SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
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 1-8570
CIRCUS CIRCUS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0121916
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2880 Las Vegas Boulevard South, Las Vegas, Nevada 89109-1120
(Address of principal executive offices)
(702) 734-0410
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since
last report)
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.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 31, 1997
Common Stock, $.01-2/3 par value 95,051,783 shares
Explanation: Item 6 of this report is amended solely for the
purpose of filing as Exhibit 10(a) hereto a Letter
Agreement between the Company and Atwater Casino
Group, L.L.C., and a related Executive Summary
including the portions of such Letter Agreement and
related Executive Summary omitted in the original
filing pursuant to the Company's request for
confidential treatment.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report are listed on
the Index to Exhibits accompanying this report.
(b) Reports on Form 8-K. No report on Form 8-K was filed
during the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CIRCUS CIRCUS ENTERPRISES, INC.
(Registrant)
Date: August 1, 1997 By Clyde T. Turner
Clyde T. Turner
Chairman of the Board and
Chief Executive Officer
Date: August 1, 1997 By Glenn Schaeffer
Glenn Schaeffer
President, Chief Financial
Officer and Treasurer
INDEX TO EXHIBITS
Exhibit
No. Description
4(a). $2.0 Billion Loan Agreement, dated as of May 23, 1997, by
and among the Company, the Banks named therein and Bank
of America National Trust and Savings Association, as
administrative agent for the Banks, and the related
Subsidiary Guarantee dated May 23, 1997, of the Company's
subsidiaries named therein.*
10(a). Letter agreement between the Company and Atwater Casino
Group, L.L.C., and related Executive Summary.
27. Financial Data Schedule for the three months ended April
30, 1997 as required under EDGAR.*
* This exhibit was included in the original filing of this
report.
EXHIBIT 10(a)
CIRCUS CIRCUS ENTERPRISES, INC.
Atwater Casino Group LLC
C/O Richard D. McLellan
Dykema Gossett PLLC
800 Michigan National Tower
Lansing Michigan 48933
RE: Formation of Joint Venture Agreement to Apply for Casino
License in Detroit, Michigan
Ladies and Gentlemen:
This binding letter (the Letter of Intent ) outlines the material
terms and conditions pursuant to which Circus Circus Enterprises,
Inc., or one of its affiliates ( Circus ) is prepared to enter into
a joint venture agreement (the Definitive Agreement ) with
Atwater Casino Group LLC ( Atwater Casino ) to apply for a casino
license in Detroit, Michigan pursuant to the Michigan Gaming
Control and Revenue Act and to own and operate a hotel/casino and
related amenities in Detroit, Michigan. Collectively, Circus and
Atwater Casino are referred to in this letter of intent as the
Joint Venture Members .
The Joint Venture Members acknowledge that they have expended
considerable amounts of time and money and have otherwise set aside
pursuing other bona fide opportunities to develop a proposal for a
casino license and a hotel/casino in Detroit, Michigan in order to
devote their full-time and attention to the finalization and
execution of this Letter of Intent in reliance upon each Joint
Venture Member's agreement to diligently engage in good faith
efforts to fulfill the respective commitments set forth in this
Letter of Intent.
The interests, rights and obligations of the Joint Venture Members
will be evidenced by a Definitive Agreement containing the terms
and conditions described in the Executive Summary set forth in
Exhibit A attached to this Letter of Intent (the Executive
Summary ). The Joint Venture Members acknowledge that while this
Letter of Intent is not intended to constitute the Definitive
Agreement, this Letter of Intent is intended to be a binding
commitment by the Joint Venture Members to enter into a Definitive
Agreement containing the substantive terms described in the
attached Executive Summary (which contains all the material and
essential substantive elements of the joint venture), together with
such additional provisions as are mutually agreed to by the Joint
Venture Members (including provisions of the Atwater Casino
Operating Agreement as amended).
The Joint Venture Members acknowledge and agree, however, that the
ability of Circus to enter into the Definitive Agreement is
conditioned upon, and expressly subject to, obtaining the approval
of the Board of Directors of Circus. Similarly, the Definitive
Agreement is subject to the approval of the Board of Managers of
Atwater Entertainment Associates, L.L.C., and the Manager of
Atwater Casino.
The Executive Summary and all information given by any Joint
Venture Member to any other Joint Venture Member in connection with
this Letter of Intent or the negotiation of the Definitive
Agreement shall be confidential material (herein the Confidential
Information ) and shall not be disclosed except to the extent
expressly mutually agreed by the Joint Venture Members and/or as
required by applicable law, regulatory authorities or final court
order. The Confidential Information shall be used solely for the
purpose of advancing the finalization of the Definitive Agreement
and consummating the joint venture contemplated by the Definitive
Agreement. The Confidential Information shall be disclosed only to
the Joint Venture Members and their respective representatives,
affiliates and/or agents who need to know such Confidential
Information for the purposes of (I) advancing the completion and
execution of the Definitive Agreement and/or (ii) consummating the
joint venture contemplated by the Definitive Agreement, except to
the extent required to be disclosed by applicable law, regulatory
authorities or final court order. If the proposed Definitive
Agreement is not signed for any reason, each Joint Venture Member
will return to the appropriate Joint Venture Member(s) all
Confidential Information received therefrom in connection with the
proposed joint venture.
This Letter of Intent will expire if it is not accepted, signed and
returned by Atwater Casino to Circus prior to 5:00 P.M., Detroit,
Michigan local time on May 28, 1997.
Very truly yours,
CIRCUS CIRCUS ENTERPRISES, INC.,
A Nevada corporation
By: Michael S. Ensign
Vice Chairman of the Board and
Its: Chief Operating Officer
THE UNDERSIGNED HEREBY ACCEPT AND AGREE TO BE BOUND BY THE TERMS OF
THE CIRCUS CIRCUS ENTERPRISES, INC. LETTER OF INTENT SET FORTH
ABOVE.
ATWATER CASINO GROUP, L.L.C.,
A Michigan limited liability company
By: Z.R.X., L.L.C.,
Its: Manager
By: ZLM Corporation
Its: Manager
By: Thomas Celani
Thomas Celani, President
Acknowledged and Agreed:
Atwater Entertainment Associates, L.L.C.,
A Michigan limited liability company
By: Herbert J. Strather
Its: Manager
EXECUTIVE SUMMARY
OF
JOINT VENTURE AMONG
CIRCUS CIRCUS AND ATWATER CASINO GROUP
1. Joint Venture Members:
Circus Circus Enterprises, Inc., a Nevada corporation or its
subsidiary or affiliate ( Circus ), Atwater Casino Group, L.L.C.,
a Michigan limited liability company (f/k/a X.R.N., L.L.C.) or its
affiliate ( Atwater Casino ),will form Detroit Entertainment,
L.L.C., a limited liability company formed in a jurisdiction
acceptable to the parties (the Joint Venture ), for the purpose of
acquiring, constructing and operating the Project (defined below).
The Joint Venture will be owned 45% by Circus and 55% by Atwater
Casino, which is owned by ZRX, L.L.C., a Michigan limited liability
company ( ZRX ) and Atwater Entertainment Associates, L.L.C., a
Michigan limited liability company ( AEA ), as its Members.
2. Project:
The Joint Venture will be formed to assemble property in Detroit,
Michigan on which it will develop, construct and operate a
hotel/casino and related parking, retail stores, restaurants,
entertainment venues, and additional facilities (the Project ) at
a cost not to exceed $700 million, unless approved by a majority of
the Board. If permitted, the Joint Venture will open and operate
a temporary casino facility ( Temporary Casino ) during the
construction and prior to the commencement of operations of the
Project. The Members may own, have under option, or control one or
more parcels of land upon which the Project will be constructed.
Upon licensing, these parcels will be conveyed to the Joint Venture
at actual cost of the parcel, including any costs incurred in
holding the land from the date of acquisition to the date it is
conveyed to the Joint Venture but excluding any mark-up, fees,
commissions, or similar charges paid to the Members or their
affiliates or any person directly or indirectly holding an interest
in the Member or affiliate.
3. Project Budget:
The total cost of land acquisition, development (including the cost
of the campaign for passage of Proposal E and expenses incurred in
the formation of Joint Venture), design, construction, equipping
and opening of the Project (including initial bankroll and
deposits) is currently estimated and approved not to exceed $700
million ( Project Budget ). The costs incurred in connection with
opening and operating the Temporary Casino shall not be included as
part of the Project Budget. Any increase in that Project Budget
must be approved by a majority of all the members of the Joint
Venture Board.
4. Capital Contributions:
(a) Atwater Casino shall not be required to make an initial
capital contribution to the Joint Venture but it will transfer any
preference rights it holds to obtain a gaming license in the City
of Detroit to the Joint Venture.
(b) Circus shall make an initial cash capital contribution to the
Joint Venture of $13 million payable as follows: $5 million payable
into escrow upon execution of the definitive Joint Venture
agreement, and $8 million upon the Joint Venture s receipt of a
gaming license. The escrowed amounts shall be distributed to ZRX
and Atwater in accordance to the Atwater Casino Operating Agreement
to reimburse them for costs incurred prior hereto pursuant to their
joint instructions upon the earlier of (i) receipt by Circus of an
opinion of legal counsel satisfactory to Circus that disbursement
of the $5 million to the applicable parties will not violate any
present or proposed applicable law, rule or regulation of any
nature, including, but not limited to, present or proposed laws,
rules and regulations relating to gaming or other activities to be
conducted by the Joint Venture and/or its partners; or (ii) a final
determination that the Joint Venture will not obtain a gaming
license in Michigan for reasons beyond the control of the parties.
The $8 million payment upon the receipt of the gaming license shall
be paid as follows: $3 million directly to Atwater and the
remaining $5 million to ZRX and Atwater pursuant to the terms of
the Atwater Casino Operating Agreement.
(b) In addition to the initial capital contribution set forth
above, Circus will make additional cash capital contributions to
equal 20% of the approved Project Budget, estimated to be a $140
million capital contribution. The initial capital contribution of
$13 million shall be credited against this amount. Circus capital
contribution shall be made as needed as the Project s costs are
being incurred and at such times as determined by the Board but in
no event shall the contributions be made later than the time
advances are required under the terms of the Project s financing
referenced in Section 5.
(c) If the actual cost of the Project exceeds the approved Project
Budget ( Supplemental Project Costs ), the Joint Venture will
attempt to obtain third party financing to cover such Supplemental
Project Costs. If financing is unavailable, or if additional
equity is necessary, then each Member shall contribute additional
cash capital contributions in proportion to their ownership
interest in the Joint Venture.
(d) Circus also shall make a cash capital contribution to the
Joint Venture or make a loan in an amount equal to the costs
associated with leasing, renovating, opening and operating the
Temporary Casino, as approved by the Board.
5. Project Financing:
(a) Circus will contribute twenty percent (20%) of the Project
Budget as provided in Section 4 above. The Joint Venture intends
to finance approximately 80% of the Project Budget (estimated
financing of $560 million) with loans from one or more third party
lenders, secured by one or more liens on the Project. Circus
agrees to secure such construction financing for the Project to the
extent possible on commercially reasonable terms through bank
financing and, to the extent bank financing is not available on
commercially reasonable terms for some or all of such debt, Circus
shall secure the balance of such debt through subordinated debt in
the high yield market. Circus shall use its best good faith
efforts to obtain non-recourse bank construction financing for the
construction of the Project in the bank market at the lowest
available cost. If it is necessary to finance a portion of the
Project through subordinated debt financing, Circus may elect to
provide such financing to the Joint Venture on terms below
commercially available market terms. In no event shall Circus be
required to provide any financing from its available bank credit
agreement or its other debt sources. Circus shall have authority
to approve, after consultation with Atwater Casino, the terms of
any construction financing for the Project, and any replacement
financing and the terms of this agreement and any other agreement
between the parties shall be subject to the terms of such
financing.
6. Management of the Company: Joint Venture Board
(a) The management of the Joint Venture will be vested in a 12-
member Board. Six members of the Board will be appointed by
Circus, six members of the Board will be appointed by Atwater
Casino (of which three members of the Board will be appointed by
each of ZRX and AEA). Board meetings will be held quarterly.
Board approval will be required for the following decisions: (i)
the initial design (including exterior design, overall layout and
theme) of the Project (based on Circus recommendations) and any
fundamental changes in such design; (ii) any increase in the
approved Project Budget; (iii) the contractor and local architect
for the Project; (iv) affirmative action programs (based on a
subcommittee s recommendations which committee will have a majority
of its members represented by AEA Board members); (v) charitable
contributions and civic involvement (based on a subcommittee s
recommendations which committee will have a majority of its members
represented by AEA Board members); (vi) expansions of the Project
after opening which are estimated to cost in the excess of $ 50
million; (vii) the annual operating budget for the Project (based
on Circus recommendations); (viii) selection of independent
certified public accountants for the Joint Venture, and (ix) any
development agreement with the City of Detroit.
(b) Board approval will generally require a majority vote.
However, so long as Circus is providing any credit support to the
Project, Circus, after consultation with Atwater Casino, will have
tie breaking authority for decisions regarding (I) the Development
Agreement with the City of Detroit; (ii) decisions regarding the
construction of the Project (including choice of contractor and
architect); (iii) approval of the annual operating budget for the
Project; and (iv) the dissolution, recapitalization or bankruptcy
of the Joint Venture. Except as authorized in the Joint Venture
Agreement, no member of the Board shall be able to take any action
on behalf of the Joint Venture unless specifically authorized by
the Board.
(c) Any costs incurred in furtherance of the Project approved by
a majority of the Board after May 1, 1997 and prior to receipt of
a gaming license shall be borne 45% by Circus and 55% by Atwater
Casino. Except as provided in the Joint Venture Agreement, no
Member is authorized to incur any expenditures on behalf of the
Joint Venture without the prior written consent of the Board. Upon
licensing, all such costs approved by the Board and borne by the
Members shall be included in the Project Budget and shall be
reimbursed immediately to the Members. Notwithstanding the general
authority granted to the Board but consistent with the policies
adopted by the Board, Circus will have the exclusive authority for
implementing decisions relating to the operation of the Project,
including the layout of the casino, marketing and credit policies,
internal control and security procedures and employment decisions.
(d) Notwithstanding the foregoing, the unanimous approval of the
Members in the Joint Venture shall be required for the following
decisions:
(i) any sale, lease, assignment, transfer, or other
conveyance exclusive of financing requirements) of the assets
of the Joint Venture or any merger, consolidation,
dissolution, divestiture or winding-up of the Joint Venture
(except as provided in Section 6(b));
(ii) any amendment or restatement of the Joint Venture
Agreement of the Joint Venture;
(iii) any transaction between the Joint Venture and a Member
or an affiliate of a Member, except as provided in Section
7(b);
(iv) any material change in the character of the business and
affairs of the Joint Venture;
(v) The commission of any act which would make it impossible
for the Joint Venture to carry on its ordinary business and
affairs (except as provided in Section 6(b)); or
(vi) The commission of any act that would contravene any
provision of the Joint Venture Agreement or applicable limited
liability company statute governing the Joint Venture.
7. Management of the Project:
(a) Circus will be responsible for the day to day operations of
the Project. The Joint Venture will pay all costs to operate the
Project. During the first ten (10) years of the operation of the
Project, Circus shall receive an annual management fee equal to an
amount between: (i) 1.5 % of the total Project Budget; or (ii) 3 %
of total revenues of the Project, as agreed to by the parties to
this agreement. Further, the Joint Venture shall allocate a
portion of the expense associated to the Management Fee to Circus,
as agreed to by the parties to this agreement.
(b) Circus may appoint, from time to time, certain employees of
Circus to devote essentially full time to the day-to-day management
of the Project and retain such employees on Circus payroll. In
such event, the Joint Venture shall reimburse Circus for the out of
pocket compensation (for example, salary, bonus, direct cost of
health and retirement benefit plans but excluding stock options and
other incentive compensation unless approved by the Board) paid to
or on behalf of such employee for performing services to the Joint
Venture on a full time basis. However, the Joint Venture shall not
reimburse Circus for any time or expense associated with Circus
personnel who do not perform full-time services on behalf of the
Joint Venture.
(c) So long as it maintains an equity interest in the facility,
Circus will grant a royalty-free license to the Project to use (i)
the Circus tradename and related marks under which the Project will
operate and (ii) Circus proprietary databases in connection with
the operation of the Project; provided, however, if Circus is not
managing the Project but still maintains an equity interest in the
Joint Venture, then it will enter into a royalty-free license
agreement for such proprietary items.
(d) Other than as set forth above, no Member or its affiliates
shall receive any management, consulting, development, or license
fees, commissions, or other payments in connection with the
acquisition, development or operation of the Project without the
approval of a majority of the Board; provided, however, any
increase in the management fee payable to Circus or an extension of
its duration shall require the approval of all the Members.
8. Gaming License:
Each Member shall be responsible for submitting its own gaming
license application and the applications of any party required to
submit an application due to its affiliation with a Member. If a
Member or a party holding an interest in such Member, other than
Circus, fails to qualify to obtain licensing or findings of
suitability or becomes disqualified from holding a gaming license
application in Michigan and other gaming jurisdictions in which
Circus now conducts, or in the future will conduct, gaming
operations, then upon thirty (30) days written notice from the
Joint Venture, such Member, subject to regulatory approval, shall
(i) transfer its interest in the Joint Venture to one of its
constituent members or an affiliate of the Member who is qualified
to obtain and hold a gaming license, or (ii) if such transfer does
not occur within thirty (30) days of the date of the notice,
transfer its interest to the Joint Venture for cash in an amount
equal to 100% of the net book value of the interest of such
Member s interest in the Joint Venture, or the amount approved by
regulatory authorities, if less, and the Member s interest will be
redistributed proportionately among the remaining Members. If
Circus fails to qualify to obtain licensing or becomes disqualified
from holding a gaming license, then Circus shall receive an amount
equal to its then existing capital account in the Joint Venture,
and such amount shall be payable pursuant to a promissory note with
payments over five (5) years and interest at seven percent (7%).
9. Transfer Restrictions:
(a) Generally, no Member may transfer its interest in the Joint
Venture without the approval of the majority in interest of the
other Members; provided that Circus shall be allowed to transfer
its ownership interest to a wholly-owned subsidiary or affiliate
without the consent of the other Members or in connection with the
sale or transfer of substantially all of the assets of Circus. In
addition, Atwater Casino may transfer its interest to an entity
that is beneficially-owned by the same persons as the transferring
Member.
(b) Transfer of any ownership interest in the Joint Venture to an
unrelated person or entity (that is, to a party not already owning
an interest in the Joint Venture member) by any Member shall be
subject to (i) regulatory approval and (ii) a right of first
refusal running to the other Members to purchase the interest on
the same terms and conditions as the proposed third party transfer,
which must be accepted or rejected within one hundred and twenty
(120) days. If more than one Member elects to exercise the right
of first refusal, then the ownership interest shall be allocated
amongst the exercising Members in proportion to their ownership
interest in the Joint Venture. Any party exercising the right of
first refusal as to Circus interest must also obtain Circus
release from any credit support to the Project. Notwithstanding
the foregoing, Circus shall not transfer its interest in the Joint
Venture prior to six (6) months after the opening of the Project
without the approval of the majority in interest of the
nontransferring Members.
(c) In the event a Member declares bankruptcy or makes an
assignment for the benefit of creditors, then the remaining Members
shall have the right to purchase that ownership interest. If more
than one Member elects to exercise its rights, than the ownership
interest shall be allocated amongst the exercising Members in
proportion to their ownership interest in the Joint Venture. The
purchase price for the ownership interest, subject to regulatory
approval, shall be 100% of the cash fair market value of the
Member s ownership interest in the Joint Venture, as determined by
appraisal, but in no event greater than the amount approved by the
regulatory authorities, if applicable.
10. Project Cash Flow:
(a) Distributable cash flow will be defined as the Project s
operating earnings, plus depreciation less financing costs and less
a reinvestment reserve. The reinvestment reserve will be set forth
in the annual budget and approved by the Board. Financial
statements will be audited annually by a big six certified public
accounting firm. Distributable cash flow (cash available after the
payment of expenses, debt service and applicable taxes of the Joint
Venture) from the Joint Venture will be distributed to the Members
in proportion to their interest in the Joint Venture each month in
arrears; provided, however, a minimum amount of cash flow shall be
distributed on a quarterly basis that is equal to the maximum
federal, state and local tax liabilities of the Members
attributable to the profit allocations from the Joint Venture to
the Members.
(b) If the Joint Venture is permitted to open a Temporary Casino,
distributable cash flow from the Temporary Casino shall be
distributed as follows: (i) first, to the Members to the extent of
the maximum federal, state or local tax liability of the Members
attributable to the income allocated to the Members from the Joint
Venture; (ii) next, to reimburse each Member for sums advanced or
loaned for the construction and operation of the Temporary Casino
based on an amortization of such costs over the estimated number of
months of operation of the Temporary Casino plus a return of 7 %;
(iii) next, a certain percentage (to be agreed to by a majority of
the Board) of any remaining distributable cash flow to the Members
in proportion to their ownership percentages; and (iv) the balance,
if any, shall be used to reduce the debt financing required for the
permanent casino.
11. Representations and Warranties:
Each Member will represent and warrant to the other Members that,
as of the date of the signing of the Joint Venture agreement, the
party has knowledge of no facts or circumstances that are likely to
affect the ability of such Member (or any party having an interest
in such Member) or the Joint Venture to receive all gaming and
other licenses, permits and approvals necessary or advisable for
the construction, completion, operation, ownership and use of the
Project as a gaming facility or which would otherwise affect any
Member s ability to be found suitable by any applicable authority,
except for certain disputes concerning ownership interests in AEA.
In the event any representation or warranty made by a Member is
untrue or is breached, the defaulting party shall indemnify the
other Members for any damages resulting from such breach.
