UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-12419
Showboat Marina Casino Partnership
Showboat Marina Finance Corporation
(Exact name of registrant as specified in its charter)
Indiana 35-1978576
Nevada 88-0356197
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
One Showboat Place, East Chicago, Indiana 46312
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (219) 378-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
13 1/2 % Series B First Mortgage New York Stock Exchange
Notes Due 2003
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on
which registered
Not Applicable Not applicable.
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ] Not Applicable
All partnership interests of Showboat Marina Casino
Partnership and all capital stock of Showboat Marina Finance
Corporation are held by affiliates of the registrants.
Indicate the number of shares outstanding of each of the
registrants' classes of common stock: (1) Showboat Marina Casino
Partnership - Not Applicable (2) Showboat Marina Finance
Corporation - 1,000 shares of common stock, $1.00 par value as of
March 15, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.
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PART I
ITEM 1. BUSINESS
GENERAL
The Showboat Marina Casino Partnership, an Indiana general
partnership ("SMCP" or the "Partnership"), was organized as of
March 1, 1996, and the Showboat Marina Finance Corporation, a
Nevada corporation and a wholly-owned subsidiary of SMCP
("SMFC"), was incorporated on March 7, 1996. SMFC was formed to
assist SMCP in obtaining financing for the construction of the
sole licensed gaming facility located at East Chicago, Indiana on
Lake Michigan (the "East Chicago Showboat"). SMCP and SMFC
(collectively the "Company") are constructing and will own and
operate, subject to the approval of the Indiana Gaming Commission
(the "Indiana Commission"), the East Chicago Showboat. Showboat,
Inc., a Nevada corporation which owns a controlling interest in
SMCP ("Showboat"), has designed the East Chicago Showboat and has
provided or will provide assistance in developing, constructing,
equipping, opening and operating the East Chicago Showboat. The
Showboat Marina Partnership, an Indiana general partnership and
an affiliate of Showboat (the "Manager," the "Predecessor" or
"SMP"), will manage the East Chicago Showboat. The Company's
principal offices are located at One Showboat Place, East
Chicago, Indiana 46312, and its telephone number is (219) 378-
3000.
SMP was organized on January 31, 1994 for the purpose of
developing the East Chicago Showboat. As of March 28, 1996, SMP
contributed all of its assets (except for the capital stock of
East Chicago Second Century, Inc.) and liabilities to SMCP. SMCP
holds the certificate of suitability granted by the Indiana
Commission and has applied to receive an owner's license and to
open the East Chicago Showboat during the second calendar quarter
of 1997.
The certificate of suitability was most recently renewed by
the Indiana Commission in January 1997 for a period ending on
June 1, 1997. The certificate of suitability was initially
issued on January 8, 1996 to SMP which is owned 55% by Showboat
Indiana Investment Limited Partnership, a wholly-owned limited
partnership of Showboat, and 45% by Waterfront Entertainment and
Development, Inc. ("Waterfront"), an Indiana corporation. The
certificate of suitability was valid for a period of 180 days
from January 8, 1996, during which time certain statutory
requirements and special conditions must be followed in order to
receive a permanent riverboat owner's license. SMP applied with
the Indiana Commission to transfer the certificate of suitability
to SMCP, and, on March 20, 1996, SMP received permission to
transfer the certificate of suitability to SMCP.
EAST CHICAGO SHOWBOAT
The East Chicago Showboat will be located on approximately
27 acres of leased land at Pastrick Marina, approximately 12
miles from Chicago, Illinois. Pastrick Marina, previously
used for private pleasure craft docking only, was expanded
to serve as a marina for the East Chicago Showboat and a mooring
facility for SMCP's state-of-the-art casino gaming vessel
(the "Casino Vessel"). The East Chicago Showboat is
located directly off Indiana State Highway 912, a six-
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lane divided highway which connects 3.5 miles to the north of
Interstate Highway 90 and 5.5 miles to the north of Interstate
Highway 80/94. SMCP believes that the East Chicago Showboat will
have the most direct and convenient access from federal and state
highways of any existing or proposed gaming operation within a
120-mile radius of the East Chicago Showboat (the "Chicago Gaming
Market").
The East Chicago Showboat will consist of the Casino Vessel,
an approximately 100,000 square foot, state-of-the-art, five
level casino vessel, an approximately 100,000 square foot, land-
based pavilion (the "Pavilion"), an approximately 1,800 space
parking garage and surface parking for an additional 1,000
automobiles. The Casino Vessel will include approximately 53,000
square feet of gaming space on four of its five levels, feature
approximately 1,770 slot machines and approximately 90 table
games (including five poker tables), and accommodate
approximately 3,750 passengers. The Casino Vessel will resemble
a modern vacation cruise vessel, with escalators, elevators,
eleven foot to twelve and one-half foot high ceilings, and state-
of-the-art design features intended to provide customers with a
smooth and comfortable ride during cruises on Lake Michigan.
The East Chicago Showboat will offer gaming 365 days per year and
will provide its customers a wide variety of table games and slot
machines of varying denominations. SMCP expects to operate the
Casino Vessel approximately 20 hours each day in a series of
excursions lasting two to three hours each.
A festive Mardi Gras party atmosphere will be replicated
through the use of murals, street performers and entertainers.
Customers will enter the Casino Vessel through its second or
third floor via enclosed ramps from the adjacent Pavilion. Of
the Casino Vessel's five levels, the top four levels will be used
for gaming with three of the four gaming levels divided into two
distinct gaming areas separated by a lobby. The fourth level of
the Casino Vessel will contain a single gaming area, passenger
lounge, snack bar and cocktail lounge. The lowest level of the
Casino Vessel will be used as administrative support areas for
the Casino Vessel.
Customers will enter the Pavilion through the parking garage
or through the PORTE COCHERE, a covered driveway entrance.
Customers entering the Pavilion from the attached parking garage
will be protected by a climate controlled enclosed walkway and
directly enter the Pavilion's second floor. Customers entering
the Pavilion through the PORTE COCHERE will proceed from the
first floor lobby to the second floor public area. The second
floor public area of the Pavilion will include a reception desk,
a gift shop, a coffee shop, a hydraulic bandstand platform, an
upscale restaurant and a cocktail lounge. The first floor of the
Pavilion will include administrative offices, executive offices,
accounting and employee support areas and receiving platforms.
With respect to parking, the East Chicago Showboat will
provide secure, well-lit customer parking for approximately 2,800
vehicles -- 1,800 spaces in the attached parking garage and 1,000
spaces in a surface parking area. The parking garage will
provide access to patrons between floors via elevators,
escalators and stairways. In addition, there will be 600 off-
site parking spaces for employee parking.
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DESIGN AND CONSTRUCTION
Showboat, through its subsidiaries, will design, develop,
construct, equip and open the East Chicago Showboat, which
opening, subject to the receipt of an owner's license, is
anticipated to be during the second calendar quarter of 1997.
SMCP entered into a fixed price contract for the
construction of the Casino Vessel and entered into fixed or
guaranteed maximum price contracts with specific completion dates
for substantial portions of the Pavilion and other structures
comprising the East Chicago Showboat. Guaranteed maximum price
contracts, however, are subject to price adjustment if the plans
and specifications are changed. In October 1996, the project
budget for the East Chicago Showboat was revised upward by $5.0
million to $200.0 million to provide for an enhanced Pavilion and
additional employee training. As of January 1997, the breakwater
for Pastrick Marina was substantially completed and the Casino
Vessel had arrived in the City of East Chicago. The Casino
Vessel, Pavilion and parking garage are scheduled for substantial
completion by April 1997. As of December 31, 1996, approximately
$116.7 million has been spent on the construction of the East
Chicago Showboat.
FINANCIAL INFORMATION
Although the Company anticipates that the primary source of
its revenue will be from the gaming operations of the Casino
Vessel, the Company views the restaurants, bars, and special
events and services to be important adjuncts to the gaming
operations of the East Chicago Showboat. However, with the East
Chicago Showboat still under construction, the Company, a
development stage entity, has no operating history, other than
construction of the East Chicago Showboat, and has yet to
generate any operating revenue or operating profits. All revenue
earned by the Company relates to interest income on funds not yet
spent on the construction of the East Chicago Showboat. During
1996, total interest income earned was $4.9 million and total net
interest expense was $9.3 million, resulting in a net loss of
$4.4 million. See "Item 8. Financial Statements and
Supplementary Data" for additional financial information on the
Company.
MARKETING STRATEGY
SMCP intends to implement marketing programs previously
utilized by Showboat and its affiliates, such as a slot club and
special promotions, to attract patrons to the East Chicago
Showboat. SMCP's marketing programs will include data based
marketing which will offer complimentary merchandise, coin/cash
rebates based on play, complimentary food and free bus
transportation to and from the East Chicago Showboat. SMCP will
also utilize competitive payouts on gaming machines, value
pricing of food and other amenities, entertainment, and friendly,
quality customer service to maximize customer satisfaction.
SMCP will also employ a comprehensive marketing program to
establish the Showboat name in the Chicago metropolitan area.
SMCP expects to use television, billboard, magazine, newspaper
and radio advertising to increase the East Chicago Showboat's
visibility and to promote an exciting and entertaining image.
Additionally, SMCP has publicized the progress of construction
and will publicize the grand opening of the East Chicago
Showboat.
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COMPETITION
The gaming industry includes land-based casinos, dockside
casinos, riverboat casinos, casinos located on Native American
land and other forms of legalized gaming. There is intense
competition among companies in the gaming industry, some of which
have significantly greater resources than the Company. Although
the Indiana gaming statutes have allocated only one riverboat
owner's license to the City of East Chicago, four additional,
existing or proposed, riverboat casino operations are authorized
in northern Indiana on Lake Michigan and six additional licenses
have been authorized in southern Indiana. Further, owner's
licenses have been issued to three of the five riverboat casino
operators in northern Indiana and the two remaining proposed
riverboat gaming operators in northern Indiana, including SMCP,
hold certificates of suitability. Additional licenses could be
issued if subsequent legislation is enacted to increase the
number of available licenses in Indiana.
With respect to current local competition, the Chicago
Gaming Market includes seven operating riverboat casinos, three
of which are located in Indiana and four of which are located in
Illinois, and two additional casinos (including the East Chicago
Showboat) have been proposed or are under construction. Of the
three Indiana operating riverboat casinos, two commenced gaming
operations in June 1996 and one commenced gaming operations in
July 1996. The four riverboat casinos operating in Illinois are
within fifty miles of the East Chicago Showboat. Illinois gaming
statutes restrict these riverboat casinos to 1,200 gaming
positions each. Although Illinois has issued all ten riverboat
casino gaming licenses authorized by existing Illinois law,
legislation has been introduced on numerous occasions in recent
years to expand riverboat gaming in Illinois, such as the
authorization of new sites in the Chicago metropolitan area and
the modification of existing regulations restricting the total
number of gaming positions. Additionally, legislation has been
proposed which would permit dockside gaming in Illinois. No
assurance can be given that the State of Illinois may not enact
such legislation in the future.
SMCP expects to compete with the riverboat casinos in the
Chicago Gaming Market based on its convenient and direct access
to and from state and federal highways, availability of a wide
variety of table games and slot machines of varying
denominations, its spacious comfortable environment, and its
Mardi Gras atmosphere.
In addition to traditional riverboat casino operations, the
Company faces other forms of local competition as well. The
Pokagon Band of Potawatomi Indians (the "Pokagon Band") of
southern Michigan and northern Indiana has been federally
recognized as an Indian tribe. In February 1995, the Pokagon
Band voted to build at least one land-based casino in southern
Michigan and, in April 1995, voted to accept a casino development
proposal from a national casino operator. The Governor of
Michigan signed a compact with the Pokagon Band in November 1995
and the Governor of Indiana has not yet begun compact
negotiations with the Pokagon Band with respect to a land-based
casino in Indiana. In addition, the Indiana Horse Racing
Commission has issued a permit for pari-mutuel wagering on a
horse racetrack in Anderson, Indiana, and has issued licenses for
three satellite wagering facilities related to the
racetrack, including one in Merrillville, Indiana located
in the same county as the East Chicago Showboat. The
legalization of casino gaming operations in jurisdictions
in close proximity to the East Chicago Showboat would
have a material adverse effect on the Company. Other changes in
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legislation could increase tax or other burdens on the Company or
could lessen restrictions on competitors of the Company in other
jurisdictions, either of which could have a material adverse
effect on the operating results of the Company.
Apart from local competition, the Company will also compete
with gaming facilities nationwide, including riverboat gaming in
Illinois, Indiana, Iowa, Louisiana, Missouri and Mississippi and
land-based casinos in Colorado, Louisiana, Nevada, New Jersey,
and South Dakota, as well as various gaming operations on Native
American land, including those located in Arizona, Connecticut,
Louisiana, Michigan, Minnesota, New York and Wisconsin and
possibly in northern Indiana. Other jurisdictions may legalize
various forms of gaming and wagering that may compete with the
East Chicago Showboat in the future, including those
jurisdictions in close proximity to East Chicago, Indiana.
Gaming and wagering includes on-line computer gambling, bingo,
pull tab games, card clubs, pari-mutuel betting on horse racing
and dog racing, state sponsored lotteries, video lottery
terminals and video poker terminals, as well as other forms of
entertainment.
REGULATION AND LICENSING
The ownership and operation of an Indiana riverboat gaming
operation is subject to extensive regulation and supervision by
various governmental authorities, including the Indiana
Commission.
INDIANA
In 1993, the State of Indiana passed a Riverboat Gambling
Act which created the Indiana Commission. The Indiana Commission
is given extensive powers and duties for the purposes of
administering, regulating and enforcing the system of riverboat
gaming. It is authorized to award no more than 11 gaming licenses
(five to counties contiguous to Lake Michigan, five to counties
contiguous to the Ohio River and one to a county contiguous to
Patoka Lake).
With the exception of Lake County, a county must pass a
referendum approving (by a majority of those who voted) riverboat
gaming before riverboat gaming can be legalized in that county.
If a referendum fails to pass in any county, another referendum
may not be held for another two years. Once a referendum has
passed in a county, the Riverboat Gambling Act requires any
proposed riverboat to operate from the most populous city in that
county, unless such city passes a resolution authorizing a
riverboat to operate elsewhere in the county. For Lake County,
the Riverboat Gambling Act provides that the second and third
most populous cities of the county, Hammond and East Chicago,
respectively, according to the 1990 census, may authorize
riverboat gaming within such cities, by passage of a municipal
referendum. Voters in both cities have passed such referenda.
Gary, Lake County's most populous city, is exempted by the
Riverboat Gambling Act from the gaming referendum requirement
altogether. Pursuant to Indiana Commission resolution, the cost
of any referendum is to be borne by all license applicants for
the voting county or municipality.
The Indiana Commission has jurisdiction and supervision over
all riverboat gaming operations in Indiana and all persons
on riverboats where gaming operations are conducted. These
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powers and duties include authority to (1) investigate all
applicants for riverboat owner's licenses, (2) select among
competing applicants those that promote the most economic
development in a home dock area and that best serve the interest
of the citizens of Indiana, (3) establish fees for licenses, and
(4) prescribe all forms used by applicants. The Indiana
Commission shall adopt rules pursuant to statute for
administering the gaming statute and the conditions under which
riverboat gaming in Indiana may be conducted. The Indiana
Commission has promulgated certain final rules and has proposed
additional rules governing the application procedure and all
other aspects of riverboat gaming in Indiana. The Indiana
Commission may suspend or revoke the license of a licensee or a
certificate of suitability or impose civil penalties, in some
cases without notice or hearing for any act in violation of the
Riverboat Gambling Act or for any other fraudulent act or if the
licensee or holder of such certificate of suitability has not
begun regular riverboat excursions prior to the end of the twelve
month period following the Indiana Commission's approval of the
application for an owner's license. In addition, the Indiana
Commission may revoke an owner's license if it is determined by
the Indiana Commission that revocation is in the best interests
of the state of Indiana. The Indiana Commission will (1)
authorize the route of the riverboat and stops that the riverboat
may make, (2) establish minimum amounts of insurance and (3)
after consulting with the Corps of Engineers, determine which
waterways are navigable waterways for purposes of the Riverboat
Gambling Act and determine which navigable waterways are suitable
for the operation of riverboats.
The Riverboat Gambling Act requires an extensive disclosure
of records and other information concerning an applicant,
including disclosure of all directors, officers and persons
holding one percent (1%) or more direct or indirect beneficial
interest.
In determining whether to grant an owner's license to an
applicant, the Indiana Commission shall consider (1) the
character, reputation, experience and financial integrity of the
applicant and any person who (a) directly or indirectly controls
the applicant, or (b) is directly or indirectly controlled by
either the applicant or a person who directly or indirectly
controls the applicant, (2) the facilities or proposed facilities
for the conduct of riverboat gaming, (3) the highest total
prospective revenue to be collected by the state from the conduct
of riverboat gaming, (4) the good faith affirmative action plan
to recruit, train and upgrade minorities in all employment
classifications, (5) the financial ability of the applicant to
purchase and maintain adequate liability and casualty insurance,
(6) whether the applicant has adequate capitalization to provide
and maintain the riverboat for the duration of the license and
(7) the extent to which the applicant meets or exceeds other
standards adopted by the Indiana Commission. The Indiana
Commission may also give favorable consideration to applicants
for economically depressed areas and applicants who provide for
significant development of a large geographic area. Each
applicant must pay an application fee of $50,000 and an
additional investigation fee of $55,000. If the applicant is
selected, the applicant must pay an initial license fee of
$25,000 and post a bond. The Indiana Commission has issued six
of these eleven licenses--three in Lake County (two in Gary; one
in Hammond); one in Vanderburgh County; one in Ohio County; and
one in Dearborn County; SMCP and two other applicants (one in
Michigan City, LaPorte County, and one in Harrison County) have
been selected by the Indiana Commission as suitable for licensure
and have been awarded a certificate of suitability. The
certificate of suitability for SMCP expires June 1, 1997, and
is subject to renewal. A person holding an owner's gaming
license issued by the Indiana Commission may not own more
than a 10% interest in another such license. An owner's
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license expires five years after the effective date of the
license; however, after three years the holder of an owner's
license will undergo a reinvestigation to ensure continued
suitability for licensure. Unless the license has been
terminated, expired or revoked, the gaming license may be renewed
if the Indiana Commission determines that the licensee has
satisfied all statutory and regulatory requirements. In
connection with its application for an owner's license, the
Manager, Waterfront, Showboat, and its affiliates declared to the
Indiana Commission that if the Manager, or upon the transfer of
the certificate of suitability to SMCP, SMCP, receives a
riverboat owner's license for East Chicago, Indiana, they shall
not commence more than one other casino gaming operation within a
fifty-mile radius of East Chicago Showboat for a period of five
years beginning on the date of issuance of an owner's license by
the Indiana Commission to the Manager or SMCP, as applicable.
Adherence to the non-competition declaration is a condition of
the certificate of suitability and the owner's license. A gaming
license is a revocable privilege and is not a property right.
There can be no assurance that SMCP will obtain an Indiana gaming
license.
Minimum and maximum wagers on games are not established by
regulation but are left to the discretion of the licensee.
Wagering may not be conducted with money or other negotiable
currency. Riverboat gaming excursions shall be at least two
hours, but not more than four hours in duration unless expressly
approved by the Indiana Commission. No gaming may be conducted
while the boat is docked except (1) for 30-minute time periods at
the beginning and end of a cruise while the passengers are
embarking and disembarking, (2) if the master of the riverboat
reasonably determines that specific weather or water conditions
present a danger to the riverboat, its passengers and crew, (3)
if either the vessel or the docking facility is undergoing
mechanical or structural repair, (4) if water traffic conditions
present a danger to (A) the riverboat, riverboat passengers, and
crew, or (B) other vessels on the water, or (5) if the master has
been notified that a condition exists that would cause a
violation of federal law if the riverboat were to cruise. The
Indiana Commission has adopted rules governing cruising on Lake
Michigan by a riverboat casino. The period of time during which
passengers embark and disembark constitutes a portion of the
gambling excursion if gambling is allowed. At the conclusion of
the thirty-minute embarkation period, the gangway or its
equivalent must be closed. A standard excursion schedule for a
casino vessel on Lake Michigan must include at least one full
excursion (a cruise into the open water on Lake Michigan, not
more than three statute miles from the dock site July through
September and not more than one statute mile October through
June) and one intermediate excursion during which the vessel
cruises in protected navigable water on or accessible to Lake
Michigan. An intermediate excursion is to be conducted if the
statutory conditions that permit dockside gaming are not present
and if sea conditions or weather conditions, or both, do not
permit a full excursion. If a casino vessel remains dockside
because of statutory conditions, the embarkation and
disembarkation rules still apply.
An admission tax of $3.00 for each person admitted to the
gaming excursion is imposed upon the license owner. An additional
20% tax is imposed on the adjusted gross receipts received from
gaming operations, which is defined as the total of all cash and
property (including checks received by the licensee whether
collected or not) received, less the total of all cash paid out
as winnings to patrons and uncollected gaming receivables (not to
exceed 2%). The gaming license owner shall remit the admission
and wagering taxes before the close of business on the day
following the day on which the taxes were incurred. Legislation
has been introduced and passed one house in the 1997 Session
of the Indiana General Assembly, and passed by the House Ways
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and Means Committee, which if enacted, would increase the tax for
admission from $3 to $4 for each person admitted to a gaming
excursion. In 1996, legislation was enacted in Indiana
permitting the imposition of property taxes on the riverboats at
rates to be determined by local taxing authorities of the
jurisdiction in which a riverboat operates. The Riverboat
Gambling Act requires a riverboat owner licensee to directly
reimburse the Indiana Commission for the costs of inspectors and
agents required to be present during the conduct of gaming
operations. Pursuant to agreements with the City, and as
reflected in the certificate of suitability issued by the
Commission, SMCP has agreed to (1) provide certain fixed
incentives of approximately $16.4 million to the City of East
Chicago and its agencies for transportation, job training, home
buyer assistance and discrete economic development initiatives,
(2) pay an aggregate of 3% of adjusted gross receipts to the City
and two not-for-profit foundations for its public schools and
housing and commercial development, (3) pay 0.75% of adjusted
gross receipts for community development projects to East Chicago
Second Century, Inc., a for-profit corporation owned by the
Manager ("Second Century") and (4) complete the Washington High
School site town home development with a total projected cost of
$5.0 million. Funding for the Washington High School site
project will be derived from contributions to Second Century from
SMCP as well as funds from other third-party sources.
The Indiana Commission is authorized to license suppliers
and certain occupations related to riverboat gaming. Gaming
equipment and supplies customarily used in conducting riverboat
gaming may be purchased or leased only from licensed suppliers.
The Indiana Riverboat Gambling Act places special emphasis
upon minority and women's business enterprise participation in
the riverboat industry. Any person issued a riverboat owner's
license must establish goals of expending at least 10% of the
total dollar value of the licensee's contracts for goods and
services with minority business enterprises and 5% of the total
dollar value of the licensee's contracts for goods and services
with women's business enterprises. The Indiana Commission may
suspend, limit or revoke the gaming owner's license or impose a
fine for failure to comply with statutory requirements.
An institutional investor which acquires 5% or more of any
class of voting securities of a holding company of a licensee is
required to notify the Indiana Commission and to provide
additional information, and may be subject to a finding of
suitability. A person who acquires 5% or more of any class of
voting securities of a holding company of a licensee is required
to apply to the Indiana Commission for a finding of suitability.
A riverboat owner licensee may not enter into or perform any
contract or transaction in which it transfers or receives
consideration which is not commercially reasonable or which does
not reflect the fair market value of the goods or services
rendered or received. All contracts are subject to disapproval
by the Indiana Commission.
A riverboat licensee or an affiliate may not enter into a
debt transaction of $1 million or more without the prior approval
of the Indiana Commission. A riverboat owner licensee or any
other person may not lease, hypothecate, borrow money against or
loan money against a riverboat owner's license.
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The Riverboat Gambling Act prohibits contributions to a
candidate for a state, legislative, or local office, or to a
candidate's committee or to a regular party committee by the
holder of a riverboat owner's license or a supplier's license, by
an officer of a licensee, by an officer of a person that holds at
least a 1% interest in the licensee, or by a person holding at
least a 1% interest in the licensee; and, the Indiana Commission
is in the process of promulgating a rule requiring the quarterly
reporting by such licensees, officers, and persons.
Legislation has been introduced in the 1997 Session of the
Indiana General Assembly, which if enacted, would prohibit the
expansion of authorized gambling until the earlier of December
31, 1999, or the date the Governor has certified that the
National Gambling Impact Study Commission has completed its
study. Additionally, the Indiana legislature formed an Interim
Study Committee on Public Gaming Issues which conducted public
forums on gaming and is expected to provide a report on gaming to
the legislature.
A lawsuit was filed on October 25, 1996, in Harrison County
Indiana by three individuals residing in counties abutting the
Ohio River, which challenges the constitutionality of the
Riverboat Gambling Act on grounds that (i) it allegedly creates
an unequal privilege because under the Act supporters of
riverboat casino gambling, having lost a county-wide vote, are
allowed to resubmit a proposal to county voters for approval of
riverboat casino gambling while opponents of riverboat casino
gambling, having lost a county-wide vote, are not allowed to
resubmit a proposal; and (ii) it was enacted as a provision
attached to a state budget bill allegedly in violation of an
Indiana constitutional provision requiring legislative acts to be
confined to one subject and matters properly connected with the
subject. The State of Indiana recently filed an answer to the
complaint. The Indiana Supreme Court has previously upheld the
constitutionality of the Riverboat Gambling Act, although the
prior challenge was on different grounds than those contained in
the recently filed lawsuit. If the Riverboat Gambling Act
ultimately was held unconstitutional it would, absent timely
corrective legislation, have a material adverse effect on SMCP's
operations.
COAST GUARD
Each cruising riverboat is regulated by the Coast Guard,
whose regulations affect vessel design, construction, operation
(including requirements that each vessel be operated by a minimum
complement of licensed personnel), and maintenance in addition to
limiting the number of passengers-customers. Since the Casino
Vessel must hold a valid Coast Guard-issued certificate of
inspection, the loss or suspension of such certificate could
preclude the use of the Casino Vessel. The Casino Vessel is
subject to annual, quarterly, as well as unannounced, inspection
by the Coast Guard and must be drydocked every five years for
inspection of the hull. Such drydockings remove the Casino
Vessel from service for a period of time and can result in
required repairs. SMCP believes that Coast Guard regulations,
and the requirements of operating and managing a cruising gaming
vessel generally, make a riverboat casino more difficult and more
expensive to conduct than a land-based casino.
All shipboard employees of SMCP employed on vessels
regulated by the Coast Guard -- even those with duties
entirely unrelated to the actual operation of the
vessel, such as dealers, cocktail hostesses and security
personnel-- are subject to the Jones Act which, among other
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things, exempts those employees from state limits on worker's
compensation awards. SMCP will obtain insurance to cover
employee claims.
In order for the Casino Vessel to be able to operate in the
United States, SMCP must be a "citizen of the United States," as
defined in the Merchant Marine Act, 1920, as amended, and the
Shipping Act, 1916, as amended. A partnership, such as SMCP, is
considered a United States citizen for purposes of United States
coastwide requirements if at least 75% of the equity interest in
SMCP is owned by United States citizens and all general partners
are United States citizens.
OTHER FEDERAL, STATE AND LOCAL LEGISLATION AND REGULATIONS
Various federal, state and local legislation and regulations
relating to safety, health and environmental matters that apply
to businesses in general, such as the Clean Air Act, the Clean
Water Act, the Occupational Safety and Health Act, the Resource
Conservation Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act, apply to SMCP as well.
In addition, certain legislation and regulations that apply
generally to vessels operating in United States waters, such as
the Oil Pollution Act of 1990 (which among other things, deals
with liability for oil spills and requires a certificate of
financial responsibility for vessels operating in United States
waters), or within the jurisdiction of various states would apply
to SMCP. One major development in federal legislation was the
passage of the Coast Guard Authorization Act of 1996 which amends
a provision of the Johnson Gambling Devices-Transportation Act of
1951 prohibiting gaming on federal waters, including Lake
Michigan. As a result of this amendment, riverboat casinos, such
as the Casino Vessel, will be able to conduct cruises on Lake
Michigan within boundaries of the State of Indiana and "mock
cruises" will only be permitted pursuant to the exceptions
authorized by the Riverboat Gambling Act.
In addition, Congress has passed a bill which would
establish a National Gambling Impact and Policy Commission (the
"Policy Commission") to study the economic impact of gambling on
the United States, the individual States and Native American
tribes. Additional federal regulation may occur due to the
initiation of hearings by the Policy Commission. Any new federal
legislation could have a material adverse effect on the Company.
Although SMCP does not anticipate making material expenditures
with respect to such laws and regulations, the applicability of
such laws and regulations may result in additional costs to SMCP.
EMPLOYEES
SMCP currently has approximately 250 employees. When the
East Chicago Showboat commences operations, management
anticipates the employment of approximately 1,900 employees --
some of whom may be subject to collective bargaining agreements.
FORWARD-LOOKING INFORMATION
Certain information included in this Annual Report
on Form 10-K and in other materials filed or to be
filed by the Company with the Securities and Exchange
Commission (as well as information included in oral
statements or other written statements made or to be
made by the Company) contain or will contain or include,
forward-looking statements within the meaning of
-12-
<PAGE>
Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. Such
forward-looking statements address, among other things, the
effects of competition, plans for projects currently under
development, plans for property enhancements, business
development activities, financing sources and the effects of
regulation (including gaming licensure and regulation and state
and local regulation). Such forward looking information is based
upon management's current plans or expectations and is subject to
a number of uncertainties and risks that could significantly
affect current plans, anticipated actions and the Company's
future financial condition and results. As a consequence,
current plans, anticipated actions and future financial condition
and results may differ from those expressed in any forward-
looking statements made by or on behalf of the Company. These
uncertainties and risks include, but are not limited to, those
relating to conducting operations at a newly or recently
developed site or in a jurisdiction for which gaming has recently
been permitted, changes in gaming, state and local laws and
regulations, development and construction activities, leverage
and debt service requirements (including sensitivity to
fluctuation in interest rates), general economic conditions,
changes in federal or state tax laws, action taken under
application for licenses (including renewals) and approvals under
applicable laws and regulations (including gaming laws and
regulations) and the legalization of gaming in certain
jurisdictions.
ITEM 2. PROPERTIES
On October 19, 1995, SMP entered into a Redevelopment
Project Lease ("the Project Lease") with the City of East
Chicago, Department of Redevelopment, pursuant to which the City
of East Chicago granted SMP a leasehold interest for
approximately 27 acres in East Chicago, Indiana (the "Leased
Premises") to construct and operate the East Chicago Showboat for
a period of thirty (30) years from the date SMP received the
certificate of suitability from the Indiana Commission (the
"Commencement Date"). As a result of the March 28, 1996 transfer
of assets and liabilities from SMP to SMCP, SMP assigned the
Lease Agreement to SMCP. SMCP may elect to renew the term for
two additional thirty year terms. The Project Lease obligates
SMCP to pay the City of East Chicago $400,000 in annual rent with
an adjustment every three years by the same percentage as the
percentage increase in the Consumer Price Index over the previous
three years not to exceed 105% of the previous annual rental.
The interests of SMCP in the Project Lease are subject to a
leasehold mortgage executed in conjunction with the Company's 13
1/2 % Series B First Mortgage Notes Due 2003. See "Item 8.
Financial Statements and Supplementary Data - Notes to Financial
Statements."
On October 22, 1996, SMCP entered into a lease (the "Lease")
with 3600 Michigan Company, Ltd. which granted SMCP with a
leasehold interest in certain property in East Chicago, Indiana
for the purposes of using the land for off-site employee parking.
The Lease is for a term of three (3) years and may be renewed at
the option of SMCP for two (2) additional five (5) year terms.
The Lease obligates SMCP to pay 3600 Michigan Company, Ltd. a
monthly rent of $4,631.28 with an adjustment on the first of May
of each year of the lease term to reflect increases or decreases
in real estate taxes per acre assessed against the leased
premises.
In addition to these leasehold interests, SMCP will
own the Casino Vessel which arrived in the City of East
Chicago from Jacksonville, Florida in December 1996 and
continues to be constructed at its berth in the Pastrick
Marina. SMCP's interests in the Casino Vessel will be
-13-
<PAGE>
subject to a first preferred ship mortgage executed in
conjunction with the Company's 13 1/2% Series B First Mortgage
Notes Due 2003 at such time as the title to the Casino Vessel is
transferred from the builder of the Casino Vessel to SMCP. See
"Item 8. Financial Statements and Supplementary Data - Notes to
Financial Statements."
The Company currently has all land necessary for the
development of the East Chicago Showboat.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
SMCP does not possess a class of common equity and its
partnership interests have not been registered under the
Securities Act of 1933 nor under Section 12 of the Securities
Exchange Act of 1934, and the partnership interests are not
publicly traded. As of the date hereof, a subsidiary of Showboat
beneficially holds 55% of the partnership interests of SMCP and
Waterfront beneficially holds 45% of the partnership interests of
SMCP. With respect to SMFC, all 1,000 shares of common stock,
$1.00 par value as of December 31, 1996, outstanding, is owned by
SMCP and has not been registered under the Securities Act of 1933
nor under Section 12 of the Securities Exchange Act of 1934, and
it is not publicly traded.
To date, SMCP has not made any distributions on its
partnership interests. The First Mortgage Note Indenture
restricts the ability of SMCP to declare or make distributions on
the partnership interests. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" and "Item 8. Financial
Statements and Supplementary Data - Notes to Financial Statements
ITEM 6. SELECTED FINANCIAL DATA
As noted in "Part I Item 1. Business--General," SMP
contributed all of its assets (except for the capital stock of
East Chicago Second Century, Inc.) and liabilities to SMCP as of
March 28, 1996. The selected financial data presented below for
the period from March 29, 1996 (the commencement of development
of SMCP) to December 31, 1996 and the cumulative period from
January 31, 1994 through December 31, 1996 have been derived from
the consolidated financial statements of SMCP and SMP. The
selected financial data should be read in conjunction with "Item
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Item 8. Financial Statements and
Supplementary Data." SMCP is in the development stage and has
had no operating results.
-14-
<PAGE>
<TABLE>
<CAPTION>
SMCP
Period from Cumulative
March 29, period from
1996 January 31,
(commencement 1994
of development (inception)
through through
December 31, December 31,
1996 1996
(in thousands) (in thousands)
<S> <C> <C>
INCOME STATEMENT DATA:
Interest income <F1>......... 4,919 4,919
Interest expense............. (14,327) (14,327)
Capitalized interest......... 4,991 4,991
Net loss..................... (4,417) (4,417)
<FN>
<F1> SMCP is in the development stage and, accordingly, had no
operating revenues during any of the periods presented.
<F2> Includes deficit accumulated during the development stage of
$4,417.
</TABLE>
<TABLE>
<CAPTION>
SMCP
DECEMBER 31, 1996
(in thousands)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 599
Short-term investments held
in escrow.................... 69,002
Total assets................. 187,894
Long-term debt............... 140,000
Total liabilities............ 153,311
Partners' capital <F2>....... 34,583
<FN>
<F1> SMCP is in the development stage and, accordingly, had no
operating revenues during any of the periods presented.
<F2> Includes deficit accumulated during the development stage of
$4,417.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DEVELOPMENT ACTIVITIES
The operations of SMCP and of SMP have been limited to
applying for appropriate gaming licenses and securing the land
for, arranging for construction of, finalizing the design of,
constructing and developing and obtaining financing for the East
Chicago Showboat. Subject to obtaining the necessary gaming
licenses, other permits and financing, SMCP expects gaming
operations at the East Chicago Showboat to commence sometime
during the second quarter of 1997.
RESULTS OF OPERATIONS
SMCP is in the development stage and has capitalized all
costs, except for some interest expense. Accordingly, SMCP does
not have any historical operating income. SMFC is wholly-owned by
SMCP and was incorporated to assist SMCP in financing the
East Chicago Showboat. The capitalized costs consist
primarily of land improvements, economic development
payments, vessel design and construction, legal, audit,
consulting and design fees, financing and commitment
-15-
<PAGE>
fees, interest on qualifying assets, and gaming application fees,
all associated with the development of the East Chicago Showboat.
SMCP anticipates that the results of its first quarter of
operations will be adversely affected by the write-off at opening
of certain preopening costs and should not be indicative of
future operations. Future operating results will be subject to
significant business, economic, regulatory and competitive
uncertainties and contingencies, many of which are beyond the
control of SMCP. While SMCP believes that the East Chicago
Showboat will be able to attract a sufficient number of customers
and achieve the level of activity necessary to permit SMCP and
SMFC to meet their obligations, there can be no assurance with
respect thereto.
MATERIAL CHANGES IN FINANCIAL CONDITION
Since its inception, SMCP has met its capital requirements
through the $39.0 million capital contribution (the "Capital
Contribution") and the $133.7 million net proceeds from the
offering (the "Offering") of its 13 1/2% Series A First Mortgage
Notes due 2003 (the "Old Notes"). On August 12, 1996 SMCP and
SMFC exchanged the Old Notes with registered notes, the 13 1/2%
Series B First Mortgage Notes due 2003 (the "New Notes"). The
Old Notes were, and the New Notes have been issued under the
Indenture dated as of March 26, 1996 (the "Note Indenture")
between SMCP, SMFC and American Bank National Association as
Trustee (in such capacity, the "Trustee" or "Registrar"). The
form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes. The New Notes
and the Old Notes are collectively referred to as the "Notes."
The funds necessary to design, develop, construct, equip and
open the East Chicago Showboat are expected to be derived from
the Capital Contribution, the proceeds from the Offering, and
capital lease financing. SMCP has authorized an increase in the
budget of up to $5.0 million to be used for interior upgrades
including an upscale restaurant and additional funding for
employee training thereby increasing the budget for the
construction of the East Chicago Showboat to $200.0 million. The
increase in the budget is principally being provided through
equipment lease commitments provided by SMCP's equipment lease
providers. PDS Financial Corporation is providing an equipment
lease in the amount of $11.0 million (the "PDS Commitment") and
FINOVA Capital Corporation is providing a loan in the amount of
the lesser of $11.0 million or SMCP's cost to acquire the
Equipment (defined in the Commitment Agreement) (the "FINOVA
Commitment"). The PDS Commitment and the FINOVA Commitment will
be secured by the equipment purchased with the proceeds of the
PDS Commitment and the FINOVA Commitment, respectively. The PDS
Commitment is for a term of 48 months and the rate is fixed two
weeks prior to closing of each lease schedule at four hundred
fifty (450) basis points over the four (4) year Treasury Note
rate as published daily in THE WALL STREET JOURNAL. The term of
the FINOVA Commitment is for an initial period ending no later
than October 1, 1997 (the "Initial Term") at which time, subject
to certain conditions, the FINOVA Commitment shall be converted
into a term loan for a period of three years (the "Term Period").
During the Initial Term the FINOVA Commitment shall
accrue interest at the announced Citibank, N.A., New
York, New York prime rate plus 2% per annum. During the
Term Period, the FINOVA Commitment shall accrue interest
at the highest yield for Treasury Notes with a maturity
date on or closest to the Maturity Date of the FINOVA
Commitment, as published in THE WALL STREET JOURNAL plus
4.90% per annum. SMCP is currently finalizing these agreements
-16-
<PAGE>
with its capital lease providers. Management believes that it
has sufficient sources of funds for the construction of the East
Chicago Showboat. The funds provided by these sources are
expected to be sufficient to develop and commence operations of
the East Chicago Showboat. However, there can be no assurance
that such funds in themselves will be sufficient for the
development and construction of the East Chicago Showboat.
SMCP has entered into a fixed price contract for the
construction of the Casino Vessel and has entered into fixed or
guaranteed maximum price contracts with specific completion dates
for substantial portions of the Pavilion and other structures
comprising the East Chicago Showboat. Fixed or guaranteed
maximum price contracts are subject to price adjustments if the
plans and specifications are changed. The unspent portion of the
Capital Contribution and the net proceeds of the Offering have
been deposited into an escrow account (the "Escrow Account") and
invested in short-term investments. The funds are disbursed
pursuant to the Escrow and Disbursement Agreement for the
construction of the East Chicago Showboat. A subsidiary of
Showboat is acting as the escrow and disbursement agent pursuant
to the Escrow and Disbursement Agreement. Showboat has entered
into a completion guarantee (the "Completion Guarantee")
committing up to $30.0 million, subject to certain exceptions,
qualifications and limitations, to complete the Minimum
Facilities (as defined in the Completion Guarantee). Showboat
has also provided a standby equity commitment (the "Standby
Equity Commitment") pursuant to which it has agreed to cause to
be made up to an aggregate of $30.0 million in additional capital
contributions to SMCP during the first three Operating Years (as
defined in the Standby Equity Commitment Agreement). The Standby
Equity Commitment is triggered when SMCP's Combined Cash Flow (as
defined in the Standby Equity Commitment) does not reach $35.0
million in any one such Operating Year, subject to certain terms
and conditions. However, in no event shall Showboat be required
to contribute more than $15.0 million in respect of any one such
Operating Year. The Completion Guarantee and the Standby Equity
Commitment are subject to certain limitations, qualifications,
and exceptions.
The Notes mature on March 15, 2003. Interest payment dates
under the Notes are March 15 and September 15 of each year with
the first payment made on September 15, 1996. The Notes are
senior secured obligations of SMCP. The Notes rank PARI PASSU,
or on a parity with, in right of payment with all existing and
future senior indebtedness of SMCP and senior in right of payment
to all future Subordinated Indebtedness of SMCP. The Notes are
without recourse to the general partners of SMCP or to Showboat.
Terms not otherwise defined herein have the meanings assigned to
them in the Note Indenture. The Notes are secured by a first
lien on substantially all of SMCP's assets. The Note Indenture
places significant restrictions on SMCP for the incurrence of
additional Indebtedness, the creation of additional Liens on the
Collateral securing the Notes, transactions with Affiliates and
making Restricted Payments unless certain conditions are met.
Restricted Payments include paying a management fee to SMP. In
order to pay the management fee, among other things, SMCP's Fixed
Charge Coverage Ratio must be greater than 1.5 to 1.0 for the
most recently ended four full fiscal quarters, after giving
effect to such Restricted Payment. To make any other Restricted
Payment SMCP must, among other things, have a Fixed Charge
Coverage Ratio of 2.0 to 1.0 for the most recently ended four
full fiscal quarters, after giving effect to such Restricted
Payment.
-17-
<PAGE>
The Notes may be redeemed at the option of SMCP, in whole or
in part, at any time on and after March 15, 2000, at the
redemption prices set forth in the Note Indenture, plus accrued
and unpaid interest and liquidated damages thereon, if any,
through the redemption date. Upon a Change of Control, each
holder of the Notes will have the right to require SMCP to
repurchase all or part of such holder's Notes at a price equal to
101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and liquidated damages thereon, if any, to the
date of repurchase. The Note Indenture contains certain
covenants that, among other things, limit the ability of SMCP and
its Restricted Subsidiaries to incur additional Indebtedness and
issue Disqualified Stock, pay dividends or make other
distributions, repurchase Equity Interests or Subordinated
Indebtedness, engage in certain lease transactions, create
certain liens, enter into transactions with affiliates, sell
assets, issue or sell certain Equity Interests of SMCP's
subsidiaries or enter into certain mergers and consolidations.
Following the commencement of operations of the East Chicago
Showboat, SMCP expects to fund its operating debt service and
capital needs from operating cash flow. Based upon SMCP's
anticipated future operations, management believes that available
cash flow from the East Chicago Showboat's future operations,
together with the proceeds from the offering and the capital
contribution, will be adequate to meet SMCP's anticipated future
requirements for working capital, capital expenditures and
scheduled payments of principal, interest and liquidated
damages, if any, on the Notes for the foreseeable future. No
assurance can be given, however, that operating cash flow will be
sufficient for that purpose. SMCP intends to establish initial
working capital reserves to provide for anticipated short-term
liquidity needs. Although no additional financing is
contemplated, SMCP will seek, if necessary and to the extent
permitted under the Indenture, additional financing through bank
borrowings, debt or equity financings. There can be no assurance
that additional financing, if needed, will be available to SMCP,
or that, if available, the financing will be on terms favorable
to SMCP. There is no assurance that SMCP's estimate of its
reasonably anticipated liquidity needs is accurate or that new
business developments or other unforeseen events will not occur,
resulting in the need to raise additional funds.
SEASONALITY
SMCP anticipates that activity at the East Chicago Showboat
will be affected by weather conditions typical to the region.
Although SMCP has no operating history, SMCP anticipates that
most business activity will occur from May through September
rather than from October through April when the region
experiences harsher weather. Accordingly, SMCP's results of
operations may fluctuate from quarter to quarter and the results
for any fiscal quarter may not be indicative of results for
future fiscal quarters.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors
Consolidated Balance Sheet as of December 31, 1996.
Consolidated Statements of Operations for the
Period from March 29, 1996
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<PAGE>
(commencement of development) through December 31, 1996
and cumulative period from January 31, 1994 (inception)
through December 31, 1996.
Consolidated Statement of Partners' Capital for the
Period from March 29, 1996 (commencement of
development) through December 31, 1996.
Consolidated Statements of Cash Flows for the Period
from March 29, 1996 (commencement of development)
through December 31, 1996 - Partnership, the Period
from January 1, 1996 through March 28, 1996, the year
ended December 31, 1995, and the period from January
31, 1994 (inception) through December 31, 1994 -
Predecessor and the cumulative period from January 31,
1994 (inception) through December 31, 1996.
Notes to Consolidated Financial Statements.
-19-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Showboat Marina Casino Partnership:
We have audited the accompanying consolidated balance sheet of
Showboat Marina Casino Partnership and subsidiary (a development
stage entity) (Partnership) as of December 31, 1996 and the
related consolidated statements of operations, partners' capital,
and cash flows for the period from March 29, 1996 (commencement
of development) through December 31, 1996, the related statements
of cash flows of Showboat Marina Partnership (Predecessor) for
the period from January 1, 1996 through March 28, 1996, the year
ended December 31, 1995, the period from January 31, 1994
(inception) through December 31, 1994, and the cumulative
statements of operations and cash flows for the period from
January 31, 1994 (inception) through December 31, 1996 for the
Partnership and Predecessor combined. These consolidated
financial statements are the responsibility of the Partnership's
and Predecessor's management. Our responsibility is to express
an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Showboat Marina Casino Partnership and subsidiary (a
development stage entity) as of December 31, 1996, and the
results of their operations and cash flows for the period from
March 29, 1996 (commencement of development) through December 31,
1996; the cash flows of the Predecessor for the period from
January 1, 1996 through March 28, 1996, the year ended December
31, 1995, the period from January 31, 1994 (inception) through
December 31, 1994, and the cumulative results of operations and
cash flows for the Partnership and Predecessor combined for the
period from January 31, 1994 (inception) through December 31,
1996, in conformity with generally accepted accounting
principles.
Las Vegas, Nevada KPMG Peat Marwick LLP
January 24, 1997
-20-
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A Development Stage Entity)
Consolidated Balance Sheet
December 31, 1996
(In thousands)
ASSETS
<S> <C>
Cash and cash equivalents.................................... $ 599
Short-term investments held in escrow........................ 69,002
Interest receivable.......................................... 1,601
Property and equipment:
Land improvements......................................... 2,123
Furniture, fixtures and equipment......................... 764
Construction in progress.................................. 97,714
Total property and equipment..................... 100,601
Licensing costs.............................................. 2,373
Economic development costs................................... 5,264
Debt issuance costs.......................................... 6,296
Other assets................................................. 2,158
---------------
16,091
---------------
$ 187,894
---------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable............................................. $ 3,717
Construction payables........................................ 4,037
Accrued interest............................................. 5,557
Long-term debt............................................... 140,000
Total liabilities................................ 153,311
Commitments and contingencies................................ ---
Partners' capital (includes deficit accumulated during the
development stage of $4,417).............................. 34,583
---------------
$ 187,894
---------------
</TABLE>
See accompanying notes to consolidated financial statements
21
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A Development Stage Entity)
Consolidated Statements of Operations
(In thousands)
PERIOD FROM CUMULATIVE
MARCH 29, 1996 PERIOD FROM
(COMMENCEMENT JANUARY 31, 1994
OF DEVELOPMENT) (INCEPTION)
THROUGH THROUGH
DECEMBER 31, DECEMBER 31,
1996 1996
-------------------- --------------------
<S> <C> <C>
Interest income.............................................. $ 4,919 $ 4,919
Interest expense............................................. 14,327 14,327
Less interest capitalized.................................... 4,991 4,991
Net interest expense.................................. 9,336 9,336
Net loss accumulated during the development
stage.............................................. $ (4,417) $ (4,417)
-------------------- --------------------
</TABLE>
See accompanying notes to consolidated financial statements
22
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP
(A Development Stage Entity)
Consolidated Statement of Partners' Capital
Period from March 29, 1996 (commencement of development)
through December 31, 1996
(In thousands)
SHOWBOAT
SHOWBOAT MARINA
MARINA INVESTMENT
PARTNERSHIP PARTNERSHIP TOTAL
------------- ------------- -----------
<S> <C> <C> <C>
Balance at beginning of period......................... $ --- $ --- $ ---
Capital contributions.................................. 21,897 390 22,287
Net loss accumulated during the development stage...... (4,373) (44) (4,417)
Transfer of net assets from Showboat Marina
Partnership....................................... 16,713 --- 16,713
------------- ------------- -----------
Balance at end of December 31, 1996.................... $ 34,237 $ 346 $ 34,583
------------- ------------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
23
<PAGE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (PARTNERSHIP)
(A Development Stage Entity)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Consolidated Statements of Cash Flows
(In thousands)
PARTNERSHIP PREDECESSOR
---------------- ------------------------------
PERIOD FROM
MARCH 29, 1996 PERIOD
(COMMENCE- FROM
MENT OF JANUARY 1,
DEVELOPMENT) 1996
THROUGH THROUGH YEAR ENDED
DECEMBER 31, MARCH 28, DECEMBER 31,
1996 1996 1995
---------------- -------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................... $ (4,417) $ --- $ ---
Interest receivable.................... (1,601) --- ---
Licensing costs........................ --- (276) (1,467)
Other assets........................... (1,733) (68) (337)
Accounts payable....................... 2,771 443 503
construction payables.................. 4,037 --- ---
Accrued interest....................... 5,557 --- ---
Net cash provided by (used in) ------------- -------------- -------------
operating activities.............. 4,614 99 (1,301)
------------- -------------- -------------
Cash flows from investing activities:
Economic development costs............. (4,144) (7) (1,113)
Land improvements...................... --- (286) (1,790)
Purchase of property and
equipment............................ (110) (198) (456)
Purchase of short-term investments..... (69,002) --- ---
Payments for construction in
progress............................. (87,300) (5,246) (4,239)
Net cash used in investing ------------- -------------- -------------
activities........................ (160,556) (5,737) (7,598)
------------- -------------- -------------
Cash flows from financing activities:
Proceeds from issuance of notes
payable, net of issuance costs....... 134,254 (550) ---
Capital contributions.................. 22,287 5,830 9,257
Net cash provided by financing ------------- -------------- -------------
activities........................ 156,541 5,280 9,257
------------- -------------- -------------
Net increase (decrease)
in cash........................... 599 (358) 358
Cash at beginning of period.............. --- 358 ---
------------- -------------- -------------
Cash at end of period.................... $ 599 $ --- $ 358
------------- -------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO PARTNERSHIP (PARTNERSHIP)
(A Development Stage Entity)
AND
SHOWBOAT MARINA PARTNERSHIP (PARTNERSHIP)
Consolidated Statements of Cash Flows
(In thousands)
(CONTINUED)
PREDECESSOR CUMULATIVE
--------------- ---------------
PERIOD FROM PERIOD FROM
JANUARY 31, JANUARY 31,
1994 1994
(INCEPTION) (INCEPTION)
THROUGH THROUGH
DECEMBER 31, DECEMBER 31,
1994 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................... $ --- $ (4,417)
Interest receivable.................... --- (1,601)
Licensing costs........................ (630) (2,373)
Other assets........................... (20) (2,158)
Accounts payable....................... --- 3,717
Construction payables.................. --- 4,037
Accrued interest....................... --- 5,557
Net cash provided by (used in) --------------- ---------------
operating activities.............. (650) 2,762
--------------- ---------------
Cash flows from investing activities:
Economic development costs............. --- (5,264)
Land improvements...................... (47) (2,123)
Purchase of property and
equipment............................ --- (764)
Purchase of short-term investments..... --- (69,002)
Payments for construction in
progress............................. (929) (97,714)
Net cash used in investing --------------- ---------------
activities........................ (976) (174,867)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of notes
payable, net of issuance costs....... --- 133,704
Capital contributions.................. 1,626 39,000
Net cash provided by financing --------------- ---------------
activities........................ 1,626 172,704
--------------- ---------------
Net increase (decrease)
in cash........................... --- 599
Cash at beginning of period.............. --- ---
--------------- ---------------
Cash at end of period.................... $ --- $ 599
--------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements
24
<PAGE>
SHOWBOAT MARINA CASINO PARTNERSHIP (PARTNERSHIP)
(A DEVELOPMENT STAGE ENTITY)
AND
SHOWBOAT MARINA PARTNERSHIP (PREDECESSOR)
Notes to Consolidated Financial Statements
December 31, 1996
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The accompanying consolidated financial statements
present the financial position, results of operations and
cash flows of Showboat Marina Casino Partnership (a
development stage entity) (SMCP) and its wholly owned
subsidiary, Showboat Marina Finance Corporation (SMFC) as of
December 31, 1996 and for the period from March 29, 1996
(commencement of development) through December 31, 1996.
These financial statements also present the cash flows of
Showboat Marina Partnership (SMP or Predecessor) for the
period from January 1, 1996 through March 28, 1996, the year
ended December 31, 1995 and the period from January 31, 1994
(inception) through December 31, 1994. The Predecessor had
no operations through March 28, 1996 other than development
and licensing activities, the costs of which were capitalized
and subsequently contributed to the SMCP as described below.
Therefore a statement of operations is not applicable.
SMCP is a general partnership and was formed as of
March 1, 1996 for the purpose of developing a riverboat
casino complex in East Chicago, Indiana to be operated on
Lake Michigan. The complex will consist of a casino gaming
vessel and a land based support facility (the East Chicago
Showboat). The East Chicago Showboat is expected to contain
approximately 53,000 square feet of gaming space with
approximately 1,770 slot machines and approximately 90 table
games (including 5 poker tables). The land based facility is
expected to consist of a pavilion, parking garage and surface
parking. The pavilion will be approximately 100,000 square
feet and will include a coffee shop, hydraulic bandstand
platform, upscale restaurant, cocktail lounge, gift shop,
ticket/promotions area as well as administrative offices.
The current design includes an 1,800 space parking garage and
1,000 surface parking spaces. SMFC was incorporated on
March 7, 1996 to assist SMCP in financing the East Chicago
Showboat. The Predecessor was formed on January 31, 1994 and
had been developing the project prior to the formation of
SMCP.
SMCP is owned 99% by the Predecessor and 1% by Showboat
Marina Investment Partnership. SMCP is effectively owned 55%
by Showboat, Inc. (Showboat) and 45% by Waterfront
Entertainment and Development, Inc. (Waterfront) through
various partnership interests.
The Predecessor had applied for the sole riverboat
owner's license allocated to East Chicago, Indiana and was
granted a certificate of suitability ( the Certificate of
-25-
<PAGE>
Suitability) by the Indiana Gaming Commission on January 8,
1996. On March 20, 1996, the Predecessor received approval
to transfer the Certificate of Suitability to SMCP. As of
March 27, 1996, the Predecessor contributed the Certificate
of Suitability, and on March 28, 1996 all of its assets
(except for the capital stock of East Chicago Second Century,
Inc.), liabilities and obligations were contributed to SMCP.
The Certificate of Suitability was subsequently renewed by
the Indiana Gaming Commission through June 1, 1997.
Predecessor will manage the East Chicago Showboat
through December 31, 2023 and will receive fees equal to 2%
of net revenue and 5% of EBITDA, as defined in the management
agreement. Showboat, the beneficial owner of 55% of the
Predecessor, will be the Managing Partner of the Predecessor.
The management agreement requires SMCP to construct the
facilities, install the furniture, fixtures and equipment and
pay for all preopening costs. After commencement of
operations, SMCP shall advance, on a timely basis, the funds
necessary to conduct the affairs of and maintain the East
Chicago Showboat.
CASH EQUIVALENTS
SMCP considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
SHORT-TERM INVESTMENTS
Short-term investments as of December 31, 1996 consists
of U.S. Treasury bills and mortgage-backed corporate debt
securities which mature at various dates through July 1997.
SMCP classifies these securities as available-for-sale as
they will be liquidated as needed to fund construction
contracts. These securities are recorded at fair value as of
December 31, 1996. Unrealized holding gains and losses, net
of the related tax effect, on available-for-sale securities
are excluded from earnings and are reported as a separate
component of partners' capital until realized. Realized
gains and losses from the sale of available-for-sale
securities are determined on a specific identification basis.
Unrealized and realized gains were not material as of or for
the period ended December 31, 1996.
INTEREST COSTS
Interest is capitalized in connection with the
construction of major facilities. The capitalized interest
is recorded as part of the asset in which it relates and will
be amortized over the asset's useful life.
PREOPENING COSTS
Preopening costs will be capitalized until operations
of the riverboat casino complex commence, at which time the
costs will be written off upon opening. The preopening costs
consist primarily of payroll, consulting fees, training and
related travel costs.
-26-
<PAGE>
ECONOMIC DEVELOPMENT COSTS
SMCP has incurred certain costs pursuant to an
agreement with the City of East Chicago to fund various
projects and programs for the benefit of East Chicago
residents. Fifty percent of a portion of these costs may be
credited as an offset against taxes due to East Chicago based
on gross receipts for a period not to exceed two years. Any
costs incurred which are not eligible to be offset will be
amortized over fifteen years which is management's best
estimate of the time period benefited by such costs.
LICENSING COSTS
SMCP is incurring costs in order to obtain the
necessary gaming licenses, including legal costs, filing and
investigation fees, which are being capitalized until
commencement of operations, at which time such licensing
costs will be amortized over five years, the initial term of
the gaming license.
ORGANIZATIONAL COSTS
SMCP is in the development stage and is currently
incurring organizational costs which are being capitalized
until operations of the riverboat casino complex commence, at
which time such organizational costs will be amortized over a
five year period. Organizational costs consist primarily of
legal fees associated with establishing the business.
DEBT ISSUANCE COSTS
Costs associated with the issuance of debt have been
deferred and are amortized over the life of the related
indebtedness using the straight line method.
INCOME TAXES
A provision for income taxes is not recorded because,
as a partnership, taxable income or loss is allocated and
taxed to the partners based on their respective percentage of
ownership. There is no significant difference between bases
of assets and liabilities for tax purposes and financial
reporting purposes.
FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS
The carrying amount of cash equivalents, interest
receivable, accounts payable, construction payables and
accrued interest approximates fair value because of the short
term maturity of these instruments. See Note 5 for
additional fair value disclosures.
USE OF ESTIMATES
Management of SMCP has made estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally
accepted accounting principles. Actual results could differ
from those estimates.
-27-
<PAGE>
(2) SHORT-TERM INVESTMENTS HELD IN ESCROW
The cash received from the sale of the 13% first
mortgage notes, together with the funds received from capital
contributions were placed in an escrow account and
subsequently used to purchase short-term debt securities.
Funds can only be released by the escrow agent (an affiliate
of Showboat) after certain conditions are met. These
conditions include that SMCP deliver a certificate certifying
as to, among other things, the application of the funds to be
disbursed, the conformity of construction undertaken to date
with the plans and specifications, the expectation that East
Chicago Showboat will be operating by October 1, 1997, the
obtaining of mechanic's and materialmen's lien releases and
title insurance policies or endorsements to existing title
insurance policies insuring against any intervening liens,
the accuracy of the construction budget for the East Chicago
Showboat and the sufficiency of remaining funds to complete
the East Chicago Showboat. The escrow agreement provides
that any funds remaining in the escrow account upon
commencement of operations may be disbursed once SMCP
generates at least $5,000,000 of combined cash flow in one
fiscal quarter.
(3) LAND IMPROVEMENTS
On October 19, 1995, the Predecessor entered into a
Redevelopment Project Lease (which was transferred to SMCP)
with the City of East Chicago, Department of Redevelopment
pursuant to which the City of East Chicago granted SMCP a
leasehold interest in certain property in East Chicago,
Indiana and the exclusive right to dock and operate a
riverboat casino in East Chicago, Indiana and to construct
ancillary land based facilities, which may include
restaurants, entertainment facilities and parking areas.
SMCP is in the process of improving the land covered by the
lease and constructing land based facilities thereon.
In exchange for such exclusivity, SMCP is obligated to
pay East Chicago $400,000 in annual rental with such rental
being adjusted every three years by the same percentage as
the percentage increase in the Consumer Price Index (CPI)
over the previous three years subject to a maximum 5%
increase for each adjustment.
The term of the lease agreement is thirty years from
the date SMCP received the Certificate of Suitability from
the Indiana Gaming Commission which occurred on January 8,
1996, which term may be renewed for two additional thirty
year terms at the election of SMCP. SMCP shall complete
construction within 18 months of receiving the Certificate of
Suitability or shall pay the City of East Chicago $250,000
per additional month needed for construction, unless SMCP has
opened a temporary riverboat casino.
If someone other than SMCP receives the license to
operate the East Chicago Showboat or SMCP does not have its
license renewed or its license is revoked or suspended,
either party may terminate the lease agreement by written
notice.
-28-
<PAGE>
(4) ECONOMIC DEVELOPMENT AGREEMENT
The Predecessor entered into an agreement with the City
of East Chicago in April 1994, subsequently amended in April
1995 and clarified through oral and written presentations to
the Indiana Gaming Commission. This agreement was
transferred to SMCP on March 27, 1996 after approval from the
Indiana Gaming Commission.
The agreement requires SMCP to: (1) provide certain
fixed incentives of approximately $16.4 million to the City
of East Chicago and its agencies for transportation, job
training, home buyer assistance and discrete economic
development initiatives; (2) pay 3% of adjusted gross
receipts to the City of East Chicago and two not-for-profit
foundations -- 1% to each entity -- for its public schools
and housing and commercial development; (3) pay 0.75% of
adjusted gross receipts for community development projects to
East Chicago Second Century, Inc., a for-profit corporation
owned by SMP ("Second Century"); and (4) complete the
Washington High School site town home development with a
total projected cost of $5.0 million. Funding for the
Washington High School site project will be derived from
contributions to Second Century from SMCP as well as funds
from other third-party sources.
Fifty percent (50%) of the fixed sums contributed by
SMCP toward certain projects will be credited against the 1%
share of adjusted gross receipts payable to the City of East
Chicago only during the first and, if necessary, second year
of operation, unless otherwise approved by the City of East
Chicago for credit in subsequent years. The timing of these
expenditures has not yet been agreed to with the City of East
Chicago.
SMCP will also reimburse the City of East Chicago for
certain expenses incurred by the City of East Chicago in
connection with the development of the East Chicago Showboat.
SMCP is committed to these expenditures whether or not an
owner's license is granted. As of December 31, 1996, SMCP
has expended $5.3 million pursuant to this agreement.
(5) LONG-TERM DEBT
On March 28, 1996, SMCP and SMFC issued $140,000,000
(the offering) in the aggregate principal amount of 13-1/2%
Series A First Mortgage Notes due 2003 (the Old Notes)
through a private placement. The proceeds from the offering
were approximately $133,700,000, net of underwriting
discounts and commissions. The net proceeds are being used
to develop the East Chicago Showboat.
On August 12, 1996, SMCP and SMFC exchanged the Old
Notes with registered notes, the 13-1/2% Series B First
Mortgage Notes due 2003 (the New Notes). The Old Notes were,
and the New Notes have been issued under the Indenture dated
as of March 26, 1996 ( the Note Indenture) between SMCP,
SMFC and American Bank National Association as Trustee
(in such capacity, the Trustee or Registrar). The form and
terms of the New Notes are identical in all material respects
to the form and terms of the Old Notes. The New Notes and
the Old Notes are collectively referred to as the Notes.
The Notes are secured by, among other things, a leasehold
mortgage on the lease between SMCP and the City of East
-29-
<PAGE>
Chicago and will be secured by a first preferred ship
mortgage on the casino gaming vessel once title to the vessel
is transferred from the ship builder to SMCP.
Interest is payable on the Notes semiannually on March
15, and September 15 of each year commencing September 15,
1996. The Notes will not be redeemable prior to March 15,
2000, except as otherwise required by a gaming authority. On
and after March 15, 2000, the Notes will be redeemable at the
option of SMCP, in whole or in part, at redemption prices
ranging from 106.750% in 2000 to 100.000% in 2002 and
thereafter, as defined in the Note Indenture for the Notes,
plus accrued and unpaid interest and liquidated damages, if
any.
The Note Indenture places significant restrictions on
the incurrence of additional indebtedness, the creation of
additional liens on the collateral securing the Notes,
transactions with affiliates and payment of certain
restricted payments.
The fair value of the Notes was $154.7 million at
December 31, 1996 based on quoted market prices.
(6) COMMITMENTS AND CONTINGENCIES
SMCP has a noncancelable operating lease for certain
property in East Chicago, Indiana, which will be used for off-
site employee parking. The lease is for a term of three
years and may be renewed at the option of SMCP for two
additional five year terms. Rental payments are $4,631 per
month with an adjustment on the first May of each year of the
lease term to reflect increases or decreases in real estate
taxes per acre assessed against the leased premises. Total
rent expense associated with this lease for the period ending
December 31, 1996, of $9,262 was capitalized as a development
cost. Future minimum lease payments will be $55,572, $55,572
and $46,310 for the years ended December 31, 1997, 1998 and
1999, respectively.
SMCP has entered into numerous agreements and
financial commitments for the construction of leasehold
improvements as well as to promote the economic development
of the City of East Chicago that must be completed whether or
not an owner's license is issued to SMCP. In the event an
owner's license is not issued, the fulfillment of these
commitments as well as the potential failure to realize the
costs already expended could have a material adverse impact
on the financial condition of SMCP.
Atlantic Marine, Inc. has been retained to build and
equip the riverboat. The current contract price is
$38,500,000, but is subject to adjustments, if any, as set
forth in the contract. SMCP expended approximately
$33,700,000 related to this contract through December 31,
1996.
Tonn & Blank, Inc., in joint venture with KLM
Construction, Inc., has been retained to build and construct
the approximately $40,000,000 land based facilities of the
East Chicago Showboat. The general construction contract
provides for payment of a basic fee of $1,700,000 and
general conditions of $1,200,000 for the general contractor
services. In addition, the joint venture may bid on
the subcontracts for construction at the East
-30-
<PAGE>
Chicago Showboat. The joint venture has been selected as the
subcontractor for the construction of building concrete,
structural steel erection and pilecaps for the East Chicago
Showboat, at a construction cost of approximately $3,800,000.
SMCP expended approximately $3,300,000 on construction
contracts with the joint venture through December 31, 1996.
Luhr Bros., Inc., has been retained to build the
breakwater, mooring/fendering bulkhead and to perform basin
dredging necessary for the marina operations of the East
Chicago Showboat. The contract is a fixed price contract for
$14.5 million and is subject to adjustments based on design
changes related to the development. SMCP expended
approximately $11,200,000 related to this contract through
December 31, 1996.
International Gaming Technology - North America and
Casino Data Systems have been contracted to supply slot
machines for $9,500,000 and an electronic gaming tracking
system for $1,500,000, respectively.
(7) PARTNERS' CAPITAL
Showboat, beneficial owner of 55% of SMCP, has
committed to a standby equity commitment of up to $30,000,000
and a completion guarantee of $30,000,000. The terms of
these agreements are as follows:
The standby equity commitment provides that if during
any of the first three full four-quarter periods after the
riverboat is operating SMCP's combined cash flow is less than
$35,000,000 for any such full fiscal four-quarter period,
Showboat will cause to be contributed capital equal to the
shortfall. However, in no event shall Showboat be required
to cause to be contributed more than $15,000,000 in any one
such full fiscal four-quarter period or more than $30,000,000
in the aggregate.
Showboat has also agreed to complete the Minimum
Facilities (as defined in the Completion Guarantee) so that
the project becomes operating and will guarantee the payment
of all project costs owing prior to such completion. The
completion guarantee will be subject to certain limitations,
qualifications and exceptions. This obligation goes into
effect only in the event there are insufficient funds to meet
the costs of developing, constructing and opening the
riverboat and is limited to $30,000,000 in the aggregate.
(8) RELATED PARTY TRANSACTIONS
As discussed in Note 6, the East Chicago Showboat has
entered into a construction contract with Tonn & Blank, Inc.
in joint venture with KLM Construction, Inc. for the purpose
of serving as general contractors for the development. Nikos
Kefalidis, the President of KLM, beneficially owns 3.0% of
SMCP.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-31-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following individuals are the directors and executive
officers of the partners of SMCP and the directors and executive
officers of SMFC. Additionally, SMCP is managed by an Executive
Committee comprised of representatives of Showboat and Waterfront
and the members of SMCP's Executive Committee are also noted
below.
J. Kell Houssels, III, age 47, is a member of the Executive
Committee of SMCP and the President and Chief Executive Officer
of SMFC and has held such position since March 1996. Mr.
Houssels, III, is also a director with Showboat Indiana, Inc.
since its formation. He has been a director of Showboat, Inc.
since 1983. He is also President and Chief Executive Officer of
Showboat, Inc. and Ocean Showboat, Inc. and director of Showboat,
Inc. and all of its subsidiaries. From May 1993 to June 1994, he
served as President and Chief Executive Officer of Showboat
Development Company. From January 1990 to May 1994, Mr.
Houssels, III served as Vice President of Showboat, Inc. From
May 1993 to June 1994, he served as President and Chief Executive
Officer of Atlantic City Showboat, Inc. and from January 1990 to
May 1993, he served as President and Chief Operating Officer of
Atlantic City Showboat, Inc.
J.K. Houssels, age 74, is the Chairman of the Board of
Directors of Showboat and a director of all subsidiaries of
Showboat, including Showboat Indiana, Inc. Until May 1994, Mr.
Houssels was the President and Chief Executive Officer of
Showboat. He is also Vice Chairman of the Board of Union Plaza
Hotel and Casino, Inc., Las Vegas, Nevada.
John D. Gaughan, age 76, is a director of Showboat and a
director of all of Showboat's subsidiaries, including Showboat
Indiana, Inc. Mr. Gaughan is also the Chairman of the Board and
President of Exber, Inc., doing business as the El Cortez Hotel
and the Western Hotel and Casino, Las Vegas, Nevada and the
Chairman of the Board of the Union Plaza Hotel and Casino, Inc.,
Las Vegas, Nevada.
Frank A. Modica, age 69, is a director of Showboat and all
of its subsidiaries, including Showboat Indiana, Inc. Until May
1995, Mr. Modica was Chairman of the Board of Atlantic City
Showboat, Inc.; until February 1995, he was the Executive Vice
President and Chief Operating Officer of Showboat and President
and Chief Executive Officer of Showboat Operating Company. Mr.
Modica is also a director of First Security Bank, Las Vegas,
Nevada.
H. Gregory Nasky, age 54, is a director of Showboat and all
of its subsidiaries, including Showboat Indiana, Inc. Mr. Nasky
is also the Executive Vice President of Showboat; the President
and Chief Executive Officer of Showboat Development Company; and
the Secretary of Showboat and all of Showboat's subsidiaries.
From October 1993 to February 1995, Mr. Nasky was the Managing
Director and Chief Executive Officer of Showboat Australia Pty
Limited and from March 1994 to February 1995 he was the
Managing Director and Chief Executive Officer of Sydney
Harbour Casino. Since March 1994, he has been of counsel
to the law firm of Kummer Kaempfer Bonner & Renshaw,
Las Vegas, Nevada, outside legal counsel to Showboat and until
-32-
<PAGE>
February 1994, a member of the law firm of Vargas & Bartlett, Las
Vegas and Reno, Nevada, previous general counsel to Showboat.
Mark J. Miller, age 40, is a member of the Executive
Committee of SMCP and Director and the Treasurer of SMFC and he
has held such positions since March 1996. He has been Executive
Vice President-Operations of Showboat, Inc. since June 1994; Vice
President-Finance of Ocean Showboat since April 1988; and Vice
President-Finance, Chief Financial Officer of Ocean Showboat
since April 1991. From May 1994 to May 1995, Mr. Miller served
as the President and Chief Executive Officer of Atlantic City
Showboat, Inc. From October 1993 to June 1994, he served as
Executive Vice President and Chief Operating Officer of Atlantic
City Showboat, Inc. and he was Vice President-Finance and Chief
Financial Officer of Atlantic City Showboat, Inc. from December
1988 to October 1993.
J. Keith Wallace, age 55, is a member of the Executive
Committee of SMCP, has been the President and Chief Executive
Officer of SMCP and Showboat Indiana, Inc. since January 1996 and
Director of SMFC since March 1, 1996. From February 1995 to
January 1996, Mr. Wallace was the President and Chief Executive
Officer of Showboat Operating Company. From May 1993 to February
1995, he was the President and Chief Executive Officer of Lake
Pontchartrain Showboat, Inc. and Showboat Louisiana, Inc., from
June 1993 to April 1995. Mr. Wallace served as Executive Vice
President and Chief Operating Officer of Showboat Louisiana,
Inc., and Lake Pontchartrain Showboat, Inc., respectively. From
August 1990 to April 1993, Mr. Wallace was the Vice President and
General Manager of Showboat Operating Company.
Jess Hinkle, age 64, has been Vice President of Operations
for SMCP since March 1996 and Vice President-Development for
Showboat Development Company from August 1993 to February 1996.
From August 1992 to 1993, Mr. Hinkle was President and Broker of
Record of HSK Realty Corp. in Pleasantville, New Jersey.
Dominick Gullo, age 54, has been Vice President of Gaming
Operations for SMCP since May 1996, the Vice President-Special
Projects for Showboat Operating Company from May 1995 to May
1996, and the Casino Manager of Lake Pontchartrain Showboat, Inc.
from May 1993 to May 1995. Prior to joining Lake Pontchartrain
Showboat, Inc., Mr. Gullo was President and Owner of Gullo
Associates, Inc. in Las Vegas, Nevada, from February 1993 to May
1993; Sales Manager of Legacy, Inc. in Las Vegas, Nevada, from
December 1992 to February 1993; Sales Manager of Master Care
International in Las Vegas, Nevada, from August 1992 to December
1992; and Shift Manager of the Frontier Hotel in Las Vegas,
Nevada, from October 1988 to February 1992.
Joseph G. O'Brien, III, age 34, has been the Vice President
of Finance and Administration for SMCP since May 1995, the Vice
President - Finance and Chief Financial Officer of Showboat
Indiana, Inc. since April 1996, the Treasurer of Showboat
Indiana, Inc. since May 1996 and the Vice President - Finance and
Chief Financial Officer of SMFC since March 1996. From June of
1993 until April of 1995, Mr. O'Brien served on the Executive
Committee of the Showboat Star Partnership in New Orleans,
Louisiana; from February 1995 until April 1995 he served as
Acting Chief Operating Officer of the Showboat Star Partnership;
and from June 1993 until February of 1995 he served as Controller
of the Showboat Star Partnership. Prior to joining the Showboat
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<PAGE>
Star Partnership, Mr. O'Brien was a certified public accountant
with the firm of Ericksen, Krentel, Canton & LaPorte in New
Orleans, Louisiana from July 1984 to June 1993.
Dominick J. Burzichelli, age 34, is Vice President of Human
Resources for SMCP. Mr. Burzichelli has been employed by
Showboat since 1986 and has served in the Human Resources
department in various capacities including Director and Manager
levels. His areas of expertise have included labor relations,
recruitment and placement.
Bob Bilocerkowcyz, age 47, has been Vice President of
Marketing for SMCP since July 1996. Prior to joining SMCP, Mr.
Bilocerkowcyz worked for Pulte Home Corporation in Bloomfield
Hills, Michigan, from September 1994 to June 1996; from November
1992 to September 1994 he was Vice President - Sales and
Marketing for R.J. Reynolds-Nabisco International; and from May
1991 to November 1992 he was Vice President for Jim Beam Brands.
Michael A. Pannos, age 48, is a member of the Executive
Committee of SMCP, has been Secretary and Director of SMFC since
March 1996 and has been Director and President of Waterfront
since July 3, 1993. He is a practicing attorney in the firm of
Pannos & Mindel since 1980. Mr. Pannos was elected as Chairman
of the Indiana Democratic Party in 1988. He was also elected
Vice-President of the Association of Democratic Chairs, and has
served as a member of the Rules Committee of the Democratic
National Committee.
Thomas S. Cappas, age 62, is a member of the Executive
Committee of SMCP, has been a Director of SMFC since March 1996
and has been Director, Treasurer and Secretary of Waterfront
since July 3, 1993. Since 1959, Mr. Cappas has been a practicing
attorney in East Chicago, Indiana. Mr. Cappas has held a variety
of public sector positions in East Chicago.
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by SMCP
during 1995 and 1996 to the officers and other persons of SMCP,
in all capacities in which they served.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
J. Keith Wallace........ 1996 $226,604 $150,000 86,429<F4>
President and Chief 1995 $ --- $ --- ---
Executive Officer
Jess Hinkle............. 1996 $149,737 $ 50,077 ---
Vice President of 1995 $ --- $ --- ---
Operations
Dominick Gullo.......... 1996 $104,548 $ 20,473 ---
Vice President of Gaming 1995 $ --- $ --- ---
Operations
<FN>
<F1> Amounts represented in this column were received by the named
individuals under the Showboat, Inc. 1994 Executive Long Term
Incentive Plan ("1994 Plan"). The 1994 Plan is an incentive
plan of Showboat which provides for awards of restricted
stock options to key executives of Showboat's operating
subsidiaries, including SMCP executive officers. The restricted
shares granted under the 1994 Plan vests over a five-year period,
with the last of the restricted shares of common stock vesting
in March 1999; provided, however, that vesting on all such
restricted shares will accelerate to the date of any change in
control of Showboat.
<F2> Amounts represented in this column equal the number of
restricted shares of common stock of Showboat granted to the
named individuals under the 1994 Plan, multiplied by the closing
bid price of Showboat's common stock on the New York Stock
Exchange on the date of grant, or $24.63 per share. The number
and dollar value of unvested restricted shares held on December
31, 1996, based on the closing bid price of Showboat's common
stock of $17 1/4 share on December 31, 1996 was: J. Keith
Wallace - 4,500 shares ($77,625), Jess Hinkle - 2,400 shares
($41,400), Dominick Gullo - 1,600 shares ($27,600), Joseph G.
O'Brien, III - 2,400 shares ($41,400), and Dominick J.
Burzichelli - 800 shares ($13,800).
<F3> Amounts represented in this column equal the number of
shares of common stock of Showboat underlying the stock options
and stock appreciation rights granted to the named individuals
under the 1994 Plan and the 1996 Stock Appreciation Rights Plan,
respectively.
<F4> Of this amount, $37,281 represents a gross-up for state
income taxes incurred, $29,148 represents a housing allowance
and $20,000 represents moving expenses.
<F5> Amount represents the number of shares of common stock of
Showboat underlying the stock appreciation rights granted to Mr.
Wallace under the Showboat, Inc. 1996 Stock Appreciation Rights
Plan.
<F6> This amount represents the vesting of 1,500 shares under the
1994 Plan.
<F7> This amount represents $3,974 in excess coverage life
insurance and $62 in medical reimbursement costs.
<F8> This amount represents the vesting of 600 shares under the
1994 Plan.
<F9> This amount represents excess coverage life insurance.
<F10> This amount represents $2,211 in excess coverage life
insurance, $242 in medical reimbursement costs, and $27,669 for
moving expenses.
<F11> This amount represents $929 in excess coverage life
insurance and $497 in medical reimbursement costs.
<F12> This amount represents the vesting of 600 shares under the
1994 Plan.
<F13> This amount primarily represents $1,795 for excess coverage
life insurance and medical reimbursement costs and $16,500,
$4,129 and $2,198 for a relocation bonus, moving expenses and
contributions to Mr. O'Brien's 401(k) Plan account, respectively.
<F14> This amount represents $843 in excess coverage life
insurance and $1,053 in medical reimbursement costs.
<F15> This amount represents the vesting of 200 shares under the
1994 Plan.
<F16> This amount represents $1,326 for medical reimbursement
costs, and $11,520 for moving expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (CONTINUED)
LONG-TERM COMPENSATION
AWARDS PAYOUTS<F1>
SECURI-
TIES UNDER- LONG- TERM
RESTRICTED LYING INCENTIVE
NAME AND STOCK OPTIONS/ PLANS ALL OTHER
PRINCIPAL POSITION AWARDS<F2> SARS<F3> PAYOUTS COMPENSATION
<S> <C> <C> <C> <C>
J. Keith Wallace........ --- 0/48,546<F5> $ 36,750<F6> $ 4,036<F7>
President and Chief --- --- $ --- $ ---
Executive Officer
Jess Hinkle............. --- --- $ 14,700<F8> $11,398<F9>
Vice President of --- --- $ --- $ ---
Operations
Dominick Gullo 24,630 8,000/0 $ 14,700<F8> $30,122<F10>
Vice President of Gaming --- --- $ --- $ ---
Operations
<FN>
<F1> Amounts represented in this column were received by the named
individuals under the Showboat, Inc. 1994 Executive Long Term
Incentive Plan ("1994 Plan"). The 1994 Plan is an incentive
plan of Showboat which provides for awards of restricted
stock options to key executives of Showboat's operating
subsidiaries, including SMCP executive officers. The restricted
shares granted under the 1994 Plan vests over a five-year period,
with the last of the restricted shares of common stock vesting
in March 1999; provided, however, that vesting on all such
restricted shares will accelerate to the date of any change in
control of Showboat.
<F2> Amounts represented in this column equal the number of
restricted shares of common stock of Showboat granted to the
named individuals under the 1994 Plan, multiplied by the closing
bid price of Showboat's common stock on the New York Stock
Exchange on the date of grant, or $24.63 per share. The number
and dollar value of unvested restricted shares held on December
31, 1996, based on the closing bid price of Showboat's common
stock of $17 1/4 share on December 31, 1996 was: J. Keith
Wallace - 4,500 shares ($77,625), Jess Hinkle - 2,400 shares
($41,400), Dominick Gullo - 1,600 shares ($27,600), Joseph G.
O'Brien, III - 2,400 shares ($41,400), and Dominick J.
Burzichelli - 800 shares ($13,800).
<F3> Amounts represented in this column equal the number of
shares of common stock of Showboat underlying the stock options
and stock appreciation rights granted to the named individuals
under the 1994 Plan and the 1996 Stock Appreciation Rights Plan,
respectively.
<F4> Of this amount, $37,281 represents a gross-up for state
income taxes incurred, $29,148 represents a housing allowance
and $20,000 represents moving expenses.
<F5> Amount represents the number of shares of common stock of
Showboat underlying the stock appreciation rights granted to Mr.
Wallace under the Showboat, Inc. 1996 Stock Appreciation Rights
Plan.
<F6> This amount represents the vesting of 1,500 shares under the
1994 Plan.
<F7> This amount represents $3,974 in excess coverage life
insurance and $62 in medical reimbursement costs.
<F8> This amount represents the vesting of 600 shares under the
1994 Plan.
<F9> This amount represents excess coverage life insurance.
<F10> This amount represents $2,211 in excess coverage life
insurance, $242 in medical reimbursement costs, and $27,669 for
moving expenses.
<F11> This amount represents $929 in excess coverage life
insurance and $497 in medical reimbursement costs.
<F12> This amount represents the vesting of 600 shares under the
1994 Plan.
<F13> This amount primarily represents $1,795 for excess coverage
life insurance and medical reimbursement costs and $16,500,
$4,129 and $2,198 for a relocation bonus, moving expenses and
contributions to Mr. O'Brien's 401(k) Plan account, respectively.
<F14> This amount represents $843 in excess coverage life
insurance and $1,053 in medical reimbursement costs.
<F15> This amount represents the vesting of 200 shares under the
1994 Plan.
<F16> This amount represents $1,326 for medical reimbursement
costs, and $11,520 for moving expenses.
</FN>
</TABLE>
-34-
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE (CONTINUED)
ANNUAL COMPENSATION
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
Joseph G. O'Brien, III.. 1996 $96,300 $36,000 ---
Vice President Finance 1995 $85,833 $21,120 ---
and Administration
Dominick J. Burzichelli. 1996 $88,018 $36,000 ---
Vice President of 1995 $62,468 $21,120 ---
Human Resources
</TABLE>
<TABLE>
SUMMARY COMPENSATION TABLE (CONTINUED)
LONG-TERM COMPENSATION
AWARDS PAYOUTS<F1>
SECURI-
TIES UNDER- LONG- TERM
RESTRICTED LYING INCENTIVE
NAME AND STOCK OPTIONS/ PLANS ALL OTHERS
PRINCIPAL POSITION AWARDS<F2> SARS<F3> PAYOUTS COMPENSATION
<S> <C> <C> <C> <C>
Joseph G. O'Brien, III.. - - $14,700<F8> $ 1,426<F11>
Vice President Finance - - $ 9,000<F12> $24,622<F13>
and Administration
Dominick J. Burzichelli. 49,260 10,000/0 $14,700<F8> $ 1,896<F14>
Vice President of - - $ 3,000<F15> $12,846<F16>
Human Resources
<FN>
<F1> Amounts represented in this column were received by the named
individuals under the Showboat, Inc. 1994 Executive Long Term
Incentive Plan ("1994 Plan"). The 1994 Plan is an incentive
plan of Showboat which provides for awards of restricted
stock options to key executives of Showboat's operating
subsidiaries, including SMCP executive officers. The restricted
shares granted under the 1994 Plan vests over a five-year period,
with the last of the restricted shares of common stock vesting
in March 1999; provided, however, that vesting on all such
restricted shares will accelerate to the date of any change in
control of Showboat.
<F2> Amounts represented in this column equal the number of
restricted shares of common stock of Showboat granted to the
named individuals under the 1994 Plan, multiplied by the closing
bid price of Showboat's common stock on the New York Stock
Exchange on the date of grant, or $24.63 per share. The number
and dollar value of unvested restricted shares held on December
31, 1996, based on the closing bid price of Showboat's common
stock of $17 1/4 share on December 31, 1996 was: J. Keith
Wallace - 4,500 shares ($77,625), Jess Hinkle - 2,400 shares
($41,400), Dominick Gullo - 1,600 shares ($27,600), Joseph G.
O'Brien, III - 2,400 shares ($41,400), and Dominick J.
Burzichelli - 800 shares ($13,800).
<F3> Amounts represented in this column equal the number of
shares of common stock of Showboat underlying the stock options
and stock appreciation rights granted to the named individuals
under the 1994 Plan and the 1996 Stock Appreciation Rights Plan,
respectively.
<F4> Of this amount, $37,281 represents a gross-up for state
income taxes incurred, $29,148 represents a housing allowance
and $20,000 represents moving expenses.
<F5> Amount represents the number of shares of common stock of
Showboat underlying the stock appreciation rights granted to Mr.
Wallace under the Showboat, Inc. 1996 Stock Appreciation Rights
Plan.
<F6> This amount represents the vesting of 1,500 shares under the
1994 Plan.
<F7> This amount represents $3,974 in excess coverage life
insurance and $62 in medical reimbursement costs.
<F8> This amount represents the vesting of 600 shares under the
1994 Plan.
<F9> This amount represents excess coverage life insurance.
<F10> This amount represents $2,211 in excess coverage life
insurance, $242 in medical reimbursement costs, and $27,669 for
moving expenses.
<F11> This amount represents $929 in excess coverage life
insurance and $497 in medical reimbursement costs.
<F12> This amount represents the vesting of 600 shares under the
1994 Plan.
<F13> This amount primarily represents $1,795 for excess coverage
life insurance and medical reimbursement costs and $16,500,
$4,129 and $2,198 for a relocation bonus, moving expenses and
contributions to Mr. O'Brien's 401(k) Plan account, respectively.
<F14> This amount represents $843 in excess coverage life
insurance and $1,053 in medical reimbursement costs.
<F15> This amount represents the vesting of 200 shares under the
1994 Plan.
<F16> This amount represents $1,326 for medical reimbursement
costs, and $11,520 for moving expenses.
</FN>
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercisable
Options/SARs to Employees or Base
Name Granted in Fiscal Price Expiration
(#)<F1> Year (%) ($/SH)<F2> Date<F3>
<S> <C> <C> <C> <C>
J. Keith Wallace........ 0/48,546 0/7.6 24.58 09/03/2006
Jess Hinkle............. 0 0 0 0
Dominick Gullo.......... 8,000/0 12.3/0 24.63 02/28/2006
Joseph G. O'Brien, III.. 0 0 0 0
Dominick J. Burzichelli. 10,000/0 15.7/0 24.63 02/28/2006
<FN>
<F1> The Board of Directors of Showboat adopted the Showboat,
Inc. 1996 Stock Appreciation Rights Plan, subject to shareholder
approval at Showboat's annual meeting to be held on May 29, 1997.
The stock appreciation rights granted under the plan will be
exercisable at any time within 30 days after a change in control
of Showboat.
<F2> The exercise price is greater than the closing bid price of
Showboat's Common Stock on the New York Stock Exchange on the
date of grant of the stock appreciation rights and the exercise
price for the options granted under the 1994 Plan is based on the
closing bid price of Showboat's common stock on the New York
Stock Exchange on the date of grant.
<F3> Stock appreciation rights granted under the plan will expire
on the earlier of (i) September 3, 2006; (ii) 30 days after a
change in control of Showboat; or (iii) upon the termination of
employment of the key employee with Showboat other than for
certain reasons, such as death, disability, retirement or good
cause. Under the 1994 Plan, the options will expire 10 years
following the date of grant unless earlier terminated pursuant to
the terms of the 1994 Plan.
<F4> For the 1996 Stock Appreciation Rights Plan, amounts are based on
the closing bid price of Showboat's Common Stock of $19.375 per
share on September 3, 1996, the date of grant of the stock
appreciation rights. For the 1994 Plan, amounts are based on the
option exercise price.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock
Price Appreciation
for Option/SAR Term
Name 5% ($)<F4> 10% ($)<F4>
<S> <C> <C>
J. Keith Wallace........ 338,843 1,246,358
Jess Hinkle............. 0 0
Dominick Gullo.......... 123,920 314,000
Joseph G. O'Brien, III.. 0 0
Dominick J. Burzichelli. 154,900 392,500
<FN>
<F1> The Board of Directors of Showboat adopted the Showboat,
Inc. 1996 Stock Appreciation Rights Plan, subject to shareholder
approval at Showboat's annual meeting to be held on May 29, 1997.
The stock appreciation rights granted under the plan will be
exercisable at any time within 30 days after a change in control
of Showboat.
<F2> The exercise price is greater than the closing bid price of
Showboat's Common Stock on the New York Stock Exchange on the
date of grant of the stock appreciation rights and the exercise
price for the options granted under the 1994 Plan is based on the
closing bid price of Showboat's common stock on the New York
Stock Exchange on the date of grant.
<F3> Stock appreciation rights granted under the plan will expire
on the earlier of (i) September 3, 2006; (ii) 30 days after a
change in control of Showboat; or (iii) upon the termination of
employment of the key employee with Showboat other than for
certain reasons, such as death, disability, retirement or good
cause. Under the 1994 Plan, the options will expire 10 years
following the date of grant unless earlier terminated pursuant to
the terms of the 1994 Plan.
<F4> For the 1996 Stock Appreciation Rights Plan, amounts are based on
the closing bid price of Showboat's Common Stock of $19.375 per
share on September 3, 1996, the date of grant of the stock
appreciation rights. For the 1994 Plan, amounts are based on the
option exercise price.
</FN>
</TABLE>
-35-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth: (1) the beneficial
ownership of the interests in SMCP and SMFC as of December 31,
1996 by each person known by SMCP and SMFC to beneficially own 5%
or more of the outstanding SMCP and SMFC interests; (2) each
officer and director of Waterfront; and (3) each executive
officer and director of Showboat Indiana, Inc., the general
partner of Showboat Indiana Investment Limited Partnership
("SIILP").
<TABLE>
<CAPTION>
Name and Address Of % Ownership % Beneficial Ownership % Beneficial Ownership
Beneficial Owner Waterfront SMCP SMFC
<S> <C> <C> <C>
SMCP......................... - - 100.0%
One Showboat Place
East Chicago, Indiana 46312
Showboat Marina
Partnership<F1>............. - 99.0% 99.0%
One Showboat Place
East Chicago, Indiana 46312
Showboat Marina Investment
Partnership<F1>............. - 1.0% 1.0%
One Showboat Place
East Chicago, Indiana 46312
SIILP<F2>.................... - 55.0% 55.0%
2800 Fremont Street
Las Vegas, Nevada 89104
Waterfront<F3>............... - 45.0% 45.0%
8101 Polo Club Drive, Suite D
Merrillville, Indiana 46410
J. Keith Wallace<F4>......... - - -
One Showboat Place
East Chicago, Indiana 46312
John D. Gaughan<F5>.......... - - -
2800 Fremont Street
Las Vegas, Nevada 89104
J.K. Houssels<F5>............ - - -
2800 Fremont Street
Las Vegas, Nevada 89104
Frank A. Modica<F5>.......... - - -
2800 Fremont Street
Las Vegas, Nevada 89104
H. Gregory Nasky<F6>......... - - -
2800 Fremont Street
Las Vegas, Nevada 89104
J. Kell Houssels, III<F7>.... - - -
2800 Fremont Street
Las Vegas, Nevada 89104
Joseph G. O'Brien, III<F8>... - - -
One Showboat Place
East Chicago, Indiana 46312
-36-
<PAGE>
Michael A. Pannos(F9>........ 37.3% 16.8% 16.8%
8101 Polo Club Drive, Suite D
Merrillville, Indiana 46410
Thomas S. Cappas<F10>........ 28.4% 12.8% 12.8%
1802 E. Columbus Drive
East Chicago, Indiana 46312
<FN>
<F1> Showboat Marina Partnership and Showboat Marina Investment
Partnership are owned 55% by SIILP and 45% by Waterfront.
<F2> SIILP is wholly owned by subsidiaries of Showboat. Showboat
Indiana, Inc., a Nevada subsidiary of Showboat, is the sole
general partner of SIILP.
<F3> Waterfront, an Indiana corporation, is owned by 13
individual investors. Investment and voting control of
Waterfront are vested in its stockholders and its board of
directors.
<F4> Mr. Wallace is the President and Chief Executive Officer of
SMCP, Showboat Indiana, Inc. and a Director of SMFC.
<F5> A Director of Showboat Indiana, Inc.
<F6> Mr. Nasky is the Secretary and a Director of Showboat
Indiana, Inc.
<F7> Mr. Houssels, III is the Chairman of the Board of Directors
of Showboat Indiana, Inc. and SMFC.
<F8> Mr. O'Brien is the Vice President-Finance, Chief Executive
Officer and Treasurer of Showboat Indiana, Inc. and the Vice
President-Finance and Chief Financial Officer of SMFC.
<F9> Michael A. Pannos is a Director and the President of
Waterfront and is Secretary and Director of SMFC. Mr.
Pannos' beneficial ownership in Waterfront and the
Company includes common stock of Waterfront owned by his
wife.
<F10>Thomas S. Cappas is a Director, Secretary and Treasurer of
Waterfront and is a Director of SMFC. Mr. Cappas' beneficial
ownership includes common stock of Waterfront owned by his
wife.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 1, 1996 SMCP entered into the Management
Agreement with SMP for a term through December 31, 2023. SMP
holds a 99% ownership interest in SMCP. In consideration for the
services provided under the Management Agreement, SMCP has agreed
to pay SMP a management fee equal to (i) 2% of Net Revenues (as
defined in the Management Agreement) and (ii) 5% of EBITDA (as
defined in the Management Agreement), subject to the limitations
set forth in the "Restricted Payments" covenant of the Indenture.
Michael A. Pannos, a Director and Secretary of SMFC, beneficially
owns 16.8% of SMCP and Thomas S. Cappas, a Director of SMFC,
beneficially owns 12.8% of SMCP.
SMCP entered into certain construction agreements with KLM
and Tonn & Blank, a joint venture acting as general contractor
for construction of the Pavilion and parking garage. Nikos
Kefalidis, the President of KLM, beneficially owns 3.0% of SMCP.
SMCP has entered into construction contracts aggregating
approximately $45.3 as of December 31, 1996 inclusive of a
management fee in the amount of $1.7 and general conditions fee
of $1.2 million for construction of the Pavilion, parking garage,
and site improvements.
SMCP's Partnership Agreement (the "Partnership Agreement")
provides that each Partner and its Indemnified Persons (as
defined therein) will not be liable, responsible or accountable
in damages or otherwise to SMCP, or to any of the Partners (as
defined therein), for any act or omission performed or omitted by
them in good faith on behalf of SMCP and in a manner reasonably
believed by them to be within the scope of their authority and in
the best interests of SMCP unless the acts or omissions
constitute either fraud, bad faith, gross negligence, or willful
misconduct as determined by final decision of a court of
competent jurisdiction or which occurred prior to the formation
of SMCP.
In addition, to the extent that, at law or in equity, a
Partner or its Indemnified Persons have duties (including
fiduciary duties) and liabilities relating thereto to the
Partner or to the Partners, and their Indemnified Persons
acting under SMCP Agreement or otherwise will not be
-37-
<PAGE>
liable to SMCP or to any Partner for its good faith reliance
on the provisions of SMCP Agreement.
At all times during 1996, H. Gregory Nasky was a Director
and Secretary of Showboat Indiana, Inc. Additionally, Mr. Nasky
was of counsel to the law firm of Kummer Kaempfer Bonner &
Renshaw, outside legal counsel to the Company. At all times
during 1996, John N. Brewer, a partner of the law firm of Kummer
Kaempfer Bonner & Renshaw, was an Assistant Secretary of Showboat
Indiana, Inc. and an Assistant Secretary of SMFC since March
1996. During 1996, the law firm of Kummer Kaempfer Bonner &
Renshaw was paid $448,819 by Showboat Marina Casino Partnership
(including for its initial public securities offering and related
general matters).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of SMCP
and its Predecessor (where applicable) are included in
Part II, Item 8: Financial Statements and Supplementary
Data, of this report:
Report of Independent Auditors
Consolidated Balance Sheet as of December 31, 1996.
Consolidated Statements of Operations for the Period
from March 29, 1996 (commencement of development)
through December 31, 1996 and cumulative period from
January 31, 1994 (inception) through December 31, 1996.
Consolidated Statement of Partners' Capital for the
Period from March 29, 1996 (commencement of
development) through December 31, 1996.
Consolidated Statements of Cash Flows for the Period
from March 29, 1996 (commencement of development)
through December 31, 1996 - SMCP - and the Period from
January 1, 1996 through March 28, 1996, the year ended
December 31, 1995, and the period from January 31, 1994
(inception) through December 31, 1994 - Predecessor and
the cumulative period from January 31, 1994 (inception)
through December 31, 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
All schedules are omitted because they are not
required, inapplicable, or the information is otherwise
shown in the financial statements or notes thereto.
-38-
<PAGE>
3. Exhibits
<TABLE>
NUMBER EXHIBIT DESCRIPTION
<S> <C>
3.01 Articles of Incorporation of Showboat Marina Finance
Corporation, filed March 7, 1996, are incorporated
herein by reference from the Company's (SEC File
No. 33-4402) Registration Statement on Form S-4 filed on
May 3, 1996, Part II, Item 21, Exhibit 3.01.
3.02 Bylaws of Showboat Marina Finance Corporation certified
March 21, 1996, are incorporated herein by reference
from the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 3.02.
3.03 Partnership Agreement by and between Showboat Marina
Partnership and Showboat Marina Investment Partnership
dated as of March 1, 1996, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 3.03.
4.01 Indenture dated as of March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Nomura Securities International, Inc.,
Bear, Stearns & Co. Inc. and American Bank National
Association, as trustee, relating to the 13 1/2 Series
A and Series B First Mortgage Notes due 2003, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 4.01.
4.02 A/B Exchange Registration Rights Agreement dated as of
March 28, 1996 among Showboat Marina Casino Partnership,
Showboat Marina Finance Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation, Nomura Securities
International, Inc. and Bear, Stearns & Co. Inc., is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 4.02.
4.03 Specimen of 13 1/2% Series B First Mortgage Notes due
2003 is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4, Amendment No. 1, filed on June 24, 1996,
Part II, Item 21, Exhibit 4.03.
4.04 Form of Letter of Transmittal to American Bank National
Association as Exchange Agent for exchange of 13 1/2%
Series A First Mortgage Notes due 2003 is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4, Amendment No.
1, filed on June 24, 1996, Part II, Item 21, Exhibit
4.04.
10.01 Management Agreement dated March 28, 1996, by and
between Showboat Marina Casino Partnership and Showboat
Marina Partnership is incorporated herein by reference
from the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.01.
-39-
<PAGE>
NUMBER EXHIBIT DESCRIPTION
10.02 Completion Guarantee dated March 28, 1996, by and
between Showboat, Inc. and American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 10.02.
10.03 Completion Guarantor Subordination Agreement dated March
28, 1996, by and between Showboat, Inc. and American
Bank National Association, as trustee, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.03.
10.04 Standby Equity Commitment dated March 28, 1996, by and
among Showboat Marina Casino Partnership, Showboat
Marina Finance Corporation and Showboat, Inc., is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.04.
10.05 Manager's Consent and Subordination of Management
Agreement dated March 28, 1996, by and between Showboat
Marina Casino Partnership and Showboat Marina
Partnership, is incorporated herein by reference from
the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4, Amendment No. 1, filed on June
24, 1996, Part II, Item 21, Exhibit 10.05.
10.06 Leasehold Mortgage, Assignment of Rents and Security
Agreement dated March 28, 1996 and made by Showboat
Marina Casino Partnership to American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 10.06.
10.07 Escrow and Disbursement Agreement, dated March 28, 1996,
by and among Showboat Marina Casino Partnership,
Showboat Marina Finance Corporation and Showboat, Inc.
(as escrow agent and disbursement agent) and American
Bank National Association, as trustee, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4, Amendment No.
2, filed on July 8, 1996, Part II, Item 21, Exhibit
10.07.
10.08 Security Agreement dated March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation and American Bank National Association, as
trustee, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.08.
10.09 Environmental Indemnity Agreement dated March 28, 1996,
by and between Showboat, Inc. and American Bank National
Association is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.09.
-40-
<PAGE>
NUMBER EXHIBIT DESCRIPTION
10.10 Assignment of Contracts and Documents dated March 28,
1996, by and between Showboat Marina Casino Partnership
and American Bank National Association, as trustee, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.10.
10.11 Shipbuilding Contract between Atlantic Marine, Inc. and
Showboat Marina Casino Partnership, dated as of March 8,
1996, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration Statement
on Form S-4 filed on May 3, 1996, Part II, Item 21,
Exhibit 10.11.
10.12 Economic Betterment Commitment Letter Agreement between
the City of East Chicago, Indiana and Showboat Marina
Casino Partnership, dated April 8, 1994, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.12.
10.13 Economic Betterment Commitment Letter Agreement between
the City of East Chicago, Indiana and Showboat Marina
Casino Partnership, dated April 18, 1995, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.13.
10.14 Noncompetition Agreement by and between the Indiana
Gaming Commission, Showboat, Inc., Waterfront
Entertainment and Development, Inc., and Showboat Marina
Partnership, dated December 15, 1995, is incorporated
herein by reference from the Company's (SEC File No. 33-
4402) Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.14.
10.15 Redevelopment Project Lease by and between Showboat
Marina Partnership and the City of East Chicago
Department of Redevelopment, dated October 19, 1995, is
incorporated herein by reference from the Company's (SEC
File No. 33-4402) Registration Statement on Form S-4
filed on May 3, 1996, Part II, Item 21, Exhibit 10.15.
10.16 Asset Transfer Agreement by and between Showboat Marina
Partnership and Showboat Marina Casino Partnership,
dated as of March 27, 1996, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3, 1996,
Part II, Item 21, Exhibit 10.16.
10.17 Agreement; General Contractor dated April 30, 1996, by
and between Showboat Marina Casino Partnership and Tonn
& Blank, Inc., in Joint Venture with KLM Construction,
Inc., is incorporated herein by reference from the
Company's (SEC File No. 001-12419) Report on Form 10-Q
for the Period Ended June 30, 1996, Part II, Item 6(a),
Exhibit 10.01.
-41-
<PAGE>
NUMBER EXHIBIT DESCRIPTION
10.18 EJCDC - Standard Form of Agreement, as modified dated
May 13, 1996, by and between Showboat Marina Casino
Partnership and Luhr Bros., Inc., is incorporated herein
by reference from the Company's (SEC File No. 001-12419)
Report on Form 10-Q for the Period Ended June 30, 1996,
Part II, Item 6(a), Exhibit 10.02.
10.19 Equipment Lease Commitment, dated as of August 26, 1996,
by and between the Showboat Marina Casino Partnership
and PDS Financial Corporation, is incorporated herein by
reference from the Company's (SEC File No. 001-12419)
Report on Form 10-Q for the Period Ended September 30,
1996, Part II, Item 6(a), Exhibit 10.01.
10.20 Ground Lease, dated as of October 22, 1996, by and
between Showboat Marina Casino Partnership and 3600
Michigan Company Ltd.
10.21 Equipment Lease Commitment, dated as of November 21,
1996 by and between the Showboat Marina Casino
Partnership and Finova Capital Corporation.
21.01 List of the Showboat Marina Casino Partnership's
Subsidiaries.
27.01 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by the Company during
the last quarter of the period covered by this Form 10-K.
-42-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. Date: March 24, 1997
<TABLE>
<CAPTION>
SHOWBOAT MARINA CASINO
PARTNERSHIP, an Indiana
general partnership
<S> <C> <C> <C>
By: SHOWBOAT MARINA INVESTMENT By: SHOWBOAT MARINA
PARTNERSHIP, an Indiana PARTNERSHIP, an Indiana
general partnership, a general partnership, a
general partner general partner
By: SHOWBOAT INDIANA INVESTMENT By: SHOWBOAT INDIANA
LIMITED PARTNERSHIP, a INVESTMENT LIMITED
Nevada limited partnership, PARTNERSHIP, a Nevada
a general partner limited partnership, a
general partner
By: SHOWBOAT INDIANA, INC., a By: SHOWBOAT INDIANA, INC.,
Nevada corporation, its a Nevada corporation,
general partner its general partner
/s/ J. Keith Wallace /s/ J. Keith Wallace
J. Keith Wallace J. Keith Wallace
President and Chief President and Chief
Executive Officer Executive Officer
By: WATERFRONT ENTERTAINMENT AND By: WATERFRONT ENTERTAINMENT
DEVELOPMENT, INC., an AND DEVELOPMENT, INC.,
Indiana corporation, a an Indiana corporation,
general partner a general partner
/s/ Michael A. Pannos /s/ Michael A. Pannos
Michael A. Pannos Michael A. Pannos
President President
SHOWBOAT MARINA FINANCE
CORPORATION, a Nevada
corporation
/s/ Michael A. Pannos
By: Michael A. Pannos
Secretary
</TABLE>
-43-
<PAGE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
<S> <C> <C>
SHOWBOAT MARINA General Partner of March 24, 1997
PARTNERSHIP, an Indiana Showboat Marina
general partnership Casino Partnership
By: SHOWBOAT INDIANA
INVESTMENT LIMITED
PARTNERSHIP, a Nevada
limited partnership, a
general partner of
Showboat Marina
Partnership
By: SHOWBOAT INDIANA,
INC., a Nevada
corporation, its
general partner
/s/ J. Keith Wallace
J. Keith Wallace
President and
Chief Executive
Officer
By: WATERFRONT
ENTERTAINMENT AND
DEVELOPMENT, INC., an
Indiana corporation, a
general partner of
Showboat Marina
Partnership
/s/ Michael A. Pannos
Michael A. Pannos
President
-44-
<PAGE>
SIGNATURES TITLE DATE
SHOWBOAT MARINA INVESTMENT General Partner of March 24, 1997
PARTNERSHIP Showboat Marina
Casino Partnership
By: SHOWBOAT INDIANA
INVESTMENT LIMITED
PARTNERSHIP, a Nevada
limited partnership, a
general partner of
Showboat Marina
Investment Partnership
By: SHOWBOAT INDIANA ,
INC., a Nevada
corporation, its
general partner
/s/ J. Keith Wallace
J. Keith Wallace
President and
Chief Executive
Officer
By: WATERFRONT
ENTERTAINMENT AND
DEVELOPMENT, INC., an
Indiana corporation, a
general partner of
Showboat Marina
Investment Partnership
/s/ Michael A. Pannos
Michael A. Pannos
President
-45-
<PAGE>
SIGNATURES TITLE DATE
President and Chief March 24, 1997
/s/ J. Keith Wallace Executive Officer
J. Keith Wallace of Showboat Indiana,
Inc. (Principal
Executive Officer of
Showboat Indiana, Inc.)
Vice President Finance March 24, 1997
and Chief Financial
Officer of Showboat
Indiana, Inc.
(Principal Financial
/s/ Joseph O'Brien, III and Accounting Officer
Joseph O'Brien, III of Showboat Indiana,
Inc.)
/s/ J.K. Houssels Director of Showboat March 24, 1997
J.K. Houssels Indiana, Inc.
/s/ John D. Gaughan Director of Showboat March 24, 1997
John D. Gaughan Indiana, Inc.
/s/ Frank A. Modica Director of Showboat March 24, 1997
Frank A. Modica Indiana, Inc.
/s/ H. Gregory Nasky Director of Showboat March 24, 1997
H. Gregory Nasky Indiana, Inc.
/s/ J.K. Houssels, III Director of Showboat March 24, 1997
J.K. Houssels, III Indiana, Inc.
Director and President March 24, 1997
of Waterfront
/s/ Michael A. Pannos Entertainment and
Michael A. Pannos Development, Inc.
(Principal Executive
Officer of Waterfront
Entertainment and
Development, Inc.
-46-
<PAGE>
SIGNATURES TITLE DATE
Director and Treasurer March 24, 1997
/s/ Thomas S. Cappas (Principal
Thomas S. Cappas Financial and
Accounting Officer) of
Waterfront
Entertainment and
Development, Inc.
/s/ Joseph G. O'Brien, III Vice President Finance March 24, 1997
Joseph G. O'Brien, III Finance and Chief
Financial Officer
(Principal Financial
and Accounting Officer
of SMFC
/s/ J. Kell Houssels, III Director, President March 24, 1997
J. Kell Houssels, III and Chief Executive
Officer of SMFC
/s/ Mark J. Miller Director of SMFC March 24, 1997
Mark J. Miller
/s/ Michael A. Pannos Director of SMFC March 24, 1997
Michael A. Pannos
/s/ Thomas S. Cappas Director of SMFC March 24, 1997
Thomas S. Cappas
/s/ J. Keith Wallace Director of SMFC March 24, 1997
J. Keith Wallace
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
3.01 Articles of Incorporation of Showboat Marina Finance
Corporation, filed March 7, 1996, are incorporated
herein by reference from the Company's (SEC File No.
33-4402) Registration Statement on Form S-4 filed on
May 3, 1996, Part II, Item 21, Exhibit 3.01.
3.02 Bylaws of Showboat Marina Finance Corporation
certified March 21, 1996, are incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 3.02.
3.03 Partnership Agreement by and between Showboat Marina
Partnership and Showboat Marina Investment
Partnership dated as of March 1, 1996, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4 filed on May 3, 1996, Part II, Item 21, Exhibit
3.03.
4.01 Indenture dated as of March 28, 1996, among Showboat
Marina Casino Partnership, Showboat Marina Finance
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Nomura Securities International, Inc.,
Bear, Stearns & Co. Inc. and American Bank National
Association, as trustee, relating to the 13 1/2 Series
A and Series B First Mortgage Notes due 2003, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4 filed on May 3, 1996, Part II, Item 21, Exhibit
4.01.
4.02 A/B Exchange Registration Rights Agreement dated as
of March 28, 1996 among Showboat Marina Casino
Partnership, Showboat Marina Finance Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation,
Nomura Securities International, Inc. and Bear,
Stearns & Co. Inc., is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 4.02.
4.03 Specimen of 13 1/2% Series B First Mortgage Notes due
2003 is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4, Amendment No. 1, filed on June
24, 1996, Part II, Item 21, Exhibit 4.03.
4.04 Form of Letter of Transmittal to American Bank
National Association as Exchange Agent for exchange
of 13 1/2% Series A First Mortgage Notes due 2003 is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4, Amendment No. 1, filed on June 24, 1996, Part
II, Item 21, Exhibit 4.04.
10.01 Management Agreement dated March 28, 1996, by and
between Showboat Marina Casino Partnership and
Showboat Marina Partnership is incorporated herein by
-48-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.01.
10.02 Completion Guarantee dated March 28, 1996, by and
between Showboat, Inc. and American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.02.
10.03 Completion Guarantor Subordination Agreement dated
March 28, 1996, by and between Showboat, Inc. and
American Bank National Association, as trustee, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4 filed on May 3, 1996, Part II, Item 21, Exhibit
10.03.
10.04 Standby Equity Commitment dated March 28, 1996, by
and among Showboat Marina Casino Partnership,
Showboat Marina Finance Corporation and Showboat,
Inc., is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.04.
10.05 Manager's Consent and Subordination of Management
Agreement dated March 28, 1996, by and between
Showboat Marina Casino Partnership and Showboat
Marina Partnership, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4, Amendment No. 1,
filed on June 24, 1996, Part II, Item 21, Exhibit
10.05.
10.06 Leasehold Mortgage, Assignment of Rents and Security
Agreement dated March 28, 1996 and made by Showboat
Marina Casino Partnership to American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.06.
10.07 Escrow and Disbursement Agreement, dated March 28,
1996, by and among Showboat Marina Casino
Partnership, Showboat Marina Finance Corporation and
Showboat, Inc. (as escrow agent and disbursement
agent) and American Bank National Association, as
trustee, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4, Amendment No. 2, filed on July
8, 1996, Part II, Item 21, Exhibit 10.07.
10.08 Security Agreement dated March 28, 1996, among
Showboat Marina Casino Partnership, Showboat Marina
Finance Corporation and American Bank National
Association, as trustee, is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.08.
-49-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
10.09 Environmental Indemnity Agreement dated March 28,
1996, by and between Showboat, Inc. and American Bank
National Association is incorporated herein by
reference from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.09.
10.10 Assignment of Contracts and Documents dated March 28,
1996, by and between Showboat Marina Casino
Partnership and American Bank National Association,
as trustee, is incorporated herein by reference from
the Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.10.
10.11 Shipbuilding Contract between Atlantic Marine, Inc.
and Showboat Marina Casino Partnership, dated as of
March 8, 1996, is incorporated herein by reference
from the Company's (SEC File No. 33-4402)
Registration Statement on Form S-4 filed on May 3,
1996, Part II, Item 21, Exhibit 10.11.
10.12 Economic Betterment Commitment Letter Agreement
between the City of East Chicago, Indiana and
Showboat Marina Casino Partnership, dated April 8,
1994, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.12.
10.13 Economic Betterment Commitment Letter Agreement
between the City of East Chicago, Indiana and
Showboat Marina Casino Partnership, dated April 18,
1995, is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.13.
10.14 Noncompetition Agreement by and between the Indiana
Gaming Commission, Showboat, Inc., Waterfront
Entertainment and Development, Inc., and Showboat
Marina Partnership, dated December 15, 1995, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4 filed on May 3, 1996, Part II, Item 21, Exhibit
10.14.
10.15 Redevelopment Project Lease by and between Showboat
Marina Partnership and the City of East Chicago
Department of Redevelopment, dated October 19, 1995,
is incorporated herein by reference from the
Company's (SEC File No. 33-4402) Registration
Statement on Form S-4 filed on May 3, 1996, Part II,
Item 21, Exhibit 10.15.
10.16 Asset Transfer Agreement by and between Showboat
Marina Partnership and Showboat Marina Casino
Partnership, dated as of March 27, 1996, is
incorporated herein by reference from the Company's
(SEC File No. 33-4402) Registration Statement on Form
S-4 filed on May 3, 1996, Part II, Item 21, Exhibit
10.16.
-50-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
10.17 Agreement; General Contractor dated April 30, 1996,
by and between Showboat Marina Casino Partnership and
Tonn & Blank, Inc., in Joint Venture with KLM
Construction, Inc., is incorporated herein by
reference from the Company's (SEC File No. 001-12419)
Report on Form 10-Q for the Period Ended June 30,
1996, Part II, Item 6(a), Exhibit 10.01.
10.18 EJCDC - Standard Form of Agreement, as modified dated
May 13, 1996, by and between Showboat Marina Casino
Partnership and Luhr Bros., Inc., is incorporated
herein by reference from the Company's (SEC File No.
001-12419) Report on Form 10-Q for the Period Ended
June 30, 1996, Part II, Item 6(a), Exhibit 10.02.
10.19 Equipment Lease Commitment, dated as of August 26,
1996 by and between the Showboat Marina Casino
Partnership and PDS Financial Corporation, is
incorporated herein by reference from the Company's
(SEC File No. 001-12419) Report on Form 10-Q for the
Period Ended September 30, 1996, Part II, Item 6(a),
Exhibit 10.01.
10.20 Ground Lease, dated as of October 22, 1996, by and 52
between Showboat Marina Casino Partnership and 3600
Michigan Company Ltd.
10.21 Equipment Lease Commitment, dated as of November 21, 63
1996 by and between the Showboat Marina Casino
Partnership and Finova Capital Corporation.
21.01 List of the Showboat Marina Casino Partnership's 73
Subsidiaries.
27.01 Financial Data Schedule 75
</TABLE>
-51-
<PAGE>
EXHIBIT 10.20
-52-
<PAGE>
GROUND LEASE
THIS LEASE made and entered into this 22nd day of October,
1996, by and between the 3600 Michigan Company Ltd. ("Lessor")
and SHOWBOAT MARINA CASINO PARTNERSHIP, an Indiana Partnership
("Lessee").
ARTICLE I
(LEASED PREMISES)
Lessor, for and consideration of the rents to be paid and
the agreements and obligations herein contained on the part of
the Lessee to be observed and performed hereby leases to Lessee
and Lessee hereby leases from Lessor that real estate described
on Exhibit "A" attached hereto and made a part hereof (the
"leased premises").
The "leased premises" is further described as being a ground
lease, which includes some improved parking/street areas, some
fencing, and some existing (minimal) site lighting, and it
includes the occupancy of one (l) building, all of which is
identified on Exhibit "A"; It does not include other buildings
that may be on the "leased premises" not identified as included
in the leased premises".
During the first two (2) years of the initial term of this
Lease, Lessee, at its option, may lease additional areas within
the area identified on Exhibit B, as provided in Article VII C.
herein.
ARTICLE II
(TERM)
The initial term of this Lease shall be for a period of
three (3) years commencing on the 1st day of November, 1996, and
terminating on the 31st day of October, 1999, unless sooner
terminated or extended as hereinafter provided.
<PAGE>
ARTICLE III
(RENT)
Lessee shall pay to Lessor a rental payment in the amount of
$771.88 per acre (ground lease) per month plus $2.00 per square
foot per year for any building occupied by Tenant, as Lessee and
Lessor may agree. Said rental payment shall be paid as follows:
$9,262.56 upon execution of this Ground Lease, and, $4,631.28
each month beginning December 1, 1996, and on the 1st day of each
month thereafter, during the term.
Said monthly rental payment of $771.88 per acre includes the
amount of $171.88 which is the amount required to reimburse
Lessor on a monthly basis for the current real estate taxes per
acre assessed against the Leased Premises.
On May 1st of each year during the term of this Agreement,
the monthly rental payments per acre shall be increased or
decreased by such amounts as are equal to the increase or
decrease in real estate taxes per acre then assessed against the
Leased Premises.
ARTICLE IV
(USE)
Lessee shall use the leased premises for employee parking in
conjunction with its casino facility in East Chicago, Indiana,
which use may include employee parking, bus staging area,
employee waiting facility (i.e. trailers if the Lab Building is
not suitable for such use) and security facilities.
Lessor makes no representations or warranties concerning the
conditions, including soil conditions, on the Leased Premises or
the availability of sanitary sewers or other utilities.
Lessee has visually inspected the premises and
accepts said Leased Premises in an "as is"
condition, latent defects and environmental matters
accepted. Provided Lessee does not remove any
<PAGE>
debris or soil from the Leased Premises. Lessee's environmental
liability shall be limited to such environmental defects
resulting from or relating to Lessee's use of the leased
premises, from which defects Lessee shall indemnify and hold
Lessor harmless.
Lessee shall only use the premises in a lawful manner, and,
any and all repairs, alterations, and improvements required for
compliance with the Lessee's lawful use of the premises shall be
made at Lessee's sole expense.
ARTICLE V
(INSURANCE)
Lessee shall procure and maintain general public liability
insurance against claims for personal injury, death or property
damage occurring in or about the leased premises in amounts and
with insurance carriers acceptable to the Lessor. All such
policies of insurance shall name Lessor as an additional insured
and shall be in an amount of not less than $4,000,000.00
aggregate.
Lessee covenants and agrees to indemnify and save harmless
the Lessor against any and all claims, demands or obligations
which may be made against Lessor arising out of or by reason of
the tenancy created hereby, except claims based on Lessor's
negligence.
ARTICLE VI
(MAINTENANCE)
Lessee, at its expense, shall keep and maintain the leased
premises and the improvements thereon in good, sitely, and safe
condition. Lessee shall keep that part of the leased premises
used for parking, vehicular traffic and walkways clean and free
from snow, ice, rubbish and obstructions of any walkways.
Lessee, at its expense, has the authority to make
initial repairs and improvements to the leased premises
to facilitate its use as an employee parking
area and bus staging area, which repairs and
<PAGE>
improvements shall include grading and paving, repairs to and
installation of fencing, repairs to and installation of lighting,
installation of security facilities, and repairs and improvements
to leased buildings. Once the initial improvements are made,
Lessee may not make substantial alterations or improvement to the
Leased Premises without the prior written consent of Lessor,
which consent shall not be unreasonably withheld.
ARTICLE VII
(OPTIONS)
A. Lessee shall have the right to extend this Lease for
two (2) additional terms of five (5) years each under the
following conditions, to-wit:
a. Notice of Lessee's intent to exercise each of the
options provided herein shall be given in writing
at least 60 days prior to expiration of the
current term;
b. The rental payments during any extension term (the
5 year options to extend) shall be not less than
the rental payments of the previous term plus a
percentage increase equal to the percentage
increase in the Consumer Price Index at the
beginning of each term.
B. If at any time during the Term of this Lease, or any
Extensions thereof, Lessor decides to sell the Leased
Premises, Lessee shall have the right of first refusal
to purchase said Leased Premises. In the event Lessor
receives a bona fide offer to purchase the Leased
Premises, Lessee shall have fourteen (14) days from
notice of said bona fide offer to enter into a written
contract with Lessor to purchase the Leased Premises
under identical terms of the bona fide offer. Failure
to timely act will void Lessee's right to purchase.
C. During the first two (2) years of the initial term,
Lessee shall have the option to lease additional
premises from Lessor, within the area identified on
Exhibit B attached hereto, and add such additional
premises to this Lease. Failure of Lessee to exercise
this option to lease additional premises within ten
(10) days after notice from Lessor of Lessor's intent
to sell such additional premises to a third party shall
void this option to lease additional premises.
D. The terms, conditions and covenants set out in
subparagraph B and C above shall not apply to any
presently existing options to buy or option to lease
the Leased Premises or any Additional Leased Premises,
provided however that the exercise of existing options
and sale pursuant thereto shall be subject to the
terms, conditions and covenants of this Ground Lease,
including subparagraphs B and C above.
<PAGE>
ARTICLE VIII
The parties understand and agree that the relationship
between them is that of a Lessor and Lessee and that this Lease
is an absolute net Lease to Lessor.
For purposes of any notice that may be required or
appropriate under the terms of this Lease, such notices shall be
directed as follows or as the parties may designate in writing:
LESSOR: 3600 Michigan Company Ltd.
9350 Kile Road
Chardon, OH 44024
LESSEE: Showboat Marina Casino Partnership
P.O. Box 777
East Chicago, IN 46312
ARTICLE IX
(PAYMENT OF TAXES)
Lessee shall be responsible for and shall timely pay all
PERSONAL property taxes, if any, assessed because of and during
their use and occupancy of the Leased Premises.
Said Lessor is being reimbursed by Lessee on a monthly basis
for real estate taxes, Lessor shall be responsible for and shall
timely pay all real estate taxes assessed against the Leased
Premises.
ARTICLE X
(COMPLIANCE WITH INDIANA GAMING STATUTE AND THE COMMISSION'S
RULES.) Lessor does now hereby agree to acquaint themselves with
and fully comply with the requirements, terms, conditions,
prohibitions and obligations of the Indiana Gaming Statute and
the Rules of the Indiana Gaming Commission as they may apply to
them.
Lessor is fully aware and acknowledges that: The Indiana
Gaming Commission reserves the right to disapprove and cancel any
contract or transaction that does not comply with the Indiana
Gaming Statute or the Commission's rules or that does not
maintain the integrity of the industry.
<PAGE>
Lessor will fully cooperate with and voluntarily comply with
all requests and inquires from the Indiana Gaming Commission or
its staff that relate, directly or indirectly, to this Agreement.
This Lease may be disapproved or canceled by the Indiana
Gaming Commission.
ARTICLE XI
Lessee covenants and agrees that if anytime the Lessor is
required to enforce this Lease whether or not litigation is
actually commenced or to defend or be a party to any action
arising out of the facts connected with or caused by reason of
this Lease or for the occupancy of the leased premises by the
Lessee, the Lessee will pay the Lessor all court costs and
reasonable attorney fees and expenses expended by Lessor in such
action or in enforcing the terms of this Lease.
LESSOR: 3600 MICHIGAN COMPANY, LTD.
9350 Kile Road
Chardon, OH 44024
By: /s/ James F. Buckmaster
James F. Buckmaster, Manager
LESSEE: SHOWBOAT MARINA CASINO PARTNERSHIP,
an Indiana Partnership
By: /s/ J. Keith Wallace
J. Keith Wallace, authorized
signator
<PAGE>
EXHIBIT A
BUCKMASTER STEEL SITE
(PLAT MAP OF SITE CANNOT BE REPRESENTED IN AN EDGAR FORMAT)
<PAGE>
EXHIBIT B
OPTION AREA
(PLAT MAP OF SITE CANNOT BE REPRESENTED IN AN EDGAR FORMAT)
<PAGE>
November 29, 1996
Mr. James F. Buckmaster, Sr.
Buckmaster Steel Co.
23200 Chagrin Blvd. Suite 605
Beachwood, Ohio 44122
SUBJECT: Ground Lease with Showboat Mardi Gras Casino, East
Chicago, IN
Dear Jim,
This letter is to inform you that Showboat Mardi Gras Casino,
(SMGC), has elected to extend it's ground lease area to include
approximately 7.30 acres in lieu of the 6.0 acres referenced in
the original ground lease, dated October 22, 1996. The new
monthly rental rate shall be $5,634.72 per month, (7.30 X
$771.88), and subject to the terms of the lease.
I've attached two copies of the revised lease plan which reflect
the total area which SMGC plans occupy during the term of the
lease, subject to it's rights to expand the lease area up to
approximately 12 acres, (as shown on Exhibit B to the lease).
Please initial one copy of the revised lease plan and return to
me for my records.
Should you have any questions or comments do not hesitate to
contact me.
Sincerely,
/s/ Thomas A. Gourguechon
Thomas A. Gourguechon
Project Manager
CC: Keith Wallace, SMGC
Joe O'Brien, SMGC
Vince Evans, SMGC
Richard Lesniak, Lesniak and Associates
EXHIBIT 10.21
-53-
<PAGE>
[Original printed on letterhead of Finova Capital Corporation]
November 21, 1996
Showboat Marina Casino Partnership
6601 Ventnor Avenue, Suite 105
Ventnor, NJ 08406
Attn: Mr. Joseph O'Brien
Gentlemen:
We are pleased to confirm our commitment to you, that subject to
all the terms and conditions hereof and receipt by us of all
documents requested by us, in form and substance satisfactory to
us and our counsel, we are prepared to enter into the following
loan transaction with you (this "Commitment"). All capitalized
terms shall have the meanings ascribed to them in this
Commitment.
Borrower: Showboat Marina Casino Partnership, a
general partnership ("Borrower") owned
1% by Showboat Marina Investment
Partnership ("SMIP") and 99% by Showboat
Marina Partnership ("SMP"), both SMIP
and SMP are 45% owned by Waterfront
Entertainment and Development, Inc.
("Waterfront") and 55% owned by Showboat
Indiana Investment L.P. ("LP") which is
owned (i) 1% Showboat Indiana, Inc.
("SII") which is wholly owned by
Showboat Development Company, ("SDCI")
and (ii) 99% by Showboat Operating
Company ("SOC") which is wholly owned by
Showboat, Inc. SMP is a general partner
of Borrower. Borrower, SMP, LP, SII,
SDCI, SOC, Showboat, Inc. and any
present and future wholly or partially
owned subsidiary or affiliate of any of
the foregoing are herein collectively
referred to as the Showboat Entities.
Loan: The lesser of (i) $11,000,000 or
(ii) Borrower' s cost to acquire the
Equipment.
Use of Loan Proceeds: To finance Borrower's acquisition of
non-gaming equipment, consisting of
kitchen, surveillance and other
equipment, substantially as set forth on
Exhibit A, (the "Equipment"), to be
located on Borrower's vessel and
Borrower's related land based support
facilities to be constructed and to be
<PAGE>
operated as a gaming casino from the
port of East Chicago, Indiana (the
"Vessel").
Advances: Subject to the terms and conditions
hereof, Borrower may, from time to time,
during the Advance Term request advances
(each an "Advance") of the Loan, in
amounts of not less than $1,000,000
each.
Promissory Note: The Loan shall be evidenced by a
promissory note, in form and substance
satisfactory to us, made by Borrower
payable to us.
Advance Term: The period commencing on the Closing
Date (as hereinafter defined) and
continuing until the earlier of
(a) October 1, 1997, (b) such time as
the maximum amount of Advances have been
made or (c) a date mutually agreed upon
by each of us. Such earliest date is
hereinafter referred to as the ("Advance
Termination Date.")
Advance Term
Interest Rate: The rate of interest publicly announced
by Citibank, N.A. in New York, NY, from
time to time as its Prime or Base Rate
plus two (2%) percent per annum. The
Advance Term Interest Rate shall
increase or decrease to reflect any
increase or decrease in the Prime Rate
or Base Rate, effective as of the date
of each such change.
Advance Term
Interest Payments: During the Advance Term, interest shall
accrue on the outstanding principal
balance of the Advances at the Advance
Term Interest Rate and shall be payable
monthly and on the Conversion Date (as
hereinafter defined).
Conditions to
Conversion to
Term Loan: The following are the conditions to the
conversion (the "Conversion Conditions")
of the then outstanding principal
balance of the Advances to a term loan
(the "Term Loan"): (i) Borrower's
faithful observance of all of the terms
and conditions of the Loan Documents (as
hereinafter defined); and (ii) there
- 2 -
<PAGE>
having occurred no material adverse
change in Borrower's financial or
business condition, on or before the
Conversion Date.
Conversion to and
Term of the Term
Loan; Conversion
Date: In the event that: (i) Borrower has
completed all of the Conversion
Conditions on or before the Advance
Termination Date; (ii) Borrower has not
breached any of the terms and conditions
of the Loan Documents; and (iii) no
material adverse change in Borrower's
financial or business condition has
occurred, the Term of the Term Loan
shall commence on such date and, subject
to the provisions of the Loan Documents
shall continue until the Maturity Date
(as hereinafter defined). The date of
the commencement of the Term of the Term
Loan is referred to herein as the
"Conversion Date."
Failure to Satisfy
Conversion Conditions: In the event that Borrower fails to
satisfy all of the Conversion Conditions
by October 1, 1997, the Advances shall
not convert into a Term Loan and all
Advances together with any interest
accrued thereupon shall become
immediately due and payable.
Term of the Term Loan: Three (3) Years.
Term Loan
Interest Rate: The highest yield for Treasury Notes
with a maturity date on or closest to
the Maturity Date, as published in THE
WALL STREET JOURNAL, on the first
business day preceding the Closing Date
plus four and ninety hundredths (4.90%)
percent per annum.
Term Loan Payments: Thirty-Six (36) equal and consecutive
monthly installments of principal and
interest, which in the aggregate will
fully amortize the Term Loan at the
Interest Rate over the Term of the Term
Loan.
- 3 -
<PAGE>
Certain Provisions
Applicable to Advances
and Term Loan: (a) Interest on the Advances and the
Term Loan shall be calculated on the
basis of a 360-day year of twelve 30-day
months, payable in arrears.
(b) All payments on the Advances and
the Term Loan shall be applied first to
charges and expenses, if any, then to
accrued interest at the Advance Rate
Interest Rate or the Term Loan Interest
Rate, as applicable and the balance in
reduction of the principal balance of
the Loan.
Special Conditions;
Maturity Date: The first Term Loan Payments shall be
payable on the first day of the second
month immediately following the month in
which the Conversion Date occurs or, if
the Conversion Date is the first day of
a month, then on the first day of the
next succeeding month; and the remaining
Term Loan Payments shall be payable on
the first day of each successive month
thereafter. The date of the last
scheduled Term Loan Payments is the
"Maturity Date." In addition, on the
first day of the first month immediately
following the Conversion Date, Borrower
shall pay the accrued interest on the
Loan, at the Term Loan Interest Rate,
for the period from the Conversion Date
through the last day of the month in
which the Conversion Date occurred
("Interest Adjustment Payment").
Closing Date: The date that we made the first Advance
but not later than July 1, 1997.
Net Loan: All payments made by Borrower to us are
to be net of all charges, taxes,
expenses and the like. All insurance,
maintenance and taxes with respect to
the transactions contemplated hereby,
the Equipment, the Collateral and the
Loan are to be paid by Borrower and are
Borrower's sole responsibility.
Fees and Other Charges: Borrower shall pay or reimburse us for
all reasonable out of pocket costs and
expenses (including, but not limited to,
our attorneys fees no to exceed $50,000,
and costs of appraisals, inspections,
filing fees and searches)
- 4 -
<PAGE>
incurred by us in connection with the
negotiation and documentation for this
Commitment, the Loan Documents and
closing of the transactions contemplated
hereby.
Collateral: The payment and performance of all of
Borrower's present and future
obligations to us pursuant to the Loan
Documents shall be secured by a
perfected first priority security
interest in and lien upon the Equipment
and all accessions and additions to,
substitutions for, and replacements
thereof and all proceeds of any of the
foregoing, whether cash or non-cash,
including, but not limited to, insurance
proceeds (collectively the
"Collateral").
Documentation: All documentation (collectively the
"Loan Documents") shall be prepared or
reviewed by us or our counsel, shall be,
in form and substance, satisfactory to
us and our counsel and shall include,
but not be limited to the following:
promissory notes, a loan and security
agreement, partnership agreements and
resolutions, subordination agreements
(with respect to liens on the Collateral
and certain debt owing by Borrower to
any of the Showboat Entities), opinions
of counsel, a Vessel Chattel Mortgage on
the Vessel covering solely the
Collateral, ("FINOVA Chattel Vessel
Mortgage"), Uniform Commercial Code
("UCC") financing statements perfecting
our security interests in the Collateral
and such other documents as we and our
counsel deem appropriate.
Additional Financing and
Equity Requirements: The making of the Advances shall be
conditioned upon, among other things,
your procurement of equity, financing
and financing commitments as follows:
(a) Evidence that Borrower received
$140,000,000 (less underwriting expenses
actually incurred by Borrower in
connection with the Bond Placement) from
the sale of First Mortgage Notes due
2003 issued jointly by Borrower and
Showboat Marina Finance Corporation
("SMFC") under an Indenture dated as of
March 28, 1996 (the "Indenture") among
- 5 -
<PAGE>
Borrower, SMFC and American Bank
National Association as Trustee (the
"Bond Placement");
(b) Evidence that Borrower received
$39,000,000 of equity capitalization
("Required Capitalization").
Subordination: Except as expressly permitted pursuant
to Section 4.07 of the Indenture, no
present or future indebtedness of
Borrower to any of the Showboat Entities
(including, without limitation, any
management fees) shall be paid or
withdrawn in whole or in part, nor shall
any of the Showboat Entitles accept any
payment of or on account of any such
indebtedness or as a withdrawal of
capital while any present or future
indebtedness from Borrower to us is
outstanding.
Certain Documentation
Provisions: The Loan Documents shall contain such
representations, warranties, covenants
(financial and otherwise), events of
default including, but not limited to,
default in the event (a) of the
termination or assignment of the
agreement to be entered into between
Borrower and SMP, for the management of
Borrower's business and operations (the
"Management Agreement"); (b) (i) SMP
ceases to be a general partner of
Borrower; (ii) SMP ceases to own 99% of
Borrower; (iii) there occurs any change
in the ownership of SMP (iv) Thomas S.
Cappos and Michael A. Pannos, cease to
own, in the aggregate, at least 25% of
Waterfront; or (v) Showboat, Inc.,
ceases to maintain (directly or
indirectly) 100% of the legal and
beneficial ownership of LP; or (c) of a
default with respect to the bonds (which
are the subject of the Bond Placement)
or any agreement executed in connection
therewith including, but not limited to,
any Indenture in connection therewith;
and remedies and other terms as are
customarily required by lenders in the
transactions of this type.
Continuing Compliance
by Borrower: The operation of Borrower's business on
the Vessel shall be in compliance with
all applicable, federal, state, and
local laws, rules, regulations, permits,
- 6 -
<PAGE>
orders and other requirements now in
effect or as may become effective and
applicable during the Term of the Loan.
If non-compliance could have a material
adverse effect on Borrower's business,
operations, or financial condition or on
Borrower's ability to perform its
obligations under the Loan Documents
Borrower must forthwith make such
changes, if any, necessary to comply
with such laws and ordinances. The Loan
Documents shall include, but not be
limited to, provisions encompassing all
of the foregoing.
Financial Reporting;
Pre and Post Closing:
Pre-Closing: Throughout the period that this
Commitment is effective, Borrower shall
deliver and cause to be delivered to us
annual financial statements, for each
of Borrower and Showboat, Inc. audited
with respect to Showboat, Inc. by KPMG
Peat Marwick LLP or other Certified
Public Accountants acceptable to us,
within 105 days following the end of the
respective fiscal years of Borrower and
Showboat, Inc., and quarterly financial
statements within 60 days following
the respective quarter ends of Borrower
and Showboat, Inc. The quarterly
financial statements shall be certified,
by the respective chief financial
officers of Borrower and Showboat, Inc.
If Borrower or Showboat, Inc. updates
its projections prior to the closing of
the transaction contemplated hereby (the
"Closing"), the updated projections
shall be provided to us
contemporaneously with the creation
thereof and shall be satisfactory to us.
Any such projections which are
satisfactory to us in both form and
content are hereinafter referred to as
the "Satisfactory Subsequent
Projections."
Post-Closing: Throughout the Term of the Loan Borrower
shall deliver to us annual financial
statements, within 105 days following
the end of its fiscal year and quarterly
financial statements within 60 days
following its quarter ends. The
financial statements shall be certified,
by Borrower's chief financial officer
- 7 -
<PAGE>
and accompanied by a certificate
executed by such chief financial officer
certifying Borrower's compliance with
the representations, warranties, and
covenants set forth in the Loan
Documents.
This Commitment and the Closing, shall be further subject to,
among other things, receipt by us of the following, each of which
shall be satisfactory to us and our counsel:
(i) all documentation set forth herein and
as may be required by our counsel, including,
but not limited to, the Loan Documents;
(ii) evidence, that the operation of
Borrower's gaming business on the Vessel is
in compliance with all applicable, federal,
state, and local laws, rules, regulations,
and evidence that Borrower has obtained all
necessary pre-licenses, licenses, permits,
orders and other requirements as may be
required by any entity having jurisdiction
thereof, including but not limited to the
Indiana Gaming Commission;
(iii) evidence that our entering into the
transaction contemplated by the terms of this
Commitment, does not require any licenses
(other than our current business licenses) or
approvals by any entity having jurisdiction
thereof;
(iv) evidence that our enforcement of our
rights under the Loan Documents including,
but not limited to, repossession and sale of
the Equipment, does not require any licenses
(other than our current business licenses) or
approvals by any entity having jurisdiction
thereof;
(v) evidence of the receipt by Borrower of
no less than $140,000,000 (less underwriting
expenses actually incurred by Borrower in
connection with the Bond Placement) from the
Bond Placement;
(vi) evidence of the receipt by Borrower of
the Required Capitalization;
(vii) evidence that the Collateral is
owned by Borrower, free and clear of all
liens and encumbrances, excepting only for
the FINOVA Vessel Chattel Mortgage, any liens
subordinated to the FINOVA Vessel Chattel
- 8 -
<PAGE>
Mortgage in form and substance satisfactory
to us and inchoate liens which affect the
Vessel ("Inchoate Liens");
(viii) results of UCC and Coast Guard
Searches;
(ix) the partnership agreement of Borrower;
(x) the Management Agreement;
(ix) all agreements relating to Borrower's
purchase of the Equipment including, without
limitation, invoices and agreements which
evidence that all Equipment is new and
unused;
(xii) evidence of the satisfaction by
Borrower of all conditions set forth herein;
(xiii) policies of insurance and
endorsements for the Collateral in such form
and of such type as are satisfactory to us
issued by insurers rated A.M. Best A-VIII or
better;
(xiv) evidence that the Collateral is
owned by Borrower, free and clear of all
liens and encumbrances other than our first
and only priority security interest and lien
and Inchoate Liens;
(xv) such opinions of counsel (including, but
not limited to, provisions relating to the
enforceability of the Loan Documents and
perfection of the FINOVA Vessel Chattel
Mortgage, our first priority security
interest and lien in the Collateral, and
confirming that (a) we require no licenses
(other than our current business licenses) or
approvals from any entity in connection with
our making of the Loan and our repossession
and sale of the Equipment and (b) Borrower
has obtained all necessary pre-licenses,
licenses and approvals to conduct a gaming
business on the Vessel) and such
certificates, registrations, waivers,
searches, releases and further documents as
may be required by our counsel.
This Commitment and the Closing shall be subject, in addition to
all other conditions and requirements set forth herein, to the
following: (i) in our sole reasonable judgment, there being
- 9 -
<PAGE>
no material adverse change in Borrower's financial, business or
other conditions or in Showboat, Inc.'s financial, business or
other condition; and (ii) the Closing occurring on or before July
1, 1997. This Commitment is not assignable without our prior
written consent. We reserve the right to cancel this Commitment
in the event Borrower or any officer, employee, agent or
representative of Borrower has made any misrepresentation to us
or has withheld any information from us with regard to the
transaction contemplated hereby.
A Commitment Fee in the amount of $75,000 is required with
Borrower's acceptance of this Commitment. We acknowledge receipt
of the sum of $75,000 previously paid as an Application Fee, and
agree to apply it towards the Commitment Fee due hereunder.
As used in this Commitment, the terms "satisfactory to us" or
"acceptable to us" or "satisfactory to our counsel" or
"acceptable to our counsel" or terms of similar import mean
satisfactory or acceptable to us or our counsel in our or its
sole judgment and discretion.
This Commitment and the Loan Documents shall be governed by the
laws of the State of Arizona. Any dispute arising under this
Commitment shall be litigated by Borrower only in any federal or
state court located in the State of Arizona, or any state court
located in Maricopa County, Arizona; and Borrower hereby
irrevocably submits to the personal jurisdiction of such courts
and waive any objection that may exist as to venue or convenience
of such forums. Nothing contained herein shall preclude us from
commencing any action in any court having jurisdiction thereof.
In the event that the transaction contemplated hereunder does not
close prior to July 1, 1997 because of Borrower's failure to
satisfy the conditions for the Closing, or because of a material
adverse change in Borrower's financial, business or other
condition or Showboat, Inc.'s financial, business, or other
condition, has occurred this Commitment shall terminate and we
shall have no liability to Borrower and we shall retain, as
earned the Commitment Fee.
In the event we fail to complete this transaction and such
failure is not because of Borrower's inability to satisfy all the
conditions for closing or Borrower's failure to achieve its
projected financial condition, as modified by Borrower's
Satisfactory Subsequent Projections, in any material manner or a
material adverse change in Borrower's financial, business or
other condition or Showboat, Inc.'s financial business, or other
condition, has occurred our liability shall be limited to a
return of the Commitment Fee, less our out-of-pocket costs and
expenses.
- 10 -
<PAGE>
Please execute the extra copy of this letter acknowledging
Borrower's acceptance of the terms hereof and return it to us.
In the event that a copy of this Commitment executed by Borrower
is not received by us on or before November 25, 1996 this offer
shall be deemed withdrawn. This Commitment supersedes, replaces
and terminates all previous proposals and/or agreements
including, but not limited to, our proposal to SMP dated August
22, 1995, our offer to make a commitment to SMP dated October 13,
1995 and our offer to make a commitment to Borrower dated
November 7, 1996. Upon execution and delivery thereof the Loan
Documents shall supersede this Commitment.
Very truly yours,
FINOVA Capital Corporation
/s/ William Breitman
William Breitman
Vice President
AGREED AND ACCEPTED:
Showboat Marina Casino Partnership
By: Showboat Marina Partnership
Its General Partner
By: /s/ JOSEPH G. O'BRIEN
Title: V-P FINANCE
By: Showboat Marina Investment Partnership
Its General Partner
By: /s/ JOSEPH G. O'BRIEN
Title: V-P FINANCE
- 11 -
EXHIBIT 21.01
-54-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF SHOWBOAT MARINO CASINO PARTNERSHIP
STATE OF
NAME INCORPORATION PARENT COMPANY
<S> <C> <C>
Showboat Marina Finance Nevada Showboat Marina
Corporation Casino Partnership
</TABLE>
-55-
<PAGE>
EXHIBIT 27.01
-56-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001013788
<NAME> SHOWBOAT MARINA CASINO PARTNERSHIP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 599
<SECURITIES> 69,002
<RECEIVABLES> 1,601
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 71,202
<PP&E> 100,601
<DEPRECIATION> 0
<TOTAL-ASSETS> 187,894
<CURRENT-LIABILITIES> 13,311
<BONDS> 140,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 187,894
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,417
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,417)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
