1 1 STATE OF NEW JERSEY 2 CASINO CONTROL COMMISSION 3 - - - - - - - - - - - - - - - - - - - 4 5 PUBLIC MEETING NO. 07-03-07 6 7 - - - - - - - - - - - - - - - - - - - 8 9 Wednesday, March 7, 2007 10 Atlantic City Commission Offices 11 Joseph P. Lordi Public Meeting Room - First Floor 12 Tennessee Avenue and Boardwalk 13 Atlantic City, New Jersey 08401 14 10:32 a.m. to 12:21 p.m. 15 16 17 Certified Shorthand Reporter: Darlene Sillitoe 18 - - - - - - - - - - - - - - - - - - - - - - - - - - - 19 20 CIPOLLONI & ASSOCIATES, INC. 21 CERTIFIED SHORTHAND REPORTERS 22 1125 ATLANTIC AVENUE, SUITE 416 23 ATLANTIC CITY, NEW JERSEY 08401 24 (609) 348-9190 25 www.cipolloni-associates.com 2 1 B E F O R E : 2 CASINO CONTROL COMMISSION: LINDA M. KASSEKERT, CHAIR 3 MICHAEL A. FEDORKO, VICE CHAIR MICHAEL C. EPPS, COMMISSIONER 4 RALPH G. FRULIO, COMMISSIONER WILLIAM T. SOMMELING, COMMISSIONER 5 PRESENT FOR THE CASINO CONTROL COMMISSION: 6 DARYL W. NANCE, ADMINISTRATIVE ANALYST DANIEL J. HENEGHAN, PUBLIC INFORMATION OFFICER 7 OFFICE OF THE GENERAL COUNSEL: 8 DIANNA W. FAUNTLEROY, GENERAL COUNSEL/EXECUTIVE SECRETARY 9 LEONARD J. DIGIACOMO, ASSISTANT GENERAL COUNSEL STEVEN M. INGIS, ASSISTANT GENERAL COUNSEL 10 SETH H. BRILIANT, SENIOR COUNSEL BERNADETTE T. FRIGEN, PROGRAM SUPERVISOR 11 CLAIRE FRANK, PROGRAM SUPERVISOR/SENIOR EEO COORDINATOR 12 13 DIVISION OF LICENSING: DORIS MANZANO, INTERPRETER 14 DIVISION OF FINANCIAL EVALUATION: 15 CHRISTOPHER GLAUM, MANAGER 16 DIVISION OF GAMING ENFORCEMENT: DEPUTY ATTORNEYS GENERAL 17 BRIAN BISCIEGLIA, DEPUTY ATTORNEY GENERAL TIMOTHY FICCHI, DEPUTY ATTORNEY GENERAL 18 JAMES FOGARTY, DEPUTY ATTORNEY GENERAL CHARLES F. KIMMEL, DEPUTY ATTORNEY GENERAL 19 20 21 22 23 24 25 3 1 A P P E A R A N C E S : 2 ITEM NO. 8 CLAIRE FRANK, PROGRAM MANAGER JAMES FOGARTY, DEPUTY ATTORNEY GENERAL 3 NICHOLAS CASIELLO, JR., ESQ. FOR: MGM MIRAGE 4 ITEM NO. 9 SETH H. BRILIANT, SENIOR COUNSEL 5 TIMOTHY FICCHI, DEPUTY ATTORNEY GENERAL PATRICIA M. WILD,ESQ. 6 FOR: RIH Acquisition, NJ, Inc. 7 ITEM NO. 10 SETH H. BRILIANT, SENIOR COUNSEL CHARLES F. KIMMEL, DEPUTY ATTORNEY GENERAL 8 NICHOLAS CASIELLO, JR., ESQ. FOR: WMS GAMING 9 ITEM NO. 12 CLAIRE FRANK, PROGRAM MANAGER 10 JAMES FOGARTY, DEPUTY ATTORNEY GENERAL NICHOLAS CASIELLO, JR., ESQ. 11 FOR: MGM MIRAGE 12 ITEM NO. 13 LEONARD J. DiGIACOMO, ASSISTANT GENERAL COUNSEL 13 MARY JO FLAHERTY, DEPUTY ATTORNEY GENERAL GILBERT BROOKS, ESQ. 14 FOR: RESORTS INTERNATIONAL HOTEL, INC. 15 16 17 18 19 20 21 22 23 24 25 4 1 AGENDA PUBLIC MEETING NO. 07-03-07 2 MARCH 7, 2007, 10:32 a.m. ITEM PAGE VOTE 3 1 Ratification of the minutes of 9 10 4 February 21, 2007 2 Applications for employee and casino 10 10 5 service industry licenses 3 Stipulations of settlement and consent 6 agreements: a) Eileen L. Kirby (07-0010-EA) 11 13 7 b) Anthony E. Reed (06-0447-EA) 11 13 c) Letitia E. Wilder (06-0425-ER) 11 13 8 d) Lilian N. Wokocha (06-0486-ER) 11 13 e) Brian Henry (05-0354-RC) 11 13 9 f) Matthew E. Bell (06-0492-EA) 11 13 g) Terrence E. Cannon (06-0618-EA) 11 13 10 h) Robert D. Davis (06-0391-ER) 11 13 i) Joseph K. Ho (06-0429-EA) 11 13 11 j) Vicky D. Smith (06-0172-ER) 11 13 k) Terrie A. Mault (06-0522-EA) 11 13 12 l) Carlota Fiore (06-0392-ER) 11 13 m) Anthony Ranniello (06-0568-ER) 13 13 13 n) Michael Grant, Jr. (07-0099-EA) 4 Initial Decision in renewal application adj. 14 of Glenford Cunningham 5 Petition of Dean White for early 14 15 15 reapplication 6 Reconsideration of Commission Final 15 17 16 Order granting Amos M. Jones casino employee license renewal application 17 7 Applications for suspension: a) Felix R. Pluma (07-0068-RC) Sworn 18 23 18 b) Marcel Thomas (07-0069-RC) Sworn 23 25 8 Petition of MGM MIRAGE requesting 25 28 19 permission for Aldo Manzini to perform the duties and exercise the powers of 20 Chief Administrative Officer and Executive Vice President for MGM MIRAGE pending 21 plenary qualification in connection with the casino license of Marina District 22 Development Company, LLC (PRN 0440717) 9 Petition of RIH Acquisitions NJ, LLC 31 33 23 (d/b/a Atlantic City Hilton) for an amendment to its Certificate of Operation 24 and Casino Hotel Alcoholic Beverage License to permit a reconfiguration and expansion 25 (PRN 0510701) 5 1 CONTINUED AGENDA PUBLIC MEETING NO. 07-03-07 2 MARCH 7, 2007, 10:32 a.m. ITEM PAGE VOTE 3 10 Petition of WMS Gaming, Inc., for approval 34 36 4 of the "Reel Adventures" Annuity Jackpot Multi-Casino Progressive Slot System and 5 its slot system agreement and trust agreement pursuant to NJAC 19:45-1.39A and 1.40B 6 (PRN 3620605) 11 Rulemaking petition of Francis Lentz for adj. 7 Proposed publication of amendments to NJAC 19:47-3.7 and 7.7 ("Last Call for Bets" in 8 Mini-Baccarat) 12 Petition of MGM MIRAGE requesting 28 31 9 permission for Daniel J. Taylor to serve as Board Director for MGM MIRAGE pending 10 plenary qualification in connection with The casino license of Marina District 11 Development Company, LLC 13 Petition of Resorts International Hotel, 37 85 12 Inc., for approval of a Material Debt Transaction and for other relief (PRN 0590704); 13 and petition of Resorts International Hotel, Inc., for Qualification of Thomas F. Harrison 14 to serve as an Officer of Colony GP IV, Inc., (PRN 3630601; Sixth Count) 15 ERIC MATEJEVICH, Sworn 48 16 17 18 19 20 21 22 23 24 25 6 1 E X H I B I T S : 2 ITEM NO. 2 DESCRIPTION 3 4 EL-1 Remand for hearings 3 license applications 5 EL-2 Grant 6 licenses 6 7 ITEM NO. 13 EVD 8 P-1 Loan Agreement, Draft 578832.3 X P-2 Ground Lease, 3-2-07, Resorts X 9 International - PROPCO, Inc. P-3A Resorts Financial Holdings, Inc., X 10 P-3B corporate documents P-4 Combined Fee and Leasehold Mortgage, X 11 Resorts International - Column Financial P-5 Mortgage and Assignment of Leases X 12 New Pier Operating Company, Inc. P-6 Mortgage and Assignment of Leases X 13 P-7 Mortgage and Assignment of Leases of X Mortgage and Rents 14 P-8 Leasehold Mortgage of Assignment of X Leases and Rents 15 P-9 Assignment of Leases and Rents - New X Pier Operating - Column Financial 16 P-10 Assignment of Leases and Rents X Resorts PROPCO - Column Financial 17 P-11 Leases and Rents, Resorts Real Estate X Holdings, Inc., - Column Financial, Inc. 18 P-12 License and Exemptions - Column X Financial, Inc. 19 P-13 Amendment to Certification of X Incorporation - PROPCO, Inc. 20 P-14 Certificate of Amendment to Certificate X of Incorporation - Resorts International 21 Holdings, Inc. P-15 Bylaws - Resorts International Casino X 22 and Hotel, Inc. P-16 Amended Certificate of Incorporation X 23 Colony RIH Holdings, Inc. P-17 Bylaws - Colony RIH Holdings, Inc. X 24 P-18 Amended Restated Incorporation New Pier Operating Company 25 7 1 CONTINUED E X H I B I T T : 2 ITEM NO. 13 EVD 3 P-19 Certificate of Amended Incorporation X Resorts Real Estate Holdings, Inc. 4 P-20 Application for qualification to do X business in New Jersey - RIH 5 P-21A Organizational Chart X P-21B Proposed Organizational Chart X 6 P-22 Refinancing Analysis X P-23 Amended and Restated Certificate of X 7 Incorporation of Resorts International Holdings, Inc. 8 P-24 Draft Letter - Patriot Act X 9 D-1 Division's 3-2-07 Report X 10 D-2 Division's 12-21-06 Report X (Sealing Request) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Exhibits retained by Commission.) 8 1 (Public Meeting 07-03-07 was commenced 2 at 10:32 a.m.) 3 MR. NANCE: I'd like to read an opening 4 statement: 5 This is to advise the general public 6 that in compliance with Chapter 231 of the 7 Public Laws of 1975 entitled the "Open Public 8 Meetings Act," the New Jersey Casino Control 9 Commission on October 16th, 2006, filed with 10 the Secretary of State at the State House in 11 Trenton an annual meeting schedule. On October 12 16th, copies were mailed to the Press of 13 Atlantic City, the Newark Star Ledger. 14 Members of the press will be permitted 15 to take photographs, and we would ask that this 16 be done in a manner which is not disruptive or 17 distracting to the Commission. 18 The use of cellular telephones in the 19 public meeting room while the Commission is in 20 session is prohibited. 21 Any members of the public who wish to 22 address the Commission will be given the 23 opportunity to do so before the Commission 24 adjourns for the day. 25 Please stand for the Pledge of 9 ITEM NO. 1 1 Allegiance. 2 (The flag salute was recited.) 3 CHAIR KASSEKERT: Good morning. 4 MR. NANCE: Good morning. The matters 5 discussed in closed session were: Employee 6 license matters. 7 The Commissioners approved the February 8 17, 2007, closed session minutes. 9 Litigation update regarding: Warren 10 Lackland and Lewis M. Springer, Jr., versus the 11 State of New Jersey, Casino Control Commission; 12 Wirtz versus the Casino Control 13 Commission, and the Division of Gaming 14 Enforcement; 15 Gloria Ford versus the State of New 16 Jersey, Casino Control Commission, et al.; 17 Husain versus the Casino Control 18 Commission, et al; 19 And the petition for removal of SD from 20 the exclusion list. 21 Item No. 1, ratification of the minutes 22 of February 21, 2007, public meeting. 23 COMMISSIONER SOMMELING: Move to 24 approve. 25 VICE CHAIR FEDORKO: Second. 10 ITEM NO. 2 1 CHAIR KASSEKERT: The motion has been 2 made and seconded. All in favor? 3 (Ayes.) 4 CHAIR KASSEKERT: Opposed? 5 (No response.) 6 CHAIR KASSEKERT: The motion carries. 7 COMMISSIONER FRULIO: Abstain on that 8 one. 9 CHAIR KASSEKERT: Oh, yes. Commissioner 10 Frulio was not here, so he'll abstain. 11 MR. NANCE: Item No. 2, applications for 12 employee and casino service industry licenses. 13 This agenda item will be entered as Exhibit 14 List 1 and 2. 15 Exhibit List 1 consists of three 16 applications for initial and/or the renewal of 17 casino key and casino employee licenses. 18 The Division has objected to licensure. 19 COMMISSIONER FRULIO: Motion to remand 20 for hearings. 21 VICE CHAIR FEDORKO: Second. 22 CHAIR KASSEKERT: The motion has been 23 made and seconded. All in favor? 24 (Ayes.) 25 CHAIR KASSEKERT: Opposed? 11 ITEM NO. 3 1 (No response.) 2 CHAIR KASSEKERT: The motion carries. 3 MR. NANCE: Exhibit List 2 consists of 4 six applications for initial and/or renewal of 5 casino key and casino employee licenses. 6 Staff and the Division have recommended 7 that these licenses be granted. 8 COMMISSIONER FRULIO: Motion to grant 9 applications. 10 VICE CHAIR FEDORKO: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 MR. NANCE: Item No. 3, stipulation of 18 settlement and consent agreements. When I call 19 your name, please come forward, stand behind 20 the middle table, spreading across the room so 21 that you may be seen: 22 Eileen Kirby, Anthony Reed, Letitia 23 Wilder, Lilian Wokocha, Brian Henry, Matthew 24 Bell, Terrence Cannon, Robert Davis, Joseph Ho, 25 Vicky Smith, Terrie Mault, Carlota Fiore, 12 ITEM NO. 3 1 Anthony Ranniello, and Michael Grant, Jr. 2 Mr. Ingis? 3 MR. INGIS: Good morning, Madame Chair, 4 Commissioners. 5 The staff has nothing to add. 6 CHAIR KASSEKERT: Okay. 7 Has everyone who's name been called come 8 forward at this point? I'm going to ask that 9 you each state for name for the record, 10 starting with you, sir. 11 MR. BELL: Matthew Bell. 12 MR. DAVIS: Rob Davis. 13 MR. MAULT: Terrie Mault. 14 MR. GRANT: Michael Grant. 15 MR. REED: Anthony Reed. 16 MR. CANNON: Terrence Cannon. 17 MR. HENRY: Brian Henry. 18 CHAIR KASSEKERT: There's one more. 19 MS. FRIGEN: Eileen Kirby is here as 20 well. 21 CHAIR KASSEKERT: Oh, okay. Very well. 22 In a moment we're going to vote on the 23 stipulations you've agreed to with the Division 24 of Gaming Enforcement. I'm going to ask at 25 this point if any of you wish to be heard on 13 ITEM NO. 3-4 1 this matter. You do not have to say anything 2 if you don't want to. 3 Does anyone wish to be heard? Okay. 4 Mr. Biscielgia? 5 MR. BISCIEGLIA: Good morning, Chair, 6 Commissioners. 7 The Division has nothing further to add 8 and ask that the stipulations be adopted. 9 CHAIR KASSEKERT: Thank you. 10 Any questions? 11 COMMISSIONER SOMMELING: Move to 12 approve, Madame Chair. 13 COMMISSIONER EPPS: Second. 14 VICE CHAIR FEDORKO: Second. 15 CHAIR KASSEKERT: The motion has been 16 made and seconded. All in favor? 17 (Ayes.) 18 CHAIR KASSEKERT: Opposed? 19 (No response.) 20 CHAIR KASSEKERT: The motion carries. 21 Thank you very much for coming. Good 22 luck. 23 FROM THE FLOOR: Thank you. 24 MR. NANCE: Item No. 4, has been 25 adjourned. 14 ITEM NO. 5 1 Item No. 5, petition of Dean White for 2 early reapplication. 3 Miss Frigen? 4 MS. FRIGEN: Good morning, Madame Chair, 5 Commissioners. 6 Is Dean White present today? I don't 7 see him. 8 For your consideration is his petition 9 seeking permission to reapply early for a 10 casino employee license. By letter dated 11 January 11th, the Division has interposed an 12 objection to this petition. 13 CHAIR KASSEKERT: Thank you. 14 Mr. Biscielgia? 15 MR. BISCIEGLIA: Thank you, Chair. The 16 original order denying Mr. White's casino 17 employee license was entered on September 3rd, 18 2003. Subsequent to this, on September 28th of 19 2003, Petitioner was charged by the Buena 20 Borough Police Department with possession of 21 CDS, marijuana, contrary to NJSA 2C:35-10. On 22 January 7th, 2004, Petitioner was convicted of 23 this offense. 24 In addition, the Petitioner did not 25 disclose this offense to the Division in the 15 ITEM NO. 6 1 petition for early reapplication. 2 For these reasons, the Division opposes 3 this petition. 4 Thank you. 5 CHAIR KASSEKERT: Thank you. 6 Any questions? 7 COMMISSIONER SOMMELING: No questions, 8 Madame Chair. 9 VICE CHAIR FEDORKO: Motion to deny Mr. 10 White permission to reapply early for a casino 11 employee license. 12 COMMISSIONER FRULIO: Second. 13 COMMISSIONER EPPS: Second. 14 CHAIR KASSEKERT: The motion has been 15 made and seconded. All in favor? 16 (Ayes.) 17 CHAIR KASSEKERT: Opposed? 18 (No response.) 19 CHAIR KASSEKERT: The motion carries. 20 MR. NANCE: Item No. 6, reconsideration 21 of Commission's final order granting Amos M. 22 Jones casino employee license renewal 23 application. 24 Miss Frigen? 25 MS. FRIGEN: Commissioners, you may 16 ITEM NO. 6 1 recall, at the meeting two weeks ago this 2 matter was adjourned to Mr. Jones the 3 opportunity -- Mr. Jones? Is he present. 4 Come forward. Have a seat at the table, 5 please. Thanks. 6 To give Mr. Jones opportunity to submit 7 additional documentation verifying to whom the 8 wages that are presently being garnished, if 9 they are going to the IRS. He, in fact, 10 subsequently did submit documentation 11 indicating that. It's my understanding at this 12 point -- I'll let Brian Biscieglia speak for 13 the Division -- but they may not be objecting 14 to finding him in compliance at this juncture. 15 CHAIR KASSEKERT: Very good. Thank you. 16 Mr. Biscielgia? 17 MR. BISCIEGLIA: Yes. Thank you, Chair. 18 The Division is in receipt of the 19 materials requested from Mr. Jones. Mr. Jones 20 is now in compliance with the stipulation of 21 settlement and subsequent order. 22 We would just like to be put on the 23 record that Mr. Jones will next be required to 24 report to the Division on this matter on 25 September 7th of 2007. 17 ITEM NO. 6 1 CHAIR KASSEKERT: Thank you. 2 MR. BISCIEGLIA: Thank you. 3 CHAIR KASSEKERT: Mr. Jones, is there 4 anything that you'd like to say? 5 MS. JONES: No, ma'am. 6 CHAIR KASSEKERT: Okay. And you heard 7 what Mr. Biscielgia said about the next -- your 8 next due date? 9 MS. JONES: Yes. 10 CHAIR KASSEKERT: In terms of reporting? 11 Okay. Very good. 12 Any questions? 13 COMMISSIONER SOMMELING: No questions, 14 Madame Chair. 15 VICE CHAIR FEDORKO: Motion to find Mr. 16 Jones in compliance with licensure conditions 17 set forth in the Commission's order dated 18 August 17, 2005. 19 COMMISSIONER SOMMELING: Second. 20 COMMISSIONER FRULIO: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 18 ITEM NO. 7 1 CHAIR KASSEKERT: The motion carries. 2 Thank you for coming. Good luck. 3 MS. JONES: Thank you. 4 MR. NANCE: Item No. 7, application for 5 suspension for Felix Pluma and Marcel Thomas. 6 Miss Frigen? 7 MS. FRIGEN: I'm aware that Mr. Pluma is 8 present in the meeting room. Let me ask for 9 the record whether Marcel Thomas is here or 10 represented today? 11 MR. THOMAS: Yeah. 12 MS. FRIGEN: Are you Mr. Thomas? 13 MR. THOMAS: Yeah. 14 MS. FRIGEN: Okay. And let me just 15 confirm. Is your attorney coming today? 16 MR. THOMAS: His wife just had a baby. 17 MS. FRIGEN: Right. I will note for the 18 record I did call Mr. Leonard's office 19 yesterday to confirm, given the weather 20 situation, whether he was coming. Because I 21 wanted to make sure we spoke when he arrived. 22 I spoke with his secretary. And she put a call 23 in to him, and he said he wasn't able to make 24 it today unless there was a telephone 25 conference. I explained to her that he had 19 ITEM NO. 7 1 previously been advised that it was a public 2 meeting and that we had granted a two-week 3 adjournment and that was a preemptory date. 4 And I didn't get a call back, but they were 5 aware that the matter would be scheduled today 6 for consideration. 7 So we do have I guess, per se, then 8 today both Mr. Thomas and Mr. Pluma. You heard 9 some background information regarding Mr. 10 Pluma's case two weeks ago. 11 I guess we would first hear from Mr. -- 12 CHAIR KASSEKERT: Biscieglia. 13 MS. FRIGEN: -- Pluma. Ask him to come 14 forward. Mr. Pluma? 15 And Doris Manzano is here again to 16 assist with translation, if necessary. 17 I would ask the Division to go forward 18 and, again, provide the Commission with updated 19 information regarding this application for 20 suspension. 21 CHAIR KASSEKERT: Thank you. 22 Mr. Biscieglia? 23 MR. BISCIEGLIA: Thank you, Chair. 24 As I stated last time, this application 25 for suspension is based on the August 23rd, 20 ITEM NO. 7 1 2006, indictment of the Respondent for 2 distribution of CDS and distribution of CDS 3 within 500 feet of a public building or park. 4 Respondent allegedly sold cocaine twice while 5 employed as a dealer at Tropicana Casino and 6 Resort. 7 After the confusion of the last meeting, 8 the Division has indeed ascertained that Mr. 9 Pluma is the subject of this investigation. We 10 have provided the Commission with arrest 11 reports. The record's showing Mr. Pluma has 12 attended a status conference in relation to 13 this matter on February 26th of 2007. And 14 another status conference is currently 15 scheduled for March 26th of 2007. 16 CHAIR KASSEKERT: Thank you. 17 Any questions? 18 COMMISSIONER SOMMELING: No questions, 19 Madame Chair. 20 CHAIR KASSEKERT: Mr. Pluma, is there 21 anything you'd like to say today? 22 MR. PLUMA: Yes. 23 CHAIR KASSEKERT: Okay. You need to 24 stand and be sworn. 25 21 ITEM NO. 7 1 FELIX R. PLUMA, having been duly sworn 2 to tell the truth, testified as follows: 3 4 MR. NANCE: Please state your name for 5 the record. 6 MR. PLUMA: Felix Pluma. 7 CHAIR KASSEKERT: Mr. Pluma, what do you 8 want to say today? 9 THE INTERPRETER: First was the reason 10 that you asked me to come here today. Now you 11 are -- you're not just mentioning my name. You 12 are mentioning someone else's name. 13 CHAIR KASSEKERT: Well, that's correct. 14 But that person's name was mentioned before. 15 We are dealing with your case right now. Your 16 issues. 17 Is there anything that you want to tell 18 us about your issue? 19 THE INTERPRETER: What case? How do you 20 want me to -- why do you want to involve me in 21 a case that I have nothing to do with? 22 CHAIR KASSEKERT: Well, as Mr. 23 Biscielgia just explained, the Division has 24 ascertained that you are under indictment for 25 certain charges. Therefore, we have to 22 ITEM NO. 7 1 consider that in whether we make the 2 determination to suspend your credentials or 3 not. And I have to tell you, that kind of 4 evidence weighs very heavily that there is an 5 indictment out there. 6 THE INTERPRETER: I've been to different 7 courts a couple times. I've been to court 8 different times. They always cancel the 9 meetings, the conferences. And now I have a 10 different -- an attorney. I don't understand 11 what's going on. 12 MR. PLUMA: I tried something to do for 13 my license for something. I don't know how to 14 finish by the courts. 15 CHAIR KASSEKERT: Well, I think the 16 Division has ascertained that you are under 17 indictment. I would caution you not to talk 18 about that, your particular case with respect 19 to why you are under indictment, because, you 20 know, you will follow through the court process 21 there. I don't want to put you in the position 22 of impugning yourself. 23 But let me ask if any of the 24 Commissioners have any questions? 25 VICE CHAIR FEDORKO: Madame Chair, I 23 ITEM NO. 7 1 make a motion to suspend the credentials of 2 Felix Pluma since he's under indictment. 3 COMMISSIONER EPPS: Second. 4 CHAIR KASSEKERT: The motion has been 5 made and seconded. All in favor? 6 (Ayes.) 7 CHAIR KASSEKERT: Opposed? 8 (No response.) 9 CHAIR KASSEKERT: The motion carries, 10 MR. PLUMA: Okay. 11 MS. FRIGEN: The next case we have would 12 be with respect to Marcel Thomas. 13 Mr. Thomas, do you want to take a seat 14 at the table? 15 This is the first time the Commission is 16 hearing this case. I would ask the Division to 17 go forward and provide the background 18 information. 19 CHAIR KASSEKERT: Thank you. 20 Mr. Biscielgia? 21 MR. BISCIEGLIA: Thank you. 22 Mr. Thomas was indicted on August 26th, 23 2006, for two counts of distribution of CDS, 24 third degree, and two counts of distribution of 25 CDS within 500 feet of a public park or 24 ITEM NO. 7 1 building. Respondent allegedly sold cocaine 2 twice outside the Tropicana Casino and Resort 3 while employed as a dealer at the Trump Plaza 4 Hotel and Casino. 5 CHAIR KASSEKERT: Thank you. 6 Any questions for the Division? 7 COMMISSIONER SOMMELING: No questions, 8 Madame Chair. 9 COMMISSIONER FRULIO: No. 10 CHAIR KASSEKERT: Mr. Thomas, is there 11 anything you'd like to say today? 12 You need to be stand and be sworn in if 13 you do. 14 15 MARCEL THOMAS, having been duly sworn to 16 tell the truth, testified as follows: 17 18 MR. NANCE: Please state your name for 19 the record. 20 MR. THOMAS: Marcel Thomas. 21 MR. NANCE: Thank you. 22 CHAIR KASSEKERT: Okay. Mr. Thomas, you 23 can proceed. 24 MR. THOMAS: Yes. I was wondering if 25 this can get -- my license stay up until my 25 ITEM NO. 8 1 findings, guilty/not guilty. 2 CHAIR KASSEKERT: Well, we have an 3 indictment. I really don't think we have much 4 of a -- much leeway with respect to that issue. 5 You are under indictment. 6 MR. THOMAS: I understand. 7 CHAIR KASSEKERT: Okay? Let me ask 8 if -- 9 VICE CHAIR FEDORKO: Let me make a 10 motion, Madame Chair, to suspend the 11 credentials of Marcel Thomas. 12 COMMISSIONER SOMMELING: Second. 13 CHAIR KASSEKERT: The motion has been 14 made and seconded. All in favor? 15 (Ayes.) 16 CHAIR KASSEKERT: Opposed? 17 (No response.) 18 CHAIR KASSEKERT: The motion carries. 19 Thank you. 20 MR. THOMAS: Thank you. 21 MR. NANCE: Item No. 8, petition of MGM 22 MIRAGE requesting permission for Aldo Manzini 23 to perform the duties and exercise the powers 24 of Chief Administrative Officer and Executive 25 Vice President for MGM MIRAGE pending plenary 26 ITEM NO. 8 1 qualification in connection with the casino 2 license of Marina Development Company, LLC. 3 Ms. Frank? 4 MS. FRANK: Good morning, Chair and 5 Commissioners. 6 The proposed resolution on Mr. Manzini's 7 temporary qualification has been circulated to 8 the parties. 9 Mr. Casiello is here for MGM Mirage and 10 Mr. Fogarty for the Division. 11 CHAIR KASSEKERT: Mr. Casiello, good 12 morning. 13 MR. CASIELLO: Good morning. I don't 14 have much to add to what has already been said 15 except, I don't believe I have received a draft 16 resolution. But I will say that if it contains 17 the standard conditions that are contained in 18 NJAC 19:43-2.7c and d, it's fine with us. 19 Thank you. 20 CHAIR KASSEKERT: Thank you. 21 Mr. Fogarty? 22 MR. FOGARTY: Good morning. 23 We have -- I sent you a letter dated 24 February 20, 2007, recommending that we don't 25 have an objection to Mr. Manzini's being 27 ITEM NO. 8 1 appointed pending qualification as Chief 2 Administrative Officer and Executive Vice 3 President for MGM Mirage. 4 I haven't seen the draft resolution, 5 myself. I'm sure it was sent, however. But I 6 haven't seen it. And I'm sure when I do, I'll 7 have no objection to it. She does such a great 8 job. 9 CHAIR KASSEKERT: Yes, she does. 10 MR. CASIELLO: She does a great job. 11 MS. FRANK: I'll take care of that 12 forthwith. 13 CHAIR KASSEKERT: Thank you. 14 Any questions? 15 COMMISSIONER FRULIO: Motion to adopt 16 the draft resolution and authorize Aldo Manzini 17 on a temporary basis prior to his plenary 18 qualification to assume the duties and exercise 19 the powers of Chief Administrative Officer and 20 Executive Vice President for MGM MIRAGE subject 21 to the conditions contained in NJAC 19:43-2.7 22 which, among other things, require that he file 23 a Personal History Disclosure Form-MJ and NJ 24 Supplemental by March 22nd, 2007. 25 VICE CHAIR FEDORKO: Second. 28 ITEM NO. 12 1 COMMISSIONER FRULIO: Second. 2 CHAIR KASSEKERT: Motion has been made 3 and seconded. This is a roll call vote. 4 MR. NANCE: Commissioner Sommeling? 5 COMMISSIONER SOMMELING: Yes. 6 MR. NANCE: Commissioner Epps? 7 COMMISSIONER EPPS: Yes. 8 MR. NANCE: Commissioner Frulio? 9 COMMISSIONER FRULIO: Yes. 10 MR. NANCE: Vice Chair Fedorko? 11 VICE CHAIR FEDORKO: Yes. 12 MR. NANCE: Chair Kassekert? 13 CHAIR KASSEKERT: Yes. 14 MR. NANCE: The record will reflect that 15 the motion is unanimous. 16 MR. CASIELLO: Thank you, Commissioners. 17 CHAIR KASSEKERT: You're welcome. 18 MR. NANCE: For your consideration, Item 19 No. 12, petition of MGM MIRAGE requesting 20 permission for Daniel J. Taylor to serve as 21 Board Director for MGM MIRAGE pending the 22 plenary qualification in connection with the 23 casino license of Marina District Development 24 Company, LLC. 25 Miss Frank? 29 ITEM NO. 12 1 MS. FRANK: Well, I do have a reputation 2 for consistency, and the draft resolution of 3 Mr. Taylor's temporary qualification will be 4 sent to the parties forthwith. 5 I may assure you, though that the 6 standard requirements that the PHD and New 7 Jersey Supplement must be filed within 15 days 8 of the Commission's action. 9 And I apologize for my oversight. 10 MR. CASIELLO: No problem. I'm sure the 11 conditions in the resolution are fine, assuming 12 they are the same ones in NJAC 19:43-2.7. 13 CHAIR KASSEKERT: And I'm assuming they 14 are; correct? 15 MS. FRANK: Yes. 16 CHAIR KASSEKERT: Very good. 17 Mr. Fogarty? 18 MR. FOGARTY: Yes. Our letter March 1, 19 2006, recommended that you qualify Mr. Taylor, 20 and has been identified to be a member of the 21 Board of Directors of MGM MIRAGE. 22 And, yes, we have no objection to the 23 forthcoming draft resolution. 24 CHAIR KASSEKERT: Thank you. 25 Any questions? 30 ITEM NO. 12 1 MR. CASIELLO: I'm sorry. Let me just 2 note he is a proposed director of MGM MIRAGE. 3 He has not been elected yet. 4 CHAIR KASSEKERT: Okay. Thank you for 5 that clarification. 6 Any questions? 7 COMMISSIONER SOMMELING: No questions, 8 Madame Chair. 9 CHAIR KASSEKERT: Motion? 10 VICE CHAIR FEDORKO: Motion to adopt a 11 draft resolution and approve the petition of 12 RIH Acquisitions -- 13 CHAIR KASSEKERT: We're on Item 12. 14 VICE CHAIR FEDORKO: Oh, Item 12. I'm 15 sorry. I didn't know we were skipping. 16 Adopt the draft resolution and authorize 17 Daniel J. Taylor on a temporary basis prior to 18 his plenary qualification to assume the duties 19 and exercise the powers of Board of Directors 20 for MGM MIRAGE subject to the conditions 21 contained in NJAC 19:43-2.7 which, among other 22 things, require that he file a personal history 23 disclosure form-MJ and NJ Supplemental by March 24 22nd, 2007. 25 COMMISSIONER FRULIO: Second. 31 ITEM NO. 9 1 CHAIR KASSEKERT: Motion is made and 2 seconded. This is a roll call vote. 3 MR. NANCE: Commissioner Sommeling? 4 COMMISSIONER SOMMELING: Yes. 5 MR. NANCE: Commissioner Epps? 6 COMMISSIONER EPPS: Yes, 7 MR. NANCE: Commissioner Fulio? 8 COMMISSIONER FRULIO: Yes. 9 MR. NANCE: Vice Chair Fedorko? 10 VICE CHAIR FEDORKO: Yes. 11 MR. NANCE: Chair Kassekert? 12 CHAIR KASSEKERT: Yes. 13 MR. NANCE: The record will reflect that 14 the motion is unanimous. 15 MS. FRANK: Thank you. 16 MR. FOGARTY: Thank you. 17 MR. CASIELLO: Thank you. 18 MR. NANCE: Item No. 9, petition of RIH 19 Acquisition, New Jersey, LLC, for an amendment 20 to its Certificate of Operation and Casino 21 Hotel Alcoholic Beverage License to permit a 22 reconfiguration and expansion. 23 Mr. Briliant? 24 MR. BRILIANT: Good morning, Madame 25 Chair, and Commissioners. 32 ITEM NO. 9 1 Patricia Wild is here on behalf of 2 Petitioner. Mr. Ficchi is here on behalf of 3 the Division. 4 CHAIR KASSEKERT: Thank you. 5 Good morning, Miss Wild. 6 MS. WILD: Good morning, Madame Chair, 7 members of the Commission. 8 I have reviewed the draft resolution in 9 this matter. I just want to state for the 10 record what this will do is permit us to add on 11 a as-needed basis an additional 5,952 square 12 feet of casino space to the Hilton. You are 13 familiar with this space because some time ago 14 I came to you asking if we could use this space 15 as tournament space. It's been very 16 successful. We continue to have successful 17 tournaments there. And what this will allow us 18 to do is actually break down those tournaments 19 afterward to use as live casino space. 20 We are, as you know, the smallest casino 21 in town, so every square foot helps. And we do 22 appreciate your consideration of this, and we 23 also appreciate your staff and also our 24 principal inspector working hard with us to get 25 this done. So I ask that you adopt the 33 ITEM NO. 9 1 resolution as proposed. 2 Thank you. 3 CHAIR KASSEKERT: Thank you. 4 Mr. Ficchi? Good morning. 5 MR. FICCHI: Good morning, Chair. Good 6 morning, Commissioners. 7 The Division has reviewed this matter 8 and also the draft resolution, and we have no 9 objection to the relief requested. 10 CHAIR KASSEKERT: Thank you. 11 Any questions? 12 COMMISSIONER SOMMELING: Madame Chair, 13 move to adopt the draft resolution and approve 14 the petition of RIH Acquisitions, NJ, LLC, for 15 an amendment to its Certificate of Operation 16 and Casino Hotel Alcoholic Beverage license to 17 permit the reconfiguration and expansion of its 18 casino floor subject to the conditions in the 19 resolution. 20 VICE CHAIR FEDORKO: Second. 21 CHAIR KASSEKERT: The motion has been 22 made and seconded. All in favor? 23 (Ayes.) 24 CHAIR KASSEKERT: Opposed? 25 (No response.) 34 ITEM NO. 10 1 CHAIR KASSEKERT: The motion carries. 2 MS. WILD: Thank you. 3 MR. FICCHI: Thank you. 4 MR. BRILIANT: Thank you, Pat. 5 (Conferring.) 6 MR. NANCE: Item No. 10, petition of WMS 7 Gaming, Inc., for approval of the "Reel 8 Adventures" Annuity Jackpot Multi-Casino 9 Progressive Slot System and its slot system 10 agreement and trust agreement pursuant to NJAC 11 19:45-1.39A and 1.40B. 12 Mr. Briliant? 13 MR. BRILIANT: Madame Chair, and 14 Commissioners, Mr. Casiello is here on behalf 15 of the Petitioner and Mr. Kimmel is here on 16 behalf of the Division. 17 CHAIR KASSEKERT: Thank you. 18 (Conferring.) 19 CHAIR KASSEKERT: Very good. Mr. 20 Casiello? 21 MR. CASIELLO: No problem. 22 Petition by WMS for approval of the 23 "Reel Adventures," progressive slot system. 24 It's a multi-denominational system payable in 25 the form of an annuity with a lump-sum option 35 ITEM NO. 10 1 with a initial reset amount of the progressive 2 jackpot of $500,000. 3 We have reviewed a draft resolution, and 4 it is acceptable. 5 Thank you. 6 CHAIR KASSEKERT: Thank you. 7 Mr. Kimmel? 8 MR. KIMMEL: Thank you. 9 The Division has also reviewed the draft 10 resolution and has no objection to its 11 adoption. 12 CHAIR KASSEKERT: Thank you. 13 Any questions? 14 MR. BRILIANT: Madame Chair. 15 COMMISSIONER SOMMELING: No questions, 16 Madame Chair. 17 MR. BRILIANT: I just also want to also 18 note for the record the petition did originally 19 contain a sealing request. And Mr. Casiello 20 and I have discussed that, and as a result, he 21 is withdrawing the sealing request. And we 22 will deal on an ad hoc basis if requests are 23 made for any copies of these documents. 24 MR. CASIELLO: That's correct. 25 CHAIR KASSEKERT: Very good. Thank you. 36 ITEM NO. 10 1 Any questions? 2 COMMISSIONER SOMMELING: No questions, 3 Madame Chair. 4 COMMISSIONER EPPS: Madame Chair, I move 5 that we approve and adopt the draft resolution 6 and approve the "Reel Adventures" slot system, 7 slot system agreement, and the "Reel 8 Adventures" annuity trust agreement subject to 9 the conditions in the resolution. 10 COMMISSIONER SOMMELING: Second. 11 CHAIR KASSEKERT: The motion has been 12 made and seconded. All in favor? 13 (Ayes.) 14 CHAIR KASSEKERT: Opposed? 15 (No response.) 16 CHAIR KASSEKERT: The motion carries. 17 MR. BRILIANT: Thank you. 18 MR. CASIELLO: Thank you. 19 MR. NANCE: Item No. 11 has been 20 adjourned. 21 CHAIR KASSEKERT: We're going to take a 22 brief recess before we consider Item 13. 23 MR. NANCE: Excuse me. I'd like to make 24 an announcement that we're going to reconvene 25 at 11:30. We will reconvene at 11:30. 37 ITEM NO. 10 1 (A recess was taken from 10:54 to 11:30 2 a.m.) 3 CHAIR KASSEKERT: You're ready? We'll 4 go back on the record? 5 MR. NANCE: Yes. Item No 13, petition 6 of Resorts International Hotel, Inc., for 7 approval of a material debt transaction and for 8 other relief; and petition of Resorts 9 International Hotel, Inc., for qualification of 10 Thomas F. Harrison to serve as an officer of 11 Colony GP-IV, Inc. 12 Mr. DiGiacomo? 13 MR. DiGIACOMO: Madame Chair, 14 Commissioners. Good morning. 15 Mr. Gil Brooks and Miss Pat Wild for the 16 Petitioners. Miss Mary Jo Flaherty for the 17 Division of Gaming Enforcement. 18 I've shared with counsel for the parties 19 a copy of draft resolution. And subject to the 20 material that will be coming into the record 21 today, I believe that they are prepared to 22 consent to the entry and form of that 23 resolution. 24 I believe that each party has several 25 exhibits that they'd like to put into the 38 ITEM NO. 10 1 record. If Mr. Brooks could attend to that 2 now. I don't believe that we have an exhibit 3 list prepared yet, so consequently, it may be 4 incumbent him to notify us as to what they are 5 and move them in. 6 CHAIR KASSEKERT: Very good. 7 Good morning, Mr. Brooks. 8 MR. BROOKS: Good morning, Madame Chair. 9 Madame Chair, we have 23 total exhibits, 10 and what I'll do is, I'll identify them by the 11 exhibit number we've preliminarily given them, 12 and then I'll identify the document. 13 Madame Chair, P-1 is the loan agreement. 14 This is the most recent draft of the loan 15 agreement that is the subject matter of the 16 loan. 17 MR. DiGIACOMO: Tentative date? Is 18 there -- 19 MR. BROOKS: There is not a tentative 20 date with it. It is the most recent draft 21 however. 22 MR. DiGIACOMO: Okay. 23 MR. BROOKS: The identifier is in the 24 lower, and it's draft 578832.3. 25 MR. DiGIACOMO: Thank you. 39 ITEM NO. 10 1 MR. BROOKS: Madame Chair, Exhibit P-2 2 is a ground lease by and between Resorts 3 International Hotel, Inc., and Resorts PROPCO, 4 Inc. This is a draft dated 3-2-07. We had 5 previously submitted an earlier draft of this 6 document. It's a later draft. 7 Madame Chair, Exhibit P-3 is a series of 8 documents. P-3A through P-3E. They are all 9 corporate documents related to the certificate 10 of incorporation and the bylaws of Resorts 11 Finance Holdings, Inc., which an entity 12 qualifier -- or which is actually an 13 intermediary company being qualified today and 14 created in connection with this transaction. 15 Madame Chair, Exhibit P-4 is a combined 16 fee and leasehold mortgage between Resorts 17 International Hotel, Inc., to Column Financial, 18 Inc., who is the lender involved in this 19 transaction. 20 Madame Chair, Exhibit P-5 is a mortgage 21 and assignment of leases and rents from New 22 Pier Operating Company, Inc., which will become 23 a subsidiary of Resorts Finance. It is 24 currently a subsidiary in the Resorts ownership 25 organizational structure, and that is likewise 40 ITEM NO. 10 1 the Column Finance, Inc., who is the lender in 2 this case. 3 Exhibit P-6 is a mortgage and assignment 4 of leases and rents from New Pier Operating 5 Company, Inc., to Column Financial, Inc. 6 Exhibit P-7 is a mortgage and assignment 7 of mortgage of leases and rents from Resorts 8 Real Estate Holdings, Inc., which is a 9 subsidiary in the Resorts organizational 10 structure today and is going to be shifting as 11 a result of this transaction. But it will 12 remain in the ownership organizational 13 structure, and it's a mortgage to, again, 14 Column Financial, Inc. 15 Madame Chair, Exhibit P-8 is a leasehold 16 mortgage and assignments of leases and rents 17 from Resorts PROPCO, Inc., which is an entity 18 qualifier and subsidiary of Resorts Finance 19 being created as part of this transaction. And 20 it is a leasehold mortgage and assignment of 21 mortgage and rents, again, to the lender, 22 Column Financial, Inc. 23 Exhibit P-9 is an assignment of leases 24 and rents from New Pier Operating, Inc., to 25 Column Financial, Inc. 41 ITEM NO. 10 1 Exhibit P-10 is a assignment of leases 2 and rents from Resorts, PROPCO Inc., to Column 3 Financial, Inc. 4 Exhibit P-11 is an assignment of leases 5 and rents from Resorts Real Estate Holdings, 6 Inc., to Column Financial, Inc. 7 Madame Chair, these documents -- before 8 I continue with the other documents that we're 9 marking. These documents were all previously 10 provided as part of the certification submitted 11 with the petition, but these are more updated 12 drafts. And, again, the designation in the 13 lower right-hand corner will give you the 14 number in terms of the draft. But these are 15 the most recent drafts of those documents. 16 Madame Chair, Exhibit P-12 is a series 17 of licenses and exemptions related to Column 18 Financial, Inc., evidencing that Column 19 Financial, Inc., is a licensed lending 20 institution. 21 The next series of documents are 22 documents related to changes in the corporate 23 documents, organic corporate documents, related 24 to the various entities we've talked about 25 already. 42 ITEM NO. 10 1 P-13 is a certificate of amendment to 2 the certificate of incorporation of Resorts 3 PROPCO, Inc. 4 P-14 is a certificate of amendment to 5 the amended and restated certificate of 6 incorporation of Resorts International Hotel 7 Casino, Inc. 8 P-15 are the bylaws for Resorts 9 International Hotel Casino, Inc. 10 P-16 is a certificate of third amendment 11 of the amended and restated certificate of 12 incorporation of Colony RIH Holdings, Inc. 13 P-17 are the bylaws for Colony RIH 14 Holdings, Inc. And with respect to Resorts, 15 International Hotel and Casino, Inc., and 16 Colony RIH Holdings, Inc., Madame Chair, both 17 of those entities currently are holding 18 intermediary companies in the Resorts ownership 19 organizational structure. Both of them are 20 publicly reporting and considered to be 21 publicly traded companies for the purposes of 22 Casino Control Act. We are asking as part of 23 the relief we are seeking here today that we no 24 longer be require that they be publicly 25 reporting companies. And so there's various 43 ITEM NO. 10 1 changes required if that relief is granted. 2 And that is why these documents are being 3 placed in evidence. They reflect the changes 4 that would be necessary pursuant to section 82 5 of the Casino Control Act. 6 Exhibit P-18 is the amended and restated 7 incorporation of New Pier Operating Company, 8 Inc. 9 Exhibit P-19 is the certificate of 10 amendment to the amended and restated 11 certificate of incorporation of Resorts Real 12 Estate Holdings, Inc. 13 Again, with respect to these entities, 14 these changes -- the changes that are reflected 15 in these documents are such that required 16 language under the Casino Control Act has been 17 placed into these -- their organic corporate 18 documents as a result of the section 82 of the 19 Act, and the fact that we are restructuring the 20 organizational ownership structure. And they 21 are required to have different language in the 22 required organic documents. 23 Exhibit P-20 is an application for a 24 certificate of authority on the part of Resorts 25 Financial Holdings, Inc., which is required so 44 ITEM NO. 10 1 that it be qualified to do business in the 2 state of New Jersey since it will be, if 3 approved today, a holding and intermediary 4 company of Resorts International Hotel, Inc. 5 Exhibits P-20A and P-20B are related 6 documents. P-20A, Madame Chair, is the 7 existing organizational structure for Resorts 8 Atlantic City and Resorts International Hotel, 9 Inc., the actual licensee. And Exhibit P-20B 10 is the proposed organizational structure. 11 MR. DiGIACOMO: Mr. Brooks, excuse me. 12 P-20 was the application for qualification to 13 do business in New Jersey for RIH; correct? 14 MR. BROOKS: Oh, that's correct. Okay. 15 CHAIR KASSEKERT: P-21. 16 MR. DiGIACOMO: And so this one will be 17 P-21A and P-21B? 18 MR. BROOKS: Yes. P-21A is, again, the 19 existing organizational structure as it exists 20 today. P-21B would be the proposed 21 organizational structure, if approved here 22 today. 23 Exhibit P-22 is a refinancing analysis 24 that was prepared by Mr. Matejevich, and he'll 25 be addressing that in his testimony here today. 45 ITEM NO. 10 1 Exhibit P-23 is the amended and restated 2 certificate of incorporation of Resorts 3 International Hotel, Inc. 4 And, finally, Madame Chair, Exhibit P-24 5 is a letter related to the loan transaction, 6 and it's a letter required by the Patriot Act. 7 It's a draft of that document. 8 Those are the Plaintiff's exhibits, 9 Madame Chair. 10 CHAIR KASSEKERT: Thank you. 11 Should we get the Division's exhibits 12 entered next, Mr. DiGiacomo? 13 MR. DiGIACOMO: Sure, Madame Chair. 14 MS. FLAHERTY: Yes. Madame Chair, 15 Commissioners. 16 The Division submitted a report dated 17 March 2nd, 2007, which related to the 18 refinancing and various approvals related to 19 that. It addressed background information in 20 addition to the proposed outline of the 21 refinancing transaction and our analysis. And 22 we would like to put that into the record. 23 Additionally, as a second exhibit, there 24 was a report which was prepared and submitted 25 to the Commission December 21st, 2006, in 46 ITEM NO. 10 1 response to Petition Reference No. 264601, 2 which related to various transfers of interests 3 in the entities related to Resorts. 4 Thank you. 5 CHAIR KASSEKERT: Thank you. 6 Are there any objections to the entry of 7 any of these exhibits? 8 MS. FLAHERTY: Not on the part of the 9 Division to the Petitioner's exhibits. 10 MR. BROOKS: No objection to the part of 11 the Division's, Madame Chair. 12 CHAIR KASSEKERT: Thank you. 13 MR. DiGIACOMO: Madame Chair, I believe 14 Mr. Brooks has in the Division exhibits a 15 request to seal? 16 MR. BROOKS: That is correct, Madame 17 Chair. We have a sealing request in connection 18 with the March 2nd, 2006, Division's report. 19 Not the second Division report. The December 20 26, 2006, report. 21 CHAIR KASSEKERT: Thank you. 22 MR. DiGIACOMO: Although I might add, 23 what has been marked as D-2, Madame Chair, as 24 Ms. Flaherty has pointed out, the subject 25 matter of that and PRN number corresponds with 47 ITEM NO. 10 1 a matter that was before the Commission and is 2 still pending before the Commission in 3 connection with the Atlantic City Hilton. 4 In that report are certain matters that 5 are pertinent to today's proceedings. Those 6 portions of that report that deal with the 7 Hilton should be excised from this proceeding, 8 and I think the redacted version so provides. 9 CHAIR KASSEKERT: Very good. 10 Any objections to the sealing request? 11 MS. FLAHERTY: No, Chair. We have no 12 objection to the sealing request. And it's the 13 Chair's discretion. 14 CHAIR KASSEKERT: Thank you. All right. 15 Seeing no objections, I will enter 16 Exhibits P-1 through P-24 and the Division's 17 two Exhibits, D-1 and D-2. 18 Any opening remarks, Mr. Brooks? 19 MR. BROOKS: No, Madame Chair. We're 20 prepared to proceed. 21 CHAIR KASSEKERT: Very good. All right. 22 MS. FLAHERTY: We can proceed as well. 23 CHAIR KASSEKERT: Okay. Mr. Brooks, I 24 assume you want to call witnesses? 25 MR. BROOKS: Madame Chair, we'd call 48 MATEJEVICH - BROOKS 1 Eric Matejevich. 2 CHAIR KASSEKERT: Very good. Mr. 3 Matejevich, we'll swear you in. 4 5 ERIC MATEJEVICH, having been duly sworn 6 to tell the truth, testified as follows: 7 8 MR. NANCE: Please state your name for 9 the record. 10 THE WITNESS: Eric Matejevich. 11 MR. NANCE: Thank you. You may be 12 seated. 13 CHAIR KASSEKERT: You may proceed. 14 MR. BROOKS: Thank you Madame Chair. 15 One bit of indulgence. I have with me Pat Wild 16 here with me today, and we have various members 17 of Resorts with us today. And I'm going to ask 18 her to introduce everybody that's here today so 19 they can recognized by the Division. 20 MS. WILD: Thank you, Madame Chair and 21 Commissioners. I just want to note for the 22 record, there are many members of our 23 management team here. Anthony Rodio, who is 24 our Regional President. Steve Callendar, who 25 is Senior Vice President of Operations and 49 MATEJEVICH - BROOKS 1 Chief Gaming Officer at Resorts. Frank 2 McCarthy, who is Senior Vice President of 3 Finance at Resorts. Phil Juliano, who is our 4 Senior VP -- Regional Senior Vice President of 5 Marketing, and Nicholas Amato, our Senior Vice 6 President and Counsel. And, last but not 7 least, Laura Palazzo, who is Vice President of 8 Finances an the Atlantic City Hilton. 9 CHAIR KASSEKERT: Thank you. 10 You may proceed. 11 MR. BROOKS: Thank you, Madame Chair. 12 13 DIRECT EXAMINATION BY MR. BROOKS: 14 Q. Mr. Matejevich, could you state your 15 position for the Commission? 16 A. I am the Chief Financial Officer of 17 Resorts International Holdings. 18 Q. And Resorts international Holdings is 19 what relationship to Resorts International Hotel, 20 Inc.? 21 A. I guess it would be called an affiliate. 22 Q. Okay. Could you describe for the 23 Commission the Column Financial credit facility? 24 A. Yes. Absolutely. It is a $360 million 25 facility which consists of a $350 million CMBS loan as 50 MATEJEVICH - BROOKS 1 well as a $10 million revolver. It's got a two-year 2 maturity, and the interest rates are very attractive 3 at LIBOR plus 300, which in today's day is about eight 4 and a half percent. 5 Q. If this loan -- if this loan is approved 6 and closes, how does Resorts intend to use the funds 7 in connection with this transaction? 8 A. We use -- the lion share of the funds 9 will be used to completely refinance the debt which 10 currently exists at Resorts. And that is including 11 the high-yield debt, which is $180 million 12 outstanding. There is a call premium associated with 13 that debt. It's called for the first time, actually, 14 this month. So we'll take advantage of that. That's 15 11 and a half percent debt. 16 We also will refinance our equipment 17 obligations with CIT, and as well as pay down the 18 commerce facility, which is in place and actually 19 terminate that facility. 20 Q. Would there be any other use in 21 connection with the loan transaction? 22 A. And then there is -- there is an HVAC 23 facility with Marina Energy, which amounts to about $5 24 million. And they will have a good portion of funds, 25 probably approximately about $39 million. A portion 51 MATEJEVICH - BROOKS 1 of that will be used to build out 63 additional rooms 2 in our new tower, the Rendezvous Tower. And there 3 will be -- will have some reserves to prepare for the 4 future if our estimates, as we forecast them, are 5 inaccurate. 6 Q. Is there a current credit facility with 7 Kerzner International for Resorts? 8 A. Yeah. Thanks. I forgot the -- 9 There is currently a $40 million loan 10 outstanding with Kerzner on the land. There's 10 11 acres of land contiguous to Resorts. We will repay 12 that $40 million loan as well. 13 Q. Now, in connection with the -- with the 14 Column Financial credit facility, how does it compare 15 with the existing debt structure at Resorts? And in 16 that regard, let me show you what we've marked for 17 identification here today, and actually marked in 18 evidence at this point, Exhibit P-22. 19 A. It's more favorable to the property. 20 There's an overall debt service savings of 21 approximately $1.7 million a year. Having said that, 22 over and above the actual cash savings, we have 23 maintenance covenants which we have to maintain at -- 24 with both the commerce facility as well as CIT. With 25 the payback of those facilities and termination, we 52 MATEJEVICH - BROOKS 1 will no longer have those maintenance covenants which 2 traditionally have caused us problems and additional 3 legal fees just in coming up with resolution of 4 technical defaults. 5 Q. Now, in connection with servicing the 6 Column Financial credit facility, did you prepare 7 projections for Division and Commission staff? 8 A. I did. 9 Q. And what did those projections reveal? 10 A. Well, we ran two scenarios. We ran what 11 we call our base case, which is our -- what we project 12 the property can do. And we can talk about those in 13 greater depth if you'd like. Those revealed that we 14 have more than enough cash to -- to pay all the 15 necessary requirements under this facility, the new 16 loan and without touching the reserves that I talked 17 about. 18 So, you know, you've got probably the 19 low twenties in terms of reserves. And so, you know, 20 we were -- that was very, very favorable. And then in 21 looking at a downside -- 22 (There was microphone static.) 23 CHAIR KASSEKERT: Nobody's touching 24 anything, so. 25 VICE CHAIR FEDORKO: Not me. 53 MATEJEVICH - BROOKS 1 A. In looking at a downside scenario, it 2 is-- it is tighter for sure. We don't have -- 3 CHAIR KASSEKERT: It's his microphone. 4 MS. FAUNTLEROY: I think it's Gil's. 5 CHAIR KASSEKERT: Try. 6 THE WITNESS: No. It was me. 7 CHAIR KASSEKERT: Oh, it was you. Okay. 8 A. So our downside scenario, which I ran, 9 which is basically a zero-growth scenario to say if 10 the property is doing as well as its done 11 historically, can we can make it? We have proceeds, 12 using reserves but not dipping into the revolver. We 13 are able to pay everything we need to pay, and then at 14 maturity, but it would mean we'd have to refinance it. 15 Q. Would there be any basis for additional 16 flexibility in that zero-growth analysis in terms of 17 repaying the debt? 18 A. I don't understand the question. 19 Q. Okay. In terms of Resorts and its 20 ownership organizational structure, would there be any 21 additional flexibility if additional funds were needed 22 in connection with the debt? 23 A. Well, I'm not an employee of Colony, so 24 I can't speak for them. But I'll say that 25 historically when we needed Colony, such as the case 54 MATEJEVICH - BROOKS 1 with Resorts International Holdings when we had the 2 two technical defaults, which I know you are well 3 aware of, Colony infused 50 million in equity, 4 whatever was necessary to do so to correct those 5 defaults. So I would think that they would be there 6 as well. You know, they have $70 million in equity 7 invested in Resorts. It's been an investment since 8 April '01. And we believe that the trajectory for 9 Atlantic City, despite Pennsylvania coming on-line, is 10 very favorable over the longer term. 11 And, you know, we hope that we view that 12 this as really a reinvigoration of their belief in 13 this asset. And the fact that they're going to put 10 14 million into the build-out of the room product, 15 preparing for whatever anti-smoking legislation is 16 passed, we're quite optimistic about the future of the 17 property. 18 Q. Now, in connection with Colony, can you 19 identify for the Commission who Colony Investors IV 20 is? 21 A. It's one of the funds of Colony Capital. 22 Q. And is it the fund that was involved in 23 the -- or is involved in the ownership organizational 24 structure? 25 A. Oh, Yes. It is. So whereas Colony's VI 55 MATEJEVICH - BROOKS 1 and VII are the majority holders of Resorts 2 International Holdings, Colony IV is the sole equity 3 owner with Nicholas Ribis of Resorts International 4 Hotel and Casino. 5 Q. Now, Colony Investors is a limited 6 partner -- Colony Investors IV is a limited 7 partnership; correct? 8 A. Correct. 9 Q. Are you aware of any timing with respect 10 to when that limited partnership is supposed to 11 dissolve? 12 A. Yes. The scheduled dissolution of 13 Colony IV is November of 2007. 14 Q. And in connection with that dissolution, 15 what will happen with respect to the Resorts assets? 16 A. So at that time the limited partners -- 17 or I should say the general partner, which consists of 18 Barrack and Ribis -- have the ability to essentially 19 get two one-year renewal options. And, say, it 20 doesn't at that time make proper sense to divest 21 themselves of asset, and so that would take us then to 22 November of 2009. 23 November of 2009 they have not only the 24 ability but the obligation, if it's not correct, to 25 divest themselves of the asset. They must maintain 56 MATEJEVICH - BROOKS 1 it, and continue as it is today. So there's no 2 requirement whatsoever to divest themselves of the 3 asset. 4 Q. And there's no time pressure associated 5 with the dissolution that's scheduled for November of 6 2007? 7 A. No. 8 Q. Now, with respect to your base case and 9 the forecasts, Resorts has had some difficulty with 10 forecasts in the past. Do you have any reason to be 11 more optimistic about the forecast with your base 12 case? 13 A. Yeah. I'm far more optimistic about 14 where we're taking this property in the future. In 15 June of last year, you may recall, we made a fairly 16 substantial management change at the property. And we 17 brought in Tony Rodio and Phil Juliano, Steve 18 Callendar, Frank McCarthy, who's in the back of the 19 room. And they've done a phenomenal job of really 20 changing where this property is going. They changed 21 the marketing focus of the property. It's now the 22 original home of the players. It was the city's first 23 casino. 24 And if you look at our financial 25 performance through the first seven months of last 57 MATEJEVICH - FLAHERTY 1 year, our EBITDA was off approximately $10 million 2 versus the prior year. In the time of these gentlemen 3 have taken over the asset and control and changed the 4 marketing focus of the asset, from the August-through- 5 December time frames we recovered about $4 million of 6 that shortfall. So August to December was up $4 7 million year over year. And, in fact, if you look at 8 the January numbers, you know, I think we were second 9 highest in the city in terms of slot growth. So I 10 think that this continues. 11 And from August through January, each 12 month we've had higher EBITDA year over year. So 13 we're quite encouraged by where we're going to take 14 this property, and we think that the process is well 15 on its way. 16 MR. BROOKS: Madame Chair, I have no 17 further questions. 18 CHAIR KASSEKERT: Thank you. 19 Miss Flaherty? 20 MS. FLAHERTY: Yes, Commissioners and 21 Chair. 22 23 CROSS-EXAMINATION BY MS. FLAHERTY: 24 Q. Good morning. 25 A. Good morning. 58 MATEJEVICH - FLAHERTY 1 Q. I wanted to ask -- I understand there 2 are going to be appraisals done at the property, and I 3 was going ask that if they have been completed? 4 A. The appraisals are currently ongoing, 5 and we have not seen draft numbers yet. 6 Q. I understand then that the loan is 7 pretty much structured into a two-part formula where 8 it would be 360 million or 80 percent of the value of 9 Resorts or, alternatively, 320 million or 70 percent 10 of the value. And has it been determined in light of 11 the fact that the appraisals are not completed which 12 one will, in fact, occur? 13 A. It hasn't been. No. That's a common 14 feature of these CBMS finances is that they base the 15 size of the loan off of what's called an LTV, A 16 loan-to-value calculation. So if the property comes 17 in 450 million or so in value, the loan will be 80 18 percent of that, or the 360 as we anticipate. 19 Q. Well, in anticipation of the higher 20 amount, the analysis the Division had prepared and 21 got -- you had provided us with -- was based on the 22 $360 million amount. If the lower amount is, in fact, 23 the loan figure, the 320, what -- could you describe 24 the difference in terms of your obligations under that 25 loan and interest paymentwise? 59 MATEJEVICH - FLAHERTY 1 A. Well, I don't have the math. Let's see. 2 So $40 million. It would be a difference of about 3 three and a half million a year in interest. 4 Q. Less? 5 A. Right. If we went with the smaller 6 amount. 7 Q. And Mr. Brooks has asked you about the 8 basis for the increase in your forecasted EBITA over 9 2006 in compared with the years which will be 10 projected for 2007, 2009. Going forward, other than 11 the rooms and the personnel changes, are there any 12 other factors further on in the horizon which would 13 affect those? 14 A. I don't fully understand the question. 15 Q. Well, if you -- you know that there will 16 be rooms completed at Resorts? 17 A. Right. 18 Q. And that there has been a change in 19 personnel over the last, you know, number of months? 20 A. Exactly. 21 Q. And I was asking if, further along in 22 the five-year period, if there were more projects or 23 concepts -- 24 A. Oh, I understand now. 25 Q. -- that were going to be implemented to 60 MATEJEVICH - FLAHERTY 1 continual the growth of EBITDA over the five-year time 2 frame? 3 A. We don't have plans at this time to do 4 any other type of major build-outs from a construction 5 standpoint. Having said that, we're trying to 6 maintain as much flexibility as possible in the 7 drafting of our loan documents to give us the ability 8 to carve out what is currently, quote-unquote, the 9 Kerzner land. In order to -- to potentially JV or 10 develop that if we so choose in the future. 11 Q. With regard to the minimum budgeted 12 property EBITDA, what would be the consequences if 13 that is not achieved? There's a figure for each year 14 in 2006 and each subsequent year. And what 15 flexibility would have to deal with that if it's not 16 met? 17 A. If the base case EBITDA is not met? 18 Q. Yes. 19 A. As I think I've said, the base case 20 EBITDA is, you know, a great case scenario where we 21 think we're going to be. If by chance we're below 22 that, that's why we ran the down-side basis, and we 23 think we've got more than enough room, given the 24 revolving credit facility as well as the reserves on 25 capital to fund all of our debt commitments. 61 MATEJEVICH - FLAHERTY 1 Q. Now, with regard to the actual minimum 2 budgeted property EBITDA that's required under the 3 bank loan, if those figure are not met per year? 4 A. Oh. 5 Q. Would that be a covenant problem? 6 A. No, no. 7 Q. And would that be -- 8 A. No. That was in the term sheet. The 9 term sheet has a section where it defines certain 10 minimum budgeted EBITDAs, and that's our forecast 11 going out several years. You know, that is, again, a 12 budgeted number. To the extent we don't hit that, for 13 some reason, it would not be any type of default 14 problem with the loan or covenant issue. 15 Q. With regard to the forecasts and -- 16 A. I should wait for a tough question and 17 then kick this thing under the table; right? 18 Q. Talked about some of the matters that 19 may impact on the forecasts. In terms of them, have 20 you considered the possibility, the negative results 21 which may occur from the smoking-ban situation, the 22 growth of slots or other gaming in other jurisdictions 23 in terms of those forecasts? 24 A. Absolutely. We've tried to incorporate 25 all the potential outside events which would impact us 62 MATEJEVICH - FLAHERTY 1 if Resorts, to the extent we've accurately portrayed 2 that. I can't attest to that. But we certainly have 3 tried to estimate the impact of both Pennsylvania and 4 the smoking legislation. 5 Q. And with regard to flexibility in the 6 event that there was a down-turn or negative growth or 7 zero growth, you would look to Colony in terms of 8 aiding the continued operation? 9 A. Absolutely. Again, Colony has $70 10 million, along with Ribis, invested equity in this 11 project. There's a belief internally that the actual 12 real estate value of the entity, given the number of 13 limited jurisdictions -- limited areas that have 14 gaming here in Atlantic City, there's a scarcity of 15 assets. So we believe there's tremendous value. 16 There are well above what the debt service on this 17 property would be and the total debt on the property. 18 And so there is real equity value. They would step in 19 and immediately attend to our needs, just as they did 20 before. 21 Q. And with regard to Colony IV in terms of 22 this expiration in November 2007, plus the two-year 23 extensions, it's your view that Colony would be in a 24 position to continue to support Resorts throughout the 25 term of this loan? 63 MATEJEVICH 1 A. That's correct. 2 MS. FLAHERTY: Those would be all my 3 questions. Thank you very much. 4 CHAIR KASSEKERT: Thank you. 5 Questions from the commission? 6 COMMISSIONER EPPS: I have. 7 CHAIR KASSEKERT: Commissioner Epps? 8 COMMISSIONER EPPS: I can wait. Go 9 ahead. 10 VICE CHAIR FEDORKO: Go ahead. 11 COMMISSIONER EPPS: With respect to your 12 projections, Resorts hasn't done better than 34 13 in the last four years. You project next year 14 45, with the only noted changes is the 63 hotel 15 rooms. And then your management changes and 16 market focus. Are you suggesting that the 17 rooms, the management changes, and the market 18 focus are what is going to make up that gap of 19 15 million? 20 THE WITNESS: Exactly. I think to break 21 it down, just briefly, the rooms themselves 22 should be a contributor of approximately 4 23 million a year, we think. On top of that, 24 currently we pay an operating lease payment for 25 the parking lots on the Kerzner land of about 64 MATEJEVICH 1 2.4 million a year. So currently that's above 2 the line. The 2.4 million is a rent payable 3 which also services the debt, the 40 million in 4 debt on the Kerzner parcel. So under the new 5 financing, with Kerzner out and Resorts Real 6 Estate Holdings below where it currently lies 7 in the holding structure, that 2.4 gets added 8 back. So that's 6.4 million right there. So 9 that, combined with the new managerial focus 10 and marketing focus of the property, I think 11 we'll get there. 12 COMMISSIONER EPPS: So even in that 13 scenario, that would represent for this year an 14 $8 million growth in EBITDA, seven or eight, 15 and then another two or three the following 16 year. 17 THE WITNESS: I'm not -- listen. It's 18 not a walk in the park. You know, and the way 19 our bonuses are structured in our company, 20 they're almost completely EBITDA based. And so 21 Colony forces us to be -- reach aggressive but 22 achievable goals, and that's what we try to do. 23 COMMISSIONER EPPS: Okay. 24 THE WITNESS: And I will say, too, that 25 you know, that I think we underestimated the 65 MATEJEVICH 1 impact -- the early impact of Pennsylvania. I 2 don't think we thought it would have the impact 3 we've seen in January and February when we did 4 those projections. 5 COMMISSIONER EPPS: Now, given your 6 projections, you have to take into account the 7 smoking ban legislation and competition from 8 Pennsylvania. 9 THE WITNESS: Right. 10 COMMISSIONER EPPS: And what those 11 impacts will be. Did you also take into 12 account and how did you -- and if you did, can 13 you tell me how you accounted for those -- the 14 fact that Harrah's is building a tower and 15 other amenities, and Borgata's building a tower 16 and other amenities, both of those will 17 probably come on line Q1 '08, I guess. Are 18 those factored in? Because, actually, in '08 19 you show another exponential growth given the 20 additional competition not -- 21 THE WITNESS: I -- 22 COMMISSIONER EPPS: Pennsylvania 23 notwithstanding. 24 THE WITNESS: I think -- right. I think 25 you can look at those two. Those two are in 66 MATEJEVICH 1 complete disparity because I look at 2 Pennsylvania -- Pennsylvania is a negative, 3 obviously. We think right now, though, that a 4 lot of people are trying it for the first time. 5 That anything -- any time something is new, 6 people are going to give it a first look. But 7 I think, ultimately, people return to this 8 market, given the greater number of amenities 9 and given the greater reinvestment in the 10 patrons that we make that the Pennsylvania 11 owners will never be able to make, given a 55 12 percent tax rate. So that -- that's one item. 13 Second item, smoking. Smoking is 14 something we debate in internally. There are 15 those of us that believe that folks come to 16 this market with a specific gaming budget and 17 will play with, in line with that budget. 18 There are others that believe that folks come 19 to this town with a specific time frame. 20 They're here for five hours, and then they're 21 gone. If you believe they're here for a time 22 frame, then the smoking ban has a greater 23 impact than if you believe they have a budget. 24 You know, it would be wonderful if the 25 prsons who are pushing the anti-smoking 67 MATEJEVICH 1 legislation would take their efforts to 2 Pennsylvania as well. I think if we were all 3 on one playing field, that would be the best 4 for everybody. And then you'll see minimal to 5 no impact over time. But as Delaware, I think, 6 clearly illustrates when one market goes 7 anti-smoking, but you have an alternative 8 market that has the ability for folks to smoke, 9 you know, when it happens in Delaware, you saw 10 a ten percent revenue decline. And those are 11 the numbers. 12 So it is something that we factored in. 13 I didn't factor in a ten-percent decline. I 14 factored in something smaller like a 15 three-percent to five-percent decline with th 16 smoking ban. But, again, I think we recover -- 17 (There is microphone static.) 18 COMMISSIONER EPPS: That wasn't a tough 19 question, was it? 20 THE WITNESS: No. 21 I think we recover a substantial portion 22 of that over time just as Delaware has. 23 Delaware has rebounded overtime. It just took 24 time. 25 Now, the second part of your question, 68 MATEJEVICH 1 what about the hotel rooms coming on-line in 2 Borgata and Harrah's. We look at anything like 3 that as a huge positive to the whole market, 4 and we would be recipient to that, too. 5 Anything -- room product in this market, which 6 attracts more folks here. Right? That's 7 greatest impediment to this market right now is 8 the lack of rooms. So the more rooms you bring 9 here or build here, the better it is, I think, 10 for everybody. 11 It's just like the -- you know, whether 12 it be the Morgan Stanley project or whatever 13 Mr. Barr might build south of the Atlantic City 14 Hilton or what Pinnacle might do on the Sands 15 site. You know, we think that's all -- that's 16 all a positive. I think everybody will benefit 17 from that. 18 COMMISSIONER EPPS: Okay. Can you 19 explain to me again the dissolution provisions 20 that you set forth in your testimony? I 21 believe you said at the end of the 2007 then 22 gets into two additional one-year options, but 23 there's no requirement to -- 24 THE WITNESS: Right. 25 COMMISSIONER EPPS: -- get rid of the 69 MATEJEVICH 1 property. 2 THE WITNESS: That's exactly it. In 3 November of 2007, that is what's called the 4 scheduled dissolution of Colony IV. And I'll 5 speak to this to the extent I can. It was 6 really more of a conversation I had with the 7 CFO of Colony, Mark Headstrom, so I can't -- 8 I'm not going to say that I'm a hundred on 9 this. 10 But in November of 2007 that's the 11 scheduled dissolution. At that time the 12 general partner may request two one-year 13 extensions. There's an advisory committee 14 associated with each fund, of which Mr. Barrack 15 heads that advisory committee. This has 16 happened in the past with investments they've 17 had. And they have received these extensions 18 to maintain ownership, as would be the case 19 here because there's no operational problem 20 with the asset. And so that would then take 21 them through November 2009. And at that time 22 it's my understanding from my discussion that 23 it's not only the ability but the obligation, 24 if it doesn't make sense, if it's not in the 25 best interest of the limited partners to 70 MATEJEVICH 1 dissolve themselves or divest of the asset, 2 then they won't do so. They will keep it, and 3 Colony IV will not close, so to speak. 4 COMMISSIONER EPPS: So if I understand 5 you correctly, it's almost an inverse analysis 6 that goes forth that says, so they're not going 7 to do a cost/benefit analysis in that it makes 8 money for us, to keep this asset because it 9 makes money for us, but only if we determine 10 that it does not make sense to divest the asset 11 because it's a negative impact will they then 12 divest. Is that what you're suggesting? 13 THE WITNESS: I'm just saying that right 14 now there's a believe that the asset is going 15 to get much better with the management 16 investment. And, having said that, they want 17 to maximize what they feel are the returns that 18 that property should achieve and receive. So 19 I'm just saying there's no pressure to divest 20 the asset based on the fact that Colony IV is 21 supposed to dissolve in November of '07. 22 There's no defined time frame by which they 23 have to divest the asset. 24 COMMISSIONER EPPS: Okay. But looking 25 at it from a different perspective, in November 71 MATEJEVICH 1 of '07 or the end of '08 or at the end of '09, 2 any of those target dates, if the asset is not 3 performing, is it likely that the holding group 4 would divest of it because it's not worth -- 5 it's not valuable -- or it's not profitable to 6 that -- 7 THE WITNESS: It's -- I don't think I 8 could say -- I couldn't speak for them or what 9 their strategy would be in that case. So it's 10 difficult for me to say what they might or may 11 not do. 12 I think they're very, very encouraged by 13 what has happened to values in Atlantic City. 14 In real estate values. 15 COMMISSIONER EPPS: Last question. 16 You said that there are no covenants 17 with this loan agreement. However, so I guess 18 your only objective is to have cash on hand to 19 pay the -- to make the payments that are 20 required. 21 THE WITNESS: Well, that's the one giant 22 covenant is the payment default. 23 COMMISSIONER EPPS: Right. But what 24 you've projected is, if you hit the 25 projections, you're absolutely fine. 72 MATEJEVICH 1 THE WITNESS: Correct. 2 COMMISSIONER EPPS: If you do a 3 no-growth, you'll have to struggle to make it. 4 If you fall under 30 next years if you don't 5 maintain your EBITDA, you fall under 30 -- 6 THE WITNESS: Uh-huh. 7 COMMISSIONER EPPS: -- then you start 8 hitting your reserves. 9 THE WITNESS: That's correct. 10 COMMISSIONER EPPS: And is there a 11 correlation as to how far you could comfortably 12 go under no growth? 13 THE WITNESS: I'm sure there is. I 14 would -- well, I think, if I recall my 15 no-growth scenario -- I'm just remembering. By 16 the maturity of the loan, which is two years 17 from now, we would essentially be at a point 18 where we haven't yet drawn on the resolving 19 credit facility but where the reserves are 20 virtually exhausted. So, you know, having said 21 that, without extending payables to any great 22 extent, then there's probably a $5 million 23 threshold there. 24 COMMISSIONER EPPS: I think that was all 25 I have. 73 MATEJEVICH 1 CHAIR KASSEKERT: All right. 2 Vice Chair Fedorko? 3 VICE CHAIR FEDORKO: Mr. Matejevich, I'm 4 not clear on this issue. Why is this $40 5 million being advanced to Colony? 6 THE WITNESS: That is -- 7 VICE CHAIR FEDORKO: And wouldn't it be 8 better to have been spent on expenditures -- 9 capital expenditures on that facility? 10 THE WITNESS: Yeah. Again, I don't know 11 that I can necessarily speak for Colony. But 12 the investment has been in the portfolio for, 13 you know, close to six years now, and they 14 haven't taken a dime out to date. And so I 15 believe that they're looking at this as being, 16 you know, a new commitment to the property, 17 taking out a little of the equity that they 18 have in, leaving in a lot of equity, 19 reinvesting in the asset. And, you know, years 20 from now, once we've achieved the EBITDAs, as 21 we think the property can achieve, then 22 potentially divesting the asset. 23 VICE CHAIR FEDORKO: I feel a little 24 confident about what you're saying because this 25 is March and not, you know -- and not the end 74 MATEJEVICH 1 of the summer. I mean, you have the summer to 2 look forward to, which I'm hopeful is going to 3 help. But you had mentioned that Colony -- you 4 think Colony will help if you need help. Have 5 you had any discussions with Colony? 6 THE WITNESS: I've had no formal 7 discussions per se. 8 VICE CHAIR FEDORKO: What makes you 9 think they're going to help you? 10 THE WITNESS: Well, their behavior in 11 Resorts International Holdings, I think, gives 12 me fairly good stead that they'll step in and 13 help to the extent I'll need it. They were 14 there very quickly with a $50 million check 15 when I needed it last time. 16 VICE CHAIR FEDORKO: All right. Thank 17 you. 18 CHAIR KASSEKERT: Just to clarify. You 19 mentioned, I think, in your testimony that the 20 figure $70 million with respect to what they 21 could put back in? Maybe I'm confused. 22 COMMISSIONER EPPS: That's the equity 23 now. 24 CHAIR KASSEKERT: Oh, the equity now. 25 The 70 million. 75 MATEJEVICH 1 THE WITNESS: Right. Seventy million 2 and total equity in the property right now. 3 CHAIR KASSEKERT: Okay. Does that -- 4 where does the 40 million upstreaming figure 5 into that? Is that independent of the 70? 6 THE WITNESS: No. So -- 7 CHAIR KASSEKERT: It's part of. 8 THE WITNESS: Is repayment of -- 9 CHAIR KASSEKERT: Okay. 10 THE WITNESS: Forty of the 70. 11 CHAIR KASSEKERT: Gotcha. 12 Did you have another question? 13 COMMISSIONER EPPS: Just to follow up 14 then. At the end of this transaction, Colony's 15 equity in Resorts is then 30? 16 THE WITNESS: Correct. 17 COMMISSIONER EPPS: So their equity is 18 considerable less? 19 THE WITNESS: Correct. 20 COMMISSIONER EPPS: And then, if Resorts 21 got in trouble and needed Colony, they would 22 need to kick that 40 right back. So they would 23 end up putting their equity right back into 24 the thing. 25 THE WITNESS: That's correct. 76 MATEJEVICH 1 COMMISSIONER EPPS: One other question. 2 The land -- the Kerzner land helps in the 3 funding of this note. Because it's equity. 4 THE WITNESS: Absolutely. 5 COMMISSIONER EPPS: However, it doesn't 6 generate revenue to pay back the note. 7 THE WITNESS: That's correct. 8 COMMISSIONER EPPS: So to own it, 9 although Resorts gets the benefit of the land 10 to borrow, it doesn't get any income from that 11 land to help pay back. Does that provide -- 12 THE WITNESS: It's essentially the 13 same -- 14 COMMISSIONER EPPS: It's the same as the 15 lease. 16 THE WITNESS: Same the lease payment. 17 Right. 18 CHAIR KASSEKERT: Right. 19 COMMISSIONER EPPS: Okay. 20 THE WITNESS: Because we're paying 21 interest on the Kerzner note day, and that's 22 not throwing off any cash. And this is just 23 replacing that. 24 COMMISSIONER EPPS: Okay. 25 THE WITNESS: And, again, just to go 77 MATEJEVICH 1 back to your point for a second. The belief 2 internally that, given the limited number of 3 assets in this town and given the fact that 30 4 percent of the US population is within a tank 5 full of gas of this town, you know, we believe 6 in a long-term viability and a long-term 7 growth. And whether Pennsylvania takes us off 8 that trajectory for a period of time, we'll 9 have to wait and see. 10 But, having said that, you know, the 11 long-term is here, and we know it's going to be 12 here. And it's a stable regulatory 13 jurisdiction with a great tax rate. And so the 14 value of that property is well in excess of 15 that debt. So there's no way that they would 16 walk away from that and give it to -- at least 17 this is my personal opinion. You don't walk 18 away from that and give it to debt holders when 19 there's tremendous value that you would leave 20 on the table. 21 COMMISSIONER EPPS: Well, one last 22 question. 23 The trend in Atlantic City seems to be 24 toward nongaming amenities now. Everybody's 25 trying to capitalize on the nongaming revenue 78 MATEJEVICH 1 and bump that number up. Resorts has a 2 difficulty in that playing field, in that 3 scenario because you don't have a lot of space 4 to convert. And you don't really have those 5 outlets currently, and they're not in your, at 6 least short-term, plans. Other than 7 capitalizing on people using those nongaming 8 amenities elsewhere and coming back to Resorts, 9 how else do you catch up in that race? 10 THE WITNESS: I don't think necessarily 11 that's a race we're going to ever fight 12 effectively. And so we don't -- I think it's a 13 race we tried to fight when we first built the 14 tower, when we put Niki Beach out there, and we 15 tried to really target a younger demographic. 16 And, you know, I think we've now gone back to 17 our core, which is our core gaming patron, 18 somebody who is serious good about gaming and 19 enjoying gaming and entertaining experience. 20 And so you're right in saying we're fairly 21 constrained from a space standpoint. So we 22 focus on the amenities we have on the property. 23 The Gallagher's Steakhouse, our in-house food 24 establishments, and try to make them as best as 25 we can. And we do have, thankfully, a 79 MATEJEVICH 1 wonderful hotel product. Second to none in the 2 city. And so we try to capitalize on that to 3 the extent we can. 4 CHAIR KASSEKERT: And I think to a great 5 extent trying to lure some of the former 6 patrons from the Sands, for example, over as 7 well in terms of your marketing program. 8 Any other questions? 9 COMMISSIONER SOMMELING: I was going to 10 ask -- 11 CHAIR KASSEKERT: Commissioner 12 Sommeling? 13 COMMISSIONER SOMMELING: Since the 14 Kerzner property is tied up in the refinancing, 15 does that preclude any aspect of future 16 development? 17 THE WITNESS: No. It doesn't. I 18 attempted to explain that earlier. I probably 19 didn't do a good job. But we're trying to 20 structure around that with our loan document to 21 give us the ability to carve out that parcel if 22 we choose to do some type of development on our 23 own or JV on that parcel. Because it is, as 24 you know, a great parcel with 10 acres right 25 there. 80 MATEJEVICH - FLAHERTY 1 COMMISSIONER SOMMELING: That's all. 2 CHAIR KASSEKERT: Any other questions? 3 COMMISSIONER FRULIO: No. 4 MS. FLAHERTY: Chair? 5 CHAIR KASSEKERT: Yeah, sure. 6 MS. FLAHERTY: I just have another 7 question. 8 9 RECROSS-EXAMINATION BY MS. FLAHERTY: 10 Q. With regard to the demand that was 11 mentioned, I wanted to ask if the 40 million would go 12 up, given the limited partner structure, it wouldn't 13 necessarily be available to come back down because the 14 limited partners wouldn't necessarily have to -- 15 A. That's correct. The limited partners 16 don't necessarily have to have a capital call, as you 17 would describe it. It would be more a revolving 18 credit facility that Colony has at the fund level 19 where they would infuse capital from Colony itself. 20 Q. So the money wouldn't necessarily come 21 from the people that it went to, but from other Colony 22 sources? 23 A. That's correct. 24 MS. FLAHERTY: Okay. 25 CHAIR KASSEKERT: Thank you. 81 MATEJEVICH - BROOKS 1 Anything on redirect? 2 MR. BROOKS: Just briefly, Madame Chair. 3 4 REDIRECT EXAMINATION BY MR. BROOKS: 5 Q. Mr. Matejevich, are you familiar with 6 any trends or land value in Atlantic City over the 7 last several years? 8 A. Thankfully, I am. We were successful, 9 as I think we all know in the room, I believe that the 10 Morgan Stanley land was transacted at about $5 million 11 an acre, and we were successful in selling our land 12 south -- eight and a half acres south of the Atlantic 13 City Hilton for between 9 and $10 million an acre. 14 And then I know Mr. Lee at Pinnacle purchased the 15 Sands site for approximately $14 million an acre. So 16 I think that bodes well for what I mentioned earlier, 17 of the scarcity of assets in the city and the value of 18 casino zoned lands. 19 Q. So in terms of the 10 acres that are 20 available -- 21 A. In terms of the 10 acres, you know, we 22 fully believe they should be worth approximately 140 23 million. 24 Q. Thank you. 25 CHAIR KASSEKERT: Anything else? 82 MATEJEVICH 1 MS. FLAHERTY: No, Chair. Thank you 2 very much. 3 CHAIR KASSEKERT: Any of the 4 Commissioners have anything? 5 VICE CHAIR FEDORKO: Let me just ask one 6 quick question. 7 Something you said, Mr. Matejevich. You 8 mentioned that the tower at the Hilton -- at 9 the Harrah's and the Borgata is going to help 10 you. Is there any way you track or you can 11 track people coming to Atlantic City, going to 12 other casinos, coming to your place? Is there 13 anyway you can track that? 14 THE WITNESS: We track that, and this is 15 really not very sophisticated, but -- and I 16 hope I do it justice in trying to explain it. 17 But my understanding is right now you pay to 18 get into a parking lot, and then you can get a 19 transfer, essentially, as you're leaving to 20 take that to another casino if you're going to 21 visit another casino. So we track where those 22 stubs come from. And I know at the Atlantic 23 City Hilton our experience is that we receive 24 the most traffic from the Tropicana, which is, 25 of course, just next to us. But the second 83 MATEJEVICH 1 most comes from Harrah's in the Marina, which 2 was surprising to us because we're the two 3 farthest apart in the entire city. And so 4 that's how we try to track that. 5 Other than that, we have fairly 6 extensive internal data warehouse called 7 Miraposa, and we can track -- really that's 8 more play between our two casinos and offer 9 people an incentive through our One Card 10 program to try to play between those two 11 because it makes the most sense. 12 VICE CHAIR FEDORKO: Okay. Thank you. 13 CHAIR KASSEKERT: Any other questions? 14 You may step down. 15 MR. BROOKS: No. 16 THE WITNESS: Thank you. 17 CHAIR KASSEKERT: Any other witnesses? 18 MR. BROOKS: No further witnesses, 19 Madame Chair. 20 CHAIR KASSEKERT: Okay. Any closing 21 remarks? 22 MR. BROOKS: Madame Chair, on my part, I 23 would just like to thank Commission staff and 24 Division staff for their assistance in 25 connection with this transaction. We were 84 ITEM NO. 13 1 compressed in terms of time. And, as usual, 2 they came to the rescue and were great in terms 3 of helping us get before you here today. 4 I'd also like to thank Mr. O'Gara who is 5 representing Credit Swiss or Colony Financial 6 in connection with this transaction and has 7 assisted us in terms of moving the process 8 forward. 9 CHAIR KASSEKERT: Thank you. 10 MS. FLAHERTY: Yes. Chair, 11 Commissioners, the Division has read the 12 resolution, and it encompasses all our 13 questions and concerns. And the conditions 14 obviously address those. 15 We would also like to thank Mr. 16 DiGiacomo for his assistance and help and all 17 his hard effort over the last few days. 18 And, again, thank you, Commissioners. 19 CHAIR KASSEKERT: Thank you. 20 Let me just ask. Does anyone need to 21 recess or are we ready to proceed? 22 All right. I'll entertain a motion 23 then. 24 VICE CHAIR FEDORKO: Madame Chair, 25 motion to adopt the draft resolution and grant 85 ITEM NO. 13 1 the relief requested in the petitions to the 2 extent set forth in the findings and rulings 3 and subject to the conditions in the 4 resolution. 5 COMMISSIONER FRULIO: Second. 6 CHAIR KASSEKERT: Motion is made and 7 seconded. This is a roll call vote. 8 MR. NANCE: Commissioner Sommeling? 9 COMMISSIONER SOMMELING: Yes. 10 MR. NANCE: Commissioner Epps? 11 COMMISSIONER EPPS: Yes. 12 MR. NANCE: Commissioner Frulio? 13 COMMISSIONER FRULIO: Yes. 14 MR. NANCE: Vice Chair Fedorko? 15 VICE CHAIR FEDORKO: Yes. 16 MR. NANCE: Chair Kassekert? 17 CHAIR KASSEKERT: Yes. 18 MR. NANCE: The record will reflect that 19 the motion is unanimous. 20 CHAIR KASSEKERT: Thank you. 21 MR. BROOKS: Thank you, Madame Chair. 22 MS. WILD: Thank you. 23 MR. NANCE: In accordance with 24 Resolution No. 06-12-13-20, the next closed 25 session of the Commission shall be held on 86 1 Wednesday, March 21st, 2007, at 9:15 a.m. in 2 the Commission offices. 3 It is now time for the public 4 participation portion of the meeting. 5 CHAIR KASSEKERT: Is there anyone from 6 the public that wishes to be heard? 7 Seeing no one, I declare this portion of 8 the meeting closed and entertain a motion to 9 adjourn. 10 COMMISSIONER SOMMELING: Motion to 11 adjourn. 12 COMMISSIONER FRULIO: Second. 13 CHAIR KASSEKERT: The motion has been 14 made and seconded. All in favor? 15 (Ayes.) 16 CHAIR KASSEKERT: Opposed? 17 (No response.) 18 CHAIR KASSEKERT: The motion carries. 19 (Public Meeting 07-03-07 was adjourned 20 at 12:21 p.m.) 21 22 23 24 25 87 1 2 C E R T I F I C A T E 3 4 5 I, DARLENE SILLITOE, a Certified 6 Shorthand Reporter and Notary Public of the 7 State of New Jersey, certify that the foregoing 8 is a true and accurate transcript of the 9 proceedings. 10 11 12 I further certify that I am neither 13 attorney, of counsel for, nor related to or 14 employed by any of the parties to the action; 15 further that I am not a relative or employee of 16 any attorney or counsel employed in this case; 17 nor am I financially interested in the action. 18 19 20 DARLENE SILLITOE CSR 21 License No XI01023 22 23 Dated: March 12, 2007 24 My Commission Expires on July 10, 2009 25 ID No 2062871