SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 10, 2002
ALPHA HOSPITALITY CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 1-12522 13-3714474
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
707 Skokie Boulevard, Suite 600, Northbrook, Illinois 60062
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (847) 418-3804
This form 8-K/A amends and restates the current report on
Form 8-K dated December 11, 2002, and as amended on January 16,
2003, and filed by the Registrant on such dates.
ITEM 2. ACQUISITION OF ASSETS
Pursuant to the terms of a recapitalization agreement (the
"Recapitalization Agreement"), on December 10, 2002, Alpha
Hospitality Corporation (the "Company") issued 1,394,200 shares
of its Series E Preferred Stock to the Bryanston Group, Inc.
("Bryanston"), its largest stockholder, in exchange for
Bryanston's voting membership interest and preferred capital
account in Catskill Development, LLC ("Catskill"). These
preferred shares have a liquidation value of $10 per share, are
non-voting and non-convertible, have no fixed date of redemption
or liquidation, and provide for cumulative dividends at the rate
of 8% per annum. Dividends on the Company's common stock and
other uses of the Company's net cash flow are subordinate to the
payment of the accrued dividends on these preferred shares.
As a result of this transaction, the Company obtained a 25%
ownership interest in Catskill and will account for its
investment using the equity method of accounting.
ITEM 5. OTHER EVENTS
On December 10, 2002, pursuant to the Recapitalization
Agreement, the Company also (i) issued an aggregate 336,496
shares of its Series E Preferred Stock to each of Bryanston,
Stanley Tollman ("Tollman") and Monty Hundley ("Hundley") in full
satisfaction of an outstanding note and as deferred compensation,
(ii) received a three year option to redeem all or any portion of
(a) the Series E Preferred Stock issued to Bryanston, Tollman and
Hundley, as described above, at its liquidation value plus all
accrued and unpaid dividends and (b) subject to stockholder
approval, Bryanston's 2,326,857 and Beatrice Tollman's 66,000
shares of Company common stock at a price of $2.12 per share, in
either case, payable in cash or by delivery of a promissory note
for the aggregate purchase price of the stock being redeemed.
Such promissory note is to be unsecured, bear interest at the
rate of 7% per annum, and be payable in fixed installments over a
three year period. Each such promissory note is to be subordinate
to the Bank Note (as defined below) and may be prepaid by the
Company at any time, without notice. Nevertheless, during the
three year redemption period, each of Bryanston and Beatrice
Tollman have granted Robert Berman, the Company's Chief Executive
Officer, an irrevocable proxy to vote their shares of common
stock, with full powers of substitution and revocation.
On December 10, 2002, the Company also entered into an
agreement with Societe Generale (the "Bank"), the holder of the
Company's Series D Preferred Stock and a Note due July 2003 in
the cumulative amount of $2,400,000. Under this agreement, the
Note and all outstanding Series D Preferred Stock were cancelled,
and the Company issued the Bank a new $1,600,000 Note (the "Bank
Note") due June 30, 2003, which provides for discounts in the
event of prepayment. This Bank Note is a first priority senior
obligation of the Company.
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
UNADUDITED PRO FORM FINANCIAL DATA
The unaudited pro forma financial statements of Alpha Hospitality
Corporation (the "Company") below give effect to several
agreements, whereby the Company changed its capital structure and
ownership so to comply with NASDAQ Marketplace Rule 4310
(c)(2)(B) pertaining to the minimum stockholders' equity. These
agreements consist of the following elements: (1) the purchase of
the voting membership and other assets in Catskill Development,
LLC ("Catskill") owned by Bryanston Group, Inc. ("Bryanston") in
exchange for shares of Series E Preferred Stock with a
liquidation value of $13,942,000; (2) the exchange of a note with
a principal amount of $1,600,000 for the Company's Series D
Preferred Stock and a Note due July 2003, which had an
outstanding cumulative balance of approximately $2,400,000, held
by Societe Generale (the "Bank"); and (3) an agreement with
Bryanston and certain other affiliates to exchange certain
obligations due from the Company with shares of Series E
Preferred Stock with a liquidation value of $3,364,960. The
unaudited pro forma balance sheet has been prepared as if all
transactions had been completed as of November 30, 2002. The
transactions with the Bank and settling obligations due to
Bryanston and certain other affiliates have been separated from
the acquisition of the interest in Catskill as discussed in Note
A to the unaudited pro forma financials statements. The pro
forma Statement of Operations has been prepared as if the
acquisition of the interest in Catskill was completed as of
January 1, 2002. These unaudited pro forma financial statements
do not necessarily reflect the results of operations of financial
position of the Company that would have resulted had such
transactions actually been consummated as of such dates. Also,
they are not necessarily indicative of the future results of
operations of the future financial position of the Company.
The unaudited pro forma financial statements should be read
together with financial statements and notes of the Company,
which are incorporated by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 and
Quarterly Report on Form 10-QSB for the quarter period ended
September 30, 2002.
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share data)
November 30,
2002 Pro Forma Capital Pro
(Unaudited) Adjustments Adjustments(A) Forma
ASSETS
CURRENT ASSETS:
Cash $ 287 (50)(B) $ 237
Other current assets 57 57
Total current assets 344 294
PROPERTY AND EQUIPMENT, net 0 0
INVESTMENT AND ADVANCES IN
CATSKILL DEVELOPMENT, LLC 2,947 3,490(D) 6,437
ASSETS OF CASINO VENTURES,
including idle property and
equipment of $7,805 and $7,063 7,955 7,955
DEPOSITS AND OTHER ASSETS 27 (13)(B) 14
$ 11,273 $ 14,700
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable June 30, 2003 $ 0 1,600(B) $ 1,600
Related party debt 2,560 (990)(B)
(1,570)(C) 0
Accounts payable and accrued
expenses 1,797 (267)(C) 1,530
Accrued payroll and related
liabilities 407 407
Current liabilities of Casino
Ventures 4,015 4,015
Total current liabilities 8,779 7,552
LONG-TERM RELATED PARTY DEBT,
including accrued interest 0 0
LONG-TERM RELATED PARTY LIABILITIES
OF CASINO VENTURES 0 0
OTHER LIABILITIES 0 0
RELATED PARTY LIABILITIES TO BE
SETTLED WITH COMMON STOCK 1,529 (1,529)(C) 0
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 790 790
STOCKHOLDERS' EQUITY:
Preferred stock, 17,312
shares authorized:
Series B, $.01 par value,
44 issued and outstanding
in 2002 and 2001 0 0
Series D, $.01 par value,
1 issued and outstanding
in 2002 0 0
Series E, $.01 par and
$10.00 redemption value,
1,731 issued and
outstanding in 2002 0 3,490(D) 3,366 (C) 6,856
Common stock, $.01 par value,
7,500 shares authorized, 4,879
issued and outstanding in 2002 49 49
Capital in excess of par value 107,386 (716)(B) 106,670
Accumulated deficit (107,260) 44 (I) (107,216)
Total stockholders' equity 175 6,358
$ 11,273 $ 14,700
See accompanying notes to unaudited pro forma financial statements.
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Eleven Months Ended
November 30
2002 Adjustments Pro Forma
REVENUES:
Casino $ 0 $ 0
Food and beverage, retail and other 0 0
0 0
COSTS AND EXPENSES:
Casino 0 0
Food and beverage, retail and other 0 0
Selling, general and administrative 2,223 2,223
Depreciation and amortization 21 21
Interest 391 32(F) 423
Pre-opening and development costs 44 44
Total costs and expenses 2,679 2,711
OTHER INCOME (LOSS):
Gain on sale of investment and
related management contract 3,277 3,277
Loss from equity investments -- (441)(E) (441)
Loss on investment - Catskill (6,934) (6,934)
Miscellaneous - debt
extinguishment 3 291(G) 294
NET LOSS BEFORE MINORITY INTEREST (6,333) (6,515)
MINORITY INTEREST 18 18
NET LOSS (6,315) (6,497)
DIVIDENDS ON PREFERRED STOCK 518 144(H)
1,022(J) 1,684
NET LOSS APPLICABLE TO COMMON SHARES (6,833) (8,181)
WEIGHTED AVERAGE COMMON SHARES, basic
and diluted 4,588 4,588
LOSS PER COMMON SHARE, basic and diluted $(1.49) $ (1.78)
See accompanying notes to unaudited pro forma financial statements.
Notes to Unaudited Pro forma Condensed Consolidated Financial
Statements
(in thousands, except for per share data)
(A) Capital adjustments reflect certain transactions
related to the Company's recapitalization and having
minimal effect on net income (loss), are not included in
the unaudited pro forma Statement of Operations. The
interest related to the short tem debt incurred in the
transaction with the Bank, as discussed in Note B, is not
included because that interest would not have a long-term
effect on the company. The transaction settling certain
obligations due to Bryanston and certain other
affiliates, as discussed in Note C, is also not included
in the unaudited Statement of Operations.
(B) To reflect the cancellation of the Company's
convertible note payable and the accrued interest due
July 2003 recorded at $990 and the exchange of the Bank's
Series D Preferred Stock recorded at $1,080 (less the
gain related to the retirement of the instrument
presented in Note G) by the issuance of the 16% Note due
June 2003 in the principal amount of $1,600. This
transaction included recognition of accrued dividends of
$215, write off of capitalized loan costs of $13 and a
cash payment of $50.
(C) To reflect the issuance of Series E Preferred Stock
with a liquidation value of $3,366 in exchange for
deferred compensation due to Stanley Tollman recorded at
$1,529 and Monty Hundley at $267 and current related
party debt due to Bryanston recorded at $1,570.
(D) To reflect a related party transaction transferring
Bryanston's interests and voting rights in Catskill to
the Company in exchange for the issuance of $13,942
liquidation value of Series E Preferred stock. The
transaction was recorded using Bryanston's cost basis of
$3,490. The Company's prior value of Catskill of $2,947
was based upon the original cost and the estimated
recoverability of its investment.
(E) To reflect the 25% interest in Catskill's net loss
for the eleven months ended November 30, 2002.
(F) To reflect the recognition of the unamortized portion
of the loan costs, $32, associated with the Bank's
convertible debt and Series D Preferred Stock.
(G) To reflect the prorated gain on the exchange of the
related convertible debt plus accrued interest and the
Series D Preferred Stock in exchange for the $1,600 Note
due June 2003. The gain was prorated as follows:
Gain on extinguishment $655
Gain related to convertible debt 291
Gain related to retirement of Series
D Pref. Stock 364
(H) To reflect the cumulative dividends balance at
January 1, 2002 in the amount of $144 on the Series D
Preferred Stock. The Series D Preferred Stock accrued
dividends were disclosed, but not recognized in the
consolidated financial statements for the year ended
December 31, 2001.
(I) To reflect the $291 gain related to convertible debt
(Note G) less preferred dividends of $215 (Note B) and
write off of $13 of capitalized loan costs (Note B), and
$19 of various accruals (Note C).
(J) To reflect the cumulative dividends related to the
1,394 shares of the Series E Preferred stock, issued in
exchange for the 25% voting interest in Catskill, on the
Company's earnings per share. The cumulative dividends
are based on an 8% rate on the total liquidation value of
$13,942.
See accompanying notes to unaudited pro forma financial statements.
Catskill Development, LLC
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
September 30, December 31,
2002 2001
ASSETS
Current Assets:
Cash & Cash Equivalents $ 955,504 1,358,469
Restricted Cash 114,578 78,070
Accounts Receivable 566,800 645,931
Inventory 7,533 7,428
Prepaid Expenses 272,608 135,774
Other Current Assets 15,746 17,173
Total Current Assets 1,932,769 2,242,845
Property, Plant and Equipment:
Land 770,000 770,000
Buildings and Improvements
8,447,824 8,414,664
Furniture, Fixtures and
Equipment 1,301,489 1,195,613
Subtotal 10,519,313 10,380,277
Less: Accumulated Depreciation 4,495,570 3,936,857
Net Property, Plant and
Equipment 6,023,743 6,443,420
Real Estate Development 5,776,206 5,740,599
Total Assets $ 13,732,718 14,426,864
LIABILITIES AND MEMEBERS' EQUITY
Current Liabilities:
Accounts Payable $ 2,394,691 1,436,971
Other Current Liabilities 701 179,743
Accrued Expenses 90,736 103,513
Total Current Liabilities 2,486,128 1,720,227
Long-Term Debt:
Notes Payable - Senior
Obligation 5,000,000 5,000,000
Accrued Interest Payable 1,655,000 1,201,250
Total Long-Term Debt 6,655,000 6,201,250
Members' Equity 4,591,590 6,505,387
Total Liabilities and Members'
Equity $ 13,732,718 14,426,864
Bachrach, Waschitz & Waschitz, LLP
See Notes To Consolidated Financial Statements
Catskill Development, LLC
Consolidated Income Statements
For the Nine Months Ended September 30, 2002 and the
Year Ended December 31, 2001
September 30, December 31,
2002 2001
Race Track Revenues:
Gross Wagering and
Simulcasting $ 8,520,953 10,285,654
Non- Wagering 176,925 216,765
Total Race Track Revenues 8,697,878 10,502,419
Racetrack Costs and
Expenses:
Purses, Awards and Other 3,001,331 3,700,717
Operating Costs 1,736,805 2,216,592
General and Administrative 2,339,930 3,038,589
Depreciation 566,390 743,716
Total Racetrack Costs and
Expenses 7,644,456 9,699,614
Net Profit From Racing
Operations 1,053,422 802,805
Real Estate Development
Expenses:
General and Administrative 42,371 113,320
Legal Expenses 2,476,420 2,228,077
Interest Expense 454,230 564,024
Total Real Estate
Development Expenses 2,973,021 2,905,421
Other Income:
Interest Income 5,802 31,384
Net (Loss) $ (1,913,797) (2,071,232)
Bachrach, Waschitz & Waschitz, LLP
See Notes To Consolidated Financial Statements
Catskill Development, LLC
Consolidated Statements of Changes in Member's Equity
For the Nine Months Ended September 30, 2002 and the Year
Ended December 31, 2001
Preferred Other Total
Capital Capital Accumulated Members
Contributions Contributions Deficit Equity
Balance December
31, 2000 $ 15,703,893 400 (8,152,474) 7,551,819
Capital
Contributions 1,024,800 - - 1,024,800
Net (Loss) - - (2,071,232) (2,071,232)
Balance December
31, 2001 16,728,693 400 (10,223,706) 6,505,387
Net (Loss) - - (1,913,797) (1,913,797)
Balance September
30, 2002 $ 16,728,693 400 (12,137,503) 4,591,590
Bachrach, Waschitz & Waschitz, LLP
See Notes To Consolidated Financial Statements
Catskill Development, LLC
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002 and
the Year Ended December 31, 2001
September 30, 2002 December 31, 2001
Operating Activities:
Net Loss $ (1,913,797) (2,071,232)
Adjustments to reconcile
net loss to net cash
Provided(Used) by
operating activities:
Depreciation 566,390 743,716
Accrued Interest
Not Paid 453,750 563,750
Loss on Asset Disposal 2,819 -
(Increase) Decrease in:
Restricted Cash (36,508) 213,052
Accounts Receivable 79,131 (131,449)
Inventory (105) 590
Prepaid Expenses (136,834) (5,568)
Other Current Assets 1,427 9,920
Increase (Decrease) in:
Accounts Payable 957,720 (78,884)
Other Current Liabilities (179,042) 219,934
Accrued Expenses (12,777) 3,075
Net Cash Used by
Operating Activities (217,826) (533,096)
Investing Activities:
Purchase of Property,
Plant and Equipment (149,532) (143,521)
Real Estate Development (35,607) (111,465)
Net Cash Used in
Investing Activities (185,139) (254,986)
Financing Activities:
Member Contributions - 1,024,800
Net Cash Provided by
Financing Activities - 1,024,800
Net Increase (Decrease) in
Cash (402,965) 236,718
Cash at Beginning of Year 1,358,469 1,121,751
Cash at End of Year $ 955,504 1,358,469
Supplemental Disclosures:
Interest Paid $ 480 274
Bachrach, Waschitz & Waschitz, LLP
See Notes To Consolidated Financial Statements
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
1. Significant Accounting Policies
This summary of significant accounting policies of
Catskill Development, LLC (the Company) is presented to
assist in understanding the Company's financial
statements. The financial statements and notes are
representations of the Company's management who is
responsible for their integrity and objectivity. These
accounting policies conform to generally accepted
accounting principles and have been consistently applied
in the preparation of the financial statements.
A. Organization and Business Activity
In October 1995, Catskill Development, LLC, a New York
limited liability company, was formed to pursue the
development of a proposed Native American Casino in
Monticello, New York (the "Casino Project"). The
Company's business plan envisioned three distinct lines
of business: a) casino activities; b) real estate related
activities; and c) the gaming operations related to
Monticello Raceway (the "Raceway") including pari-mutuel
and any potential future Video Lottery Terminal ("VLT")
operations. Monticello Raceway Management, Inc. (MRMI),
a New York Corporation, is a wholly owned subsidiary and
was formed to hold the pari-mutuel license.
Currently, the Company conducts pari-mutuel wagering on
live race meetings for Standardbred horses and
participates in intrastate and interstate simulcast
wagering at the Raceway in Monticello, New York. The
Company's operations are subject to regulation by the New
York State Racing and Wagering Board.
The Company continues to pursue a Native American Casino
Project at the Raceway. However, to this point it has
been unsuccessful (see Note 6).
B. Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiary, Monticello Raceway Managements, Inc. All
significant intercompany balances and transactions have
been eliminated in consolidation.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
C. Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America required management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual
results could differ from those estimated.
D. Concentrations of Credit Risk
The Company maintains significant cash balances with
financial institutions in excess of the insurance
provided by the Federal Deposit Insurance Corporation
(FDIC).
The Company, in the normal course of business, settles
wagers for other racetracks and is thereby exposed to
credit risk. However, receivables are generally not a
significant portion of the Company's total assets and are
comprised of a large number of accounts.
E. Cash and Cash Equivalents
Cash and cash equivalents include cash on account, demand
deposits and certificates of deposits with original
maturities of less than three months at acquisition.
F. Restricted Cash
Under New York States Racing, Pari-Mutuel Wagering and
Breeding Law the track is obliged to withhold a certain
percentage of certain types of wagers towards the
establishment of a pool of money the use of which is
restricted to the funding of approved capital
improvements, repairs and/or certain advertising
expenses. Periodically during the year the track
petitions the Racing and Wagering Board to certify that
the noted expenditures are eligible for re-imbursement
from the capital improvement fund. The unexpended
balance is shown as restricted cash on the balance sheet.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
G. Property, Plant and Equipment
Plant and equipment are recorded at cost. Depreciation
is calculated using the straight-line basis over the
estimated useful lives of the related assets as follows:
15 years for grandstands and buildings, 5 to 7 years for
equipment and 7 years for furniture and fixtures.
H. Real Estate Development
In connection with its real estate activities, the
Company capitalizes certain legal, architectural,
engineering and environmental study fees as well as other
costs directly related to the development of its real
estate. (See Note 2)
I. Impairment of Assets
In the event that facts and circumstances indicate that
the carrying amount of tangible assets or groups of
assets may be impaired, an evaluation of recoverability
would be performed. If an evaluation is required, the
estimate future undiscounted cash flows associated with
the assets would be compared to the assets' carrying
amount to determine if a write-down to market value or
discounted cash flow value is required. Management has
determined that no impairment of assets has occurred.
J. Inventory
Inventory is recorded at the lower of cost or market on a
first in, first out basis.
K. Revenue Recognition
Wagering revenues are recognized gross of purses, stakes
and awards and pari-mutual wagering taxes. The costs
relating to these amounts are shown as "Purses, Awards
and Other" in the accompanying Income Statements.
Revenues from simulcasts are recognized as of the day of
the race.
L. Advertising
The Company expenses the costs of general advertising,
promotion and marketing programs at the time the costs
are incurred.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
M. Income Taxes
The Company was formed as a limited liability company and
elected to be treated as a partnership for tax purposes,
and thus no income tax expense is recorded in the
statements. Income of the Company is taxed to the
members in their respective returns. All income from the
100% owned subsidiary is passed to the Company because of
an agency agreement between the companies. Therefore no
tax accrual is needed on the subsidiary's records.
2. Fixed Assets
Depreciation expense was $566,390 for the nine months ended
September 30, 2002 and $743,716 for the year ended December
31, 2001.
The Company is in the business of developing real estate for
additional gaming activities. As of September 30, 2002 and
December 31, 2001, the Company had capitalized $47,515 and
$111,645, respectively to continue its efforts.
3. Members Equity and Senior Obligation
The members of the Company have contributed considerable
amounts of money to the Company to fund the purchasing of
the Raceway and pursuing the approval and development of a
Native American Casino on a portion of the Raceway property.
These contributions (and a priority return of 10% per annum)
and the mortgage described below, (with interest compounded
at 10% per annum) must be repaid before any net earnings
from operations would be available for distribution to the
Company's other members. As of September 30, 2002 the
aggregate amount needed to satisfy the payment of said
contributions (with priority returns) to certain members of
the Company is $29,304,137.
These preferred capital balances are subordinate to a
mortgage, payable to two members, (the "Senior Obligation"),
which at September 30, 2002, and December 31, 2001 was
$6,665,000 and $6,201,250 respectively including accrued
interest at 10% per annum. All payments accrue and the
principal and accrued interest totaling $8,052,550 is due
September 15, 2004. Currently, any cash flow from the
operations of the Raceway are being retained by the Company
for working capital purposes and to fund litigation and
development expenses in conjunction with other potential
gaming operations at the track. As a result, the Company is
not expected to make any distributions with respect to
certain other members' interests until the Company has
achieved additional net revenues sufficient to discharge the
payment of the Senior Obligation, accrued interest,
preferred capital balance and priority returns.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
The Company was formed as a limited liability company,
therefore its members individual liability is limited under
the appropriate laws of the State of New York. The Company
will cease to exist July 1, 2025. The Company's distinct
lines of business: (A) casino development; (B) real estate
related activities; and (C) the gaming operations related to
Monticello Raceway including pari-mutuel and any potential
future Video Lottery Terminal operations are owned as
follows: (after the transaction of February 12, 2002 noted
below and the transaction of December 12, 2002 described in
Note 8 - Subsequent Events)
On February 12, 2002, Alpha Monticello, Inc. (a wholly owned
subsidiary of Alpha Hospitality Corporation ("Alpha"), a
member of the Company, entered into an agreement with
Watertone Holdings LP ("Watertone"), also a member of the
Company, providing for the acquisition of 47.5% of
Watertone's economic interests in the casino and racetrack
business components of the Company. The transaction
contemplated by this agreement closed on March 12, 2002.
4. Related Party Transactions
As explained in Notes 1H and 2 the Company is in the
business of developing real estate for additional gaming
activities. In connection with this development the Company
has paid various consulting fees to related parties
consisting of members or directors of Catskill Development.
LLC. For the nine months ended September 30, 2002 and the
year ended December 31, 2001 the Company expensed in general
and administrative expenses $111,000 and $113,668
respectively of such costs. From inception through
September 30, 2002 the Company has capitalized as
development costs $600,574 of such related party consulting
fees.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
5. Operating Leases
At September 30, 2002 the Company had commitments under
operating leases which end in 2006 for various pieces of
equipment requiring annual lease payments for the twelve
months ending September 30th as follows:
Lease expense was $148,539 for the nine months ended
September 30, 2002 and $153,208 for the year ended December
31, 2001.
6. Commitments and Contingencies
The Monticello Harness Horsemen's Association, Inc. has
brought an action against Monticello Raceway Management,
Inc. and one of the members of the Company seeking the sum
of $1,300,0000 to be credited to the horsemen's purse
account. The suit claims that revenues received by the
Raceway from various simulcasting sources were not properly
credited to their horsemen's purse account. Management has
responded vigorously to contest the case after attempts at
out-of-court settlement proved fruitless. A motion is
pending to dismiss the action for lack of subject matter
jurisdiction. Such dismissal would not prevent the
Plaintiff from bringing suit in the proper court or to seek
alternative dispute resolution. There are disputed issues
of fact between the parties, which makes an estimate of the
outcome or the amount or range of loss difficult to gauge.
In accordance with Statement of Financial Accounting
Standards No. 5, the amount of the loss, if any that may be
ultimately realized has not been reflected in the
accompanying financial statements.
In July 1996, the Company and its members entered into a
series of agreements with the Mohawk Tribe related to the
development of a casino on land adjacent to the Monticello
Raceway in Monticello, New York. Pursuant to such
agreements, the Mohawk Tribe was to purchase certain land
from the Company and various affiliates of the Company were
to help with the development of a casino on the land and
manage any resulting casino. More particularly, the Tribe
entered into a Gaming Facility Management Agreement with
Mohawk Management LLC ("MM"). Pursuant to such Agreement,
MM was to be provided with the exclusive right to manage the
Monticello Casino for seven (7) years from its opening and
to receive certain fees for the provision of management and
related services.
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
Completion of the project contemplated by the agreements
with the Mohawk Tribe was subject to certain conditions,
including the obtaining of relevant federal and State
governmental approvals. The Company, in conjunction with
its affiliates, assumed responsibility for and undertook,
seeking and obtaining all local, state and federal approvals
required or necessary to construct and operate the Casino
Project. By letter dated April 6, 2000, addressed to
Governor George Pataki, Kevin Gover, Assistant Secretary of
the Department of the Interior, advised and notified the
Governor of New York that the Company's proposed casino
project with the Mohawk Tribe had been approved and
specifically requested that the Governor concur. However,
on April 22, 2000, the Company became aware of a purported
letter agreement between the Mohawk Tribe and Park Place
Entertainment Corporation ("PPE"), which agreement (with two
irrelevant exceptions) purportedly gave PPE the exclusive
rights to develop and manage any casino development the
Mohawk Tribe may have in the State of New York.
On November 13, 2000, the Company (also known as the
"Plaintiffs") joined in a suit filed in United States
District Court, Southern District of New York against PPE,
alleging entitlement to substantial damages as a consequence
of, among other things, PPE's wrongful interference with
several agreements between Catskill and the Tribe pertaining
to the proposed Casino Project. The Plaintiffs alleged
tortuous interference with contract and prospective business
relationships, unfair competition and state anti-trust
violations and sought over $6 billion in damages. On May
11, 2001, the District Court granted PPE's motion to dismiss
three of the four claims made by Plaintiffs. However, on
May 30, 2001, the Plaintiffs moved for reconsideration of
that ruling, and, on reconsideration, the Court reinstated
one of the dismissed claims, with Plaintiffs' claims of
tortuous interference with contract and prospective business
relationship remaining after such decision. On August 22,
2002, U.S. District Court Judge Colleen McMahon granted
PPE's motion for summary judgment.
The Company has filed a notice of appeal with respect to the
dismissal of its case against PPE and has retained the firm
of Mayer, Brown, Rowe and Maw to represent it in the appeal.
It is expected that briefs in the appeal will be filed
within the next four months and that a decision on the
appeal should be rendered within eighteen months. Although
management believes that the Company and its related parties
have meritorious arguments in the appeal, no assurance can
be given that the appeal will be successful or that, even if
the appeal is successful as a whole or in part, the
litigation will ultimately be resolved in a manner
advantageous to the Company.
The Company is also a party to a various non-environmental
legal proceedings and administrative actions, all arising
from the ordinary course of business. Although it is
impossible to predict the outcome of any legal proceeding,
the
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
Company believes any liability that may finally be
determined with respect to such legal proceedings should not
have a material effect on The Company's consolidated
financial position, results of operations or cash flows.
7. Video Lottery Terminals
In October 2001, the New York State Legislature passed a
bill that expanded the nature and scope of gaming in the
state ("VLT Legislation"). The bill was signed by the
Governor on October 31, 2001. The provision of the VLT
Legislation relevant to the Company include: a) authority
given to the Governor to negotiate casino licenses for up to
three Native American casinos in the Catskills; and b) the
authority for several of New York's racetracks, including
the Raceway, to operate video lottery terminal ("VLT") in
their facilities. The VLT operation will be conducted by
the New York State Lottery (the "Lottery") with the
racetracks functioning largely as agents for the Lottery.
The Company is currently working with the New York State
Lottery to explore the feasibility of installing VLT's at
the Raceway. The Company received a letter from the
Lottery, dated March 21, 2002, advising the Raceway that the
Lottery has completed its initial review of the Raceway's
business plan for the operation of VLT's at the Raceway
during the initial three year trial period approved by the
State Legislature. Based on such review, the Lottery has
made an initial allocation of 1,800 VLT's to the Raceway and
has approved the maximum permitted rate for compensation of
25% of revenues generated after payout of prizes for the
Raceway. The law currently provides that the Raceway must
apply 35% in the first year, escalating to 45% in years two
and three, of its compensation to enhance purses at the
Raceway and each year must dedicate 5% of its compensation
to a State Breeding Development Fund.
The business plan was submitted at the request of the
Lottery, and in accordance with Lottery procedures, does not
represent a final decision with respect to the
implementation of VLT's by the Company. The business plan
includes certain assumptions recommended by the Lottery and
other estimates considered preliminary by the Company.
Using these estimates and assumptions, the plan does not
show levels of operating income currently considered
adequate by the Company to go forward with the project. The
Company continues to evaluate the appropriateness of making
the required expenditures necessary for VLT operations
relative to the length of the test period, the ultimate
level of return on investment, and the implementation date
for the program. The Lottery has not yet established a firm
start date or adopted regulations with regard to the
program. On May 16, 2002, the New York State Legislature
passed a bill that further expanded the October 2001 VLT
Legislation. This bill extends the test period under the
current law from three years to a
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
period ending December 31, 2007. Further, the bill
authorizes each track to enter into an agreement with the
organization representing its horsemen to reduce the
percentage of its vendor fees dedicated to enhancing purses
at such track during the initial three years, to an amount
not less than 25 percent. That bill was signed by the
Governor on May 29, 2002. In addition, the Company's
ability to proceed with the VLT program may be impacted by
its plans with respect to casino development at the site.
Currently, the legislature is considering an additional
bill, which if passed, could extend the operating hours for
VLT's and provide a larger percentage of revenues to the
racetracks. Accordingly, no assurance can be given that the
Company will decide to proceed with the operation of VLT's
at the Raceway.
8. Subsequent Events
In October 23, 2002, the Company retained CIBC World Markets
Corporation to help it review its strategic alternatives and
assist in maximizing the value of its assets. The Company
is in negotiations with a federally recognized Native
American tribe in New York and various casino management and
development entities with respect to the development of a
Native American Casino. The development of a casino at the
Raceway will require consummation of arrangements with these
parties and various reviews and approvals. No assurances
can be given that such arrangements will be entered into or
that any approvals will be obtained.
On December 10, 2002, Alpha reached an agreement with
Bryanston Group, Inc. ("Bryanston") (a former member of the
Company) and certain other affiliates regarding certain
obligations due from and claims against the Company.
Included in the agreement with Bryanston is the acquisition
of Bryanston's interest in Catskill Development, including
its voting membership interest and preferred capital account
in the Company. Bryanston has agreed to transfer such
interests to Alpha.
On February 4, 2003 Catskill Development, LLC entered into a
Letter of Intent with Alpha Hospitality Corporation
("Alpha"), its partner in developing gaming activities at
the Monticello Raceway (the "Raceway") and other related
entities. The agreement provides for Alpha to acquire a 48
year ground lease on the Raceway and contiguous properties,
together with all of Catskill's development and management
rights with respect to the site and related gaming
activities, in exchange for an 80.25% position in Alpha's
common stock.
The Letter of Intent provides for Catskill to lease its 230-
acre Raceway property to Alpha for a period of 48 years for
an annual base rent of $1,800,000. Lease terms are to
contain certain options for Alpha to acquire title to
portions of the property. Alpha will have the right to
purchase a 29-acre parcel for the purpose of placing it in
trust for a Native American Tribe or Nation at the purchase
price of
Catskill Development, LLC
Notes to Consolidated Financial Statements
September 30, 2002 and December 31, 2001
$1. The exercise of such option will require obtaining
necessary federal and state approvals. In addition, the
remaining property may be purchased within two years of the
opening of a casino at the present value of the ground lease
at the time of such exercise.
The agreement is subject to the execution of definitive
agreements, approvals by Alpha's Board of Directors and an
opinion that the transaction will be tax-free to all parties
and other technical requirements, including a fairness
opinion. No assurance can be given that the transactions
provided for in the Letter of Intent will ultimately occur
or will occur at the times and on the terms and conditions
contained in the Letter of Intent.
Bachrach, Waschitz & Waschitz, LLP
CERTIFIED PUBLIC ACCOUNTANTS
598 WEST BROADWAY
P.O. BOX 871
MONTICELLO, NEW YORK 12701
NORMAN BACHRACH, CPA (845) 794-5210
MICHAEL WASCHITZ, CPA FAX(845) 794-5628
GARY WASCHITZ, CPA E-Mailacct@bwwcpa.com
REPORT OF INDEPENDENT AUDITORS
To the Members of
Catskill Development, LLC
We have audited the accompanying consolidated balance sheets of
Catskill Development, LLC as of September 30, 2002 and December
31, 2001, and the related consolidated statements of income,
changes in members equity and cash flows for the nine months
ended September 30, 2002 and the year ended December 31, 2001.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with United States
generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Catskill Development, LLC at September 30,
2002 and December 31, 2001, and the consolidated results of its
operations and its cash flows for the nine months ended September
30, 2002 and the year ended December 31, 2001, in conformity with
United States generally accepted accounting principles.
Bachrach, Waschitz & Waschitz, LLP
February 5, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Dated: February 10, 2003 ALPHA HOSPITALITY CORPORATION
(Registrant)
By:/s/Scott A. Kaniewski
Scott A. Kaniewski
Chief Financial Officer
EXHIBIT 99.1
RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT is made and entered into this
10th day of December, 2002, by and between ALPHA HOSPITALITY
CORPORATION, a Delaware corporation (the "Company"), ALPHA
MONTICELLO, INC., a Delaware corporation and a wholly owned
subsidiary of the Company ("Alpha"), BRYANSTON GROUP, INC., a
Georgia corporation ("BG"), STANLEY TOLLMAN, BEATRICE TOLLMAN and
MONTY HUNDLEY (together with BG, Stanley Tollman and Beatrice
Tollman, the "Stockholders").
RECITALS
WHEREAS, BG is the owner of 2,326,857 shares of common stock,
$.01 par value per share (the "Common Stock") and Beatrice
Tollman is the owner of 66,000 shares of Common Stock (the
"Stockholder Shares");
WHEREAS, BG is the holder of a note issued to it by the Company
with an unpaid balance of $1,570,126 (the "BG Note") and the
Company is indebted to each of Stanley Tollman and Monty Hundley
for $1,528,167 and $266,667, respectively, for unpaid
compensation (together with the BG Note, the "Stockholder Debt");
WHEREAS, BG is the holder of a membership interest in Catskill
Development L.L.C., a New York limited liability company
("Catskill Development");
WHEREAS, the Company desires to reconstitute its capital
structure through (i) the issuance of a newly created series of
redeemable preferred stock in full satisfaction of the
Stockholder Debt, (ii) being granted the option to repurchase the
Stockholder Shares and (iii) acquiring, in exchange for
additional such preferred stock, BG's ownership interests in
Catskill Development, in each case subject to the terms and
conditions set forth herein ((i), (ii) and (iii) above are
referred to collectively herein as the "Recapitalization"); and
WHEREAS, the Stockholders desire (i) to receive the newly created
series of preferred stock in exchange for the Stockholder Debt
and the interests in Catskill Development, and (ii) the
opportunity to receive a redemption price for the Stockholder
Shares that currently represents a significant premium on the
Common Stock's most recent closing bid price.
NOW, THEREFORE, in consideration of the premises and mutual
agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
recapitalization
Closing. The Closing under this Agreement (the "Closing")
shall be held simultaneously with the execution of this
Agreement. Such date on which the Closing is to be held
is herein referred to as the "Closing Date." The Closing
shall be held at the offices of Olshan Grundman Frome
Rosenzweig & Wolosky LLP, 505 Park Avenue, New York, New
York 10022, at 10:00 A.M. on such date, or at such other
time and place as the Company, Alpha and the Stockholders
may agree upon in writing.
Creation of Preferred Stock. A Certificate of Designation,
setting forth the designation, preferences and other rights and
qualifications of a new series of preferred designated Series E
Preferred Stock (the "Preferred Stock"), in the form attached
hereto as Exhibit A, has been filed
with the Secretary of State
of the State of Delaware and the Company has authorized the
issuance and sale of up to 1,730,697 shares of such Preferred
Stock.
Purchase of Membership Interests and Amendment of Catskill
Operating Agreement. BG hereby irrevocably sells, assigns and
transfers all of its rights, title and interests in and to
Catskill Development, including its Voting Membership and
Preferred Capital Account and any other interests which it may
have in and to the business and properties of Catskill
Development (the "Catskill Interest"), to the Company in exchange
for 1,394,200 shares of the Preferred Stock (representing a
purchase price of $13,942,000 (the "Catskill Price"). BG agrees
to take such further actions and execute and deliver such
documents as may be necessary or reasonable to further effectuate
and secure such sale, assignment and transfer to the Company and
to comply with any regulatory or other government requirements in
connection therewith.
Societe General Restructuring. The Company has restructured its
indebtedness to Societe Generale by issuing Societe Generale a
new promissory note in the principal amount of $1,600,000.
Debt Restructuring. Subject to the terms and conditions of this
Agreement, at the Closing, the Company shall restructure its
indebtedness to certain of the Stockholders by issuing to each of
them that number of shares of Preferred Stock set forth opposite
such Stockholder's name on Schedule 1.5, which is attached hereto
and made a part hereof, in exchange for forgiveness of the
Stockholder Debt. At the Closing, the Company shall deliver to
each such Stockholder a certificate or certificates, registered
in such Stockholder's name as is set forth on Schedule 1.5,
representing the number of shares of Preferred Stock being
acquired hereunder, against cancellation of their respective
obligations. The Stockholders shall acknowledge such cancellation
by delivery, as the case may be, by BG of the BG Note and/or by
Stanley Tollman and/or Monty Hundley of a letter in the form
attached hereto as Exhibit B evidencing forgiveness of the
Stockholder Debt.
Common Stock Repurchase Right.
Subject to the terms and conditions of this Agreement, each of
the Stockholders hereby grants a three (3) year option in favor
of the Company (the "Common Purchase Option") to reacquire, at
any time, or from time to time, and without prior notice, up to
that number of shares of Common Stock (appropriately adjusted for
any subsequent stock split, dividend, combination, or other
recapitalization) (the "Common Option Shares") and at the
purchase price (appropriately adjusted for any subsequent stock
split, dividend, combination, or other recapitalization) (the
"Common Repurchase Price") set forth opposite such Stockholder's
name on Schedule 1.6, attached hereto and made a part hereof;
provided, however, that the Common Purchase Option shall not
become effective until the Company receives stockholder approval
of this Agreement. The Common Purchase Option shall be exercised
by delivery to the Stockholder of a written notice signed by an
officer or director of the Company. The Company shall pay for the
Common Option Shares it has elected to repurchase by cash or, in
its sole discretion, delivery to the Stockholder of a promissory
note, in the form attached hereto as Exhibit C (a "Note"), in the
principal amount of the aggregate Common Repurchase Price for the
number of shares of Common Stock being repurchased. Payment of
the Common Repurchase Price shall be completed within five
business days after notice of the exercise of the Common Purchase
Option has been delivered to the Stockholder. Upon receipt of the
Common Repurchase Price, whether in the form of cash or a Note,
then, notwithstanding that any certificates for the shares of
Common Option Shares so called for repurchase shall not have been
surrendered for
cancellation, the shares represented thereby
shall no longer be deemed outstanding, and all rights with
respect to such Common Option Shares shall immediately cease and
terminate.
All certificates representing any Common Option Shares subject
to the provisions of this Agreement shall be delivered to the
Company's transfer agent upon closing so that a legend
referencing the restrictions imposed by this Agreement can be
placed on such certificates.
Irrevocable Proxy. For three (3) years commencing on the date
hereof, each of the Stockholders holding Common Option Shares
irrevocably constitutes and appoints Robert Berman, the Company's
Chief Executive Officer, or, in the event that Mr. Berman shall
become incapacitated or deceased, Scott Kaniewski (the
"Designee"), whether or not the Common Option Shares have been
transferred into the name of the Designee or his nominee, as such
Stockholder's proxy with full power, in the same manner, to the
same extent and with the same effect as if such Stockholder were
to do the same, in the sole discretion of the Designee, to vote
such Common Option Shares, giving such Designee full power of
substitution and revocation (the "Proxy"). The Proxy is coupled
with an interest sufficient in law to support an irrevocable
power and shall be irrevocable and shall survive the death,
incapacity, dissolution or liquidation, as the case may be, of
any Stockholder. Each Stockholder hereby revokes any proxy or
proxies heretofore given to any person or persons and agrees not
to give any other proxies in derogation hereof until such time as
this Agreement is no longer in full force and effect.
Preferred Stock Repurchase Right.
Subject to the terms and conditions of this Agreement, each of
the Stockholders hereby grants an option in favor of the Company
(the "Preferred Purchase Option") to reacquire, at any time, or
from time to time, and without prior notice, up to that number of
shares of Preferred Stock (appropriately adjusted for any
subsequent stock split, dividend, combination, or other
recapitalization) (the "Preferred Option Shares") being issued to
him/her/it pursuant to Section 1.3 and/or 1.5 above, for the
purchase price of $10.00 per share (the "Preferred Repurchase
Price") plus accrued dividends. The Preferred Purchase Option
shall be exercised by delivery to the Stockholder of a written
notice signed by an officer or director of the Company. The
Company shall pay for the Preferred Option Shares it has elected
to repurchase by cash or, in its sole discretion, delivery to the
Stockholder of a Note, in the principal amount of the aggregate
Preferred Repurchase Price for the number of shares of Preferred
Stock being repurchased. Payment of the Preferred Repurchase
Price shall be completed within five business days after notice
of the exercise of the Preferred Purchase Option has been
delivered to the Stockholder. Upon receipt of the Preferred
Repurchase Price, then, notwithstanding that any certificates for
the shares of Preferred Stock so called for repurchase shall not
have been surrendered for cancellation, the shares represented
thereby shall no longer be deemed outstanding, and all rights
with respect to such Preferred Stock shall immediately cease and
terminate. The Stockholders acknowledge that each Note delivered
pursuant to this Section 1.8(a) shall be subordinate to the
Societe Generale promissory note described in Section 1.4 and
that no payments shall be made on any such Note until the Societe
Generale promissory note shall have been fully paid and
discharged.
All certificates representing any Preferred Option Shares
subject to the provisions of this Agreement shall bear a legend
referencing the restrictions imposed by this Agreement.
Distributions. Notwithstanding the foregoing, the Company
shall apply any funds of the Company to be used for repurchases
under Sections 1.5 and 1.8 toward the repurchase of the Common
Option Shares, pro rata, and then to the repurchase of the
Preferred Option Shares, pro rata. In addition, the Company
agrees that so long as any of the Preferred Option Shares remain
outstanding, no dividends shall be paid and no distributions
shall be made from the Net Available Cash Flow of the Company for
any purpose other than purchase of the Common Option Shares or
the retirement of the Preferred Shares. For purposes of this
Agreement, "Net Available Cash Flow" shall mean the net amounts
received by the Company in connection with any sale of the
Company's business assets after the date hereof, or the issuance
of any stock or debt by the Company, or the net amount resulting
from any business operation(s) conducted by the Company, but
shall not include (i) any amount used or set aside to retire the
outstanding promissory note issued by the Company to Societe
Generale or (ii) such additional amount, not to exceed $1,000,000
in any calendar year, that the Company shall apply or set aside
to apply to the payment of reasonable operating expenses of the
Company.
MUTUAL RELEASES
Release of the Company by the Stockholders. For and in
consideration of the promises, agreements and releases
provided herein, each of the Stockholders hereby releases
and discharges the Company, and any of its managers,
directors, officers, partners, agents, attorneys,
assureds, employees, past and present, heirs, executors,
administrators, successors and assigns from any and all
actions, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents,
executions, claims and demands whatsoever, in law,
admiralty or equity, which against the Company and its
principals, managers, directors, officers, partners,
agents, attorneys, assureds, employees, past and present,
heirs, executors, administrators, successors and assigns
such Stockholder ever had, now has, or hereafter can,
shall or may have upon or by reason of any matter, cause
or thing whatsoever from the beginning of the world to
the date of this Agreement. However, nothing contained
herein (or in Section 2.2) shall in any way affect the
right of the Stockholders to enforce their rights and
remedies under this Agreement.
Release of Company Affiliates by the Stockholders. The Company
agrees to use its best reasonable efforts to obtain releases for
the Stockholders from its affiliates in the form of the release
contained in Section 2.3. As to each affiliate from which the
Company has obtained such a release for the benefit of the
Stockholders, Stockholders hereby agree to release and discharge
such affiliate, and any of their managers, directors, officers,
partners, agents, attorneys, assureds, employees, past and
present, heirs, executors, administrators, successors and assigns
from any and all actions, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims and
demands whatsoever, in law, admiralty or equity, which against
the Company and its principals, managers, directors, officers,
partners, agents, attorneys, assureds, employees, past and
present, heirs, executors, administrators, successors and assigns
such Stockholder ever had, now has, or hereafter can, shall or
may have upon or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the date of this
Agreement. For purposes of this Article II, the term "affiliates"
means, without limitation, Catskill Development, Watertone
Holdings, LP, a Delaware limited partnership, BKB, LLC, a New
York limited liability company, Americas Tower Partners, a New
York general partnership, Monticello Realty L.L.C., a Delaware
limited liability company, Alpha Monticello, Inc., a Delaware
corporation, Clifford A. Ehrlich, a resident of Sullivan County,
New York, Shamrock
Strategies, Inc., a Delaware corporation, and
Fox Hollow Lane, LLC, a New York limited liability company.
Release of the Stockholders by the Company. For and in
consideration of the promises, agreements and releases provided
herein, the Company and its managers, directors, and officers
hereby release and discharge the Stockholders and their agents,
attorneys, assureds, past and present, heirs, executors,
administrators, successors and assigns from any and all actions,
suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments,
extents, executions, claims and demands whatsoever, in law,
admiralty or equity, which against the Stockholders, their
agents, attorneys, assureds, past and present, heirs, executors,
administrators, successors and assigns the Company ever had, now
has or hereafter can, shall or may have upon or by reason of any
matter, cause or thing whatsoever from the beginning of the world
to the date of this Agreement. However, nothing contained herein
shall in any way affect the right of the Company to enforce its
rights and remedies under this Agreement.
STOCKHOLDERS Representations and Warranties
Each of the Stockholders hereby represents and warrants to the
Company as follows:
Organization; No Conflicts. To the extent indicated on the
signature pages hereto, such Stockholder is either (i) a
corporation duly organized and validly existing under the laws of
its state of incorporation or (ii) an individual. Such
Stockholder represents that it was not organized for the purpose
of making an investment in the Company. None of the execution and
delivery of this Agreement by such Stockholder, the consummation
by such Stockholder of the transactions contemplated hereby or
compliance by such Stockholder with any of the provisions hereof
shall violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to such Stockholder or any
of his/her/its properties or assets, in each such case except to
the extent that any conflict, breach, default or violation would
not interfere with the ability of such Stockholder to perform the
obligations hereunder.
Enforceability. The execution, delivery and performance of
this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby are within
the powers of such Stockholder and have been duly authorized by
all necessary individual or corporate action, as appropriate, on
the part of such Stockholder. This Agreement has been duly
executed and delivered by such Stockholder and constitutes a
legal, valid and binding obligation of the Stockholder
enforceable against such Stockholder in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency,
reorganization and moratorium laws, (ii) other laws of general
application affecting the enforcement of creditors' rights
generally and general principles of equity, (iii) the discretion
of the court before which any proceeding therefor may be brought
and (iv) as rights to indemnity may be limited by federal or
state securities laws or by public policy.
Approvals and Consents. No action, approval, consent or
authorization, including, but not limited to, any action,
approval, consent or authorization by any governmental or quasi-
governmental agency, commission, board, bureau, or
instrumentality is necessary or required as to such Stockholder
in order to constitute this Agreement as a valid, binding and
enforceable obligation of such Stockholder in accordance with its
terms.
Common Stock. Each Stockholder is the record and beneficial
owner of all shares of Common Stock set forth opposite such
Stockholder's name on Schedule 1.6, free and clear of any
restrictions on transfer, taxes, liens, options, warrants,
purchase rights, contracts, commitments, equities, claims, and
demands. Such Stockholder is not a party to any option, warrant,
purchase right, or other contract or commitment that could
require such Stockholder to sell, transfer, or otherwise dispose
of its Common Stock (other than this Agreement). Moreover, such
Stockholder is not a party to any voting trust, proxy, or other
agreement or understanding with respect to its Common Stock.
Investment Representations.
Such Stockholder is acquiring the Preferred Stock set forth
opposite his/her/its name on Schedule 1.5 solely for his/her/its
own account as an investment and not with a view to any
distribution or resale thereof within the meanings of such terms
under the Securities Act of 1933, as amended (the "Securities
Act").
Such Stockholder has such knowledge, experience and
skill in business and financial matters that such Stockholder is
capable of evaluating the merits and risks of an investment in
the Preferred Stock.
Such Stockholder (i) has received all information that
he/she/it deems reasonably necessary to make an informed
investment decision with respect to an investment in the
Preferred Stock; (ii) has had the opportunity to make such
investigation as he/she/it desires regarding the Company and an
investment therein and (iii) has had the opportunity to ask
questions of representatives of the Company concerning the
Company.
Such Stockholders understands that he/she/it must bear
the economic risk of an investment in the Company for an
uncertain period of time because (i) the Preferred Stock has not
been registered under the Securities Act and applicable state
securities laws and (ii) the Preferred Stock may not be sold,
transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the
Preferred Stock or an available exemption from registration under
the Securities Act, the Preferred Stock must be held
indefinitely. In particular, such Stockholder is aware that the
Preferred Stock may not be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of that
Rule are met. In this connection, such Stockholder represents
that he/she/it understands that under Rule 144, the Preferred
Stock must be held for at least one year after purchase thereof
from the Company prior to resale (two years in the absence of
public current information about the Company) and that, under
certain circumstances, the conditions for use of Rule 144 include
the availability of public current information about the Company,
that sales be effected through a "broker's transaction" or in
transactions with a "market maker," and that the number of shares
being sold not exceed specified limitations. Such public current
information about the Company for purposes of Rule 144 is
presently not available, and may not be publicly available in the
future.
Such Stockholder understands that, in addition the
legends described above in Article I, the certificates evidencing
the Preferred Stock may bear one or all of the following legends:
"The shares represented by this certificate have
not been registered under the United States Securities Act of
1933. They may not be sold, offered for sale, pledged,
hypothecated or otherwise transferred in the absence of a
registration statement in effect with respect to such
shares under such Act or an opinion of counsel or other evidence
satisfactory to Sporting Magic, Inc. and its counsel that such
registration is not required."
(i) Any legend required by any other jurisdiction.
Broker's Fees. Neither such Stockholder nor
any of its stockholders, directors, officers, employees or
agents, if any, has retained, employed or used any broker or
finder in connection with the transactions provided for herein or
in connection with the negotiation thereof.
ADDITIONAL REPRESENTATIONS AND WARRANTIES
In addition to those representations made by BG in Article III,
BG further represents and warrant to the Company as follows:
Catskill Interest. BG is the record and beneficial owner of
the Catskill Interest, free and clear of any restrictions on
transfer, taxes, liens, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. BG is not
a party to any option, warrant, purchase right, or other contract
or commitment that could require it to sell, transfer, or
otherwise dispose of its Catskill Interest (other than this
Agreement). Moreover, BG is not a party to any voting trust,
proxy, or other agreement or understanding with respect to its
Catskill Interest.
COMPANy Representations and Warranties
Organization; No Conflicts. The Company is duly
organized, validly existing and in good standing in its
jurisdiction of organization and has all of the requisite
power and authority to enter into this Agreement and to
assume and perform its obligations hereunder. None of the
execution and delivery of this Agreement by the Company,
the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any
of the provisions hereof shall violate any order, writ,
injunction, decree, judgment, statute, rule or regulation
applicable to the Company or any of its properties or
assets, in each such case except to the extent that any
conflict, breach, default or violation would not
interfere with the ability of the Company to perform the
obligations hereunder.
Power, Authorization and Validity. The Company has the right,
power, legal capacity and authority: (a) to carry on its business
as now conducted and as proposed to be conducted and (b) subject
to stockholder approval of this Agreement, to enter into and
perform all of its obligations under this Agreement and all other
agreements to which the Company is or will be a party that are
required to be executed pursuant to this Agreement (collectively
with this Agreement, the "Company Merger Agreements"). The Common
Option Shares subject to the Proxy represent a sufficient number
of shares to approve and adopt this Agreement.
Catskill Interest. The Company is authorized to receive the
Catskill Interest and exercise all of the rights of BG thereunder
in accordance with the terms and conditions of the First Amended
and Restated Operating Agreement between the members of Catskill
Development, dated January 1, 1999.
General Provisions
Entire Agreement; Amendment and Waiver. This Agreement
constitutes the entire agreement between the parties with
respect to the subject matter contained herein and
supersedes all prior oral or written agreements, if any,
between the parties with respect to such subject matter.
Any amendments hereto or modifications hereof must be
made in writing and executed by each of the parties
hereto.
Binding Effect; Assignment. This Agreement and the various
rights and obligations arising hereunder shall inure to the
benefit of and be binding upon the parties and their respective
successors and assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be transferred
or assigned (by operation of law or otherwise) by any of the
parties hereto. Any transfer or assignment of any of the rights,
interests or obligations hereunder in violation of the terms
hereof shall be void and of no force or effect.
Governing Law; Venue, Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of New York without giving effect to conflict of laws
principles. Each party hereto hereby irrevocably submits to the
exclusive personal and subject matter jurisdiction of the United
State District Court for the Southern District of New York and
the Supreme Court of the State of New York located in the borough
of Manhattan over any suit action or proceeding arising out of or
relating to this Agreement. Each party hereby irrevocably waives
to the fullest extent permitted by law, (a) any objection that
they may now or hereafter have to the venue of such suit, action
or proceeding brought in any such court; and (b) any claim that
any such suit, action or proceeding has been brought in an
inconvenient forum. Final judgement in any suit, action or
proceeding brought in any such court shall be conclusive and
binding upon each party duly served with process therein and may
be enforced in the courts of the jurisdiction of which either
party or any of their property is subject, by a suit upon such
judgement.
Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by virtue of
any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the
maximum extent possible.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
[Signature Page Follows]
[COUNTERPART SIGNATURE PAGE TO RECAPITALIZATION AGREEMENT BETWEEN
ALPHA HOSPITALITY CORPORATION, ALPHA MONTICELLO, INC., BRYANSTON
GROUP, INC., STANLEY TOLLMAN, BEATRICE TOLLMAN AND MONTY HUNDLEY
DATED DECEMBER 10, 2002]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be made and executed on the date first above written.
THE COMPANY:
ALPHA HOSPITALITY CORPORATION
By:
______________________________
Name:
Title:
ALPHA
ALPHA MONTICELLO, INC.
By:
______________________________
Name:
Title:
THE STOCKHOLDERS:
BRYANSTON GROUP, INC.
By:
______________________________
Name:
Title:
______________________________
___
Stanley Tollman
______________________________
___
Beatrice Tollman
______________________________
___
Monty Hundley
EXHIBIT A
CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES E PREFERRED STOCK
($.01 par value per share)
of
ALPHA HOSPITALITY CORPORATION
a Delaware Corporation
__________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
__________
ALPHA HOSPITALITY CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That, pursuant to authority conferred upon the
Board of Directors of the Corporation (the "Board") by the
Certificate of Incorporation of said Corporation, and pursuant to
the provisions of Section 151 of the Delaware General Corporation
Law, there hereby is created, out of the 5,000,000 shares of
Preferred Stock of the Corporation authorized in Article FOURTH
of the Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred stock consisting of 1,730,697 shares,
$.01 par value per share, to be designated "Series E Preferred
Stock," and to that end the Board adopted a resolution providing
for the designations, powers, preferences and rights, and the
qualifications, limitations and restrictions, of the Series E
Preferred Stock, which resolution is as follows:
RESOLVED, that the Certificate of the
Designations, Powers, Preferences and Rights of the
Series E Preferred Stock ("Certificate of Designation")
be and is hereby authorized and approved, which
Certificate of Designation shall be filed with the
Delaware Secretary of State in the form as follows:
1. Designations and Amount. One Million Seven Hundred
Thirty Thousand Six Hundred Ninety Seven (1,730,697) shares of
the Preferred Stock of the Corporation, $.01 par value per share,
shall constitute a class of Preferred Stock designated as "Series
E Preferred Stock" (the "Series E Preferred Stock").
2. Dividends.
(a) The holders of shares of Series E Preferred
Stock shall be entitled to receive, when and as declared by the
Board of Directors of the Corporation (the "Board") out of assets
of the Corporation legally available for payment, a cash dividend
at the rate of 8% of
the Liquidation Value (or $.80) per annum
per share of Series E Preferred Stock (the "Preferred Dividend"),
payable only as provided in Section 2(b) hereof. The Preferred
Dividend shall accrue and shall be cumulative from the date of
initial issuance of such share of Series E Preferred Stock. The
amount of the Preferred Dividend that shall accrue for the
initial dividend period and for any period shorter than a full
dividend period shall be computed on the basis of a 360-day year
of twelve 30-day months.
(b) The Preferred Dividend shall be payable
(whether or not declared by the Board) upon the effective date of
the earliest of a (i) redemption of the Series E Preferred Stock
in accordance with Section 6 hereof or (ii) Liquidation (as
hereinafter defined).
3. Rights on Liquidation, Dissolution or Winding Up,
Etc. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (each, a
"Liquidation"), no distribution shall all be made (1) to the
holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the holders of
the Series E Preferred Stock unless, prior thereto, the holders
of such shares of Series E Preferred Stock shall have received
$10.00 per share (the "Liquidation Value"), plus an amount equal
to all accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment. For
purposes of this Certificate of Designation, each of (1) the
sale, conveyance, exchange or transfer of all or substantially
all of the property and assets of the Corporation or (2) the
consolidation or merger of the Corporation with or into any other
corporation, in which the stockholders of the Corporation
immediately prior to such event do not own a majority of the
outstanding shares of the surviving corporation shall be deemed
to be a liquidation, dissolution or winding up of the
Corporation.
4. Rank. The Series E Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of
assets, senior to all series of any other class of the
Corporation's Preferred Stock.
5. Voting Rights. The holders of Series E Preferred
Stock shall not be entitled to vote on any matter except as
required by law.
6. Redemption. The Corporation, at the option of the
Board, may redeem the whole or any part of the Series E Preferred
Stock at any time outstanding, at any time or from time to time,
by paying the redemption price of $10.00 per share, plus accrued
dividends, in cash or, in its sole discretion, by delivery of a
Note in the form attached hereto as Exhibit A, for each share of
Series E Preferred Stock so to be redeemed plus dividends accrued
thereon at the date fixed for redemption. In the case of the
redemption of only a part of the Series E Preferred Stock at the
time outstanding, the Corporation shall select by lot or in such
other manner as the Board may determine the shares to be
redeemed. The Board shall have full power and authority, subject
to the limitations and provisions contained herein, to prescribe
the manner in which and the terms and conditions upon which the
Series E Preferred Stock shall be redeemed from time to time. If
the Board has elected to redeem such Series E Preferred Stock by
paying cash and on or before the date fixed by the Board for
redemption the funds necessary for such redemption shall have
been set apart so as to be and continue to be available therefor,
then, notwithstanding that any certificates for the shares of
Series E Preferred Stock so called for redemption shall not have
been surrendered for cancellation, the shares represented thereby
shall no longer be deemed outstanding, the right to receive
dividends thereon shall cease to accrue from and after the date
of redemption so fixed, and all rights with respect to such
shares of Series E Preferred Stock so called for redemption shall
immediately on such redemption date cease and terminate, except
only the right of the holders thereof to receive the redemption
price therefor, but without interest. None of the Series E
Preferred Stock acquired by the Corporation by redemption or
otherwise shall be reissued or disposed of but shall from time to
time be retired in the manner provided by law.
7. No Pre-emptive Rights. No holder of shares of
Series E Preferred Stock will possess any preemptive rights to
subscribe for or acquire any unissued shares of capital stock of
the Corporation (whether now or hereafter authorized) or
securities of the Corporation convertible into or carrying a
right to subscribe to or acquire shares of capital stock of the
Corporation.
IN WITNESS WHEREOF, Alpha Hospitality Corporation has
caused this Certificate of Designation to be executed this 9th
day of December, 2002.
ALPHA HOSPITALITY CORPORATION
By:
Name:
Title:
EXHIBIT B
[Letterhead of Stockholder]
Certificate of Satisfaction
December , 2002
Alpha Hospitality Corporation
707 Skokie Boulevard, Suite 600,
Northbrook, IL 60062
Ladies and Gentlemen:
This will confirm that upon receipt by [Full Name of Stockholder]
("Stockholder") of ___ shares of Series E Preferred Stock of
Alpha Hospitality Corporation ("Alpha"), such receipt shall serve
as full and complete satisfaction of the $[________________] in
indebtedness currently due from Alpha to Stockholder.
STOCKHOLDER
By:___________________________
EXHIBIT C
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAW
AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT
THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
ALPHA HOSPITALITY CORPORATION
Subordinated Promissory Note
_________________, 2003
$______________
Alpha Hospitality Corporation, a Delaware corporation (together
with its successors and assigns, the "Issuer"), for value
received, hereby promises to pay to the order of
__________________________________ (together with its successors,
transferees and assigns, the "Noteholder") the principal sum of
_____________________________ (the "Note Amount"), in the amounts
and on the dates ("Note Amount Repayment Date") set forth below:
Date Amount
(1 Year Anniversary of (13.33% of the Note
Note) Amount)
(18 Month Anniversary of (17.78% of the Note
Note) Amount)
(2 Year Anniversary of (22.22% of the Note
Note) Amount)
(30 Month Anniversary of (26.67% of the Note
Note) Amount)
(3 Year Anniversary of (20.00% of the Note
Note) Amount)
Interest. The Issuer further promises to pay interest on the
unpaid Note Amount from the date hereof until the Note is
paid in full (whether at maturity or prepayment), payable
on each Note Amount Repayment Date, at the simple
interest rate of seven percent (7%) per annum.
Prepayment. The Issuer may at its option, at any time or from
time to time, prepay this Note (and accrued interest), in
whole or in part, without premium or penalty. Any such
optional prepayment shall be applied to reduce the unpaid
Note Amount installments, in direct order of maturity
(such that the Note Amount next due shall be repaid
first).
Issuer Register. The Issuer shall keep a register at its
principal place of business (the "Register") in which it shall
enter the Noteholder's name and address as set forth above. For
the purpose of paying principal and any interest on this Note,
the Issuer shall be entitled to rely on the name and address in
the Register.
Transfer. This Note is neither assignable nor transferable by
the Noteholder without the Issuer's prior written
consent.
No Waiver. No failure by the Noteholder to exercise, and no
delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other
right. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
Acceleration. In case one or more of the following events
("Events of Default") (whatever the reason for such Event
of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body) shall have occurred and be continuing:
failure by the Issuer to pay all or any part of the Note
Amount within ten (10) business days after the same shall
become due and payable; or
failure by the Issuer to pay all or any part of the interest on
the Note within ten (10) business days after the same shall
become due and payable; or
the Issuer becomes the subject of any voluntary bankruptcy,
insolvency or similar proceeding, or any involuntary bankruptcy,
insolvency or similar proceeding not stayed or dismissed within
sixty (60) days of filing,
then: (i) except in the case of an Event of Default specified in
Section 6(c) hereof, the Noteholder, by notice in writing to the
Issuer, may declare the aggregate Note Amount to be due and
payable immediately, and upon any such declaration the same shall
become immediately due and payable and (ii) if an Event of
Default specified in Section 6(c) occurs, the Note Amount shall
become and be immediately due and payable without any declaration
or other act on the part of the Noteholder.
No Action. The Issuer shall not by any action, including,
without limitation, amending its certificate of
incorporation through any reorganization,
reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of
securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the
terms of this Note, but will at all times in good faith
assist in the carrying out of all such terms and in the
taking of all such actions as may be reasonably necessary
or appropriate to protect the rights of the Noteholder
against impairment.
Costs; Expenses. Should the Noteholder initiate an action to
enforce the provisions of this Note, then the prevailing
party in such action, as determined by the court, agency,
tribunal or other body with jurisdiction over the action,
shall be reimbursed its reasonable fees and out-of-pocket
expenses of counsel in connection with such action.
Amendment. This Note may only be amended by a written instrument
or instruments executed by both the Issuer and the
Noteholder.
Senior Debt. This Note shall be senior to all existing and future
indebtedness of the Issuer other than indebtedness
created pursuant to that certain promissory note issued
by the Issuer to Societe Generale on December 9, 2002 for
the principal sum of $1,600,000.
Waivers. The Issuer hereby waives any requirements of demand,
presentment for payment, notice of dishonor, notice of
protest and protest.
Governing Law; Forum. This agreement shall be governed by, and
construed and interpreted in accordance with, the laws of
the state of New York without reference to the choice of
laws provisions thereof. Any action, suit or proceeding
initiated by any party hereto against any other party
hereto under or in connection with this Note shall be
brought in any state or federal court in the State of New
York. Each party hereto submits itself to the exclusive
jurisdiction of any such court, waives any claims of
forum non conveniens and agrees that service of process
may be effected on it by the means by which notices are
to be given pursuant to this Note.
Notices. All notices (including other communications required or
permitted) under this Note must be in writing and must be
delivered (a) in person, (b) by registered or certified
mail, postage prepaid, return receipt requested, (c) by a
generally recognized courier or messenger service that
provides written acknowledgment of receipt by the
addressee or (d) by facsimile or other generally accepted
means of electronic transmission with a verification of
delivery. Notices are deemed delivered when actually
delivered to the address for notices. Notices to the
Noteholder must be given to its last known address
appearing on the Register and notices to the Issuer must
be given at its principal place of business. Any party
may furnish, from time to time, other addresses for
notices to it.
IN WITNESS WHEREOF, Issuer has caused this Note to be executed by
its officer thereunto duly authorized as of the date first above
written.
ALPHA HOSPITALITY CORPORATION
By:________________________________
_
Name:
Title:
SCHEDULE 1.5
Debtholder Debt Being Number of Shares of
Forgiven Preferred Stock to be
at Closing Issued at Closing
Bryanston $1,570,126 157,013
Group, Inc.
Stanley Tollman $1,528,167 152,817
Monty Hundley $ 266,667 26,667
SCHEDULE 1.6
Stockholder Common Number of Principal Amount of
Repurchase Common Option Notes to be Issued
Price Shares Upon Exercise of
Option
Bryanston $2.12 2,326,857 $4,932,937
Group, Inc.
Beatrice $2.12 66,000 $139,920
Tollman
Exhibit 99.2
RESTRUCTURING AGREEMENT
This RESTRUCTURING AGREEMENT (the "Restructuring Agreement"),
dated as of December 9, 2002, is between ALPHA HOSPITALITY
CORPORATION, a Delaware corporation (the "Company"), and SOCIETE
GENERALE, a bank organized under the laws of France (the
"Investor").
W I T N E S S E T H :
WHEREAS, (x) on February 8, 2000, the Investor acquired for a
purchase price of $4,000,000, 4,000 shares of the Company's
Series D Preferred Stock having an aggregate face amount of
$4,000,000 and certain warrants to purchase the Company's common
stock and (y) on July 31, 2000, the Investor acquired for a
purchase price of $1,250,000, $1,250,000 aggregate principal
amount of the Company's 4% Convertible Notes Due July 31, 2003
and certain warrants to purchase the Company's common stock;
WHEREAS, as of the date hereof approximately $1,295,000 aggregate
face amount of the Company's Series D Preferred Stock is
outstanding (inclusive of approximately $215,000 of accrued
dividends thereon) (the "Series D Preferred") and approximately
$1,032,000 aggregate principal amount of the Company's 4%
Convertible Notes Due July 31, 2003 is outstanding (inclusive of
approximately $88,000 of accrued interest thereon) (the
"Convertible Notes") and all of the warrants originally issued to
the Investor remain outstanding;
WHEREAS, the Investor has alleged that certain defaults have
occurred with respect to the Company's obligations in respect of
the Series D Preferred and the Convertible Notes;
WHEREAS, certain significant changes have occurred with respect
to the Company's business and operations and representatives of
the Company have advised the Investor that the Company currently
has a need to reduce its total indebtedness in order to meet the
requirements to remain listed on certain securities exchanges and
that a restructuring of the Investor's investment in the Series D
Preferred and the 4% Convertible Notes are critical to achieving
that objective;
WHEREAS, the Company has advised the Investor that it is desirous
of restructuring its investment in the Series D Preferred and the
Convertible Notes in accordance with the terms set forth in this
Restructuring Agreement in exchange for the receipt of the waiver
granted by the Investor set forth herein, the exchange of the
Investor's current holdings of Series D Preferred and the
Convertible Notes for a newly issued note of the Company and
certain cash payments by the Company to the Investor and the
Investor has agreed to accept such offer subject to the terms set
forth in this Restructuring Agreement.
NOW THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, intending to be
legally bound hereby, the parties hereto agree as follows:
DEFINITIONS
Certain Definitions. For purposes of this
Agreement, the following terms shall have the
following respective meanings:
"Affiliate" of a Person means another Person that directly
or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control
with, such first-mentioned Person. The term "control"
(including the terms "controlling," "controlled by" and
"under common control with") means the possession, direct
or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Capital Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents
(however designated) of corporate stock, including each
class of common stock and preferred stock, of such Person.
"Commission" means the United States Securities and
Exchange Commission.
"Governmental Authority" means any federal or state
government or political subdivision thereof and any agency
or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"Material Adverse Effect" has the meaning set forth in
Section 2.01.
"Person" means an individual or a corporation,
partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company,
Governmental Authority or other entity of any kind.
"SEC Reports" means, collectively, the Company's Annual
Report on Form 10-K for the year ended December 31, 2001,
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002, June 30, 2002 and September
30, 2002 and the Company's Current Reports on Form 8-K
filed with the Commission during the calendar year 2002.
ISSUANCE OF NOTES; PAYMENT OF CASH;
CANCELLATION OF EXISTING SECURITIES
Agreement to Issue Notes and Make Cash Payment and
Consideration Therefor. On the terms and subject
to the conditions set forth in this Agreement, the
Company hereby agrees to issue to the Investor its
16% Note due June 30, 2003 in substantially the
form set forth as Exhibit A hereto in the principal
amount of $1,600,000 (the "New Note") and to pay
the Investor the sum, in immediately available
funds of $50,000 and in consideration therefor, the
Investor hereby agrees to deliver to the Company
for cancellation the Series D Preferred, and the
Convertible Notes and to irrevocably waive any
claims with respect to its holdings of the Series D
Preferred and the Convertible Notes as set forth
herein.
Closing. The closing of the transaction set forth in
Section 2.01 (the "Closing") shall be deemed to take place
concurrently with the execution and delivery of this
Restructuring Agreement by the parties hereto. At the
Closing, the following closing transactions shall take
place, each of which shall be deemed to occur
simultaneously with the Closing and shall
constitute a
condition to the consummation of the Closing: (i) the
Company shall execute, issue and deliver a certificate
evidencing the 16% Notes Due June 30, 2003 to be issued to
the Investor; (ii) the Company shall deliver to the
Investor by wire transfer of immediately available funds
the amount of $50,000, (iii) the Investor shall deliver to
the Company certificates represents the Series D Preferred
Stock and the Convertible Notes for cancellation; (iv) the
Company shall pay the fees and expenses of Jones, Day,
Reavis & Pogue of $10,000 by wire transfer of immediately
available funds and (v) the Company shall deliver to the
Investor a certificate executed by the Chief Executive
Officer and Chief Financial Officer of the Company,
signing in such capacity, dated the date of the Closing,
among other confirmations contained therein, (a)
certifying that attached thereto are true and complete
copies of the resolutions duly adopted by the Board of
Directors of the Company authorizing the execution and the
consummation of the transactions contemplated this
Restructuring Agreement, which authorization shall be in
full force and effect on and as of the date of such
certificate, (b) confirming the accuracy of the
representations and warranties of the Company contained in
this Restructuring Agreement and (c) certifying and
attesting to the office, incumbency, due authority and
specimen signatures of each Person who executed any
document for or on behalf of the Company. This Agreement
shall not be effective, however, until the Company shall
have delivered to the Investor a copy of the
Recapitalization Agreement, executed by Bryanston Group,
Inc. ("Bryanston"), the Company and certain other parties
(the "Recapitalization Agreement"), which agreement shall
provide for the discharge of any existing indebtedness of
Bryanston and such other parties owed by the Company, in
form and substance satisfactory to the Investor and shall
be in full force and effect as of the date of delivery
thereof, it being understood that any obligations under
such Recapitalization Agreement will be subordinate to the
New Note and it being further understood that the
representations and warranties of the Company in this
Restructuring Agreement and the New Note shall give effect
to the Recapitalization Agreement.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Investor to execute this
Restructuring Agreement and consummate the transactions
contemplated hereby, the Company hereby represents and
warrants to the Investor that on and as of the date
hereof:
Organization and Standing. The Company and each of
its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite
corporate power and authority, and all authorizations,
licenses, permits and certifications necessary for it to
own its material properties and assets and to carry on its
material business as it is now being conducted (and as, to
the extent described therein, described in the SEC
Reports). The Company and each of its subsidiaries is
duly qualified to transact business and is in good
standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of its
businesses makes such qualification necessary, except
where the failure to so qualify or be in good standing
would not have a material adverse effect on the business,
assets, operations, properties, condition (financial or
otherwise) or prospects of the Company and its
subsidiaries, taken as a whole, or any material adverse
effect on the Company's ability to consummate the
transactions contemplated by, and to
execute, deliver and
perform its obligations under, each of the Transaction
Documents (a "Material Adverse Effect").
Securities of the Company. The authorized and
outstanding Capital Stock of the Company is as set forth
in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002. The New Note has been
duly and validly authorized. When issued against delivery
of the consideration therefor as provided in this
Restructuring Agreement, the New Note will be validly
issued and will constitute a valid and enforceable
obligation of the Company, enforceable against the Company
in accordance with its terms (subject to the effects of
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of
equity). The issuance of the New Note is not subject to
any preemptive rights, rights of first refusal or other
similar limitation. There are no agreements or other
obligations (contingent or otherwise) that may require the
Company to repurchase or otherwise acquire any shares of
its Capital Stock.
Authorization; Enforceability. The Company has the
corporate power and authority to execute, deliver and
perform the terms and provisions of the Restructuring
Agreement and the New Note, and has taken all necessary
corporate action to authorize the execution, delivery and
performance by it of the Restructuring Agreement and the
New Note and consummate the transactions contemplated by
each of the Restructuring Agreement and the New Note. No
other corporate proceedings on the part of the Company are
necessary, and no consent of the shareholders of the
Company is required, for the valid execution and delivery
by the Company of the Restructuring Agreement and the New
Note and the performance and consummation by the Company
of the transactions contemplated by each of the
Restructuring Agreement and the New Note. The Company has
duly executed the Restructuring Agreement and the New
Note. Assuming the due execution of the Restructuring
Agreement by the Investor, the Restructuring Agreement
constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance
with each of its respective terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at
law).
No Violation; Consents.
(a) The execution, delivery and performance by the
Company of the Restructuring Agreement and the New Note
and the consummation of the transactions contemplated
thereby do not and will not (i) contravene the applicable
provisions of any law, statute, rule, regulation, order,
writ, injunction, judgment or decree of any court or
Governmental Authority to or by which the Company or any
of its subsidiaries or any of its respective property or
assets is bound, (ii) violate, result in a breach of or
constitute (with due notice or lapse of time or both) a
default or give rise to an event of acceleration under any
contract, lease, loan or credit agreement, mortgage,
security agreement, trust indenture or other agreement or
instrument to which the Company is a party or by which it
or any of its subsidiaries is bound or to which any of its
respective properties or assets is subject, nor result in
the creation or imposition of any lien, security interest,
charge or encumbrance of any kind upon any of the
properties, assets or Capital Stock of the Company or any
of its subsidiaries, or (iii) violate any provision of the
organizational and other governing documents of the
Company or any of its subsidiaries.
(b) No consent, approval, authorization or order of, or
filing or registration with, any court or Governmental
Authority or other Person is required to be obtained or
made by the Company for the execution, delivery and
performance of this Restructuring Agreement and the New
Note or the consummation by the Company of any of the
transactions contemplated thereby to be performed by it
except for those consents or authorizations previously
obtained and those filings previously made.
Solvency; No Default. (a) The Company is, and upon
giving effect to the transactions contemplated hereby to
be performed by it as of the Closing will be, Solvent (as
defined below). "Solvent" means that, as of the date of
determination, (i) the then fair saleable value of the
assets of the Company (on a consolidated basis) exceeds
the then total amount (on a consolidated basis) of its
debts and other liabilities, (including any guarantees and
other contingent, subordinated, unmatured or unliquidated
liabilities whether or not reduced to judgment, disputed
or undisputed, secured or unsecured), (ii) the Company
expects to have sufficient funds and cash flow to pay its
liability on its existing debts as they become absolute
and matured, (iii) final judgments against the Company in
pending or threatened actions for money damages will not
be rendered at a time when, or in an amount such that, the
Company will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into
account (a) the maximum reasonable amount of such
judgments in any such actions (other than amounts that
would be remote), (b) the earliest reasonable time at
which such judgments would be rendered and (c) any
reasonably expected insurance recovery with respect
thereto), and (iv) the Company does not have unreasonably
small capital with which to engage in its present
business.
(b) The Company is not, and immediately after the
consummation of the transactions contemplated hereby to be
performed by the Company will not be, in default under or
in violation of (whether upon the passage of time, the
giving of notice or both) its organizational and other
governing documents, or any provision of any security
issued by the Company, or of any agreement, instrument or
other undertaking to which the Company is a party or by
which it or any of its property or assets is bound, or the
applicable provisions of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of
any court or Governmental Authority to or by which the
Company or any of its property or assets is bound, which
default or violation, either individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect.
SEC Reports; Financial Condition; No Adverse Changes.
(a) The audited consolidated financial statements of the
Company and the related notes thereto as at December 31,
2001 reported on by Friedman, Alpren & Green, LLP,
independent accountants, present fairly the financial
condition, results of operations and cash flows of the
Company (on a consolidated basis) at such date and for the
periods set forth therein. The unaudited consolidated
balance sheets, consolidated statements of operations and
consolidated statements of cash flows at and for the
period ended September 30, 2002 (such audited and
unaudited consolidated financial statements, collectively,
the "Financial Statements"), present fairly the financial
condition, results of operations and cash flows of the
Company (on a consolidated basis) at such date and for the
periods set forth therein, subject to normal year-end
adjustments with respect to the September 30, 2002
financial statements. The Financial Statements, including
the related schedules and notes thereto, have been
prepared in accordance with generally accepted accounting
principles as set forth in the opinions and pronouncements
of the Accounting Principles Board of American Institute
of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board
as in effect on the date of filing of
such documents with
the Commission, applied on a consistent basis (except for
changes concurred in by the Company's independent public
accountants) unless otherwise expressly stated therein.
Since September 30, 2002 to and including the date hereof,
there has been no sale, transfer or other disposition by
the Company of any material part of the business, property
or securities of the Company and no purchase or other
acquisition of any business, property or securities by the
Company material in relation to the financial condition of
the Company except as set forth in Schedule 3.06(a)
hereof.
(b) Except as are fully reflected or reserved against in
the Financial Statements and the notes thereto, there are
no liabilities or obligations with respect to the Company
or any of its subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and
whether or not due) other than immaterial ordinary course
accruals, except as set forth in Schedule 3.06(a) hereof.
(c) Since September 30, 2002 there has been no
development or event, nor any prospective development or
event known to the Company or any of its subsidiaries, or
any litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other
relief from a court or administrative agency of competent
jurisdiction pending, threatened or, to the knowledge of
the Company, contemplated, or any action of any
Governmental Authority, that has had or could reasonably
be expected to have a Material Adverse Effect except as
set forth in Schedule 3.06(a) hereof.
(d) After giving effect to the transactions contemplated
by this Agreement and the Recapitalization Agreement, the
Company will have no indebtedness other than the New Note.
The liabilities of the Company other than as contemplated
by Section 3.06(b) hereof, has not materially increased
from the amounts set forth in the unaudited financial
statements referenced in Section 3.06(a) hereof.
Subsidiaries. As of the date hereof, the Company has
no subsidiaries other than those listed on Exhibit 21 of
the Company's Annual Report on Form 10-K for the year
ended December 31, 2002.
No Litigation. No litigation or claim (including those
for unpaid taxes), or environmental proceeding against the
Company or any of its subsidiaries is pending, threatened
or, to the Company's best knowledge, contemplated that, if
determined adversely, would (after taking into
consideration any reasonably expected insurance recovery
with respect thereto), have a Material Adverse Effect on
the Company or relates to or would otherwise impact the
consummation of the transactions contemplated by this
Restructuring Agreement.
Environmental Matters. The Company and each of its
subsidiaries is in compliance in all material respects
with all applicable state and federal environmental laws,
and no event or condition has occurred that may interfere
in any material respect with the compliance by the Company
or any of its subsidiaries with any environmental law or
that may give rise to any liability under any
environmental law that, individually or in the aggregate,
would have a Material Adverse Effect.
Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as
management of the Company believes to be prudent and
customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to
believe that it and its subsidiaries will
not be able to
renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its
business without a significant increase in cost.
Disclosure. The representations and warranties of the
Company in the Restructuring Agreement and, as of the
respective dates of filing thereof, the statements
contained in the SEC Reports do not contain any untrue
statement of a material fact and do not omit to state any
material fact necessary to make the statements herein or
therein not misleading. The SEC Reports contain all
material information concerning the Company required to be
set forth therein, and no event or circumstance has
occurred or exists since September 30, 2002, that would
require the Company to disclose such event or circumstance
in order to make the statements in the SEC Reports not
misleading as of the date of the Closing but that has not
been so publicly disclosed except as set forth in Schedule
3.06(a) hereof. The Company hereby acknowledges that the
Investor is and will be relying on the SEC Reports and the
Company's representations, warranties and covenants
contained herein in making an investment decision with
respect to the matters contemplated by the Restructuring
Agreement and will be relying thereon.
COVENANTS OF THE COMPANY
Restriction on Incurrence of Indebtedness and Other
Limitation.
(a) The Company (or any of its subsidiaries) will not
issue or incur any indebtedness (or guarantee or otherwise
become liable, directly or indirectly, whether contingent
or otherwise, for obligations of any Person) prior to the
payment in full of the New Note, unless such indebtedness
is expressly subordinated to the New Note (pursuant to a
subordination agreement executed by the lender in form and
substance satisfactory to the Investor) and provides that
no cash payments of interest or principal may be made
until the New Note is paid in full. The Company (or any
of its subsidiaries) may not issue any other security
which provides for payment by the Company of cash in any
form prior to such time as the New Note is paid in full or
otherwise repurchase, retire, acquire, defease, redeem or
otherwise in any manner directly or indirectly make any
cash payments (whether as interest, dividends, principal
or otherwise) in respect of any security (whether or not
outstanding as of the date hereof) until the New Note is
paid in full.
(b) Neither the Company nor any of its subsidiaries will
distribute cash or assets other than in the ordinary
course of business, provided that the Company or any of
its subsidiaries may transfer assets provided that the net
cash proceeds received therefrom are applied to repay the
New Note. In addition to the foregoing, neither the
Company nor any of its subsidiaries may transfer cash or
assets to Affiliates other than in connection with
transactions in the ordinary course entered into on an
arms-length basis. Neither the Company nor any of its
subsidiaries will create or permit to exist any liens on
any of its or its subsidiaries' properties which are not
in existence as of the date of this Restructuring
Agreement. Neither the Company nor any of its Significant
Subsidiaries (as defined in the New Note) will consolidate
or merge with or into any other Person.
MISCELLANEOUS
Arms Length Negotiation. Each of the Company and
the Investor acknowledge and agree that the terms
of this Restructuring Agreement and the New Note
and were negotiated in good faith and on an arms
length basis and that each party has freely entered
into this transaction based upon its own
independent evaluation of the transaction and has
received such financial, legal and other
professional advice as it deems appropriate in
connection with the foregoing. The language used
in this Restructuring Agreement and the New Note
will be deemed to be the language chosen by the
parties to express their mutual intent, and no
rules of strict construction will be applied
against any party.
Waiver by Investor and the Company. The Investor agrees
that, upon consummation of the Closing and assuming the
accuracy of the representations and warranties of the
Company made in this Restructuring Agreement, it
irrevocably waives any and all actions, suits, claims and
demands whatsoever it had, has or may ever have against
the Company and its officers, directors, employees and
agents in connection with its acquisition, ownership and
disposition of the Series D Preferred and the Convertible
Notes and any and all matters relating to such securities.
The Company agrees that, upon consummation of the Closing,
it irrevocably waives any and all actions, suits, claims
and demands whatsoever it had, has or ever may have
against the Investor and its officers, directors,
employees and agents in connection with its acquisition,
ownership and disposition of the Series D Preferred and
the Convertible Notes and any and all matters relating to
such securities.
Press Releases and Disclosure. No party hereto shall
issue any press release or make any other public
disclosure related to this Restructuring Agreement or any
of the transactions contemplated hereby without the prior
written approval of the other party hereto, except as may
be necessary or appropriate in the opinion of the party
seeking to make disclosure to comply with the requirements
of applicable law or stock exchange rules. If any such
press release or public disclosure is so required, the
party making such disclosure shall consult with the other
party prior to making such disclosure, and the parties
shall use all reasonable efforts, acting in good faith, to
agree upon a text for such disclosure that is satisfactory
to all parties. The Company has advised the Investor that
it intends to file a Form 8-K with the Commission in
substantially the form contained in Schedule 3.06(a)
hereof and to issue a press release announcing such filing
and the Investor consents to the foregoing.
Notices. All notices, demands, requests, consents,
approvals or other communications required or permitted to
be given hereunder or that are given with respect to this
Agreement shall be in writing and shall be personally
served or deposited in the mail, registered or certified,
return receipt requested, postage prepaid or delivered by
reputable air courier service with charges prepaid, or
transmitted by hand delivery, telegram, telex or
facsimile, addressed as set forth below, or to such other
address as such party shall have specified most recently
by written notice: (i) if to the Company, to: Alpha
Hospitality Corporation, 707 Skokie Boulevard, Suite 600,
Northbrook, IL 60062, Attention: Scott Kaniewski,
Facsimile No.: (847) 418-3805, and (ii) if to the
Purchaser: c/o SG Cowen Securities Corporation, 1221
Avenue of the Americas, New York, New York 10020,
Attention: Francois Barthelemy, Facsimile No.: (212) 278-
5466, with
copies (which shall not constitute notice) to:
Jones, Day, Reavis & Pogue, 222 E. 41st St., New York, New
York 10017, Attention: J. Eric Maki, Esq., Facsimile No.
(212) 755-7306. Notice shall be deemed given on the date
of service or transmission if personally served or
transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on
the third business day following the date mailed or on the
next business day following delivery of such notice to a
reputable air courier service.
Entire Agreement. This Agreement (together with the New
Note and all other documents delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes
all prior and contemporaneous agreements, representations,
understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the
subject matter hereof.
Amendment and Waiver. This Agreement may not be
amended, modified, supplemented, restated or waived except
by a writing executed by the party against which such
amendment, modification or waiver is sought to been
enforced. Waivers may be made in advance or after the
right waived has arisen or the breach or default waived
has occurred. Any waiver may be conditional. No waiver
of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or
succeeding breach thereof nor of any other agreement or
provision herein contained. No waiver or extension of
time for performance of any obligations or acts shall be
deemed a waiver or extension of the time for performance
of any other obligations or acts.
Assignment; No Third Party Beneficiaries. The
Restructuring Agreement and the rights, duties and
obligations hereunder may not be assigned or delegated by
either the Company, on the one hand, or the Investor, on
the other hand, without the prior written consent of the
other party hereto; provided that the Investor may assign
or delegate its rights, duties and obligations hereunder
to any Affiliate of the Investor. Except as provided in
the preceding sentence, any purported assignment or
delegation of rights, duties or obligations hereunder made
without the prior written consent of the other party
hereto shall be void and of no effect. This Agreement and
the provisions hereof shall be binding upon and shall
inure to the benefit of each of the parties and their
respective successors and permitted assigns. This
Agreement is not intended to confer any rights or benefits
on any Persons other than as set forth above.
Severability. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or
provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid
or unenforceable provision as may be possible and be valid
and enforceable.
Further Assurances. Each party hereto, upon the request
of any other party hereto, shall do all such further acts
and execute, acknowledge and deliver all such further
instruments and documents as may be necessary or desirable
to carry out the transactions contemplated by this
Agreement.
Titles and Headings. Titles, captions and headings of
the sections of this Agreement are for convenience of
reference only and shall not affect the construction of
any provision of this Agreement.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
Jurisdiction;Venue. Each party hereto hereby
irrevocably submits to the exclusive personal and subject
matter jurisdiction of the United States District Court
for the Southern District of New York and the Supreme
Court of the State of New York located in the borough of
Manhattan over any suit, action or proceeding arising out
of or relating to this Restructuring Agreement or the New
Note. Each party hereby irrevocably waives to the fullest
extent permitted by law (a) any objection that they may
now hereafter have to the venue of such suit, action or
proceeding brought in any such court and (b) any claim
that any such suit, action or proceeding has been brought
in an inconvenient forum.
Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original,
all of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by the undersigned,
thereunto duly authorized, as of the date first set forth
above.
ALPHA HOSPITALITY CORPORATION
By:
Name:
Title:
SOCIETE GENERALE
By:
Name:
Title: Authorized Signatory
ALPHA HOSPITALITY CORPORATION
16% NOTE DUE JUNE 30, 2003
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE
SECURITIES LAWS AND HAS BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH SECURITIES LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
U.S. $1,600,000
FOR VALUE RECEIVED, Alpha Hospitality Corporation (the
"Company"), a corporation duly organized and existing
under the laws of the State of Delaware, hereby promises
to pay to Societe Generale, or its registered assigns (the
"Holder"), the principal sum of $1,600,000 pursuant to the
amortization schedule set forth on the reverse hereof, and
to pay interest on the unpaid principal amount of this
Note in the manner set forth on the reverse hereof from
the date of execution of this Note set forth below at the
rate of 16% per annum. Reference is hereby made to the
further provisions set forth on the reverse hereof, which
provisions shall for all purposes have the same effect as
if set forth in this place.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed by an officer thereunto duly
authorized.
Dated: December , 2002 ALPHA HOSPITALITY CORPORATION
By:
____________________________
___
Name:
Title:
- REVERSE OF NOTE -
1. ISSUANCE. This Note is a duly authorized issue of the
Company designated as its 16% Note Due June 30, 2003 in
an original aggregate principal amount of $1,600,000.
2. INTEREST. The Company shall pay interest on the
outstanding principal amount of this Note at the rate of
16% per annum, computed based on a 360-day year consisting
of twelve 30-day months. Interest on this Note will
accrue from the date of this Note set forth on the front
of this Note until the payment in full of the principal
amount hereof has been made in accordance with the
provisions hereof. Interest on this Note shall be payable
in arrears as set forth in Section 3 hereof.
3. PRINCIPAL. (A) The payment of the principal on
this Note shall be due in such amounts and on such payment
dates (each, a "Payment Date") as follows: (i) $400,000
shall be due and payable on February 28, 2003, (ii)
$400,000 shall be due and payable on March 31, 2003 and
(iii) $800,000 shall be due and payable on June 30, 2003.
Accrued interest on the outstanding principal amount of
this Note shall also be due and payable on each Payment
Date. Interest will accrue on overdue payments of
principal and interest at the rate of 16% per annum.
(B) The Company shall at any time have the
option to make a prepayment (a "Prepayment") of all but
not less than all of the principal amount due on any
Payment Date (together with interest accrued to the date
of such Prepayment). If the amount of any Prepayment
shall be less than the entire outstanding principal amount
of this Note (plus accrued interest thereon), such
Prepayment shall be applied against the next scheduled
payment or payments due in chronological order. In
addition, in the event of a Prepayment, the Company shall
be entitled to a reduction of the principal amount payable
(but not of the amount of accrued interest relating
thereto) as follows: (x) as to the principal amount due on
the February 28, 2003 Payment Date, a reduction of 5% of
the principal amount otherwise payable if such payment is
made by January 15, 2003, (y) as to the principal amount
due on the March 31, 2003 Payment Date, a reduction of 10%
of the principal amount otherwise payable if such payment
is made by January 15, 2003 and a reduction of 5% of the
principal amount otherwise payable if such payment is made
by February 28, 2003, and (z) as to the principal amount
due on the June 30, 2003 Payment Date, a reduction of 15%
of the principal amount otherwise payable if such payment
is made by February 28, 2003, a reduction of 10% of the
principal amount otherwise payable if such payment is made
between March 1, 2003 and March 31, 2003 and a reduction
of 5% of the principal amount otherwise payable if such
payment is made between April 1, 2003 and May 31, 2003.
In the event of a Prepayment of less than the entire
outstanding principal amount of this Note, accrued
interest with respect to the remaining outstanding
principal amount will be payable on each scheduled Payment
Date as completed by Section 3(A) above.
4. RANKING. This Note constitutes senior unsecured
indebtedness of the Company, ranks pari passu in right of
payment with other unsubordinated and unsecured
indebtedness of the Company and ranks senior in right of
payment to all subordinated indebtedness of the Company.
As of the date of this Note set forth on the front of this
Note, the Company does not have, and prior to payment in
full of this Note the Company may not incur, guarantee or
otherwise
become liable for, directly or indirectly,
whether contingent or otherwise, indebtedness ranking pari
passu in right of payment with this Note or secured by
assets of the Company or any of its subsidiaries.
5. EVENTS OF DEFAULT.
(a) An "Event of Default" under this Note occurs if:
1. the Company defaults in the payment of the principal
of or interest on this Note when due and any such default
continues for a period of 3 days;
2. the Company fails to comply in any material respect
with any of its agreements in this Note (other than those
referred to in clause (1) above) or the provisions of the
Restructuring Agreement, and such failure continues for 15
days after the notice specified below (provided that the
Company shall be entitled to such cure period only if it
timely delivers to the Holder such notice specified
below);
3. indebtedness of the Company or any subsidiary of the
Company that, as of the date of this Note or at any
subsequent time, constitutes a "significant subsidiary" as
defined under Securities and Exchange Commission
Regulation S-X and, as of the date of this Note or at any
subsequent time, taken alone, has a net worth of at least
$500,000 (a "Significant Subsidiary") is not paid within
any applicable grace period after maturity or is
accelerated by the holders thereof because of a default,
the total amount of such indebtedness unpaid or
accelerated exceeds $100,000 and such default continues
for 5 days after the notice specified below;
4. the Company or any Significant Subsidiary pursuant to
or within the meaning of any federal or state bankruptcy,
insolvency or other law for the relief of debtors
("Bankruptcy Law"):
1. commences a voluntary case or proceeding;
2. consents to the entry of an order for relief against
it in an involuntary case or proceeding;
3. consents to the appointment of any receiver, trustee,
assignee, liquidator, custodian or similar official under
any Bankruptcy Law (a "Custodian") of it or for any
substantial part of its property; or
4. makes a general assignment for the benefit of its
creditors; or
5. takes any comparable action under any foreign laws
relating to insolvency;
5. a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or
any Significant Subsidiary in an involuntary
case or proceeding;
(B) appoints a Custodian of the Company or
any Significant Subsidiary or for any
substantial part of its property; or
(C) orders the winding up or liquidation
of the Company or any Significant Subsidiary;
or similar relief is granted under any foreign laws and
the order or decree remains unstayed and in effect for 60
days; or
6. any final judgment or decree for the payment of money
in excess of $500,000 (to the extent not covered by
insurance) is rendered against the Company or any
Significant Subsidiary and is not discharged and either
(A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (B) there is a
period of 60 days following such judgment during which
such judgment or decree is not discharged, waived or the
execution thereof stayed and, in the case of (B), such
default continues for 5 days after the notice specified
below.
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and
whether it is voluntary or involuntary or is effected by
operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any
administrative or governmental body.
A default under clause (2), (3) or (6) above is not
an Event of Default until the Holder of this Note notifies
the Company of such default and the Company does not cure
such default within the time specified after receipt of
such notice. Such notice must specify the default, demand
that it be remedied and state that such notice is a
"Notice of Default."
The Company shall deliver to the Holder of this Note,
within 5 days after the occurrence thereof, written notice
of any event that with the giving of notice, the lapse of
time or both would become an Event of Default under clause
(2), (3) or (6) above, its status and what action the
Company is taking or proposes to take with respect
thereto.
(b) If an Event of Default (other than an Event of
Default specified in clause (4) or (5) above) occurs and
is continuing, the Holder of this Note may declare the
principal of and accrued interest on this Note to be
immediately due and payable, and upon such declaration an
amount equal to 125%, of the entire outstanding principal
amount of this Note and 100% of such interest shall be
immediately due and payable. If an Event of Default
specified in clause (4) or (5) above occurs, the entire
outstanding principal of and interest on this Note shall
ipso facto become and be immediately due and payable
without any declaration or other act on the part of the
Holder of this Note.
6. NO AMENDMENT. No provision of this Note may be
amended, altered or modified without the written agreement
of the Holder and the Company.
7. LOST OR DESTROYED NOTE. If this Note shall be
mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new
Note for the principal amount of this Note so mutilated,
lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note,
and of the ownership thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
8. GOVERNING LAW. This Note shall be governed by,
enforced under and construed in accordance with the laws
of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
9. NOTICE. Any notice or other communication required
or permitted to be given hereunder shall be given as
provided herein or delivered against receipt if to (i) the
Company at 707 Skokie Boulevard, Suite 600, Northbrook, IL
60062, Facsimile No.: xxxxxxx, Attention: Scott Kaniewski
(or to such other address of which notice has been given
to the Holder in writing), and (ii) the Holder of this
Note, to such Holder at its last address furnished to the
Company in writing. Any notice or other communication
mailed or otherwise delivered shall be deemed given at the
time of receipt thereof.
10. WAIVER.
(a) The Company hereby waives, except as provided
herein, presentment for payment, notice of dishonor,
protest and notice of protest and, in the event of default
hereunder, the Company agrees to pay all costs of
collection, including reasonable attorneys' fees.
(b) Any waiver by the Holder hereof of a breach of
any provision of this Note shall not operate as or be
construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Note. The failure of the Holder hereof to insist upon
strict adherence to any term of this Note on one or more
occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict
adherence to that term or any other term of this Note.
Any waiver must be in writing.
UNENFORCEABLE PROVISIONS. If any provision of this Note
is invalid, illegal or unenforceable, the remaining
provisions of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other
persons and circumstances.