet of gaming space, which accommodates approximately 2,670 slot machines and 180 table games, and parking for 7,500 cars. The site for the Mohegan Sun Casino is located approximately one mile from the interchange of Interstate 395 and Connecticut Route 2A (which was widened to a four-lane expressway). As part of its integrated development plan, the Mohegan Gaming Authority constructed a four-lane access road (with its own exit) from Route 2A, which gives patrons of the Mohegan Sun Casino direct access to Interstate 395 and to Interstate 95, the main highway connecting Boston, Providence and New York City. 92 Sun believes that the demographics of the area surrounding the Mohegan Sun Casino are extremely favorable, with 10.2 million adults residing within 100 miles and 21.8 million adults residing within 150 miles of the Mohegan Sun Casino. The Mohegan Sun Casino is located approximately 10 miles west of Foxwoods, which Sun believes to be one of the most profitable casinos in the world. Foxwoods, which is operated by the Pequot Tribe, reported approximately $595 million of revenues from slot machines for the 12 months ended June 30, 1996, an average of approximately $405 per slot machine per day. Sun believes that the location, ease of access and distinctive northeastern Indian theme of the Mohegan Sun Casino should enable it to capture a significant share of the gaming market in the northeastern United States. See "RISK FACTORS--Risk Factors Related to Sun--Competition--The Mohegan Sun Casino". To fund the construction and development of the Mohegan Sun Casino, the Mohegan Gaming Authority, an agency of the Mohegan Tribe, completed the Mohegan Offering, a private placement to institutional investors of $175 million of Mohegan Senior Notes, in September 1995. Fixed interest is payable on the Mohegan Senior Notes at the rate of 13.5% per annum. In addition, certain cash flow participation interest is payable on the Mohegan Senior Notes on each interest payment date in an amount equal to 5% of the Mohegan Gaming Authority's cash flow. In addition, the Mohegan Gaming Authority has $40 million of equipment financing and $13 million of working capital financing. In connection with the Mohegan Offering, Sun and TCA purchased $38.3 million and $1.7 million, respectively, of the Subordinated Notes from the Mohegan Gaming Authority. The Subordinated Notes bear interest at 15% per annum. However, payment in cash of such interest is deferred until $87.5 million in principal amount of the Mohegan Senior Notes have been retired and the Mohegan Gaming Authority achieves a fixed charge coverage ratio of 2.5 to 1.0 over the previous four fiscal quarters. The Subordinated Notes are subordinated in right to required payments on the Mohegan Senior Notes, as are payments to TCA of management fees under the TCA Management Agreement. In connection with its supply of certain operational and financial support to TCA, Sun will receive certain priority payments from TCA's management fees. Specifically, Sun will receive priority payments from TCA of approximately $10 million for development and construction services and for supplying the Secured Completion Guarantee. In addition, Sun will receive a priority payment from TCA of 11.5% per annum of its investment in the Subordinated Notes, so long as they are outstanding, for supplying capital to the Mohegan Gaming Authority. Each of these priority payments will be paid from TCA's management fees prior to the pro rata distribution to TCA's partners (including Sun) of TCA's profits. The other partners of TCA have the option to buy from Sun up to $19 million of Subordinated Notes at par, and have indicated that they intend to exercise such option. Pursuant to the Secured Completion Guarantee and subject to certain qualifications and limitations, Sun agreed to cause the Mohegan Sun Casino to be completed and guaranteed, on a senior basis, the payment of all project costs owing prior to such completion up to a maximum aggregate amount of $50 million. Based upon the current budget for the Mohegan Sun Casino, Sun anticipates funding the full $50 million under the Secured Completion Guarantee. The Mohegan Gaming Authority is required to issue the Secured Completion Guarantee Notes in principal amounts equal to payments made by Sun under the Secured Completion Guarantee. Any such notes issued pursuant to the Secured Completion Guarantee will bear interest at the prime rate as announced by Chemical Bank plus 1% per annum. In addition, Sun will receive a priority payment from TCA of approximately 16.5% per annum of its investment in the Secured Completion Guarantee Notes issued as part of the Secured Completion Guarantee as long as such notes are outstanding. SIIL has agreed to secure Sun's obligations under the Secured Completion Guarantee with a pledge of 1,500,000 Ordinary Shares owned by SIIL. In addition, Sun's obligations under the Secured Completion Guarantee are secured by the $15 million letter of credit, which was obtained on behalf of Sun. The final calculations of the cost of developing, constructing, equipping and opening the Mohegan Sun Casino have not been finalized but are expected to total approximately $318 million, which consists of $305 million of project development costs and $13 million of initial working capital. The sources of funds 93 for the project costs are (i) $175 million from the sale of the Mohegan Senior Notes, (ii) $40 million from the sale of the Subordinated Notes, (iii) $50 million committed by Sun pursuant to the Secured Completion Guarantee and (iv) $40 million of equipment financing. In addition, $13 million of initial working capital has been provided by a bank working capital facility. Sun Cove, a wholly owned subsidiary of Sun, is one of two managing partners of TCA. All decisions of the managing partners require the concurrence of Sun Cove and the other managing partner, LMW Investment, Inc. ("LMW"). In the event of deadlock there are mutual buy-out provisions. Sun's other partners in TCA are RJH Development Corp. ("RJH") and Slavik Suites, Inc. ("Slavik Suites"). LMW is a Connecticut corporation controlled by Len Wolman. RJH is a New York corporation controlled by Richard J. Hertz. Slavik Suites is a Michigan corporation. All of the partners are primarily engaged in hotel management and real estate development. Sun has been advised that the other partners are restructuring with the effect that RJH will sell its interest to an entity controlled by LMW and Slavik Suites. No assurances can be given that the operating results of Mohegan Sun Casino will meet management's expectations. See "RISK FACTORS--Risk Factors Related to Sun--Risks Associated with New Projects and Expansion of Sun." INDIAN OCEAN Sun owns a 22.8% interest in Sun Indian Ocean, a Mauritian company which is publicly traded on the Mauritius Stock Exchange. Sun Indian Ocean is regarded as one of the premier resort operators in the Indian Ocean and owns five beach resort hotels in Mauritius: the 179-room Le Saint Geran Hotel, Golf Club & Casino ("Le Saint Geran"), the 200-room Le Touessrok Hotel & Ile Aux Cerfs ("Le Touessrok"), the 250-room La Pirogue Hotel & Casino ("La Pirogue"), the 337-room Le Coco Beach ("Le Coco Beach") and the 240-room Sugar Beach Resort Hotel ("Sugar Beach"). Sun Indian Ocean also owns the 180-room Le Galawa Beach Resort ("Le Galawa") in the Comoros. Mauritius and the Comoros are tropical islands located in the Indian Ocean approximately 1,200 miles and 200 miles, respectively, off the east coast of mainland Africa. The resorts in Mauritius and the Comoros are marketed primarily to luxury and mid-market tourists from Europe and southern Africa. Le Saint Geran and Le Touessrok offer deluxe accommodations and are acknowledged by the European travel trade to be among the finest resorts in the world. La Pirogue, Le Coco Beach, Sugar Beach and Le Galawa cater to mid-market and budget travellers. Sun Indian Ocean owns five of the 16 major hotels in Mauritius representing approximately 36% of the room inventory among properties with more than 80 rooms. Mauritius' tourist industry mainly comprises visitors from England, Germany, France, Italy and South Africa. Scheduled air service to and from Mauritius is provided through scheduled flights on numerous airlines including Air France, British Airways, Cathay Pacific, Singapore Airlines, Air India, Air Mauritius, Lufthansa and South African Airlines. Sun Indian Ocean is a leading resort operator at the upper end of the market, as there is only one other five-star property on Mauritius. Sun believes that the recent openings of Le Coco Beach and Sugar Beach have increased its market share on Mauritius, further enhance its presence in the mid-market and provide certain economies of scale. Pursuant to the management agreements with Sun Indian Ocean, Sun provides comprehensive management services under individual management agreements with each of Le Saint Geran, Le Touessrok, La Pirogue, Sugar Beach and Le Coco Beach. The term of each of these management agreements (the "Sun Indian Ocean Management Agreements") continues through December 2003. Sun has the right to extend each Sun Indian Ocean Management Agreement for a five-year period by notice in writing delivered to Sun Indian Ocean by December 2001. Under each of the Sun Indian Ocean Management Agreements, Sun receives a management fee calculated as a percentage of revenues (2%) and adjusted EBITDA (15%). In addition, under each of the 94 Sun Indian Ocean Management Agreements other than the management agreement for Le Saint Geran, Sun receives project consulting fees charged at 2.5% of the total project costs for construction and refurbishment. Sun also has a management agreement to provide services to Le Galawa in the Comoros. The terms of this agreement are identical to the terms of the Sun Indian Ocean Management Agreements except that Sun is entitled to receive a basic fee of 3.5% of revenues rather than 2%. In addition, Sun Indian Ocean is entitled to receive a basic fee of 1.5% of revenues. FRANCE Sun owns an effective 25% of Sun France, a private company founded in 1990, which owns four locals-oriented casinos in France, located in Nice and Chamonix and in the Marseilles districts of Cassis and Carry-le-Rouet. Sun's principal partners in Sun France are Chargeurs, S.A., Accor S.A. and the Barriere Family, the latter two of which have broad experience in the French domestic gaming and international lodging industries. Accor, a publicly traded company, is one of the largest hotel operators in the world, operating under the trade names "Sofitel", "Novotel", "Mercure" and others. Barriere is one of the largest French casino operators, operating 10 casinos. The Chargeurs organization is a publicly traded industrial company in France. In 1990, Sun France acquired the Casino Ruhl in Nice (the "Casino Ruhl") and subsequently acquired the three additional casinos in 1992. The Casino Ruhl, the only casino in Nice, operates 300 slot machines and 28 table games. The Cassis casino operates 100 slot machines and 17 table games, the Carry-le-Rouet casino operates 80 slot machines and one table game and the Chamonix casino operates 49 slot machines and 13 table games. Sun France operates in excess of 20,000 square feet of gaming space, which contained approximately 530 slot machines and 60 table games. In France customers are required to pay an entry fee payable to the government and provide details of identity in order to gain access to table games. Further information is required from patrons wishing to obtain credit through credit cards. These requirements tend to limit the number of customers. In addition, French casinos have traditionally been heavily regulated and taxed with approximately a 60% levy on table games. The effective tax on slots is lower, beginning at 40% and gradually increasing to 60%, with the result that the profitability of Sun France will be largely determined by the number of slot machines installed. Sun provides various services to Sun France's four casinos under a technical assistance agreement pursuant to which Sun receives a fixed fee equivalent to approximately $800,000 per year (at current exchange rates). The technical assistance agreement expires in 1997. COMPETITION PARADISE ISLAND Sun's resorts on Paradise Island compete with cruise ships and other hotels, resorts and casinos, particularly those on Paradise Island and New Providence Island in The Bahamas. There are approximately 7,600 rooms for overnight guests on Paradise Island and New Providence Island combined, of which approximately 3,100 are located on Paradise Island, including 1,318 in hotels owned and operated by Sun. The Marriot Crystal Palace, a resort and casino with a theater and other amenities located on New Providence Island, across Nassau harbor from Paradise Island, is Atlantis' primary competitor on Paradise Island and New Providence Island. The Atlantis Casino also competes with the Princess Casino and, to a lesser extent, the Lucayan Beach Resort and Casino, each of which offers hotel accommodation, restaurants, gaming and other leisure facilities on Grand Bahama Island, approximately 40 minutes by air from Paradise Island. The Atlantis Casino also competes with the El San Juan located in Puerto Rico and, to a lesser extent, with gaming 95 casino facilities located in several other hotels and resorts in Puerto Rico, with cruise ships which effectively provide additional rooms and with resorts and casinos located on other Caribbean islands, in Atlantic City, in Las Vegas and elsewhere in the United States. See "RISK FACTORS--Risk Factors Related to Sun--Competition--Paradise Island" for a description of potential future competition. THE MOHEGAN SUN CASINO The Mohegan Sun Casino is marketed primarily to day-trip customers. Management believes it competes primarily with other casinos within 150 miles and, to a lesser extent, with casinos in Atlantic City, New Jersey, certain of which have greater resources and name recognition than Sun or the Mohegan Tribe. Currently, Foxwoods is the only casino in operation within 150 miles of the Mohegan Sun Casino site. Foxwoods is located approximately 10 miles from the Mohegan Sun Casino site and is currently the largest gaming facility in the United States in terms of the number of slot machines. In addition, Foxwoods offers a number of amenities that the Mohegan Sun Casino does not currently offer, including hotels and extensive non-gaming entertainment facilities. Foxwoods has been in operation for more than four years, and the Mohegan Gaming Authority believes that Foxwoods' successful operation has enabled it to build financial resources that are currently substantially greater than those of the Mohegan Gaming Authority or the Mohegan Tribe. A number of Indian tribes are seeking to establish gaming operations in the northeastern United States. Sun cannot predict whether any of these tribes will be successful in establishing gaming operations. See "RISK FACTORS--Risk Factors Related to Sun--Competition--The Mohegan Sun Casino." OTHER EXISTING OPERATIONS Sun Indian Ocean's resorts on Mauritius and the Comoros, as vacation destinations, are in competition with other locations offering vacations to tourists from Europe, South Africa and parts of Asia. In Mauritius, there is also competition from other resorts on the island. In the Comoros, however, there are no competitive resorts at the current time. Sun Indian Ocean has a leading position in the luxury end of the Mauritian hotel market where it owns two of the three luxury hotels offering a total of 379 rooms, while the competing hotel offers only 84 rooms. It faces more competition for the mid-market La Pirogue and Sugar Beach and for the budget Le Coco Beach. In total, there are approximately 4,000 hotel rooms of international quality available in Mauritius, of which 1,500 are marketed in approximately the same price bracket as La Pirogue and Sugar Beach. There is currently one competing hotel with 141 rooms that is situated on the same beach as La Pirogue. In France, casino licenses may be issued only in resort towns or locations with natural spa facilities. If additional casino licenses were granted in the resort locations in which Sun France operates and such casinos were built, Sun France's casinos would face competition from those casinos. There are currently no other casino facilities in the towns where Sun France operates; however, there are approximately eight casinos in Cannes, Monte Carlo and other towns along the Cote d'Azur which are in direct competition with the Sun France casinos. See "RISK FACTORS--Risk Factors Related to Sun--Competition--Other Existing Operations." CERTAIN MATTERS AFFECTING SUN'S PARADISE ISLAND OPERATIONS AIRLINE ARRANGEMENTS The majority of patrons at Sun's resorts on Paradise Island arrive through the recently expanded Nassau International Airport located on New Providence Island. This large, modern facility is served by several carriers offering frequently scheduled jet service from New York, Atlanta, Toronto, Miami and other cities. Ground transportation is facilitated by a bridge linking Paradise Island and New Providence Island. 96 Additionally, Sun Bahamas, through a subsidiary, owns and operates the Paradise Island Airport, a short takeoff and landing facility, including a 3,000-foot runway, airport terminal and customs building, situated on 63 acres of land located at the southeast corner of Paradise Island. Paradise Island Airlines, through a code-sharing arrangement with U.S. Air, provides regularly scheduled air service from southern Florida to Paradise Island pursuant to a Services Agreement with Sun. This agreement will expire in mid-1998 and will be automatically renewed for one-year terms unless notice of non-renewal is given at least six months prior to expiration. Sun believes, however, that fewer than 15% of its patrons arrive via the Paradise Island Airport. UNION CONTRACT ARRANGEMENTS In The Bahamas, approximately 1,900 of Sun Bahamas employees are represented by The Bahamas Catering and Allied Workers Union (the "Union"). Sun Bahamas participates in The Bahamas Hotel Employers Association (the "Association"), which represents resort operators in the Paradise Island-New Providence Island area. The Association's existing contract with the Union expires in 1998. Sun believes that Sun Bahamas' and the Association's relations with the Union are good. CASINO LICENSE Paradise Enterprises Limited, a subsidiary of Sun ("PEL"), is currently licensed to operate the Atlantis Casino under the Bahamian Gaming Act. In accordance with Bahamian casino licensing requirements, PEL is obligated to have its casino license renewed annually by the Gaming Board of the Commonwealth of The Bahamas. In addition, other than an existing obligation to grant two additional casino licenses, the Bahamian Government has agreed that it will grant no new casino licenses with respect to gaming operations on Paradise Island or New Providence Island for a period of 20 years from the date of the Heads of Agreement (as defined below), provided that Sun Bahamas achieves 75% of its projected minimum employment growth of 2,000 full-time jobs in connection with its expansion and development plans by year ten of the renewal period. The moratorium on granting new casino licenses will remain in place, however, in the event such growth is not achieved because of overall poor market conditions rather than inadequate management by Sun. GAMING TAXES AND FEES Currently, the Gaming Act provides for taxes on casino revenues consisting of an annual basic license fee of $200,000 plus a tax of 25% on all gaming win up to $10 million, 20% on the next $6 million of win, 10% on the next $4 million of win and 5% on all win over $20 million. ATLANTIS CASINO LEASE A subsidiary of Sun entered into various agreements effective in 1978, pursuant to which the Atlantis Casino is leased to the Hotel Corporation of The Bahamas ("HCB"), a government-owned entity, at an annual rental of $500,000. Pursuant to the Heads of Agreement, PEL has an exclusive right to manage and operate the Atlantis Casino, for which it currently pays HCB an annual operating fee of $3 million and 5% of the gaming win above $20 million. Prior to the acquisition of Sun's Paradise Island operations, PEL paid HCB an annual operating fee of $5 million and 15% of gaming win above $25 million. MANAGEMENT AGREEMENT The Bahamian Government has extended the existing management agreement between HCB and PEL through May 2014. The amended annual payment terms beginning in May 1994 are as follows: (i) for years one through five, a $3 million base fee plus 5% of gaming win over $20 million, (ii) for years six through ten, a $3 million base fee plus 7.5% of gaming win over $20 million, (iii) for years eleven through fifteen, a $4 million base fee plus 10% of gaming win over $20 million and (iv) thereafter upon such terms 97 as the relevant parties shall agree, provided that the fee shall not exceed a base fee of $5 million plus 15% of gaming win above a threshold of $25 million. Upon expiration, the management agreement will continue in effect with such changes as the parties may agree but in any event on terms no less favorable than those agreed upon with other casino managers on Paradise Island and New Providence Island. The Bahamian Government has agreed to consider steps eventually to eliminate the role of HCB and allow for direct licensing of casinos. The following table summarizes, for the period shown, the taxes and fees paid or accrued by Sun Bahamas under the Gaming Act and certain agreements with the Bahamian Government:
YEAR ENDED DECEMBER 31, 1995 ----------------- Gaming Taxes............................................................... $ 7.1 million Basic License and Operating fees........................................... 6.2 million ----------------- Total.................................................................. $ 13.3 million ----------------- -----------------
CERTAIN ARRANGEMENTS WITH THE BAHAMIAN GOVERNMENT In August 1993, SIIL, Sun and the Bahamian Government entered into the Heads of Agreement (as supplemented and amended, the "Heads of Agreement") pursuant to which Sun agreed to pursue the Initial Development Program and SIIL, Sun and the Bahamian Government agreed to a number of other arrangements described below. CONTROL OF SUN. SIIL has agreed, pursuant to the Heads of Agreement, not to reduce its voting interest in Sun below 45% until six months after completion of the Paradise Island Expansion and thereafter to control a majority of the Sun Board for a period of five additional years. DEVELOPMENT. Sun has agreed to consider further development of certain of its resorts on Paradise Island. Sun has also agreed to maintain the Ocean Club as a luxury resort. ATHOL ISLAND. Sun has the right to present a master plan for the development of Athol Island, an undeveloped island east of Paradise Island, for a period of three years ending May 1997. The Bahamian Government will not allow any other development on Athol Island during such period. JURISDICTION AND GOVERNING LAW. Sun has consented to jurisdiction of the courts of the Commonwealth of The Bahamas. The Heads of Agreement is governed by the laws of The Bahamas. NEW AGREEMENT WITH THE BAHAMIAN GOVERNMENT In connection with the Paradise Island Expansion, on December 13, 1995 Sun and the Bahamian Government entered into the New Heads of Agreement, which supplements the Heads of Agreement, pursuant to which Sun will receive certain tax relief, incentives and other benefits described below. These benefits will be granted in exchange for Sun agreeing to, among other things, spend a minimum of $250 million on the Paradise Island Expansion, build a minimum of 1,000 additional guest rooms and employ and keep employed between 2,000 and 2,500 additional Bahamian workers after completion of the Paradise Island Expansion. CASINO LICENSE FEES AND WIN TAXES In replacement of the gaming taxes and the fees payable to the HCB, the Bahamian Government has agreed, for a period of 20 years following completion of the Paradise Island Expansion, to set annual casino license fees at $100,000 per thousand square feet of casino space, plus a minimum annual casino win tax of $4.3 million on all gaming win up to $20 million, 12.5% on all gaming win between $20 million and $120 million and 10% on all gaming win in excess of $120 million. Additionally, during the first 11 years 98 following completion of the Paradise Island Expansion, the Bahamian Government will allow Sun to reduce the annual casino license fees by $5 million and to reduce by 45% the win tax to be paid on gaming win between $20 million and $120 million. STAMP TAX AND IMPORT DUTY The New Heads of Agreement provides for an exemption of Sun from stamp tax and import duty on much of the material and equipment which will be required for the Paradise Island Expansion. JOINT MARKETING ARRANGEMENTS As part of the New Heads of Agreement, the Bahamian Government will extend, until the year 2003, certain joint marketing arrangements with Sun pursuant to which, among other things, Sun is eligible to receive matching funds of up to $4 million annually from the Bahamian Government for marketing and promotional activities, subject to an eight-year total of $20 million. INFRASTRUCTURE The New Heads of Agreement includes several important government commitments to improve the infrastructure of Paradise Island and New Providence Island. These commitments include improving road access and other transportation facilities used by visitors to Paradise Island and New Providence Island as well as installation of a telecommunications cable from Florida to The Bahamas through a joint venture with AT&T Corp. CERTAIN MATTERS AFFECTING THE MOHEGAN SUN CASINO THE MOHEGAN TRIBE The Mohegan Tribe is a federally recognized Native American Indian tribe with approximately 1,100 members, whose federal recognition became effective May 15, 1994. In May 1994, the Mohegan Tribe and the State of Connecticut entered into a gaming compact to authorize and regulate Class III gaming operations (slot machines and table games). TCA managed the development and construction and manages the operation and marketing of the Mohegan Sun Casino. TCA MANAGEMENT AGREEMENT The Mohegan Tribe and TCA have entered into the TCA Management Agreement pursuant to which the Mohegan Tribe has engaged TCA to develop, operate, manage and maintain the Mohegan Sun Casino in exchange for an annual fee which is calculated in three tiers based upon net revenues (as defined) set forth below (in thousands):
III ------------ II ANNUAL FEE I ------------------ FROM ------------ ANNUAL FEE FROM TIERS I & II 40% OF TIER I PLUS 30% OF NET REVENUES PLUS 35% OF NET NET REVENUES UP TO REVENUES BETWEEN ABOVE ------------ ------------------ ------------ Year 1........................................................... $ 50,546 $ 50,547-63,183 $ 63,183 Year 2........................................................... 73,115 73,116-91,394 91,394 Year 3........................................................... 91,798 91,799-114,747 114,747 Year 4........................................................... 95,693 95,694-119,616 119,616 Year 5........................................................... 104,107 104,108-130,134 130,134 Year 6 (subject to Buyout Option)................................ 114,335 114,336-142,919 142,919 Year 7 (subject to Buyout Option)................................ 130,944 130,945-163,680 163,680
99 MANAGEMENT FEES. The monthly management fee payments to TCA are calculated against 1/12th of targeted annual net revenue amounts set forth in the TCA Management Agreement and then adjusted to actual net revenue amounts realized annually within 60 days of the close of each fiscal year. The annual adjustment may or may not have a material effect on cash flow. In addition, TCA will be required to establish, and, together with the Mohegan Tribe, make monthly contributions to, a replacement reserve fund, which may be used to pay any approved budgeted capital expenditures for the Mohegan Sun Casino. The annual TCA contribution to such fund will total $1.2 million. TERM. The term of the TCA Management Agreement is seven years from the date of the opening of the Mohegan Sun Casino, subject to a one-time option for a buy-out by the Mohegan Tribe on the last day of the 60th month following the first full month of operations (the "Buyout Option"). In order to exercise the Buyout Option, the Mohegan Tribe must fulfill certain obligations, including: (i) fully paying and satisfying certain outstanding indebtedness, including all indebtedness under the Mohegan Senior Notes, the Secured Completion Guarantee Notes and the Subordinated Notes and (ii) entering into discussion with TCA to determine the exercise price of the Buyout Option on commercially reasonable terms. PRIORITY PAYMENTS. In connection with its supplying certain operational and financial support to TCA, Sun will receive priority payments of $10 million from the TCA management fee. In addition, in exchange for providing capital to the Mohegan Gaming Authority, each of the partners of TCA will be receiving a priority payment from TCA equal to 11.5% per annum of its investment in the Subordinated Notes so long as they are outstanding. Sun will also receive a priority payment of approximately 16.5% per annum of its investments in the Secured Completion Guarantee Notes so long as they are outstanding. Each of these priority payments will be paid from TCA's management fees prior to the PRO RATA distribution to TCA's partners of TCA's profits. BUSINESS BOARD. Pursuant to the TCA Management Agreement, certain decision-making authority and oversight duties are delegated to a committee comprised of an equal number of representatives of the Mohegan Tribe and of TCA (the "Business Board"). Actions by the Business Board require the unanimous approval of its members or their respective designees. The Mohegan Tribe and TCA have agreed that, in the event that the Business Board is unable to reach a mutual decision or compromise, any disputes will be submitted to summary arbitration before a single arbitrator, who will render a decision within 48 hours of submission of the dispute. WAIVER OF SOVEREIGN IMMUNITY. Pursuant to the TCA Management Agreement, the Mohegan Tribe has waived sovereign immunity for the purpose of permitting, compelling or enforcing arbitration and has agreed to be sued by TCA in any court of competent jurisdiction for the purpose of compelling arbitration or enforcing any arbitration or judicial award arising out of the TCA Management Agreement, the Secured Completion Guarantee, the Secured Completion Guarantee Notes and the Subordinated Notes. The parties have agreed that all disputes and claims arising out of the TCA Management Agreement or the Mohegan Tribe's gaming ordinance will be submitted to binding arbitration, which shall be the sole remedy of the parties, and that punitive damages may not be awarded to either party by any arbitrator. The Mohegan Tribe's waiver of sovereign immunity is limited to enforcement of money damages from undistributed or future net revenues of the Mohegan Sun Casino (or, under certain conditions, net revenues of other gaming operations of the Mohegan Tribe). Funds earned and paid to the Mohegan Tribe as the Mohegan Tribe's share of net revenues prior to any judgment or award are not subject to the waiver and would not be available for levy pursuant to any judgment or award. GAMING DISPUTES COURT. The Mohegan Tribe's Constitution (the "Mohegan Constitution") provides for the governance of the Mohegan Tribe by a tribal council, in which the legislative and executive powers of the Mohegan Tribe are vested, and a constitutional review board. On July 20, 1995, the tribal council enacted a tribal ordinance creating the Gaming Disputes Court (the "Court"), which is composed of a trial and an appellate branch. The Mohegan Constitution and the tribal ordinance establishing the Court give the Court exclusive jurisdiction for the Mohegan Tribe over all disputes and controversies related to 100 gaming between any person or entity and the Mohegan Gaming Authority, the Mohegan Tribe or TCA. The Court has been authorized by the Mohegan Constitution to consist of at least four judges, none of whom may be members of the Mohegan Tribe and each of whom must be either a retired federal judge or Connecticut Attorney Trial Referee (who is an attorney appointed by the Connecticut Supreme Court). REVOLVING CREDIT FACILITY Under the Revolving Credit Facility between Sun Bahamas (as borrower), Sun and certain subsidiaries of Sun Bahamas (as guarantors), Standard Bank London, Limited, Absa Bank Limited, Nedcor Bank Limited and Henry Ansabacher & Co. Limited (as lenders) and The Bank of Nova Scotia and The Royal Bank of Scotland plc (as managing agents and lenders), the lenders have committed to provide revolving loans of up to $250 million; PROVIDED that as more fully set forth below, various borrowing conditions and covenant restrictions in the Revolving Credit Facility may limit Sun Bahamas' ability to borrow under the Revolving Credit Facility. The proceeds of loans made under the Revolving Credit Facility may be used by Sun Bahamas, Sun and the Restricted Subsidiaries (as defined below) (i) for the Paradise Island Expansion, (ii) for general corporate purposes and (iii) to make Permitted Investments (as defined below). The Restricted Subsidiaries include the existing direct and indirect subsidiaries of Sun, other than (i) Sun Bahamas, (ii) the subsidiary which holds the Pirate's Cove Hotel and (iii) Sub. The subsidiaries which will hold the Atlantic City assets of GGE will not be Restricted Subsidiaries. Future subsidiaries may be Restricted Subsidiaries or unrestricted subsidiaries, at Sun's election. The Revolving Credit Facility is guaranteed by Sun and each of the Restricted Subsidiaries, and is secured by substantially all the assets of Sun Bahamas and each of the guarantors. Loans under the Revolving Credit Facility bear interest at a rate per annum equal to either (i) the higher of (a) The Bank of Nova Scotia's base rate or (b) the Federal Funds rate plus one half of one percent plus (in either case) a margin of 1.50% per annum or (ii) The Bank of Nova Scotia's reserve-adjusted LIBO rate plus a margin of 2.25% per annum. The margins set forth in the preceding sentence are subject to reduction in certain circumstances based upon levels of operating cash flow and total debt. Loans under the Revolving Credit Facility may be prepaid and reborrowed at any time and from time to time, and are due in full on October 15, 2001. The lenders' commitments to make loans under the Revolving Credit Facility are subject to customary conditions precedent, including ongoing compliance with financial and other covenants, no material adverse changes in the financial condition, operations, assets, business or properties of Sun, Sun Bahamas and the Restricted Subsidiaries (taken as a whole) and (during the completion of the Paradise Island Expansion) ongoing performance of the construction in accordance with the applicable plans and specifications, construction budget and construction schedule. Certain additional conditions to borrowing (described below) apply when the amount of loans outstanding will first be greater than (i) the Allowed Amount (as defined below) and (ii) 150% of the Allowed Amount. The Revolving Credit Facility contains customary covenants restricting the freedom of operations of Sun and its subsidiaries, including (i) maintenance of specified insurance coverage, (ii) an obligation to promptly notify the managing agents if Sun Bahamas becomes aware that the Paradise Island Expansion is not proceeding according to schedule, (iii) prohibitions on other indebtedness of Sun, Sun Bahamas and the Restricted Subsidiaries, (iv) prohibitions on the creation of liens upon any properties, revenues or assets of Sun, Sun Bahamas and the Restricted Subsidiaries, (v) prohibitions on dividends and similar distributions in excess of an amount equal to 10% of the previous years' consolidated net income of Sun for any fiscal quarter (subject to a cap for any fiscal year of 33% of such previous years' consolidated net income), (vi) restrictions on capital expenditures by Sun, Sun Bahamas and its Restricted Subsidiaries in any fiscal year, (vii) prohibitions on transactions with affiliates unless such transactions are fair and equitable to Sun, Sun Bahamas and the Restricted Subsidiaries and would be entered into by a prudent person, (viii) prohibitions on the sale, transfer, lease, contribution or conveyance of any assets of Sun, Sun Bahamas or the Restricted Subsidiaries in excess of $10 million in any fiscal year, or $35 million in 101 aggregate during the term of the Revolving Credit Facility, and (ix) prohibitions during the completion of the Paradise Island Expansion on change orders in excess of $15 million (or which will affect the construction schedule by more than 3 months or significantly affect the nature, scope or quality of the Paradise Island Expansion) without the prior written approval of the required lenders. In addition, the Revolving Credit Facility contains the following financial covenants: (i) minimum Borrower EBITDA (as defined, but generally meaning earnings of Sun Bahamas and its subsidiaries before interest expense, income taxes, depreciation and amortization), tested on a rolling four quarter basis, (ii) minimum Consolidated EBITDA (as defined, but generally meaning earnings of Sun and its subsidiaries before interest expense, income taxes, depreciation and amortization), tested on a rolling four quarter basis, (iii) a minimum ratio of Consolidated EBITDA to consolidated interest expense of Sun, (iv) minimum net worth for Sun and its subsidiaries, (v) a minimum ratio of total debt of Sun, Sun Bahamas and the Restricted Subsidiaries to Unconsolidated EBITDA (as defined, but generally meaning earnings of Sun, Sun Bahamas and the Restricted Subsidiaries before interest expense, income taxes, depreciation and amortization, tested on a rolling four quarter basis) equal to 4.5 to 1 initially and reducing to 3.5 to 1 on the earlier of November 1, 1999 or one year after the completion of the Paradise Island Expansion (and reducing to 3.0 to 1 one year thereafter) and (vi) a minimum ratio of senior debt to Unconsolidated EBITDA (the same ratio set forth in clause (v) above except subordinated debt is excluded) equal to 4.0 to 1 initially and reducing to 3.0 to 1 and 2.0 to 1 at the times set forth in clause (v) above, respectively. The following additional conditions to borrowing are applicable the first time a borrowing results in the amount of loans outstanding under the Revolving Credit Facility exceeding $100 million (subject to an increase to $125 million if Consolidated EBITDA for 1996 exceeds $43 million) (such $100 million, as adjusted to $125 million, if applicable, is the "Allowed Amount"): (i) a performance bond for a portion of the construction contract costs for the Paradise Island Expansion must have been obtained, (ii) a bringdown endorsement to the title policy for the Paradise Island properties must have been obtained and (iii) an amount at least equal to 150% of the Allowed Amount must have been spent towards the Paradise Island Expansion (and Sun and its subsidiaries must have funded from sources other than borrowings under the Revolving Credit Facility at least 50% of the Allowed Amount towards the Paradise Island Expansion plus all amounts by which the construction budget for the Paradise Island Expansion exceeds $300 million (offset by amounts, if any, by which the Permitted Investment Amount described below is reduced by Sun Bahamas to offset such additional budgeted amounts prior to its having then paid such additional budgeted costs towards the Paradise Island Expansion or for purposes of allowing for more Permitted Investments as described below)). In order for the aggregate borrowings under the Revolving Credit Facility to first exceed 150% of the Allowed Amount, a further $75 million must have been spent on the Paradise Island Expansion and, as modified to give effect to the additional expenditures towards the Paradise Island Expansion, the additional conditions described in the preceding sentence must again be satisfied. The Revolving Credit Facility also requires that Sun, Sun Bahamas and the Restricted Subsidiaries (i) not make or guarantee loans or advances to or of third parties or unrestricted subsidiaries of Sun and (ii) not acquire any securities, ownership or similar interest in any third parties or unrestricted subsidiaries of Sun or (iii) not acquire any additional real property or improvements, other than "Permitted Investments" that consist of the foregoing (but limited to advances and investments in entities engaged in the hotel, resort or gaming industries) in an amount which prior to the completion of the Paradise Island Expansion shall not exceed the "Permitted Investment Amount". The Permitted Investment Amount is initially $100 million, subject to increase to $130 million if Consolidated EBITDA for 1996 exceeds $43 million. The Permitted Investment Amount is reduced by (i) amounts guaranteed by Sun for its unrestricted subsidiaries or third parties, (ii) debt (including capitalized lease obligations) and deferred payments under conditional sales or other similar title retention agreements that are recourse to Sun, Sun Bahamas or any Restricted Subsidiary and that are incurred after June 28, 1996, (iii) advances made under the Secured Completion Guaranty; in connection with the construction of the Mohegan Sun Casino and (iv) amounts by which the construction budget for the Paradise Island Expansion exceeds $300 million (but 102 only to the extent that Sun and its subsidiaries have not then paid costs towards completing the Paradise Island Expansion equal to such excess amount); and the Permitted Investment Amount is increased by (i) repayments to Sun of the Subordinated Notes and the Secured Completion Guarantee Notes, (ii) the net proceeds received by Sun as a result of its issuance of equity or subordinated debt securities, and (iii) amounts distributed to Sun by unrestricted subsidiaries. It is currently anticipated that this covenant restricting Permitted Investments will prevent Sun Bahamas from borrowing under the Revolving Credit Facility (if Sun's current investment plans are consummated) until such time as the Permitted Investment Amount is increased by at least $20 million as provided above or Sun and its Subsidiaries have paid at least $20 million towards the Paradise Island Expansion; however, Sun believes that even with such limitation, sufficient cash resources will be available to fund such required expenditures and other cash requirements currently anticipated (without borrowing under the Revolving Credit Facility). 103 MANAGEMENT OF SUN The current directors of Sun are:
DIRECTOR NAME COUNTRY OF CITIZENSHIP SINCE - ----------------------------------------- ----------------------------------------- ----------- Derek Hawton............................. South Africa 1993 Solomon Kerzner.......................... South Africa 1993 Peter Buckley............................ United Kingdom 1994 Howard Marks............................. United States 1994 Eric Siegel.............................. United States 1994
Pursuant to the Sun Charter, the maximum number of directors of Sun is fixed at five. The current directors of Sun will hold office until the date of the annual general meeting to be held in 1997. At the annual general meeting to be held in 1997, and at each subsequent annual general meeting, directors will be appointed by resolution of the holders of Ordinary Shares to hold office until the date of the next annual general meeting. The current executive officers of Sun are:
EXECUTIVE OFFICER NAME AGE SINCE - ------------------------------------------------------------------------------------------------- --- ----------- Solomon Kerzner Chairman and Chief Executive Officer........................................................... 61 1993 Howard B. Kerzner President...................................................................................... 32 1995 Charles D. Adamo Executive Vice President--General Counsel...................................................... 36 1995 John R. Allison Executive Vice President--Chief Financial Officer.............................................. 50 1994 Kevin DeSanctis Chief Operating Officer--North America & Caribbean............................................. 43 1995 William C. Katz Executive Vice President--Project Development.................................................. 44 1995 Peter J. Venison Chief Operating Officer--Europe & Indian Ocean................................................. 53 1995
The backgrounds of each of the directors and the executive officers of Sun are described below: Solomon Kerzner, 61--Chairman and Chief Executive Officer. Mr. Kerzner has been the Chairman and Chief Executive Officer of Sun since October 1993 and from October 1993 to June 1996, was President. Mr. Kerzner is the Chairman of SIIL, Sun's controlling shareholder, and of WLG, which owns an indirect interest in SIIL. Mr. Kerzner is one of the visionary leaders of the resort and gaming industries. Prior to founding Sun, Mr. Kerzner pioneered the concept of an entertainment and gaming destination resort designed and managed to appeal to multiple market segments by developing Sun City. Located approximately 100 miles northwest of Johannesburg, South Africa, Sun City has been expanded in phases since its opening in 1979. The resort has been designed to cater to a broad public market by combining gaming with a wide variety of nongaming entertainment experiences. Today, Sun City covers approximately 620 acres and attracts over two million visitors annually. The facilities at Sun City include: four hotels with approximately 1,300 rooms, an entertainment center that includes a 6,000-seat indoor superbowl, a 46-acre man-made lake for watersports and approximately 55,000 square feet of gaming space. In 1992, Sun City was expanded to include The Lost City, a $275 million themed resort which recreates a forgotten African civilization that has been rediscovered. The Lost City covers approximately 60 acres and its center includes 104 The Palace, a 350-room luxury hotel. The resort also includes a man-made jungle in which over one million trees were transplanted and the Valley of the Waves, which includes a wave pool, adventure rides and sand beaches. During Mr. Kerzner's 30-year career he has been responsible for the development of 21 hotels with over 5,500 rooms, and was the founder of the largest hotel chain in southern Africa. Sun does not have any interest in any of the southern African properties developed by Mr. Kerzner. Howard B. Kerzner, 32--President. Mr. Kerzner joined Sun in May 1995 as Executive Vice President--Corporate Development and has been President of Sun since June 1996. Prior to that time, he was Director--Corporate Development of SIIL from September 1992. Previously Mr. Kerzner was an Associate of Lazard Freres & Co. LLC from September 1991. Prior to that Mr. Kerzner worked for the First Boston Corporation. Mr. Kerzner is the son of Mr. Solomon Kerzner. Charles D. Adamo, 36--Executive Vice President--General Counsel. Mr. Adamo joined Sun in May 1995 as General Counsel. Prior to that time, he was Group Legal Advisor of SIIL from September 1994. Previously, Mr. Adamo was engaged in the practice of law at the firm of Cravath, Swaine & Moore in New York from 1986. Mr. Adamo is admitted to the bar in the State of New York. John R. Allison, 50--Executive Vice President--Chief Financial Officer. Mr. Allison joined Sun in May 1995 as Chief Financial Officer. Mr. Allison joined SIIL in March 1994 as Group Financial Director. From December 1987 until February 1994, Mr. Allison was Chief Financial Officer--South African Operations of Sun International Inc. ("SII"), a resort and management holding company with interests in approximately 27 hotels in southern Africa. Prior to that time, he was the Group Financial Director of Kimberly-Clark (South Africa) Limited for four years. He is a fellow of the Institute of Chartered Accountants in England and Wales and a member of the South African Institute of Chartered Accountants. Peter Buckley, 53--Director. Mr. Buckley has been a Director of Sun since April 1994. Mr. Buckley is Chairman and Chief Executive Officer of Caledonia. In 1994 he was appointed Chairman of Caledonia having been Deputy Chairman and Chief Executive since 1987. He is also Chairman of Amber Holdings PLC and Sterling Industries PLC--both listed companies associated with Caledonia--as well as being Chairman of British Air Transport (Holdings) Ltd., English & Scottish Investors plc and Bristow Helicopter Group Limited. He is a Non-executive Director of Close Brothers Group plc, Exco plc, RHS Enterprises Ltd., Societe Generale de Surveillance Holding S.A.--Geneva, SIIL and the Telegraph plc. Kevin DeSanctis, 43--Chief Operating Officer--North America & Caribbean. Mr. DeSanctis joined Sun in July 1995 as President, Gaming. Prior to joining Sun, Mr. DeSanctis served as Executive Vice President and Chief Operating Officer of Hemmeter Enterprises since April 1994. From 1991 to 1994, Mr. DeSanctis served as President and Chief Operating Officer of the Trump Plaza Hotel and Casino. From August 1989 to February 1991, Mr. DeSanctis served as Vice President of Casino Operations of The Mirage Hotel and Casino in Las Vegas, Nevada. Prior to August 1989, Mr. DeSanctis served in various positions in the casino industry. D.A. Hawton, 58--Director. Mr. Hawton has been a Director of Sun since December 1993. Mr. Hawton is Executive Chairman of Safren (among South Africa's 25 largest industrial groups employing 30,000 people). He is also Director of South African Mutual Life Assurance (South Africa's largest insurance company with assets in excess of $40 billion) and Director of Standard Bank Investment Corporation (South Africa's largest banking group). Mr. Hawton is a fellow of South Africa's chartered Institute of Secretaries. William C. Katz, 44--Executive Vice President--Project Development. Mr. Katz joined Sun in May 1995 as Executive Vice President--Project Development. Prior to that time, he was Vice President-- Project Development, Americas & Caribbean, of SIIL from September 1994. From 1993 to September 1994, Mr. Katz was Operations Manager for Beauchamp Construction Company, Coral Gables, Florida. From 1991 to 1993, Mr. Katz was Project Executive for Morse Diesel International, Fort 105 Lauderdale, Florida. From 1989 to 1991, Mr. Katz was Project Executive for Stolte, Inc., Miami, Florida. Mr. Katz is a licensed general contractor in the State of Florida. Howard Marks, 50--Director. Mr. Marks has been a Director of Sun since April 1994. Mr. Marks is Chairman of Oaktree Capital Management, LLC ("Oaktree Capital"). Oaktree Capital manages funds in excess of $5 billion for institutional investors. Previously, Mr. Marks was employed by The TCW Group, Inc. where he became Chief Investment Officer for Domestic Fixed Income and President of its largest affiliate, TCW Asset Management Company. Mr. Marks is a Director of New World Communications Group. Eric Siegel, 38--Director. Mr. Siegel has been a Director of Sun since April 1994. Mr. Siegel is a Principal of Pegasus Insurance Partners and a Limited Partner of Apollo Advisors, L.P. ("Apollo")/Lion Advisors, L.P. Apollo invests in debt and equity securities and other instruments of public and private companies. Mr. Siegel is also a Director and member of the executive committee of El Paso Electric Company, a publicly traded utility company. Peter J. Venison, 53--Chief Operating Officer-- Europe & Indian Ocean. Mr. Venison joined Sun in May 1995 as Executive Vice President and President, Europe & Indian Ocean. Prior to that time, he was a Managing Director of SII from May 1990. Before joining SII, Mr. Venison was President of Treadev Limited, a resort development company. STOCK OPTION PLANS. Sun has adopted the Sun Stock Option Plan which was approved by the shareholders at the annual general meeting held in 1995. The Plan provides for options to be granted to purchase up to 2,000,000 Ordinary Shares, of which options to acquire 1,659,346 Ordinary Shares at exercise prices ranging from $11.6875 to $50.00 have been granted. The Plan also provides for the options to become exercisable, unless otherwise specified by the Board of Directors and subject to certain acceleration and termination provisions, after two years from the date of grant in respect of 20% of such options and thereafter in installments of 20% per year over a five-year period. The options will have a term of 10 years from the date of grant. Employees, officers and directors of Sun and subsidiaries of Sun may be granted options under the Plan. Such options may be transferred to trusts with respect to which any such participants are beneficiaries and corporations or other entities controlled by such participants. COMPENSATION OF OFFICERS AND DIRECTORS. The total compensation paid to all officers and directors of Sun as a group for the year ended December 31, 1995, was $3,449,747.00. 106 PRINCIPAL SHAREHOLDER OF SUN
CLASS OF SHARES OWNER AMOUNT OWNED PERCENT OF CLASS - ------------------------------------------------- --------------------------- -------------- ---------------- Ordinary Shares.................................. SIIL 16,112,380 55% Directors and Officers as a Ordinary Shares.................................. group -- less than 1%
SIIL, through its control of approximately 55% of the outstanding Ordinary Shares as of October 28, 1996 (approximately 48% assuming consummation of the Merger at a Conversion Number of .4324), controls Sun. WLG, a company owned by a trust for the family of Mr. Solomon Kerzner, Chairman of the Board of Directors and Chief Executive Officer of Sun, indirectly owns through intermediate entities approximately one-third of the outstanding Ordinary Shares of SIIL. Peter Buckley, a director of Sun and SIIL, is also Chairman and Chief Executive Officer of Caledonia, an English corporation, which indirectly owns through intermediate entities approximately one-third of the outstanding Ordinary Shares of SIIL. Derek Hawton, a director of Sun and SIIL, is also Chairman and Chief Executive Officer of Safren, a South African corporation, which indirectly controls through intermediate entities approximately one-third of the outstanding Ordinary Shares of SIIL. Ownership participation in SIIL is governed by a Subscription and Shareholders' Agreement. Rosegrove Limited ("Rosegrove") owns approximately two-thirds of the outstanding equity of SIIL and World Leisure Investments Limited, a Bermuda corporation ("WLI"), owns the remaining shares. WLI is owned by WLG, which is owned by a trust for the benefit of the Kerzner family. Rosegrove is owned indirectly and equally by Safren and Caledonia. Caledonia is a diversified trading and investment company listed on the London Stock Exchange. Safren is an industrial conglomerate whose interests span shipping, warehousing, travel services, casino resorts and retailing. Safren is listed on the Johannesburg Stock Exchange. Currently, the officers and directors of Sun, as a group, hold options granted pursuant to the Sun Stock Option Plan to acquire 1,088,205 Ordinary Shares, 49,732 of which were exercisable as of the date of this Proxy Statement/Prospectus. 107 BUSINESS OF GGE GENERAL GGE is a holding company which, through RIH, its indirect wholly owned subsidiary, is principally engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic City, New Jersey. GGE was known as Resorts International, Inc. until its name change, which was effective June 30, 1995. In Atlantic City, GGE owns and operates the Resorts Casino Hotel, which has approximately 660 guest rooms, a 70,000 square foot casino, an 8,000 square foot simulcast parimutuel betting and poker area and related facilities, located on the Boardwalk. Approximately 10 acres of Boardwalk property owned by GGE is leased to ACS under the Showboat Lease, a 99-year net lease expiring in 2082. All lease payments due under the Showboat Lease directly service GGE's interest obligations under the Showboat Notes. The leased acreage is the site of the Showboat, which is operated by ACS. GGE also owns approximately 7.7 acres in the South Inlet area and other real estate in the Atlantic City area, most of which is vacant land. Casino operations in Atlantic City are conducted under a casino license which is subject to periodic review and renewal by action of the NJCC. GGE's current license was renewed in January 1996 through January 31, 2000, subject to a financial stability review midway through the license period. In April 1994 the GGE Restructuring was confirmed by the United States Bankruptcy Court for the District of Delaware and on May 3, 1994 the GGE Restructuring became effective. GGE's reorganization under the GGE Restructuring included, among other things, (i) the sale of GGE's Paradise Island operations and properties and (ii) the exchange of $481,907,000 principal amount of public indebtedness for $160,000,000 principal amount of new debt securities, 40% of the GGE Common Stock, the proceeds from the sale of the Paradise Island operations and approximately $36,700,000 cash. The Paradise Island assets disposed of were sold to Sun. See "BUSINESS OF SUN--The Properties and Current Expansion Projects--The Bahamas" and "SUMMARY--Griffin Gaming & Entertainment, Inc.--Notes to Selected Consolidated Historical Financial Data." THE PROPERTIES AND CURRENT EXPANSION PROJECT RESORTS CASINO HOTEL The Resorts Casino Hotel in Atlantic City, New Jersey commenced operations in May 1978 and was the first casino/hotel opened in Atlantic City. This was accomplished by the conversion of the former Haddon Hall Hotel, a classic hotel structure originally built in the early 1900's, into a casino/hotel. It is situated on approximately seven acres of land with approximately 310 feet of Boardwalk frontage overlooking the Atlantic Ocean. The Resorts Casino Hotel consists of two hotel towers, the 15-story East Tower and the nine-story North Tower. In addition to the casino facilities described below, the casino/hotel complex includes approximately 660 guest rooms and suites, the 1,400-seat Superstar Theater, seven restaurants, one cocktail lounge, a VIP slot and table player lounge, an indoor swimming pool and health club, and retail stores. The complex also has approximately 50,000 square feet of convention facilities, including eight large meeting rooms and a 16,000 square foot ballroom. The Resorts Casino Hotel has a 70,000 square foot casino and a simulcast parimutuel betting and poker area of approximately 8,000 square feet. In August 1996, these gaming areas contained 41 blackjack tables, 18 poker tables, 11 roulette tables, 10 dice tables, 8 Caribbean stud poker tables, 4 baccarat tables, 2 let it ride poker tables, 2 three card poker tables, 2 pai gow poker tables, 2 big six wheels, one sic bo table, 2,351 slot machines, and five betting windows and four customer-operated terminals for simulcast parimutuel betting. Also included in the simulcast area is a keno lounge which has two keno cashier windows. There are also two keno windows in the bus waiting area and one on the casino floor. In 1995 GGE purchased the Chalfonte Site, a 4.4 acre tract on the Boardwalk adjacent to the Resorts Casino Hotel, on which it planned to construct up to 700 new hotel rooms, 70,000 square feet of casino space and a 2,000 space parking garage and transportation center. Subject to the receipt of regulatory approvals, GGE planned to break ground in the fall of 1996 on the infrastructure necessary to support the 108 full expansion. The first phase of construction was expected to consist of 500 new hotel rooms, 50,000 square feet of casino space and the new garage. Construction costs for this phase were estimated at approximately $200 million. GGE also recently entered into a five year lease with an option to purchase approximately 3 acres to the north of the Resorts Casino Hotel, purchased an adjacent parcel and was successful in vacating the portion of North Carolina Avenue that lies between the Chalfonte Site and the Resorts Casino Hotel. These parcels, together with the Chalfonte Site, total more than 9 acres, all of which would play a role in GGE's expansion plans. Although the Merger Agreement limits the amount of capital expenditures that GGE can make on this project prior to consummation of the Merger or termination of the Merger Agreement, GGE is continuing with the process of obtaining permits and limited design activities. Sun has advised GGE that if and when the Merger is consummated, Sun expects to proceed with development of the Chalfonte Site, although it might reconsider the type of facility to be developed. Casino gaming in Atlantic City is highly competitive and is strictly regulated under the NJCCA and regulations promulgated thereunder which affect virtually all aspects of GGE's Atlantic City casino operations. See "--Competition" and "--Certain Matters Affecting GGE's Operations--Regulation and Gaming Taxes and Fees" below. SHOWBOAT LEASE The Showboat is situated on approximately 10 acres which are owned by GGE and leased to ACS pursuant to the Showboat Lease, a 99-year net lease dated October 26, 1983, as amended. The Showboat Lease provides for an initial annual rental, which commenced in March 1987, of $6,340,000, subject to annual adjustment based upon changes in the consumer price index. The annual rental is $8,805,000 for the 1996 lease year. Showboat Notes are secured and serviced by the Showboat Lease, and all lease payments are made to the Indenture Trustee for the Showboat Notes to meet GGE's interest obligations under those notes. OTHER PROPERTIES GGE owns various non-operating sites, approximating 37 acres, and has a lease with an option to purchase approximately 3 acres in Atlantic City that could be developed. Included in these parcels are the 9 acres adjacent to Resorts Casino Hotel and the 2 acre Steeplechase Pier site, both of which GGE intends to develop. GGE also owns in fee an approximately 552 acre parcel located in Atlantic City on Blackhorse Pike, of which approximately 545 acres are considered to be woodlands and wetlands, which may not be developed. GGE also owns in fee various individual parcels of property located in the area of Atlantic City known as the South Inlet which in the aggregate constitute approximately 7.7 acres and a parcel of land in Atlantic City consisting of approximately six acres and a warehouse thereon. GGE is the owner of various additional properties at scattered sites in Atlantic City. Principal among these is the so-called "Trans Expo" site, a 2.3 acre parcel located near the site of the new convention center. COMPETITION See "RISK FACTORS--Risk Factors Related to GGE" for a discussion of competition in Atlantic City. CERTAIN MATTERS AFFECTING GGE'S OPERATIONS NEW CONVENTION CENTER AND CASINO/HOTEL EXPANSION In January 1992, the State of New Jersey enacted legislation that authorized a financing plan for the construction of a new convention center to be located on a 30-acre site next to the Atlantic City train station at the base of the Atlantic City Expressway. GGE understands that the new convention center will have 500,000 square feet of exhibit space and an additional 109,000 square feet of meeting rooms. Construction of the new convention center began in early 1993 and it is scheduled to be completed in the spring of 1997. 109 The convention center is part of a broader plan that includes an additional expansion of the Atlantic City International Airport, the transformation of the main entryway into Atlantic City into a new corridor, and the construction of a new 500 room convention hotel. Officials have commented upon the need for improved commercial air service into Atlantic City as a factor in the success of the proposed convention center. The corridor will link the new convention center and hotel with the Boardwalk. In all, six blocks are to be transformed into an expansive park with extensive landscaping, night-time lighting, a large fountain and pool with an 86-foot lighthouse. It is believed that additional hotel rooms are necessary to support the convention center as well as to allow Atlantic City to become a competitive destination resort. Thus, in addition to the 500 room convention hotel, to further spur construction of new hotel rooms and renovation of substandard hotel rooms into deluxe accommodations, up to a total of $100 million has been set aside by the Casino Reinvestment Development Authority (the "CRDA"), a public authority created under the NJCCA, to aid in financing such projects. To date, the CRDA has approved the expansion projects submitted by eight casino/hotels which are to receive CRDA financing totaling the $100 million set aside, and could result in the construction of approximately 4,000 hotel rooms. Recently, an additional $75 million was set aside to provide further incentive for additional hotel rooms. Also, Mirage Resorts, Inc., a Las Vegas, Nevada casino/hotel company, has been selected to be the developer of an approximately 180 acre tract in the Marina area of Atlantic City. Mirage Resorts, Inc. proposes to build a $500 million, 2,000 room casino/ hotel, Boyd Gaming Corp. proposes to build a $500 million, 1,000 room casino/hotel and Circus Circus Enterprises, Inc. proposes to build a $600 million, 2,000 room casino/hotel on that tract. GGE understands that negotiations regarding financing costs of certain infrastructure improvements needed to develop that tract are ongoing between the state of New Jersey and Mirage Resorts, Inc. Plans for the construction of two other new casino/hotels in Atlantic City have also been announced. Although these developments are viewed as positive and favorable to the future prospects of the Atlantic City gaming industry, GGE, at this point, can make no representations as to whether, or to what extent, its results may be affected by the completion of the new convention center, the airport expansion projects and the proposed increase in number of hotel rooms in the area. MARKETING GGE continues to take advantage of the celebrity status of Merv Griffin, who is actively engaged in the marketing of the Resorts Casino Hotel. Mr. Griffin, who is Chairman of the Board of GGE, is featured in television commercials and in print advertisements. Mr. Griffin also appears live at the Resorts Casino Hotel in numerous entertainment events including the nationally televised "Merv Griffin's New Year's Eve Special" which has been produced live at the Resorts Casino Hotel each year since 1991. GGE's marketing strategy is designed to enhance the appeal of the Resorts Casino Hotel to the mid-and premium-level slot and table game players, although slot players have been, in recent years, the primary focus of GGE's marketing efforts. In 1993 GGE introduced the "cash-back" program, which rewards slot players with cash refunds or complimentaries based on their volume of play, and expanded and upgraded "Hollywood Hills," its high-limit slot area. This area was further expanded in late May 1995. In the fall of 1994, GGE increased its charter flight program to recapture lost market share in table win. The charter program was further expanded in 1995 to attract mid-level slot players. In the fall of 1994, GGE introduced the "Griffin Games," created by Merv Griffin, whereby slot players are chosen at random to participate in daily slot tournaments; daily tournament winners qualify to participate in a $100,000 "winners tournament." In January 1995 the "Griffin Games" were expanded to include patrons playing blackjack and in January 1996 they were further expanded to include roulette players. GGE also has a VIP slot and table player lounge, "Club Griffin," which serves complimentary food and beverages. GGE continues to emphasize entertainment as an integral part of its marketing program. The musical variety show "Funderful", created and produced by Merv Griffin, opened in September 1996 to excellent reviews. The entertainment schedule is supplemented on a monthly basis with headliners who to date in 110 1996 included, among others, Regis and Kathie Lee, Rosie O'Donnell, Tony Danza, Tom Jones and the Beach Boys. In addition to the above, GGE continues to rely heavily on its bus program to supply a critical mass of low- to mid-level slot players. SEASONAL FACTORS GGE's business activities are strongly affected by seasonal factors that influence the New Jersey beach tourist trade. Higher revenues and earnings are typically realized from GGE's Atlantic City operations during the middle third of the year. REGULATION AND GAMING TAXES AND FEES GENERAL. GGE's operations in Atlantic City are subject to regulation under the NJCCA, which authorizes the establishment of casinos in Atlantic City, provides for licensing, regulation and taxation of casinos and related persons and entities and created the NJCC and the Division of Gaming Enforcement to administer the NJCCA. In general, the provisions of the NJCCA concern: (i) the ability, reputation, character, financial stability and integrity of casino operators, their officers, directors and employees and others financially interested in or in control of a casino; (ii) the nature and suitability of hotel and casino facilities, operating methods and conditions; and (iii) financial and accounting practices. Gaming operations are subject to a number of restrictions relating to the rules of games, type of games permitted, credit play, size of hotel and casino operations, hours of operation, persons who may be employed and licensure of such persons, persons or entities that may do business with casinos, the maintenance of accounting and cash control procedures, security and other aspects of the business. CASINO LICENSE. A casino license is initially issued for a term of one year and must be renewed annually by action of the NJCC for the first two renewal periods succeeding the initial issuance of a casino license. Thereafter the NJCC may renew a casino license for a period of four years, although the NJCC may reopen licensing hearings at any time. A license is not transferable and may be conditioned, revoked or suspended at any time upon proper action by the NJCC. The NJCCA also requires an operations certificate which, in effect, has a term coextensive with that of a casino license. On February 26, 1979, the NJCC granted a casino license to RIH for the operation of GGE's Atlantic City casino. In January 1996, RIH's license was renewed until January 31, 2000. RIH's renewed license is subject to a financial stability review midway through the license period. In order for a casino license to be renewed, the licensee must show by clear and convincing evidence that it meets all of the criteria set out in the NJCCA, including the qualification of holding, intermediary and subsidiary companies of a casino licensee and of the directors, officers and certain employees of such companies. RESTRICTIONS ON OWNERSHIP OF SECURITIES. The NJCCA imposes certain restrictions upon the ownership of securities issued by a corporation which holds a casino license or is a holding, intermediary or subsidiary company of a corporate licensee (collectively, "holding company"). Among other restrictions, the sale, assignment, transfer, pledge or other disposition of any security issued by a corporation which holds a casino license is conditional and shall be ineffective if disapproved by the NJCC. If the NJCC finds that an individual owner or holder of any securities of a corporate licensee or its holding company must be qualified and is not qualified under the NJCCA, the NJCC has the right to propose any necessary remedial action. In the case of corporate holding companies and affiliates whose securities are publicly traded, the NJCC may require divestiture of the security held by any disqualified holder who is required to be qualified under the NJCCA. In the event that entities or persons required to be qualified refuse or fail to qualify and fail to divest themselves of such security interest, the NJCC has the right to take any necessary action, including the revocation or suspension of the casino license. If any security holder of the licensee or its holding company or affiliate who is required to be qualified is found disqualified, it will be unlawful for the security holder to (i) receive any dividends or interest upon any such securities, (ii) exercise, directly or through any trustee or nominee, any right conferred by such securities or (iii) receive any remuneration in any form from the 111 corporate licensee for services rendered or otherwise. The GGE Charter provides that all securities of GGE are held subject to the condition that if the holder thereof is found to be disqualified by the NJCC pursuant to provisions of the NJCCA, then that holder must dispose of his or her interest in the securities. REMEDIES UNDER THE NJCCA. In the event that it is determined that a licensee has violated, or fails to affirmatively prove that it meets all of the criteria of, the NJCCA, or if a security holder of the licensee required to be qualified is found disqualified but does not dispose of his securities in the licensee or holding company, under certain circumstances the licensee could be subject to fines or have its license suspended, conditioned or revoked. The NJCCA provides for the mandatory appointment of a conservator to operate the casino and hotel facility if a license is revoked or not renewed and permits the appointment of a conservator if a license is suspended for a period in excess of 120 days. If a conservator is appointed, the suspended or former licensee is entitled to a "fair rate of return out of net earnings, if any, during the period of the conservatorship, taking into consideration that which amounts to a fair rate of return in the casino or hotel industry." Under certain circumstances, upon the revocation of a license or failure to renew, the conservator, after approval by the NJCC and consultation with the former licensee, may sell, assign, convey or otherwise dispose of all of the property of the casino/hotel. In such cases, the former licensee is entitled to a summary review of such proposed sale by the NJCC and creditors of the former licensee and other parties in interest are entitled to prior written notice of sale. LICENSE FEES, TAXES AND INVESTMENT OBLIGATIONS. The NJCCA provides for casino license renewal fees and other fees based upon the cost of maintaining control and regulatory activities and various license fees for the various classes of employees. In addition, a casino licensee is subject annually to a tax of 8% of "gross revenue" (defined under the NJCCA as casino win, less provision for uncollectible accounts up to 4% of casino win) and license fees of $500 on each slot machine. Also, the NJCCA has been amended to create a new Atlantic City fund (the "AC Fund") for economic development projects other than the construction and renovation of casino/hotels. Beginning in fiscal year 1995/1996 and for the following three fiscal years, if the amount of money expended by the NJCC and the Division of Gaming Enforcement is less than $57,300,000, the prior year's budget for these agencies, the amount of the difference is to be contributed to the AC Fund. Thereafter, beginning with fiscal year 1999/2000 and for the following three fiscal years, an amount equal to the average paid into the AC Fund for the previous four fiscal years shall be contributed to the AC Fund. Each licensee's share of the amount to be contributed to the AC Fund is based upon its percentage of the total industry gross revenue for the relevant fiscal year. After eight years, the casino licensee's requirement to contribute to this fund ceases. The following table summarizes, for the periods shown, the fees, taxes and contributions assessed upon GGE by the NJCC.
FOR THE YEAR -------------------------------------------- 1993 1994 1995 ------------- -------------- ------------- Gaming tax......................................................... $ 19,545,000 $ 19,996,000 $ 21,402,000 License, investigation, inspection and other fees.................. 3,985,000 4,218,000 3,917,000 Contribution to AC Fund............................................ 224,000 ------------- -------------- ------------- $ 23,530,000 $ 24,214,000 $ 25,543,000 ------------- -------------- ------------- ------------- -------------- -------------
The NJCCA, as originally adopted, required a licensee to make investments equal to 2% of the licensee's gross revenue (the "investment obligation") for each calendar year, commencing in 1979, in which such gross revenue exceeded its "cumulative investments" (as defined in the NJCCA). A licensee had five years from the end of each calendar year to satisfy this investment obligation or become liable for an "alternative tax" in the same amount. In 1984 the New Jersey legislature amended the NJCCA so that these provisions now apply only to investment obligations for the years 1979 through 1983. Certain issues have been raised by the CRDA and the State of New Jersey Department of the Treasury (the "Treasury") concerning the satisfaction of investment obligations for the years 1979 through 1983 by GGE. These 112 matters were dormant for an extensive period of time until late 1995 when GGE was contacted by the CRDA. CRDA legal representatives have recently indicated that Treasury may take a position that GGE owes additional investment alternative taxes including interest and possibly penalties. If these issues are determined adversely, GGE could be required to pay the relevant amount in cash. Management of GGE intends to contest these issues and believes a negotiated settlement with an insignificant monetary cost to GGE is possible. Effective for 1984 and subsequent years, the amended NJCCA requires a licensee to satisfy its investment obligation by purchasing bonds to be issued by the CRDA or by making other investments authorized by the CRDA, in an amount equal to 1.25% of a licensee's gross revenue. If the investment obligation is not satisfied, then the licensee will be subject to an investment alternative tax of 2.5% of gross revenue. Licensees are required to make quarterly deposits with the CRDA against their current year investment obligations. GGE's investment obligations for the years 1995, 1994 and 1993 amounted to $3,348,000, $3,124,000, and $3,054,000, respectively, and, with the exception of a $127,000 credit received in 1995 for making a donation, have been satisfied by deposits made with the CRDA. At December 31, 1995, GGE held $5,567,000 face amount of bonds issued by the CRDA and had $18,197,000 on deposit with the CRDA. The CRDA bonds issued through 1995 have interest rates ranging from 3.9% to 7% and have repayment terms of between 20 and 50 years. LEGAL MATTERS The validity of the Ordinary Shares being offered hereby is being passed upon for Sun by Harry B. Sands and Company. Cravath, Swaine & Moore, counsel to Sun, and Gibson, Dunn & Crutcher LLP, counsel to GGE, have delivered opinions concerning certain Federal income tax consequences of the Merger. See "THE MERGER AGREEMENT--Conditions to the Obligations of Sun and Sub," "--Conditions to the Obligations of GGE" and "THE MERGER --Certain Federal Income Tax Consequences." EXPERTS The consolidated financial statements of Griffin Gaming & Entertainment, Inc. appearing in Griffin Gaming & Entertainment, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The combined financial statements of the PIRL Group, which consists of Sun Bahamas, consolidated with its subsidiaries, combined with the accounts of certain subsidiaries of Resorts International, incorporated by reference in Sun's Annual Report (Form 20-F) for the year ended December 31, 1995 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon incorporated by reference therein and incorporated herein and in the registration statement by reference. Such combined financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Sun International Hotels Limited included herein and incorporated by reference in this Proxy Statement/Prospectus, to the extent and for the periods indicated in the reports thereon, have been audited by Arthur Andersen, chartered accountants, and are incorporated by reference herein in reliance upon the authority of said firm as experts in giving said reports. The financial statements of the Mohegan Tribal Gaming Authority incorporated by reference herein, to the extent and for the period indicated in the reports thereon, have been audited by Arthur Andersen LLP and are incorporated herein by reference in reliance upon such report. 113 AMENDMENT dated as of October 10, 1996, to Agreement and Plan of Merger dated as of August 19, 1996 (the "Merger Agreement"), among Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Parent"), Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"). WHEREAS the respective Boards of Directors of Parent, Sub and the Company, and Parent acting as the sole stockholder of Sub, have previously approved the merger of the Company with and into Sub, upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS Parent, Sub and the Company desire to amend the Merger Agreement as set forth herein to provide for the merger of Sub with and into the Company; WHEREAS the respective Boards of Directors of Sub and the Company, and Parent acting as the sole stockholder of Sub, have approved the merger of Sub with and into the Company, upon the terms and subject to the conditions set forth in the Merger Agreement as amended hereby; NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties agree as follows: SECTION 1. AMENDMENTS. (a) The first paragraph of the preamble to the Merger Agreement is hereby amended and restated in its entirety to read as follows: "WHEREAS the respective Boards of Directors of Parent, Sub and the Company, and Parent acting as the sole stockholder of Sub, have approved the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby (i) each issued and outstanding share of Common Stock, par value $.01 per share, of the Company 2 ("Company Common Stock"), other than shares owned directly or indirectly by Parent or the Company, will be converted into the right to receive the Merger Consideration (as defined in Section 2.01(c)) and (ii) each issued and outstanding share of Class B Common Stock, par value $.01 per share, of the Company ("Company Class B Common Stock") which was issued, and trades, as a unit (the "Units") with the Company's 11.375% Junior Mortgage Notes due 2004 (the "Junior Mortgage Notes"), will be converted into the right to receive the Class B consideration (as defined in Section 2.01(d))". (b) Section 1.01(a) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(a) Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time (as defined in Section 1.03). Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL.". (c) Section 1.05(a) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(a) The Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.". (d) Section 1.05(b) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(b) The By-laws of the Company as in effect at the Effective Time shall be the By-laws of the 3 Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law." (e) Section 2.01(a) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital stock of Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation.". (f) Section 2.01(b) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of Company Common Stock that is owned by the Company or by any subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Sub or any other subsidiary of Parent shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.". (g) Section 2.01(d) of the Merger Agreement is hereby amended and restated in its entirety to read as follows: "(d) CONVERSION OF COMPANY CLASS B COMMON STOCK. Each issued and outstanding share of Company Class B Common Stock shall be converted into the right to receive .1928 of a fully paid and nonassessable Ordinary Share (the "Class B Consideration"). As of the Effective Time, all such shares of Company Class B Common Stock shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Class B Common Stock shall cease to have any rights with respect thereto, except the right to receive the Class B Consideration to be issued in consideration therefor upon surrender of such certificate in accordance with Section 2.02, without interest. As of the Effective Time, 4 the fraction of an Ordinary Share into which a share of Company Class B Common Stock is converted shall be issued, and trade, as a unit with the related Junior Mortgage Note in lieu of such share of Company Class B Common Stock.". (h) Exhibit A to the Merger Agreement is hereby deleted. SECTION 2. REPRESENTATIONS AND WARRANTIES. Each party hereto hereby represents as to itself to the other parties hereto that: (a) such party has all requisite corporate power and authority to enter into this Amendment and, subject, in the case of the Company, to the Company Stockholder Approval (as defined in the Merger Agreement) and, in the case of Parent, to the Parent Shareholder Approval (as defined in the Merger Agreement), to consummate the transactions contemplated by this Amendment; (b) the execution and delivery of this Amendment by such party and the consummation by such party of the transactions contemplated by this Amendment have been duly authorized by all necessary corporate action on the part of such party, subject, in the case of the Company, to the Company Stockholder Approval (as defined in the Merger Agreement) and, in the case of Parent, to the Parent Shareholder Approval (as defined in the Merger Agreement); and (c) this Amendment has been duly executed and delivered by such party and constitutes a valid and binding obligation of such party, enforceable against such party in accordance with its terms. SECTION 3. COUNTERPARTS. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 5 SECTION 5. FULL FORCE AND EFFECT. Except as specifically amended hereby, the Merger Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof", and words of similar import shall, unless the context otherwise requires, refer to the Merger Agreement as amended hereby. Any reference in any document to the Merger Agreement shall be deemed to be a reference to the Merger Agreement as amended hereby. IN WITNESS WHEREOF, Parent, Sub and the Company have cause this Amendment to be signed by their respective officers thereunto duly authorized, all as of the date first written above. SUN INTERNATIONAL HOTELS LIMITED, by /s/ C.D. Adams --------------------------------------- Name: C.D. Adams Title: EVP SUN MERGER CORP., by /s/ C.D. Adams ------------------------------------ Name: C.D. Adams Title: EVP GRIFFIN GAMING & ENTERTAINMENT, INC., by /s/ MATTHEW P. KEARNEY ------------------------------------ Name: Title: Exec V.P. & Finance & CFO Annex II STOCKHOLDER AGREEMENT dated as of August 19, 1996, among SUN INTERNATIONAL HOTELS LIMITED, a corporation organized and existing under the laws of the Commonwealth of the Bahamas ("Parent"), and the individual and the other party listed on Schedule A attached hereto (each, a "Stockholder" and, collectively, the "Stockholders"). WHEREAS Parent, Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"), propose to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented from time to time, including any amendment pursuant to Section 1.01 thereof, the "Merger Agreement") providing for the merger of the Company with and into Sub (the "Merger") upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS each Stockholder owns (beneficially and of record) (i) the number of shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") set forth opposite its name on Schedule A attached hereto (such shares of Common Stock owned of record, together with any other shares of Common Stock acquired by such Stockholder after the date hereof and during the term of this Agreement being collectively referred to herein as the "Subject Shares") and (ii) options issued under the 1994 Stock Option Plan (the "Options") and warrants (the "Warrants") to acquire the number of shares of Common Stock, if any, set forth opposite its name on Schedule A attached hereto, and each Stockholder desires that the Company, Parent and Sub enter into the Merger Agreement; and WHEREAS, as a condition to its willingness to enter into, and to cause Sub to enter into, the Merger Agreement, Parent has requested that the Stockholders enter into this Agreement. NOW, THEREFORE, to induce Parent and Sub to enter into, and in consideration of Parent and Sub entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties hereto agree as follows: 2 SECTION 1. Definitions. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Merger Agreement. SECTION 2. Representations and Warranties of the Stockholders. Each Stockholder hereby, severally and not jointly, represents and warrants to Parent in respect of itself as follows: (a) The Stockholder has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or to any of the Stockholder's property or assets. If the Stockholder is married and any of the Stockholder's Subject Shares, Options or Warrants constitute community property or otherwise need spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, the Stockholder's spouse or the person giving such other approval, enforceable against such spouse or person in accordance with its terms. (b) The Stockholder is the record and beneficial owner of, and has good and marketable title to, the Subject Shares and the Options and Warrants, if any, set forth opposite its name on Schedule A attached hereto, free and clear of any claims, liens, encumbrances, security interests and other restrictions on rights of disposition whatsoever. As of the date hereof, the Stockholder does not own, of record or beneficially, any shares of capital stock of the Company other than the Subject Shares and the shares of 3 Common Stock subject to any Options or Warrants set forth opposite its name on Schedule A attached hereto. The Stockholder has the sole right to vote such Subject Shares, and none of such Subject Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Subject Shares, except as contemplated by this Agreement. (c) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in respect of this Agreement or in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder. SECTION 3. Representations and Warranties of Parent. Parent hereby represents and warrants to the Stockholders that Parent has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Parent. This Agreement has been duly executed and delivered by Parent and constitutes a valid and binding obligation of Parent enforceable in accordance with its terms. SECTION 4. Agreements to Vote; Grant of Irrevocable Proxy; Appointment of Proxy. Until the termination of this Agreement in accordance with Section 11, each Stockholder, severally and not jointly, agrees as follows: (a) At any meeting of stockholders of the Company or at any adjournment thereof or in any other circum stances upon which its vote, consent or other approval is sought, the Stockholder shall vote (or cause to be voted) the Stockholder's Subject Shares (i) in favor of the Merger, the approval and adoption of the Merger Agreement and the approval of the terms of the Merger Agreement and each of the other transactions contemplated by the Merger Agreement and (ii) against (A) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company or any 4 other takeover proposal as such term is defined in Section 8.03 of the Merger Agreement (a "Takeover Proposal") or (B) any amendment of the Company's Amended and Restated Certificate of Incorporation or by-laws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of any class of capital stock of the Company. Subject to Section 13, the Stockholder further agrees not to commit or agree to take any action inconsistent with the foregoing. (b) The Stockholder represents that any proxies heretofore given in respect of the Stockholder's Subject Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Upon Parent's request, the Stockholder hereby agrees to irrevocably grant to, and appoint, Parent, and any person who may hereafter be designated by Parent as permitted under applicable law, and each of them individually, the Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of the Stockholder, to vote the Stockholder's Subject Shares, or grant a consent or approval in respect of such Subject Shares, in favor of or against, as the case may be, the matters set forth in Section 4(a), and to execute and deliver an appropriate instrument irrevocably granting such proxy, provided that Parent has obtained all approvals as may be necessary in connection with the granting of such proxy to comply with the New Jersey Casino Control Act. (d) The Stockholder hereby affirms that any irrevocable proxy granted pursuant to Section 4(c) will be given in connection with the execution of the Merger Agreement, and that such irrevocable proxy will be given to secure the performance of the duties of the Stockholder under this Agreement. The Stockholder hereby further affirms that, if granted pursuant to such Section, the irrevocable proxy will be coupled with an interest and may under no circumstances be revoked. If so granted, the Stockholder hereby ratifies and confirms all that such irrevocable proxy 5 may lawfully do or cause to be done by virtue thereof. Such irrevocable proxy, if and when executed, is intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. SECTION 5. Covenants of the Stockholders. Until the termination of this Agreement in accordance with Section 11, each Stockholder, severally and not jointly, agrees as follows: (a) Except as provided in the immediately succeeding sentence, the Stockholder agrees not to (i) sell, transfer, pledge, assign or otherwise encumber or dispose of (including by gift) (collectively, "Transfer"), or enter into any contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of, the Subject Shares, any Option or Warrant or any shares of Common Stock subject to any Option or Warrant to any person other than pursuant to the terms of the Merger, (ii) enter into any voting arrangement, whether by proxy, power-of-attorney, voting agreement, voting trust or otherwise, in connection with, directly or indirectly, any Takeover Proposal or (iii) exercise any Option or Warrant, in whole or in part, and agrees not to commit or agree to take any of the foregoing actions. Notwithstanding the foregoing, the Stockholder shall have the right, for estate planning purposes, to Transfer Subject Shares to a transferee following the due execution and delivery to Parent by each transferee of a legal, valid and binding counterpart to this Agreement. (b) Subject to the terms of Section 13, the Stockholder shall not, nor shall it permit any director, officer, employee, investment banker, attorney or other adviser or representative of the Stockholder to, (i) solicit, initiate or encourage the submission of any Takeover Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal. 6 (c) Until after the Merger is consummated or the Merger Agreement is terminated pursuant to its terms, the Stockholder shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by the Merger Agreement. (d) The Stockholder shall execute and deliver the letter contemplated by Section 5.11 of the Merger Agreement. (e) (i) In the event that the Merger Agreement shall have been terminated under circumstances where Parent is or may become entitled to receive the Termination Fee, the Stockholder shall pay to Parent on demand an amount equal to 50% of all profit (determined in accordance with Section 5(e)(ii)) of the Stockholder from the consummation of any Takeover Proposal that is consummated within one year of such termination or with respect to which a definitive agreement is executed within one year of such termination. (ii) For purposes of this Section 5(e), the profit of the Stockholder from any Takeover Proposal shall equal (A) the aggregate consideration received by the Stockholder, directly or indirectly, pursuant to or in connection with such Takeover Proposal, valuing any non-cash consideration (including any residual interest in the Company) at its fair market value on the date of such consummation plus (B) the fair market value, on the date of disposition, of all Subject Shares, Options and Warrants of the Stockholder or shares of Common Stock acquired by the Stockholder upon exercise of any Option or Warrant disposed of after the termination of the Merger Agreement and prior to the date of such consummation less (C) the fair market value of the aggregate consideration that would have been issuable or payable to the Stockholder if it had received the Merger Consideration pursuant to the Merger Agreement as originally executed, valued as of immediately prior to the first public 7 announcement of the termination of, or the intention of Parent or the Company to terminate, the Merger Agreement, as if the Merger had been consummated on the date of such public announcement. (iii) In the event that (x) prior to the Effective Time, a Takeover Proposal shall have been made and (y) the Effective Time shall have occurred and Parent for any reason shall have increased the amount of Merger Consideration payable over that set forth in the Merger Agreement in effect on the date hereof (the "Original Merger Consideration"), the Stockholder shall pay to Parent on demand an amount in cash equal to the product of (i) the sum of the number of Subject Shares of the Stockholder and the number of shares of Common Stock subject to Options and Warrants held by the Stockholder as of the Effective Time and (ii) 50% of the excess, if any, of (A) the per share cash consideration or the per share fair market value of any non-cash consideration, as the case may be, received by the Stockholder pursuant to the Merger Agreement, as amended, determined as of the Effective Time, over (B) the fair market value of the Original Merger Consideration determined as of the time of the first increase in the amount of the Original Merger Consideration. (iv) For purposes of this Section 5(e), the fair market value of any non-cash consideration consisting of: (A) securities listed on a national securities exchange or traded on the NASDAQ/NMS shall be equal to the average closing price per share of such security as reported on such exchange or NASDAQ/NMS for the five trading days after the date of valuation; and (B) consideration which is other than cash or securities of the form specified in clause (A) of this Section 5(e)(iv) shall be determined by a nationally 8 recognized independent investment banking firm mutually agreed upon by the parties within 10 business days of the event requiring selection of such banking firm; provided, however, that if the parties are unable to agree within two business days after the date of such event as to the investment banking firm, then the parties shall each select one firm, and those firms shall select a third investment banking firm, which third firm shall make such determination; provided further, that the fees and expenses of such investment banking firm shall be borne equally by Parent, on the one hand, and the Stockholders, on the other hand. The determination of the investment banking firm shall be binding upon the parties. (v) Any payment of profit under this Section 5(e) may be paid (x) in cash, by wire transfer of same day funds to an account designated by Parent, or (y) through a mutually agreed transfer of securities, to the extent such transfer is permitted by applicable law and the transfer of such securities to Parent would not adversely impact Parent or the value of such securities, by delivery of such securities, suitably endorsed for transfer, to Parent or its designee. SECTION 6. Stop Transfer; Legend. The Company agrees with, and covenants to, Parent that the Company shall not register the transfer of any certificate representing any Stockholder's Subject Shares, unless such transfer is made to Parent or Sub or otherwise in compliance with this Agreement. Each Stockholder agrees that the Stockholder will tender to the Company, within five business days after the date hereof, any and all certificates representing the Stockholder's Subject Shares and the Company will inscribe or cause to be inscribed upon such certificates the following legend: "The shares of Common Stock, par value $0.01 per share, of Griffin Gaming & Entertainment, Inc. represented by this certificate are subject to a Stockholder 9 Agreement dated as of August 19, 1996, and may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of, except in accordance therewith. Copies of such Agreement may be obtained at the principal executive offices of Griffin Gaming & Entertainment, Inc. SECTION 7. Termination of License and Services Agreement. The License and Services Agreement dated as of September 17, 1992, as amended, among, The Griffin Group Inc., the Company and Resorts International Hotel, Inc., is hereby terminated, effective as of the Effective Time, and no payments shall be required to be made by any party thereto with respect to such termination. Parent, the Company and The Griffin Group Inc. agree that at the Closing, The Griffin Group Inc., the Surviving Corporation and Resorts International Hotel, Inc. will enter into a License and Services Agreement substantially in the form attached hereto as Exhibit A (the "New License Agreement"). In the event the Stockholders are required to make any payments under Section 5(e), each Stockholder shall pay to Parent on demand 50% of the amount equal to the excess of (a) any consideration received by such Stockholder, directly or indirectly, in respect of employment, services, licenses or other agreements or arrangements over (b) the consideration, if any, that would have been received by such Stockholder pursuant to the New License Agreement (valuing any non-cash consideration in accordance with Section 5(e)(ii)). SECTION 8. Further Assurances. Each Stockholder will, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents, proxies and other instruments and take such further actions as Parent or Sub may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. SECTION 9. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties, except that Parent may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent. Any assignment in violation of the foregoing shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 10 SECTION 10. Public Announcements. Each Stockholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or court process. SECTION 11. Termination. This Agreement shall terminate upon the earlier of (a) July 31, 1997 or (b) the Effective Time; provided, however, that if the Company is not in breach of any of its obligations under the Merger Agreement and none of the Stockholders are in breach of any of their obligations under this Agreement, this Agreement shall terminate at the time the Merger Agreement is terminated (i) pursuant to Section 7.01(a) thereof, (ii) by the Company pursuant to Section 7.01(b)(iv), 7.01(d) or 7.01(e) thereof or (iii) by Parent pursuant to Section 7.01(g) or 7.01(h) thereof. Notwithstanding the foregoing, Section 5(e) and the last sentence of Section 7 shall survive the consummation of the Merger or the termination of the Merger Agreement. SECTION 12. Miscellaneous. (a) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (b) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to Parent in accordance with Section 8.02 of the Merger Agreement and to the Stockholders at their respective addresses set forth on Schedule A attached hereto (or at such other address for a party as shall be specified by like notice). (c) Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" 11 are used in this Agreement, they shall be deemed to be followed by the words "without limitation". (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (f) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. (g) Severability. If any term, provision, covenant or restriction herein, or the application thereof to any circumstance, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law, and the parties hereto shall reasonably negotiate in good faith a substitute term or provision that comes as close as possible to the invalidated or unenforceable term or provision, and that puts each party in a position as nearly comparable as possible to the position each such party would have been in but for the finding of invalidity or unenforceability, while remaining valid and enforceable. (h) Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in 12 accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in a Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than a Federal court sitting in the state of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. SECTION 13. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement herein in his capacity as such director or officer. Each Stockholder signs solely in his capacity as the record holder and beneficial owner of such Stockholder's Subject Shares or Options or Warrants and nothing herein shall limit or affect any actions taken by a Stockholder in his capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. IN WITNESS WHEREOF, each of Parent and the Stockholder that is a corporation has caused this Agreement to be signed by its officer thereunto duly authorized and each other Stockholder has signed this Agreement, all as of the date first written above. SUN INTERNATIONAL HOTELS LIMITED, By: /s/ Charles D. Adamo ------------------------------ Name: Charles D. Adamo Title: Executive Vice President, General Counsel ATLANTIC RESORTS HOLDINGS, INC. By: /s/ Lawrence Cohen ------------------------------ Name: Lawrence Cohen Title: Vice President /s/ Merv Griffin ------------------------------ Merv Griffin IN WITNESS WHEREOF, each of the Company, The Griffin Group Inc., and Resorts International Hotel, Inc. consent to the provisions of Section 7 hereof, and the Company consents to the provisions of Section 6 hereof, all as of the date first written above. GRIFFIN GAMING & ENTERTAINMENT, INC., By: /s/ Thomas E. Gallagher ------------------------------ Name: Title: President and CEO THE GRIFFIN GROUP INC., By: /s/ Lawrence Cohen ------------------------------ Name: Lawrence Cohen Title: Vice President RESORTS INTERNATIONAL HOTEL, INC., By: /s/ Matthew B. Kearney ------------------------------ Name: Title: SCHEDULE A Number of Number of Number of Shares of Shares of Number of Shares of Common Common Shares of Name and Common Stock Stock Stock Common Stock Address of Owned Subject to Subject to Beneficially Stockholder of Record Options Warrants Owned ----------- --------- ------- -------- ----- Atlantic Resorts 2,125,108 0 746,696 2,871,804 Holdings, Inc. c/o The Griffin Group, Inc. 780 Third Avenue New York, NY 10017 Merv Griffin 0 0 0 2,871,804 c/o The Griffin Group, Inc. 780 Third Avenue New York, NY 10017 AMENDMENT dated as of October 10, 1996, to Stockholder Agreement dated as of August 19, 1996 (the "Stockholder Agreement"), among Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Parent"), and Atlantic Resorts Holdings, Inc. and Merv Griffin (each, a "Stockholder" and, collectively, the "Stockholders"). WHEREAS Parent and the Stockholders have previously entered into the Stockholder Agreement; WHEREAS Parent, Sun Merger Corp., a Delware corporation and a wholy owned subsidiary of Parent ("Sub"), and Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"), have previously entered into an Agreement and Plan of Merger dated as of August 19, 1996, providing for the merger of the Company with and into Sub upon the terms and subject to the conditions set forth therein; WHEREAS Parent, Sub and the Company have agreed to amend the Merger Agreement to provide for the merger of Sub with and into the Company, and in connection with such amendment, parent and the Stockholders desire to amend the Stockholder Agreement as set forth herein; NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties agree as follows: SECTION 1. AMENDMENTS. (a) The first paragraph of the preamble to the Stockholder Agreement is hereby amended by deleting the clause "the Company with and into Sub" in the ninth and tenth lines thereof and replacing it with "Sub with and into the Company". SECTION 2. REPRESENTATIONS AND WARRANTIES. (a) Each Stockholder hereby, adversily and not jointly, represents and warrants to Parent in respect of itself as follows: The Stockholder has all requisite power and authority to enter into this Amendment and to consummate the transactions contemplated hereby. This Amendment has been duly authorized, executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stock- holder enforceable in accordance with its terms. If the Stockholder is married and any of the Stockholder's Subject Shares, Options or Warrants (each as defined in the Stockholder Agreement) constitute community property or otherwise need spousal or other approval for this Amendment to be legal, valid and binding, this Amendment has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, the Stockholder's spouse or the person giving such other approval, enforceable against such spouse or person in accordance with its terms. b) Parent represents and warrants to each Stockholder that Parent has all requisite corporate power and authority to enter into this Amendment and to consummate the transactions contemplated hereby. The execution and delivery of this Amendment by Parent, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Parent. This Amendment has been duly executed and delivered by Parent and constitutes a valid and binding obligation of Parent enforceable in accordance with its terms. SECTION 3. COUNTERPARTS. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 5. FULL FORCE AND EFFECT. Except as specifically amended hereby, the Stockholder Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof", and words of similar import shall, unless the context otherwise requires, refer to the Stockholder Agreement as amended hereby. Any reference in any document to the Stockholder Agreement shall be deemed to be a reference to the Stockholder Agreement as amended hereby. IN WITNESS WHEREOF, each of Parent and the Stockholder that is a corporation has caused this Amendment to be signed by its officer thereunto duly authorized and each other Stockholder has signed this Agreement, all as of the date first written above. SUN INTERNATIONAL HOTELS LIMITED, by /s/ illegible ------------------------------------- Name: Title: ATLANTIC RESORTS HOLDINGS, INC., by /s/ illegible ------------------------------------- Name: Title: /s/ Merv Griffin ------------------------------------- Merv Griffin IN WITNESS WHEREOF, each of the Company, The Griffin Group Inc., and Resorts International Hotel, Inc. consent to this Amendment, all as of the date first above written. GRIFFIN GAMING & ENTERTAINMENT, INC., by /s/ illegible ------------------------------------ Name: Title: THE GRIFFIN GROUP INC., by /s/ illegible ------------------------------------ Name: Title: RESORTS INTERNATIONAL HOTEL, INC., by /s/ illegible ------------------------------------ Name: Title: ANNEX III STOCKHOLDER AGREEMENT dated as of August 19, 1996, among GRIFFIN GAMING & ENTERTAINMENT, INC., a Delaware corporation (the "Company"), and SUN INTERNATIONAL INVESTMENTS LIMITED (the "Stockholder"). WHEREAS Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of the Bahamas ("Parent"), Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company propose to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented from time to time, including any amendment pursuant to Section 1.01 thereof, the "Merger Agreement") providing for the merger of the Company with and into Sub (the "Merger") upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS the Stockholder owns Ordinary Shares, par value $.001 per share, of Parent (the "Ordinary Shares"); and WHEREAS, as a condition to its willingness to enter into, the Merger Agreement, the Company has requested that the Stockholder enter into this Agreement. NOW, THEREFORE, to induce the Company to enter into, and in consideration of the Company entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Merger Agreement. SECTION 2. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to the Company that it has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and 2 compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or to any of the Stockholder's property or assets. SECTION 3. Representations and Warranties of the Company. The Company hereby represents and warrants to the Stockholder that the Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms. SECTION 4. Voting Agreements. (a) Until the termination of this Agreement in accordance with Section 8, the Stockholder agrees to vote the Ordinary Shares then owned of record by it, or grant a consent or approval in respect of such Ordinary Shares, at any meeting of stockholders of Parent or at any adjournment thereof or in any other circumstances upon which its vote, consent or other approval is sought, (i) in favor of any amendments to Parent's Articles of Association that add such provisions as may be necessary as a result of consummation of the transactions contemplated by the Merger Agreement to comply with the New Jersey Casino Control Act and (ii) if the Merger Agreement is amended pursuant to Section 1.01 thereof, in favor of the approval and adoption of the Merger Agreement and the approval of the terms of the Merger Agreement and each of the transactions contemplated by the Merger Agreement. SECTION 5. Further Assurances. The Stockholder will, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments and take such further actions as the Company may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. 3 SECTION 6. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party. Any assignment in violation of the foregoing shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. SECTION 7. Termination. This Agreement shall terminate upon the earlier of (a) the termination of the Merger Agreement or (b) the Effective Time of the Merger. SECTION 8. Miscellaneous. (a) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (b) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Company in accordance with Section 8.02 of the Merger Agreement and to the Stockholder care of Parent in accordance with Section 8.02 of the Merger Agreement (or at such other address for a party as shall be specified by like notice). (c) Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. 4 (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (f) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of the Bahamas regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. (g) Severability. If any term, provision, covenant or restriction herein, or the application thereof to any circumstance, shall, to any extent, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law, and the parties hereto shall reasonably negotiate in good faith a substitute term or provision that comes as close as possible to the invalidated or unenforceable term or provision, and that puts each party in a position as nearly comparable as possible to the position each such party would have been in but for the finding of invalidity or unenforceability, while remaining valid and enforceable. (h) Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this 5 Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. IN WITNESS WHEREOF, each of the Company and the Stockholder has caused this Agreement to be signed by its officer thereunto duly authorized as of the date first written above. GRIFFIN GAMING & ENTERTAINMENT, INC., By: /s/ Thomas E. Gallagher -------------------------------- Name: Title: President and CEO SUN INTERNATIONAL INVESTMENTS LIMITED, By: /s/ Charles D. Adamo -------------------------------- Name: Charles D. Adamo Title: Authorized Signatory AMENDMENT dated as of October 10, 1996, to Stockholder Agreement dated as of August 19, 1996 (the "Stockholder Agreement"), among Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"), and Sun International Investments Limited (the "Stockholder"). WHEREAS the Company and the Stockholder have previously entered into the Stockholder Agreement; WHEREAS Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Parent"), Sun Merger Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the Company have previously entered into an Agreement and Plan of Merger dated as of August 19, 1996, providing for the merger of the Company with and into Sub upon the terms and subject to the conditions set forth therein; WHEREAS Parent, Sub and the Company have agreed to amend the Merger Agreement to provide for the merger of Sub with and into the Company, and in connection with such amendment, the Company and the Stockholder desire to amend the Stockholder Agreement as set forth herein; NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties agree as follows: SECTION 1. AMENDMENTS. (a) The first paragraph of the preamble to the Stockholder Agreement is hereby amended by deleting the clause "the Company with and into Sub" in the ninth and tenth lines thereof and replacing it with "Sub with and into the Company". SECTION 2. REPRESENTATIONS AND WARRANTIES. (a) The Stockholder hereby represents and warrants to the Company as follows: The Stockholder has all requisite power and authority to enter into this Amendment and to consummate the transactions contemplated hereby. This Amendment has 2 been duly authorized, executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable in accordance with its terms. (b) The Company represents and warrants to the Stockholder that the Company has all requisite corporate power and authority to enter into this Amendment and to consummate the transaction contemplated hereby. The execution and delivery of this Amendment by the Company, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Company. This Amendment has been duly executed and delivered by Parent and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms. SECTION 3. COUNTERPARTS. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall be effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the Commonwealth of The Bahamas, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. SECTION 5. FULL FORCE AND EFFECT. Except as specifically amended hereby, the Stockholder Agreement shall continue in full force and effect in accordance with the provisions thereof. As used therein, the terms "Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof", and words of similar import shall, unless the context 3 otherwise requires, refer to the Stockholder Agreement as amended hereby. Any reference in any document to the Stockholder Agreement shall be deemed to be a reference to the Stockholder Agreement as amended hereby. IN WITNESS WHEREOF, each of the Company and the Stockholder has caused this Amendment to be signed by its officer thereunto duly authorized as of the date first written above. GRIFFIN GAMING & ENTERTAINMENT, INC., by /s/ MATTHEW A. KEARNEY ---------------------------- Name: Matthew A. Kearney Title: Exec. V.P. - Finance - CFO SUN INTERNATIONAL INVESTMENTS LIMITED, by /s/ [ILLEGIBLE] ---------------------------- Name: [ILLEGIBLE] Title: Annex IV August 18, 1996 Sun International Hotels Limited Coral Towers Paradise Island, The Bahamas Attention: Mr. Solomon Kerzner, Chairman of the Board of Directors Dear Sirs: We understand that Sun International Hotels Limited ("Sun") intends to enter into an Agreement and Plan of Merger (the "Merger") pursuant to which Griffin will merge into one of Sun's subsidiaries ("Mergersub") in a transaction in which each holder of a share of Griffin common stock will receive .4324 Ordinary Shares of Sun, subject to adjustment as more fully set forth in the Agreement and Plan of Merger, and each holder of a share of Griffin Class B common stock will receive .1928 Ordinary Shares of Sun. You have provided us with the Agreement and Plan of Merger among Sun, Mergersub and Griffin in substantially final form (the "Merger Agreement"). You have asked us to render our opinion as to whether the Merger is fair, from a financial point of view, to Sun. In the course of our analyses for rendering this opinion, we have: 1. reviewed the Merger Agreement; 2. reviewed Sun's Annual Reports on Form 20-F for the fiscal years ended December 31, 1994 and 1995, and its Reports on Form 6-K setting forth its financial results for the periods ended March 31, 1996; 3. reviewed certain operating and financial information, including projections, provided to us by management relating to Sun's business and prospects; 4. met with certain members of Sun's senior management to discuss its operations, historical financial statements and future prospects; 5. visited Sun's facilities on Paradise Island, The Bahamas and in Montville, Connecticut; 6. reviewed Griffin's Annual Reports to Shareholders and Annual Reports on Form 10-K for the fiscal years ended December 31, 1993 through 1995, and its Quarterly Reports on Form 10-Q for the periods ended March 31, 1996 and June 30, 1996; 7. reviewed certain operating and financial information, including projections, provided to us by Sun's management relating to Griffin's business and prospects; 8. met with certain members of Griffin's senior management to review certain operating and financial information and to discuss its operations, historical financial statements, business and future prospects; 9. visited Griffin's facilities in Atlantic City, New Jersey; 10. reviewed the historical prices and trading volumes of the common shares of Sun and Griffin; 11. reviewed publicly available financial data and stock market performance data of companies which we deemed generally comparable to Sun and Griffin; 12. reviewed the terms of recent acquisitions of companies which we deemed generally comparable to Griffin; and 13. conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. In the course of our review, we have relied upon and assumed the accuracy and completeness of the financial and other information provided to us by Sun and Griffin. With respect to Sun's and Griffin's projections referenced above, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of Sun and Griffin as to the expected future performance of Sun and Griffin, respectively. We have not assumed any responsibility for the information or projections provided to us and we have further relied upon the assurances of the managements of Sun that they have no actual knowledge of any facts that would make the information or projections provided to us incomplete or misleading. In arriving at our opinion, we have not performed or obtained any independent appraisal of the assets of Sun and Griffin. This opinion does not address Sun's underlying decision to effect the Transaction. Our opinion is necessarily based on economic, market and other conditions, and the information made available to us, as of the date hereof. Based on the foregoing, it is our opinion that the Merger is fair, from a financial point of view, to Sun. We have acted as financial advisor to Sun in connection with Merger and will receive a fee for such services, payment of a significant portion of which is contingent upon the consummation of the Merger. It is understood that this letter is intended solely for the benefit and use of the Board of Directors of Sun and is not to be used for any other purpose, or reproduced, disseminated, quoted or referred to at any time, in whole or in part, without our prior written consent or as otherwise agreed to by us, except that it may be reproduced in full in any proxy statement/prospectus or information statement filed with the Securities and Exchange Commission and distributed to stockholders of Sun or Griffin. Very truly yours, BEAR, STEARNS & CO. INC. By: /s/ David M. Solomon ------------------------ Senior Managing Director Annex V August 19, 1996 Board of Directors Griffin Gaming & Entertainment, Inc. 1133 Boardwalk Atlantic City, NY 08401 Members of the Board: We understand that Griffin Gaming & Entertainment, Inc. ("GGE" or the "Company"), Sun International Hotels Limited ("Sun") and Sun Merger Corp., a wholly owned subsidiary of Sun ("Acquisition Sub"), have entered into an Agreement and Plan of Merger, dated as of August 19, 1996 (the "Merger Agreement"), which provides, among other things, for the merger (the "Merger") of the Company with and into Acquisition Sub. Pursuant to the Merger, each issued and outstanding share of common stock, par value $.01 per share (the "Company Common Stock") of the Company, other than shares held in treasury or held directly or indirectly held by the Company or by Sun, will be converted into the right to receive a certain number (the "Exchange Ratio") of ordinary shares, par value $.001 per share, of the Sun (the "Sun Ordinary Shares"), determined pursuant to a certain formula set forth in the Merger Agreement, but in no event shall the value of Sun Ordinary Shares to be received in exchange for a share of Company Common Stock be less than $20.50 without the prior consent of the Company. The terms and conditions of the Merger are more fully set forth in the Merger Agreement. We further understand that approximately 33% of the outstanding shares of Company Common Stock are owned by The Griffen Group, Inc. ("Griffin Group"). You have asked for our opinion as to whether the Exchange Ratio pursuant to the Merger Agreement is fair from a financial point of view to the holders of shares of Company Common Stock. For purposes of the opinion set forth herein, we have: (i) reviewed certain publicly available financial statements and other information of GGE and Sun, respectively; Board of Directors Griffin Gaming & Entertainment, Inc. August 19, 1996 Page 2 (ii) reviewed certain internal financial statements and other financial and operating data concerning GGE and Sun prepared by the managements of GGE and Sun, respectively; (iii) analyzed certain 1996 budget information (the "1996 Budget") prepared by the management of the Company; (iv) analyzed certain financial projections prepared by Sun's financial advisors; (v) discussed the past and current operations and financial condition and the prospects of the Company and Sun with senior executives of the Company and Sun, respectively; (vi) reviewed the reported prices and trading activity for the Company Common Stock and Sun Ordinary Shares; (vii) compared the financial performance of GGE and Sun and the prices and trading activity of the Company Common Stock and Sun Ordinary Shares with that of certain other comparable publicly-traded companies and their securities; (viii) reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions; (ix) participated in discussions among representatives of the Company, Sun and their financial and legal advisors; (x) reviewed the Merger Agreement and certain related documents; and (xi) performed such other analyses and considered such other factors as we have deemed appropriate. We have assumed and relied upon without independent verification the accuracy and completeness of the information reviewed by us for the purposes of this opinion. With respect to the financial projections, including the 1996 Budget of the Company, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of the Company and Sun. We have not made any independent valuation or appraisal of the assets or liabilities of the Company or Sun, nor have we been furnished with any such appraisals. In addition, we have assumed that the Merger will be consummated on the terms set forth in the Merger Agreements including, among other things, that the Merger will be treated as a tax-free reorganization pursuant to the Internal Revenue Code of 1986. Our opinion Board of Directors Griffin Gaming & Entertainment, Inc. August 19, 1996 Page 3 is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In arriving at our opinion, Morgan Stanley was not authorized to solicit, and did not solicit, nor did we receive any indication of, interest from any party with respect to the acquisition, business combination or other extraordinary transaction involving the Company or any of its assets. We have acted as financial advisor to the Board of Directors of the Company in connection with this transaction and will receive a fee for our services. It is understood that this letter is for the information of the Board of Directors of the Company and may not be used for any other purpose without our prior written consent, except that this opinion may be included in its entirety in any filing made by the Company with the Securities and Exchange Commission with respect to the Merger. We express no opinion and make no recommendation as to how the stockholders of the Company should vote at the stockholders' meeting held in cononection with the Merger. Based upon and subject to the foregoing, we are of the opinion on the date hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a financial point of view to the holders of shares of Company Common Stock. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: /s/ David Topper -------------------------------- David Topper Managing Director Annex VI LICENSE AND SERVICES AGREEMENT THIS LICENSE AND SERVICES AGREEMENT is made and entered into as of __________________, 1997, by and among THE GRIFFIN GROUP INC., 780 Third Avenue, New York, New York 10017 ("Group") for the name, likeness and services of Merv Griffin, GRIFFIN GAMING & ENTERTAINMENT, INC., a Delaware corporation, 1133 Boardwalk, Atlantic City, New Jersey 08401 [or Survivor Corporation] ("GGE"), and RESORTS INTERNATIONAL HOTEL, INC., a New Jersey corporation, 1133 Boardwalk, Atlantic City, New Jersey 08401 ("RIH") (references herein to "the Company" shall mean both GGE and RIH). In consideration of the mutual covenants, representations, warranties, agreements and obligations herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. Scope of License. (a) Group grants to the Company for the term of this Agreement, the non-exclusive license to utilize the name and likeness of Merv Griffin ("Name and Likeness") in connection with print advertisements, radio and television commercials, and in connection with limited merchandising, all for the sole purpose of advertising and promoting (i) the Company's Casino Hotel in Atlantic City, New Jersey (the "Atlantic City Property"), (ii) the Atlantis Resort and Casino on Paradise Island, the Bahamas, and (iii) the Mohegan Sun Casino located in Connecticut managed by an affiliate of Sun International Hotels, Ltd. (all such properties hereinafter collectively referred to as the "Casino Properties"), subject to the terms, conditions and limitations provided herein. (b) The Company shall not use the Name or Likeness in any company or business name or in any way other than as expressly authorized herein. Specifically, but without limitation, neither the Merv Griffin name nor likeness shall be used in any manner in connection with any products, services, programs, plans, ideas, promotions or tie-ins except only as may be expressly approved by Group in the manner contemplated by Section 8 hereof and then only for purposes of advertising and promoting the Casino Properties. (c) The Company shall have the non-exclusive right during the term of this Agreement to use the shows and gaming concepts created by Group or Merv Griffin as set forth on Schedule A annexed hereto ("Shows and Concepts") at the Atlantic City Property. -1- 2. Services. (a) Group agrees to provide to the Company, for the term of this Agreement, on a pay or play basis, the non-exclusive services of Merv Griffin, subject to the performance by the Company of each and all of its obligations under this Agreement and in particular the indemnification and insurance obligations contemplated by Sections 5 and 6 hereof, as a host, producer, presenter and featured performer relative to various shows to be presented at the Casino Properties, to furnish marketing and consulting services, to participate in radio, television and print advertisements, and to serve as spokesperson for the Company, all such services to be subject to Merv Griffin's availability in respect of other professional or business matters and to any personal matters. Merv Griffin shall not, however, be required to make more than two (2) radio commercials and two (2) television commercials during each contract year of this Agreement with respect to the Casino Properties. All photo sessions, tapings and appearances for radio and television commercials shall be scheduled at a mutually convenient time to Merv Griffin. Group shall, in addition, approve the makeup and wardrobe person to be used for Merv Griffin on any television commercial (the cost of which shall be paid solely by the Company). (b) In connection with all of the services set forth above and elsewhere herein and subject to reimbursement for certain costs and expenses as expressly set forth herein, Group shall provide such personnel in addition to Merv Griffin, and provide such overhead expenses, as are necessary to carry out its duties hereunder. 3. Term. The rights and license granted hereunder shall be effective as of the date hereof and shall continue in force (unless earlier terminated in accordance with the provisions of this Agreement) until September 16, 2001. 4. Compensation. Upon the execution of this Agreement, GGE is paying to Group the amount of $10,973,000, which amount represents compensation in the amount of $2,546,000 for the services hereunder for the period September 17, 1997 to September 16, 1998, $2,673,000 for the services hereunder for the period September 17, 1998 to September 16, 1999, $2,807,000 for the services hereunder for the period September 17, 1999 to September 16, 2000, and $2,947,000 for the services hereunder for the period September 17, 2000 to September 16, 2001. Group acknowledges payment under the Prior License Agreement (as defined in Section 19 hereof) for the period from the date hereof to September 16, 1997. 5. Indemnification; Insurance. (a) The Company hereby indemnifies and agrees to defend and hold harmless forever Group, and its officers, directors, shareholders, employees, agents and representatives, and Merv Griffin against any and all claims, demands, losses, costs and expenses (including attorneys fees), investigations, damages, judgments, penalties, and liabilities of any kind or nature whatsoever, directly or indirectly arising out of, resulting from, relating to or connected with (i) any use of the Name and Likeness by the Company or any person or entity obtaining the right to use the Name and Likeness directly or indirectly -2- hereunder, or (iii) any actual or alleged damage or any injury resulting from, occurring on the premises of, relating to or in any way connected with the Casino Properties or its promotions, or (iv) any actual or alleged inaccuracies or misrepresentations in connection with the use of the Name and Likeness by the Company. The Company shall promptly upon receipt of notice of any such claim engage counsel approved by Group (which approval shall not be unreasonably withheld) and defend such claim at the Company's sole cost and expense (which cost and expense must be reasonable); or, if the Company shall fail or refuse to do so, Group, at its option, may engage counsel and defend such claim at the Company's sole cost and expense, which cost and expense the Company shall pay to Group within five (5) business days upon being invoiced therefor. (b) The Company agrees, at its sole cost and expense, to deliver to Group on or before execution of this Agreement and to maintain during the term of this Agreement and for any applicable statute of limitations period thereafter (but in no event less than six (6) years after the term of this Agreement) an endorsement naming Group and Merv Griffin, individually, as named insureds on all insurance policies covering the Company including, without limitation, with respect to comprehensive public liability and personal injury insurance, each such policy in amounts no less than Two Million Dollars ($2,000,000.00) per occurrence and an umbrella coverage of no less than Twenty Five Million Dollars ($25,000,000.00) against all such liability. The Company will submit to Group certified copies, signed by a legal representative of the insurance company, of fully paid policies of insurance as specified above naming Group and Merv Griffin, individually, each as an insured party, and requiring that the insurer shall not terminate or materially modify such instance without written notice to Group and Merv Griffin, individually, at least sixty (60) days in advance thereof. Without limiting any rights or remedies of Group or Merv Griffin hereunder, all rights granted hereunder to the Company will terminate automatically upon any failure by the Company to maintain the insurance required hereby. 6. Directors and Officers Indemnification. (a) The Company shall indemnify Merv Griffin and any officer, director or employee of Group who at any time during the term of this Agreement serves as an officer or director of GGE or any subsidiary or affiliate thereof (each an "Indemnitee" and collectively "Indemnitees") to the fullest extent permitted by Delaware law in effect as the date hereof against all costs, expenses, liabilities and losses (including, without limitation, attorneys' fees, judgments, fines, penalties, ERISA excise taxes and amounts paid in settlement) reasonably incurred by an Indemnitee in connection with a Proceeding. For the purpose of this Section 6, a "Proceeding" shall mean any action, suit or proceeding by reason of the fact that such person is or was an officer, director or employee of GGE or any subsidiary or affiliate hereof or is or was serving as an officer, director, member, employee, trustee or agent of any other entity at the request of GGE. -3- (b) The Company shall advance to each Indemnitee all reasonable costs and expenses incurred by such Indemnitee in connection with a Proceeding within 20 days after such receipt by the Company of a written request for such advance. Such request shall include an itemized list of the costs and expenses and an undertaking by such Indemnitee to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. (c) No Indemnitee shall be entitled to indemnification under this Section 6 unless such Indemnitee meets the standard of conduct specified in the Delaware General Corporation Law. Notwithstanding the foregoing, to the extent permitted by law neither Section 145 (d) of the Delaware General Corporation Law nor any similar provision shall apply to indemnification under this Section 6, so that if an Indemnitee in fact meets the applicable standard of conduct, he shall be entitled to such indemnification whether or not GGE (whether by the board of directors, the shareholders, independent legal counsel or other party) determines that indemnification is proper because such Indemnitee has met such applicable standard of conduct. Neither the failure of GGE to have made such a determination prior to the commencement by an Indemnitee of any suit or arbitration proceeding seeking indemnification nor a determination by GGE that such Indemnitee has not met such applicable standard of conduct shall create a presumption that such Indemnitee has not met the applicable standard of conduct. (d) The Company shall not settle any proceeding or claim in any manner which would impose on any Indemnitee any penalty or limitation without such Indemnitee's prior written consent. Neither the Company nor any Indemnitee will unreasonable withhold its or his consent to any proposed settlement. (e) GGE shall maintain beginning with the date hereof and continuing for a period of six (6) years following the expiration or termination of this Agreement directors' and officers' liability insurance policies as in effect on the date hereof or replacement policies substantially equivalent in amount and scope of coverage and shall include and maintain in its Certificate of Incorporation and Bylaws directors' and officers' liability indemnification provisions not less favorable than those in effect on the date hereof. 7. Copyright, Trademark, Goodwill. (a) Except as otherwise expressly provided in Section 1 of this Agreement, the Company has no rights in and shall not apply for, register, use or claim any rights in any copyright, trademark, service mark, trade name or business name incorporating the Name and Likeness or any element thereof or in any of the Shows and Concepts. The Company acknowledges and agrees that the concept, format, music and scripts of such Shows and Concepts are the property of Group. The Company further agrees to offer to Group at the conclusion of its use of the Shows and Concepts any and all sets, costumes, -4- gamewalls, recorded music, and other materials customarily returned by the Company to a producer of such creative properties. (b) The Company understands and agrees that this license is non- exclusive and that Group and Merv Griffin in its and his sole discretion has the right to utilize the rights described herein and to grant other licenses in and to such rights on any terms and conditions it or he deems appropriate. The Company acknowledges that the use of the Name and Likeness outside the scope of this Agreement is an infringement of Group's or Merv Griffin's right, title and interest in and to the Name and Likeness, and the Company expressly covenants that during the term of this Agreement, and after the expiration or termination hereof, the Company shall not, directly or indirectly, commit any act of infringement of such Name and Likeness or take any other action in derogation thereof. (c) The Company recognizes the great value of the publicity and goodwill associated with the Name and Likeness, that the Name and Likeness have acquired a secondary meaning in the mind of the public whereby the Name and Likeness are identified exclusively with Group and Merv Griffin and, in such connection, the Company acknowledges that such goodwill exclusively belongs to Group and Merv Griffin except only to the limited extent of the specific rights granted to the Company hereunder. 8. Approvals. The Company agrees that each use of the Name and Likeness, whenever practicable, shall be subject to the prior written approval of Group, which shall not, however, be unreasonably withheld. The Company agrees, whenever practicable, to furnish Group for its prior written approval, the complete text and layout and all artwork and graphics of all print advertisements, promotional material and any other publicity, a list of the publications in which such advertisements or publicity may be issued, the complete script of any radio commercial, and complete script and storyboard for any television commercial in which the Name and Likeness will be used or embodied, in each case before any use of the Name and Likeness in connection therewith. Each radio and television commercial shall be played in full for Group's written approval prior to any public broadcast thereof, which approval shall not be unreasonably withheld. Any proposed change in any approved item must be resubmitted for the prior written approval of Group. Group shall have twenty (20) business days following receipt of any request for approval to approve or reject same; provided that Group shall be deemed to have approved such submission unless Group disapproves same in writing within such twenty (20) day period, and Group or Merv Griffin may agree to waive or shorten the required submission period on a case by case basis but any such agreement or waiver shall apply only to the submissions specified therein. 9. Additional Undertakings of the Company. The Company agrees and covenants that: -5- (a) It will not attack the title of Group in and to the Name and Likeness, nor will it attack the right of Group to grant the license granted hereunder or the legality of the terms hereof; (b) It will not harm, misuse or bring into disrepute the Name and Likeness; (c) It will utilize the Name and Likeness and otherwise conduct its business or cause the same to be done only in an ethical, lawful, first-class and high quality manner and in accordance with the terms and intent of this Agreement; (d) It will not create any expense or incur any liability chargeable to Group; and (e) It will comply with all applicable laws, regulations, ordinances and other requirements relating or pertaining to the advertising, promotion and operation of the Casino Properties; it will obtain all necessary permits, licenses and other consents for the operation of its business; and it will comply with the requests of any regulatory agencies which shall have jurisdiction over the Casino Properties. 10. Additional Representations and Warranties of the Company. GGE and RIH each represent and warrant that: (a) GGE is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; RIH is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey; each of GGE and RIH has full corporate power and authority to conduct its business as now being conducted and as contemplated hereby; is duly qualified to do business in each jurisdiction in which the nature of the business conducted by it requires such qualification; and holds all necessary licenses and permits from federal, state, county and local authorities for the proper conduct of said business; (b) There is not outstanding or threatened any order, writ, injunction, decree or legal or administrative proceeding of any kind against or affecting either GGE or RIH which would impair the ability of either GGE or RIH to perform its obligations hereunder; (c) Each of GGE and RIH is in compliance with all applicable federal, state, county and municipal laws, including any such laws which require the obtaining of licenses or permits to conduct it business; and (d) Each of GGE or RIH has the unrestricted right, power and authority to enter into this Agreement and perform its obligations hereunder. 11. Representations and Warranties of Group. Group represents and warrants that: -6- (a) Group is a corporation duly organized, validly existing and in good standing under the laws of the State of Connecticut; has full power and authority to conduct its business as now being conducted and as contemplated hereby; is duly qualified to do business in each jurisdiction necessary in order for Group to fully perform under this Agreement; and holds all necessary licenses and permits from federal, state, county and local authorities for the proper conduct of said business; (b) There is not outstanding or threatened any order, writ, injunction, decree or legal or administrative proceeding of any kind against or affecting Group which would impair Group's ability to perform its obligations hereunder; (c) Group is in compliance with all applicable federal, state, county and municipal laws, including any such laws which require the obtaining of licenses or permits to conduct its business; and (d) Group has the unrestricted right, power and authority to enter into this Agreement and perform its obligations hereunder. 12. Termination by Group. (a) This Agreement shall terminate, at Group's option, and Merv Griffin may at his option terminate all of his obligations under this Agreement, upon written notice to the Company, without prejudice to any other rights or remedies which Group or Merv Griffin may have, whether under the provisions of this Agreement, in law, or in equity or otherwise, upon the occurrence of any one or more of the following events at any time during the term hereof: (i) if any governmental agency shall determine that the advertising or promotion or operation of the Casino Properties is materially improper, and as a consequence thereof, any material fine, penalty, sanctions or liability should be imposed against the Company or any officer or director thereof; or (ii) if the Company shall be unable to pay its debts when due, or shall make any assignment for the benefit of creditors, or shall file or permit to be filed any petition under the bankruptcy or insolvency laws of any jurisdiction or shall have or suffer a receiver or trustee to be appointed for its business or property, or be adjudicated a bankrupt or an insolvent, or an order for relief shall have been entered (whether voluntary or involuntary) under the federal Bankruptcy Code with respect to either GGE or RIH; or (iii) if (notwithstanding any other provision hereof) as determined by Group in good faith there is a substantial likelihood of damage to the -7- name or reputation of Group or Merv Griffin because of its or his association with the Company; or (iv) if the Company breaches any of its other material covenants, representations, warranties, conditions, agreements or obligations hereunder and shall fail to cure such breach within sixty (60) days following written notice of such breach. Upon any such termination, Group shall be entitled to retain all monies paid to it hereunder, including under Section 4 hereof, and shall be entitled to be paid all amounts owing to it as of the date of termination. (b) Upon the expiration of this Agreement or in the event of any termination of this Agreement on account of any of the matters set forth in this Section 12: (i) the Company's representations, warranties, covenants and obligations, and the Company's indemnification of Group hereunder, shall survive such expiration or termination and the insurance provided for in Section 5(b) and Section 6 shall be maintained in full force and effect as therein provided; (ii) The Company shall as soon as practicable and in no event later than 60 days following such termination immediately cease any and all use of the Name and Likeness in any manner whatsoever and shall in addition take the a actions specified in clauses (a) through (d) of Section 18 hereof; (iii) All rights granted by Group hereunder shall revert to Group; and the Company shall reimburse Group or Merv Griffin for expenses incurred but not yet reimbursed, and pay any other compensation and benefits to which Merv Griffin may be entitled under any applicable plans, programs and agreements of the Company. 13. Termination by the Company. This Agreement shall terminate, at the Company's option, in the case of any event described in clause (a) of this Section 13 upon one hundred and twenty (120) days prior written notice to Group, in the case of any event described in clauses (b) through (f) of this Section 13, upon 30 days prior written notice to Group, and in the case of any event described in clause (g) of this Section 13, without prior notice, without prejudice to any other rights or remedies which the Company may have, whether under the provisions of this Agreement, in law or in equity or otherwise, upon the occurrence of any one or more of the following events: (a) in the event of the death of Merv Griffin, or if by reason of permanent mental or physical disability Merv Griffin is unable to provide his services as required under this Agreement; or -8- (b) if Group or Merv Griffin shall be unable to pay their debts when due, or shall make any assignment for the benefit of creditors, or shall file or permit to be filed any petition under the bankruptcy or insolvency laws of any jurisdiction, county or place, or shall have or suffer a receiver or trustee to be appointed for its business or property or be adjudicated a bankrupt or an insolvent, or an order for relief shall have been entered (whether voluntary or involuntary) under the federal Bankruptcy Code with respect to either Group or Merv Griffin; or (c) if Group or Merv Griffin shall be convicted of, or enter a plea of no contest to any indictment for, a felony involving moral turpitude under the laws of the United States or any state, by any court of competent jurisdiction; or (d) if Group or Merv Griffin shall be convicted of, or enter a plea of no contest to any indictment or any other crime under the laws of the Untied States or any state, which includes as an essential element thereof, larceny, fraud, misappropriation or self-dealing; or (e) if Group breaches any of its other material covenants, representations, warranties, conditions, agreements or obligations hereunder and shall fail to cure such breach within sixty (60) days following written notice of such breach; or (f) if any governmental authority having jurisdiction over the Company shall enter a final judgment as to which all appeals have been exhausted, to the effect that the implementation of this Agreement or any material provisions thereof is in violation of any applicable law, order or regulation and as a consequence thereof any material fine, penalty, sanctions or liability shall be imposed against the Company or any officer or director thereof, or if any such governmental authority shall enter a judgment which is not final to such effect, if such judgment is obtained on the basis of any action initiated by a person not a party to this Agreement and on the basis of alleged misconduct by Merv Griffin or Group constituting a breach by either of them of the terms of this Agreement; or (g) the Company shall have determined in its sole discretion to terminate the Agreement. Upon any termination of this Agreement on account of any of the matters set forth in this Section 13, each of the Company's financial obligations to Group pursuant to this Agreement shall thereupon terminate and neither party shall thereupon have any continuing rights or obligations under this Agreement, except for the Company's indemnification and insurance obligations, which shall continue, without modification or limitation, in the manner set forth in Sections 6 and 7 of this Agreement, with respect to any and all matters occurring prior to such termination, and except that: -9- (i) within 60 days after such termination the Company shall cease the use of the Name and Likeness; (ii) within 60 days after such termination the Company shall terminate all print advertisements, and radio and television commercials, utilizing the Name and Likeness; (iii) within 60 days after such termination the Company shall remove or otherwise delete or obliterate from any real or personal property constituting any part of or asset belonging to or used in connection with any of the Casino Properties any image display, logo and other reference to or use of the Name and Likeness; and (iv) the Company after such termination shall have the right to liquidate in the ordinary course of its business or otherwise dispose of all remaining stocks or promotional materials and merchandise bearing the Name and Likeness. Upon any such termination, Group shall be entitled to retain all monies paid to it hereunder, including under Section 4 hereof, and shall be entitled to be paid all amounts owing to it under Section 17 hereof as of the date of termination. 14. Injunctive and Other Relief. (a) The Company recognizes the unique and special nature and value of the use of the Name and Likeness and agrees that it is extremely difficult and impractical to ascertain the extent of the detriment to Group which would be caused in the event of any use of the Name and Likeness contrary to the terms of this Agreement. The Company furthermore acknowledges that Group and Merv Griffin will have no adequate remedy at law in the event the Company uses the Name and Likeness in any way not permitted hereunder, and that Group and Merv Griffin shall be entitled to equitable relief by way of temporary and permanent injunction, and such other and further relief as any court of competent jurisdiction may deem just and proper, in addition to any and all other remedies provided for herein and available to Group or Merv Griffin at law or equity. (b) Group recognizes the unique and special nature and value of the use of the Name and Likeness and agrees that it is extremely difficult and impractical to ascertain the extent of the detriment to the Company which would be caused in the event the use of the Name and Likeness as provided in this Agreement were not to be available to the Company. Group furthermore acknowledges that the Company will have no adequate remedy at law in the event the Name and Likeness is not available to the Company as provided in this Agreement and that the Company shall be entitled to equitable relief by way of temporary and permanent injunction, and such other and further relief as any court of competent jurisdiction may deem just and proper, in addition to any and all other remedies provided for herein and available to the Company at law or equity. -10- 15. Reservation of Rights. Group retains all rights not expressly and exclusively conveyed herein. 16. Performances. The specific terms regarding shows to be hosted or produced by Merv Griffin at the Atlantic City Property or in which Merv Griffin is to be featured performer shall be subject to good faith negotiation; provided, however, that the Company shall provide and pay for all production personnel, equipment, materials, dressing rooms, musicians, props, staging, lighting, sound systems, and other goods and services as required by Group to set up, produce and close the show, sufficient suites, other accommodations, food and beverages for the show's entourage; rehearsal time, stage, lighting, sound and personnel; and a minimum of twenty-five (25) complimentary tickets. Group shall have sole approval of all credits and billing, any opening and closing act, any sponsors and all publicity and advertising in connection with each show. The Company shall not permit any taping, filming, recording or any collateral use whatsoever of any such show or any element thereof other than by Group. 17. Business, Travel and Other Expenses. The Company shall reimburse Group promptly upon invoice, or, if requested by Group, shall make the arrangements, advance the funds and pay directly, in connection with Group's personnel's and Merv Griffin's need to travel for personal appearances or any advertising, publicity, promotional or other services specifically requested hereunder, all required round trip transportation to and from all destinations (including all required air and ground transportation), hotel accommodations, food and other living and incidental expense, which in the case of Merv Griffin, shall be of a first class quality consistent with his celebrity status. All such payments should be in addition to any other payments set forth herein or in any other agreement between the parties. Any legal, consulting fees or other expenses incurred in connection with the preparation and negotiation of this Agreement shall be paid by the Company. 18. Sale of Resort Property. In the event of any sale or other disposition by the Company of any of the Casino Properties, and as soon thereafter as practicable, and in no event later than 60 days following such sale (120 days if in connection with such disposition, the Company has entered into an agreement whereby the Company is to provide operating services to such Casino Property), the Company shall: (a) cease the use of the Name and Likeness with respect to such Casino Property; (b) terminate all print advertisements, and radio and television commercials, utilizing the Name and Likeness with respect to such Casino Property; -11- (b) terminate all print advertisements, and radio and television commercials, utilizing the Name and Likeness with respect to such Casino Property; (c) remove or otherwise delete or obliterate from any real or personal property constituting any part of or asset belonging to or used in connection with such Casino Property any image display, logo and other reference to or use of the Name and Likeness; and (d) liquidate in the ordinary course of its business or otherwise dispose of all remaining stocks of promotional materials and merchandise bearing the Name and Likeness. 19. Termination of Prior License and Services Agreement. Group and the Company agree that the License and Services Agreement dated as of September 17, 1992, as amended (the "Prior License Agreement"), among Group, GGE and RIH shall terminate as of the date hereof. Notwithstanding any provision of the Prior License Agreement to the contrary, no payments shall be required to be made by any party thereto with respect to such termination. Notwithstanding the termination of the Prior License Agreement, (i) GGE shall pay Group all monies owing to Group thereunder and (ii) GGE shall be required to continue, without modification or limitation, the indemnification and insurance obligations provided for in Sections 7 and 8 of the Prior License Agreement for acts prior to such termination. 20. Notices. All notices and statements provided for herein shall be in writing and are to be sent to the respective parties at the addresses first set forth above, unless otherwise provided in writing. 21. Relationship of Parties. This Agreement does not constitute and shall not be construed as constituting a partnership or joint venture or agency relationship between any of the parties hereto. The Company shall have no right to obligate or bind Group in any manner whatsoever, and nothing herein contained shall give or is intended to give any rights of any kind to any third person. 22. Non-Assignability. No party to this Agreement, without each other party's prior written approval, may sell, sublicense, lease, pledge as collateral, give, assign, franchise or otherwise transfer any of its rights hereunder or any interest herein, directly in any manner whatsoever. Neither this Agreement nor any of the rights of any party hereunder shall devolve by operation of law or otherwise upon any assignee, receiver, liquidator, trustee or other party. 23. Construction; Forum. This Agreement shall be construed in accordance with the laws of the State of New York as applied to contracts executed and intended to be fully performed therein. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF ANY NEW YORK STATE COURT OR ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR -12- 24. Severability. If any provision or portion of this Agreement shall be invalid or unenforceable for any reason, there shall be deemed to be made such minor changes (and only such minor changes) in such provision or portion of this Agreement as are necessary to make it valid and enforceable. The invalidity or unenforceability of any provision or portion of this Agreement shall not affect the validity or enforceability of any other provision or portion of this Agreement. 25. Counterparts. This Agreement may be executed in several counterparts, each one of which shall be an original as to the signing party and all of which shall constitute one and the same Agreement. 26. Waiver; Entire Agreement; Amendment. The waiver by any party of any breach of this Agreement shall not in any way be construed as a waiver by such party of any subsequent breach, whether similar or not, of this Agreement. This Agreement sets forth the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all existing agreements and understandings between them. This Agreement may not be altered, amended or modified in any way except upon the agreement of the parties hereto in writing. 27. Legal Fees. If any legal action, arbitration, or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorney's fees and other costs it incurred in that action or proceeding, in addition to any other relief to which it may be entitled. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first above written. THE GRIFFIN GROUP INC. By: ____________________________ GRIFFIN GAMING & ENTERTAINMENT, INC. By: ____________________________ RESORTS INTERNATIONAL HOTEL, INC. By: ____________________________ -13- I hereby affirm that The Griffin Group Inc. is fully authorized to make and perform each of the undertakings of this Agreement, particularly as they relate to the licensing of my name and likeness and the furnishing of related services by me. -------------------------------- MERV GRIFFIN -14- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 56 of the IBCA empowers a company incorporated under the IBCA to indemnify against all expenses, including legal fees, and against all judgements, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, an officer or a liquidator of the company; or (b) is or was, at the request of the company, serving as a director, officer or liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, PROVIDED, HOWEVER, that such indeminification may only be provided to a person if the person acted honestly and in good faith with a view to the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of the IBCA unless a question of law is involved. Sun provides for indemnification of its directors and officers pursuant to Article 85 of the Sun Charter which provides that, net of any indemnification an officer or director of Sun receives from another source, Sun will indemnify its officers and directors to the fullest extent permitted by the IBCA. Sun has purchased directors' and officers' liability insurance policies indemnifying its officers and directors and the officers and directors of its subsidiaries against claims and liabilities (with stated exceptions) to which they may become subject by reason of their positions with Sun or its subsidiaries as directors and officers. ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES. (a) The following is a list of Exhibits included as part of this Registration Statement. 2.1 Agreement and Plan of Merger dated as of August 19, 1996, among the Registrant, Sun Merger Corp. and GGE, as amended (included as Annex I to the Proxy Statement/ Prospectus). 2.3 Combination and Restructuring Agreement dated as of December 12, 1994, between SIIL and the Registrant (incorporated by reference to Exhibit 2.1 of Registration Statement No. 33-89250 of the Registrant on Form F-1). 2.4 Form of Amendment No. 1 to the Combination and Restructuring Agreement between SIIL and the Registrant (incorporated by reference to Exhibit 2.3 of Registration Statement No. 33-89250 of the Registrant on Form F-1). 3.1 Amended and Restated Memorandum of Association of the Registrant. 3.2 Articles of Association of the Registrant adopted April 28, 1995, as amended (incorporated by reference to Exhibits 3.3 and 3.4 of Registration Statement No. 33-80477). 4.1 Form of Ordinary Share Certificate (incorporated by reference to Exhibit 4.1 of Registration Statement No. 33-80477 of the Registrant on Form F-3).
II-1 4.2 Form of Registration Rights Agreement among the Registrant, Fidelity Management and Research Company and TCW Special Credits (incorporated by reference to Exhibit 2.3 of the 1994 Annual Report of the Registrant on Form 20-F, as amended by Amendment No. 1 thereto, File No. 0-22794). 4.3 Form of Amendment No. 1 to the Registration Rights Agreement among the Registrant, Fidelity Management and Research Company and TCW Special Credits (incorporated by reference to Exhibit 4.4 of Registration Statement No. 33-89250 of the Registrant on Form F-1, as amended by Amendment No. 2 thereto). 4.4 There are no instruments with respect to long-term debt of the Registrant that involve securities authorized thereunder exceeding 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. 5.1 Opinion of Harry B. Sands and Company, as to the legality of the securities being registered. 8.1 Opinion of Cravath, Swaine & Moore, as to certain United States federal income tax consequences of the Merger. 8.2 Opinion of Gibson, Dunn & Crutcher LLP as to certain United States federal income tax consequences of the Merger. 10.1 The Registrant's Stock Option Plan (incorporated by reference to Exhibit 10.10 of Registration Statement No. 33-89250 of the Registrant on Form F-1). 10.2 Employment Agreement dated as of May 1, 1995 between the Registrant and Solomon Kerzner (incorporated by reference to Exhibit 10.2 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.3 Heads of Agreement among the Government of the Commonwealth of The Bahamas, the Registrant and SIIL dated August 18, 1993 (incorporated by reference to Exhibit 3.3 of the 1994 Annual Report of the Registrant on Form 20-F, as amended by Amendment No. 1 thereto, File No. 0-22794). 10.4 Heads of Agreement between the Government of the Commonwealth of The Bahamas and the Registrant dated December 13, 1995 (incorporated by reference to Exhibit 10.4 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.5 Amended and Restated Partnership Agreement of Trading Cove Associates dated as of August 29, 1995, among Sun Cove Limited, RJH Development Corp., Leisure Resort Technology, Inc., Slavik Suites, Inc. and LMW Investments, Inc. (incorporated by reference to Exhibit 10.7 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.6 Note Purchase Agreement dated as of September 29, 1995, between the Mohegan Tribal Gaming Authority and the Registrant (incorporated by reference to Exhibit 10.8 of the Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.7 Secured Completion Guarantee dated as of September 29, 1995, made by the Registrant in favor of First Fidelity Bank, as trustee (incorporated by reference to Exhibit 10.9 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.8 Amended and Restated Gaming Facility Development and Construction Agreement between the Mohegan Tribe of Indians of Connecticut and Trading Cove Associates dated September 1, 1995 (incorporated by reference to Exhibit 10.10 of Registration Statement No. 33-80477 of the Registrant on Form F-3).
II-2 10.9 Amended and Restated Gaming Facility Management Agreement between the Mohegan Tribe of Indians of Connecticut and Trading Cove Associates dated August 30, 1995 (incorporated by reference to Exhibit 10.11 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.10 Representative Management Agreement for properties located in the Indian Ocean region and managed by a subsidiary of the Registrant, together with an Addendum thereto and a related Novation Agreement (incorporated by reference to Exhibit 10.12 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.11 Technical Assistance Agreement dated April 24, 1992 between a subsidiary of the Registrant and Societe de Participation et d'Investissements dans les Casinos (incorporated by reference to Exhibit 10.13 of Registration Statement No. 33-80477 of the Registrant on Form F-3). 10.12 Form of Revolving Credit Facility among the Registrant, certain subsidiaries of the Registrant and certain lenders party thereto. 10.13 Stockholder Agreement dated as of August 19, 1996 among the Registrant and the stockholders named therein, as amended (included as Annex II to the Proxy Statement/ Prospectus). 10.14 Stockholder Agreement dated as of August 19, 1996 among GGE and SIIL, as amended (included as Annex III to the Proxy Statement/Prospectus). 10.15 Agreement for Sale dated September 18, 1996 among the Registrant, Ocean Properties Bahamas Limited and Paradise Corporation. 10.16 Declaration of Trust and Agreement dated as of October 29, 1996 among Sun, Sub and the Honorable Thomas H. Kean. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Arthur Anderson (in respect of their January 31, 1996 report incorporated by reference to the 1995 Sun 20-F). 23.2 Consent of Arthur Anderson (in respect of their December 15, 1995 report regarding the Mohegan Tribal Gaming Authority incorporated by reference to Sun's Report on Form 6-K dated January 30, 1996). 23.3 Consent of Ernst & Young, LLP (in respect of their February 19, 1996 report incorporated by reference to the 1995 GGE 10-K). 23.4 Consent of Ernst & Young LLP (in respect of their July 14, 1994 report incorporated by reference to the 1995 Sun 20-F). 23.5 Consent of Bear, Stearns & Co. Inc. (in respect of their August 18, 1996 opinion). 23.6 Consent of Morgan Stanley & Co. Incorporated (in respect of their August 19, 1996 opinion). 23.7 Consent of Harry B. Sands and Company (included in Exhibit 5.1 to this Registration Statement). 23.8 Consent of Cravath, Swaine & Moore (included in Exhibit 8.1 to this Registration Statement). 23.9 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 8.2 to this Registration Statement). 24.1 Power of Attorney (included on the signature page of this Registration Statement). 99.1 Form of proxy card to be mailed to holders of Ordinary Shares.
II-3 99.2 Form of proxy card to be mailed to holders of GGE Common Stock. 99.3 Form of proxy card to be mailed to holders of unexchanged pre-split shares of GGE Common Stock.
(b) Not applicable. (c) The opinion of Bear, Stearns & Co. Inc. is included as Annex IV to the Proxy Statement/ Prospectus and the opinion of Morgan Stanley & Co. Incorporated is included as Annex V to the Proxy Statement/Prospectus. ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (a) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; (b) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (c) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (d) to file a post-effective amendment to the Registration Statement to include any financial statements required by Rule 3-19 at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act of 1933 need not be furnished, PROVIDED that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (d) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements; (e) that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration II-4 Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (f) that prior to any public reoffering of the securities registered hereunder through the use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the Registrant undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable registration form; (g) that every prospectus (i) that is filed pursuant to paragraph (f) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is issued in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (h) insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue; (i) (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request; and (j) to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York on the 1st day of November, 1996. SUN INTERNATIONAL HOTELS LIMITED BY /S/ CHARLES D. ADAMO ----------------------------------------- NAME: CHARLES D. ADAMO TITLE: EXECUTIVE VICE PRESIDENT-GENERAL COUNSEL POWER OF ATTORNEY The Undersigned directors and/or officers, or both, of SUN INTERNATIONAL HOTELS LIMITED, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Sun"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form F-4, hereby constitute and appoint Charles D. Adamo, Howard B. Kerzner, John Allison and Kevin DeSanctis alone or acting together, their true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, their true and lawful attorneys-in-fact and agent, for them and in their names, place and stead, in any and all capacities, to sign said Registration Statement, and any and all amendments thereto, with power where appropriate to affix the corporate seal of Sun thereto and to attest said seal, and to file said Registration Statement and such amendment, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may pursuant to the requirements of the Securities Act of 1933, lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have duly signed this Power of Attorney in the capacities and on the dates indicated.
NAME TITLE DATE - ------------------------------------------------------ -------------------------------- ---------------------- Chairman of the Board of * Directors and Chief Executive ------------------------------------------- Officer (Principal Executive November 1, 1996 Solomon Kerzner Officer) * ------------------------------------------- Director November 1, 1996 Derek Hawton * ------------------------------------------- Director November 1, 1996 Peter Buckley * ------------------------------------------- Director November 1, 1996 Howard Marks * ------------------------------------------- Director November 1, 1996 Eric Siegel
II-6
NAME TITLE DATE - ------------------------------------------------------ -------------------------------- ---------------------- * Chief Financial Officer and ------------------------------------------- Secretary (Principal Financial November 1, 1996 John Allison Officer) * Authorized Representative in the ------------------------------------------- United States November 1, 1996 John Corbishley
*By: /s/ CHARLES D. ADAMO ------------------------- Charles D. Adamo ATTORNEY-IN-FACT II-7 EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE - --------- -------------------------------------------------------------------------------------------------- ----------- 3.1 Amended and Restated Memorandum of Association of the Registrant. ................................ 5.1 Opinion of Harry B. Sands and Company, as to the legality of the securities being registered. .... 8.1 Opinion of Cravath, Swaine & Moore, as to certain United States federal income tax consequences of the Merger. ...................................................................................... 8.2 Opinion of Gibson, Dunn & Crutcher LLP as to certain United States federal income tax consequences of the Merger. ................................................................................... 10.12 Form of Revolving Credit Facility among the Registrant, certain subsidiaries of the Registrant and certain lenders party thereto. ................................................................... 10.15 Agreement for Sale dated September 18, 1996 among the Registrant, Ocean Properties Bahamas Limited and Paradise Corporation. ........................................................................ 10.16 Declaration of Trust and Agreement dated as of October 29, 1996 among Sun, Sub and the Honorable Thomas H. Kean. .................................................................................. 21.1 Subsidiaries of the Registrant. .................................................................. 23.1 Consent of Arthur Anderson (in respect of their January 31, 1996 report incorporated by reference to the 1995 Sun 20-F). ........................................................................... 23.2 Consent of Arthur Anderson (in respect of their December 15, 1995 report regarding the Mohegan Tribal Gaming Authority incorporated by reference to Sun's report on Form 6-K dated January 30, 1996). ........................................................................................... 23.3 Consent of Ernst & Young, L.L.P. (in respect of their February 19, 1996 report incorporated by reference to the 1995 GGE 10-K). ................................................................. 23.4 Consent of Ernst & Young (in respect of their July 14, 1994 report incorporated by reference to the 1995 Sun 20-F). .............................................................................. 23.5 Consent of Bear, Stearns & Co. Inc. (in respect of their August 18, 1996 opinion) ................ 23.6 Consent of Morgan Stanley & Co. Incorporated (in respect of their August 19, 1996 opinion) ....... 99.1 Form of proxy card to be mailed to holders of Ordinary Shares. ................................... 99.2 Form of proxy card to be mailed to holders of GGE Common Stock. .................................. 99.3 Form of proxy card to be mailed to holders of unexchanged pre-split shares of GGE Common Stock. ...........................................................................................
EX-3.1 2 EXHIBIT 3.1 Exhibit 3.1 AMENDED AND RESTATED THE COMPANIES ACT 1992 ------------------- C O M P A N Y L I M I T E D B Y S H A R E S ---------------------------------- MEMORANDUM OF ASSOCIATION OF SUN INTERNATIONAL HOTELS LIMITED ------------------------------------------------------- 1. The name of the Company is SUN INTERNATIONAL HOTELS LIMITED. 2. The Registered Office of the Company will be situate in the Island of New Providence one of the Islands in the Commonwealth of The Bahamas. 3. The object or purpose for which the Company is established is to engage in any act or activity that is not prohibited under any law for the time being in force in the Commonwealth of The Bahamas. 4. The liability of the members is limited. 5. The capital of the Company is Three hundred and Fifty thousand Dollars in the currency of the United States of America (U.S.$350,000.00) divided into Three Hundred and Fifty million (350,000,000) shares of one-tenth of one cent ($0.001) each, with power to increase the capital and to divide the shares in the capital for the time being, whether original or increased, into several classes, and to attach thereto respectively any preferential, deferred, qualified, or special rights, privileges or conditions whether as to voting or otherwise. 6. The Company shall be a Public Company. [SEAL] EX-5.1 3 EXHIBIT 5.1 EXHIBIT 5.1 [LOGO] October 31, 1996 Sun International Hotels Limited, Executive Offices, Coral Towers, Paradise Island, The Bahamas Dear Sirs: RE: SUN INTERNATIONAL HOTELS LIMITED We have acted as Bahamian Counsel for Sun International Hotels Limited, a corporation organized under the laws of the Commonwealth of The Bahamahs (hereinafter called "the Company"), in connection with a Registration Statement on Form F-4 ("the Registration Statement") being filed with the Securities and Exchange Commission under the Securities Act of 1933 relating to the proposed issuance of up to 4,684,356 Ordinary Shares of the Company in connection with the merger of a wholly owned subsidiary of the Company into Griffin Gaming & Entertainment, Inc. pursuant to the terms of the August 19th, 1996 merger agreement, as amended ("the Merger Agreement"), among the Company, its subsidiary and Griffin Gaming & Entertainment, Inc. In the connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion, including the Articles of Association of the Company, as amended, and the Amended and Restated Memorandum of Association of the Company. Based upon the foregoing and having regard for such legal considerations as we deem, relevant, we are of the opinion as follows: 1. The Company is a validly existing corporation under the laws of the Common wealth of The Bahamas; and [LETTERHEAD] Sun International Hotels Limited , 1996 Page 2 2. The Ordinary Shares of the Company covered by the Registration Statement, when delivered in exchange for shares of Griffin Gaming & Entertainment, Inc. common stock and Class B stock pursuant to the Merger Agreement, will be duly authorized, validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name therein and in the related Proxy Statement/Prospectus under the caption "Legal Matters". Yours faithfully, HARRY B. SANDS & COMPANY /s/ GISELLE M. PYFROM --------------------------- GISELLE M. PYFROM EX-8.1 4 EXHIBIT 8.1 Exhibit 8.1 [CRAVATH, SWAINE & MOORE - LETTERHEAD] November 1, 1996 Dear Sirs: We have acted as counsel for Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of the Bahamas (the "Parent"), in connection with the proposed merger (the "Merger") of Sun Merger Corp ("Sub"), a Delaware corporation that is a direct, wholly-owned subsidiary of Parent, with and into Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"), pursuant to an Agreement and Plan of Merger dated as of August 19, 1966 (the "Merger Agreement"), among Parent, Sub and the Company. In that connection you have requested our opinion regarding certain Federal income tax consequences of the Merger. In providing our opinion, we have examined the Merger Agreement, the Joint Proxy Statement-Prospectus of Parent and the Company (the "Proxy Statement/Prospectus") and such other documents and corporate records as we have deemed necessary or appropriate for purposes of our opinion. In addition, we have assumed that (i) the Merger will be consummated in accordance with the provisions of the Merger Agreement and the Proxy Statement/Prospectus, (ii) the statements concerning the Merger set forth in the Merger Agreement and the Proxy Statement/Prospectus are accurate and complete, (iii) the representations made by Parent, the Company and a certain stockholder of the Company in their respective letters to us in the form of exhibits hereto and delivered to us for purposes of this opinion (the "Representation Letters") are accurate and complete and will remain accurate and complete at all times up to and including the Effective Time (as defined in the Merger Agreement), (iv) any representations made in the Representation Letters "to the best of knowledge of" or similarly qualified are correct without such qualification and (v) the Company complies with all of the reporting 2 requirements set forth in Treasury Regulation Sec. 1.367 (a)-3T(c)(4). If any of the above described assumptions are untrue for any reason, our opinions as expressed below may be adversely affected and may not be relied upon. Based upon the foregoing, for Federal income tax purposes, we are of the opinion that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), Parent and the Company will each be a party to such reorganization within the meaning of Section 368(b) of the Code, and that no gain or loss will be recognized by the shareholders of the Company upon their exchange of Company stock for Parent stock under Section 354 of the Code (except to the extent such a shareholder receives cash in lieu of fractional shares). Our opinions are based on current provisions of the Code, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service and case law, any of which may be changed at any time with retroactive effect. Any change in applicable laws or the facts and circumstances surrounding the Merger, or any inaccuracy in the statements, facts, assumptions and representations on which we relied, may affect the continuing validity of the opinion set forth herein. We assume no responsibility to inform you of any such change or inaccuracy that may occur or come to our attention. We hereby consent to your filing this opinion as part of the Prospectus and to the reference to our firm appearing under the caption "Certain Federal Income Tax Consequences" in the Prospectus. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the General Rules and Regulations of the Commission. This opinion is being provided solely for the benefit of Parent. No other person or party shall be entitled to rely on this opinion. Sincerely, /s/ Cravath, Swaine & Moore --------------------------- EX-8.2 5 EXHIBIT 8.2 Exhibit 8.2 [GIBSON, DUNN & CRUTCHER LLP - LETTERHEAD] November 1, 1996 (212) 351-4000 C 75259-00063 Griffin Gaming & Entertainment, Inc. 1133 Boardwalk Atlantic City, New Jersey 08401 Ladies and Gentlemen: You have requested our opinion regarding certain federal income tax consequences of the proposed merger (the "Merger") of Sun Merger Corp, a Delaware corporation ("Sub"), a direct, wholly-owned subsidiary of Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas ("Parent"), with and into Griffin Gaming & Entertainment, Inc., a Delaware corporation (the "Company"). In formulating our opinion, we have reviewed such documents as we deemed necessary or appropriate, including that certain Agreement and Plan of Merger, dated as of August 19, 1996, among Parent, Sub, and the Company (the "Merger Agreement"), and that certain Joint Proxy Statement-Prospectus of Parent and the Company (the "Prospectus"). Our opinion set forth below assumes (i) the accuracy of the statements and facts concerning the Merger set forth in the Merger Agreement and the Prospectus, (ii) that the Merger is consummated in the manner contemplated by, and in accordance with, the terms set forth in the Merger Agreement and the Prospectus, (iii) the accuracy of (a) the representations made to us by Parent, which are set forth in the representation letter delivered to us by Parent, dated November 1, 1996, (b) the representations made to us by the Company, which are set forth in the representation letter delivered to us by the Company, dated November 1, 1996, and (c) the representations made to us by a certain shareholder of the Company, which are set forth in the representation letter delivered to us by said shareholder, dated November 1, 1996, and (iv) that the Company complies with all of the reporting requirements set forth in Treasury Regulation Sec. 1.367(a)-3T(c)(4). Griffin Gaming & Entertainment, Inc. November 1, 1996 Page 2 Based upon the facts and statements set forth above, our examination and review of the documents referred to above, and subject to the assumptions set forth above, we are of the opinion that: 1. The Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Parent, Sub and the Company each will be treated as a party to a reorganization within the meaning of Section 368(b) of the Code. We express no opinion concerning any tax consequences of the Merger other than those specifically set forth herein. Our opinion is based on current provisions of the Code, the Treasury Regulations promulgated thereunder, published pronouncements of the Internal Revenue Service and case law, any of which may be changed at any time with retroactive effect. Any change in application laws or the facts and circumstances surrounding the Merger, or any inaccuracy in the statements, facts, assumptions and representations on which we relied, may affect the continuing validity of the opinion set forth herein. We assume no responsibility to inform you of any such change or inaccuracy that may occur or come to our attention. We hereby consent to your filing this opinion as part of the Prospectus and to the reference to our firm appearing under the caption "Certain Federal Income Tax Consequences" in the Prospectus. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the General Rules and Regulations of the Commission. Very truly yours, /s/ Gibson, Dunn & Crutcher LLP DBR/ADP/CRB EX-10.12 6 EXHIBIT 10.12 EX-10.12 Credit Agreement TABLE OF CONTENTS SECTION PAGE - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms................................................ 3 1.2. Use of Defined Terms......................................... 40 1.3. Cross-References............................................. 40 1.4. Accounting and Financial Determinations...................... 40 ARTICLE II COMMITMENTS, BORROWING PROCEDURES, NOTES AND LETTERS OF CREDIT 2.1. Amendment and Restatement; Commitments....................... 41 2.1.1. Commitment of Each Lender.................................... 42 2.1.2. Letter of Credit Commitment.................................. 42 2.1.3. Lenders Not Permitted or Required to Make Loans.............. 42 2.1.4. Issuer Not Permitted or Required to Issue Letters of Credit................................................. 42 2.2. Reduction of Commitment Amount............................... 42 2.2.1. Optional..................................................... 43 2.3. Borrowing Procedure.......................................... 43 2.4. Continuation and Conversion Elections........................ 43 2.5. Funding...................................................... 44 2.6. Issuance Procedures.......................................... 44 2.6.1. Other Lenders' Participation................................. 44 2.6.2. Disbursements................................................ 45 2.6.3. Reimbursement................................................ 45 2.6.4. Deemed Disbursements......................................... 46 2.6.5. Nature of Reimbursement Obligations.......................... 46 2.7. Notes........................................................ 47 ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES 3.1. Repayments and Prepayments................................... 48 3.2. Interest Provisions.......................................... 49 3.2.1. Rates........................................................ 49 3.2.2. Post-Maturity Rates.......................................... 49 3.2.3. Payment Dates................................................ 49 3.3. Fees......................................................... 50 3.3.1. Commitment Fee............................................... 50 3.3.2. Letter of Credit Fee......................................... 50 3.3.3. Other Fees................................................... 51 3.4. Guaranty Provisions.......................................... 51 3.4.1. Guaranty..................................................... 51 -i- SECTION PAGE - ------- ---- 3.4.2. Acceleration of Guaranty..................................... 51 3.4.3. Guaranty Absolute, etc....................................... 52 3.4.4. Reinstatement, etc........................................... 53 3.4.5. Waiver, etc.................................................. 53 3.4.6. Postponement of Subrogation, etc............................. 53 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS 4.1. LIBO Rate Lending Unlawful................................... 54 4.2. Deposits Unavailable......................................... 55 4.3. Increased LIBO Rate Loan Costs, etc.......................... 55 4.4. Funding Losses............................................... 56 4.5. Increased Capital Costs...................................... 56 4.6. Taxes........................................................ 57 4.7. Payments, Computations, etc.................................. 58 4.8. Sharing of Payments.......................................... 59 4.9. Setoff....................................................... 60 4.10. Defaulting Lender............................................ 60 4.11. Replacement Lender........................................... 61 ARTICLE V CONDITIONS TO CREDIT EXTENSIONS 5.1. Initial Credit Extension..................................... 62 5.1.1. Resolutions, etc............................................. 62 5.1.2. Delivery of Notes............................................ 62 5.1.3. Form of Performance Bond/Completion and Cost Overrun Agreement......................................... 62 5.1.4. Guaranty..................................................... 63 5.1.5. SIHL Pledge Agreement and Borrower Pledge Agreement................................................. 63 5.1.6. Subsidiary Pledge Agreement.................................. 63 5.1.7. Foreign Pledge Agreements.................................... 63 5.1.8. Obligor Contract Assignment Agreements....................... 64 5.1.9. Perfected Liens.............................................. 64 5.1.10. Debentures................................................... 64 5.1.11. Other Security Instruments................................... 65 5.1.12. Prime Contractor; Inspecting Engineer's Report............... 66 5.1.13. Opinions of Counsel.......................................... 67 5.1.14. Closing Date Certificates.................................... 68 5.1.15. Compliance Certificate....................................... 68 5.1.16. Plans and Specifications, etc................................ 68 5.1.17. Environmental Reports........................................ 68 5.1.18. Survey....................................................... 68 5.1.19. Title Insurance.............................................. 69 5.1.20. Contracts.................................................... 69 -ii- SECTION PAGE - ------- ---- 5.1.21. Leases....................................................... 69 5.1.22. Insurance Policies; Assignment of Policies................... 69 5.1.23. Exchange Approval............................................ 70 5.1.24. Intercreditor Agreement...................................... 70 5.2. All Credit Extensions........................................ 70 5.2.1. Compliance with Warranties, No Default, etc.................. 70 5.2.2. Credit Extension Request..................................... 72 5.2.3. Completion/Cost Overrun Guaranty............................. 72 5.2.4. Title Policy Endorsement..................................... 72 5.2.5. Updated Project Cost Analysis................................ 72 5.2.6. Change Orders................................................ 72 5.2.7. Cost of Completion........................................... 73 5.2.8. Inspecting Engineer's Approval............................... 74 5.2.9. Satisfactory Legal Form...................................... 74 ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1. Organization, etc............................................ 75 6.2. Due Authorization, Non-Contravention, etc.................... 75 6.3. Government Approval, Regulation, etc......................... 76 6.4. Validity, etc................................................ 76 6.5. Financial Information........................................ 76 6.6. No Material Adverse Change................................... 76 6.7. Litigation, Labor Controversies, etc......................... 77 6.8. Subsidiaries................................................. 77 6.9. Ownership of Properties...................................... 77 6.10. Taxes........................................................ 77 6.11. Pension and Welfare Plans.................................... 77 6.12. Environmental Warranties..................................... 78 6.13. Regulations G, U and X....................................... 79 6.14. Accuracy of Information...................................... 80 6.15. Compliance of Property with Legal and Insurance Requirements, etc......................................... 80 6.16. Protection under Security Instruments........................ 80 6.17. Leases....................................................... 80 6.18. Development Rights........................................... 81 6.19. No Condemnation Proceedings.................................. 81 6.20. Insurance.................................................... 81 6.21. Improvements................................................. 81 6.22. Seniority of Obligations, etc................................ 82 6.23. Shell Status of SCI and SCM.................................. 82 ARTICLE VII COVENANTS 7.1. Affirmative Covenants........................................ 82 -iii- SECTION PAGE - ------- ---- 7.1.1. Financial Information, Reports, Notices, etc................. 83 7.1.2. Compliance with Laws, etc.................................... 85 7.1.3. Maintenance of Properties.................................... 85 7.1.4. Insurance.................................................... 86 7.1.5. Books and Records............................................ 89 7.1.6. Environmental Covenant....................................... 89 7.1.7. Future Investments and Restricted Subsidiaries............... 90 7.1.8. Inspecting Engineer's Access to Information.................. 91 7.1.9. Use of Proceeds.............................................. 91 7.1.10. Management Contracts; Omnibus Agreement...................... 91 7.1.11. Compliance with Instruments.................................. 93 7.1.12. Priority of Lenders' Liens................................... 94 7.1.13. Access to Property........................................... 94 7.1.14. Notice of Delay.............................................. 94 7.1.15. Submission of Plans.......................................... 94 7.1.16. Compliance with Contracts.................................... 94 7.1.17. Delivery of Agreements, Contracts, etc....................... 94 7.2. Negative Covenants........................................... 95 7.2.1. Business Activities.......................................... 95 7.2.2. Indebtedness................................................. 95 7.2.3. Liens........................................................ 97 7.2.4. Financial Condition.......................................... 99 7.2.5. Investments..................................................103 7.2.6. Restricted Payments, etc.....................................106 7.2.7. Capital Expenditures, etc....................................108 7.2.8. Transactions with Affiliates.................................109 7.2.9. Restrictive Agreements, etc..................................109 7.2.10. Consolidation, Merger, etc...................................110 7.2.11. Asset Dispositions, etc......................................110 7.2.12. Management Contracts.........................................111 7.2.13. Leases.......................................................112 7.2.14. Modification of Subordinated Debt Documents..................112 7.2.15. Change Orders................................................113 7.2.16. Refurbishment................................................113 7.2.17. Rate Protection Agreements...................................113 ARTICLE VIII EVENTS OF DEFAULT 8.1. Listing of Events of Default.................................113 8.1.1. Non-Payment of Obligations...................................113 8.1.2. Breach of Warranty...........................................114 8.1.3. Non-Performance of Certain Covenants and Obligations...............................................114 8.1.4. Non-Performance of Other Covenants and Obligations...............................................114 8.1.5. Default on Other Indebtedness................................114 8.1.6. Judgments....................................................114 -iv- SECTION PAGE - ------- ---- 8.1.7. Pension Plans................................................115 8.1.8. Change in Control............................................115 8.1.9. Bankruptcy, Insolvency, etc..................................115 8.1.10. Impairment of Security, etc..................................116 8.1.11. Amendments to, or Termination of, Certain Agreements................................................116 8.1.12. Loss of Bahamian Approvals...................................116 8.1.13. Outside Completion Date......................................117 8.1.14. Loss or Revocation of Casino License.........................117 8.1.15. Abandonment of Project.......................................117 8.1.16. Loss of Property; Change in Management.......................117 8.1.17. Failure of Subordination.....................................117 8.1.18. Redemption...................................................118 8.2. Action if Bankruptcy.........................................118 8.3. Action if Other Event of Default.............................118 ARTICLE IX THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND MANAGING AGENTS 9.1. Actions......................................................118 9.2. Funding Reliance, etc........................................119 9.3. Exculpation..................................................120 9.4. Successor....................................................120 9.5. Loans by Agents..............................................122 9.6. Credit Decisions.............................................122 9.7. Copies, etc..................................................123 9.8. Administrative Agent Independent Rights......................123 ARTICLE X MISCELLANEOUS PROVISIONS 10.1. Waivers, Amendments, etc.....................................123 10.2. Notices......................................................124 10.3. Payment of Costs and Expenses................................124 10.4. Indemnification..............................................125 10.5. Survival.....................................................127 10.6. Severability.................................................127 10.7. Headings.....................................................127 10.8. Execution in Counterparts, Effectiveness, etc................127 10.9. Governing Law; Entire Agreement..............................127 10.10. Successors and Assigns.......................................128 10.11. Sale and Transfer of Loans and Note; Participations in Loans and Note..........................128 10.11.1. Assignments..................................................128 10.11.2. Participations...............................................130 -v- SECTION PAGE - ------- ---- 10.12. Other Transactions...........................................131 10.13. Forum Selection and Consent to Jurisdiction..................131 10.14. Waiver of Jury Trial.........................................132 10.15. Judgment Currency............................................132 10.16. Confidentiality..............................................133 10.17. Schedules....................................................133 10.18. Replacement of Lenders.......................................134 -vi- SCHEDULE I - Disclosure Schedule EXHIBIT A - Form of Note EXHIBIT B-1 - Form of Borrowing Request EXHIBIT B-2 - Form of Issuance Request EXHIBIT C - Form of Continuation/Conversion Notice EXHIBIT D - Form of Lender Assignment Agreement EXHIBIT E - Form of Guaranty EXHIBIT F-1 - Form of Borrower Pledge Agreement EXHIBIT F-2 - Form of Amended and Restated SIHL Pledge Agreement EXHIBIT F-3 - Form of Subsidiary Pledge Agreement EXHIBIT G - Form of Obligor Contract Assignment Agreement EXHIBIT H-1 - Form of Borrower Closing Date Certificate EXHIBIT H-2 - Form of SIHL Closing Date Certificate EXHIBIT I - Form of Compliance Certificate EXHIBIT J - Form of Debentures EXHIBIT K - Form of Subordination Agreement EXHIBIT L - Form of Assignment of Architect's Agreement EXHIBIT M - Form of Architect's Consent to Assignment EXHIBIT N - Form of Assignment of Contracts EXHIBIT O - Form of Contractor's Consent to Assignment EXHIBIT P - Form of Permitted Investment Note EXHIBIT Q - Form of Intercreditor Agreement -vii- MBP DRAFT 10/25/96 U.S. $250,000,000 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of November 1, 1996, among SUN INTERNATIONAL BAHAMAS LIMITED, as the Borrower, SUN INTERNATIONAL HOTELS LIMITED and THE SUBSIDIARIES OF THE BORROWER PARTIES HERETO, as Guarantors, VARIOUS FINANCIAL INSTITUTIONS, as the Lenders, THE BANK OF NOVA SCOTIA and THE ROYAL BANK OF SCOTLAND plc, as the Managing Agents, and THE BANK OF NOVA SCOTIA, as the Administrative Agent and the Collateral Agent for the Lenders. AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of November 1, 1996, is among SUN INTERNATIONAL BAHAMAS LIMITED, a corporation organized under the laws of The Commonwealth of the Bahamas (the "Borrower"), SUN INTERNATIONAL HOTELS LIMITED, a corporation organized under the laws of The Commonwealth of the Bahamas ("SIHL") and those Subsidiaries of the Borrower parties hereto, as Guarantors, the various financial institutions as are or may become parties hereto (collectively, the "Lenders"), THE BANK OF NOVA SCOTIA ("Scotiabank") and THE ROYAL BANK OF SCOTLAND plc ("Royal Bank"), as the managing agents (collectively, the "Managing Agents") for the Lenders and Scotiabank, as administrative agent (the "Administrative Agent") and as Collateral Agent for the Lenders. W I T N E S S E T H: WHEREAS, each of SIHL and the Borrower are engaged directly and through their various Subsidiaries in the business of owning and operating hotel and casino properties and other activities in the resort and gaming industry; WHEREAS, pursuant to the facility agreement, dated as of May 3, 1994 (as amended (including the amendments described below), supplemented, amended and restated or otherwise modified prior to the date hereof, the "Existing Credit Agreement"), among the Borrower, SIHL (as pledgor), certain Subsidiaries of the Borrower parties thereto (as guarantors), certain financial institutions from time to time parties thereto as managers and banks (the "Existing Lenders") and Scotiabank as lead manager and as agent, the Existing Lenders made and remain committed to make extensions of credit to the Borrower on the terms set forth therein; WHEREAS, by an amendment to the Existing Credit Agreement, dated December 27, 1994 (the "First Amendment Agreement"), made between the same parties as are parties to the Existing Credit Agreement, the Existing Lenders agreed to increase the facility granted to the Borrower from $75,000,000 to $80,000,000 (the "Loan Facility") and certain terms and provisions of the Existing Credit Agreement were amended as therein contained; WHEREAS, by a further amendment to the Existing Credit Agreement, dated March 8, 1996 (the "Second Amendment Agreement") made between the same parties as are parties to the Existing Credit Agreement, certain terms and provisions of the Existing Credit Agreement were further amended whereby the Loan Facility would be made available to the Borrower as a revolving loan facility upon the terms and conditions therein contained; WHEREAS, the Borrower, SIHL and the Guarantors parties hereto have requested that the Existing Credit Agreement be amended and restated in its entirety to become effective and binding on the Borrower, SIHL and such Guarantors pursuant to the terms of this Agreement and the Lenders (including the Existing Lenders) have agreed (subject to the terms of this Agreement) to amend and restate the Existing Credit Agreement in its entirety to read as set forth in this Agreement, and it has been agreed by the parties to the Existing Credit Agreement that the commitments which the Existing Lenders have agreed to extend to the Borrower (which includes the Loan Facility) under the Existing Credit Agreement shall be extended or advanced upon the amended and restated terms and conditions contained in this Agreement with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (which shall hereafter have no further effect upon the parties thereto, other than for accrued fees and expenses, and indemnification provisions, accrued and owing under the terms of the Existing Credit Agreement on or prior to the date hereof or arising (in the case of an indemnification) under the terms of the Existing Credit Agreement); provided, that any Rate Protection Agreements with any one or more Existing Lenders (or their respective Affiliates) shall continue unamended and in full force and effect; WHEREAS, in connection with amending and restating the Existing Credit Agreement, the Borrower desires to obtain Commitments from the Lenders pursuant to which (a) Loans in a maximum aggregate principal amount, together with all Letter of Credit Outstandings at any one time outstanding, not to exceed the then existing Commitment Amount will be made to the Borrower from time to time prior to the Commitment Termination Date; and (b) the Issuer will issue Letters of Credit for the account of SIHL, the Borrower or the Restricted Subsidiaries (and the Lenders will participate in such Letters of Credit) from time to time prior to the Commitment Termination Date in a maximum aggregate Stated Amount at any one time outstanding not to exceed $15,000,000 (provided, that the aggregate outstanding principal amount of Loans and Letter of Credit Outstandings at any time shall not exceed the then existing Commitment Amount); WHEREAS, the Existing Lenders, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth (including Article V), to amend and restate the Existing Credit Agreement in its entirety pursuant to the terms of this Agreement, and the Lenders and the Issuer are willing to extend such Commitments and make such Loans to the -2- Borrower and issue (or participate in) such Letters of Credit for the account of SIHL, the Borrower and the Restricted Subsidiaries; WHEREAS, the proceeds of (a) Loans will be applied (i) towards the Project Costs in respect of which such Loans were advanced by the Lenders, (ii) for the general corporate purposes of the Borrower, SIHL and Restricted Subsidiaries and (iii) subject to Section 7.1.9, to make Permitted Investments by SIHL, the Borrower or other Restricted Subsidiaries, as more fully described below; and (b) Letters of Credit will be issued for the account of SIHL, the Borrower and the Restricted Subsidiaries for the general corporate purposes of such Persons; and WHEREAS, as an inducement to the Existing Lenders, the Lenders and the Issuer amending and restating the Existing Credit Agreement and entering into this Agreement, and the Lenders and the Issuer extending their Commitments to make Credit Extensions, SIHL, the Borrower and the other Restricted Subsidiaries are required to execute and deliver this Agreement and certain other Loan Documents, guaranty the Obligations of the Borrower and perform (and, in the case of SIHL, cause certain of its Restricted Subsidiaries to perform) their respective obligations hereunder and under the Loan Documents; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Additional Expenditure Amount" means the amount by which the aggregate Project Costs are anticipated to exceed $300,000,000, based on the certificate delivered to the Managing Agents pursuant to Section 5.1.16 or Section 5.2.7 or as reflected in any revision to the Preliminary Project Cost Analysis or the Project Cost Analysis in connection with any Change Order (and determined, in each case, at the time such certificates and Change Orders are delivered); provided, that if SIHL or the Borrower knows that Project Costs will exceed, or be -3- less than, the amounts set forth in such certificates, in the Preliminary Project Cost Analysis or in the Project Cost Analysis, then the Additional Expenditure Amount shall be based on such increased, or decreased, amount of Project Costs, respectively. "Additional Mohegan Sub Notes" is defined in the definition of Mohegan Sub Notes. "Administrative Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agents" means, collectively, the Administrative Agent, the Collateral Agent and the Managing Agents. "Agreement" means, on any date, this Amended and Restated Revolving Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. "Allowed Amount" means $100,000,000; provided, however,that if SIHL has Unconsolidated EBITDA (excluding therefrom all amounts payable to SIHL or a Restricted Subsidiary under the Resorts Agreement) of at least $43,000,000 for the 1996 Fiscal Year as certified by an Authorized Officer of SIHL with the financial reports required to be delivered in accordance with clause(b) of Section 7.1.1, then the Allowed Amount shall be $125,000,000. "Alternate Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of -4- (a) the rate of interest most recently established by the Administrative Agent at its Domestic Office as its base rate for Dollar loans; and (b) the Federal Funds Rate most recently determined by the Administrative Agent plus 1/2 of 1%. The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Applicable Base Rate Margin" means, with respect to any Base Rate Loan on any date, (i) at all times prior to the date of Substantial Completion, 1.50% per annum, and (ii) thereafter, the per annum percentage set forth below opposite the Total Debt to Unconsolidated EBITDA Ratio indicated in the Compliance Certificate most recently delivered pursuant to this Agreement: Total Debt to Unconsolidated Applicable Base EBITDA Ratio Rate Margin ---------------------------- --------------- Greater than or equal to 3.0:1 1.50% Greater than or equal to 2.0:1 but less than 3.0:1 1.00% Less than 2.0:1 0.50% The Total Debt to Unconsolidated EBITDA Ratio used to compute the Applicable Base Rate Margin shall, subject to the next sentence, be the Total Debt to Unconsolidated EBITDA Ratio set forth in the Compliance Certificate most recently delivered by SIHL to the Administrative Agent; changes in the Applicable Base Rate Margin resulting from a change in the Total Debt to Unconsolidated EBITDA Ratio shall become effective upon delivery by SIHL to the Administrative Agent of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1. If SIHL shall fail to deliver a Compliance Certificate within 60 days after the end of any Fiscal Quarter as required pursuant to clause (c) of Section 7.1.1, the Applicable Base Rate Margin from and including the 61st day after the end of such Fiscal Quarter to but not including the date SIHL delivers to the Administrative Agent a Compliance Certificate shall conclusively equal 1.50% per annum. "Applicable LIBO Rate Margin" means, with respect to any LIBO Rate Loan on any date, (i) at all times prior to the date of -5- Substantial Completion, 2.25% per annum, and (ii) thereafter, the per annum percentage set forth below opposite the Total Debt to Unconsolidated EBITDA Ratio indicated in the Compliance Certificate most recently delivered pursuant to this Agreement: Total Debt to Unconsolidated Applicable LIBO EBITDA Ratio Rate Margin ---------------------------- --------------- Greater than or equal to 3.0:1 2.250% Greater than or equal to 2.0:1 but less than 3.0:1 1.875% Less than 2.0:1 1.500% The Total Debt to Unconsolidated EBITDA Ratio used to compute the Applicable LIBO Rate Margin shall, subject to the next sentence, be the Total Debt to Unconsolidated EBITDA Ratio set forth in the Compliance Certificate most recently delivered by SIHL to the Administrative Agent; changes in the Applicable LIBO Rate Margin resulting from a change in the Total Debt to Unconsolidated EBITDA Ratio shall become effective upon delivery by SIHL to the Administrative Agent of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1. If SIHL shall fail to deliver a Compliance Certificate within 60 days after the end of any Fiscal Quarter as required pursuant to clause (c) of Section 7.1.1, the Applicable LIBO Rate Margin from and including the 61st day after the end of such Fiscal Quarter to but not including the date SIHL delivers to the Administrative Agent a Compliance Certificate shall conclusively equal 2.25% per annum. "Architect's Agreements" means the material agreements pursuant to which architects, engineers and other design professionals have agreed with SIHL or any of its Subsidiaries to provide services in connection with the Project. "Assignee Lender" is defined in Section 10.11.1. "Assignment of Architect's Agreements" is defined in clause (b) of Section 5.1.11. "Assignment of Contracts" is defined in clause (c) of Section 5.1.11. "Authorized Officer" means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.1. "Bahamas Casino Lease" is defined in Section 6.17. -6- "Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Borrower" is defined in the preamble. "Borrower Closing Date Certificate" means the closing date certificate executed and delivered by the Borrower pursuant to Section 5.1.14, substantially in the form of Exhibit H-1 hereto. "Borrower EBITDA" means, at the end of any Fiscal Quarter, the aggregate amount of the sum of the items set forth in clauses (a) through (e) (inclusive) of the definition of Consolidated EBITDA, but only to the extent such items are directly attributable to the Borrower and its Subsidiaries for such Fiscal Quarter and the three immediately preceding Fiscal Quarters. "Borrower Pledge Agreement" means the Pledge Agreement executed and delivered by the Borrower pursuant to Section 5.1.5, substantially in the form of Exhibit F-1 hereto, as further amended, supplemented, restated or otherwise modified from time to time. "Borrowing" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Request" means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1 hereto. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or London, England; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the London interbank market. "Caledonia" means Caledonia Investments Plc., an English corporation. "Capital Expenditures" means, for any period, the sum of (a) the aggregate amount of all expenditures of any Person for fixed or capital assets made during such period -7- which, in accordance with GAAP, would be classified as capital expenditures; and (b) without duplication, the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "Capitalized Lease Liabilities" means all monetary obligations of any Person under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Cash Equivalent Investment" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc., or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, or (ii) any Lender; or (d) any repurchase agreement entered into with any Lender (or other commercial banking institution of the stature referred to in clause (c)(i)) which -8- (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c); and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder. "Casino Licenses" means, collectively, all licenses that are required to be granted by any applicable federal, state, local, tribal or other regulatory body, gaming board or other agency that has jurisdiction over (i) the Mohegan Sun Casino, (ii) any casino now or hereafter located on the Property, (iii) if the Griffin Merger is consummated, and if and when a casino license is granted, the Resorts Casino Hotel in Atlantic City, New Jersey, U.S.A. or (iv) any other casinos otherwise owned or operated by SIHL, the Borrower or any other Restricted Subsidiary that are singly or in the aggregate of equal or greater importance to the ongoing operations of SIHL and the Restricted Subsidiaries as those casinos specified in clauses (i), (ii) and (iii) above. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means (a) the failure of WLG, Caledonia or KIL to control and have the power to vote individually or in aggregate, directly or indirectly, at least 45% (at all times prior to the date of Substantial Completion) and 35% (thereafter) of all of the outstanding shares of all classes of voting stock of SIHL (on a fully diluted basis); provided, that the percentages 45% and 35% may be reduced (but in no event shall such percentages be reduced to less than 40% and 30%, respectively) by the aggregate amount of the voting stock of SIHL (if any) that is issued in connection with the Griffin Merger or would be considered outstanding as a result of the issuance of Subordinated Notes which are convertible into the voting stock of SIHL; or (b) any "person" or "group" (as such terms are used in Rule 13d-5 under the Exchange Act, and Sections 13(d) and 14(d) of the Exchange Act) of persons (other than WLG, Caledonia, KIL or other Persons approved by SIIL) becomes, directly or indirectly, in a single transaction or in a related series of transactions by way of merger, -9- consolidation, or other business combination or otherwise, the "beneficial owner" (as such term is used in Rule 13d-3 of the Exchange Act) of more than 20% of the outstanding shares of all classes of voting stock of SIHL (on a fully diluted basis); provided, that if, prior to the date of Substantial Completion, the percentage of ownership set forth in clause (a) is reduced to 40%, then the percentage set forth above in this clause shall be reduced to 19%; or (c) prior to the date of Substantial Completion, the failure of WLG to control and have the power to vote, directly or indirectly, at least 10% of all of the outstanding shares of all classes of voting stock of SIHL (on a fully diluted basis); or (d) prior to the date of Substantial Completion, the failure of trusts, of which the beneficiaries are (and shall be) Solomon Kerzner and his immediate family, to directly own at least 51% of all of the outstanding shares of all classes of voting stock of WLG (on a fully diluted basis); or (e) during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors of SIHL (together with any new directors whose election to such Board or whose nomination for election by the stockholders of SIHL was approved by WLG, Caledonia or KIL or 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 Board of Directors of SIHL then in office; or (f) the failure of SIHL to directly own, free and clear of all Liens (other than Liens in favor of the Secured Parties) 100% of the issued and outstanding shares of capital stock of the Borrower, on a fully-diluted basis. "Change Orders" means, subject to Section 7.2.15, the change orders to the Plans and Specifications the result of which is to (i) singly or in the aggregate increase the cost of the Project by $15,000,000 or more, (ii) extend the scheduled completion of the Project by more than three months or (iii) otherwise significantly affect the nature, scope or quality of the Project as determined by the Managing Agents, in all cases issued between the date of this Agreement and the date for which the Change Order is to be reviewed. -10- "Closing Date Certificates" means, collectively, the Borrower Closing Date Certificate and the SIHL Closing Date Certificate. "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral Agent" means The Bank of Nova Scotia, in its capacity as collateral agent for the Secured Parties, and each other Person as shall have subsequently been appointed as a successor collateral agent for the Secured Parties. "Combination Agreement" means the Combination and Restructuring Agreement, dated as of December 12, 1994, between the Borrower and SIHL, a true and correct copy of which has been previously delivered to the Administrative Agent. "Commitment" means, as the context may require, a Lender's Loan Commitment or the Issuer's (or a Lender's) Letter of Credit Commitment. "Commitment Amount" means, on any date, $250,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Commitment Termination Date" means the earliest to occur of (a) October 31, 2001; (b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (b) or (c), the Commitments shall terminate automatically and without further action. "Commitment Termination Event" means the earliest to occur of (a) the occurrence of any Event of Default described in clauses (a) through (d) of Section 8.1.9; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans to be due and payable pursuant to Section 8.3, or -11- (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "Compliance Certificate" means a certificate duly completed and executed by an Authorized Officer of SIHL, substantially in the form of Exhibit I hereto, as amended, supplemented, amended and restated or otherwise modified from time to time, together with such changes thereto as the Administrative Agent may from time to time reasonably request for the purpose of monitoring each of SIHL's and the Borrower's compliance with the financial covenants contained herein. "Connecticut Management Agreement" means the Amended and Restated Gaming Facility Agreement, dated as of August 30, 1995, between TCA and the Mohegan Tribe of Indians of Connecticut. "Connecticut Opportunity" means the development and management of a resort and casino to be situated in the town of Montville, Connecticut on property owned by Mohegan Tribe of Indians of Connecticut. "Consolidated EBITDA" means, at the end of any Fiscal Quarter, the aggregate amount of the sum of the items set forth in clauses (a) through (e) (inclusive) below for SIHL and its Subsidiaries for such Fiscal Quarter plus the three immediately preceding Fiscal Quarters: (a) Net Income, plus (b) the amount deducted, in determining Net Income, representing amortization, plus (c) the amount deducted, in determining Net Income, of all income taxes (whether paid or deferred) of SIHL and its Subsidiaries, plus (d) Interest Expense, plus (e) the amount deducted, in determining Net Income, representing depreciation of assets. -12- "Consolidated Interest Coverage Ratio" means, at the close of any Fiscal Quarter, the ratio computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters of: (a) Consolidated EBITDA (for all such Fiscal Quarters) to (b) the sum (for all such Fiscal Quarters) of Interest Expense of SIHL and its Subsidiaries. "Consolidated Net Worth" means, on any date of determination, the Net Worth of SIHL and its Subsidiaries on such date. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable (i) by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, (ii) to otherwise assure a creditor against loss for Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or (iii) for the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby; provided that, notwithstanding the foregoing, "Contingent Liability" shall not include obligations or payments that may become due under the terms of the Secured Completion Guaranty. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto. "Contracts" shall mean all material contracts of SIHL or its Subsidiaries with construction contractors or providers of goods and services for or in connection with the construction of the Project. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. -13- "Credit Extension" means, as the context may require, (a) the making of a Loan by a Lender; or (b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any existing Letter of Credit, by the Issuer and participation in such Letter of Credit by the Lenders pursuant to the terms of this Agreement. "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Debentures" is defined in Section 5.1.10. "Debt" means, without duplication, (i) the aggregate outstanding principal and stated amount of all Indebtedness of SIHL and its Restricted Subsidiaries of the nature referred to in clauses (a), (b), (c) and (f) of the definition of "Indebtedness" and (ii) any Contingent Liabilities of SIHL and its Restricted Subsidiaries in respect of any types of the Indebtedness described in clause (i) above. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Defaulting Lender" means (a) any Lender that fails in its obligation to fund any Loan pursuant to Section 2.1 or participate in any Letter of Credit Outstandings pursuant to the terms of this Agreement and such failure continues for three consecutive Business Days; provided that the refusal of a Lender to make a Loan because it in good faith asserts that the Borrower has failed to satisfy a condition precedent to borrowing contained in Article V shall not result in such Lender becoming a "Defaulting Lender"; (b) any Lender as to which any event of the type described in Section 8.1.9 occurs (with all references in such Section to the Borrower instead being to such Lender); (c) any Lender as to which any governmental authority (including the Office of Thrift Supervision, Resolution Trust Corporation, the Federal Deposit Insurance Company, the Office of the Comptroller of Currency or the Federal Reserve Board) directly or indirectly seizes, takes possession of or undertakes, authorizes, or orders similar action with respect to, or authorizes, or orders the liquidation, dissolution, winding up, sale, transfer or -14- other disposition of, or takes steps or institutes proceedings or otherwise proceeds to liquidate, dissolve, wind up, sell, transfer or otherwise dispose of, such Lender or all or any part of such Lender's property or appoints or authorizes or orders the appointment of a receiver, liquidator, sequestrator, trustee, custodian, conservator or other officer or entity having similar powers over such Lender or over all or any part of such Lender's property. "Disbursement" is defined in Section 2.6.2. "Disbursement Date" is defined in Section 2.6.2. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Required Lenders. "Dollar" and the sign "$" mean lawful money of the United States. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "Effective Date" means the date this Agreement becomes effective pursuant to Section 10.8. "Environmental Laws" means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "Event of Default" is defined in Section 8.1. "Exchange Act" means the Securities and Exchange Act of 1934, as amended. "Existing Credit Agreement" is defined in the second recital. -15- "Existing Lenders" is defined in the second recital. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Scotiabank from three federal funds brokers of recognized standing selected by it. "Fee Letters" means, collectively, the confidential letter agreements by and between the Borrower and each Lender entering into a fee arrangement with Borrower or SIHL. "FF&E Debt" means Indebtedness of the type set forth in clause (f) of Indebtedness (and Contingent Liabilities incurred in connection therewith) to the extent incurred for furniture, fixtures and equipment used in, or to be located in or on, the Project, the amount of which shall be included in Project Costs. "First Amendment Agreement" is defined in the third recital. "Fiscal Quarter" means any quarter, ending on March 31, June 30, September 30 or December 31, of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g. the "1996 Fiscal Year") refer to the Fiscal Year ending on the December 31 occurring during such calendar year. "Foreign Pledge Agreement" means any supplemental pledge agreement governed by the laws of a jurisdiction other than a State of the United States executed and delivered by SIHL or any of its Restricted Subsidiaries pursuant to the terms of this Agreement, in form and substance satisfactory to the Administrative Agent, as may be necessary or desirable under the laws of organization or incorporation of a Subsidiary or Person in which an equity or similar interest is to be pledged to the Administrative Agent pursuant to the terms of Section 7.1.7, to further protect or perfect the Lien on and security interest in any collateral being pledged pursuant to a Pledge Agreement. -16- "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "Governmental Authority" means The Commonwealth of The Bahamas, the United States of America, any state, local or municipal entity located within the foregoing, and (in each case), any political subdivision thereof and any agency, department, commission, board, bureau or instrumentality of any of the foregoing or any quasi-governmental authority, now existing or hereafter created, having jurisdiction over the Property, the Borrower, any Obligor or any Lender Party. "Griffin" means Griffin Gaming & Entertainment, Inc., a Delaware corporation and its successors and assigns. "Griffin Merger" means the merger of Griffin with and into SMC upon the terms and conditions of the Griffin Merger Agreement. "Griffin Merger Agreement" means the Agreement and Plan of Merger, dated as of August 19, 1996, among SIHL, SMC and Griffin. "Guarantor" means SIHL, each Subsidiary of the Borrower and each Restricted Subsidiary that on (or following) the Effective Date executes and delivers a Guaranty to the Administrative Agent or is a party hereto as a "Guarantor". "Guaranty" means, collectively, each Subsidiary Guaranty executed and delivered by an Authorized Officer of each Restricted Subsidiary on the Effective Date pursuant to Section 5.1.4 or following the Effective Date pursuant to Section 7.1.7 and clause (f) of Section 7.2.5, substantially in the form of Exhibit E hereto, as amended, supplemented, restated or otherwise modified from time to time. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing -17- liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of any Obligor, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause such Obligor to be in default of any of its obligations under Section 7.2.4. "Improvements" shall mean the buildings, structures and other improvements located and constructed on the Land. "including" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; -18- (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit (including the Letters of Credit), whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined (other than current liabilities of a nature other than the current portion of Indebtedness of the type described in clause (a), (b) or (c) of this definition); (e) net liabilities of such Person under all Hedging Obligations; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer. "Indemnified Liabilities" is defined in Section 10.4. "Indemnified Parties" is defined in Section 10.4. "Inspecting Engineer" means Jackson Burnside or any other independent firm of professional engineers or consulting architects approved by the Managing Agents. "Instruments" shall mean any contract, agreement, indenture, mortgage, document or writing (whether by formal agreement, letter or otherwise) under which any obligation is evidenced, assumed or undertaken, or any Lien (or right or interest therein) is granted or perfected. -19- "Insurance Requirements" shall mean all provisions of any insurance policy covering or applicable to the Borrower or a Subsidiary of the Borrower, the Real Estate or any part thereof, all requirements of the issuer of any such policy and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any body exercising similar functions) applicable to or affecting (a) the Real Estate or any part thereof, (b) any use or condition thereof or (c) the Borrower. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement, dated the date hereof, in substantially the form of Exhibit Q hereto, as amended, supplemented, restated or otherwise modified from time to time. "Interest Expense" means, for any period, the aggregate amount of interest expense of a Person for such period which, in accordance with GAAP, would be included on the consolidated financial statements of such Person, including the portion of any rent paid on Capitalized Lease Liabilities which is allocable to interest expense in accordance with GAAP. Any such interest expense which is subject to a Hedging Obligation will be calculated on the net effect of any payments made by the other party to such Hedging Obligation. "Interest Period" means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than five different dates; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period may end later than the Stated Maturity Date. -20- "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person; (c) any ownership or similar interest held by such Person in any other Person; and (d) for purposes of clause (g) of Section 7.2.5 at all times prior to the date of Substantial Completion, the definition of "Investment" shall also include each of the items set forth in clause (a)(i) through (and including) clause (a)(vii) of the definition of "Permitted Investment Amount". The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Investment Amount" means $130,000,000; provided, however, that if SIHL does not have Unconsolidated EBITDA (including therefrom all amounts payable to SIHL or a Restricted Subsidiary under the Resorts Agreement) of at least $43,000,000 for the 1996 Fiscal Year, as certified by an Authorized Officer of SIHL with the financial reports required to be delivered in accordance with clause (b) of Section 7.1.1, then the Investment Amount shall be automatically reduced to $100,000,000 on the date of delivery of such financials. "Issuance Request" means a Letter of Credit request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-2 hereto. "Issuer" means Scotiabank in its capacity as the issuer of the Letters of Credit. "KIL" means Kersaf Investments Limited, a South African corporation. "Land" means all of the real property and improvements now or hereafter owned by any member of the SIBL Group (including approximately 180 acres of undeveloped real property, three hotels, a casino and an 18 hole golf course) located on Paradise -21- Island in The Commonwealth of the Bahamas described in any of the Debentures. "Lease" means each material lease, license, occupancy and use agreement, operating agreement, concession and other arrangement, oral or written, existing on the date of the initial Credit Extension or entered into after such date, in each case whereby any Person agrees to pay money or any other consideration for the use, possession or occupancy of the Property or any portion thereof. "Legal Requirements" with respect to any Person or property, shall mean all laws, statutes, codes, acts, ordinances, permits, licenses, authorizations, directions and requirements of all Governmental Authorities, departments, commissions, boards, courts, authorities, agencies, officials and officers, and any material deed restrictions or other requirements of record, applicable to such Person or such property, or any portion thereof or interest therein or any use or condition of such property or any portion thereof or interest therein (including those relating to zoning, planning, subdivision, building, safety, health, use, environmental quality and other similar matters). "Lender Assignment Agreement" means a Lender Assignment Agreement substantially in the form of Exhibit D hereto. "Lender Parties" means, collectively, each Agent, the Issuer and each Lender (and including, for purposes of the Rate Protection Agreements, any Affiliate of any Lender that is a counterparty to such Rate Protection Agreement), and their respective successors, transferees and assigns. "Lenders" is defined in the preamble. "Letter of Credit" is defined in Section 2.1.2. "Letter of Credit Commitment" means the Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and, with respect to each Lender, the obligations of such Lender to participate in such Letters of Credit pursuant to Section 2.6.1. "Letter of Credit Commitment Amount" means, on any date, a maximum amount of $15,000,000 (or, if less, the then existing Commitment Amount). -22- "Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to Scotiabank's LIBOR Office (or, if Scotiabank is not the Administrative Agent, first class banks in London) in the eurodollar interbank market as at or about 11:00 a.m. London, England time two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of Scotiabank's LIBO Rate Loan (or, if Scotiabank shall not then be making any LIBO Rate Loans, an amount approximately equal to the amount of the LIBO Rate Loan being made by the Lender then making the largest such LIBO Rate Loan) and for a period approximately equal to such Interest Period. "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/32 of 1%) determined pursuant to the following formula: LIBO Rate LIBO Rate = ----------------------------------------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Administrative Agent from Scotiabank, two Business Days before the first day of such Interest Period. -23- "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise) or charge against or interest in property to secure payment of a debt or performance of an obligation. "Loan" is defined in Section 2.1.1. "Loan Commitment" means, relative to any Lender, such Lender's obligation to make Loans pursuant to Section 2.1.1. "Loan Document" means this Agreement, the Notes, the Letters of Credit, each Obligor Contract Assignment Agreement, each Guaranty, each Pledge Agreement, the Debentures, each Borrowing Request, each Issuance Request, each Fee Letter, each Rate Protection Agreement and each other agreement, document or instrument delivered in connection herewith or therewith. "Management Contracts" means, collectively, the following agreements, in each case as amended or otherwise modified in accordance with the terms of this Agreement: (a) to the extent in effect, the Management Agreement, dated October 11, 1993, between SIBL, as assignee (on August 11, 1995) of the rights and obligations of SIHL under such Management Agreement and SIML, and any other management or similar agreement requiring the payment of money by any member of the SIBL Group (collectively referred to as the "PI Management Agreement"); -24- (b) the agreement, dated February 16, 1983, among SIML (formerly known as Southern Sun Hotel Management Limited), SRL and Mauritius Southern Sun Hotels Limited, as modified by an addendum, dated August 15, 1993, to such agreement among the parties thereto, in each case relating to the management of Saint Geran at Belle Mare, Mauritius; (c) the agreement, dated February 16, 1983, between SRL and SIML (formerly known as Southern Sun Hotel Management Limited), as modified by an addendum, dated August 15, 1993, to such agreement among the parties thereto, in each case relating to the management of Le Touessrok Hotel in Mauritius; (d) the agreement, dated February 16, 1983, between SRL and SIML (formerly known as Southern Sun Hotel Management Limited), as modified by an addendum, dated August 15, 1993, to such agreement among the parties thereto, in each case relating to the management of La Pirogue Hotel in Mauritius; (e) the agreement, dated 03.02.95, between Wolmar Sun Hotels Limited and SIML, relating to the management of the Sugar Beach hotel located in Wolmar, Flic en Flac in Mauritius and provisionally named Wolmar Sun Hotels Limited; (f) the agreement, dated 03.02.95, between Sun Leisure Ltd. and SIML, relating to the management of La Coco Beach hotel located in Belle Mare, Mauritius and provisionally named Sun Leisure Hotels Limited; (g) the Technical Assistance Agreement, dated April 24, 1992, between PBV and SPIC; (h) each management or similar agreement pursuant to which SIHL or any other Subsidiary of SIHL is paid fees in connection with the Connecticut Opportunity; and (i) the Resorts Agreement, for so long as any amounts paid thereunder are included in the calculation of Unconsolidated EBITDA, until such time as such agreement is no longer deemed to be a Management Contract pursuant to clause (b) of Section 7.1.10. "Managing Agents" is defined in the preamble. "Mohegan Sub Notes" means the subordinated notes in original aggregate principal amount of $38,300,000 payable to SIHL by the Mohegan Gaming Authority pledged by SIHL in favor of the Administrative Agent pursuant to the SIHL Pledge Agreement, and all accrued interest through the date hereof, and shall also -25- include any additional Mohegan Sub Notes issued in lieu of interest, fees or revenue thereon, and any other Mohegan Sub Notes (referred to as the "Additional Mohegan Sub Notes") issued in connection with payments under the Secured Completion Guaranty. "Mohegan Sun Casino" means the hotel and casino to be constructed in Montville, Connecticut, U.S.A. "Moody's" means Moody's Investors Service, Inc. "Net Debt Proceeds" means, with respect to the sale or issuance (to the extent permitted by the terms of this Agreement) by SIHL to any Person of any Subordinated Debt, the excess of: (a) the gross cash proceeds received by SIHL from such sale or issuance, over (b) all reasonable and customary underwriting commissions and legal, investment banking, brokerage and accounting and other professional fees, sales commissions and disbursements, in each case actually incurred in connection with such sale or issuance which have not been paid to Affiliates of SIHL in connection therewith. "Net Equity Proceeds" means with respect to the sale or issuance by SIHL to any Person (other than any sale or issuance limited to only WLG, Caledonia or KIL or any of their Affiliates) of any stock or other equity interests, warrants or options or the exercise of any such warrants or options in respect thereof, the excess of: (a) the gross proceeds received by SIHL from such sale, issuance or exercise over (b) all underwriting, broker and out-of-pocket fees and expenses paid by SIHL to other than an Affiliate of SIHL in connection therewith. "Net Income" means, for any period, the aggregate of all amounts (exclusive of (i) extraordinary gains and extraordinary losses and (ii) gains or losses from the sale of assets) which, in accordance with GAAP, would be included as net income on the most recently available consolidated financial statements of SIHL for such period; provided, that for purposes of the definition of Unconsolidated EBITDA, the calculation of SIHL's Net Income shall exclude net income attributable to Unrestricted Subsidiaries. -26- "Net Worth" at any time means the excess of total assets of SIHL and its Subsidiaries at such time over total liabilities of SIHL and its Subsidiaries at such time, in each case as determined on a consolidated basis in accordance with GAAP. "Note" means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Obligations" means all obligations (monetary or otherwise) of the Borrower, SIHL and each other Obligor arising under or in connection with this Agreement, the Notes, the Letters of Credit, and each other Loan Document, and Hedging Obligations under a Rate Protection Agreement owed to a Lender or an Affiliate thereof (or a Person that was a Lender or an Affiliate of a Lender at the time the applicable Rate Protection Agreement was entered into), unless the Lender, such Affiliate (or other Person) otherwise agrees. "Obligor" means the Borrower, SIHL or any Restricted Subsidiaries obligated under any Loan Document. "Obligor Contract Assignment Agreement" means, collectively, each Obligor Contract Assignment Agreement executed and delivered by an Authorized Officer of each of SIML and PBV pursuant to Section 5.1.8, substantially in the form of Exhibit G hereto, as amended, supplemented, restated or otherwise modified from time to time. "Omnibus Agreement" means the Omnibus Financing Agreement, dated as of September 21, 1995, between TCA and SIHL. "Ordinary Shares" means the ordinary shares of common stock of SIHL, par value $0.001 per share. "Organic Document" means, as applicable and relative to any Obligor, its certificate of incorporation, its by-laws, its certificate of partnership, its partnership agreement, and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock. "Original Debentures" means, collectively, (i) the Debenture, dated July 18, 1994, from the Borrower to The Bank of Nova Scotia, The Royal Bank of Scotland plc, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (ii) the Debenture And Legal Mortgage, dated July 18, 1994, from Paradise Island Limited to The Bank of Nova Scotia, The Royal Bank of -27- Scotland plc, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (iii) the Debenture And Legal Mortgage, dated July 18, 1994, from Island Hotel Company Limited to The Bank of Nova Scotia, The Royal Bank of Scotland plc, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (iv) the Debenture And Legal Mortgage, dated July 18, 1994, from Paradise Beach Inn, Limited to The Bank of Nova Scotia, The Royal Bank of Scotland plc, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, and (v) the Debenture, dated May 2, 1994, from PEL to The Bank of Nova Scotia, The Royal Bank of Scotland plc, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited. "Outside Completion Date" means September 1, 1999. "PAL" means Paradise Acquisition Limited, a corporation organized under the laws of The Commonwealth of The Bahamas. "Participant" is defined in Section 10.11. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PBV" means Purposeful B.V., a company organized under the laws of the Netherlands. "Pension Plan" means a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Percentage" means, relative to any Lender, the percentage set forth opposite its signature hereto (which Percentages give effect to the inclusion of a Lender on the Effective Date that was not an Existing Lender) or set forth in the Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11. "Permits" shall mean collectively all material building, construction, land use, environmental and other permits, licenses (including the Casino License required for operation of the casino to be constructed as part of the Project), franchises, approvals, consents and authorizations (including central bank -28- and planning board approvals from applicable Bahamian authorities) required for or in connection with the construction, ownership, use, occupation and operation of the Property and the Project and the transactions provided for in this Agreement. "Permitted Encumbrances" shall mean the exceptions to title to the Real Estate that are listed in Schedule B of the title insurance policy issued as of the date hereof on behalf of the Administrative Agent by the Title Insurer. "Permitted Investment" means investments in or acquisitions of the capital stock of, or partnership and/or other ownership interests in, a Person engaged in the hotel, resort and/or gaming industry, and/or parcels of real property or assets that can be used in the hotel, resort and/or gaming industry. "Permitted Investment Amount" shall be the Investment Amount, as (a) reduced (without duplication) by (i) amounts guaranteed by SIHL or any Restricted Subsidiary or for which SIHL or any Restricted Subsidiary otherwise has any Contingent Liability to third parties or Unrestricted Subsidiaries in connection with Indebtedness of such Persons; (ii) any Debt and any Indebtedness of the type set forth in clause (f) of the definition of Indebtedness (and Contingent Liabilities in respect thereof) (other than (A) Debt permitted under clauses (a) and (i) of Section 7.2.2, (B) Subordinated Debt, and (C) FF&E Debt in an amount not to exceed $50,000,000 incurred and included as Project Costs, with such FF&E Debt being governed by clause (a)(v) below), in each case incurred by SIHL, the Borrower or any other Restricted Subsidiary after June 28, 1996 payable to other than SIHL, the Borrower or another Restricted Subsidiary which is recourse to SIHL, the Borrower or any other Restricted Subsidiary (to the extent of such recourse); (iii) the principal amount of any advances made by SIHL pursuant to the Secured Completion Guaranty; (iv) Investments of the type set forth in clauses (a), (b) and (c) of the definition of "Investments" made by SIHL, the Borrower or any other Restricted Subsidiaries since June 28, 1996; (v) the Additional Expenditure Amount less the aggregate amount by which the Borrower, SIHL or its -29- Subsidiaries have funded Project Costs in cash with other than the proceeds of Credit Extensions or FF&E Debt (excluding from such funded Project Costs amounts from time to time designated by SIHL in writing to the Administrative Agent as having been allocated towards the Required Expenditure Amount required to be funded under this Agreement), calculated at the time such calculation of the Permitted Investment Amount is made; it being acknowledged and agreed that the FF&E Debt referenced in clause (a)(ii)(C) of this definition shall not reduce Project Costs for purposes of such calculation; (vi) the purchase price in the amount of $32,500,000 for real property and/or (without duplication) improvements thereon for the Holiday Inn and related real property located on Paradise Island; and (vii) the purchase price paid since June 28, 1996 by SIHL or any Restricted Subsidiary for assets purchased in other than the ordinary course of business (including $10,000,000 in respect of the purchase of an airplane in 1996); and (b) as increased (i) by the amount received in cash in respect of Mohegan Sub Notes that are prepaid or repaid in cash to, or sold for cash by, SIHL or its Restricted Subsidiaries; (ii) by the amount of Net Debt Proceeds and Net Equity Proceeds received by SIHL as a result of the issuance of Subordinated Debt by or capital stock of SIHL; and (iii) the amount dividended or otherwise distributed, or paid (under management contracts or otherwise), in each case in cash by Unrestricted Subsidiaries to SIHL or a Restricted Subsidiary that does not constitute Indebtedness of SIHL or a Restricted Subsidiary. "Permitted Investment Notes" is defined in clause (e) of Section 7.2.5. "Person" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any -30- other entity, whether acting in an individual, fiduciary or other capacity. "Personal Property" is defined in Section 6.9. "PI Management Agreement" is defined in clause (a) of the definition of "Management Contracts". "Plan" means any Pension Plan or Welfare Plan. "Plans and Specifications" means the detailed plans and specifications relating to the Project, delivered to the Administrative Agent pursuant to Section 7.1.17, together with (subject to Section 7.2.15), all Change Orders from time to time in effect. "Pledge Agreement" means, as the context may require, the SIHL Pledge Agreement, the Borrower Pledge Agreement and each Subsidiary Pledge Agreement. "Preliminary Plans and Specifications" means the preliminary plans and specifications delivered to the Administrative Agent pursuant to Section 5.1.16, together with (subject to Section 7.2.15), all Change Orders from time to time in effect. "Preliminary Project Cost Analysis" means the preliminary breakdowns of the estimated Project Costs of constructing and completing the Project to be delivered to the Managing Agents in accordance with Section 5.1.16. "Preliminary Project Schedule" means a preliminary construction schedule for the Project to be delivered to the Managing Agents in accordance with Section 5.1.16. "Prime Contractor" means Ellis Don, Inc., or any other reputable contractor approved by the Managing Agents. "Project" means the construction, in accordance with (initially), the Preliminary Plans and Specifications, until such time as the Plans and Specifications are delivered pursuant to the terms of this Agreement, at which point such construction shall be in accordance with the Plans and Specifications, of an approximately 1,200 room hotel, and construction of a new casino (including the construction of the West Hotel Tower, the East Hotel Tower, the Low Rise building, various site buildings (including the River Bar and Grill and the Atlantis Dune Bar and Grill) and water features), in each case on property owned on the Effective Date by the Borrower or its Subsidiaries on Paradise Island in The Commonwealth of The Bahamas. -31- "Project Construction" means that portion of the construction of the Project that is the subject of the *[Contract] with the Prime Contractor. "Project Cost Analysis" means a detailed final budget including a detailed breakdown of estimated costs of constructing and completing the Project (as such budget may be revised from time to time in connection with (subject to Section ) Change Orders from time to time in effect). "Project Costs" means (i) all costs which SIHL or any of its Subsidiaries shall be required to pay under the terms of the Contracts, (ii) all other costs paid or incurred for labor, materials, supplies, machinery, equipment and to contractors, suppliers, builders and materialmen in connection with the Project, (iii) all professional fees and bonding costs payable in connection with the Project, and (iv) all insurance premiums incurred in connection with the Project, but specifically excluding interest expense. "Project Schedule" means a detailed construction schedule for the Project (as such schedule may be revised from time to time in connection with (subject to Section ), Change Orders from time to time in effect). "Property" means the Real Estate and the Personal Property. "Quarterly Payment Date" means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day. "Rate Protection Agreement" means, collectively, any interest rate swap, cap, collar or similar agreement entered into by the Borrower pursuant to the terms of this Agreement or the Existing Credit Agreement under which the counterparty to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender. "Real Estate" means the Improvements and the Land. "Refinancing WC Facility" is defined in clause (i) of Section 7.2.2. "Refurbishment" the refurbishment of the Borrower's existing casino on Paradise Island in The Commonwealth of The Bahamas. "Reimbursement Obligation" is defined in Section 2.6.3. - -------- * COMPANY TO SUPPLY COPY FOR REVIEW. -32- "Release" means a "release", as such term is defined in CERCLA. "Required Expenditure Amount" means (a) with respect to the Credit Extension which will cause the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed the Allowed Amount, 50% of the Allowed Amount; and (b) with respect to the Credit Extension which will cause the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed 150% of the Allowed Amount, $75,000,000. "Required Lenders" means, at any time, Lenders holding at least 66 2/3% of the then aggregate outstanding principal amount of the Loans then held by the Lenders, or, if no such principal amount is then outstanding, Lenders having at least 66 2/3% of the Commitments. "Resorts Agreement" means any agreement entered into with SIHL or a Restricted Subsidiary pursuant to which such Person is paid to manage the Resorts Casino Hotel (or any successor thereto) in Atlantic City, New Jersey, U.S.A., as the same may be amended, supplemented, modified or terminated from time to time in accordance with the terms hereof. "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time. "Restricted Payment Amount" means a maximum amount in each Fiscal Quarter not to exceed 5% (prior to the date of Substantial Completion) and 10% (thereafter) of Net Income (including after giving effect to the payment of any taxes) for the prior Fiscal Year, but in any event only up to a maximum aggregate amount of 20% (prior to the date of Substantial Completion) and 33% thereafter, in each case in any given Fiscal Year, of the Net Income for the immediately preceding Fiscal Year. "Restricted Subsidiary" means the Borrower, each Subsidiary of the Borrower, each Subsidiary of SIHL existing on the Effective Date as further set forth on Item 1.1(a) ("Restricted Subsidiaries") of the Disclosure Schedule (other than Birbo B.V., a Netherlands corporation, SMC, PAL, SCI and SCM), and any additional wholly-owned Subsidiaries of SIHL that SIHL may from time to time irrevocably elect to designate as a Restricted Subsidiary by written notice to such effect delivered to the Administrative Agent, but only if SIHL and such Subsidiary comply with the provisions of Section and after giving effect to -33- such designation no Default (including under Section ) shall have occurred or would result therefrom. "Royal Bank" is defined in the preamble. "S&P" means Standard & Poor's Ratings Services. "SCI" means Sun Casino Investments, S.A., a Swiss corporation. "SCM" means Sun Casino Management, S.A., a Swiss corporation. "Scotiabank" is defined in the preamble. "Second Amendment Agreement" is defined in the fourth recital. "Secured Completion Guaranty" means the Secured Completion Guarantee, dated as of September 29, 1995, by SIHL in favor of First Fidelity Bank, as trustee for the holders of the Senior Notes. "Secured Obligations" means (without duplication), collectively, (i) the Obligations; and (ii) all amounts arising under or in connection with the Supplemental Financing owing to a Secured Party. "Secured Parties" means, collectively, (i) the Lender Parties, (ii) the financial institution (or institutions) from time to time providing the Supplemental Financing and (iii) each Person that is a counterparty to one or more Rate Protection Agreements, if such Person is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender. "Senior Debt to Unconsolidated EBITDA Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) Debt (other than Subordinated Debt) outstanding on the last day of such Fiscal Quarter to (b) Unconsolidated EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters. -34- "Senior Indenture" means the Indenture, dated as of September 29, 1995, between the Mohegan Gaming Authority and First Fidelity Bank, as trustee, executed and delivered in connection with the issuance of the Senior Notes. "Senior Notes" means the 13.5% Senior Notes due 2002 of the Mohegan Gaming Authority, issued pursuant to the Senior Indenture. "SIBL Group" means, collectively, the Borrower and each of its Subsidiaries and Sun International Representation Inc., a Florida corporation and each of its Subsidiaries. "Significant Subsidiary" means, at any date of determination, the Borrower, its Subsidiaries and any other Subsidiary of SIHL that, together with its Subsidiaries, (i) for the most recent Fiscal Quarter of SIHL accounted for (or, in the case of any Subsidiary that is acquired following the Effective Date, would have accounted for) more than 5% of the consolidated revenues of SIHL and its Subsidiaries during such Fiscal Quarter or (ii) as of the end of the most recent Fiscal Quarter of SIHL was the owner of (or, in the case of any Subsidiary that is acquired following the Effective Date, would have been the owner of) more than 5% of the consolidated assets of SIHL and its Subsidiaries at the end of such Fiscal Quarter, all as set forth on the most recently available consolidated financial statements of SIHL for such Fiscal Quarter. "SIHL" is defined in the preamble. "SIHL Closing Date Certificate" means the closing date certificate executed and delivered by SIHL pursuant to Section 5.1.14, substantially in the form of Exhibit H-2 hereto. "SIHL Pledge Agreement" means the Amended and Restated Pledge Agreement executed and delivered by SIHL pursuant to Section 5.1.5, substantially in the form of Exhibit F-2 hereto, as amended, supplemented, restated or otherwise modified from time to time. "SIIL" means Sun International Investments Limited, a corporation organized under the laws of the British Virgin Islands. "SIML" means Sun International Management Limited, a British Virgin Islands corporation. "SMC" means Sun Merger Corp., a Delaware corporation and its successors and assigns. -35- "SPIC" means Societe de Participation et d'Investissements de Casinos, a societe anonyme organized under the laws of France. "SRL" means Sun Resorts Limited, a Mauritius corporation quoted on the Mauritian Stock Exchange. "Stated Amount" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof. "Stated Expiry Date" is defined in Section 2.6. "Stated Maturity Date" means October 31, 2001. "Subordinated Debt" means all unsecured Indebtedness of SIHL for money borrowed which is incurred under the terms of any Subordinated Note Indenture and evidenced by Subordinated Notes and which matures on a date that is at least one year after the Stated Maturity Date. "Subordinated Noteholder" means, at any time, any holder of a Subordinated Note. "Subordinated Note Indenture" means, collectively, each Indenture, note purchase agreement or other agreement evidencing the terms or agreements relating to Subordinated Debt, if any, to be executed and delivered by SIHL in connection with the incurrence by SIHL of Subordinated Debt in form and substance (including as to schedules, covenants, defaults, remedies, subordination provisions and the absence of amortization) reasonably agreed to by the Required Lenders, as each such Subordinated Note Indenture may be amended, supplemented, amended and restated or otherwise modified in accordance with the terms of Section 7.2.14. "Subordinated Notes" means, collectively, the Subordinated Notes, if any, in form and substance reasonably satisfactory to the Required Lenders, to be issued by SIHL pursuant to a Subordinated Note Indenture as such Subordinated Notes may be amended, supplemented or otherwise modified from time to time in accordance with Section 7.2.14. "Subordination Agreement" means a Subordination Agreement in the form of Exhibit K hereto executed and delivered to the Administrative Agent pursuant to clause (b) of Section 7.2.2 by SIHL and the Borrower and any Subsidiary of SIHL that makes a loan to either SIHL or the Borrower. "Subordination Provisions" is defined in Section 8.1.19. -36- "Subsidiary" means, with respect to any Person, any corporation, partnership or other entity (whether now or hereafter acquired or existing) of which more than 50% of the outstanding capital stock, partnership interests or similar interests having ordinary voting power (irrespective of whether at the time capital stock or interests of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "Subsidiary Pledge Agreement" means, collectively, each Pledge Agreement executed and delivered by each Restricted Subsidiary of SIHL (other than the Borrower) on the Effective Date pursuant to Section 5.1.6 or thereafter pursuant to Section 7.1.7, substantially in the form of Exhibit F-3 hereto, as amended, supplemented, restated or otherwise modified from time to time. "Substantial Completion" shall be deemed to have occurred for purposes of the Loan Documents at such time as the Project shall have been substantially completed in accordance with the Plans and Specifications and all Legal Requirements, and the new hotel and casino comprising the Project shall be ready for occupancy and operation, as evidenced by a certificate of the Inspecting Engineer and the issuance by the appropriate Governmental Authority of certificates of occupancy and all other Permits for the occupancy, use and operation of such Improvements contemplated by the Plans and Specifications relating to the Project, all in form and substance reasonably satisfactory to the Managing Agents. "Sun Cove" means, Sun Cove Ltd., a Connecticut corporation. "Supplemental Debentures" means, collectively, (i) the Supplemental Debenture, dated December 27, 1994, from the Borrower to The Bank of Nova Scotia, recorded in The Commonwealth of The Bahamas in Book 6399 at pages 326 to 331, (ii) the Supplemental Debenture And Further Charge, dated December 27, 1994, from Paradise Island Limited to The Bank of Nova Scotia, recorded in The Commonwealth of The Bahamas in Book 6399 at pages 289 to 325, (iii) the Supplemental Debenture And Further Charge, dated December 27, 1994, from Island Hotel Company Limited to The Bank of Nova Scotia, recorded in The Commonwealth of The Bahamas in Book 6399 at pages 340 to 349, (iv) the Supplemental Debenture And Further Charge, dated December 27, 1994, from Paradise Beach Inn, Limited to The Bank of Nova Scotia, recorded in The Commonwealth of The Bahamas in Book 6399 at pages 332 to 339, (v) the Supplemental Debenture, dated December 27, 1994, from PEL to The Bank of Nova Scotia, recorded -37- in The Commonwealth of The Bahamas in Book 6399 at pages 282 to 288, (vi) the Supplemental Debenture, dated March 8, 1996, issued by the Borrower in favor of The Bank of Nova Scotia, The Royal Bank of Scotland PLC, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (vii) the Supplemental Debenture, dated March 8, 1996, issued by PEL in favor of The Bank of Nova Scotia, The Royal Bank of Scotland PLC, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (viii) the Supplemental Debenture And Further Charge, issued by Paradise Beach Inn, Limited in favor of The Bank of Nova Scotia, The Royal Bank of Scotland PLC, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, (ix) the Supplemental Debenture And Further Charge, dated March 8, 1996, issued by Island Hotel Company Limited in favor of The Bank of Nova Scotia, The Royal Bank of Scotland PLC, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited, and (x) the Supplemental Debenture And Further Charge, dated March 8, 1996, issued by Paradise Island Limited in favor of The Bank of Nova Scotia, The Royal Bank of Scotland PLC, ABSA Bank Limited, NEDCOR Bank Limited and Henry Ansbacher & Co. Limited. "Supplemental Financing" is defined in clause (i) of Section 7.2.2. "Survey" is defined in Section 5.1.18. "Taxes" is defined in Section 4.6. "TCA" means Trading Cove Associates, a Connecticut general partnership. "TCA Partnership Agreement" means the Amended and Restated Partnership Agreement, made as of September __, 1995, among Sun Cove, RJH Development Corp., a New York corporation, Leisure Resort Technology, Inc., a Connecticut corporation, Slavik Suites, Inc., a Michigan corporation and LMW Investments, Inc., a Connecticut corporation. "Title Insurer" is defined in Section 5.1.19. "Total Debt to Unconsolidated EBITDA Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) Debt outstanding on the last day of such Fiscal Quarter to (b) Unconsolidated EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters. -38- "type" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "Unconsolidated EBITDA" means, at the end of any Fiscal Quarter, the aggregate amount of the sum of the items set forth in clauses (a) through (e) (inclusive) below for SIHL and the Restricted Subsidiaries only for such Fiscal Quarter plus the three immediately preceding Fiscal Quarters: (a) Net Income, plus (b) the amount deducted, in determining such Net Income, representing amortization of assets, plus (c) the amount deducted, in determining such Net Income, of all income taxes (whether paid or deferred), plus (d) Interest Expense, plus (e) the amount deducted, in determining such Net Income, representing depreciation of assets; provided, that amounts payable to SIHL or a Restricted Subsidiary under the Resorts Agreement (if in effect) shall be included in the calculation of Unconsolidated EBITDA only for so long as its inclusion shall be permitted under clause (b) of Section 7.1.10. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "Unrestricted Subsidiary" means each Subsidiary of SIHL that is not a Restricted Subsidiary; provided, that neither the Borrower nor any of its Subsidiaries, or any Subsidiary that is at any time a Restricted Subsidiary, may be designated as an Unrestricted Subsidiary. "WC Facility" means the credit facility existing on the Effective Date between the Borrower and The Bank of Nova Scotia, as amended, supplemented, amended and restated or otherwise modified from time to time in accordance with its terms. "Welfare Plan" means a "welfare plan", as such term is defined in section 3(1) of ERISA. -39- "wholly-owned Subsidiary" of any Person means any corporation, partnership, association or other business entity of which 100% of the total voting power of shares of stock, partnership interests or other equity interest entitled (without regard to the occurrence of any contingency) to vote in the election of directors, general partners, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other wholly-owned Subsidiaries of such Person or a combination thereof. "WLG" means World Leisure Group Limited, a British Virgin Islands corporation. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each Note, Borrowing Request, Issuance Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those U.S. generally accepted accounting principles ("GAAP") applied in the preparation of the financial statements referred to in Section 6.5. If any preparation in the financial statements referred to in Section 6.5 or Section 7.1.1 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) result in a change in any results, amounts, calculations, ratios, standards or terms found in this Agreement from those which would be derived or be applicable absent such changes, the Borrower and/or SIHL may reflect such changes in the financial statements required to be delivered pursuant to Section 7.1.1, but calculations of financial covenants shall be made without giving effect to any -40- such changes. Upon the request of SIHL or any Lender the parties hereto agree to enter into negotiations in order to amend the financial covenants and other terms of this Agreement if there occur any changes in GAAP that have a material effect on the financial statements of the Borrower and/or SIHL, so as to equitably reflect such changes with the desired result that the criteria for evaluating the Borrower's and/or SIHL's financial condition and such other terms shall be the same in all material respects after such changes as if the changes had not been made. ARTICLE II COMMITMENTS, BORROWING PROCEDURES, NOTES AND LETTERS OF CREDIT SECTION 2.1. Amendment and Restatement; Commitments. The Borrower, SIHL and the Guarantors parties hereto (subject to the terms of this Agreement) and the Existing Lenders, the Lenders and the Issuer hereby agree that the Existing Credit Agreement is hereby amended and restated in its entirety to become effective and binding on the Borrower, SIHL and such Guarantors pursuant to the terms of this Agreement and the Lenders (including the Existing Lenders), and the Existing Credit Agreement is hereby amended and restated in its entirety to read as set forth in this Agreement, and the parties hereto hereby agree that the commitments which the Existing Lenders have agreed to extend to the Borrower (which includes the Loan Facility) under the Existing Credit Agreement shall be extended or advanced upon the amended and restated terms and conditions contained in this Agreement with the intent that the terms of this Agreement shall supersede the terms of the Existing Credit Agreement (which shall hereafter have no further effect upon the parties thereto, other than for accrued fees and expenses, and indemnification provisions, accrued and owing under the terms of the Existing Credit Agreement on or prior to the date hereof or arising (in the case of an indemnification) under the terms of the Existing Credit Agreement); provided, that any Rate Protection Agreements with any one or more Existing Lenders (or their respective Affiliates) shall continue unamended and in full force and effect. In furtherance of the foregoing, on the terms and subject to the conditions of this Agreement (including Article V), (a) each Lender severally agrees to make Loans pursuant to the Commitments described in this Section 2.1; and (b) the Issuer agrees that it will issue Letters of Credit pursuant to Section 2.1.2, and each Lender severally agrees that it will participate in such Letters of Credit in accordance with Section 2.6.1. -41- SECTION 2.1.1. Commitment of Each Lender. From time to time on any Business Day occurring prior to the Commitment Termination Date, each Lender will make loans (relative to such Lender, and of any type, its "Loans") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1 is herein referred to as its "Commitment". On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Loans. SECTION 2.1.2. Letter of Credit Commitment. From time to time on any Business Day occurring prior to the Commitment Termination Date, the Issuer will, subject to the terms of this Agreement (including Section 2.1.4), (a) issue one or more letters of credit (a "Letter of Credit") for the account of the Borrower, the Restricted Subsidiaries or SIHL in the Stated Amount requested by the Borrower on such day; or (b) extend the Stated Expiry Date of an existing Letter of Credit previously issued hereunder to a date not later than the earlier of (x) the Commitment Termination Date and (y) one year from the date of such extension. SECTION 2.1.3. Lenders Not Permitted or Required to Make Loans. No Lender shall be permitted or required to make any Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings (a) of all Lenders would exceed the Commitment Amount, or (b) of such Lender would exceed such Lender's Percentage of the Commitment Amount. SECTION 2.1.4. Issuer Not Permitted or Required to Issue Letters of Credit. The Issuer shall not be permitted or required to issue any Letter of Credit if, after giving effect thereto, (a) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b) the sum of the aggregate amount of all Letter of Credit Outstandings plus the aggregate principal amount of all Loans then outstanding would exceed the Commitment Amount then in effect. SECTION 2.2. Reduction of Commitment Amount. The Commitment Amount is subject to reduction from time to time pursuant to this Section 2.2. -42- SECTION 2.2.1. Optional. The Borrower may, from time to time on any Business Day, voluntarily reduce the Commitment Amount; provided, however, that all such reductions shall require at least three Business Days' prior notice to the Administrative Agent and be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $1,000,000. SECTION 2.3. Borrowing Procedure. By delivering a Borrowing Request to the Administrative Agent on or before 12:00 noon, New York time, on a Business Day, the Borrower may from time to time irrevocably request, on not less than two, in the case of Base Rate Loans, or three, in the case of LIBO Rate Loans, nor (in either case), more than five Business Days' notice, that a Borrowing be made in a minimum amount of $5,000,000 and an integral multiple of $1,000,000, or in the unused amount of the Commitments. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. On or before 11:00 a.m. New York time, on such Business Day each Lender shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer of immediately available funds on the same Business Day to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 10:00 a.m., New York time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than three nor more than five Business Days' notice that all, or any portion in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000, of any Loans be, in the case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (i) each such conversion or continuation shall be made pro rata among the applicable outstanding Loans of all Lenders, and (ii) no portion of the outstanding principal amount of any Loans may be continued as, or -43- be converted into, LIBO Rate Loans when any Default has occurred and is continuing. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower and each Lender hereby consents and agrees that, for purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.6. Issuance Procedures. By delivering to the Administrative Agent an Issuance Request on or before 10:00 a.m., New York City time, on a Business Day, the Borrower may, from time to time irrevocably request, on not less than three Business Days' notice, in the case of an initial issuance of a Letter of Credit, and not less than three Business Days' notice prior to the existing Stated Expiry Date (or, if a Letter of Credit has an automatic extension provision, at least five Business Days' notice prior to the date that such Letter of Credit will, by its terms, be extended or, if earlier, the date on which a notice from the Issuer is required to be delivered to the beneficiary of the Letter of Credit informing the beneficiary that the Letter of Credit will not be extended) in the case of a request for the extension of the Stated Expiry Date of a Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the case may be, a Letter of Credit in such form as may be requested by the Borrower and approved by the Issuer, solely for the purposes described in Section 7.1.9. Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier to occur of (i) the Commitment Termination Date or (ii) one year from the date of its issuance. The Issuer will make available to the beneficiary thereof the original of each Letter of Credit which it issues hereunder. SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each Letter of Credit issued by the Issuer pursuant hereto, and without further action, each Lender shall be deemed to have irrevocably purchased, to the extent of its Percentage, a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Lender shall, to the extent of its -44- Percentage, be responsible for reimbursing promptly (and in any event within three Business Days following the Disbursement Date) the Issuer for Reimbursement Obligations arising under the Letter of Credit issued by the Issuer which have not been reimbursed by the Borrower in accordance with Section 2.6.3. In addition, such Lender shall, to the extent of its Percentage, be entitled to receive (i) a ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.2 with respect to each Letter of Credit (other than the issuance fees payable to the Issuer with respect to such Letter of Credit pursuant to the last sentence of Section 3.3.2) and (ii) from the date that such Lender has reimbursed the Issuer in accordance with the first sentence of this Section, (A) the interest payable pursuant to Section 2.6.2 and, if applicable, (B) the interest payable pursuant to Section 3.2.2 with respect to any Reimbursement Obligation not paid when due. To the extent that any Lender has reimbursed the Issuer for a Disbursement as required by this Section, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Borrower or otherwise) in respect of such Disbursement. SECTION 2.6.2. Disbursements. The Issuer will notify the Borrower and the Administrative Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 11:00 a.m., New York City time, on the first Business Day following the Disbursement Date, the Borrower will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum equal to the rate then in effect for Base Rate Loans (with the then Applicable Base Rate Margin for Loans accruing on such amount) for the period from the Disbursement Date through the date of such reimbursement. SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon), and, upon the failure of the Borrower to reimburse the Issuer, each Lender's obligation under Section 2.6.1 to reimburse the Issuer, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or such Lender, as the case may be, may have or have had against the Issuer or any such Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith -45- opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided, however, that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of the Borrower or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct on the part of the Issuer. SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the continuation of any Default of the type described in Section 8.1.9 or, with notice from the Administrative Agent, upon the occurrence and during the continuation of any other Event of Default, (a) an amount equal to that portion of all Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all Letters of Credit issued and outstanding hereunder shall, without demand upon or notice to the Borrower, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b) upon notification by the Administrative Agent to the Borrower of its obligations under this Section, the Borrower shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by the Issuer. Any amounts so payable by the Borrower pursuant to this Section shall be deposited in cash with the Administrative Agent and held as collateral security pursuant to a cash collateral agreement in form and substance satisfactory to the Administrative Agent for the Obligations in connection with the Letters of Credit issued by the Issuer. At such time when the Defaults or Events of Default giving rise to the deemed disbursements hereunder shall have been cured or waived, the Administrative Agent shall return to the Borrower all amounts then on deposit with the Administrative Agent pursuant to this Section which have not been applied to the partial satisfaction of such Obligations. SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and, to the extent set forth in Section 2.6.1, each Lender shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or wilful misconduct) shall not responsible for: -46- (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) the failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in connection with such Letter of Credit in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon the Borrower and each such Lender, and shall not put the Issuer under any resulting liability to the Borrower or any such Lender, as the case may be. SECTION 2.7. Notes. Each Lender's Loans under its Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the original Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Note (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby. Such notations shall be conclusive and binding on the Borrower absent manifest error; provided, however, that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. -47- ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid principal amount of each Loan upon the final Stated Maturity Date therefor. Prior thereto, the Borrower may (or shall, as applicable), make the repayments and prepayments set forth below. (a) The Borrower may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans, and the Borrower may select whether such prepayment shall be allocated to the Base Rate Loans, LIBO Rate Loans or both (and the amounts so allocated to each); provided, however, that (i) any such prepayment shall be made pro rata among Loans of the same type and, if applicable, having the same Interest Period of all Lenders; (ii) no such prepayment of any LIBO Rate Loan may be made on any day other than the last day of the Interest Period for such Loan; (iii) all such voluntary prepayments shall require at least one but no more than five Business Days' prior written notice to the Administrative Agent; and (iv) all such voluntary partial prepayments shall be in an aggregate minimum amount of $5,000,000 and an integral multiple of $1,000,000. (b) The Borrower shall, on each date when any reduction in the Commitment Amount shall become effective, including pursuant to Section 2.2, make a mandatory prepayment of all Loans, and if required deliver cash collateral for Letter of Credit Outstandings, equal to the excess, if any, of the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings over the Commitment Amount as so reduced. (c) The Borrower shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion of all Loans is so accelerated. Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by -48- Section 4.4. No voluntary prepayment of principal of any Loans shall cause a reduction in the Commitment Amount. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Base Rate Margin; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable LIBO Rate Margin. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of any Loan is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the Alternate Base Rate plus the Applicable Base Rate Margin plus a margin of 2%. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the date of the initial Borrowing hereunder; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest -49- Period shall exceed three months, on the third month anniversary of such Interest Period); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non- refundable. SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender for the period (including any portion thereof when its Commitment is suspended by reason of the Borrower's inability to satisfy any condition of Article V) commencing on (a) June 28, 1996 and continuing through the Effective Date, a commitment fee at a rate of 1/4 of 1% per annum; and (b) the Effective Date and continuing through the Commitment Termination Date, a commitment fee at the rate of 1/2 of 1% per annum, in each case on such Lender's Percentage of the sum of the average daily unused portion of the Commitment Amount (net of Letter of Credit Outstandings). Such commitment fees shall be payable by the Borrower in the case of clause (a) above, on the Effective Date and, in the case of clause (b) above, in arrears on each Quarterly Payment Date, commencing with the first such day following the Effective Date, and on the Commitment Termination Date. SECTION 3.3.2. Letter of Credit Fee. The Borrower agrees to pay to the Administrative Agent, for the pro rata account of the Issuer and each other Lender, a Letter of Credit fee in an amount equal to the then Applicable Margin for LIBO Rate Loans, multiplied by the average daily undrawn Stated Amount of all Letters of Credit outstanding during the applicable period, with such fees being payable quarterly in arrears on each Quarterly -50- Payment Date. The Borrower further agrees to pay to the Issuer an issuance fee in an amount equal to the higher of (i) $100 (as such amount may be increased from time to time in accordance with the Issuer's standard charges for such services) and (ii) 1/4 of 1% per annum of the Stated Amount thereof, with such fees being payable quarterly in arrears on each Quarterly Payment Date. SECTION 3.3.3. Other Fees. The Borrower agrees to pay to each Lender for its own account the non-refundable fees in the amounts and on the dates set forth in such Lender's Fee Letter. SECTION 3.4. Guaranty Provisions. Each of SIHL and each Subsidiary of the Borrower from time to time a party to this Agreement hereby jointly and severally irrevocably guarantees the payment of all Obligations as set forth in this Section 3.4. SECTION 3.4.1. Guaranty. Each of SIHL and each other Guarantor from time to time a party to this Agreement hereby absolutely, unconditionally and irrevocably jointly and severally (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the Borrower and each other Obligor, whether for principal, interest, fees, expenses or otherwise (including all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. ss. 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss. 502(b) and ss. 506(b)); and (b) indemnifies and holds harmless each Lender Party and each holder of a Note for any and all costs and expenses (including reasonable attorneys' fees and expenses) incurred by such Lender Party or such holder, as the case may be, in enforcing any rights under Section 3.4. This guaranty and the provisions of this Section 3.4 constitutes a guaranty of payment when due and not of collection, and SIHL and each other Guarantor specifically agrees that it shall not be necessary or required that any Lender or Agent exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of SIHL or such Guarantor hereunder. SECTION 3.4.2. Acceleration of Guaranty. Each of SIHL and each other Guarantor agrees that, in the event of a Default of the type set forth in Section 8.1.9 and if such event shall occur at a time when any of the Obligations of the Borrower and each -51- other Obligor may not then be due and payable, SIHL and such other Guarantor will pay to the Administrative Agent for the account of the Lender Parties forthwith the full amount which would be payable hereunder by SIHL or such Guarantor if all such Obligations were then due and payable. SECTION 3.4.3. Guaranty Absolute, etc. Section 3.4 shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Obligations of the Borrower and each other Obligor have been paid in full, all obligations of SIHL and each other Guarantor hereunder shall have been paid in full and all Commitments shall have terminated. SIHL and each other Guarantor guarantees that the Obligations of the Borrower and each other Obligor will be paid strictly in accordance with the terms of this Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender or Agent with respect thereto. The liability of SIHL and each other Guarantor under Section 3.4 shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, any Note or any other Loan Document; (b) the failure of any Lender Party (i) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person (including any other guarantor) under Section 3.4 of this Agreement, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Obligations of the Borrower or any other Obligor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Borrower or any other Obligor, or any other extension, compromise or renewal of any Obligation of the Borrower or any other Obligor; (d) any reduction, limitation, impairment or termination of the Obligations of the Borrower or any other Obligor for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and SIHL and each other Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, -52- compromise, unenforceability of, or any other event or occurrence affecting, the Obligations of the Borrower, any other Obligor or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note or any other Loan Document; (f) any addition, exchange, release, surrender or non- perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by any Lender Party or any holder of any Note securing any of the Obligations of the Borrower or any other Obligor; or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any other Obligor, any surety or any guarantor. SECTION 3.4.4. Reinstatement, etc. Each of SIHL and each other Guarantor agrees that Section 3.4 shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Obligations is rescinded or must otherwise be restored by any Lender Party or any holder of any Note, upon the insolvency, bankruptcy or reorganization of the Borrower, any other Obligor or otherwise, all as though such payment had not been made. SECTION 3.4.5. Waiver, etc. Each of SIHL and each other Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations of the Borrower or any other Obligor and Section 3.4 and any requirement that any Lender Party or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against the Borrower, any other Obligor or any other Person (including any other guarantor) or entity or any collateral securing the Obligations of the Borrower or any other Obligor, as the case may be. SECTION 3.4.6. Postponement of Subrogation, etc. Neither SIHL nor any other Guarantor will exercise any rights which it may acquire by way of rights of subrogation under Section 3.4, by any payment made hereunder or otherwise, until the prior payment, in full and in cash, of all Obligations of the Borrower and each other Obligor. Any amount paid to SIHL or any other Guarantor on account of any such subrogation rights prior to the payment in full of all Obligations of the Borrower and each other Obligor shall be held in trust for the benefit of the Lender Parties and -53- shall immediately be paid to the Administrative Agent and credited and applied against the Obligations of the Borrower and each other Obligor, whether matured or unmatured, in accordance with the terms hereof; provided, however, that if (a) SIHL and/or any other Guarantor have made payment to the Lender Parties and each holder of a Note of all or any part of the Obligations of the Borrower or any other Obligor; and (b) all Obligations of the Borrower and each other Obligor have been paid in full and all Commitments have been permanently terminated, each Lender Party agrees that, at SIHL's or such other Guarantor's request, the Administrative Agent, on behalf of the Lender Parties, will execute and deliver to SIHL or such Guarantor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to SIHL or such Guarantor of an interest in the Obligations of the Borrower and each other Obligor resulting from such payment by SIHL or such Guarantor. In furtherance of the foregoing, for so long as any Obligations or Commitments remain outstanding, SIHL and each other Guarantor shall refrain from taking any action or commencing any proceeding against the Borrower or any other Obligor (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments made under the provisions of Section 3.4 to any Lender Party. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, so long as such Lender shall then be taking the same action with respect to all other similar loans it may have outstanding to other borrowers, upon notice thereof to the Borrower and the Lenders, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of all Lenders to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans shall automatically convert into Base Rate Loans at the end of the then -54- current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to Scotiabank in its relevant market; or (b) by reason of circumstances affecting Scotiabank's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, so long as the Administrative Agent shall then be taking the same action with respect to all other similar loans it may have outstanding to other borrowers, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3. Increased LIBO Rate Loan Costs, etc. Provided that each Lender requesting reimbursement under this Section 4.3 is then taking the same action with respect to all other similar loans it has outstanding to other borrowers of a class similar to the Borrower (including as to the aggregate amount of credit extensions made to such other borrowers), the Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans, including any increased costs or reduced returns caused by the imposition of any reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) required by any central bank, regulator or other governmental authority (including the Bank of England) having authority over any Lender, in each case to the extent not already specifically addressed by the provisions of the definition of "LIBOR Reserve Percentage", except as to any increased cost or reduced amount that results from the imposition of Taxes (liability for which is determined pursuant to Section 4.6). The Lender requesting reimbursement under this Section shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor -55- and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. Any Lender claiming any amounts payable pursuant to this Section shall use its commercially reasonable efforts to change its applicable lending office with respect to some or all of its LIBO Rate Loans if the making of such change would avoid the need for or reduce the amount of any such additional amounts that would thereafter accrue, so long as such Lender will not incur any costs that the Borrower will not agree to reimburse to such Lender and such change is not inconsistent with such Lender's internal policies. SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of, (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise, including all such loss or expense arising as a result of the provisions of Section 4.11; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.5. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other -56- governmental authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of its Commitment or the Loans made, or the Letters of Credit issued or participated in, by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case so long as such Lender shall then be taking the same action with respect to all other similar loans it may have outstanding to other borrowers, upon notice from time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. A statement of such Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Lender may use any reasonable method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. SECTION 4.6. Taxes. (a) All payments by SIHL, each other Guarantor or the Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender's net income or receipts (such non-excluded items being called "Taxes"). In the event that any withholding or deduction from any payment to be made by SIHL, any other Guarantor or the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then SIHL, such Guarantor or the Borrower (as applicable) will (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Administrative Agent an official receipt or other documentation reasonably satisfactory to the Administrative Agent evidencing such payment to such authority; and (iii) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would -57- have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such Lender may pay such Taxes and each of SIHL, each other Guarantor and the Borrower will (without duplication) promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had such Taxes not been asserted. (b) If either SIHL, any other Guarantor or the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, SIHL, each other Guarantor and the Borrower shall jointly and severally indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section 4.6, a distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by SIHL, such Guarantor and the Borrower. (c) Any Lender claiming any indemnity payment or additional amount payable pursuant to this Section shall use commercially reasonable efforts to file any certificate or document reasonably requested by SIHL or the Borrower or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such indemnity payment or additional amount which may thereafter accrue and such filing or change is not inconsistent with that Lender's internal policies. SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly provided, all payments by SIHL, each other Guarantor and the Borrower pursuant to this Agreement, the Notes, each Letter of Credit or any other Loan Document shall be made by SIHL, such Guarantor and the Borrower (without duplication) to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 12:00 noon, New York time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by -58- the Administrative Agent on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such extension. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clauses (b) or (c) of the definition of the term "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan or Reimbursement Obligation (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 and 4.6) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Credit Extensions made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each of SIHL, each other Guarantor and the Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to -59- Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of SIHL, the Borrower or such Guarantor in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any Event of Default described in clauses (a) through (d) of Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence of any other Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each of SIHL, each other Guarantor and the Borrower hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or money of each of SIHL, such Guarantor and the Borrower then or thereafter maintained with such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.8. Each Lender agrees promptly to notify SIHL, such Guarantor or the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 4.10. Defaulting Lender. (a) Upon any Lender becoming a Defaulting Lender, (i) the Administrative Agent shall endeavor to promptly notify each other Lender of the amount owed or potentially owed, as the case may be, by such Defaulting Lender and (ii) the Commitment Amount shall be reduced by an amount equal to the unutilized portion of such Defaulting Lender's Percentage thereof then in effect (the "Unutilized Portion"); provided, however, that, with the prior written consent of the Administrative Agent, the Borrower may request a non-defaulting Lender to, whereupon such non-defaulting Lender may (in its sole discretion and without the consent of any other Lender), by promptly notifying the Borrower and the Administrative Agent, increase its Commitment in an amount equal to the Unutilized Portion, in which case, upon receipt by the Borrower and the Administrative Agent of such notice, (x) the Commitment of such non-defaulting Lender shall be so increased and (y) the amount of the Commitment Amount then in effect shall be equal to the amount of the Commitment Amount in effect -60- immediately prior to the time such Defaulting Lender became a Defaulting Lender and (iii) the Percentage of such Defaulting Lender shall be reduced to zero. (b) No Defaulting Lender shall be entitled to receive any fees accrued on and after the date such Lender became a Defaulting Lender. (c) Notwithstanding anything contained herein to the contrary, no Defaulting Lender shall be entitled to receive any payments hereunder on account of any Loans or Notes until all amounts that are due and payable with respect to any Loans as to which such Defaulting Lender is not a Lender or a participant shall have been paid in full. (d) Nothing in this Section shall be deemed to release any Defaulting Lender from fulfilling its obligations under this Agreement or otherwise or to prejudice the rights which SIHL, the Borrower or any other Lender or the Administrative Agent may have against any such Defaulting Lender. SECTION 4.11. Replacement Lender. In the event that SIHL, any other Guarantor or the Borrower becomes obligated to pay any additional material amounts to any Lender pursuant to Section 4.3 or 4.5 (which amounts are generally not due or payable to all Lenders generally under such Sections) or such Lender is not able to make LIBO Rate Loans pursuant to Section 4.1, as a result of any event or condition described in any of such Sections, then, unless such Lender has removed or cured the conditions creating the cause of such obligation to pay such additional amounts, the Borrower may designate a substitute lender (and such Lender agrees to be replaced by such substitute Lender upon and in accordance with the terms set forth in this Section) reasonably acceptable to the Managing Agents (such lender herein called a "Replacement Lender") to have assigned to it pursuant to Section 10.11.1, and to purchase, such Lender's rights and obligations with respect to its entire Loans and Commitment hereunder, without recourse to or warranty by, or expense to, such Lender for a purchase price equal to the outstanding principal amount payable to such Lender with respect to its Loans and Commitment hereunder, plus any accrued and unpaid interest and accrued and unpaid fees in respect of such Lender's Loans and Commitment owing to such Lender. Upon such assignment and purchase by the Replacement Lender and payment of all other amounts owing to the Lender being replaced hereunder, and the payment to the Administrative Agent of the processing fee due to it under Section 10.11.1, such Lender shall no longer be a party hereto or have any rights or obligations hereunder, and the Replacement Lender shall succeed to the rights and obligations of such Lender with respect to its Loans and Commitment hereunder; provided, that the rights of such replaced Lender pursuant to -61- Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the rights and obligations of such Lender pursuant to Article IX and Sections 10.3 and 10.4, shall survive any assignment described in this Section. ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extension. The obligations of the Lenders and the Issuer to make the initial Credit Extension shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1. SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have received from each Obligor a certificate, dated the date of the initial Credit Extension of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; (b) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document executed by it; and (c) resolutions of the shareholders of each Obligor organized under the laws of The Commonwealth of The Bahamas then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary or Assistant Secretary of such Obligor canceling or amending such prior certificate. SECTION 5.1.2. Delivery of Notes. The Administrative Agent shall have received, for the account of each Lender, its Notes duly executed and delivered by the Borrower. SECTION 5.1.3. Form of Performance Bond/Completion and Cost Overrun Agreement. The Lenders shall have received a form of the performance bond (or other completion and cost overrun agreement) that the Borrower proposes to deliver pursuant to the terms of Section 5.2.3, which shall be in form and substance reasonably satisfactory to the Required Lenders. -62- SECTION 5.1.4. Guaranty. The Administrative Agent shall have received a Guaranty, duly executed and delivered by an Authorized Officer of each Restricted Subsidiary (other than the Borrower and the Guarantors party hereto) existing on the Effective Date (and, if different, on the date of the initial Credit Extension). SECTION 5.1.5. SIHL Pledge Agreement and Borrower Pledge Agreement. The Administrative Agent shall have received executed counterparts of (i) the SIHL Pledge Agreement and (ii) the Borrower Pledge Agreement, each dated as of the date hereof or the date of the initial Credit Extension, duly executed by an Authorized Officer of SIHL or the Borrower (as the case may be), together with the certificates evidencing all of the issued and outstanding shares of capital stock of each Pledged Share Issuer listed on Item 5.1.6 ("Pledgors") of the Disclosure Schedule pledged pursuant to each Pledge Agreement, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to such Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with Section 8-313 and Section 8-321 of the Uniform Commercial Code, as in effect in the State of New York or the local law equivalent, where applicable. SECTION 5.1.6. Subsidiary Pledge Agreement. The Administrative Agent shall have received executed counterparts of each Subsidiary Pledge Agreement, dated as of the date hereof or the date of the initial Credit Extension, duly executed by an Authorized Officer of each Obligor listed on Item 5.1.6 ("Pledgors") of the Disclosure Schedule, together with the certificates, evidencing all of the issued and outstanding shares of capital stock pledged pursuant to each Subsidiary Pledge Agreement, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant to such Subsidiary Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Secured Parties in accordance with Section 8-313 and Section 8-321 of the Uniform Commercial Code, as in effect in the State of New York or the local law equivalent, where applicable. SECTION 5.1.7. Foreign Pledge Agreements. All Foreign Pledge Agreements shall have been duly executed and delivered by all parties thereto and shall remain in full force and effect, and all Liens granted to the Administrative Agent thereunder -63- shall be duly perfected (or the local equivalent thereof) to provide the Administrative Agent with a security interest in and Lien on all collateral granted thereunder free and clear of other Liens, other than Liens securing the Secured Obligations or except to the extent of other Liens consented to by the Lenders. SECTION 5.1.8. Obligor Contract Assignment Agreements. The Administrative Agent shall have received executed counterparts of Obligor Contract Assignment Agreements, each dated as of the date hereof or the date of the initial Credit Extension, duly executed by SIHL, SIML and by PBV in respect of the assignment of such Obligor's rights under each Management Contract and SIHL's rights under the Omnibus Agreement, together with (a) executed copies of Uniform Commercial Code financing statements (Form UCC-1) or analogous filings that are required by jurisdictions outside of the United States, in each case naming SIHL, SIML or PBV (as the case may be) as a debtor and the Administrative Agent as the secured party, filed in all jurisdictions as may be necessary or, in the opinion of the Managing Agents, desirable to perfect the security interest of the Administrative Agent pursuant to such Obligor Contract Assignment Agreements; and (b) to the extent necessary, executed copies of proper termination statements or similar instruments satisfactory to the Administrative Agent necessary to release all Liens and other rights of any Person in any collateral described in any Obligor Contract Assignment Agreement or any Pledge Agreement previously granted by any Obligor. SECTION 5.1.9. Perfected Liens. The Managing Agents shall be satisfied that the Lenders shall have received first priority (or local equivalent) perfected Liens on (a) to the extent practicable, all Collateral (as defined in each Obligor Contract Assignment Agreement), and (b) all Collateral (as defined in each Pledge Agreement). SECTION 5.1.10. Debentures. The Administrative Agent shall have received counterparts of (i) the Original Debentures, (ii) the Supplemental Debentures (in each case as originally executed by each owner of the Land) and (iii) the debentures, dated as of the date hereof, substantially in the form of Exhibit J hereto, executed by each owner of the Land (the Original Debentures, the Supplemental Debentures and the debentures referred to in clause (iii), as amended, supplemented, consolidated, spread, severed, partially released, partially reconveyed, restated and otherwise modified from time to time, collectively referred to as the "Debentures"), granting a first priority lien (in the case of the real property) and a floating charge (in the case of the personal property) to the -64- Administrative Agent, for the benefit of the Secured Parties in all right, title and interest in and to the Property and all Leases, rents, revenues, issues and profits pertaining to or in any way related to the Property (including hotel and casino revenues and receipts) each duly executed by an Authorized Officer of the owner of such property, together with (a) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of the Debentures as may be necessary or, in the reasonable opinion of the Managing Agents, desirable effectively to create a valid first mortgage Lien (or, in the case of personal property, floating charge Lien) against the properties purported to be covered thereby, subject only to the Permitted Encumbrances; and (b) such other approvals, opinions, or documents as the Managing Agents may reasonably request with respect to the Debentures. SECTION 5.1.11. Other Security Instruments. The Managing Agents shall have received the following, each dated as of the date of the initial Credit Extension (or such other, earlier date as shall be acceptable to the Managing Agents), duly executed, acknowledged (if appropriate) and delivered by the Borrower or, where applicable, another Obligor, and each other party thereto, in form and substance reasonably satisfactory to the Managing Agents, and, in the case of Instruments required to be recorded or filed, such Instruments shall have been duly recorded or filed, as the case may be (or provision entirely satisfactory to the Managing Agents and their counsel for the recording or filing thereof and for the payment of all fees, taxes and other expenses in connection therewith): (a) such evidence of filing as may be acceptable to the Managing Agents naming the applicable Obligor as the debtor and the Administrative Agent as the secured party, or other similar instruments or documents, filed under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Managing Agents, desirable to perfect the security interest of the Administrative Agent (for the benefit of the Secured Parties) pursuant to the Debentures; (b) assignment of Architect's Agreements in the form of Exhibit L, pursuant to which all right, title and interest of the Borrower in, to, under and in respect of the Architect's Agreements and the Plans and Specifications (or, if applicable, the Obligor holding an interest in the Architect's Agreements and the Plans and Specifications) shall be assigned to the Managing Agents, as security for -65- the payment and performance of the Obligations (as amended, supplemented and otherwise changed from time to time and in effect, herein collectively called the "Assignment of Architect's Agreements"), together with copies of the Architect's Agreements, which shall have been approved by the Managing Agents and the consent of each applicable architect to such assignment and the agreement of such architect to perform its Architect's Agreement in accordance with its terms for the benefit of the Administrative Agent as holder of the Debentures (for the benefit of the Secured Parties) and any purchaser of the Property at a foreclosure sale or other transferee of the Property (which consents and agreements shall be in writing, substantially in the form of Exhibit M hereto, or such other form as agreed to by the Administrative Agent); and (c) to the extent available and subject to Section 7.1.17, assignment of material Contracts in the form of Exhibit N, pursuant to which all right, title and interest of the Borrower in, to, under and in respect of the material Contracts and all Permits and all other contract rights of the Borrower in connection with the Project (or, if applicable, the Obligor holding an interest in such items) (including all management agreements and operating agreements) shall be assigned to the Administrative Agent, for the benefit of the Secured Parties (as amended, supplemented and otherwise modified from time to time and in effect, herein collectively called the "Assignments of Contracts"), together with the consent of each applicable contractor thereto and the agreement of such contractor to perform its Contract in accordance with its terms for the benefit of the Administrative Agent as holder of the Debentures (for the benefit of the Secured Parties) and any purchaser of the Property at a foreclosure sale or other transferee of the Property (which consents and agreements shall be in writing, substantially in the form of Exhibit O hereto, or such other form as agreed to by the Administrative Agent). SECTION 5.1.12. Prime Contractor; Inspecting Engineer's Report. The Managing Agents shall have approved the Prime Contractor selected by the Borrower, which approval shall not be unreasonably withheld. To the extent then available and subject to Section 7.1.17, the Managing Agents shall have received a report reasonably satisfactory to the Managing Agents prepared by the Inspecting Engineer that the Project, when completed in accordance with the Plans and Specifications, will comply in all material respects with all applicable Legal Requirements and Insurance Requirements. -66- SECTION 5.1.13. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the date of the initial Credit Extension and addressed to the Administrative Agent and all Lenders, from (a) Roberts Sheridan & Kotel, a Professional Corporation, New York and Connecticut counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (b) Charles Adamo, General Counsel to SIHL and counsel to the other Obligors, in form and substance satisfactory to the Managing Agents; (c) Harry B. Sands & Company, Bahamian counsel to certain Obligors, in form and substance satisfactory to the Managing Agents; (d) Conyers, Dill & Pearman, Bermuda counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (e) Smith-Hughes, Raworth & McKenzie, British Virgin Islands counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (f) Carey Langlois, Guernsey, Channel Islands counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (g) Georges A. Robert, Mauritius counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (h) Loeff Claeys Verbeke, Netherlands counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (i) Smeets Thesseling & Van Bokhorst, Netherland Antilles counsel to the Obligors, in form and substance satisfactory to the Managing Agents; (j) Darrois Villey Maillot Brochie, French counsel to the Obligors in form and substance satisfactory to the Managing Agents; and (k) Mayer, Brown & Platt, counsel to the Administrative Agent, in form and substance satisfactory to the Managing Agents. -67- SECTION 5.1.14. Closing Date Certificates. The Administrative Agent shall have received, with counterparts for each Lender, the Closing Date Certificates, dated the date of the initial Credit Extension and duly executed and delivered by an Authorized Officer of the Borrower and an Authorized Officer of SIHL, in which certificate the Borrower and SIHL, as applicable, shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties of such Person, made as of such date (and under this Agreement), and, at the time such certificate is delivered, such statements shall in fact be true and correct. All documents and agreements required to be appended to the Closing Date Certificates shall be in form and substance satisfactory to the Administrative Agent. SECTION 5.1.15. Compliance Certificate. The Administrative Agent shall have received, with counterparts for each Lender, an initial Compliance Certificate on a pro forma basis as if the Credit Extensions to be made on the date of the initial Credit Extension had occurred, dated the date of the initial Credit Extension, duly executed (and with all schedules thereto duly contemplated) and delivered by the chief executive, financial or accounting Authorized Officer of SIHL and of the Borrower. SECTION 5.1.16. Plans and Specifications, etc. The Managing Agents and the Inspecting Engineer shall have received, and the Managing Agents shall have approved, (i) the Preliminary Plans and Specifications, (ii) the Preliminary Project Schedule and (iii) the Preliminary Project Cost Analysis, each certified by the Borrower, and to the extent then available and subject to Section 7.1.17, the Plans and Specifications, the Project Schedule and the Project Cost Analysis, each certified by the Borrower. Subject to Section 7.1.17, the Inspecting Engineer shall have issued a report, satisfactory to the Managing Agents, confirming that the Project Construction can be completed in accordance with the costs set forth in the Project Cost Analysis (to the extent then available) on or prior to the Outside Completion Date. SECTION 5.1.17. Environmental Reports. The Managing Agents shall have received and approved all studies, reports, surveys and analyses in the possession of the Borrower with respect to environmental matters relating to the Real Estate constituting the Project. SECTION 5.1.18. Survey. The Administrative Agent shall have received the most recent survey (the "Survey") of the Land and the Improvements thereon reasonably acceptable to the Managing Agents, certified to the Lenders and their successors and assigns and the Title Insurer by a licensed surveyor or engineer approved by the Managing Agents, which survey shall be -68- satisfactory in all respects to the Managing Agents and their counsel and to the Title Insurer. SECTION 5.1.19. Title Insurance. The Administrative Agent shall have received a mortgagee's title insurance policy in favor of the Managing Agents in amounts and in form and substance and issued by insurers (collectively, the "Title Insurer") satisfactory to the Managing Agents, with respect to the property purported to be covered by the Debentures, insuring that the interests created by the Debentures constitute valid first Liens thereon free and clear of all defects and encumbrances other than the Permitted Encumbrances and other matters approved by the Managing Agents, and such policy shall also include, to the extent available, a comprehensive endorsement, variable rate endorsement, access and utilities endorsements, a mechanic's lien endorsement, a zoning endorsement and such other endorsements as the Managing Agents shall request. All premiums, title examination, survey, departmental violations, judgment and Uniform Commercial Code search charges (as applicable) and other charges and fees shall have been paid in full or provided for in a manner satisfactory to the Title Insurer and the Managing Agents, and the Managing Agents shall have received satisfactory evidence of such payment or provision. The Administrative Agent shall have also received all title deeds necessary to evidence the Borrower's good and marketable title to the Property. SECTION 5.1.20. Contracts. To the extent then available and subject to Section 7.1.17, the Managing Agents and the Inspecting Engineer shall have received a complete list and summary (including the parties, term, general subject matter, compensation and cancellation terms), together with certified true copies of all Contracts necessary or appropriate for the construction of the work included in the Project, and the Managing Agents and the Independent Engineer shall have approved such Contracts (such consent not to be unreasonably withheld). SECTION 5.1.21. Leases. The Managing Agents shall have received certified true and complete copies, and (other than in the case of the Bahamas Casino Lease) approved the form and substance (such consent not to be unreasonably withheld), of each Lease existing on the date of the initial Credit Extension and, in addition, shall have received such subordination agreements, subordination, non-disturbance and attornment agreements, estoppel certificates, and other Instruments as the Managing Agents may request. SECTION 5.1.22. Insurance Policies; Assignment of Policies. The Administrative Agent shall have received duplicate originals of all policies of insurance required to be maintained pursuant to Section 7.1.4, with all appropriate endorsements to such policies, together with evidence satisfactory to the -69- Administrative Agent of the payment of all premiums due thereon. In addition, the Administrative Agent shall have received an assignment of all such insurance policies in favor of the Secured Parties, and all activities necessary to perfect the Secured Parties' security interest shall have been taken, in the opinion of the Managing Agents. SECTION 5.1.23. Exchange Approval. The Administrative Agent shall have received a copy of a letter from The Central Bank of The Bahamas to the Borrower, SIHL and the other Guarantors in a form satisfactory to the Administrative Agent, confirming that it is aware of this Agreement and undertaking to make available to the Borrower, SIHL and such Guarantors such foreign exchange as may be necessary to enable the Borrower, SIHL and such Guarantors to fulfill their payment obligations under this Agreement in Dollars. SECTION 5.1.24. Intercreditor Agreement. The Administrative Agent shall have received, with counterparts for each Lender, the Intercreditor Agreement, duly executed and delivered by Scotiabank (in its capacity as collateral agent for the Lender Parties), each Lender (or affiliate thereof) party to a Rate Protection Agreement and Scotiabank, in its capacity as the lender under the Supplemental Financing, and acknowledged by each Obligor. SECTION 5.2. All Credit Extensions. The obligation of each Lender to fund any Loan or the Issuer to issue any Letter of Credit on the occasion of any Credit Extension (including the initial Credit Extension) shall be subject to the satisfaction of each of the conditions precedent set forth in Sections 5.2.1, 5.2.2 and 5.2.9. The obligation of each Lender to fund any Loan or the Issuer to issue any Letter of Credit which (i) will cause the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed the Allowed Amount or (ii) will cause the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed 150% of the Allowed Amount (in each case for the first time since the Effective Date) shall be subject to the satisfaction of each of the additional conditions precedent set forth in Sections 5.2.3 through (and including) 5.2.9. SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and all after giving effect to any Credit Extension (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct -70- (a) the representations and warranties set forth in Article VI (excluding, however, those contained in Section 6.7) and in the other Loan Documents shall be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); (b) except as disclosed by the Borrower to the Administrative Agent and the Lenders pursuant to Section 6.7 (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge of SIHL or the Borrower, threatened, against the SIBL Group or SIHL or any of its Subsidiaries which would reasonably be expected to materially adversely affect the business, operations, assets, revenues or properties of SIHL and its Restricted Subsidiaries, taken as a whole, or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document; (ii) no development shall have occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 which would reasonably be expected to materially adversely affect the businesses, operations, assets, revenues or properties of SIHL and its Restricted Subsidiaries, taken as a whole; and (iii) no judgments or orders for the payment of money in excess of $5,000,000, individually or in the aggregate (to the extent not covered by insurance (other than self-insurance) from a carrier not contesting its obligations to make payment under the applicable insurance policy), shall have been rendered against SIHL, the Borrower or any other Restricted Subsidiary that is organized under the laws of The Commonwealth of The Bahamas; (c) no Default shall have then occurred and be continuing, and neither SIHL, any other Obligor, nor any Restricted Subsidiaries are in material violation of any law or governmental regulation or court order or decree; and (d) if such Credit Extension is the Credit Extension which causes for the first time the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed the Allowed Amount, the Borrower -71- shall have theretofore (or concurrently with the making of such Credit Extension, shall) have satisfied the requirements of Section 7.1.17. SECTION 5.2.2. Credit Extension Request. The Administrative Agent shall have received a Borrowing Request if Loans are being requested, or an Issuance Request if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct in all material respects. SECTION 5.2.3. Completion/Cost Overrun Guaranty. The Administrative Agent shall have received a completion and cost overrun agreement in an amount of not less than $60,000,000 in form and substance substantially the same as the form of performance bond (or other completion and cost overrun agreement) delivered to the Lenders pursuant to Section 5.1.3, and issued by an insurance company or other Person, reasonably satisfactory to the Required Lenders, in respect of the Contracts for the Project, or a guarantee otherwise reasonably acceptable to the Required Lenders shall have been provided. SECTION 5.2.4. Title Policy Endorsement. The Managing Agents shall have received an endorsement, dated the date of such Credit Extension, duly issued by the Title Insurer amending the title insurance policy referred to in Section 5.1.19 to insure the mortgage lien of the Debentures on the Property, subject only to Permitted Encumbrances, to an amount equal to the aggregate original principal amount of all Credit Extensions then outstanding, and otherwise satisfactory in form and substance to the Managing Agents and their counsel. SECTION 5.2.5. Updated Project Cost Analysis. To the extent requested by the Managing Agents, the Managing Agents shall have received an update of the Project Cost Analysis, or any significant change in the Plans and Specifications, or any significant delay in the progress of construction of the Project. SECTION 5.2.6. Change Orders. The Inspecting Engineer and the Managing Agents shall have received all Change Orders issued between the date of this Agreement and the date of such Credit Extension and all such Change Orders shall have been approved in accordance with Section 7.2.15. SECTION 5.2.7. Cost of Completion. The Managing Agents and the Inspecting Engineer shall have received and the Managing -72- Agents shall have approved a certificate, dated as of the date of such Credit Extension, from SIHL in form and scope reasonably satisfactory to the Managing Agents certifying as to the following, and the Managing Agents and their representatives (including the Inspecting Engineer) shall have received such information and performed such diligence as they deem necessary or appropriate to verify the following: (i) as to the amount of Project Costs incurred through the proposed Credit Extension date; (ii) the amount of cash (other than with the proceeds of Credit Extensions and FF&E Debt) expended towards the Project through the proposed Credit Extension date; (iii) as to an estimate as of the date of the proposed Credit Extension of the remaining Project Costs necessary to complete the Project, and the amount by which the aggregate Project Costs are anticipated to exceed $300,000,000; (iv) the aggregate cost of constructing the Project pursuant to the Plans and Specifications; (v) confirming that the amount of Investments made pursuant to clause (g) of Section 7.2.5 does not exceed the Permitted Investment Amount, and setting forth in detail satisfactory to the Administrative Agent the calculations and supporting documentation made in reaching such conclusion; (vi) the aggregate amount of holdbacks on such date; (vii) that Substantial Completion can be achieved on or prior to the Outside Completion Date; (viii) with respect to the first Credit Extension which will cause the aggregate outstanding principal amount of all Loans and all Letter of Credit Outstandings to exceed the Allowed Amount, (A) that Project Costs incurred to such date are no less than 150% of the Allowed Amount; and (B) that the Borrower, SIHL or any of its Subsidiaries has expended in cash (from other than proceeds of the Credit Extensions and FF&E Debt) not less than the Required Expenditure Amount towards the construction of the Project; (ix) with respect to the first Credit Extension which will cause the aggregate outstanding principal amount of all -73- Loans and Letter of Credit Outstandings to exceed 150% of the Allowed Amount, (A) that Project Costs incurred to such date are no less than 150% of the Allowed Amount plus $75,000,000; and (B) that the Borrower, SIHL or any of its Subsidiaries has expended in cash (from other than proceeds of the Credit Extensions and FF&E Debt) not less than the Required Expenditure Amount towards the construction of the Project. SECTION 5.2.8. Inspecting Engineer's Approval. The Managing Agents shall have received from the Inspecting Engineer a certificate, in form and substance satisfactory to the Managing Agents and dated as of the date of such Credit Extension, (i) to the effect that the Project Construction has, as of the date of such certificate, been constructed in all material respect in accordance with the Plans and Specifications and that all Permits necessary (in the judgment of the Inspecting Engineer) at that stage of the development of the Project Construction have been obtained and are in full force and effect and paid for in full and that, as far as can be determined on the date of the delivery of such certificate, when completed in accordance with the Plans and Specifications the Project Construction will comply in all material respects with all Legal Requirements and Insurance Requirements; (ii) stating the aggregate amount of Project Costs relating to the Project Construction incurred through such date; (iii) stating that the progress of the construction is such that Substantial Completion of the Project Construction can occur on or prior to the Outside Completion Date; (iv) stating the aggregate amount of Project Costs necessary to complete the Project Construction; and (v) as to such other matters as the Managing Agents may reasonably request. SECTION 5.2.9. Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of SIHL or any of its Subsidiaries (including the Borrower) or any other Obligors shall be reasonably satisfactory in form and substance to the Administrative Agent and its counsel; the Administrative Agent and its counsel shall have received all information, -74- approvals, opinions, documents or instruments as the Administrative Agent or its counsel may reasonably request. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, the Issuer and the Administrative Agent to enter into this Agreement and to make Credit Extensions hereunder, each of the Borrower and SIHL represents and warrants unto the Administrative Agent, the Issuer and each Lender as set forth in this Article VI. SECTION 6.1. Organization, etc. Each of SIHL, the Borrower and each other Restricted Subsidiary is a corporation or partnership validly organized and existing and in good standing under the laws of the State or jurisdiction of its incorporation or organization, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it. SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each of the Borrower and SIHL of this Agreement, the Notes and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it and the Borrower's Construction of the Project are within the Borrower's, SIHL's and each such Person's corporate or partnership powers (as applicable), have been duly authorized by all necessary corporate or partnership action, and do not (a) contravene the Borrower's, SIHL's or any such Person's Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower, SIHL or any such Person; or (c) result in, or require the creation or imposition of, any Lien on any of the Borrower's, SIHL's or any such Person's properties, other than pursuant to a Loan Document. -75- SECTION 6.3. Government Approval, Regulation, etc. Except for those that have been duly obtained or made and are in full force and effect, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower, SIHL or any other Obligor of this Agreement, the Notes or any other Loan Document to which it is a party. Neither SIHL nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes and each other Loan Document executed by the Borrower or SIHL, as the case may be, will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower and of SIHL, as the case may be, enforceable in accordance with their respective terms; and each Loan Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, be the legal, valid and binding obligation of such Obligor enforceable in accordance with its terms. SECTION 6.5. Financial Information. The (i) consolidated balance sheet of the Borrower and each of its Subsidiaries as at December 31, 1995, and the related consolidated statements of earnings and cash flow of the Borrower and each of its Subsidiaries; and (ii) the consolidated balance sheet of SIHL and each of its Subsidiaries as at December 31, 1995, and the related consolidated statements of earnings and cash flow of SIHL and each of its Subsidiaries; in each case copies of which have been furnished to the Administrative Agent and each Lender, have in each case been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended. SECTION 6.6. No Material Adverse Change. Since December 31, 1995, there has been no material adverse change in the financial condition, operations, assets, business or properties of SIHL and its Restricted Subsidiaries, taken as a whole. -76- SECTION 6.7. Litigation, Labor Controversies, etc. Except as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule, there is no pending or, to the knowledge of the Borrower or of SIHL, threatened litigation, action, proceeding, or labor controversy affecting SIHL or any of its Subsidiaries, or any of their respective properties, businesses, assets or revenues, which would reasonably be expected to materially adversely affect the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole, or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document, or the construction of the Project. SECTION 6.8. Subsidiaries. Neither the Borrower nor SIHL has any Subsidiaries, except those Subsidiaries (a) which are identified in Item 6.8 ("Existing Subsidiaries") of the Disclosure Schedule; or (b) which are permitted to have been acquired in accordance with Section 7.2.5 or 7.2.10. SECTION 6.9. Ownership of Properties. SIHL and each of the Restricted Subsidiaries owns good and valid title to all of its material properties and assets, real (including the Real Estate) and personal (the "Personal Property"), tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3. SECTION 6.10. Taxes. SIHL and each of the Restricted Subsidiaries has filed all material tax returns and reports required by law to have been filed by it and has paid or will pay when due all material taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement, and since such date and prior to the date of any Credit Extension hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower, SIHL, or any member of their -77- respective Controlled Groups (if different) of any material liability, fine or penalty. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule, neither SIHL, the Borrower nor any member of their respective Controlled Groups (if different) has any material contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12 ("Environmental Matters") of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by SIHL or any of its Subsidiaries have been, and continue to be, owned or leased by SIHL and its Subsidiaries in material compliance with all Environmental Laws; (b) there are no pending and, to the knowledge of SIHL and the Borrower, (i) there are no threatened and (ii) have been no past, (i) claims, complaints, notices or requests for information received by SIHL or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, or (ii) complaints, notices or inquiries to SIHL or any of its Subsidiaries regarding potential material liability under any Environmental Law; (c) there have been no Releases of Hazardous Materials at, on or under any property now or, to the knowledge of the Borrower or SIHL, previously owned or leased by SIHL or any of its Subsidiaries that, singly or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole; (d) SIHL and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters which are necessary for their businesses; (e) no property now or previously owned or leased by SIHL or any of its Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS -78- or on any similar list of sites requiring investigation or clean-up; (f) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or, to the knowledge of the Borrower and SIHL, previously owned or leased by SIHL or any of its Subsidiaries that, singly or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole; (g) neither SIHL nor any Subsidiary of SIHL has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which would reasonably be expected to lead to material claims against SIHL or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (h) to the knowledge of the Borrower and SIHL, there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by SIHL or any Subsidiary of SIHL that, singly or in the aggregate, have, or would reasonably be expected to have, a material adverse effect on the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole; and (i) to the knowledge of the Borrower and SIHL, no conditions exist at, on or under any property now or previously owned or leased by the Borrower or SIHL which, with the passage of time, or the giving of notice or both, would reasonably be expected to give rise to any material liability under any Environmental Law. SECTION 6.13. Regulations G, U and X. Neither the Borrower nor SIHL is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Credit Extensions will be used to purchase or carry margin stock or for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. -79- SECTION 6.14. Accuracy of Information. All factual information heretofore (and listed on Schedule II hereto) or contemporaneously furnished on the Effective Date by or on behalf of the Borrower or SIHL or their respective Subsidiaries in writing to the Managing Agents or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby and all other such factual information hereafter furnished by or on behalf of the Borrower or SIHL or their respective Subsidiaries to the Managing Agents or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Administrative Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. Insofar as any of the factual information described above includes assumptions, estimates, projections or opinions, no representation or warranty is made herein with respect thereto; provided, however, that to the extent any such assumptions, estimates, projections or opinions are based on factual matters, the Borrower or SIHL or their respective Subsidiaries has reviewed such factual matters and nothing has come to its attention in the context of such review which would lead it to believe that such factual matters were not or are not true and correct in all material respects or that such factual matters omit to state any material fact necessary to make such assumptions, estimates, projections or opinions not misleading in any material respect. SECTION 6.15. Compliance of Property with Legal and Insurance Requirements, etc. The Property currently complies, and the Property (and the use thereof) as improved in accordance with the Plans and Specifications will comply, in all material respects, with all covenants, conditions and restrictions (including applicable zoning laws and ordinances) affecting the Property or any portion thereof (whether or not of record), and with all Insurance Requirements and Legal Requirements. SECTION 6.16. Protection under Security Instruments. The Debentures, together with the financing statements (if any) filed with respect thereto, constitutes a valid, first mortgage lien on, and (where applicable), a valid perfected floating lien on and security interest in, the property subject thereto, subject only to Permitted Encumbrances and Liens permitted on such property by Section 7.2.3. SECTION 6.17. Leases. There are no Leases with respect to any material part of the Real Estate other than the Indenture of Lease, dated May 2, 1984 (the "Bahamas Casino Lease"), between Resorts International (Bahamas) 1984 Limited (a predecessor-in- interest to a Subsidiary of Borrower) and The Hotel Corporation -80- of The Bahamas. None of such Leases contains any option to purchase all or any portion of the Real Estate or any interest therein or any rights of first refusal, first offer or similar rights relating to any sale of the Real Estate or any portion thereof or interest therein. SECTION 6.18. Development Rights. The Borrower has not, directly or indirectly, conveyed, assigned or otherwise disposed of or transferred, or entered into any contract, agreement or other Instrument or arrangement (other than any Instrument constituting a Permitted Encumbrance) providing for the conveyance, assignment, disposition or transfer of, any development rights, air rights or other similar rights, privileges or attributes, including those arising under any existing or future zoning or land use ordinance or other Legal Requirement, with respect to the Property. SECTION 6.19. No Condemnation Proceedings. There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the knowledge of the Borrower, SIHL or any other Guarantor, threatened which adversely affects the title to, or the use, operation or value of, the hotel and casino operations that are subject to the Debentures. SECTION 6.20. Insurance. The Borrower has obtained or caused to be obtained insurance coverage covering the Property which meets in all respects the requirements of this Agreement, and such coverage is in full force and effect. SECTION 6.21. Improvements. The construction of the Improvements constituting part of the Project has to date been performed in all material respects in accordance with the Preliminary Plans and Specifications (at all times prior to delivery of the Plans and Specifications), and thereafter in accordance with the Plans and Specifications relating to the Project, (in each case), as modified (in each case), from time to time by Change Orders, and in compliance in all material respects with all Legal Requirements, and will be completed on or prior to the Outside Completion Date and at a cost no greater than (i) the amount set forth in the Preliminary Project Cost Analysis (at all times prior to delivery of the Project Cost Analysis), and thereafter the amounts set forth in the Project Cost Analysis plus (in each case), (ii) additional Project Costs, but only to the extent such additional Project Costs are reflected in the calculation of the Additional Expenditure Amount and SIHL and its Restricted Subsidiaries are nonetheless able to remain in compliance with clause (g) of Section 7.2.5 after giving effect to such increase in the Additional Expenditure Amount. -81- SECTION 6.22. Seniority of Obligations, etc. SIHL has (or will have) the power and authority to incur the Indebtedness (if any) evidenced by the Subordinated Notes as provided for under each Subordinated Note Indenture and has (or will have) duly authorized, executed and delivered each Subordinated Note Indenture, as applicable. SIHL has (or will have) issued, pursuant to due authorization, the Subordinated Notes under each Subordinated Note Indenture. Once executed and delivered by SIHL, each Subordinated Note Indenture will constitute the legal, valid and binding obligation of SIHL enforceable against SIHL in accordance with its terms. The subordination provisions of the Subordinated Notes and contained in each Subordinated Note Indenture will be enforceable against the holders of the Subordinated Notes by the holder of any "Senior Indebtedness", "Senior Debt" or similar term referring to the Obligations, as applicable in such Subordinated Note Indenture, which has not effectively waived the benefits thereof. All monetary Obligations, including those to pay principal of and interest (including post-petition interest, whether or not permitted as a claim under applicable law) on the Loans and Reimbursement Obligations, and fees and expenses in connection therewith, constitute (or will constitute) "Senior Indebtedness", "Senior Debt" or similar term referring to the Obligations, as applicable in such Subordinated Note Indenture, and all such Obligations are (or will be) entitled to the benefits of the subordination created by such Subordinated Note Indenture. SIHL acknowledges that each Lender Party is entering into this Agreement, and is extending its Commitments, in reliance upon the subordination provisions of (or to be contained in) each Subordinated Note Indenture, the Subordinated Notes and this Section. SECTION 6.23. Shell Status of SCI and SCM. On the Effective Date neither SCI or SCM (i) own or have title to any assets or properties with a fair market value in excess of $100,000 (individually or in the aggregate); or (ii) have incurred any Indebtedness, or made any Investments, in any other Person. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. Each of SIHL and the Borrower agrees with the Administrative Agent, the Managing Agents, the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed -82- in full, each of SIHL and the Borrower will perform the obligations set forth in this Section 7.1. SECTION 7.1.1. Financial Information, Reports, Notices, etc. SIHL and the Borrower will furnish, or will cause to be furnished, to each Lender, the Issuer and the Administrative Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of SIHL, a consolidated balance sheet of (i) SIHL and its Subsidiaries, (ii) SIHL and the Restricted Subsidiaries and (iii) the Borrower and its Subsidiaries, in each case as of the end of such Fiscal Quarter and consolidated statements of earnings and cash flow of (i) SIHL and its Subsidiaries, (ii) SIHL and the Restricted Subsidiaries and (iii) the Borrower and its Subsidiaries, in each case for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by the chief financial Authorized Officer of SIHL or the Borrower, as applicable; (b) as soon as available and in any event within 105 days after the end of each Fiscal Year of SIHL, (i) a copy of the annual audit report for such Fiscal Year for SIHL and its Subsidiaries, including therein a consolidated balance sheet of SIHL and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of SIHL and its Subsidiaries for such Fiscal Year, in each case certified (without any Impermissible Qualification) by Arthur Andersen, L.L.P. or other independent public accountants acceptable to the Required Lenders, together with a certificate from such accountants containing a computation of, and showing compliance with, each of the financial ratios and restrictions contained in Section 7.2.4; (ii) a copy of the annual unaudited report for such Fiscal Year for SIHL and the Restricted Subsidiaries, including therein a consolidated balance sheet of SIHL and the Restricted Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of SIHL and the Restricted Subsidiaries for such Fiscal Year, in each case certified by an Authorized Officer of SIHL; and -83- (iii) a copy of the annual unaudited report for such Fiscal Year for the Borrower and its Subsidiaries, including therein a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such Fiscal Year, in each case certified by an Authorized Officer of the Borrower; (c) as soon as available and in any event within 60 days after the end of each Fiscal Quarter, a Compliance Certificate, executed by the chief financial Authorized Officer of SIHL, showing compliance with the financial covenants set forth in Section 7.2.4 and, in the case of the Compliance Certificate delivered for the fourth Fiscal Quarter of a Fiscal Year, the amount of Capital Expenditures that were made during such Fiscal Year and certifying as to the absence of any Default; (d) as soon as possible and in any event within three days after the occurrence of each Default, a statement of the chief financial Authorized Officer of SIHL or the Borrower setting forth details of such Default and the action which SIHL or the Borrower has taken and proposes to take with respect thereto; (e) as soon as possible and in any event within three days after (x) the occurrence of any adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and copies of all documentation relating thereto; (f) promptly after the sending or filing thereof, copies of all reports which SIHL sends to any of its securityholders, and all reports and registration statements which SIHL or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (g) immediately upon becoming aware of the institution of any steps by SIHL or the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that SIHL or the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the -84- incurrence by SIHL or the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of SIHL or the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; (h) promptly following any amendment, waiver or other modification to the Combination Agreement or any Management Contract, or delivery of any notice of default or termination of (i) any provision relating to the covenant not to compete contained in Section 7(h) of the Combination Agreement or (ii) any Management Contract, a copy of such amendment, waiver, modification and notice; (i) promptly following the delivery or receipt, as the case may be, of any written notice or communication pursuant to or in connection with any Subordinated Note Indenture or any of the Subordinated Notes, a copy of such notice or communication; (j) promptly following the execution and delivery thereof (if executed and delivered), a true and complete copy of the Resorts Agreement; and (k) such other information respecting the condition or operations, financial or otherwise, of SIHL or any of its Subsidiaries (including the Borrower) as the Issuer or any Lender through the Administrative Agent may from time to time reasonably request. SECTION 7.1.2. Compliance with Laws, etc. Each of SIHL and the Borrower will, and will cause each of their respective Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include (without limitation): (a) in the case of SIHL, the Borrower and the other Restricted Subsidiaries, the maintenance and preservation of its corporate existence and qualification as a foreign corporation; and (b) the payment, before the same become delinquent, of all material taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 7.1.3. Maintenance of Properties. Each of SIHL and the Borrower will, and will cause each of their respective Subsidiaries (other than Unrestricted Subsidiaries) to, maintain, -85- preserve, protect and keep its properties in reasonably good repair, working order and condition, and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless SIHL or the Borrower determines in good faith that the continued maintenance of any of their respective properties (other than the Property) is no longer economically desirable. SECTION 7.1.4. Insurance. Each of SIHL and the Borrower will, and will cause each of their respective Subsidiaries (other than Unrestricted Subsidiaries) to, maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses and will, upon request of the Administrative Agent, furnish to the Lender Parties at reasonable intervals a certificate of an Authorized Officer of SIHL or the Borrower (as applicable) setting forth the nature and extent of all insurance maintained by SIHL, the Borrower or their respective Subsidiaries (other than Unrestricted Subsidiaries) in accordance with this Section. Without limiting the foregoing, SIHL and the Borrower at all times, at its expense, will comply, or cause compliance, with all Insurance Requirements and all Legal Requirements. SIHL and the Borrower shall maintain or cause to be maintained and keep in full force and effect all Casino Licenses and all Permits necessary for the use, operation, occupancy and maintenance of the Project and the Property. In addition, without limiting the foregoing, the Borrower shall (and cause members of the SIBL Group to) comply with the following requirements. (a) The Borrower will, and will cause its Subsidiaries to, maintain insurance on and in relation to its (and their) property (including the Property), business and assets with reputable underwriters or insurance companies against such risks and to such extent as is usual for companies carrying on a business such as that carried on by it whose practice is not to self insure. (b) The Borrower will, and will cause its Subsidiaries to, maintain during the continuance of this Agreement insurance noting the Administrative Agent's interest as joint loss payee with the Borrower (or such Subsidiary) on behalf of the Secured Parties (to the extent of their interest) against loss or damage by fire, hurricane, flood, windstorm, tempest, seawave, earthquake, riot, civil commotion, aircraft and articles dropped therefrom to the full value thereof (not subject to average) all buildings and the contents thereof, structures and erections situate upon any freehold or leasehold property of the Borrower and -86- its Subsidiaries (both while under construction and after completion), and in particular shall maintain with respect thereto: (i) "All Risks" insurance on the buildings situate thereon in an amount not less than the replacement building value; (ii) "All Risks" insurance on all inventory, furnishings, fittings and equipment situate thereon or in transit thereto; (iii) "All Risks" public liability third party insurance in an amount as is usual for companies carrying on a similar business; and (iv) "All Risks" builders' risk insurance with respect to the Property during any period when there is construction work being performed relating to above-ground improvements comprising the Project; and shall keep the property (including the Property) and Land and all buildings and contents thereof and structures and erections so insured with an insurer approved by the Managing Agents and that it will at all times take all necessary steps to ensure that such insurance remains in full force and effect and from time to time furnish the Administrative Agent with satisfactory evidence of such insurance. (c) Cause any of the policies of insurance maintained by it pursuant to the above clauses to be forthwith amended (if necessary) to include clauses in form satisfactory to the Administrative Agent to (i) ensure payment of any loss to the Administrative Agent (for the benefit of the Secured Parties), notwithstanding (A) any act, failure to act or negligence of or violation of any warranty, declaration or condition contained in any such policy by any named insured, (B) the occupation or use of the Property for purposes more hazardous than permitted by the terms of any such policy, (C) any exercise of the power of sale or any foreclosure or other action or proceeding taken by any Agent, the Issuer or the Lenders pursuant to -87- any provision of this Agreement, the Debentures or any other Instrument executed pursuant hereto, or (D) any change in title to or ownership of the Property or any portion thereof; (ii) ensure that no breach or violation of any term of or any warranty declaration or condition contained in such policy of insurance by the Borrower or any of its Subsidiaries or any other assured will invalidate or render unenforceable such policy or any provision thereof as regards the Secured Parties, (iii) provide that the insurers will agree to hold harmless and waive rights of recourse against the Secured Parties and their respective officers, directors, employees and agents, (iv) provide that the insurers will waive any right of subrogation against the Secured Parties, (v) provide that the Secured Parties shall not be liable for any premiums in respect thereof and that the insurers shall not exercise any right of set-off or counterclaim in respect of unpaid premiums or otherwise against the interests of the Secured Parties, and (vi) ensure that the relevant insurer undertakes to advise the Secured Parties promptly after acquiring knowledge: (A) of any cancellation of the insurance, at least 30 days before such cancellation is due to take effect; (B) of any alteration in or termination of or expiry of the insurance, at least 30 days before such alteration, termination or expiry is due to take effect; (C) of any delay or failure to pay any premium or to renew the insurance, at least 30 days prior to the date of renewal thereof; and (D) of any act or omission or any event of which the insurer has knowledge and which might invalidate or render unenforceable (as between the Borrower, such Subsidiary and such insurer) in whole or in part such insurance. -88- (d) Ensure that all moneys in respect of reinstatement received under any insurance effected pursuant to the foregoing provisions or under any other insurance effected or maintained by the Borrower or any of its Subsidiaries relating to its property (including the Property) shall (at the option of the Secured Parties) be applied either in making good the loss or damage in respect of which such moneys shall have been paid or in or towards the discharge of the Borrower's obligations hereunder. SECTION 7.1.5. Books and Records. Each of SIHL and the Borrower will, and will cause each of their respective Subsidiaries (other than Unrestricted Subsidiaries) to, keep books and records which accurately reflect all of their respective business affairs and transactions and permit the Managing Agents, the Issuer and each Lender or any of their respective representatives, at reasonable times and intervals, to visit all of its offices, to discuss its financial matters with its officers and independent public accountant (and each of SIHL and the Borrower hereby authorizes such independent public accountant to discuss SIHL or the Borrower's and such Subsidiaries' financial matters with each Lender or its representatives whether or not any representative of SIHL or the Borrower or such Subsidiary is present) and to examine any of its books or other corporate records. Following the occurrence of an Event of Default, the Borrower shall pay any fees of such independent public accountant incurred in connection with either Managing Agent's, the Issuer's or any Lender's exercise of its rights pursuant to this Section. SECTION 7.1.6. Environmental Covenant. Each of SIHL and the Borrower will, and will cause each of their respective Subsidiaries to, (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; (b) immediately notify the Administrative Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to compliance with Environmental Laws; and (c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 7.1.6. -89- SECTION 7.1.7. Future Investments and Restricted Subsidiaries. To the extent permitted by this Agreement, (a) upon SIHL, the Borrower or any Guarantor directly or indirectly acquiring additional capital stock of or other equity interests in any Person that constituted a Pledged Share Issuer (as defined in a Pledge Agreement); or (b) upon SIHL designating a wholly-owned Subsidiary as a Restricted Subsidiary; or (c) upon SIHL or any Restricted Subsidiary acquiring any Additional Mohegan Sub Notes (including pursuant to any Investments made as a result of payments made under the Secured Completion Guaranty); or (d) upon SIHL or any of its Restricted Subsidiaries making an Investment in a Person directly or indirectly with the proceeds of any Loans that have been advanced to SIHL by the Borrower, SIHL or the Borrower shall notify the Administrative Agent of such acquisition, designation or Investment, as the case may be, and SIHL, the Borrower and each other Obligor shall, pursuant to a Pledge Agreement (as supplemented, if necessary, by a Foreign Pledge Agreement), pledge to the Administrative Agent, for its benefit and that of the Issuer and the Lenders, (i) in the case of clause (a) above, all of the additional capital stock or equity interests so acquired within 30 days of acquisition, (ii) in the case of the designation of a Restricted Subsidiary pursuant to clause (b) above, all of the outstanding capital stock or equity interests of such additional Restricted Subsidiary on or prior to the date on which such Person is designated a Restricted Subsidiary, (iii) in the case of clause (c) above, all of the Additional Mohegan Sub Notes as acquired, duly endorsed in favor of the Administrative Agent or, (iv) in the case of clause (d) above, the promissory note, duly endorsed in favor of the Administrative Agent (if such Investment is by way of a loan or advance) or the capital stock, equity or other ownership interest (if such Investment is in the form of other than a loan or advance), in each case made or issued by SIHL and each Restricted Subsidiary that is in the chain of ownership in connection with such Investment, and, in the case of clauses (a), (b) and (if applicable), (d) above, also deliver to the Administrative Agent undated stock powers for such certificates, executed in blank (or, if any such shares of capital stock or equity interests are uncertificated, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities or equity interests has been transferred to and perfected by the Administrative Agent, for the benefit of the -90- Issuer and the Lenders, in accordance with Section 8-313 and Section 8-321 of the U.C.C. or any other analogous local law which may be applicable), and to the extent any Subsidiary designated as a Restricted Subsidiary is not already a party to a Guaranty, such Restricted Subsidiary shall execute and deliver to the Administrative Agent a Guaranty, together with, if requested by the Administrative Agent, such opinions of legal counsel for SIHL or the Borrower from counsel reasonably satisfactory to the Administrative Agent relating thereto, which legal opinions shall be in form and substance reasonably satisfactory to the Administrative Agent. SECTION 7.1.8. Inspecting Engineer's Access to Information. Each of SIHL and the Borrower will, and will cause their respective Subsidiaries to, (a) promptly make available to the Inspecting Engineer all information and records requested by the Inspecting Engineer relating to the Project that the Inspecting Engineer determines to be necessary or desirable in order to satisfy its obligations under this Agreement (including the delivery of any certificates or reports that are to be delivered by the Inspecting Engineer pursuant to Section 5.2); and (b) direct and, to the extent practicable (by operation of its contract with the Prime Contractor or otherwise), cause the Prime Contractor to meet with the Inspecting Engineer upon reasonable prior notice and to cooperate with the Inspecting Engineer (including the delivery of all information and reports of the type described in clause (a) in the possession of the Prime Contractor) to the extent necessary to enable the Inspecting Engineer to satisfy its obligations under this Agreement. SECTION 7.1.9. Use of Proceeds. The Borrower shall apply the proceeds of each Borrowing in accordance with the eighth recital; without limiting the foregoing, no proceeds of any Loan will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any "margin stock", as defined in F.R.S. Board Regulation U. In addition to the foregoing, to the extent that the proceeds of any Loans are used directly or indirectly to make a Permitted Investment by SIHL, the provisions of clause (e) of Section 7.2.5 shall be complied with. SECTION 7.1.10. Management Contracts; Omnibus Agreement. (a) SIHL shall cause the amounts payable to it under the Omnibus Agreement and to it or its Subsidiaries under each Management Contract (other than (if applicable), the -91- Resorts Agreement, which shall be governed by clause (b)) to be payable (i) in the case of the Omnibus Agreement, to only, SIHL and/or (upon no less than 10 Business Days' prior written notice to the Administrative Agent) one or more Restricted Subsidiaries, and (ii) in the case of each Management Contract (other than (if applicable), the Resorts Agreement, which shall be governed by clause (b)), to SIHL or a Restricted Subsidiary, and (in each case) upon any Restricted Subsidiary being entitled to receive any such payments, each such Restricted Subsidiary shall execute and deliver to the Administrative Agent, for the benefit of the Secured Parties, an Obligor Contract Assignment Agreement, together with executed copies of Uniform Commercial Code financing statements (Form UCC-1) under the laws of the State of Connecticut, and any analogous filings required by jurisdictions outside of the United States, in each case naming SIHL or such Restricted Subsidiary as a debtor and the Administrative Agent as the secured party, or such other similar instruments or documents as may be necessary or, in the opinion of the Required Lenders, desirable to perfect the security interest of the Administrative Agent pursuant to such Obligor Contract Assignment Agreements. (b) SIHL may, upon 10 Business Days' prior written notice to the Administrative Agent, elect to have the Resorts Agreement deemed to be a Management Contract and the payments required under the Resorts Agreement to be included in Unconsolidated EBITDA by causing (i) all fees payable under the Resorts Agreement to be payable only to a Restricted Subsidiary and (ii) the Restricted Subsidiary that is to receive such payments to execute and deliver an agreement, substantially in the form of the Obligor Contract Assignment Agreement (with such changes thereto as approved by the Administrative Agent to the extent necessary to comply with this clause), and financing statements and other similar instruments and documents referred to in clause (a) in the context of the Obligor Contract Assignment Agreements. To the extent such election is made (and the other requirements of this Section are complied with), the amount of fees paid to a Restricted Subsidiary thereunder (not to exceed 3% of the gross revenues (determined in accordance with GAAP) of Griffin for the preceding Fiscal Quarter plus 15% of the "gross operating profit" (determined in accordance with GAAP) of Griffin for such preceding Fiscal Quarter) shall be included in the calculation of Unconsolidated EBITDA for each Fiscal Quarter in which such fees are actually received by a Restricted Subsidiary; provided, that the amount of such fees included in Unconsolidated EBITDA shall not exceed $10,000,000 in any Fiscal Year. SIHL may, by delivering a notice (the "Resorts Notice") on the last day of a Fiscal Quarter, elect to have -92- amounts payable under the Resorts Agreement to no longer be payable to a Restricted Subsidiary and the Resorts Agreement to no longer be deemed a Management Contract, with such election to take effect, and with such amounts to no longer be payable, in each case as of the date on which the Compliance Certificate is delivered for the immediately succeeding Fiscal Quarter; provided, that such election shall only be permitted once over the term of this Agreement and then only if (i) the Compliance Certificate delivered by SIHL for the Fiscal Quarter in which the Resorts Notice is delivered, in addition to the Compliance Certificate delivered for the immediately succeeding Fiscal Quarter, each containing calculations in detail reasonably satisfactory to the Administrative Agent shall, in each case, evidence compliance with each covenant set forth in Section 7.2.4 as if all management and other fees paid to a Restricted Subsidiary under the Resorts Agreement during such Fiscal Quarter in which the Resorts Notice is delivered, and such immediately succeeding Fiscal Quarter, were not included in the calculation of Unconsolidated EBITDA; and (ii) on the date that the fees payable under the Resorts Agreement are no longer payable to a Restricted Subsidiary and the Resorts Agreement is no longer included as a Management Contract, no Default shall have occurred and be continuing or would result therefrom. SECTION 7.1.11. Compliance with Instruments. The Borrower at its expense will, and will cause its Subsidiaries to, promptly comply in all material respects with all Permits, all material rights of way or use, privileges, franchises, servitudes, licenses, easements, tenements, hereditaments and appurtenances forming a part of the Property and all instruments creating or evidencing the same, in each case, to the extent compliance therewith is required of the Borrower or such Subsidiary under the terms thereof. The Borrower will not, and will not permit any of its Subsidiaries to take, or omit to take, any action which would reasonably be expected to result in any material adverse effect upon the Borrower's and the Restricted Subsidiaries' that are organized under the laws of The Commonwealth of The Bahamas, taken as a whole, rights under such instruments or in a forfeiture or termination of the rights afforded to the Borrower or such Subsidiary under any such instruments and will not, without the prior written consent of the Managing Agents, amend in any material respect any of such -93- instruments if the effect of such amendment would materially adversely affect the collateral of the Secured Parties that is the subject of or affected by such instruments. SECTION 7.1.12. Priority of Lenders' Liens. SIHL and the Borrower will, and will cause the other Restricted Subsidiaries to, do all things necessary to ensure that at all times the claims of the Secured Parties against the Obligors under this Agreement, the Notes and the Debentures and the other Loan Documents that provide for collateral security for the Obligations are prior to and superior to the claims of all other creditors, except as expressly permitted in this Agreement. SECTION 7.1.13. Access to Property. The Borrower shall permit the Managing Agents and their agents, consultants, employees and representatives (including the Inspecting Engineer) access to inspect the Property upon giving reasonable notice (except during the continuance of an Event of Default when no notice shall be required). SECTION 7.1.14. Notice of Delay. The Borrower shall notify the Managing Agents as soon as the Borrower becomes aware that the construction of the Project is not proceeding according to the schedule set forth in the Project Schedule. SECTION 7.1.15. Submission of Plans. The Borrower shall submit to the Inspecting Engineer and the Administrative Agent promptly following completion thereof all final Plans and Specifications. SECTION 7.1.16. Compliance with Contracts. The Borrower shall comply in all material respects with each Contract, and shall notify the Inspecting Engineer in writing forthwith of any material breach or event which with the giving of notice or lapse of time or both would constitute a material breach thereof. SECTION 7.1.17. Delivery of Agreements, Contracts, etc. The Borrower shall, promptly following completion or after becoming available and in any event prior to any Credit Extension which will cause the aggregate outstanding principal amount of all Loans and Letter of Credit Outstandings to exceed the Allowed Amount, deliver or cause to be delivered (i) Assignment of Architect's Agreements, Assignment of Contracts, related consents and other items required to be delivered pursuant to clauses (b) and (c) of Section 5.1.11; (ii) the report required pursuant to Section 5.1.12; -94- (iii) the Plans and Specifications for the Project, the Project Schedule and the Project Cost Analysis; (iv) the report of the Inspecting Engineer required to be delivered pursuant to the last sentence of Section 5.1.16; and (v) each of the Contracts and related items described in Section 5.1.20, in each case to the extent any of such items were not delivered to the Lenders on the Effective Date, which items shall be substantially similar to the preliminary items (if any) submitted to the Managing Agents on the Effective Date or otherwise satisfactory to the Managing Agents. SECTION 7.2. Negative Covenants. Each of SIHL and the Borrower agrees with the Administrative Agent, the Managing Agents, the Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, each of SIHL and the Borrower will perform the obligations set forth in this Section 7.2. SECTION 7.2.1. Business Activities. SIHL and the Borrower will not, and SIHL will not permit any of its Subsidiaries to, engage in any business activity, except those described in the first recital and such activities as may be incidental or related thereto. SECTION 7.2.2. Indebtedness. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations; (b) unsecured Indebtedness of the Borrower and SIHL owing to a Subsidiary of SIHL, but only if the Borrower or SIHL (as the case may be) and such Subsidiary have executed and delivered to the Administrative Agent a Subordination Agreement; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) Indebtedness which is incurred by SIHL, the Borrower or any of the other Restricted Subsidiaries to a -95- vendor of any assets permitted to be acquired pursuant to Section 7.2.7 to finance its acquisition of such assets; (e) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding Indebtedness of the types set forth in clauses (a), (b) and (c) of the definition of Indebtedness or Contingent Liabilities in respect of such types of Indebtedness); (f) Indebtedness in respect of Capitalized Lease Liabilities to the extent permitted in Section 7.2.7; (g) Indebtedness of Restricted Subsidiaries owing to SIHL; provided, that such Indebtedness shall be evidenced by a note (which shall, unless the Administrative Agent shall otherwise agree, be in the form of Exhibit A to the SIHL Pledge Agreement) and shall, pursuant to SIHL Pledge Agreement, be pledged to the Administrative Agent for its benefit and that of the Secured Parties; (h) Indebtedness of a Restricted Subsidiary owing to another Restricted Subsidiary; provided, that such Indebtedness shall be evidenced by a note (which shall, unless the Administrative Agent shall otherwise agree, be in the form of Exhibit A to the Subsidiary Pledge Agreement) and shall, pursuant to a Subsidiary Pledge Agreement, be pledged to the Administrative Agent for its benefit and that of the Secured Parties; (i) Indebtedness of the Borrower pursuant to (i) the WC Facility or (ii) any other revolving credit facility entered into by the Borrower to refinance the WC Facility (with such revolving credit facility being referred to as the "Refinancing WC Facility", and the WC Facility and the Refinancing WC Facility being collectively referred to as the "Supplemental Financing") and, in the case of the Refinancing WC Facility, on terms and conditions satisfactory to the Managing Agents), in each case for purposes of providing working capital funds to the Borrower in a principal amount not to exceed (i) $7,500,000 (on or prior to the date of Substantial Completion), and (ii) $15,000,000 thereafter; provided, that prior to incurring Supplemental Financing, the lenders of the Supplemental Financing (or an agent acting on behalf of such lenders) shall have executed and delivered to the Administrative Agent the Intercreditor Agreement; (j) unsecured Subordinated Debt of SIHL; -96- (k) Indebtedness of SIHL owing to the Borrower resulting from the Borrower advancing the proceeds of Loans to SIHL, but only if the provisions of clause (e) of Section 7.2.5 are complied with; (l) Indebtedness of SIHL in the form of the guarantee of the obligations of Unrestricted Subsidiaries or third party non-Affiliates which shall not, prior to the date of Substantial Completion, be in an aggregate amount in excess of the Permitted Investment Amount; and (m) other unsecured Indebtedness of SIHL and its Restricted Subsidiaries (other than the Borrower); provided, however, that (i) prior to the date of Substantial Completion, FF&E Debt shall not exceed $50,000,000, (ii) no Indebtedness otherwise permitted by clause (d) or clauses (f) through (and including) (m) shall be permitted if, either before or after giving effect to the incurrence of such Indebtedness, any Default under Section 7.2.4 has occurred and is then continuing or, on a pro forma basis, would result therefrom, and (iii) before incurring Indebtedness under clause (j), clause (l) or clause (m) in excess of $1,000,000, the Administrative Agent shall have received a certificate from an Authorized Officer of SIHL that no Default has occurred and is continuing or would result therefrom, and evidencing compliance with each of the covenants set forth in Section 7.2.4 (as if such Indebtedness had been incurred). SECTION 7.2.3. Liens. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations, granted pursuant to any Loan Document and Permitted Encumbrances; (b) Liens in favor of Secured Parties on the same collateral that secures the Obligations to secure (i) Indebtedness permitted pursuant to clause (i) of Section 7.2.2 and (ii) Hedging Obligations arising under Rate Protection Agreements entered into in respect to the Credit Extensions, in each case which Liens may rank pari passu with the Lender Parties' Lien on the same collateral on terms satisfactory to the Managing Agents, but only if such Secured Parties have executed and delivered the Intercreditor Agreement; (c) Liens described in Item 7.2.3(c) ("Existing Liens") of the Disclosure Schedule granted prior to the -97- Effective Date to secure payment of Indebtedness of the type permitted and described in clause (c) of Section 7.2.2; (d) Liens granted to secure payment of Indebtedness of the type permitted and described in clause (d) of Section 7.2.2 and covering only those assets acquired with the proceeds of such Indebtedness; (e) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (g) Liens incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (h) judgment Liens in existence less than 15 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; and (i) Liens granted by SIHL to other than Subordinated Noteholders (or trustees or representatives of Subordinated Noteholders) to secure other than Subordinated Debt, consisting of a security interest in cash, Cash Equivalent Investments and/or marketable securities to secure obligations of SIHL which are incurred pursuant to clause (l) of Section 7.2.2 (other than, in each case, any collateral in which the Administrative Agent has, or under the terms of this Agreement or a Loan Document should have, a Lien, including the capital stock of Restricted Subsidiaries); provided, that, prior to the date of Substantial Completion, the aggregate amount of Indebtedness that may be secured pursuant to this clause shall not exceed the Permitted Investment Amount. -98- SECTION 7.2.4. Financial Condition. SIHL (and in the case of clause (a), the Borrower) will not permit: (a) The Borrower EBITDA at the end of any Fiscal Quarter occurring during any period set forth below to be less than the Borrower EBITDA set forth opposite such period: Period Borrower EBITDA ------ --------------- Effective Date through (and including) 09/30/96 $28,000,000 10/01/96 through (and including) 12/31/96 $37,000,000 01/01/97 through (and including) 03/31/97 $37,000,000 04/01/97 through (and including) 06/30/97 $37,000,000 07/01/97 through (and including) 09/30/97 $37,000,000 10/01/97 through (and including) 12/31/97 $42,000,000 01/01/98 through (and including) 03/31/98 $42,000,000 04/01/98 through (and including) 06/30/98 $42,000,000 07/01/98 through (and including) 09/30/98 $42,000,000 10/01/98 through (and including) 12/31/98 $50,000,000 01/01/99 through (and including) 03/31/99 $66,000,000 04/01/99 through (and including) 06/30/99 $66,000,000 07/01/99 through (and including) 09/30/99 $70,000,000 10/01/99 through (and including) 12/31/99 $100,000,000 01/01/00 through (and including) 03/31/00 $100,000,000 04/01/00 through (and including) 06/30/00 $100,000,000 07/01/00 through (and including) 09/30/00 $100,000,000 10/01/00 through (and including) 12/31/00 $105,000,000 -99- 01/01/01 through (and including) 03/31/01 $105,000,000 04/01/01 through (and including) 09/30/01 $105,000,000 (b) The Unconsolidated EBITDA at the end of any Fiscal Quarter occurring during any period set forth below to be less than the Unconsolidated EBITDA set forth opposite such period: Period Unconsolidated EBITDA ------ --------------------- Effective Date through (and including) 09/30/96 $30,000,000 10/01/96 through (and including) 12/31/96 $40,000,000 10/01/97 through (and including) 03/31/97 $40,000,000 04/01/97 through (and including) 06/30/97 $40,000,000 07/01/97 through (and including) 09/30/97 $40,000,000 10/01/97 through (and including) 12/31/97 $53,000,000 01/01/98 through (and including) 03/31/98 $56,000,000 04/01/98 through (and including) 06/30/98 $56,000,000 07/01/98 through (and including) 09/30/98 $56,000,000 10/01/98 through (and including) 12/31/98 $56,000,000 01/01/99 through (and including) 03/31/99 $80,000,000 04/01/99 through (and including) 06/30/99 $80,000,000 07/01/99 through (and including) 09/30/99 $85,000,000 10/01/99 through (and including) 12/31/99 $115,000,000 01/01/00 through (and including) 03/31/00 $115,000,000 04/01/00 through (and including) 06/30/00 $115,000,000 -100- 07/01/00 through (and including) 09/30/00 $115,000,000 10/01/00 through (and including) 12/31/00 $120,000,000 01/01/01 through (and including) 03/31/01 $120,000,000 04/01/01 through (and including) 09/30/01 $120,000,000 (c) The Consolidated Interest Coverage Ratio as of the end of any Fiscal Quarter occurring during any Fiscal Year set forth below to be less than the Consolidated Interest Coverage Ratio set forth opposite such period: Consolidated Interest Period Coverage Ratio ------ -------------- 1996 2.75:1.0 1997 3.00:1.0 1998 3.00:1.0 1999 3.50:1.0 2000 and thereafter 3.50:1.0 (d) Consolidated Net Worth at any time to be less than an amount equal to the sum of (i) $418,500,000; plus (ii) 75% of Net Income of SIHL and its Subsidiaries for each of the preceding full Fiscal Quarters occurring since March 31, 1996 (without deduction for losses); plus (iii) 100% of Net Equity Proceeds (if any) received by SIHL during each of the preceding full Fiscal Quarters occurring since March 31, 1996; plus (iv) the Net Worth of a Person acquired by SIHL or any of its Subsidiaries after June 28, 1996 (including Griffin Gaming and Entertainment, Inc., if so acquired), in an amount equal to the Net Worth of such -101- Person on such date of acquisition (after giving effect to such acquisition). (e) The Total Debt to Unconsolidated EBITDA Ratio at any time during any period set forth below to be greater than the ratio set forth opposite such period: Total Debt to Unconsolidated Period EBITDA Ratio - ------------------------------- --------------------------- 1. During the period commencing on the Effective Date and ending on the earlier of (i) 36 months after the Effective Date and (ii) 12 months after the date of Substantial Completion: 4.5:1; 2. On the date which is the day immediately succeeding the earlier of the dates set forth in Item 1 and continuing through the date (the "Anniversary Date") that is the 12-month anniversary thereof: 3.5:1; and 3. On the date which is the day immediately succeeding the Anniversary Date and thereafter: 3:1. (f) The Senior Debt to Unconsolidated EBITDA Ratio any time during any period set forth below to be greater than the ratio set forth opposite such period: -102- Senior Debt to Unconsolidated Period EBITDA Ratio - -------------------------------- --------------------- 1. During the period commencing on the Effective Date and ending on the earlier of (i) 36 months after the Effective Date and (ii) 12 months after the date of Substantial Completion: 4.0:1; 2. On the date which is the day immediately succeeding the earlier of the dates set forth in Item 1 and continuing through the date that is the 12-month anniversary thereof: 3:1; and 3. On the date which is the 12-month anniversary of the date set forth in Item 2 and thereafter: 2:1. SECTION 7.2.5. Investments. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except (without duplication): (a) Investments existing on the Effective Date and identified in Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule; (b) Cash Equivalent Investments; (c) Investments permitted as Indebtedness pursuant to clause (b), clause (g) and clause (h) of Section 7.2.2; (d) in the ordinary course of business, Investments by SIHL in any of the Restricted Subsidiaries, or by any Restricted Subsidiary in any of its Restricted Subsidiaries, by way of contributions to capital to the extent that all capital stock of other equity interests evidencing such Investments are pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to Section 7.1.7; (e) Investments made (i) by the Borrower with the proceeds of the Loans in the form of loans or advances to SIHL; provided, that -103- (A) SIHL promptly (and in any event within one Business Day following receipt) makes an Investment in the amount of such Loan proceeds in a Restricted Subsidiary and causes such Restricted Subsidiary to apply such Investment in a venture (or in a Person engaged in a venture) of the type permitted by the first recital (whether or not, after giving effect to such Investment, the Person in which such Restricted Subsidiary makes such Investment becomes a Subsidiary of SIHL); (B) if SIHL elects to have such Investment result in a new Restricted Subsidiary, the provisions of Section 7.1.7 are complied with; (C) concurrently with the Investment made by SIHL or such Restricted Subsidiary in such venture (or Person engaged in a venture) of the type described in the first recital SIHL and such Restricted Subsidiary shall pledge to the Administrative Agent under a Pledge Agreement all of the capital stock, equity or other ownership interest that is issued to SIHL or such Restricted Subsidiary by any Restricted Subsidiary that is in the chain of ownership in connection with such Investment; (D) SIHL agrees that it will, concurrently with the making of any loan or advance by the Borrower to SIHL pursuant to this Section, execute and deliver to the Borrower a note payable by SIHL to the Borrower in the form attached hereto as Exhibit P (a "Permitted Investment Note") in a principal amount equal to the amount of the Loans advanced by the Borrower to SIHL, or (if a Permitted Investment Note was previously executed and delivered to the Administrative Agent by SIHL), shall deliver written instruction to the Administrative Agent to record (on SIHL's behalf) on the grid attached to a Permitted Investment Note the principal amount of such loan or advance made by the Borrower to SIHL; and (E) the Borrower agrees that it will promptly deliver to the Administrative Agent in pledge under the Borrower Pledge Agreement all such Permitted Investment Notes, duly endorsed to the order of the Administrative Agent; and the Administrative Agent shall be satisfied that all actions necessary to perfect its first priority Lien in such Permitted Investment Notes under all applicable laws shall have been taken, and (ii) directly or indirectly by SIHL -104- (and its Subsidiaries, if applicable) with the proceeds of Investments made by the Borrower under clause (e)(i) above; (f) Investments made with Net Equity Proceeds by SIHL in an amount equal to the amount of such Net Equity Proceeds in a venture (or in a Person engaged in a venture) of the type permitted by the first recital, whether or not such Investment is in a Subsidiary of SIHL, or, after giving effect to such Investment, the Person in which such Investment is made becomes a Subsidiary of SIHL; provided, that if SIHL elects to have such Investment result in a Restricted Subsidiary, the provisions of Section 7.1.7 are complied with; and (g) subject to Section 7.2.1, other Investments; provided, that the aggregate amount of such other Investments made by SIHL, the Borrower and the other Restricted Subsidiaries plus the aggregate amount of Investments made by SIHL or any Restricted Subsidiary in other than a Restricted Subsidiary under clause (e)(ii) above (i) prior to the date of Substantial Completion and at a time when any Loans or Letters of Credit are outstanding or Reimbursement Obligations are owing, or (ii) prior to the date of Substantial Completion and following the first year anniversary of the Effective Date (whether or not Loans or Letters of Credit are outstanding or Reimbursement Obligations are owing following such first year anniversary) shall not (in either case), after giving effect to such Investment, exceed the Permitted Investment Amount; provided, however, that (h) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (i) Investments made by SIHL in the Mohegan Tribal Gaming Authority (to satisfy SIHL's obligations under the Secured Completion Guaranty) shall result in the issuance to SIHL of Additional Mohegan Sub Notes of the Mohegan Tribal Gaming Authority that are pledged to the Administrative Agent for the benefit of the Secured Parties pursuant to the SIHL Pledge Agreement; -105- (j) no Investment otherwise permitted by (x) clause (e) or (g) shall be permitted to be made if, immediately before or after giving effect thereto, any Default of the type set forth in clauses (a) through (d) of Section 8.1.9 or any other Event of Default shall have occurred and be continuing or would result therefrom, or (y) clause (g) in excess of $5,000,000 individually or $5,000,000 in the aggregate for all Investments over the course of a 30-consecutive day period, shall (in either case of this clause (j)(y)) be permitted unless, prior to making such Investment on any date prior to Substantial Completion, an Authorized Officer of SIHL has delivered a certificate to the Administrative Agent certifying as to the matters set forth in clauses (a), (b) and (c) of Section 5.2.1 both before and after giving effect to such Investment; and (k) notwithstanding anything to the contrary contained herein, an Investment or other acquisition of all or any portion of the capital stock or other equity interest in any Person permitted in this Section may be pursued or made only if such Investment or acquisition is not opposed by the board of directors (or equivalent managerial body) of such Person prior to the expenditure of any funds in connection therewith. SECTION 7.2.6. Restricted Payments, etc. On and at all times after the Effective Date, (a) neither SIHL nor the Borrower will declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of SIHL or the Borrower (as the case may be) or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of SIHL or the Borrower (as the case may be) (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of the Restricted Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of the Restricted Subsidiaries to purchase, make any deposit in respect of or redeem, any shares of any class of capital stock (now or hereafter outstanding) of SIHL or the Borrower (as the case may be), or warrants, options or other rights with respect to any shares of any class of -106- capital stock (now or hereafter outstanding) of SIHL or the Borrower; provided, that notwithstanding the foregoing, (i) so long as at the time of declaration or payment of such dividends no Default has occurred and is continuing or would result therefrom, the Borrower may declare and pay cash dividends to SIHL; provided that, prior to the date of Substantial Completion, the amount so dividended by the Borrower to SIHL in any Fiscal Quarter shall not exceed 5% of Net Income (including after giving effect to the payment of any taxes) for the prior Fiscal Year, (ii) Subsidiaries of the Borrower may declare and pay cash dividends to the Borrower or the intermediate parent (of such Subsidiary) that also is a Subsidiary of the Borrower, and (iii) SIHL shall be permitted to declare and pay cash dividends on its Ordinary Shares if (x) both before and after giving effect to such declaration, no Default has occurred and is continuing or would result therefrom, (y) SIHL shall have delivered a Compliance Certificate to the Administrative Agent certifying to that effect and evidencing, on a pro forma basis after giving effect to the payment of such dividend, compliance with each of the covenants set forth in Section 7.2.4, and (z) the aggregate amount of cash dividends paid in any Fiscal Quarter, when aggregated with the amount expended in respect of Subordinated Notes under clause (b) shall not exceed the Restricted Payment Amount; (b) SIHL will not, and will not permit any of the Restricted Subsidiaries to (i) make any payment or prepayment of principal of, or interest on, any Subordinated Notes (A) on any day other than, in the case of interest only, the stated, scheduled date for such payment of interest set forth in the applicable Subordinated Notes or in the applicable Subordinated Note Indenture, or (B) which would violate the terms of this Agreement or the subordination provisions of such Subordinated Note Indenture; or (ii) redeem, purchase or defease, any Subordinated Notes; provided, that, notwithstanding the foregoing, following the date of Substantial Completion SIHL shall be permitted in -107- each Fiscal Quarter to pay, prepay, purchase, redeem or defease Subordinated Notes but only to the extent that the principal amount so paid, prepaid, purchased, redeemed or defeased, when aggregated with the amount of dividends paid under clause (a)(iii), does not exceed the Restricted Payment Amount; and (c) SIHL will not, and will not permit any of the Restricted Subsidiaries to, make any deposit for any of the foregoing purposes in excess of the amounts permitted by clauses (a) or (b). SECTION 7.2.7. Capital Expenditures, etc. (a) SIHL will not, and will not permit any of the Restricted Subsidiaries (other than the SIBL Group) to, make or commit to make Capital Expenditures in any Fiscal Year, except Capital Expenditures not expended in connection with the Project, as set forth in the Project Cost Analysis which do not aggregate in excess of the amount set forth below opposite such Fiscal Year: 1996 $1,000,000 1997 $1,000,000 1998 $1,000,000 1999 $1,000,000 2000 $1,000,000 2001 $1,000,000. (b) The Borrower will not, and will not permit any of its Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal Year, except Capital Expenditures made or committed to in connection with (i) the Project, as set forth in the Project Cost Analysis, and (ii) other Capital Expenditures not expended in connection with the Project which do not aggregate (in the case of Capital Expenditures under this clause (b)(ii)) in excess of the amount set forth below opposite such Fiscal Years: 1996 $15,000,000 1997 $15,000,000 1998 $20,000,000 1999 $20,000,000 2000 $25,000,000 2001 $25,000,000; provided, that the amount of Capital Expenditures permitted in any given year (without duplication) under clause (a) or clause (b) but not used in such year (as certified in a Compliance Certificate pursuant to clause (c) of Section 7.1.1 with such unused amount being referred to as the "Carry Forward Amount") may be carried forward by SIHL, the Borrower or another Restricted Subsidiary, as the case may be, to, but only to (and used in) the next succeeding year, and prior to the date of -108- Substantial Completion the Carry Forward Amount shall be deemed to be used only after SIHL or such Restricted Subsidiaries (other than the SIBL Group) (in the case of clause (a)) or the Borrower and its Subsidiaries (in the case of clause (b)) (as applicable) have used the amount of Capital Expenditures permitted in such Fiscal Year (without giving effect to the Carry Forward Amount) and after the date of Substantial Completion the Carry Forward Amount will be deemed to have been applied first. SECTION 7.2.8. Transactions with Affiliates. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract is fair and equitable to SIHL, the Borrower or such other Restricted Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of SIHL, the Borrower or such other Restricted Subsidiary with a Person which is not one of its Affiliates; provided, that, notwithstanding the foregoing, neither SIHL nor any Restricted Subsidiary will enter into any management or similar agreement requiring the payment of money for services or advice in connection with operating a casino, hotel or other property unless the Person to be paid for providing such services or advice is a Restricted Subsidiary and the recipient of amounts to be paid has executed and delivered an Obligor Contract Assignment Agreement. SECTION 7.2.9. Restrictive Agreements, etc. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, enter into any agreement (excluding this Agreement, any other Loan Document, and, in the case of clause (a)(i) below, (x) any agreement governing any Indebtedness permitted by clause (d) of Section 7.2.2 as to the assets financed with the proceeds of such Indebtedness and (y) Indebtedness permitted by clause (i) of Section 7.2.2) prohibiting (a) the (i) creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or (ii) ability of SIHL, the Borrower or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or (b) the ability of SIHL, the Borrower or any other Restricted Subsidiary to make any payments, directly or indirectly, to SIHL or the Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on Investments, or the ability of -109- any such Restricted Subsidiary to make any payment, directly or indirectly, to SIHL or the Borrower. SECTION 7.2.10. Consolidation, Merger, etc. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other Person, or purchase or otherwise acquire all of the capital stock or all or substantially all of the assets of any Person (or of any division thereof) except (a) (i) any wholly-owned Subsidiary that is a Restricted Subsidiary (other than the Borrower or any other member of the SIBL Group) may liquidate or dissolve voluntarily into, and may merge with and into, SIHL or any other wholly-owned Subsidiary that is a Restricted Subsidiary, and the assets or stock of any wholly-owned Subsidiary that is a Restricted Subsidiary (other than the Borrower or any other member of the SIBL Group) may be purchased or otherwise acquired by SIHL or any other wholly-owned Subsidiary that is a Restricted Subsidiary, and (ii) any wholly-owned Subsidiary of the Borrower may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other wholly-owned Subsidiary of the Borrower, and the assets or stock of any wholly-owned Subsidiary of the Borrower may be purchased or otherwise acquired by the Borrower or any other wholly-owned Subsidiary of the Borrower; and (b) so long as no Default of the type set forth in clauses (a) through (d) of Section 8.1.9 or any other Event of Default has occurred and is continuing or would occur as a result of, and after giving effect thereto, SIHL or any of the Restricted Subsidiaries may purchase all or substantially all of the assets or all of the capital stock of any Person (in each case other than an Unrestricted Subsidiary) if permitted (without duplication) by Section 7.2.7 to be made as a Capital Expenditure or if permitted as an Investment pursuant to Section 7.2.5. SECTION 7.2.11. Asset Dispositions, etc. SIHL and the Borrower will not, and SIHL will not permit any of the other Restricted Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, (i) any assets of SIHL or any Restricted Subsidiary or capital stock of any Restricted Subsidiary or (ii) all or any substantial part of its (or their respective) assets (including accounts receivable and capital stock of Subsidiaries) to any Person, unless -110- (a) such sale, transfer, lease, contribution or conveyance is (i) in the ordinary course of its business or (ii) permitted by Section 7.2.10; (b) in addition to clause (a) and (c) the value of the assets being sold, transferred, leased, contributed or conveyed (i) in any single transaction or series of transactions does not exceed $10,000,000 in any given Fiscal Year and (ii) after giving effect to all such sales, transfers, leases, contributions or conveyances, does not exceed $35,000,000 in the aggregate over the term of this Agreement, and any such sale, transfer, lease, contribution or conveyance is in an arms-length transaction and made for fair market value, and at least 50% of the consideration received is in cash, with all non-cash consideration being evidenced by a note in form and substance satisfactory to the Administrative Agent, which note shall be pledged to the Administrative Agent under a Pledge Agreement and the Administrative Agent shall be satisfied that it has a first- priority, perfected Lien on and security interest in such note; or (c) the sale is of the Mohegan Sub Notes, and then only if such sale is in an arms-length transaction, for cash consideration. Notwithstanding anything to the contrary in any Loan Document, SIHL and the Borrower will not, and SIHL will not permit any of the other Subsidiaries to, sell, transfer or convey the Real Estate constituting part of the Project or the Refurbishment or any portion thereof or interest therein. Upon a sale, transfer, lease, contribution or conveyance of assets permitted by this Section the Lien in favor of the Secured Parties upon the assets so sold, transferred, leased, contributed or conveyed shall automatically terminate and be released. SECTION 7.2.12. Management Contracts. SIHL and the Borrower shall not, and SIHL will not permit any other Restricted Subsidiary to, agree to any material amendment or other modification to any Management Contract, the Omnibus Agreement or the Connecticut Management Agreement or (to the extent not restricted by law) permit the Omnibus Agreement or the Connecticut Management Agreement to be materially amended without (in each case) the prior written consent of the Managing Agents, which may be withheld in the sole discretion of the Managing Agents, it being acknowledged and agreed by the parties hereto that any amendment or other modification which would have the effect of (i) reducing any fees paid to SIHL or any Restricted Subsidiary under any such agreements, (ii) shortening the term of any such agreements or (iii) allowing the fees or other amounts payable under such agreements to be paid to any Person or Persons -111- other than SIHL or a Restricted Subsidiary, shall, in each case, be deemed to be material; provided, that notwithstanding the foregoing, (i) amounts payable under the Resorts Agreement may be payable to other than a Restricted Subsidiary, and the Resorts Agreement may be deemed to no longer be a Management Contract (and therefore the provisions of this Section shall not thereafter apply to the Resorts Agreement), to the extent permitted by Section 7.1.10 and (ii) the Resorts Agreement may be amended or modified but only if, both before and after giving effect to such amendment or modification, no Default shall have occurred and be continuing or would result therefrom. For so long as any PI Management Agreement is in effect, the terms thereof, and all fees payable thereunder, shall at all times be subject to the approval of the Managing Agents (which may be withheld in their sole discretion) and shall be subject and subordinate on terms satisfactory to the Managing Agents to the payment of the Obligations, to the lien of the Debentures and to the rights of the Secured Parties thereunder and under the other Loan Documents. Each of SIHL and the Borrower acknowledges and agrees that upon the acceleration of all or any part of the Credit Extensions pursuant to Sections 8.2 or 8.3, or the exercise of foreclosure remedies under any Loan Documents, the Managing Agents shall be entitled to immediately terminate each PI Management Agreement and (if different), all existing and future intercompany management and license agreements, technical assistance agreements, marketing and promotional agreements, and all other agreements pertaining to or in any way relating to the Property with SIML or any other present or future Subsidiary or controlled Affiliate of SIHL without cost or liability, and SIHL and the Borrower covenant and agree that all such agreements shall contain appropriate provisions satisfactory to the Managing Agents permitting such termination. SECTION 7.2.13. Leases. The Borrower will not, and will not permit any of its Subsidiaries to, (i) enter into any material Lease affecting the property constituting any part of the Project without the prior written consent of the Required Lenders, not to be unreasonably withheld, or (ii) amend or supplement in any material manner, or terminate or accept a surrender of any existing Lease affecting the property constituting any part of the Project, without first obtaining the written consent of the Managing Agents, which may be withheld in the sole discretion of the Managing Agents. SECTION 7.2.14. Modification of Subordinated Debt Documents. Without the prior written consent of the Required Lenders, SIHL will not consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, any Subordinated Debt (including any Subordinated Note Indenture or any of the Subordinated Notes), or any guarantees delivered in connection with any Subordinated Debt -112- (collectively, the "Restricted Agreements"), or make any payment in order to obtain an amendment thereof or change thereto, if the effect of such amendment, supplement, modification or change is to (i) increase the principal amount of, or increase the interest rate on, or add or increase any fee with respect to such Subordinated Debt or any such Restricted Agreement, advance any dates upon which payments of principal or interest are due thereon or change any of the covenants with respect thereto in a manner which is more restrictive to SIHL or any of its Subsidiaries or (ii) change any event of default or condition to an event of default with respect thereto, change the redemption, prepayment or defeasance provisions thereof or change the subordination provisions thereof. SECTION 7.2.15. Change Orders. Neither SIHL nor the Borrower, or any of their respective Subsidiaries, shall approve any Change Orders or permit them to be implemented unless they are first submitted to the Administrative Agent for approval by (i) the Managing Agents or (ii) to the extent the Change Orders singly, or in the aggregate with other Change Orders, will (A) increase the cost of the Project by $50,000,000 or more or (B) extend the scheduled completion of the Project by more than six months, the Required Lenders (in each case which approval shall not be unreasonably withheld or delayed). SECTION 7.2.16. Refurbishment. SIHL will not, and will not permit any Subsidiary to, begin or direct its agents or employees to begin the Refurbishment until the date of Substantial Completion. SECTION 7.2.17. Rate Protection Agreements. SIHL will not, and will not permit any of its Restricted Subsidiaries to, enter into any Rate Protection Agreements with an aggregate notional principal amount of Indebtedness in excess of $250,000,000. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default". SECTION 8.1.1. Non-Payment of Obligations. The Borrower or SIHL shall default (i) in the payment or prepayment when due of any principal on any Credit Extension or repayment of any Reimbursement Obligation, or (ii) in the payment when due of any interest on any Credit Extension or any commitment fee (and such default shall continue unremedied for a period of three Business Days), or (iii) in the payment of any other Obligation (and such -113- default shall continue unremedied for a period of 15 days following the submission of an invoice to the Borrower in respect of such other Obligation). SECTION 8.1.2. Breach of Warranty. The representations and warranties of the Borrower, SIHL and each other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower, SIHL or any other Obligor to the Administrative Agent, the Issuer or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made in any material respect. SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. Either the Borrower or SIHL shall default in the due performance and observance of any of its obligations under Section 7.2 or Sections 7.1.1, 7.1.4, 7.1.6, 7.1.7 or 7.1.17. SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 15 days after notice thereof shall have been given to the Borrower by the Administrative Agent. SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) of (i) the Borrower or any of its Subsidiaries or (ii) SIHL or any other Restricted Subsidiary having a principal amount, individually or in the aggregate, in excess of (x) $5,000,000 (in the case of the Borrower or any Subsidiary of the Borrower) or (y) $10,000,000 (in the case of SIHL and any other Restricted Subsidiary), or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness of the Borrower (or any of its Subsidiaries) or SIHL or any other Restricted Subsidiary which results in the acceleration of the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness of the Borrower (or any of its Subsidiaries) or SIHL or any other Restricted Subsidiary, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 8.1.6. Judgments. Any judgment or order for the payment of money in excess of $5,000,000 (to the extent not -114- covered by insurance (other than self-insurance)) shall be rendered against SIHL, the Borrower, any other Restricted Subsidiary and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 20 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 8.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan (a) the institution of any steps by SIHL, the Borrower, any member of their respective Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, SIHL, the Borrower or any such member could be required to make a contribution to such Pension Plan, or would reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $2,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. SECTION 8.1.8. Change in Control. Any Change in Control shall occur. SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower, any of its Subsidiaries, SIHL or any of its Significant Subsidiaries or any Obligor shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for such Person or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for such Person or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that each such Person hereby expressly authorizes the Administrative Agent, the Issuer and, each Lender to appear -115- in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of any such Person, and, if any such case or proceeding is not commenced by such Person, such case or proceeding shall be consented to or acquiesced in by such Person or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that each such Person hereby expressly authorizes the Administrative Agent, the Issuer and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower, SIHL or any other Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document. SECTION 8.1.11. Amendments to, or Termination of, Certain Agreements. Any Management Contract, the Connecticut Management Agreement, the Omnibus Agreement, the TCA Partnership Agreement or any provisions relating to the non-competition agreements contained in the Combination Agreement shall, in whole or in part, be amended, supplemented, modified, terminated, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any party thereto, in each case if the effect of such amendment, supplement, modification, termination or other action, as determined by the Lenders, is materially adverse to the rights or interest of the Lender Parties or the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole. SECTION 8.1.12. Loss of Bahamian Approvals. The approval of the Exchange Control of The Central Bank of The Commonwealth of The Bahamas with respect to this Agreement or the Notes, and -116- the undertaking to make available to the Borrower and the other Obligors such foreign exchange as may be necessary to enable the Borrower and the other Obligors to fulfill their payment obligations in Dollars, ceases to be in full force and effect and the Borrower shall fail to renew the same within 30 days or alternative arrangements shall not have been made by the Borrower for payment of the Obligations in Dollars. SECTION 8.1.13. Outside Completion Date. The failure of the date of Substantial Completion to occur on or prior to the Outside Completion Date. SECTION 8.1.14. Loss or Revocation of Casino License. Any Casino License is revoked, suspended, rescinded, denied or not renewed when required in accordance with its terms and as a result the casino or casinos governed thereby are not able to operate for a period of 14 or more days. SECTION 8.1.15. Abandonment of Project. The Project is abandoned, or the existing casino on the Land is abandoned prior to Substantial Completion. SECTION 8.1.16. Loss of Property; Change in Management. The Borrower or any of the Obligors or any Property or any material part of the revenues or assets of the Borrower, the Obligors or the Property (as the case may be) is seized, nationalized, expropriated or compulsorily purchased or any applicable authority resolves to make an order for such seizure, nationalization, expropriation or compulsory purchase or the management of the Borrower or any Obligor is wholly or partially displaced or its authority in the conduct of its business is wholly or partially curtailed and such action would reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business or properties of SIHL and the Restricted Subsidiaries, taken as a whole. SECTION 8.1.17. Failure of Subordination. The subordination provisions relating to any Subordinated Note Indenture or contained in any Subordinated Notes (the "Subordination Provisions") shall fail to be enforceable by the Lender Parties (which have not effectively waived the benefits thereof) in accordance with the terms thereof, or the principal or interest on any Loan, Reimbursement Obligation or other monetary Obligations shall fail to constitute Senior Indebtedness, "Senior Debt" or the same (or any other similar) term used to define the monetary Obligations; or SIHL shall, directly or indirectly, disavow or contest in any manner (i) the effectiveness, validity or enforceability of any of the Subordination Provisions, or (ii) that any of such Subordination Provisions exist for the benefit of the Lender Parties. -117- SECTION 8.1.18. Redemption. Any judgment shall be entered in favor of a Subordinated Noteholder rescinding the subordination provisions of any Subordinated Debt or any event shall occur which, under the terms of or any other agreement or Subordinated Note Indenture, as the case may be, shall require SIHL to purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire all or any portion of the principal amount of any such Subordinated Debt prior to its final stated maturity date (other than as a result of the conversion of such Subordinated Debt into the equity of SIHL without the requirement of any monetary consideration being paid by or on behalf of SIHL). SECTION 8.2. Action if Bankruptcy. If any Event of Default described in clauses (a) through (d) of Section 8.1.9 shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. ARTICLE IX THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND MANAGING AGENTS SECTION 9.1. Actions. Each Lender and Issuer hereby appoints Scotiabank and Royal Bank as the Managing Agents. Each Lender and Issuer hereby appoints Scotiabank as its Administrative Agent under and for purposes of this Agreement, the Notes and each other Loan Document, and as Collateral Agent under and for all purposes of the Intercreditor Agreement. Each Lender and Issuer authorizes the Administrative Agent and the Collateral Agent to act on behalf of such Issuer or Lender under this Agreement, the Notes and each other Loan Document as -118- Administrative Agent and under the Intercreditor Agreement as Collateral Agent and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent or Collateral Agent (with respect to which the Administrative Agent or the Collateral Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of such Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender and Issuer hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent and Collateral Agent, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document or the Intercreditor Agreement, including reasonable attorneys' fees, and as to which such Agent is not reimbursed by the Borrower or SIHL; provided, however, that no Lender or Issuer shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from such Agent's gross negligence or wilful misconduct. Neither the Administrative Agent nor the Collateral Agent shall be required to take, or omit to take, any action hereunder, under the Notes or under any other Loan Document or (in the case of the Collateral Agent) under the Intercreditor Agreement, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document or the Intercreditor Agreement, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent or the Collateral Agent shall be or become, in such Agent's determination, inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the -119- Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing. SECTION 9.3. Exculpation. Neither the Managing Agents, the Collateral Agent or the Administrative Agent nor any of their respective directors, officers, employees or agents shall be liable to any Secured Party for any action taken or omitted to be taken by it under this Agreement or any other Loan Document or under the Intercreditor Agreement, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document or the Intercreditor Agreement, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents or the Intercreditor Agreement, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower or SIHL or any other Obligor of its obligations hereunder or under any other Loan Document or under the Intercreditor Agreement. Any such inquiry which may be made by the Collateral Agent or the Administrative Agent shall not obligate it to make any further inquiry or to take any action. The Administrative Agent and the Collateral Agent shall each be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which such Agent believes to be genuine and to have been presented by a proper Person. SECTION 9.4. Successor. Each Managing Agent may resign upon the terms set forth in clause (a). The Administrative Agent may resign upon the terms set forth in clause (b). The Collateral Agent may resign in accordance with the terms of the Intercreditor Agreement. (a) Each Managing Agent may resign at any time upon at least 60 days' notice to the Borrower and all Lenders. If a Managing Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Managing Agent which, with the prior written consent of the Borrower, not to be unreasonably withheld or delayed, shall thereupon become a Managing Agent hereunder. If no successor Managing Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 60 days after the retiring Managing Agent's giving notice of resignation, then the retiring Managing Agent may, on behalf of the Lenders and with the consent of the Borrower (not to -120- be unreasonably withheld), appoint a successor Managing Agent, which shall be one of the Lenders. In furtherance of the foregoing, upon the announcement that any Managing Agent will resign in its capacity as a Managing Agent, each of SIHL, the Borrower and the Lenders agree to use their best efforts to promptly appoint another Managing Agent. If no successor Managing Agent shall have been so appointed and shall have accepted such appointment, then the remaining Managing Agent shall be vested with the right to make the decisions that are otherwise required to be made by the Managing Agents under this Agreement and each Loan Document. If at any time there is no Managing Agent, then the Required Lenders shall be vested with the right to make any decisions that are otherwise required to be made by the Managing Agents under this Agreement and each Loan Document. Upon the acceptance of any appointment as a Managing Agent hereunder, such successor Managing Agent shall be entitled to receive from the retiring Managing Agent such documents of transfer and assignment as such successor Managing Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Managing Agent, and the retiring Managing Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Managing Agent's resignation hereunder as a Managing Agent, the provisions of (i) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was a Managing Agent under this Agreement; and (ii) Section 10.3 and Section 10.4 shall continue to inure to its benefit. (b) The Administrative Agent may resign as such at any time upon at least 60 days' prior notice to the Borrower and all Lenders. If the Administrative Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Agent which, with the prior written consent of the Borrower, not to be unreasonably withheld or delayed, shall thereupon become the Administrative Agent hereunder. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of -121- any appointment as Administrative Agent hereunder, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of (i) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (ii) Section 10.3 and Section 10.4 shall continue to inure to its benefit. SECTION 9.5. Loans by Agents. Each of Scotiabank and Royal Bank shall have the same rights and powers with respect to (x) the Credit Extensions made by either of them or any of their respective Affiliates, and (y) the Notes held by either of them or any of their respective Affiliates as any other Lender and may exercise the same as if it were not an Agent, as applicable. Each of Scotiabank and Royal Bank and their respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if Scotiabank and Royal Bank were not an Agent hereunder, including providing the Supplemental Financing and being a counterparty to a Rate Protection Agreement. SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has, independently of the Administrative Agent, the Collateral Agent, each Managing Agent and each other Lender, and based on such Lender's review of the financial information of SIHL and the Borrower, this Agreement, the other Loan Documents and the Intercreditor Agreement (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitment. Each Lender also acknowledges that it will, independently of the Administrative Agent, the Collateral Agent, each Managing Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document and under the Intercreditor Agreement. -122- SECTION 9.7. Copies, etc. The Administrative Agent and the Collateral Agent (in the case of the Intercreditor Agreement) shall give prompt notice to each Lender of each notice (including each notice stating the Additional Expenditure Amount delivered by the Borrower) or request required or permitted to be given to such Agent by the Borrower pursuant to the terms of this Agreement or the Intercreditor Agreement (as applicable) unless concurrently delivered to the Lenders by the Borrower. The Administrative Agent and the Collateral Agent (in the case of the Intercreditor Agreement) will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent and the Collateral Agent (in the case of the Intercreditor Agreement) from the Borrower for distribution to the Lenders by such Agent in accordance with the terms of this Agreement or the Intercreditor Agreement (as applicable). SECTION 9.8. Administrative Agent Independent Rights. Each of the parties hereto hereby agrees that (i) the Administrative Agent will be a joint and several creditor of each and every Obligation of the Borrower and the Obligors under the Credit Agreement and each other Loan Document, (ii) subject to the provisions hereof, the Administrative Agent shall have its own independent right to demand performance by the Borrower and each other Obligor of the Obligations under this Agreement and each other Loan Document and (iii) any payments made directly to the Administrative Agent in respect of the Obligations shall have been deemed to have been made by the Borrower or such other Obligor for the benefit of the Lender Parties. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower, SIHL and the Required Lenders; provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) modify this Section 10.1, change the definition of "Required Lenders", increase the Commitment Amount or the Percentage of any Lender, reduce any fees described in Article III, release (i) any collateral security or (ii) a -123- Guarantor from its obligations under a Guaranty or under Section 3.4, except as otherwise specifically provided in any Loan Document or extend the Commitment Termination Date shall be made without the consent of each Lender (it being agreed that no consent need be obtained in the case of the release of collateral in accordance with clause (b) of Section 7.1.10 or Section 7.2.11); (c) extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Loan (or reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of each Lender; (d) increase the Stated Amount of any Letter of Credit unless consented to by the Issuer; or (e) affect adversely the interests, rights or obligations of any Agent in its capacity as an Agent or the Issuer shall be made without consent of such Agent or the Issuer, as the case may be. No failure or delay on the part of any Lender Party in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower, SIHL or any other Guarantor in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 10.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when received. SECTION 10.3. Payment of Costs and Expenses. The Borrower and SIHL jointly and severally agree to pay on demand all -124- expenses of the Managing Agents (including reasonable out-of-pocket expenses incurred by the Managing Agents in connection with the reasonable fees and out-of-pocket expenses of the Inspecting Engineer, counsel to the Managing Agents and of local counsel, if any, who may be retained by counsel to the Managing Agents) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated; (b) the filing, recording, refiling or rerecording of the Pledge Agreement and the Obligor Contract Assignment Agreement and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of the Debentures, the Pledge Agreement, the Obligor Contract Assignment Agreement or any other Loan Document; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrower and SIHL further jointly and severally agree to pay, and to save the Administrative Agent, the Issuer and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the Credit Extensions hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower and SIHL also jointly and severally agree to reimburse the Administrative Agent, the Issuer and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses) incurred by the Administrative Agent, the Issuer or such Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 10.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitment, the Borrower and SIHL hereby jointly and severally indemnify, exonerate and hold each of the Managing Agent, the Issuer and each Lender and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and -125- all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties, so long as the same shall not have constituted a breach thereof by such Indemnified Party (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Credit Extension); (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by SIHL or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not the Administrative Agent, the Issuer or such Lender is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by SIHL or any of its Subsidiaries of any Hazardous Material; or (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by SIHL or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, SIHL or such Subsidiary, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction -126- of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 10.5. Survival. The obligations of the Borrower and SIHL under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under Section 9.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by each Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 10.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower, SIHL, each Subsidiary of the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when (i) counterparts hereof executed on behalf of the Borrower, each Subsidiary of the Borrower existing on the Effective Date, SIHL, the Issuer, the Agents and each Lender (or notice thereof satisfactory to the Administrative Agent) shall have been received by the Administrative Agent and notice thereof shall have been given by the Administrative Agent to the Borrower, SIHL and each Lender and (ii) the Administrative Agent (or, in the case of amounts payable under the Fee Letters, the applicable Lender) shall have received for its own account, or for the account of such Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Sections 3.3 and 10.3, if then invoiced. SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE FOREIGN PLEDGE AGREEMENTS AND THE DEBENTURES) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL -127- LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. In the event of any conflict between the terms and conditions of this Agreement and the terms and conditions of any Debentures the terms and conditions of this Agreement shall prevail. SECTION 10.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: (a) neither the Borrower, SIHL nor any Restricted Subsidiary may assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11. SECTION 10.11. Sale and Transfer of Loans and Note; Participations in Loans and Note. Each Lender may assign, or sell participations in, its Loans Letters of Credit participations and Commitment to one or more other Persons in accordance with this Section 10.11. SECTION 10.11.1. Assignments. Any Lender, (a) with the written consents of the Borrower and the Administrative Agent (which consents shall not be unreasonably delayed or withheld) may at any time assign and delegate to one or more commercial banks or other financial institutions; and (b) with notice to the Borrower and the Administrative Agent, but without the consent of the Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates (each such Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "Assignee Lender"), all or any fraction of such Lender's total Loans, Letters of Credit Outstanding and Commitments (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Loans, Loan Commitment, Letter of Credit Commitment and participation in the Letters of Credit issued hereunder) in a minimum aggregate amount of $5,000,000 (or the then remaining amount of such Lender's Loans, participating interests in Letter of Credit Outstandings and Commitments); -128- provided, however, (i) that in the case of partial assignments of a Lender's Loans, participating interests in Letter of Credit Outstandings and Commitments after giving effect to any such assignment such Lender shall have Loans, participating interests in Letters of Credit Outstandings and Commitments in an aggregate amount of at least $5,000,000, (ii) any assignment by a Lender to any of its Affiliates shall not be subject to the terms of this Section 10.11.1 and may be made free and clear of any restriction so long as the Borrower and SIHL shall not be required to pay any amount under Sections 4.3, 4.4, 4.5 or 4.6 that is greater than the amount which it would have been required to pay had no assignment to an Affiliate been made, or so long as such Lender shall agree to reimburse the Borrower and SIHL for such increased amounts, (iii) any such Assignee Lender will comply, if applicable, with the provisions contained in Section 4.6 and (iv) the Borrower, each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (c) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Administrative Agent by such Lender and such Assignee Lender; (d) such Assignee Lender shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; and (e) the processing fees described below shall have been paid. From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it and assumed by the Assignee Lender in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) a new Note evidencing such Assignee Lender's assigned -129- Loans and Commitment and, if the assignor Lender has retained Loans and a Commitment hereunder, a replacement Note in the principal amount of the Loans and Commitment retained by the assignor Lender hereunder (such Note to be in exchange for, but not in payment of, that Note then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Note. The assignor Lender shall mark the predecessor Note "exchanged" and deliver it to the Borrower. Accrued interest on that part of the predecessor Note evidenced by the new Note, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Note evidenced by the replacement Note shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,000. Any attempted assignment and delegation not made in accordance with this Section 10.11.1 shall be null and void. SECTION 10.11.2. Participations. Any Lender may at any time sell to one or more commercial banks or other financial institutions (each of such commercial banks and other financial institutions being herein called a "Participant") participating interests in any of the Loans, Loan Commitment, Letter of Credit Commitment and Letter of Credit Outstandings participated in by it, or other interests of such Lender hereunder; provided, however, that (a) no participation contemplated in this Section 10.11 shall relieve such Lender from its Commitment or its other obligations hereunder or under any other Loan Document; (b) such Lender shall remain solely responsible for the performance of its Commitment and such other obligations; (c) the Borrower and each other Obligor and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, and no Lender shall take or refrain from taking any action hereunder or under any other Loan Document upon the instruction or in accordance with the direction of any -130- Participant except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (b) or (c) of Section 10.1; and (e) neither the Borrower nor SIHL shall be required to pay any amount under Section 4.3, 4.4, 4.5, or 4.6 that is greater than the amount which it would have been required to pay had no participating interest been sold. Each of the Borrower and SIHL acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a Lender. SECTION 10.12. Other Transactions. Nothing contained herein shall preclude the Administrative Agent, the Issuer or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE ISSUER, THE LENDERS, SIHL OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, COUNTY OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH OF SIHL AND THE BORROWER HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEMS (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, UNITED STATES, AS ITS AGENT TO RECEIVE, ON SIHL'S AND THE BORROWER'S BEHALF AND ON BEHALF OF SIHL'S AND THE BORROWER'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO SIHL OR THE BORROWER IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND EACH OF SIHL AND THE BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS -131- THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH OF SIHL AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF SIHL AND THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT SIHL OR THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF SIHL AND THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 10.14. Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, THE ISSUER, THE LENDERS, SIHL AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE ISSUER, THE LENDERS, SIHL OR THE BORROWER. EACH OF SIHL AND THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE ISSUER, AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. SECTION 10.15. Judgment Currency. The Obligations of the Borrower, SIHL and each other Obligor in respect of any sum due to any Lender or the Administrative Agent hereunder, under the Notes or under or in respect of any other Loan Document shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum was originally denominated (the "Original Currency"), be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, such Lender or the Administrative Agent, in accordance with normal banking procedures, purchases the Original Currency with the Judgment Currency. If the amount of Original Currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, each of SIHL and the Borrower agrees as a separate obligation and notwithstanding any such judgment, to indemnify each Lender and the Administrative Agent, as the case may be, against such loss, and if the amount of Original Currency -132- so purchased exceeds the sum originally due to such Lender and the Administrative Agent, as the case may be, each Lender and the Administrative Agent agrees to remit any excess to the Borrower or to SIHL. SECTION 10.16. Confidentiality. The Lenders shall hold all non-public information obtained pursuant to the requirements of or in connection with this Agreement which has been identified as such by SIHL or the Borrower in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event, subject to Sections 10.11.1 and 10.11.2, may make disclosure (i) to commercial banks or other financial institutions in connection with the contemplated transfer of all or any part of their assignment of their Loans and Commitment or participation therein so long as a similar confidentiality undertaking enforceable by such Lender, the Administrative Agent, SIHL and the Borrower are theretofore obtained by the Lender, (ii) to their examiners, Subsidiaries, outside auditors, counsel and other professional advisors in connection with this Agreement and (iii) as required or requested by any governmental authority or representative thereof or pursuant to legal process; provided that, unless specifically prohibited by applicable law or court order, each Lender shall endeavor to notify the Borrower of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and provided, further, that in no event shall any Lender be obligated or required to return any materials furnished by SIHL or the Borrower. SECTION 10.17. Schedules. The information set forth in the Schedules (including the Disclosure Schedule) to this Agreement is qualified in its entirety by reference to the specific provisions of this Agreement and is not intended to constitute, and shall not be construed as constituting, representations or warranties of the party to which such Schedules relate except as and to the extent provided in this Agreement. Inclusion of information in the Schedules shall not be construed as an admission that such information is material for purposes of the specific provisions of this Agreement to which such information relates. Information included in the Schedules that is not required to be so included under the specific provisions of this Agreement shall be deemed to be included for information purposes only and information of a similar nature need not be included elsewhere, at the discretion of the party providing such information. Any information disclosed by a party in any Schedule shall be deemed to be disclosed in all the Schedules of such party and for all purposes under this Agreement to the -133- extent the specific provisions of this Agreement require such disclosure. SECTION 10.18. Replacement of Lenders. In the event that S&P, Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of Lenders that are insurance companies (or Best's Insurance Reports, if such insurance company is not rated by Insurance Watch Ratings Service)) shall downgrade the long-term certificate of deposit rating or long-term senior unsecured debt rating of such Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the case of Lender that is an insurance company (or B, in the case of an insurance company not rated by InsuranceWatch Ratings Service)), then each of the Issuer and the Borrower shall have the right, but not the obligation, upon notice to such Lender and the Administrative Agent, to replace such Lender with an Assignee Lender in accordance with and subject to the restrictions contained in Section 10.11.1, and such Lender hereby agrees to transfer and assign without recourse (in accordance with and subject to the restrictions contained in Section 10.11.1) all its interests, rights and obligations in respect of its Commitments, outstanding Loans and participating interest in Letter of Credit Outstanding under this Agreement to such Assignee Lender; provided, however, that (i) no such assignment shall conflict with any law, rule and regulation or order of any governmental authority, (ii) such Assignee Lender shall pay to such Lender in immediately available funds on the date of such assignment the principal of and interest and fees (if any) accrued to the date of payment on the Loans made, and Letters of Credit participated in, by such Lender hereunder and all other amounts accrued for such Lender's account or owed to it hereunder and (iii) the Borrower and the Issuer agree that the certificate of deposit rating and long-term senior unsecured debt rating of each Lender that is a signatory to this Agreement on the Effective Date is (whether or not rated by S&P, Moody's or Thompson's BankWatch) acceptable, and following the Effective Date such Lender shall be subject to this Section only if it's certificate of deposit or long-term senior unsecured debt rating is downgraded below that in effect on the Effective Date by a recognized organization performing rating functions similar to those performed by S&P and Moody's. -134- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. SUN INTERNATIONAL BAHAMAS LIMITED By: ________________________________________ Title: Address: 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo Guarantors: SUN INTERNATIONAL HOTELS LIMITED By: ________________________________________ Title: Address: 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo PARADISE ISLAND LIMITED By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo -135- ISLAND HOTEL COMPANY LIMITED By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo PARADISE BEACH INN, LIMITED By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo PARADISE ENTERPRISES LIMITED By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo -136- SUN INTERNATIONAL REPRESENTATION INC. By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo ISS INC. By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo PIV INC. By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo -137- PIA INC. By: ________________________________________ Title: Address: c/o Sun International Hotels Limited 1415 East Sunrise Blvd. Ft. Lauderdale, Florida 33304 Facsimile No.: 954-713-2620 Attention: John R. Allison and Charles D. Adamo -138- PERCENTAGE THE LENDERS, THE ISSUER AND AGENTS - ---------- ---------------------------------- 32.00000000% THE BANK OF NOVA SCOTIA, as Administrative Agent, as a Managing Agent, as Issuer and as a Lender By: ________________________________________ Title: Domestic Office: One Liberty Plaza New York, New York 10006 Facsimile No.: 212-225-5090 Attention: John Hopmans LIBOR Office: One Liberty Plaza New York, New York 10006 Facsimile No.: 212-225-5090 Attention: John Hopmans 24.00000000% THE ROYAL BANK OF SCOTLAND PLC, as a Managing Agent and as a Lender By: ________________________________________ Title: Domestic Office: Waterhouse Square 138-142 Holborn London EC1N 2TH Facsimile No.: 011-44-171-427-9977 Attention: Lisa McCormick LIBOR Office: 5-10 Great Tower Street London EC3P 3HX Facsimile No.: 011-44-171-220-7370 Attention: Supervisor, Currency Advances -139- 16.00000000% NEDCOR BANK LIMITED By: ________________________________________ Title: Domestic Office: Nedbank House 20 Abchurch Lane London, England EC4N 7AD Facsimile No.: 011-44-171-626-0423 Attention: Andrew Garden LIBOR Office: Nedbank House 20 Abchurch Lane London, England EC4N 7AD Facsimile No.: 011-44-171-626-0423 Attention: Andrew Garden 12.00000000% ABSA BANK LIMITED By: ________________________________________ Title: By: ________________________________________ Title: Domestic Office: 52-54 Gracechurch Street London, England EC3V OEH Facsimile No.: 011-44-171-528-8298 Attention: Kathy Mellors (in the case of notices relating to Borrowings, Continuations and Conversions of Loans) Julie Skinner (in all other cases) -140- LIBOR Office: 52-54 Gracechurch Street London, England EC3V OEH Facsimile No.: 011-44-171-528-8298 Attention: Kathy Mellors (in the case of notices relating to Borrowings, Continuations and Conversions of Loans) Julie Skinner (in all other cases) 8.00000000% HENRY ANSBACHER & CO. LIMITED By: ________________________________________ Title: By: ________________________________________ Title: Domestic Office: One Mitre Square London, England EC3A 5AN Facsimile No.: 011-44-171-626-0850 Attention: Richard Brawand LIBOR Office: One Mitre Square London, England EC3A 5AN Facsimile No.: 011-44-171-626-0850 Attention: Richard Brawand -141- 8.00000000% STANDARD BANK LONDON, LIMITED By: ________________________________________ Title: Domestic Office: Cannon Bridge House 25 Dowgate Hill London, England Facsimile No.: 011-44-171-815-4243 Attention: Jonathan First LIBOR Office: Cannon Bridge House 25 Dowgate Hill London, England Facsimile No.: 011-44-171-815-4243 Attention: Jonathan First -142- EX-10.15 7 EXHIBIT 10.15 Exhibit 10.15 COMMONWEALTH OF THE BAHAMAS New Providence DATED the 18th day of September, 1996 BETWEEN:- OCEAN PROPERTIES BAHAMAS LIMITED & PARADISE CORPORATION AND SUN INTERNATIONAL HOTELS LIMITED ---------------------------------- AGREEMENT FOR SALE ---------------------------------- - ------------------------------------------------------------------------------- AGREEMENT FOR SALE/PURCHASE EXECUTION COPY - 12/9/96 COMMONWEALTH OF THE BAHAMAS NEW PROVIDENCE THIS AGREEMENT is made the Eighteenth day of September, 1996 BETWEEN: (1) OCEAN PROPERTIES BAHAMAS LIMITED a company incorporated under the laws of the Commonwealth of The Bahamas and having its registered office in the City of Nassau on the Island of New Providence one of the Islands of the Commonwealth of The Bahamas ("Ocean Bahamas") of the first part (2) PARADISE CORPORATION a company incorporated under the laws of the State of Nevada one of the United States of America ("Paradise Corp") of the second part and (3) SUN INTERNATIONAL HOTELS LIMITED a company also incorporated under the laws of the Commonwealth of The Bahamas and having its Registered Office in the City of Nassau in the Island of New Providence aforesaid ("Sun Hotels") of the third part NOW IT IS AGREED AS FOLLOWS: 1. DEFINITIONS 1.1 In this Agreement the following words and expressions have the following meanings unless inconsistent with the context: 1.1:1 "the Governmental Approvals" means the Vendors' Governmental Approvals and the Purchaser's Governmental Approvals 1.1:2 "the Assets" means all the assets property and rights to be sold to the Purchaser pursuant to clause 2 AS-IS-WHERE-IS with all faults and without any warranties other than as expressly set forth herein PROVIDED HOWEVER that the Assets shall not include any items of personal property which bear the trademark or indicia of the Franchisor 1.1:3 "the Assumed Liabilities" means the liabilities to be assumed by the Purchaser pursuant to clause 4 1.1:4 "the Book Debts" means all book and other debts accounts receivable notes receivable accrued or accruing due to the Vendor in respect of -2- the Business as at the Transfer Date. The Book Debts expressly exclude any inter-company receivables of the Vendor and as of the date of this Agreement are limited to those set forth in Schedule One 1.1:5 "the Business" means the hotel business situate on Paradise Island in the said Commonwealth of The Bahamas and carried on by the Vendor through the Manager and known as the Holiday Inn Sunspree Resort which term is used herein for convenience and to facilitate reference herein to certain activities and interests of the Vendor; provided however that it is specifically understood and agreed that this Agreement concerns only the sale of the Assets by the Vendor to the Purchaser and the use of such term shall not be construed in any manner whatsoever to indicate that the Purchaser is purchasing the Business and (except as expressly set forth herein) neither the Vendor nor its stockholders directors officers agents employees accountants attorneys or any other agent or representative whatsoever or any of the companies or entities affiliated with the Vendor has made any warranties representations or guarantees express implied or statutory written or oral to the Purchaser and the Purchaser specifically understands and acknowledges that neither the Vendor nor its stockholders directors officers agents employees accountants attorneys or any other agent or representative whatsoever or any of the companies or entities affiliated with the Vendor shall have any liability of whatsoever kind nature or description to the Purchaser in connection with the probability of success of the operation of the Business (financial or otherwise) or otherwise and the Purchaser specifically acknowledges and agrees that (except as expressly set forth herein) neither the Vendor nor its stockholders directors officers agents employees accountants attorneys or any other agent or representative whatsoever or any of the companies or entities affiliated with the Vendor has made or is bound by any warranties expressed or implied of whatsoever kind type nature description or characterization with respect to the Business. The Purchaser has received independent advice from legal financial and other similar professional advisors of its choice with respect to the advisability of purchasing only the Assets and the Purchaser as a material inducement -3- to the Vendor to execute this Agreement hereby specifically acknowledges that the Financial Statements are furnished by the Vendor to the Purchaser for information purposes only and without any warranty or representation of any kind type nature or description and neither the Vendor nor its agents employees or any of the companies affiliated with the Vendor has made any warranties representations or guarantees express implied or statutory written or oral to the Purchaser and the Purchaser specifically understands and acknowledges that neither the Vendor nor its stockholders directors officers agents employees accountants attorneys or any other agent or representative whatsoever or any of the companies or entities affiliated with the Vendor shall have any liability of whatsoever kind nature description to the Purchaser in connection with the decision of the Purchaser to purchase only the Assets and to accept the Assets and all aspects of the Business AS-IS-WHERE-IS with all faults and without any warranties expressed or implied of whatsoever kind type nature description or characterization except as expressly provided herein 1.1:6 "Cash Float" means any cash balances held at the Transfer Date for the purpose of reimbursing out-of-pocket expenses of the Business 1.1:7 "Contracts" means the contracts and other documents listed in Schedule Two 1.1:8 "Completion" means the performance by the Parties of their respective obligations under clause 8 on the Transfer Date 1.1:9 "the Creditors" means the aggregate amount owed by the Vendor in connection with the Business to or in respect of trade creditors as recorded in the books of account of the Business as at the Transfer Date (save for the Assumed Liabilities) 1.1:10 "the said currency" means the lawful currency of the United States of America 1.1:11 "the Date for Governmental Approvals" means the Transfer Date 1.1:12 "the Employees" means the persons engaged in the Business at or immediately prior to the Transfer Date whose names are listed in Schedule Three -4- 1.1:13 "the Excluded Employees" means the employees listed in Part I of Schedule Three 1.1:14 "the Transferring Employees" means the employees listed in Part II of Schedule Three 1.1:15 "the Equipment" means the furniture fittings and equipment located at the site of the Business and used in connection with the Business at the Transfer Date owned by the Vendor and listed in Schedule Four 1.1:16 "Excluded Assets" means the assets listed in clause 3 which are owned by the Vendor but are excluded from the sale to the Purchaser 1.1:17 "the Financial Statements" means accountant-prepared statements for Ocean Bahamas in respect of the Business as of the 31st day of October for the years 1993 1994 and 1995 prepared in accordance with generally accepted accounting principles and furnished to the Purchaser with the express understanding that (a) the Purchaser will make no use whatsoever of the Financial Statements and (b) the Purchaser is not relying upon the Financial Statements and (c) the Financial Statements are furnished for information purposes only and are furnished without any warranties representations or guarantees express implied or statutory written or oral or of any other kind type nature or description 1.1:18 "the Franchise Agreement" means that certain licence agreement dated the 8th day of August, 1994 made between Bass International Holdings NV and Ocean Bahamas and the terms "Franchisor" and "Franchisee" shall be construed accordingly 1.1:19 "the Goodwill" means goodwill if any of the Vendor in connection with the Business 1.1:20 "the Holder" means the successor to Aetna Life Insurance Company under the Indenture 1.1:21 "the Indenture" means that debenture dated the 6th day of November, 1987 made between the Vendor of the first part and Aetna Life Assurance Company of the second part recorded in Volume 4856 at pages 65 to 136 in the Registry of Records in the City of Nassau aforesaid as amended including without limitation those amendments and modifications contained and set forth in those certain instruments dated the 10th day of January, 1992 and the 11th day of March, 1994 -5- 1.1:22 "Liabilities" means the liabilities shown on the books and records of the Business as outstanding and any other liabilities or obligations whether fixed or contingent known or unknown at the Transfer Date (save for the Assumed Liabilities) 1.1:23 "the Licences" means those licences in respect of the Business listed in Schedule Five 1.1:24 "the Loan-related Obligations" means those matters set forth in the Estoppel Letter dated the 19th day of July, 1996 executed by the Holder in favour of the Vendor a copy of which is attached hereto as Exhibit A 1.1:25 "the Manager" means Sunspree Management Limited a wholly- owned subsidiary of the Vendor and its predecessors 1.1:26 "OPL" means Ocean Properties Ltd. a company incorporated under the laws of the State of Maine another of the United States of America which corporation is an affiliate of the Vendor 1.1:27 "the Parties" means Ocean Bahamas Paradise Corp and Sun Hotels 1.1:28 "the Property" means that certain parcel of real property described in Schedule Six 1.1:29 "the Purchaser" means Sun Hotels a company whose shares are quoted on the New York Stock Exchange 1.1:30 "the Purchaser"s Governmental Approvals" means any and all required approvals of whatsoever kind type nature description or characterization including for the purposes of illustration and not limitation the following: 1.1:30.1 Permit required under the International Persons Landholding Act 1993 in connection with the acquisition of the Property 1.1:30.2 Bahamas Investment Authority approval in respect of the acquisition of the Business including the Assets 1.1:31 "the Purchaser"s Attorney" means Giselle M. Pyfrom of Harry B. Sands and Company of Nassau Bahamas 1.1:32 "the Stocks" means the items used in connection with the Business at the Transfer Date such items as at the date of this Agreement at their current replacement value being listed in Schedule Seven 1.1:33 "the Transfer Date" means the day of September, 1996 1.1:34 "the Vendor" means Ocean Bahamas and Paradise Corp -6- 1.1:35 "the Vendors" Governmental Approvals" means any and all required approvals of whatsoever kind type nature description or characterization including for the purposes of illustration and not limitation the approval from the Exchange Control Department of the Central Bank of The Bahamas to allow the Vendor immediately upon the Transfer Date to transfer or repatriate the total proceeds of the sale of the Assets hereunder to the United States of America in the said currency without any tax premium or any other kind or type of premium and without penalty in The Bahamas 1.1:36 "the Vendors" Attorney" means Hartis E. Pinder,. Esq of Messrs., Mckinney Bancroft & Hughes Mareva House George Street Nassau Bahamas 1.1:37 "the Warranties" means the warranties and representations and undertakings set out in Schedule Eight 1.2 Words denoting the singular number only shall include the plural and vice versa. Words denoting any gender include all genders and words denoting persons shall include firms and corporations and vice versa 1.3 Unless the context otherwise requires reference to any clause sub- clause or schedule is to a clause sub-clause or schedule (as the case may be) of or to this Agreement 1.4 Unless the context otherwise requires references to acts or omissions by the Vendor in respect of the Business shall include the acts or omissions of the Manager 1.5 The headings in this Agreement are inserted for convenience only and shall not affect the construction or interpretation of this Agreement 2. SALE AND PURCHASE OF THE ASSETS 2.1 Subject to the provisions of this Agreement the Vendor shall sell as beneficial owner and the Purchaser shall purchase subject to the Indenture and the other Assumed Liabilities but otherwise free from all charges liens equities and encumbrances with effect from the Transfer Date the following assets of the Vendor: 2.1:1 the Goodwill 2.1:2 the Property -7- 2.1:3 the Equipment 2.1:4 the Stocks 2.1:5 the Book Debts together with all cheques bills notes and securities receivable for same 2.1:6 the Cash Float 2.1:7 without in any way limiting the generality of the foregoing all other assets of whatever nature employed in the Business at the Transfer Date including the Licences but excluding the Excluded Assets 2.2 The aggregate consideration for the sale by the Vendor of the Assets (in addition to the assumption of the Assumed Liabilities by the Purchaser shall be the payment to the Vendor of the sum of Twelve million dollars in the said currency (US$12,000,000.00) but subject to upward adjustments for Stocks Book Debts and Cash Float and apportioned outgoings charges and prepayments pursuant to clause 5 2.3 The consideration shall be paid: 2.3:1 as to Twelve million dollars in the said currency (US$12,000,000.00) at the Transfer Date in accordance with clause 8.5:1 2.3:2 as to the value of the Stocks in accordance with clause 9.1 2.3:3 as to an amount equal to Ninety-seven percent (97%) of the Book Debts as of the Transfer Date in accordance with clause 9.2 2.3:4 as to the amount of the Cash Float in accordance with clause 9.3 2.3:5 as to the amount due to the Vendor in respect of any apportionments or prepayments in accordance with clause 9.4 3. EXCLUDED ASSETS AND LIABILITIES 3.1 There shall be excluded from the sale and purchase of the Assets and retained by the Vendor the following assets: 3.1:1 all the books and records of the Vendor other than as referreed to in clauses 8.3:4.1 8.3:4.2 and 8.3:4.3 3.1:2 all cash and deposits of whatsoever kind type characterization nature or description relating to the Business (except the Cash Float) and/or held by or on behalf of the Holder including (for the purpose of illustration and not by way of limitation) all sums on deposit at NationsBank in the FF&E escrow account on the Transfer Date -8- 3.2 There shall be excluded from the sale and purchase of the Assets and retained by the Vendor the Liabilities the Creditors and any items of personal property which bear the trademark or indicia of the Franchisor 4. ASSUMED LIABILITIES 4.1 Subject to the consent where necessary of other contracting parties (which the Parties shall use all reasonable endeavours to obtain) the Purchaser shall as from the Transfer Date assume perform and discharge the liabilities of the Vendor listed below. If it proves impossible to obtain any such consent in relation to any of such liabilities the Purchaser will assume perform and discharge such liability as agent for and on behalf of the Vendor and will indemnify the Vendor accordingly. The Assumed Liabilities are those liabilities and obligations of the Vendor under or in respect of: 4.1:1 The Indenture including the Loan-related Obligations 4.1:2 The Contracts 4.1:3 Related to or arising out of the environmental state or condition of the Assets of whatsoever kind type nature or characterization 4.1:4 The Transferring Employees from and after the Transfer Date 4.1:5 Real Property Taxes in respect of the Property from and after the 11th day of March, 1994 4.2 The Purchaser shall not be the successor to the Vendor and it is agreed that the Purchaser shall not assume or be responsible or become responsible or become liable to pay, satisfy, perform or discharge any obligation, liability or indebtedness whatsoever contingent or otherwise of the Vendor or its affiliates except the Assumed Liabilities. The Vendor shall indemnify and hold harmless the Purchaser and its affiliates from and against any obligation liability or indebtedness of any kind or nature of the Vendor or its affiliates not included in the Assumed Liabilities 5. APPORTIONMENT/PREPAYMENTS 5.1 Except for the Assumed Liabilities all other charges and outgoings of the Business or in relation to the Property including but not limited to electricity water telephone charges deposits business licence fees guest taxes and all other payments outgoings and costs of a periodical nature which are chargeable by reference to a period commencing before and ending after the -9- Transfer Date shall be apportioned on a time basis so that such part of the relevant charges attributable to the period ended on the Transfer Date shall be borne by the Vendor and such part of the relevant charges attributable to the period commencing on the day following the Transfer Date shall be borne by the Purchaser 5.2 Upon Completion the Vendor shall account to the Purchaser for all prepayments received in respect of any of the Contracts or in respect of any orders or arrangements not wholly completed or discharged by the Vendor at the Transfer Date to the extent that such prepayments exceed the actual cost (if any) incurred by the Vendor in partially performing the Contracts or such orders or arrangements prior to the Transfer Date 5.3 The apportionments and prepayments referred to in this clause shall be determined and agreed in accordance with clause 9.4 6. CONDUCT OF THE BUSINESS 6.1 Except as expressly provided herein to the contrary including without limitation the obligation of the Vendor to terminate the Franchise Agreement pursuant to clause 13.1 of this Agreement and the obligation of the Vendor to decertify the Property and to remove therefrom all items of personal property which bear the trademark or indicia of the Franchisor under the Franchise Agreement (and to utilize the employees of the Purchaser to effectuate such decertification without cost charge or expense to the Vendor) and accepting any acts of the Purchaser which affects the conduct of the Business the Vendor shall carry on the Business as a going concern in the ordinary course from the date of this Agreement to the Transfer Date and during such period shall: 6.1:1 not sell or dispose of any of the Assets or remove any physical Assets of the Business from the Property save in the course of normal day to day trading 6.1:2 not enter into any material contract or incur capital expenditure (other than as disclosed in writing to the Purchaser prior to the date of this Agreement or except with the prior written consent of the Purchaser (such consent not to be unreasonably withheld)) -10- 6.1:3 not to depart in any material respect from the ordinary course of the day-to-day conduct of the Business as affected by the terms and provisions hereof and as further affected by the acts of the Purchaser 6.1:4 not to grant or create or agree to grant or create any mortgage charge debenture or other encumbrance over or affecting any of the Assets 6.1:5 not permit any of its insurances to lapse or do or omit to do anything which voids any policy of insurance 6.2 The Purchaser shall take over the Assets with effect from the Transfer Date and shall assume responsibility for the management of the Assets in all respects 7. RISK The Assets shall be at the risk of the Vendor for the inclusive period from the date of this Agreement to the Transfer Date 8. COMPLETION 8.1 Completion of the sale and purchase of the Assets shall be conditional upon satisfaction of each of the following conditions: 8.1:1 the delivery by the Vendor to the Purchaser of the Financial Statements within Five (5) days of the date of this Agreement provided however that the Purchaser as a material inducement to the Vendor to provide the Financial Statements hereby specifically acknowledges that the Financial Statements are furnished by the Vendor to the Purchaser for information purposes only and without any warranty or representation of any kind type nature or description 8.1:2 the accuracy in all material respects of the Warranties 8.1:3 the grant of the Vendor Governmental Approvals which must be obtained and written confirmation thereof furnished to the Purchaser on or before the Date for Governmental Approvals 8.1:4 the grant of the Purchaser Governmental Approvals which must be obtained and written confirmation thereof furnished to the Vendor on or before the Date for Governmental Approvals 8.1:5 the Vendor's good and marketable documentary title to the Property in fee simple in possession free from incumbrances otherwise than the -11- Indenture and the other Assumed Liabilities in so far as they are capable of affecting and do affect the Property 8.2 Completion of the sale and purchase hereby agreed shall take place on the Transfer Date at the offices of the Purchaser"s Attorneys or at such other place as the Parties shall agree 8.3 At Completion the Vendor shall deliver or cause to be delivered to the Purchaser: 8.3:1 certified copies of all necessary corporate approvals of the Vendor authorizing the transactions contemplated by this Agreement as required by Section 165 of the Companies Act, 1992 and any relevant provisions of the respective Memoranda and Articles of Association of the Vendor 8.3:2 duly executed conveyances assignments and other documents in the terms to be agreed with the Purchaser's Attorney necessary to vest title in the Property in the Purchaser together with all deeds and documents relating to the title of Ocean Bahamas in the Property 8.3:3 duly executed assignments in respect of the transfer of: 8.3:3.1 the Loan-related Obligations the Vendors' rights and liabilities under the Indenture 8.3:3.2 the Contracts and 8.3:3.3 the Book Debts 8.3:4 all the Assets hereby agreed to be sold which are capable of passing by delivery including without limitation the following: 8.3:4.1 all designs drawings plans schematics sales publications advertising and promotional material which apply to the Property and the structures or buildings on the Property in the possession or control of the Vendor save and except any items which bear the trademark or indicia of the Franchisor 8.3:4.2 all documentation and records in relation to the Contracts in the possession of the Vendor 8.3:4.3 all contract National Insurance payroll account Union and Pension records relating to all Transferring Employees duly completed and up to date 8.3:4.4 a valid and binding written acknowledgment from the Manager and the Franchisor that all agreements and arrangements -12- (including without limitation the Franchise Agreement) which affect the Business or Assets have been canceled by mutual agreement and without any compensation or damages being payable by the Purchaser 8.4 At Completion the Purchaser will deliver to the Vendors' Attorneys the following: 8.4:1 by way of wire transfer in favour of the Vendor or such other party or parties as the Vendor shall direct in writing and/or to one or more accounts of the Vendor as designated by the Vendor in writing the said sum of Twelve million dollars in the said currency (US$12,000,000.00) together with an amount in respect of Book Debts referred to in clause 2.3:3 an amount in respect of Stocks referred to in clause 2.3:2 an amount in respect of Cash Float referred to in clause 2.3:4 and subject to any adjustment for apportionments and prepayments referred to in clause 2.3:5 and provided the Vendor is in compliance with its obligations hereunder other than those mentioned below such wire transfers shall be transmitted by the Purchaser's bank prior to 1:00pm on the Transfer Date as a precondition to the performances required of the Vendor pursuant to clauses 8.1 and 8.4 or otherwise as the Parties may agree in writing 8.4:2 unconditional general releases in the form attached hereto as Exhibit B whereby the Purchaser releases and agrees to indemnify the Vendor OPL and their respective past and present employees officers directors shareholders attorneys accountants agents as well as any and all entities owned by or affiliated with the Vendor or OPL including without limitation the Manager of and from all actions causes of action labour disputes and issues suits losses costs debts dues sums of money accounts reckonings bonds bills specialties covenants controversies warranties agreements promises variances trespasses damages judgments extents executions claims disputes offset rights defenses to payment specific performance indemnification rights subrogation rights and contribution rights for upon by reason of on account of or arising from or out of or by virtue of any transaction event or occurrence duty or obligation indemnification agreement promise warranty covenant or representation breach of contract and -13- demands of whatsoever kind or nature in law or in equity whether direct or indirect known or unknown actual or contingent heretofore arising now existing or hereafter arising however or whenever arising with respect to the Assumed Liabilities 9. STOCKS BOOK DEBTS AND CASH FLOAT 9.1 The Parties shall jointly update the Stocks no later than Two (2) full working days prior to the Transfer Date to reflect items in addition to those items shown on Schedule Seven ("the Added Items") as well as those items shown on Schedule Seven which are not at the Property on the date that the update is conducted. The Parties shall agree the current replacement value of all Added Items. The Purchaser specifically absolutely and unconditionally agrees to all items listed in Schedule Seven and the replacement value reflected therein for all such items 9.2 The Parties shall jointly update the Book Debts to reflect items in addition to those items shown in Schedule One no later than Two (2) full working days prior to the Transfer Date from which shall be calculated the amount referred to in clause 2.3:3. The Purchaser specifically absolutely and unconditionally agrees to all items listed in Schedule One for which the Parties have agreed the Purchaser shall pay to the Vendor the sum of Two million dollars in the said currency (US$2,000,000.00) 9.3 The Parties shall jointly determine the Cash Float as near as practicable to the Transfer Date 9.4 The Parties shall jointly determine apportionments and prepayments as referred to in clause 5 as near as practicable to the Transfer Date 9.5 The Vendor shall forthwith upon Completion give notice in writing pursuant to the Choses in Action Act to the relevant debtors of the assignment of the Book Debts. The Vendor shall following Completion and after payment by the Purchaser to the Vendor at Completion of the amount referred to in clause 2.3:3 promptly pay to the Purchaser all sums received by it in respect of the Book Debts (whether received before or after the date of this Agreement) and pending payment will hold such sums so received on trust for the Purchaser -14- 10. EMPLOYEES 10.1 As regards the Excluded Employees: 10.1.1 The Vendor shall give notice prior to the Transfer Date to terminate the employment contracts of each of the Excluded Employees in each case on proper notice or payment in lieu of notice according to the respective terms of their employment and the notices so given will expire on or prior to the Transfer Date and the Vendor shall discharge and indemnify the Purchaser against all costs claims liabilities expenses and demands arising from all dismissals by the Vendor of the Excluded Employees 10.1.2 The Vendor shall indemnify the Purchaser against each and every cost claim liability expense or demand which relates to or arises out of either any act or omission by the Vendor or any other event or occurrence including (but without limitation) the sale of the Assets which the Purchaser may incur in relation to any contract of employment and collective agreements concerning the Excluded Employees and the Vendor warrants and undertakes that payment of all salaries wages monthly pension contributions insurance and other employee-related expenses shall be current to the Transfer Date with respect to the Excluded Employees 10.2 As regards the Transferring Employees: 10.2:1 The contracts of employment shall at Completion be transferred to the Purchaser to the extent transferable 10.2:2 The Purchaser agrees to assume any and all liabilities of the Vendor of whatsoever kind or type under and pursuant to any agreement of any kind type nature or description which relates to the Transferring Employees including without limitation any labour contract labor union or collective bargaining agreements 10.2:3 The Purchaser shall be responsible for and undertakes to indemnify and keep indemnified the Vendor from and against any and all liabilities obligations costs claims and demands of whatsoever kind type nature or characterization resulting from the voluntary or involuntary termination of any employee arrangements which pertain to the Transferring Employees which occurs in connection with the -15- implementation of the terms and provisions of this Agreement whether occurring prior or subsequent to the Transfer Date 10.2:4 The Vendor undertakes to indemnify and keep the Purchaser indemnified from and against all liabilities obligations costs claims and demands arising from or in respect of any of the Transferring Employees insofar as and to the extent that the same was caused by any act or omission of the Vendor prior to the Transfer Date and the Vendor warrants and undertakes that payment of all salaries wages monthly pension contributions insurance and other employee-related expenses shall be current to the Transfer Date with respect to the Transferring Employees 10.2:5 Notwithstanding the foregoing or any other term or provision contained and set forth in this Agreement to the contrary in no event shall the Vendor bear any responsibility whatsoever for any increases in the cost of benefits attributable to the sale of the Assets or attributable to the transfer of the Transferring Employees 11. THE PROPERTY 11.1 The Vendor sells the Property as beneficial owner 11.2 Upon Completion the Purchaser shall be entitled to vacant possession of the Property which is sold subject to the Indenture and the other Assumed Liabilities in so far as they are capable of affecting and do affect the Property 11.3 In respect of the Property the Vendor shall deduce a good and marketable documentary title in fee simple in possession free from incumbrances other than as noted above from a good root of title in accordance with the provisions of The Conveyancing and Law of Property Act 12. CONTRACTS/LICENCES 12.1 The Purchaser shall after Completion but subject to the provisions of this clause 12 carry out and perform in accordance with their terms the Contracts and the Licences 12.2 If any of the Contracts or the Licences cannot be properly transferred from the Vendor to the Purchaser without the consent of a third party to the novation transfer and/or assignment of the relevant agreement or licence then the Vendor and the Purchaser shall co-operate in taking such steps as may be -16- practicable in order to apply for such consent and the Vendor shall use reasonable efforts to obtain from other parties to the Contracts and the Licences consent to the substitution of the Purchaser in the place of the Vendor as a party or licencee as the case may be (whether by transfer assignment novation or otherwise) 12.3 The Purchaser undertakes to indemnify and keep indemnified the Vendor from and against any payment required to be made or other liability incurred by or arising against the Vendor in relation to the Contracts or the Licences in respect of any period after Completion 13. TERMINATION OF EXISTING AGREEMENTS 13.1 The Vendor shall at its sole cost and expense terminate as at the Transfer Date the Franchise Agreement as to the Business and any agreement with the Manager 13.2 The Vendor undertakes to indemnify and keep indemnified the Purchaser from and against any payment required to be made or other liability incurred by or arising against the Purchaser in relation to the contracts and agreements to be terminated under clause 13.1 and (insofar as and only to the extent that the same was caused by any act or omission of the Vendor prior to the Transfer Date) the Contracts 14. CREDITORS AND LIABILITIES The Vendor agrees to remain solely responsible for all the Liabilities (save as otherwise expressly provided in this Agreement) and undertakes to discharge the Creditors and to indemnify the Purchaser fully at all times from and against any and all claims actions proceedings demands liabilities costs and expenses in connection with any of the Liabilities or the Creditors 15. WARRANTIES 15.1 The Vendor represents warrants and undertakes to and with the Purchaser and its successors in title that the Warranties are at the date of this Agreement and will be at the date of Completion and the Transfer Date true and correct in all material respects. The Vendor undertakes to the Purchaser to indemnify the Purchaser fully at all times from and against all costs claims proceedings demands and expenses which the Purchaser may sustain incur or pay by reason of any breach of any of the Warranties -17- 15.2 The remedies of the Purchaser in respect of breach of any of the Warranties shall continue to subsist notwithstanding Completion 15.3 The rights and remedies of the Purchaser in respect of any breach of the Warranties shall not be affected by any investigation made by or on behalf of the Purchaser into the affairs of the Vendor by the Purchaser failing to exercise or delaying the exercise of any of its rights or remedies or by any other event or matter whatever except a duly authorised written waiver or release 15.4 The Purchaser acknowledges that in entering into this Agreement (other than as expressly represented warranted or otherwise set forth herein): 15.4:1 the Purchaser was not induced to execute and deliver this Agreement by any warranty representation inducement promise or side agreement of any kind type characterization nature or description made by the Vendor and/or its agents employees or any of the companies affiliated with the Vendor 15.4:2 the Purchaser received independent advice from legal financial engineering architectural and other similar professionals of its choice with respect to the advisability of purchasing the Assets pursuant to the stipulations agreements conditions and covenants contained and set forth in this Agreement 15.4:3 neither the Vendor nor its agents employees or any of the companies affiliated with the Vendor has made any warranties representations or guarantees express implied or statutory written or oral to the Purchaser and the Purchaser specifically understands and acknowledges that neither the Vendor nor its agents employees or affiliated companies or entities shall have any liability of whatsoever kind nature or description to the Purchaser in connection with the probability of success of the operation of the Business or otherwise and the Purchaser has accepted the Assets AS-IS-WHERE-IS with all faults and without any warranties expressed or implied or whatsoever kind type nature description or characterization 16. COSTS/STAMP DUTY 16.1 Except as expressly set forth in clause 16.2 below the Parties shall pay their own costs in connection with the negotiation preparation approval and -18- implementation of this Agreement or any agreement conveyance assignment or other documents incidental to or referred to in this agreement (whether or not the transactions contemplated by this Agreement are consummated) 16.2 The Purchaser shall pay and undertakes to indemnify the Vendor with respect to all stamp duty (transfer tax) fees costs charges expenses impact fees or any other costs charges expenses exactions or whatsoever kind type nature description or characterization payable by or assessed against the Vendor in The Bahamas as a result of the proposed transactions and similarly all Bahamian sales transfer recording and similar taxes and fees of whatsoever kind type nature description or characterization in connection with the sale and transfer of the Assets and the consummation of this Agreement; it being the specific understanding that the Vendor shall have received on the Transfer Date the amount set forth in Clause 2.2 net of all transfer costs charges and expenses excepting only the fees and expenses of the professional advisors of the Vendor 16.3 The Parties hereby warrant and represent to each other that no real estate commission or similar fee shall be payable to any agent or third party upon or after Completion and should either party be proven inaccurate in this respect then such party shall be solely responsible for the payment of any such commission or fee and all legal fees and similar expenses incurred by the other party in connection therewith 17. FURTHER ASSURANCE AND GOOD FAITH 17.1 The Parties undertake with each other to execute and deliver any and all documents and to take any steps as shall be reasonably required to be executed and delivered so that the Parties fully comply with each and every stipulation agreement condition and covenant contained and set forth in this Agreement including for the purposes of illustration and not limitation: (i) all documents and steps required to vest the Assets in the Purchaser and (ii) all documents and steps required to ensure the compliance of the Manager in all relevant respects with regard to the matters referred to in this Agreement and (iii) all documents and steps to evidence the absolute and unconditional assumption of the Assumed Liabilities by the Purchaser as of the Transfer Date -19- 17.2 The Parties each represent to the others that they will make proper application for their respective Governmental Approvals and shall diligently and conscientiously pursue the obtaining thereof by the Date for Governmental Approvals 17.3 Each of the Parties undertakes with the others to render such assistance as may be reasonably required (at the expense of the requesting party) in order to facilitate the grant of the respective Governmental Approvals 17.4 Upon the grant or refusal (as the case may be) of any of the Governmental Approvals immediate written notification thereof shall be made to the other Parties or their respective attorneys 18. CONFIDENTIALITY 18.1 No employees representatives counsel or accountants of the Purchaser and/or its affiliates or any other person or entity claiming by or through the Purchaser directly or indirectly shall have access to the Assets or to the Financial Statements contracts books records and other relevant information pertaining thereto or to the employees and/or agents of the Vendor or to the hotel licensor of the Business or the Franchisor without the prior written consent of the Vendor which consent may be withheld in the sole judgment of the Vendor 18.2 All information supplied by the Vendor to the Purchaser and/or its agents or affiliates which is designated by the Vendor as confidential shall be held in strict confidence and shall not be disclosed to any third party for any reason whatsoever without the prior written consent of the Vendor which consent may be withheld in the sole judgment of the Vendor 18.3 Except with respect to public statements required by the Franchisor each of the Parties agrees that no public statements will be made with respect to the proposed transactions unless required by law or the other parties have granted prior written consent thereto 19. ASSIGNMENT Sun Hotels shall be at liberty to assign its rights under this Agreement to a wholly-owned subsidiary of Sun Hotels (which expression shall include such further wholly-owned subsidiaries of which Sun Hotels is the ultimate parent or holding company) without the prior written consent of the Vendor PROVIDED THAT all of the -20- obligations of the Purchaser hereunder including (for the purposes of illustration and not limitation) all indemnification obligations of the Purchaser hereunder and the obligation of the Purchaser to execute and deliver one or more general releases under clause 8.4:2 which obligations shall remain the personal obligation and liability of the Purchaser notwithstanding that such obligations and liabilities shall also be the personal obligation and liability of any such assignee and any such assignee shall also execute and deliver to the Vendor such releases and shall execute and deliver to the Vendor such documentation as shall be required to evidence the assumption of such obligations; it being the purpose and intendment of this clause to underscore the express understanding of the Parties that all of the rights and remedies of the Vendor hereunder and all of the duties obligations and undertakings of Sun Hotels hereunder are and shall remain absolute and unconditional notwithstanding any such assignment(s) 20. MISCELLANEOUS 20.1 Completion shall not in any way prejudice or affect the operation of any of the stipulations agreements conditions and covenants contained and set forth in this Agreement which contemplate or are capable of operation after Completion and accordingly all such stipulations agreements conditions and covenants shall continue in full force and effect after and shall survive Completion. Completion shall not constitute a waiver by any Party of any breach of this Agreement whether or not known to the Party at the date of Completion 20.2 This Agreement and the Schedules to it shall constitute the entire agreement and understanding between the Parties with respect to all matters which are referred to and shall supersede any previous agreement(s) between the Parties or any of them in relation to the matters referred to in this Agreement 20.3 If any term covenant or condition of this Agreement or the application thereof to any person or circumstance shall be determined to be unenforceable by a court of competent jurisdiction ("the Offending Provision") then the remainder of this Agreement or the application of such term covenant or condition to persons entities or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby and each term covenant and condition of this Agreement shall be valid and enforced to the fullest extent permitted by law; provided however that the parties affected by the Offending -21- Provision shall endeavour in good faith within Sixty (60) days after the date such determination is made to agree upon alternative provisions which shall have the same practical effect as the Offending Provision and upon any agreement being reached the new provision shall be incorporated into and form a part of this Agreement 21. RELEVANT LAW This Agreement shall be governed by and construed in accordance with Bahamian law and the Parties submit to the non-exclusive jurisdiction of the Supreme Court of The Commonwealth of The Bahamas and agree that in the event of any action being begun in respect of this agreement the process by which it is begun may be served on them in accordance with clause 22 22. NOTICES 22.1 Any notice required hereunder shall be given in writing and shall be sent by reputable overnight delivery service (e.g. Federal Express) or sent by certified mail return receipt requested to the Parties at the addresses set forth below. Any Party from time to time may change its address to which notice is to be sent pursuant hereto by sending a notice of such change in conformity with the foregoing requirements to the other Party. All notices sent in conformity with the foregoing requirements shall be deemed delivered (and received) upon receipt or first refusal to accept delivery ADDRESS FOR VENDOR: ADDRESS FOR PURCHASER: Ocean Properties Bahamas Limited Sun International Hotels Limited 1100 Linton Boulevard Executive Offices Suite C-9 Coral Tower Delray Beach, Florida 33444 Paradise Island, Bahamas Tel: (809) 363-3000 Telephone: (407) 279 0322 Fax: (809) 363-3703 Paradise Corporation 1 Cate Street Suite 3 Portsmouth, New Hampshire 03801 Telephone: (603) 433 4742 -22- WITH A COPY TO: WITH A COPY TO: Richard H. Critchfield, Esq Giselle M. Pyfrom 1100 Linton Boulevard Harry B. Sands and Company Delray Beach, Florida 33444 Fifty Shirley Street P. O. Box N-624 Telephone: (407) 279 0322 Nassau, Bahamas Tel: (809) 322-2670 AND Fax: (809) 323-8914 Hartis E. Pinder, Esq Mckinney, Bancroft & Hughes Mareva House George Street P. O. Box N-3937 Nassau, Bahamas Telephone: (809) 322 4195 EX-10.16 8 EXHIBIT 10.16 ICA TRUST AGREEMENT This Declaration of Trust and Agreement is made on this 29 day of October, 1996 ("Agreement"), between and among Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of the Bahamas ("Parent"), having an office at Coral Towers, Paradise Island, The Bahamas, Sun Merger Corp., a Delaware Corporation and a wholly-owned subsidiary of Parent ("Sub"), having an office at 1415 East Sunrise Boulevard, Fort Lauderdale, Florida, and the Honorable Thomas H. Kean, whose address is the Office of the President, Drew University, Mead Hall, Madison, New Jersey ("Trustee"). RECITALS Whereas, Resorts International Hotel, Inc., a New Jersey corporation located at 1133 Boardwalk, Atlantic City, New Jersey ("RIH") holds a casino license and a casino-hotel alcoholic beverage license, both issued by the New Jersey Casino Control Commission ("CCC") pursuant to the terms of the New Jersey Casino Control Act, N.J.S.A. 5:12-1 ET SEQ., ("Act") and both effective January 31, 1996 for a term expiring on January 31, 2000; Whereas, RIH holds the aforementioned licenses in connection with a CCC approved casino-hotel which occupies the southerly two-thirds of a block in the City of Atlantic City bounded by North Carolina Avenue, Pacific Avenue, Pennsylvania Avenue and the Boardwalk, with the approved casino-hotel site presently comprised of the Haddon Hall site, the former site of the Bradway Hotel on which the "Bradway Addition" is situated, the North Carolina Avenue Corridor and the North Tower Annex; Whereas, RIH is a wholly-owned subsidiary of an intermediary company known as GGRI, Inc. ("GGRI") and GGRI is a wholly-owned subsidiary of a publicly- traded holding company known as Griffin Gaming & Entertainment, Inc., a Delaware corporation located at 1133 Boardwalk, Atlantic City, New Jersey ("GGE"); Whereas, GGE wholly owns Resorts International Hotel Financing, Inc. ("RIHF"), which has two issues of debt securities outstanding, each of which is publicly-traded and. bears a relation to the RIH casino-hotel and, although RIH is not a holding company of RIH, it has been required by the CCC to comply with N.J.A.C. 19:43-1.1, 2.3, 2.5, 2.7, 2.8, 2.9, 8.1 and 19.45-1.4 and 1.7, as if it was a holding company; Whereas, each of RIH, GGRI, GGE and RIHF have been found qualified by the CCC pursuant to the applicable provisions of the Act, specifically N.J.S.A. 5:12-82, 83, 84, 85, 88 and 105 and N.J.A.C. 19:43-1.1 ET SEQ.; Whereas, on August 19, 1996 Parent, Sub and GGE entered into an Agreement and Plan of Merger ("Merger Agreement") (attached hereto as Exhibit A); Whereas, pursuant to the applicable terms and subject to the conditions set forth in the Merger Agreement, and in accordance with the Delaware General Corporation Law ("DGCL"), GGE will be merged with Sub and, following the effective date of this event, GGE, and accordingly, RIH, GGRI and RIHF, will become wholly-owned subsidiaries of Parent in accordance with the DGCL (the "Merger"); 2 Whereas, as a result of the Merger, Parent will be required to qualify under the Act, specifically N.J.S.A. 5:12-84 and 85, as a holding company of RIH; Whereas, N.J.S.A. 5:12-95.12 ET SEQ., the Interim Casino Authorization section of the Act, provides that whenever any entity contracts to transfer any property relating to an on-going casino operation, including a security holding in a casino licensee or holding or intermediary company of the casino licensee, under circumstances which require that the transferee be qualified under the Act, specifically N.J.S.A. 5:12-84 and 85, the CCC may grant interim authorization ("ICA") where it finds by clear and convincing evidence: (1) that statements of compliance have been issued pursuant to various sections of the Act, specifically N.J.S.A. 5:12-81, 82(c), 82(d), 82(e) and 134; (2) that the casino-hotel facility is an approved hotel in accordance with the requirements of the Act, specifically N.J.S.A. 5:12-83; (3) that a trustee designated in accordance with the Act, specifically N.J.S.A. 5:12-95.14, has satisfied the qualification criteria applicable to a casino key employee, except for residency; and (4) that interim operation will best serve the interests of the public; and Whereas, the Trustee has agreed to act as the trustee required to obtain an ICA and has further agreed to do all things necessary in order to qualify as the trustee in accordance with the Act, specifically N.J.S.A. 5:12-95.14; Now, therefore, in consideration of the mutual promises contained herein, the parties hereto agree as follows: 3 SECTION I. TERM OF AGREEMENT AND TRUST (a) This Agreement and the Trust that it creates shall become effective upon the execution of this Agreement by the parties, final approval of this Agreement and the Trustee by the CCC, the consummation of the Merger prior to a final determination by the CCC that Parent is qualified and delivery of all necessary documents and Trust Property, which shall hereinafter be defined as all of the Parent's present and future right, title and interest in property related to RIH or its holdings, which shall be evidenced by the shares of GGE as the surviving corporation and all voting rights in such shares ("Trust Property"), in accordance with the terms of this Agreement. (b) This Agreement and the Trust that it creates shall terminate automatically on the transfer of the Trust Property and any funds acquired in connection therewith to the Parent following the qualification of the Parent under the Act, or on approval by the CCC of an application to terminate the Agreement and/or Trust. (c) Although the Trust created as a result of this Agreement shall be effective at such time and upon the events set forth in subsection (a) above, the provisions of Section VII shall only become operative if, after the effective date, the CCC makes a finding that there is reasonable cause to believe that Parent, or any Person required to be qualified in connection with Parent, may be found unqualified and a stay of the effect of this finding is not granced to Parent by either the CCC or a court of competent 4 jurisdiction. The Trust, once operative, shall remain operative until the CCC finds the Parent qualified, or until there is a final and unappealable determination that the Parent is unqualified and the property subject to the trust is disposed of in accordance with the Act, specifically N.J.S.A, 5: 12- 95. 14 (e) , except that the Parent may request the CCC to direct the Trustee to dispose of the Trust Property in accordance with N.J.S.A. 5:12-95.14(e) prior to a final and unappealable determination with respect to qualification. SECTION II. PURPOSE OF THE AGREEMENT AND TRUST The primary purpose of this Agreement and the Trust created as a result thereof is to allow the Parent to obtain an ICA which will in turn give the Parent the discretionary ability to consummate the Merger Agreement and operate GGE, RIH and RIHF subject to a final, plenary determination by the CCC that Parent is qualified to act as holding company in connection with RIH. Consummation of the Merger shall also be subject to the conditions set forth, in the Merger Agreement. SECTION III. TRANSFER OF TRUST PROPERTY Upon the execution of this Agreement by the parties and final approval of the Agreement and the Trustee by the CCC and the consummation of the Merger, the Parent shall transfer and convey the Trust Property to the Trustee, subject to the terms and conditions and for the use and purposes of this Agreement. Subject to the provisions of the Act and this Agreement, Parent shall be the beneficiary of the Trust. 5 SECTION IV. TRUSTEE'S ACCEPTANCE OF THE AGREEMENT Upon the Agreement becoming effective and the Trust Property being transferred to him in accordance with Section III above, the Trustee agrees to hold the Trust Property in trust, subject to the terms and conditions of this Agreement. Prior to the Trust becoming operative in accordance with Section I(c) of this Agreement, the Trustee shall, upon the request of Parent, distribute any funds received in connection with the Trust Property to Parent or as Parent so directs. SECTION V. TRUSTEE COMPENSATION (a) To compensate the Trustee for the service, costs and expenses he shall incur in connection with his duties under this Agreement, Parent shall pay the Trustee the sum of $37,500 upon the effective date of the Agreement as that term is defined in Section I(a) of this Agreement, and the sum of $37,500 on the termination of this Agreement as same is defined in Section I(b) of this Agreement. This second payment shall be forfeited by the Trustee, however, if prior thereto the CCC determines that he has breached his fiduciary obligations in the discharge of his duties under this Agreement. (b) Commencing on the effective date of this Agreement and continuing until the termination of this Agreement, the Parent shall also pay the Trustee $300 per hour for the time reasonably spent by the Trustee in administering the Trust business and the Parent shall reimburse the Trustee for all reasonable expenses incurred in fulfilling his duties under this Agreement, including 6 the retention of any necessary financial and/or legal advisors. Expenses incurred by the Trustee in remaining qualified under the Act shall be deemed to be reasonable expenses incurred by the Trustee in fulfillment of his duties under this Agreement. SECTION VI. FIDUCIARY DUTIES OF THE TRUSTEE (a) Up and until such time as the CCC orders that this Trust shall become operative in accordance with Section I(c) of this Agreement, the Trustee shall be required to follow the Parent's written instructions regarding the holding and management of the Trust Property pursuant to the terms of this Agreement. The Trustee shall have the duty to provide the issuer of the Trust Property with an executed copy of this Agreement, and in cooperation with the Parent take all necessary steps to have all of the Parent's interest in the Trust Property transferred to his name and have that transfer duly recorded on the Register and Records of the issuer. (b) Unless and until the provisions of Section VII shall become operative in accordance with Section I(c) of this Agreement, and subject to the terms of this Agreement, the Trustee, as Parent's agent for holding and management of the Trust Property, shall follow all of Parent's written instructions regarding the holding and management of the Trust Property and Parent shall have all of the rights afforded it by the Trust Property including by way of illustration and not limitation, the right to instruct the Trustee to: (1) pledge the Trust Property as collateral for loans, with the prior approval of the CCC following notice to the CCC and 7 New Jersey Division of Gaming Enforcement ("DGE"); (2) with notice to the CCC and DGE, sell, transfer or distribute all or any part of the Trust Property to any third party subject to the requirements of the ICA; and (3) vote any securities that are part of the Trust Property. It is hereby acknowledged that the only instrument that the Trustee will hold that evidences the Trust Property will be the shares of GGE and that, prior to the Trust becoming operative in accordance with Section I (c) of this Agreement, the Trustee will not be required to act with respect to any matter involving the operation of GGE or its subsidiaries, unless such matter requires the approval of the shareholders of GGE in accordance with DGCL and/or the Act. In the event a matter requires the approval of the shareholders of GGE, and prior to the Trust becoming operative, the Trustee shall act as directed by Parent. (c) After a determination by the CCC that Parent is qualified and after written notice of same to the Trustee, the Trustee, in cooperation with the Parent, shall not later than the business day next following the determination transfer the Trust Property to Parent or an assignee to which Parent's rights under this Agreement are assigned by Parent. After this transfer, this Agreement and the Trust that it creates shall terminate. (d) The parties recognize and agree that the purpose of this Agreement is to allow Parent to comply with the ICA and, to that end, some of the duties and responsibilities of the Trustee under this Agreement relating to the control and management of the Trust Property may change from time to time, as provided in this 8 Agreement, to insure Parent's continued compliance with the requirements of the ICA. SECTION VII. DUTIES OF THE TRUSTEE IF THE TRUST BECOMES OPERATIVE (a) In the event the Trust created as a result of this Agreement becomes operative in accordance with Section I (c) of this Agreement, the Trustee shall exercise all rights incident to the ownership of the Trust Property, including the right to vote any securities that are part of the Trust Property, and he shall be vested with all powers, authority and duties necessary to the unencumbered exercise of such rights, as provided under the Act, specifically N.J.S.A. 5:12-130.1 through 130-11. Parent, however, shall have no right to participate in the earnings of the casino-hotel or receive any return on its investment or debt security holdings during the time the Trust is operative. (b) In terms of exercising the rights and powers set forth in subsection (a) above, the Trustee agrees to adhere to the provisions of this Agreement in exercising his powers under this Section and, among other things, the Trustee agrees to place any funds received as a return on the Trust Property in bonds or other obligations, maturing in not more than 180 days, which, as to Principal and interest, constitute direct obligations of, or are unconditionally guaranteed by, the United States of America. (c) If the CCC denies qualification to Parent and such denial becomes final and unappealable, the Trustee shall endeavor and be authorized to sell, assign, convey or otherwise dispose of all Trust Property to such persons as shall be appropriately licensed 9 or qualified or shall obtain interim authorization in accordance with the Act, specifically N.J.S.A. 5:12-95.12 to 95-16. The disposition of Trust Property by the Trustee shall be completed within 120 days of the final and unappealable denial of qualification, or within such additional time as the CCC may for good cause allow, and shall be conducted in accordance with the Act, specifically N.J.S.A. 5:12-130.1 through 130.11, except that the proceeds of such disposition shall be distributed to Parent only in an amount not to exceed the lower of the actual cost of the Trust Property to Parent or the value of the Trust Property calculated as if the investment had been made on the date the Trust becomes operative, and any excess remaining proceeds shall be paid to the New Jersey Casino Revenue Fund which has been created pursuant to the Act, specifically N.J.S.A. 5:12-145. (d) For purposes of subsection (c) above, the "actual cost" of the Trust Property shall be the aggregate value of Parent's ordinary shares issued at the time the Merger is consummated plus the purchase price paid by Parent for any other Trust Property, reduced by any return obtained by Parent on the dividends, interest or any other payment, including proceeds of any partial or total sale of the Trust Property permitted by this Agreement and regardless of whether any such return occurred before or after the execution of this Agreement. SECTION VIII. QUALIFICATION OF TRUSTEE (a) The Trustee warrants and represents that he satisfies the qualification criteria applicable to a casino key employee, except 10 for residency and that he shall continue to meet such criteria throughout the duration of this Agreement. (b) The Trustee agrees that if he commits an act or becomes aware of any information that would cause a reasonable person to believe that he will ultimately not be able to satisfy the qualification criteria applicable to a casino key employee, he will notify Parent and the DGE within two (2) days of becoming aware of such information, in a writing that sets forth the details of his action or knowledge. SECTION IX. REMOVAL OF TRUSTEE (a) Parent shall have the right to petition the CCC on an emergent basis to immediately remove the Trustee from his position as Trustee under this Agreement for cause and/or a breach of the Trustee's fiduciary duties and replace him with a successor deemed qualified by the CCC. (b) In the event a successor trustee is proposed by Parent and approved by the CCC, the successor trustee shall promptly execute and deliver to Parent and the CCC a copy of this Agreement. Also, the Trust Property shall be transferred to the successor trustee and he shall hold the Trust Property subject to the terms of this Agreement. SECTION X. RESIGNATION OF TRUSTEE The Trustee shall have the right to resign as Trustee under this Agreement on ten (10) days' notice to both Parent and the CCC. However, a resignation by the Trustee shall not be effective unless and until a successor trustee has been appointed, installed and 11 approved by the CCC in accordance Section X(b) above. If no successor trustee is proposed by Parent within ten (10) business days of such resignation, the CCC shall be empowered to appoint any person it deems qualified to be the successor trustee. SECTION XI. LIABILITY OF TRUSTEE The Trustee shall incur no liability to Parent as holder of the Trust Property, as the Trustee or otherwise, except in instances where an action or omission constitutes gross negligence or willful misconduct. The Trustee shall serve without bond. SECTION XII. RECORDS The Trustee agrees to keep records of all of his business and transactions as Trustee including time spent by the Trustee in attending to Trust business and the expenses incurred in connection with such business. The Trustee shall send Parent a monthly statement that lists all business undertaken in relation to the Trust and every transaction made by him and the time spent and expenses incurred by him in conducting his business and completing each transaction in the month previous to the date of the statement. The Trustee agrees to make his records available to the CC and the DGE. Parent expressly consents to the Trustee allowing the CCC and the DGE to view the records of Trustee's transactions and business as Trustee. SECTION XIII. INDEMNIFICATION OF TRUSTEE Parent agrees to indemnify and hold harmless the Trustee to the fullest extent permitted by law, from and against all claims, losses, damages, expenses (including legal fees), penalties and 12 liabilities arising out of any action or omission in connection with the performance of his duties under this Agreement, except in instances where an action or omission constitutes gross negligence or willful misconduct. The rights of the Trustee under this Section shall survive the termination of this Agreement regardless of whether any claims, losses, damages, expenses, penalties or liabilities are asserted or incurred prior to the termination of this Agreement. SECTION XIV. RIGRTS OF THE TRUSTEE (a) The Trustee shall have no duties or responsibilities except those expressly set forth herein. The Trustee may rely on any notice, instruction, certificate, statement, request, consent, confirmation, agreement or other instrument that is authorized or permitted by this Agreement and that he reasonably believes to be genuine and to have been signed or presented by a proper person or Persons on Parent's behalf. As a condition to the taking, suffering or omitting of any action by him hereunder, 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 with respect to any action taken, suffered or omitted by him hereunder in good faith and in reasonable reliance thereon. (b) No provision of this Agreement shall require the Trustee to expend or risk his own funds or otherwise incur any financial liability in the performance of any of his duties hereunder, or in the exercise of any of his rights or powers, unless he shall have received adequate indemnity against such risk or liability. 13 (c) The Trustee may execute any duties or obligations hereunder either directly or by or through agents or attorneys-in-fact. The Trustee shall not be responsible for the negligence or misconduct of any agents or attorneys- in-fact selected by him with reasonable care. However, this provision will not act to release or relieve any agent or attorney-in-fact from any responsibility they may have to Parent as a result of any negligence or misconduct on their part. SECTION XV. ASSIGNABILITY Parent shall have the right to assign its rights under this Agreement. Any such assignment must have the prior approval of the CCC. SECTION XVI. MODIFICATION OR WAIVER This Agreement may not be amended, modified or supplemented, nor may any provisions of this Agreement be waived, discharged or revoked, without the prior written consent of Parent and the Trustee. No modification, amendment or supplement to this Agreement shall be effective without the prior approval of the CCC after notice to the CCC and DGE of any proposed amendment, modification or supplement. SECTION XVII. HEADINGS The headings of the Sections of this Agreement are for reference purposes only and shall in no way affect the meaning or interpretation of this Agreement. SECTION XVIII. INVALIDITY The invalidity of any provision of this Agreement shall not be 14 deemed to impair or affect in any manner the validity or enforceability of the remainder of this Agreement. SECTION XIX. NOTICES Any notice or other communication required to be given under this Agreement shall be given by telephone, telefax, facsimile or other similar means of electronic communication and by a writing sent by Federal Express or an equivalent overnight delivery service. Notice shall be deemed to be given upon transmission or upon its being delivered to Federal Express or any other acceptable overnight delivery service. The number and address for providing notice under this Agreement shall be as follows: Trustee: Honorable Thomas H. Kean Office of the President Drew University Mead Hall Madison, New Jersey 07940 Telecopier: (201) 408-3080 With a copy to: Michael R. Cole, Esquire and Robert Fisher, III, Esquire Riker, Danzig, Scherer, Hyland & Perretti Headquarters Plaza I Speedwell Avenue Morristown, New Jersey 07962 Telecopier: (201) 538-1984 Parent: Sun International Hotels Limited 1415 East Sunrise Boulevard Fort Lauderdale, Florida 33304 Attention: Butch Kerzner Telecopier: (954) 713-2091 With a copy to: Charles D. Adamo, Esquire Sun International Executive Offices Coral Towers Atlantis Resort & Casino P.O. Box N-4777 Paradise Island 15 Nassau, The Bahamas Telecopier: (809) 363-3703 and Gilbert Brooks, Esquire Kozlov, Seaton, Romanini & Brooks, P.C. 1940 Route 70 East, Suite 200 Cherry Hill, New Jersey 08003 Telecopier: (609) 424-4446 CCC: John R. Zimmerman, General Counsel Casino Control Commission Tennessee Avenue and The Boardwalk Arcade Building Atlantic City, New Jersey 08401 Telecopier: (609) 441-3747 DGE: Frank Catania, Director Division of Gaming Enforcement 140 East Front Street CN-047 Trenton, New Jersey 08625 Telecopier: (609) 633-7355 SECTION XX. COUNTERPARTS This Agreement may be executed in counterparts, each of which, when executed and delivered, shall be an original and both of which together will constitute the same Agreement. SECTION XXI. VARIATIONS IN PRONOUNS All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. SECTION XXII. WAIVERS No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder preclude any other or further 16 exercise thereof or the exercise of any other right, power or privilege hereunder. The right and remedies provided herein are cumulative and are not exclusive of any rights or remedies which any party may otherwise have at law in equity. SECTION XXIII. GOVERNING LAW The parties agree that this Agreement shall be governed and construed in accordance with the laws of the State of New Jersey. In Witness Whereof, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. Attest: Sun International Hotels Limited /s/ illegible /s/ Charles D. Adamo - ----------------------- ---------------------------------------- Charles D. Adamo Executive Vice-President, General Counsel Attest: Sun Merger Corp. /s/ illegible /s/ Charles D. Adamo - ----------------------- ---------------------------------------- Charles D. Adamo Executive Vice-President General Counsel Witness: /s/ illegible /s/ Hon. Thomas H. Kean, Trustee - ----------------------- ---------------------------------------- Hon. Thomas H. Kean, Trustee 17 EX-21.1 9 EXHIBIT 21.1 EXHIBIT 21.1 SUBSIDIARIES Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas has the subsidiaries shown below. Sun International Hotels Limited is controlled by Sun International Investments Limited, a British Virgin Islands corporation. JURISDICTION OF NAME OF SUBSIDIARY ORGANIZATION ------------------ ------------ Aberdeen Management Limited . . . . . . . . . . . . Guernsey Birbo NV. . . . . . . . . . . . . . . . . . . . . . The Netherlands Antilles Birbo BV. . . . . . . . . . . . . . . . . . . . . . The Netherlands Paradise Acquisitions Limited . . . . . . . . . . . The Bahamas Purposeful BV . . . . . . . . . . . . . . . . . . . The Netherlands Sun Casino Investments SA . . . . . . . . . . . . . Switzerland Sun Casino Management SA. . . . . . . . . . . . . . Switzerland Sun Cove Limited. . . . . . . . . . . . . . . . . . United States of America Sun Hotels International (Bermuda) Limited. . . . . Bermuda Sun Hotels International Management NV. . . . . . . The Netherlands Antilles Sun International Bahamas Limited . . . . . . . . . The Bahamas Sun International Finance Limited . . . . . . . . . British Virgin Islands Sun International Management Limited. . . . . . . . British Virgin Islands Sun International Marketing (UK) Limited. . . . . . United Kingdom Sun International Representation Incorporated . . . United States of America EX-23.1 10 EXHIBIT 23.1 EXHIBIT 23.1 [LETTERHEAD] November 1, 1996 Sun International Hotels Limited 1415 East Sunrise Boulevard Ft. Lauderdale, Florida 33304 Dear Sirs: As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 31, 1996 (except with respect to the matter discussed in Note 21, as to which the date is April 4, 1996) included in the Company's Form 20-F for the year ended December 31, 1995 and to all references to our Firm included in this registration statement on Form F-4. /s/ Arthur Andersen ARTHUR ANDERSEN London, England EX-23.2 11 EXHIBIT 23.2 EXHIBIT 23.2 [LETTERHEAD] Sun International Hotels Limited 1415 East Sunrise Boulevard Ft. Lauderdale, Florida 33304 Dear Sirs: As independent public accountants, we hereby consent to the incorporation by reference in this registration statement on Form F-4 of (1) our report dated December 15, 1995, on the financial statements of the Mohegan Tribal Gaming Authority for the period ended September 28, 1995 and (2) to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Hartford, Connecticut November 1, 1996 EX-23.3 12 EXHIBIT 23.3 EXHIBIT 23.3 Consent We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form F-4 No. 333-______) and related Prospectus of Sun International Hotels Limited for the registration of Ordinary Shares and to the incorporation by reference therein of our report dated February 19, 1996, with respect to the consolidated financial statements and schedules of Griffin Gaming and Entertainment, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 1995 filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Philadelphia, Pennsylvania October 30, 1996 EX-23.4 13 EXHIBIT 23.4 EXHIBIT 23.4 Consent We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form F-4 No. 333- _______) and related Prospectus of Sun International Hotels Limited for the registration of Ordinary Shares and to the incorporation by reference therein of our report dated July 14, 1994; with respect to the financial statements and schedules of PIRL Group incorporated by reference in the Annual Report (Form F-20) of Sun International Hotels Limited, filed with the Securities and Exchange Commission. Ernst & Young LLP Philadelphia, Pennsylvania October 30, 1996 EX-23.5 14 EXHIBIT 23.5 Exhibit 23.5 ------------ [LETTERHEAD] November 1, 1996 Sun International Hotels Limited Executive Offices Coral Towers Paradise Island, The Bahamas Dear Sirs: We hereby consent to the inclusion in the Registration Statement on Form F-4 and the related Proxy Statement/Prospectus with respect to the proposed merger of Sun Merger Corp., a wholly owned subsidiary of Sun International Hotels Limited, with and into Griffin Gaming & Entertainment, Inc., of our opinion letter appearing as Annex IV to such Prospectus/Proxy Statement which is a part of such Registration Statement, and to the references to our firm name under the captions "SUMMARY - The Merger - Opinion of Sun's Financial Advisor" and "THE MERGER - Sun's Reasons for the Merger; Recommendation of its Board of Directors" and "Opinion of Sun's Financial Advisor." In giving such consent, we do not admit and we hereby disclaim that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the "Securities Act"), or the rules and regulations adopted by the Securities and Exchange Commission thereunder (the "Securities Act Rules") nor do we admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act or the Securities Act Rules. Very truly yours, BEAR, STEARNS & CO. INC. By /s/ David M. Solomon ---------------------------- Name: David M. Solomon Title: Senior Managing Director EX-23.6 15 EXHIBIT 23.6 Exhibit 23.6 [MORGAN STANLEY LOGO] MORGAN STANLEY & CO. INCORPORATED 1585 BROADWAY NEW YORK, NEW YORK 10036 (212) 761-4000 October 29, 1996 We hereby consent to the inclusion in the Registration Statement on Form F-4 and the related Proxy Statement/Prospectus with respect to the proposed merger of Sun Merger Corp., a wholly owned subsidiary of Sun International Hotels Limited, with and into Griffin Gaming & Entertainment, Inc., of our opinion letter appearing as Annex V to such Prospectus/Proxy Statement which is a part of such Registration Statement, and to the references to our firm name under the captions "SUMMARY - The Merger and the Merger Agreement - Opinion of GGE's Financial Advisor" and "THE MERGER - GGE's Reasons for the Merger; Recommendation of its Board of Directors" and "Opinion of GGE's Financial Advisor." In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended (the "Securities Act"), or the rules and regulations adopted by the Securities and Exchange Commission thereunder (the "Securities Act Rules") nor do we admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act or the Securities Act Rules. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By:/s/ David J. Topper --------------------- David J. Topper Managing Director EX-99.1 16 EXH 99.1 FORM OF PROXY CARD (ORDINARY SHARES) THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SUN INTERNATIONAL HOTELS LIMITED PROXY - EXTRAORDINARY GENERAL MEETING - DECEMBER 10,1996 The undersigned, a shareholder of Sun International Hotels Limited, a corporation organized and existing under the laws of the Commonwealth of The Bahamas (the "Company"), does hereby appoint Charles D. Adamo, Howard B. Kerzner and Kevin DeSanctis, and each of them, as proxies with full power of substitution in each of them, in the name, place and stead of the undersigned, to vote at the Extraordinary General Meeting of the Company to be held at Room 501 of the Holiday Inn Crowne Plaza, 1605 Broadway, New York, NY 10019 on December 10, 1996 at 8:30 a.m., local time, and at any adjournments, or postponements thereof, all of the Company's Ordinary Shares that the undersigned would be entitled to vote if personally present. THIS PROXY WILL BE VOTED AS SPECIFIED, EXCEPT THAT IF NO INSTRUCTIONS ARE INDICATED, IT WILL BE VOTED TO APPROVE THE CHARTER AMENDMENT AND IN DISCRETION. A PROXY MARKED ABSTAIN WILL BE VOTED AGAINST THE APPROVAL OF THE CHARTER AMENDMENT. The Board of Directors of the company recommends a vote FOR approval of the Charter Amendment. Shareholders are encouraged to vote on the matter to be considered. The undersigned hereby acknowledged receipt of the Notice of Extraordinary General Meeting and related Proxy Statement/Prospectus, both dated November 1, 1996. (continued, and to be signed on reverse side) P R O X Y The undersigned hereby instructs said proxies or their substitutes: 1. To approve the Charter Amendment For X Against X Abstain X The Board of Directors recommends a vote FOR approval of the Charter Amendment. 2. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect to all other matters which may properly come before the Extraordinary General Meeting or any adjournments or postponements thereof. Address Change If you have noted an Address Change on the reverse side of this card, mark here. ADDRESS CHANGE MARK HERE X PROXY DEPARTMENT NEW YORK, N.Y. 10203-0326 PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. Please sign exactly as name appears in your account. If stock is held jointly, signature should include both names. Executors, Administrators, Trustees, Guardians and others signing in a representative capacity, please give your full titles. DATE ------------------------, 1996 - -----------------------------, (L.S.) - -----------------------------, (L.S.) Signature(s) PLEASE MARK BOXES (X) IN BLACK OR BLUE INK X EX-99.2 17 EXHIBIT 99.2 FORM OF PROXY CRD (GGE COMMON STOCK) - ------------------------------------------------------------------------------- GRIFFIN GAMING & ENTERTAINMENT, INC. PROXY FOR SPECIAL MEETING OF STOCKHOLDERS DECEMBER 10, 1996 The undersigned hereby appoints Matthew B. Kearney and David G. Bowden, or either of them, each with full power of substitution, as the proxies of the undersigned and hereby authorizes them to represent and to vote as designated on the reverse side all shares of the common stock, par value $.01 per share (the "Common Stock"), of Griffin Gaming & Entertainment, Inc. (the "Company") that the undersigned would be entitled to vote if personally present at the Special Meeting of Stockholders of the Company to be held on December 10, 1996 and at any adjournments or postponements thereof. ------------------------------------------------------------- THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE COMPANY THIS PROXY, WHEN PROPERLY RECEIVED, WILL BE VOTED IN THE MANNER INDICATED HEREIN BY THE UNDERSIGNED STOCKHOLDER. A PROXY MARKED ABSTAIN WILL BE VOTED AGAINST THE ADOPTION OF THE MERGER AGREEMENT (AS DEFINED BELOW). IF NO INSTRUCTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE MERGER AGREEMENT, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IMPORTANT -- PLEASE SIGN AND DATE THE OTHER SIDE AND RETURN PROMPTLY (Continued on reverse side) - ------------------------------------------------------------------------------- [TRIANGLE] FOLD AND DETACH HERE [TRIANGLE] - ------------------------------------------------------------------------------- GRIFFIN GAMING & ENTERTAINMENT, INC. Please mark your votes as /X/ indicated in this example FOR AGAINST ABSTAIN 1. Proposal to adopt the Agreement / / / / / / and Plan of Merger, dated as of August 19, 1996 and amended by an amendment dated as of September 25, 1996 (the "Merger Agreement"), by and among Sun International Hotels Limited, Sun Merger Corp. and the Company. 2. In their discretion to vote on such other business as may properly come before the meeting or any adjournments or postponements thereof. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or such other authorized officer. If a partnership, please sign in full partnership name by authorized person. Whether or not you plan to attend the meeting, you are urged to execute and return this proxy, which may be revoked at any time prior to its use. Date:_______________________________________________________________, 1996 __________________________________________________________________________ (Signature of Stockholder) Date:_______________________________________________________________, 1996 __________________________________________________________________________ (Signature of Additional Stockholder) Please sign your name exactly as it appears hereon and date and return this proxy in the reply envelope provided. If you receive more than one proxy card, please sign and return all cards received. __________________________________________________________________________ [TRIANGLE] FOLD AND DETACH HERE [TRIANGLE] EX-99.3 18 EXHIBIT 99.3 FORM OF PROXY CRD (PRE-SPLIT SHARES) GRIFFIN GAMING & ENTERTAINMENT, INC. PROXY FOR SPECIAL MEETING OF STOCKHOLDERS [ ], 1996 The undersigned hereby appoints Matthew B. Kearney and David G. Bowden, or either of them, each with full power of substitution, as the proxies of the undersigned and hereby authorizes them to represent and to vote as designated on the reverse side all shares of the common stock, par value $.01 per share (the "Common Stock"), of Griffin Gaming & Entertainment, Inc. (the "Company") that the undersigned would be entitled to vote if personally present at the Special Meeting of Stockholders of the Company to be held on [ ], 1996 and at any adjournment or adjournments thereof. ----------------------------------------------------------- THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE COMPANY THIS PROXY, WHEN PROPERLY RECEIVED, WILL BE VOTED IN THE MANNER INDICATED HEREIN BY THE UNDERSIGNED STOCKHOLDER. A PROXY MARKED ABSTAIN WILL BE VOTED AGAINST THE ADOPTION OF THE MERGER AGREEMENT (AS DEFINED BELOW). IF NO INSTRUCTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE MERGER AGREEMENT, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. IMPORTANT - PLEASE SIGN AND DATE THE OTHER SIDE AND RETURN PROMPTLY (CONTINUED ON REVERSE SIDE) ____________________________________________________________________________ FOLD AND DETACH HERE - ---------------------------------------------------------------------------- GRIFFIN GAMING & ENTERTAINMENT, INC. Please mark your votes as X indicated in this example The Company effected a one-for-five reverse stock split of its Common Stock on June 30, 1995. The Company's records indicate that you have not yet surrendered your pre-split share certificates for exchange. Please contact the Reorganization Department at ChaseMellon Shareholder Services at (800) 777-3674 for information on how to exchange your certificates. In counting the votes represented by this proxy, the inspectors of election will divide the number of your pre-split shares of Common Stock by five in order to give effect to the reverse stock split; fractions will not be counted. FOR AGAINST ABSTAIN 1. Proposal to adopt the Agreement and Plan of Merger, dated as of August 19, 1996 (the "Merger Agreement"), by and among Sun International Hotels Limited, Sun Merger Corp. and the Company. 2. In their discretion to vote on such other business as may properly come before the meeting or any adjournment or adjournments thereof. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR SUCH OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN FULL PARTNERSHIP NAME BY AUTHORIZED PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO EXECUTE AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE. DATE: ----------------------------------------------------------, 1996 - ----------------------------------------------------------------------- (SIGNATURE OF STOCKHOLDER) Date: ----------------------------------------------------------, 1996 - ----------------------------------------------------------------------- (SIGNATURE OF ADDITIONAL STOCKHOLDER) PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON AND DATE AND RETURN THIS PROXY IN THE REPLY ENVELOPE PROVIDED. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS RECEIVED. - ------------------------------------------------------------------------ FOLD AND DETACH HERE -----END PRIVACY-ENHANCED MESSAGE-----