SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
---------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES
EXCHANGE ACT OF 1943
For the transition period from _________________ to ________________
Commission file number 0-14897
Players International, Inc.
Nevada 95-4175832
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
1300 Atlantic Ave., Suite 800 Atlantic City, NJ 08401
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (609) 449-7777
-------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the registrant's classes of
common stock was 29,187,480 shares at November 8, 1996.
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1996 and
March 31, 1996 1
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended September 30, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows for the Three and Six
Months Ended September 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
September 30, 1996 March 31, 1996
------------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,746 $ 18,786
Marketable securities, net -- 4,461
Accounts receivable, net of allowance for doubtful accounts of
$298 at September 30, 1996 and $118 at March 31, 1996 3,688 4,541
Notes receivable 600 3,062
Inventories 3,046 2,719
Deferred income tax 2,969 2,970
Prepaid expenses and other current assets 5,584 5,044
----------- -----------
Total current assets 32,633 41,583
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization of $31,139 at September 30, 1996 and $23,078
at March 31, 1996 292,609 279,916
----------
DEFERRED INCOME TAX - long-term 4,897 4,897
----------- -----------
INTANGIBLES, net of accumulated amortization of $2,105
at September 30, 1996 and $1,714 at March 31, 1996 36,640 37,126
---------- -----------
INVESTMENT IN JOINT VENTURE 59,474 39,474
---------- -----------
OTHER ASSETS 9,216 10,436
----------- -----------
TOTAL ASSETS $ 435,469 $ 413,432
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
1
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 1996 March 31, 1996
------------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of Long-Term debt $ 24,000 $ --
Accounts payable 5,631 6,736
Accrued liabilities 25,435 32,432
Other liabilities 6,443 537
---------
Total current liabilities 61,509 39,705
--------- ---------
OTHER LONG-TERM LIABILITIES 29,462 27,100
--------- ---------
LONG-TERM DEBT NET OF CURRENT PORTION 150,000 153,000
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, Authorized--10,000,000 shares
Issued and outstanding--none -- --
Common stock, $.005 par value, Authorized--90,000,000 shares
Issued--29,859,580 at September 30, 1996 and March 31, 1996 149 149
Additional paid-in capital 123,670 123,719
Unrealized loss on marketable securities, net of tax -- (1)
Treasury stock, at cost; 672,100 shares at September 30, 1996 (7,294) (7,294)
and March 31, 1996
Retained earnings 77,973 77,054
--------- ---------
Total Stockholders' Equity 194,498 193,627
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 435,469 $ 413,432
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
2
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Casino $ 67,260 $ 73,743 $ 139,512 $ 136,853
Food and beverage 3,704 3,502 7,409 5,170
Hotel 1,768 1,600 3,579 1,600
Other 1,676 1,451 3,519 2,285
------------ ------------ ------------ ------------
74,408 80,296 154,019 145,908
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Casino 30,227 29,843 61,682 54,241
Food and beverage 3,708 4,194 7,453 5,740
Hotel 802 908 1,629 918
Other gaming related expenses 24,031 21,158 47,624 35,645
Corporate administrative expenses 2,690 2,494 5,062 4,324
Pre-opening and gaming development costs 1,884 2,237 3,295 7,995
Depreciation and amortization 4,746 5,780 9,382 9,258
Restructuring charge 9,007 -- 9,007 --
------------ ------------ ------------ ------------
77,095 66,614 145,134 118,121
------------ ------------ ------------ ------------
Income (loss) before other income (expense)
and provision (benefit) for income taxes (2,687) 13,682 8,885 27,787
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 55 2,060 168 4,183
Other income, net 81 72 66 377
Interest expense (3,749) (3,963) (7,613) (7,352)
------------ ------------ ------------ ------------
(3,613) (1,831) (7,379) (2,792)
------------ ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes (6,300) 11,851 1,506 24,995
PROVISION (BENEFIT) FOR INCOME
TAXES (2,457) 4,622 587 9,748
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 3,843) $ 7,229 $ 919 $ 15,247
============ ============ ============ ============
EARNINGS (LOSS) PER COMMON AND
COMMON SHARE EQUIVALENT
Primary $ (0.12) $ 0.22 $ 0.03 $ 0.47
Fully Diluted $ (0.12) $ 0.22 $ 0.03 $ 0.47
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
Primary 30,964,067 32,730,731 31,106,399 32,602,273
Fully Diluted 30,964,067 32,730,819 31,106,399 32,602,654
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
3
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended September 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 919 $ 15,247
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,382 9,258
Other 240 (2,169)
Changes in assets and liabilities:
Accounts and notes receivable 3,266 (2,276)
Inventories, prepaid expenses and other current assets (867) (2,697)
Other assets 572 (10,235)
Accounts payable and accrued liabilities (8,200) (7,025)
Other liabilities 8,469 197
--------- ---------
Net cash provided by operating activities 13,781 300
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchases of property and equipment (21,174) (56,336)
Purchase of marketable securities -- (170,806)
Proceeds from sale of marketable securities 4,401 79,244
Investment in joint venture (20,000) --
Net cash used in investing activities (36,773) (147,898)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 21,000 150,000
Payments of long-term debt -- (9,071)
Proceeds from exercise of stock options -- 1,260
Other (48) (1)
--------- ---------
Net cash provided by financing activities 20,952 142,188
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,040) (5,410)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,786 23,886
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,746 $ 18,476
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 10,232 $ 275
Income taxes paid 3,827 8,596
Unrealized gain on marketable securities, net of tax -- 394
Debt incurred to purchase land and equipment -- 667
Accrued liabilities incurred to purchase property and equipment -- 5,500
Other long-term liabilities relating to costs in excess of fair value
of tangible assets acquired -- 14,656
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
4
<PAGE>
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Form 10-K for the year ended March 31, 1996.
In the opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows of all periods presented have been made.
The results of operations for the six month period ended September 30,
1996, are not necessarily indicative of the operating results for the full year.
Certain reclassifications have been made to the financial statements as
previously presented to conform to current classifications.
Note 2 - Casino Revenues and Promotional Allowances
Casino revenues are the net of gaming wins less losses. Revenues
exclude the retail value of complimentary food and beverage, hotel
accommodations and other items furnished to customers, which totaled
approximately $6,717,000 and $5,764,000, and $13,617,000 and $9,705,000 for the
three and six months ended September 30, 1996 and 1995, respectively.
The estimated cost of providing such complimentary services are
included in casino costs and expenses through inter-department allocations from
the department granting the services as follows (dollars in thousands):
For the Three Months For the Six Months
Ended September 30, Ended September 30,
--------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Food and beverage $ 5,342 $ 4,002 $11,068 $ 6,786
Hotel 252 -- 526 --
Admissions and other 361 1,086 655 1,896
------- ------- -------
$ 5,955 $ 5,088 $12,249 $ 8,682
======= =======
Note 3 - Pre-opening and Gaming Development Costs
All costs in connection with the identification and development of new
gaming jurisdictions and sites are expensed, except for the cost of property and
equipment which is capitalized.
5
<PAGE>
Note 4 - Primary and Fully Diluted Shares
Per share amounts have been computed based on the weighted average
number of outstanding shares and common stock equivalents, if dilutive, during
each period. A summary of the number of shares used in computing primary
earnings per share follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended September 30, Ended September 30,
--------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares outstanding 29,494,862 30,051,219 29,494,862 29,889,606
Dilutive effect of options and warrants 1,469,205 2,679,512 1,611,537 2,712,667
---------- ---------- ---------- ----------
Shares used in computing primary earnings
per share 30,964,067 32,730,731 31,106,399 32,602,273
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended September 30, Ended September 30,
--------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares outstanding 29,494,862 30,051,219 29,494,862 29,889,606
Dilutive effect of options and warrants 1,469,205 2,679,600 1,611,537 2,713,048
---------- ---------- ---------- ----------
Shares used in computing fully diluted earnings
per share 30,964,067 32,730,819 31,106,399 32,602,654
========== ========== ========== ==========
</TABLE>
Note 5 - Long-Term Debt
On August 25, 1995, the Company entered into a $120,000,000 reducing
revolving credit agreement (the "Credit Facility") with a consortium of banks.
As of September 30, 1996, there was a balance of $24,000,000 outstanding under
the Credit Facility ($32,000,000 as of November 14, 1996).
In October 1996, the Company informed the banks party to the Credit
Facility that it had not achieved the $65 million level of earnings before
interest, taxes, depreciation and amortization for the four consecutive quarters
ended September 30, 1996 as required by the covenants of the Credit Facility,
and thus was in default under the Credit Facility. The banks have temporarily
waived such default pending negotiation and documentation of a definitive
amendment to the Credit Facility (the "Amended Credit Facility"). The Company
expects to have the Amended Credit Facility completed in December, 1996. Until a
definitive amendment to the Credit Facility is executed, borrowings under the
Credit Facility will be classified as current liabilities.
Long-term debt as of September 30, 1996 consisted exclusively of
$150,000,000 in 10 7/8% Senior Notes due 2005.
Note 6 - Restructuring Charge
During the quarter ended September 30, 1996, the Company decided to
significantly reduce its pursuit of development opportunities in new or emerging
jurisdictions and instead concentrate on improving its existing operations. This
resulted in the sale of a non-operating riverboat held for future deployment and
a corporate aircraft, the closure of two development offices and the retirement
or termination of 21 senior management and staff. The affected employees
included those specifically responsible for the Company's developmental
activities and others necessitated to effect the Company's revised business
plan. The one-time
6
<PAGE>
charge of $9,007,000 consists principally of the net loss on the disposal of
assets held for or used in development activities and the cost of employee
severance arrangements.
Note 7 - Subsequent Events
On November 5, 1996, the voters of Calcasieu Parish, Louisiana, by a
two to one margin, voted in favor of the continuation of riverboat gaming in the
parish in a referendum authorized by the Louisiana legislature. This vote means
that the Company may continue to operate its facilities at the present site in
Lake Charles, subject to the timely renewal of its current licenses. Under
current Louisiana law, any application to locate any other riverboat facility in
the parish, or to change the location of an existing riverboat to another
docking site within the parish, will require the approval of the voters in
another referendum in the parish.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company operates gaming, resort and entertainment facilities. These
include a riverboat casino in Metropolis, Illinois, two riverboat casinos in
Lake Charles, Louisiana and a land-based casino resort in Mesquite, Nevada. The
Company also owns and operates a thoroughbred racetrack in Paducah, Kentucky. A
joint venture riverboat casino entertainment complex in Maryland Heights,
Missouri, is presently under construction.
The Company's fiscal year ends on March 31. References to the second
quarter of 1997 or 1996, mean the three month periods ended September 30, 1996
and September 30, 1995, respectively.
Comparison of Operating Results for the Three Month periods ended
September 30, 1996 and 1995
Results of Operations
Financial Highlights
<TABLE>
<CAPTION>
% Increase
Three months ended September 30 1996 1995 (Decrease)
---- ---- ----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Casino revenues
Metropolis $20,385 $23,367 (12.8)%
Lake Charles 41,407 44,869 (7.7)%
Mesquite 5,468 5,507 (0.7)%
------- ------- -----
$67,260 $73,743 (8.8)%
Total revenues
Metropolis $21,263 $24,465 (13.1)%
Lake Charles 43,547 46,294 (5.9)%
Mesquite 9,269 9,181 1.0%
Other 329 356 (7.6)%
------- ------- -----
$74,408 $80,296 (7.3)%
Operating income (loss)
Metropolis $6,115 $9,552 (36.0)%
Lake Charles 7,052 12,516 (43.7)%
Mesquite (1,755) (3,337) 47.4%
Corporate, development and pre-opening expenses (5,092) (5,049) (0.9)%
Restructuring charge (9,007) -- --
------- ------- -----
($2,687) $13,682 (119.6)%
------- ------- -----
Operating margin (operating income/total revenues)
Metropolis 28.8% 39.0% (10.2) pts.
Lake Charles 16.2% 27.0% (10.8) pts.
Mesquite Neg. Neg. n.m.
Consolidated, excl. restructuring charge 8.5% 17.0% (8.5) pts.
Consolidated Neg. 17.0% n.m.
------- ------- -----
Depreciation and amortization $4,746 $5,780 (17.9)%
------- ------- -----
Interest expense, net $3,694 $1,903 94.1%
------- ------- -----
Net income, excl. restructuring charge $1,651 $7,229 (77.2)%
------- ------- -----
Net income (loss) ($3,843) $7,229 (153.2)%
------- ------- -----
Net income per share, excl. restructuring charge $0.05 $0.22 (77.3)%
------- ------- -----
Net income (loss) per share ($0.12) $0.22 (154.5)%
------- ------- -----
</TABLE>
n.m. - not meaningful
neg. - negative
The 9% decrease in casino revenues and the 7% decrease in total
revenues during the 1997 second quarter versus the prior year period, resulted
from an increase in competing riverboat casino capacity in both the Metropolis
and Lake Charles markets as well as competition from more distant casinos in
Tunica,
8
<PAGE>
Mississippi and St. Louis, Missouri. A competing riverboat casino opened in
Evansville, Indiana, in December 1995 and in Lake Charles a competitor opened
its second riverboat in July 1996.
Operating income for the three months ended September 30, 1996,
excluding the restructuring charge, decreased approximately 54% from the same
period in 1995. The 36% and 44% declines in Metropolis and Lake Charles,
respectively, resulted from a decline in casino revenues at both properties
coupled with increased expenditures for advertising, marketing, promotions and
entertainment incurred in response to the additional competition. In Lake
Charles, operating expenses also increased as a result of the February 1996
opening of a 60,000 square foot floating entertainment "Island", which added
significant dining and entertainment capacity. Additionally, the per passenger
tax paid to local government in Lake Charles was increased by $.50 in August
1995.
The three months ended September 30, 1995, constituted the first full
operating quarter for the Mesquite facility. As such, a significant amount of
non-recurring promotional and other expenses relating to the opening were
incurred during that quarter. The 47% reduction in Mesquite's operating loss for
the three months ended September 30, 1996, was due to a modest increase in
revenue and increased operating efficiency, primarily the result of lower food
and beverage expenses.
Depreciation and amortization expense for the three months ended
September 30, 1996, decreased by approximately 18% from the same period in 1995,
primarily as a result of a change in the estimated useful lives of certain
depreciable assets and intangibles, effective October 1, 1995.
The restructuring charge reflected in the second quarter of 1997
reflects the Company's decision to significantly reduce its pursuit of
development opportunities in new or emerging jurisdictions and instead
concentrate on improving its existing operations. This resulted in the sale of
the Players I riverboat which was previously held for future deployment and a
corporate aircraft, the closure of two development offices and the retirement or
termination of 21 senior management and staff. The affected employees included
those specifically responsible for the Company's developmental activities and
others affected by the Company's revised business plan. The one-time charge
consists principally of the net loss on the disposal of assets held for or used
in development activities and the cost of employee severance arrangements.
Other Factors Affecting Net Income
Net interest expense increased by 94%, to $3.7 million, for the three
months ended September 30, 1996, versus the same period in 1995. Interest income
decreased by approximately $2 million as a result of the decrease in investable
funds resulting from the increased investments in Maryland Heights and Mesquite.
Interest cost reflects the $150 million, 10-7/8% Senior Notes issued in April
1995, borrowings under a $120 million revolving bank credit facility entered
into in August 1995 (totaling $24 million as of September 30, 1996) and imputed
interest associated with the August 1995 acquisition of the Downtowner Hotel in
Lake Charles. Capitalized interest increased by approximately $1.5 million in
the second quarter of 1997, to $1.7 million, due to the ongoing investment in
Maryland Heights and the development of the Mesquite golf course.
9
<PAGE>
Comparison of Operating Results for the Six Month periods ended
September 30, 1996 and 1995
Results of Operations
Financial Highlights
<TABLE>
<CAPTION>
% Increase
Six months ended September 30 1996 1995 (Decrease)
---- ---- -----------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Casino revenues
Metropolis $39,536 $42,963 (8.0)%
Lake Charles 88,755 88,317 0.5%
Mesquite 11,221 5,573 101.3%
------- ------- ----
$139,512 $136,853 1.9%
Total revenues
Metropolis $41,187 $44,957 (8.4)%
Lake Charles 93,375 90,903 2.7%
Mesquite 18,810 9,332 101.6%
Other 647 716 (9.6)%
------- ------- ----
$154,019 $145,908 5.6%
Operating income (loss)
Metropolis $11,850 $16,767 (29.3)%
Lake Charles 18,484 27,306 (32.3)%
Mesquite (3,100) (3,394) 8.7%
Corporate, development and pre-opening expenses (9,342) (12,892) 27.5%
Restructuring charge (9,007) -- --
------- ------- ----
$8,885 $27,787 (68.0)%
------- ------- ----
Operating margin (operating income/total revenues)
Metropolis 28.8% 37.3% (8.5) pts.
Lake Charles 19.8% 30.0% (10.2) pts.
Mesquite Neg. Neg. n.m.
Consolidated, excl. restructuring charge 11.6% 19.0% (7.4) pts.
Consolidated 5.8% 19.0% (13.2) pts.
------- ------- ----
Depreciation and amortization $9,382 $9,258 1.3%
------- ------- ----
Interest expense, net $7,445 $3,169 134.9%
------- ------- ----
Net income, excl. restructuring charge $6,413 $15,247 (57.9)%
------- ------- ----
Net income $919 $15,247 (94.0)%
------- ------- ----
Net income per share, excl. restructuring charge $0.21 $0.47 (55.3)%
------- ------- ----
Net income per share $0.03 $0.47 (93.6)%
------- ------- ----
</TABLE>
n.m. - not meaningful
neg. - negative
The 8% decrease in casino revenues and total revenues in Metropolis
during the six months ended September 30, 1996, versus the same period in 1995,
resulted from the opening of a competing riverboat casino in Evansville,
Indiana. This resulted in lower revenue even though total amounts wagered were
generally consistent between periods. Casino and total revenues in Mesquite more
than doubled in the six months ended September 30, 1996. The Mesquite casino
resort opened on June 29, 1995. As such, it had six months of operations in the
current period compared to just over three months of operations in the prior
year period. The increase in total revenues in Lake Charles during the six
months ended September 30, 1996 versus the same period in 1995, resulted from
the acquisition of the former Downtowner hotel in August 1995 and the February
1996 opening of a 60,000 square foot floating entertainment "Island", which
added significant dining and entertainment capacity.
Operating income for the six months ended September 30, 1996, excluding
the restructuring charge, decreased approximately 36% from the same period in
1995. The 29% and 32% declines in Metropolis and Lake Charles, respectively,
resulted from a decline or flat casino revenues at the respective property
coupled with increased expenditures for advertising, marketing, promotions and
entertainment incurred in response to
10
<PAGE>
additional competition. In Lake Charles, operating expenses also increased as a
result of the February 1996 opening of the entertainment "Island". Additionally,
the per passenger tax paid to local government in Lake Charles was increased by
$.50 in August 1995.
The approximately 9% reduction in Mesquite's operating loss for the six
months ended September 30, 1996, versus the same period in 1995, was due to
increased operating efficiency, primarily the result of lower food and beverage
expenses.
Corporate, development and pre-opening expenses declined by
approximately 28% in the six months ended September 30, 1996, versus the same
period in 1995, primarily due to the opening of the Mesquite property in late
June of 1995 with a subsequent reduction in pre-opening expenses.
Other Factors Affecting Net Income
Net interest expense increased by approximately $4.3 million for the
six months ended September 30, 1996, versus the same period in 1995. Interest
income declined by approximately $4 million, as a result of the decrease in
investable funds resulting from the increased investments in Maryland Heights
and Mesquite. The increased interest cost reflects the $150 million, 10-7/8%
Senior Notes issued in April 1995, borrowings under a $120 million revolving
bank credit facility entered into in August 1995 (totaling $24 million as of
September 30, 1996) and imputed interest associated with the August 1995
acquisition of the Downtowner Hotel in Lake Charles. Capitalized interest
increased by approximately $2.5 million, to $2.9 million, due to the ongoing
investment in Maryland Heights and the development of the Mesquite golf course.
Capital Resources, Capital Spending and Liquidity
During the six months ended September 30, 1996, cash flow from
operations and $21 million in borrowings from the Company's $120 million
revolving bank credit facility were the sources of funds for capital
expenditures, debt service and other corporate requirements. During the
comparable period in 1995, the primary source of funds for such purposes was the
proceeds from the April 1995 issuance of $150 million of 10-7/8% Senior Notes.
Operating activities provided $13.8 million in cash in the current six
month period versus $300,000 in the prior period. The increase is primarily
attributable to the costs of issuing the Senior Notes and arranging the bank
credit facility in the prior period.
Capital expenditures during the six months ended September 30, 1996,
totaled $21 million, primarily for the development of a golf course in Mesquite,
which opened in October 1996, and maintenance capital spending at the Company's
three major operating facilities. Such capital expenditures do not include a $20
million investment in the unconsolidated Maryland Heights joint venture. Capital
expenditures during the comparable 1995 period totaled $56.3 million, which
consisted principally of the final construction costs for Players Island Resort
and the addition of a second riverboat in Lake Charles.
The Company's portion of the Maryland Heights project is expected to
cost approximately $140 million, excluding capitalized interest. As of September
30, 1996, the Company had funded approximately $66 million of this amount.
In October 1996, the Company informed the banks party to the Credit
Facility (the "Banks") that it had not achieved the $65 million level of
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the four consecutive quarters ended September 30, 1996 as required by the
covenants of the Credit Facility, and thus was in default under the Credit
Facility. See Note 5 of the Notes to Condensed Consolidated Financial
Statements. The Banks have temporarily waived such default pending negotiation
and documentation of a definitive amendment to the Credit Facility (the "Amended
Credit Facility"). The Company expects to have the Amended Credit Facility
completed in December, 1996. Although the terms of the Amended Credit Facility
have
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yet to be agreed upon, it is expected that (i) the minimum EBITDA covenant in
the Credit Facility will be reduced, (ii) borrowing costs will increase under
the Amended Credit Facility, (iii) an amendment fee to amend the Credit Facility
will be payable and (iv) additional fees and costs will be payable to fund
certain future borrowing levels under the Amended Credit Facility. The Company
anticipates that borrowings under the Amended Credit Facility and cash flow from
operations will be sufficient to fund the completion and opening of the Maryland
Heights project.
Forward-looking Information
Certain information included in this Quarterly Report on Form 10-Q
contains, and 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 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 Amended Credit Facility and the
availability of economically attractive terms of financing for the Maryland
Heights project currently under development, the effects of competition, plans
for future expansion and property enhancements, business development activities,
capital expenditure programs and requirements, financing sources and the effects
of regulation (including gaming licensure and regulation, state and local
regulation and tax 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 the successful negotiation of the Amended
Credit Facility, conducting operations in an increasingly competitive
environment, 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 (including local referenda to terminate the
authority to conduct gaming operations), 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 applications for licenses (including
renewals) and approvals under applicable laws and regulations (including gaming
laws and regulations) and the legalization of gaming in certain jurisdictions.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has the following developments to report concerning outstanding
legal matters previously reported:
Transam, Ltd. d/b/a/ Two Bunch Palms Resort & Spa v. Players International,
Inc., et al.
On or about November 21, 1995, Transam, Ltd., a Delaware Corporation,
d/b/a/ Two Bunch Palms Resort & Spa ("Two Bunch Palms") filed an action in the
United States District Court, Central District of California, against the
Company, a subsidiary of the Company, certain principals of the Company, and
certain other defendants alleging various causes of action arising out of an
agreement for services entered into by the Company with Gerald Greenbach and
Creative Hospitality Management. Mr. Greenbach, at the time the Agreement was
executed by the Company, was an executive of Two Bunch Palms. Mr. Greenbach both
individually and through Creative Hospitality Management agreed to provide the
Company with a variety of consulting services with respect to the operation and
marketing of the Company's spa facilities at Players Island Resort in Mesquite,
Nevada. Two Bunch Palms alleges that the Company and/or Mr. Greenbach and
Creative Hospitality Management engaged in copyright infringement, trade dress
infringement, unfair competition, false advertising, misappropriation of trade
secrets, unfair competition as well as certain related allegations with respect
to the services provided by Mr. Greenbach and Creative Hospitality Management to
the Company. The Company has agreed to pay Two Bunch Palms the sum of $200,000
to settle this matter. The Company anticipates that its insurance carriers will
reimburse the Company for substantial portions of this sum.
Poulos and Ahern Litigation
The Company, certain suppliers and distributors of video poker and
electronic slot machines and over forty other casino operators have been named
as defendants in a class action suit filed April 26, 1994 in the United States
District Court, Middle District of Florida, by William Ahern and William H.
Poulos. The plaintiffs allege common law fraud and deceit, mail fraud, wire
fraud and Racketeer Influenced and Corrupt Organizations Act violations in the
marketing and operation of video poker games and electronic slot machines. The
suit seeks unspecified damages and recovery of attorney's fees and costs. On
December 9, 1994, an Order was entered by the District Court in Florida
transferring the consolidated action to the United States District Court for the
District of Nevada. The defendants filed various motions seeking dismissal of
the action. On April 17, 1996, the Court dismissed plaintiffs' Complaint without
prejudice for failure to plead their claims with specificity and dismissed
defendants' remaining substantive motions as moot. The Court permitted
plaintiffs until May 31, 1996 to file an Amended Complaint, within which time an
Amended Complaint was filed. The Company refiled its substantive motions for
dismissal of the Amended Complaint, which motions are currently pending. The
Company believes that the claims are wholly without merit and does not expect
that the lawsuit will have a material adverse effect on the Company's financial
position or results of operations.
Schreier v. Players International, Inc., et al.
On or about October 27, 1995 the Company was served with a purported class
action in the United States District Court for the District of Nevada which is
essentially identical to the Poulos and Ahearn litigation, except for certain
variations in the definition of the purported class. The Company filed a motion
to dismiss the complaint. Plaintiff's attempts to consolidate this action with
Poulos and Ahern litigation were not successful. The Nevada District Court
entered an order granting motions to dismiss based on defects in the pleadings,
and denying as moot all other pending motions, including those of the Company.
The Court granted plaintiffs until September 30, 1996 within which to file an
amended complaint that complies with the applicable pleading requirements. The
plaintiffs filed an amended complaint on or about September 30, 1996. The
Company renewed its motion to dismiss based on abstention and related doctrines,
and based on defects
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in the pleadings. The Company believes that the claims are wholly without merit
and does not expect that the lawsuit will have a material adverse effect on the
Company's financial position or results of operations.
Item 6. Exhibits and Reports on Form 8-K
Exhibits Filed with this Form 10-Q
Exhibit No. Exhibit Description
- ----------- -------------------
3.2 By-laws, as amended, of Players International, Inc.
27.0 Financial Data Schedule
Reports on Form 8-K Filed During Quarter
The Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 19, 1996 concerned senior management changes
and an expansion of its Board of Directors.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLAYERS INTERNATIONAL, INC.
Date: November 14, 1996 By: /s/ Henry M. Applegate
--------------------------
Henry M. Applegate, Senior Vice
President, Chief Financial Officer
and Chief Accounting Officer
15
BY-LAWS, AS AMENDED
OF
PLAYERS INTERNATIONAL, INC.
ARTICLE I - OFFICES
The principal executive office of the Corporation shall be located at 1300
Atlantic Avenue, Suite 800, Atlantic City, N.J. 08401 and it may be changed from
time to time by the Board of Directors. The Corporation may also maintain
offices at such other places within or without the United States as the Board of
Directors may, from time to time, determine.
ARTICLE II - MEETING OF THE STOCKHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the stockholders of the Corporation shall be held
within six (6) months after the close of the fiscal year of the Corporation or
at such later date as may be determined by the Board of Directors, for the
purposes of electing directors and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the stockholders may be called at any time by the Board
of Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holder of twenty-five percent (25%) of
the shares then outstanding and entitled to vote thereat, or as otherwise
required by law.
Section 3 - Place of Meetings:
All meetings of stockholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by statute, written notice of each meeting
of stockholders, whether annual or special, stating the time when and place
where it is to be held, shall be served either personally or by mail, not less
than ten or more than sixty (60) days before the meeting, upon each stockholder
of record entitled to vote at such meeting, and to any other stockholder to whom
the giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle stockholders to receive payment for their share
pursuant to statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such stockholder at his address, as it appears on the records of the
stockholders of the Corporation, unless he shall have previously filed with the
Secretary of the corporation a written request that notices intended for him be
mailed to the address designated in such request
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting,
or to any stockholder who attends such meeting, in person or by proxy, or to any
stockholder who, in person or by proxy, submits a signed waiver of
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notice either before or after such meeting. Notice of any adjourned meeting of
stockholders need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such certificate and any amendments thereof being
hereinafter collectively referred to as the "Certificate of Incorporation"), at
all meetings of stockholders of the Corporation, the presence at the
commencement of such meetings in person or by proxy of stockholders holding of
record 51% of the total number of shares of the Corporation then issued and
outstanding and entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The withdrawal of any
stockholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
stockholders, the stockholders, by a majority of the votes cast by the holders
of shares entitled to vote thereat, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors, to be
taken by vote of the stockholders, shall be authorized by a majority of votes
cast at a meeting of stockholders by the holders of shares entitled to vote
thereat.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of stockholders, each holder of record of stock
of the corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each stockholder entitled to vote, or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
stockholder himself, or by his attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of eleven (11) months from
the date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the minutes of
the meeting.
(d) Any action, except election of directors, which may be taken by a vote
of stockholders at a meeting, may be taken without a meeting if authorized by a
written consent of shareholders holding at least a majority of the voting power;
provided that if a greater proportion of voting power is required by such action
at such meeting, then such greater proportion of written consents shall be
required.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be not less than 1
not more than 11, unless and until otherwise determined by vote of a majority of
the entire Board of Directors. The number of Directors shall not be less than
three (3), unless all of the outstanding shares of stock are owned beneficially
and of record by less than three (3) stockholders, in which event the number of
directors shall not be less than the number of stockholders or the minimum
permitted by statute.
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(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be stockholders, shall be elected by a plurality of the votes cast at a
meeting of stockholders, by the holders of shares of stock present in person or
by proxy, entitled to vote in the election. There shall be no cumulative voting
with respect to the election of the members of the Board of Directors.
(c) Each director shall hold office until the annual meeting of the
stockholders next succeeding his election, and until his successor is elected
and qualified, or until his prior death, resignation, or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management
of the affairs, property and interests of the Corporation and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the stockholders.
Section 3 - Annual and Regular Meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the stockholders, at the place of
such annual meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution
for the holding of other regular meetings of the Board of Directors, and may fix
the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
change was made within the time limited, and in the manner set forth in
Paragraph (b) Section (4) of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in Paragraph (c) of
such Section 4.
Section 4 - Special Meeting; Notice:
(a) Special meetings of the Board of Directors shall be held whenever
called by the President or by one of the directors, at such time and place as
may be specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of a special meeting
shall be mailed directly to each director, addressed to him at his residence or
usual place of business, at least four (4) days before the day on which the
meeting is to be held, or shall be sent to him at such place by facsimile
transmission, telegram, radio, or cable, or shall be delivered to him personally
or given to him orally, not later than the day before the day on which the
meeting is to be held. A notice, or waiver of notice except as required by
Section 8 of this Article III, need not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting, prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if
any and if present, shall preside. If there shall be no Chairman, or he shall be
absent, then the Vice Chairman shall preside, and in his absence, a Chairman
chosen by the directors shall preside.
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<PAGE>
Section 6 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority
of the entire Board shall be necessary and sufficient to constitute a quorum for
the transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws.
(b) A majority of the directors, present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the same
from time to time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall
have one vote, irrespective of the number of shares of stock, if any, which he
may hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
(c) Unless otherwise required by amendment to the Articles of Incorporation
or statute, any action required or permitted to be taken at any meeting of the
Board of Directors or any Committee thereof may be taken without a meeting if a
written consent thereto is signed by all the members of the Board or Committee.
Such written consent shall be filed with the minutes of the proceedings of the
Board or Committee.
(d) Unless otherwise prohibited by Amendments to the Articles of
Incorporation or statute, members of the Board of Directors or of any Committee
of the Board of Directors may participate in a meeting of such Board or
Committee by means of a conference telephone network or a similar communications
method by which all persons participating in the meeting can hear each other.
Such participation is constituted presence of all the participating persons at
such meeting The minutes of any such meeting shall be either signed or otherwise
approved by the persons participating in the meeting.
Section 8 - Vacancies:
Any vacancy in the Board of Directors, occurring by reason of an increase
in the number of directors, or by reason of the death, resignation,
disqualification, removal (unless vacancy created by the removal of a director
by the stockholders shall be filled by the stockholders at the meeting at which
the removal was effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board
of Directors, the President or the Secretary of the Corporation. Unless
otherwise specified in such written notice such resignation shall take effect
upon receipt thereof by the Board of Directors or such officer, and the
acceptance of such resignation shall not be necessary to make it effective.
Section 10 - Removal:
Any director may be removed with or without cause at any time by the
affirmative vote of stockholders holding of record in the aggregate at least a
majority of the outstanding shares of stock of the
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Corporation at a special meeting of the stockholders called for that purpose,
and may be removed for cause by action of the Board.
Section 11 - Compensation:
The Board of Directors may, from time to time, establish or alter by
resolution appropriate compensation to be paid to all members of the Board of
Directors who are not otherwise employed by the Corporation. The Board of
Directors may also establish, and from time to time alter, appropriate
compensation for service by a member of the Board of Directors as Chairman of a
Committee of the Board of Directors. The Board shall establish a fixed sum to be
paid to non-employee members of the Board of Directors for attendance at any
Committee meetings and shall provide for the payment of expenses of members of
the Board of Directors for attendance at any meetings of the Board of Directors
or of a Committee thereof. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation and any other
corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other corporation, provided that such facts are
disclosed or made known to the Board of Directors, prior to their authorizing
such transaction.
(b) Any director, personally or individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors prior to
their authorization of such contract or transaction, and provided that the Board
of Directors shall authorize, approve or ratify such contract or transaction by
vote (not counting the vote of any such Director) of a majority of a quorum,
notwithstanding the presence of any such director at the meeting at which such
action is taken. Such director or directors may be counted in determining the
presence of a quorum at such meeting. This Section shall not be construed to
impair or invalidate or in any way affect any contract or other transaction
which would otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire
Board, may from time to time designate from among its members an executive
committee and such other committees, and alternate members thereof, as they may
deem desirable, with such powers and authority (to the extent permitted by law)
as may be provided in such resolution. Each such committee shall serve at the
pleasure of the Board.
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ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer, or a President and Secretary-Treasurer, and such other
officers, including a Chairman of the Board of Directors, and one or more Vice
Presidents, as the Board of Directors may from time to time deem advisable. Any
officer other than the Chairman or Vice Chairman of the Board of Directors may
be, but is not required to be, a director of the Corporation. Any two or more
offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of
Directors at the regular annual meeting of the Board following the annual
meeting of the stockholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified or until his death, resignation, or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such
resignation to the Board of Directors, or to the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, such
resignation shall take effect upon receipt thereof by the Board of Directors or
by such officer, and the acceptance of such resignation shall not be necessary
to make it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
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Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board
of Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these by-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the corporation, unless otherwise provided.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee,
or agent of the Corporation shall execute to the Corporation a bond in such sum,
and with such surety or sureties, as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence for the accounting for all property,
funds or securities of the corporation which may come into his hands.
Section 7 - Share of Stock of Other Corporations:
Whenever the Corporation is the holder of shares of stock of any other
corporation, any right or power of the Corporation as such stockholder
(including the attendance, acting and voting at stockholders' meetings and
execution of waivers, consents, proxies or other instruments) may be exercised
on behalf of the Corporation by the President, any Vice President or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation's stock shall
be in such form as shall be adopted by the Board of Directors, and shall be
numbered and registered in the order issued. They shall bear the holder's name
and the number of shares of stock and shall be signed by (i) the Chairman of the
Board or the President or a Vice President, and (ii) the Secretary or Treasurer,
or any Assistant Secretary or Assistant Treasurer, and shall bear the corporate
seal.
(b) No certificate representing shares of stock shall be issued until the
full amount of consideration therefor has been paid, except as otherwise
permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize
the issuance of certificates for fractions of a share of stock which shall
entitle the holder to exercise voting rights, receive dividends and participate
in liquidating distributions, in proportion to the fractional holdings; or it
may authorize the payment in cash of the fair value of fractions of a share of
stock as of the time when those entitled to receive such fractions are
determined; or it may authorize the issuance, subject to such conditions as may
be permitted by law, of scrip in registered or bearer form over the signature of
an officer or agent of the Corporation, exchangeable as therein provided for
full shares of stock, but such scrip shall not entitle the holder to any rights
of a stockholder, except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of stock of the
Corporation shall immediately notify the corporation of any loss or destruction
of the certificate representing the same. The Corporation may issue a new
certificate in the place of any certificate theretofore issued by it, alleged to
have been lost or destroyed. On production of such evidence of loss or
destruction as the Board of Directors in its discretion may require, the Board
of Directors may, in its discretion, require the owner of the lost or destroyed
certificate, or his legal representatives, to give the corporation a bond in
such sum as the Board may direct, and with such surety or sureties as may be
satisfactory to the Board, to indemnify the Corporation against any claims,
loss, liability or
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damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgement of the Board of Directors, it is proper to do so.
Section 3 - Transfer of Shares:
(a) Transfer of shares of stock of the Corporation shall be made on the
stock ledger of the Corporation only by the holder of record thereof, in person
or by his duly authorized attorney, upon surrender for cancellation of the
certificate or certificates representing such share of stock with an assignment
or power of transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature and of authority to
transfer and of payment of taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the stock ledger of the corporation, the Board of
Directors may fix, in advance, a date not exceeding sixty (60) days, nor less
than ten (10) days, as the record date for the determination of stockholders
entitled to receive notice of, or to vote at, any meeting of stockholders, or to
consent to any proposal without a meeting, or for the purpose of determining
stockholders entitled to receive payment of any dividends or allotment of any
rights, or for the purpose of any other action. If no record date is fixed, the
record date for the determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if no notice is given, the
day preceding the day on which the resolution of the directors relating thereto
is adopted. When a determination of stockholders of record entitled to notice of
or to vote at any meeting of stockholders has been made as provided for herein,
such determination shall apply to any adjournment thereof, unless the directors
fix a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any
funds available therefor, as often, in such amounts, and at such time or times
as the Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall end on March 31 and may be changed
by the Board of Directors from time to time subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal shall be in such form as shall be approved from time to
time by the Board of Directors.
ARTICLE IX - INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHER PERSONS
Section 1 - Right to Indemnification:
Each Indemnitee (as defined below) shall be indemnified and held harmless
by the corporation for all actions taken by him and for all failures to take
action (regardless of the date of any such action or failure
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to take action) to the fullest extent permitted by the Nevada General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, the rights of indemnification provided hereby shall
continue as theretofore to the maximum extent permitted by law notwithstanding
such amendment unless such amendment permits the corporation to provide broader
indemnification rights than the law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, Employee Retirement Income Security Act
excise taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred or suffered by the Indemnitee in connection with any
Proceeding (as defined below). The right to indemnification conferred in this
Article shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred by an Indemnitee in defending a civil or
criminal action, suit or proceeding as it is incurred and in advance of the
final disposition of such action, suit or proceeding; provided, however, that,
if the Nevada General Corporation Law continues so to require, the payment of
such expenses incurred by an Indemnitee in advance of the final disposition of
such action, suit or proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by a court of competent
jurisdiction that such Indemnitee is not entitled to be indemnified by the
Corporation under this Article or otherwise.
(ii) Indemnification pursuant to this Section shall continue as to an Indemnitee
who has ceased to be a director or officer and shall inure to the benefit of his
or her heirs, executors and administrators.
(iii) For purpose of this Article, (A) "Indemnitee" shall mean each director or
officer of the Corporation who was or is a party or is threatened to be made a
party to any Proceeding, by reason of the fact that he is or was director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, including service with
respect to employee benefit plans; and (B) "Proceeding" shall mean any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative.
Section 2 - Indemnification of Employees and Agents:
The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as of the foregoing indemnification of directors and officers.
Section 3 - Non-Exclusivity of Rights:
The rights to indemnification and to the advancement of expenses provided
in this Article shall not be exclusive of any other rights that any person may
have or hereafter acquire under any statute, provision of the Articles of
Incorporation or By-laws, agreement, vote of stockholders or disinterested
directors or otherwise for either an action in his official capacity while
holding his office; provided, however, if the Nevada General Corporation Law so
requires, indemnification, unless ordered by a court (with respect to a
proceeding by or in the right of the Corporation) or for the advancement of
expenses as set forth in Section 1 above, may not be made to or behalf of any
director or officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action.
Section 4 - Insurance:
The Corporation may purchase and maintain insurance or make any other
financial arrangements permitted by applicable law on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee or agent, or
arising
9
<PAGE>
out of his status of such, whether or not the Corporation has the authority to
indemnify him against such liability and expenses.
ARTICLE X - AMENDMENTS
Section 1 - By Stockholders:
All by-laws of the Corporation shall be subject to alteration or repeal,
and new by-laws may be made, by the affirmative vote of stockholders holding of
record in the aggregate at least a majority of the outstanding shares of stock
entitled to vote in the election of directors at any annual or special meeting
of stockholders, provided that the notice or waiver of notice of such meeting
shall have summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and
repeal, from time to time, by-laws of the Corporation; provided, however, that
the stockholders entitled to vote with respect thereto as in this Article X
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of stockholders or the Board of Directors or to change any
provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
stockholders.
10
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