3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
-------------------------
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 0-14897
Players International, Inc.
(Exact name of registrant as specified in its charter)
Nevada 95-4175832
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
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:
As of August 11, 1999, there were 32,032,737 shares of the
registrant's Common Stock outstanding, net of treasury stock.
-1-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
--------------------------------------------
INDEX
-----
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets at June 30,
1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended June 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
-2-
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements.
- ------------------------------
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
------
June 30, March 31,
1999 1999
--------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 25,400 $ 25,687
Accounts receivable, net of allowance
for doubtful accounts of $435 at
June 30, 1999 and $461 at
March 31, 1999 1,803 1,882
Notes receivable 1,500 1,500
Inventories 1,164 1,164
Deferred income tax 3,281 3,281
Prepaid expenses and other current
assets 2,421 2,715
--------- ---------
Total current assets 35,569 36,229
--------- ---------
Property and equipment, net of accumulated
depreciation and amortization of $64,261
at June 30, 1999 and $59,846
at March 31, 1999 221,909 222,437
--------- ---------
Intangibles, net of accumulated
amortization of $4,778 at June 30, 1999
and $4,535 at March 31, 1999 34,405 34,344
--------- ---------
Investment in joint venture 89,812 91,034
--------- ---------
Other assets 4,876 5,091
--------- ---------
Total assets $ 386,571 $ 389,135
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, March 31,
1999 1999
--------- ---------
(Unaudited)
Current liabilities:
Current portion of long-term debt $ - $ 541
Accounts payable 3,820 3,627
Accrued liabilities 31,794 31,197
Other liabilities 18,926 19,555
--------- ---------
Total current liabilities 54,540 54,920
--------- ---------
Deferred income tax 2,959 2,959
--------- ---------
Long-term debt, net of current portion 150,000 155,000
--------- ---------
Other long-term liabilities 16,163 16,444
--------- ---------
Stockholders' equity:
Preferred stock, no par value,
Authorized- 10,000,000 shares,
Issued- none - -
Common stock, $.005 par value,
Authorized- 90,000,000 shares,
Issued- 32,704,837 shares 163 163
Additional paid-in capital 132,666 132,666
Treasury stock, at cost;
672,100 shares (7,294) (7,294)
Retained earnings 37,374 34,277
--------- ---------
Total stockholders' equity 162,909 159,812
--------- ---------
Total liabilities and stockholders'
equity $ 386,571 $ 389,135
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(Unaudited)
For the Three Months
Ended June 30,
-------------------
1999 1998
-------- --------
Revenues:
Casino $ 80,255 $ 77,024
Food and beverage 2,342 2,510
Hotel 494 989
Other 959 1,042
-------- --------
84,050 81,565
-------- --------
Costs and expenses:
Casino 35,586 35,846
Food and beverage 1,973 2,111
Hotel 200 397
Other operating expenses 10,023 10,603
Selling, general and administrative 14,769 13,456
Corporate and other non-operating
costs 3,778 1,854
Allocated amounts of joint venture 2,669 2,721
Depreciation and amortization 4,871 4,936
-------- --------
73,869 71,924
-------- --------
Income before other income (expense)
and provision for income taxes 10,181 9,641
-------- --------
Other income (expense):
Interest income 89 60
Interest expense (4,976) (5,701)
-------- --------
(4,887) (5,641)
-------- --------
Income before provision for income taxes 5,294 4,000
Provision for income taxes 2,197 1,560
-------- --------
Net income $ 3,097 $ 2,440
======== ========
Earnings per common share
Basic and diluted $ 0.10 $ 0.08
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-5-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
For the Three Months
Ended June 30,
--------------------
1999 1998
--------- ---------
Cash flows from operating activities:
Net income $ 3,097 $ 2,440
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,871 4,936
Equity in allocated amounts of
joint venture 1,188 1,145
Other 25 88
Changes in assets and liabilities:
Accounts and notes receivable 96 914
Inventories, prepaid expenses and
other assets (334) 1,868
Accounts payable and accrued
liabilities 1,424 (3,153)
Other liabilities (876) 20
-------- --------
Net cash provided by operating
activities 9,491 8,258
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (5,019) (2,123)
Proceeds from disposal of property and
equipment 782 24
-------- --------
Net cash used in investing
activities (4,237) (2,099)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 5,000 9,000
Repayments of long-term debt (10,541) (12,980)
Debt issuance costs - (164)
-------- --------
Net cash used in financing
activities (5,541) (4,144)
-------- --------
Net increase (decrease) in cash and cash
equivalents (287) 2,015
Cash and cash equivalents at beginning of
period 25,687 17,223
-------- --------
Cash and cash equivalents at end of
period $ 25,400 $ 19,238
======== ========
Supplemental cash flow disclosure:
Interest paid $ 9,319 $ 9,280
Income taxes paid 1 2
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-6-
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,
1999. In the opinion of management, all adjustments (consisting
of 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 three months ended
June 30, 1999, 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 gaming
losses. Revenues exclude the retail value of complimentary food
and beverage, hotel accommodations and other items furnished to
customers, which totaled approximately $5,802,000 and $6,126,000
for the three months ended June 30, 1999 and 1998, 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:
For the Three Months
Ended June 30,
----------------------
(dollars in thousands)
1999 1998
--------- ---------
Food and beverage $ 3,970 $ 4,248
Other 414 433
--------- ---------
$ 4,384 $ 4,681
========= =========
Note 3 - Allocated Amounts of Joint Venture
- -------------------------------------------
The Company owns a 50% interest in a casino entertainment
facility in Maryland Heights, Missouri (the "joint venture").
The investment in the joint venture is accounted for using the
equity method of accounting.
Summary condensed financial information for the joint
venture is as follows:
For the Three Months
Ended June 30,
----------------------
(dollars in thousands)
1999 1998
--------- ---------
Net revenues $ 5,545 $ 4,914
Depreciation and
amortization $ 2,376 $ 2,328
Net loss $ 5,338 $ 5,441
-7-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Earnings Per Share
- ---------------------------
The following table illustrates the computation of
basic and diluted earnings per share:
For the Three Months
Ended June 30,
------------------------
1999 1998
---------- ----------
Numerator:
Net income $3,097,000 $2,440,000
Denominator:
Denominator for basic
earnings per share-
weighted-average shares 32,032,737 31,941,579
Effect of dilutive
securities-stock options 223,458 147,286
---------- ----------
Denominator for diluted
earnings per share-
adjusted weighted-average
shares 32,256,195 32,088,865
========== ==========
Basic earnings per share $ 0.10 $ 0.08
========== ==========
Diluted earnings per share $ 0.10 $ 0.08
========== ==========
Note 5 - Loan Modification and Forbearance Agreement
- ----------------------------------------------------
On June 30, 1999, a note receivable in the amount of
$1,500,000 matured without payment. On July 13, 1999, the maker
of the note entered into a Loan Modification and Forbearance
Agreement with the Company, under which the maker paid the
Company $900,000 against the note, which payment was used to
satisfy approximately $300,000 of accrued and unpaid interest,
and approximately $600,000 of unpaid principal. Under the terms
of the agreement, the maker was to satisfy the approximate
$900,000 remaining principal balance, with interest, in three
equal consecutive monthly installments, with full payment of the
note to be made by September 30, 1999. The first of the three
monthly installments was received on August 2, 1999. On August
9, 1999, the maker of the note accelerated the terms of the
agreement and paid the remaining principal and interest due on
the loan.
Note 6- Contingencies
- ---------------------
In April, 1997, a federal investigation of former Louisiana
Governor Edwin Edwards, his son Stephen Edwards, Richard D.
Shetler and others with respect to their involvement in the
riverboat gaming industry and other matters became public. Upon
learning of the investigation, the Company immediately began
cooperating with the federal authorities. (Stephen Edwards is a
former outside attorney and Richard D. Shetler is a former
consultant to and lobbyist for the Company in Louisiana.) In
August, 1998, the Company was advised in writing by the United
States Attorney that neither the Company nor its current or
former employees were subjects or targets of the federal
investigation. On October 9, 1998, Richard D. Shetler pleaded
guilty to conspiracy to commit extortion of the Company. On
November 6, 1998, a grand jury of the United States District
Court for the Middle District of Louisiana returned an indictment
against Edwin Edwards, Stephen Edwards, and four other defendants
for matters relating to the riverboat casino industry. The
indictment charges Edwin Edwards and Stephen Edwards with
extorting and conspiring to extort the Company in violation of
the Racketeer Influenced Corrupt Organizations Act and interstate
travel in aid of racketeering. On November 12, 1998, the
defendants pleaded not guilty to the allegations set forth in the
indictment. The Missouri Gaming Commission, the Illinois Gaming
Board and the Louisiana Gaming Control Board are each aware of
and are each investigating the involvement of the Company in the
Shetler and Edwards cases to determine the suitability of the
Company and its subsidiaries for continued licensure. The
Company has and will continue to cooperate with the gaming
regulatory authorities in their investigations. To date, none of
the gaming regulatory authorities has commenced any disciplinary
action against the Company or any of its employees as a result of
the Shetler and Edwards cases or other related matters.
-8-
Assurances cannot be given that disciplinary action will not be
commenced or that licenses will be renewed. The Company is
unable at this stage to determine the likely outcome of these
gaming regulatory investigations or estimate the amount or range
of potential loss, if any.
In June, 1999, the Coushatta Tribe of Louisiana (the
"Tribe") informed the Company of the Tribe's intention to file a
civil suit. The allegation of this threatened civil action is
the Company's wrongful attempt to prevent the Tribe from opening
its land-based casino in Louisiana in 1993 and 1994 through the
Company's association with Edwin Edwards, Stephen Edwards and
Richard D. Shetler. In the opinion of management, based upon the
advice of counsel, the Company has committed no wrongdoings, has
valid defenses, and will vigorously defend against any claims
advanced by the Tribe. The Company is unable at this stage to
determine the likely outcome of this threatened civil action or
estimate the amount or range of potential loss, if any.
-9-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
- ----------------------------------------------------------
The Company owns and operates riverboat gaming and
entertainment facilities. These include one riverboat casino in
Metropolis, Illinois (the "Metropolis facility"), two riverboat
casinos in Lake Charles, Louisiana (the "Lake Charles facility")
and two contiguous, permanently moored, dockside riverboat
casinos in Maryland Heights, Missouri (the "Maryland Heights
facility"). The Company also owns and operates a harness
horseracing track in Paducah, Kentucky. The Company's fiscal
year ends on March 31st. Certain reclassifications have been
made to the financial highlights previously presented to conform
to current classifications. References to the first quarter of
fiscal 2000 or fiscal 1999, mean the three month periods ended
June 30, 1999, and June 30, 1998, respectively.
In February, 1999, the Company entered into a definitive
agreement and plan of merger with Jackpot Enterprises, Inc.
("Jackpot"). Pursuant to the terms of the agreement, Jackpot
will acquire the Company for $8.25 per share, consisting of $6.75
per share in cash and $1.50 in Jackpot's common stock, subject to
adjustment under certain circumstances, for each share of the
Company's outstanding common stock. The completion of the merger
is subject to a number of conditions, including approval by the
stockholders of both companies, receipt of all necessary
regulatory approvals (including the approvals of the Illinois,
Louisiana, Missouri and Kentucky gaming authorities) and the
financing of the transaction. A special meeting of the
stockholders of the Company for the purpose of approving the
merger with Jackpot and adopting the merger agreement is
scheduled to be held on September 14, 1999.
Results of Operations
Comparison of Operating Results for the Three-Month Periods Ended
June 30, 1999 and 1998
Financial Highlights
For the Three Months
Ended June 30,
-----------------------
% Increase/
1999 1998 Decrease
---------- ---------- -----------
(dollars in thousands,
except per share data)
Casino Revenues
Metropolis $ 21,061 $ 19,684 7.0
Lake Charles 33,988 36,265 (6.3)
Maryland Heights 25,206 21,075 19.6
---------- ---------- -----------
$ 80,255 $ 77,024 4.2
---------- ---------- -----------
Total Revenues
Metropolis $ 21,796 $ 20,473 6.5
Lake Charles 35,817 38,904 (7.9)
Maryland Heights 26,240 21,991 19.3
Other 197 197 -
---------- ---------- -----------
$ 84,050 $ 81,565 3.0
---------- ---------- -----------
Operating Income (Loss)
Metropolis $ 5,410 $ 4,888 10.7
Lake Charles 5,575 7,005 (20.4)
Maryland Heights (a) 3,365 847 297.3
Corporate and other (4,169) (3,099) (34.5)
---------- ---------- -----------
$ 10,181 $ 9,641 5.6
---------- ---------- -----------
Other Information
Depreciation and
amortization (b) $ 4,871 $ 4,936 (1.3)
Interest expense (net) $ 4,887 $ 5,641 (13.4)
Net income $ 3,097 $ 2,440 26.9
Earnings per share
assuming dilution $ 0.10 $ 0.08 25.0
-10-
For the Three Months
Ended June 30,
-----------------------
% Increase/
1999 1998 Decrease(c)
---------- ---------- -----------
(dollars in thousands,
except per share data)
Operating Margin (operating
income/total revenues)
Metropolis 24.8% 23.9% .9 pts
Lake Charles 15.6% 18.0% (2.4) pts
Maryland Heights 12.8% 3.9% 8.9 pts
Consolidated 12.1% 11.8% .3 pts
(a) Amount includes the Company's 50% share of the Maryland
Heights joint venture operating losses, which include
depreciation and amortization. Such joint venture operating
losses were $2.7 million for each of the three months ended June
30, 1999 and 1998.
(b) Amount excludes the Company's share of the Maryland Heights
joint venture depreciation and amortization of approximately $1.2
million and $1.1 million for the three months ended June 30, 1999
and 1998, respectively, which are included in the joint venture
operating losses as shown above.
(c) The "% Increase/(Decrease)" for operating margins represents
the absolute difference in percentage points (pts) between the
two periods.
Increases in casino revenues and operating income
experienced during the first quarter of fiscal 2000 as compared
to the first quarter of fiscal 1999 were primarily attributable
to the Company's Maryland Heights facility. Increases at this
facility are due to the continued growth in the St. Louis gaming
market. Slot revenue was the primary driver for these revenue
increases. The Maryland Heights facility added approximately
150 slot machines during the first quarter of fiscal 2000.
The Company's Metropolis facility also experienced improved
results quarter-over-quarter. A reconfiguration of the gaming
floor plus the introduction of new slot product during the
quarter contributed to the 10.9% increase in slot revenue at
this facility. On June 25, 1999, the Governor of Illinois
signed a bill into law allowing dockside gaming for all Illinois
casinos. The Metropolis facility commenced dockside gaming
operations on June 26, 1999.
Casino revenues and operating income at the Lake Charles
facility were negatively impacted during the first quarter of
fiscal 2000 by disruption associated with the demolition of the
former Players Hotel and the construction of a 250-space surface
parking lot on the former hotel site. In addition, the facility
continued to be affected by Interstate 10 ("I-10") road
construction. While the road construction has moved east of the
facility, signage in the area encourages both eastbound and
westbound travelers to follow alternate routes. Thus, traffic
flow and access to the property continue to be impeded and will
continue to be through the end of this phase of construction.
This phase of construction is expected to be completed during
October 1999. As a result of the I-10 road construction,
coupled with competitive pressures, operating results could
continue to be negatively impacted through, and perhaps beyond,
the construction period.
Hotel revenues decreased by approximately $500,000 quarter-
to-quarter due to the November 1998 closure of the former
Players Hotel in Lake Charles. The Company now operates only
one hotel.
Corporate and other expenses increased in the first quarter
of fiscal 2000 as compared to the first quarter of fiscal 1999
by approximately $1.1 million primarily due to a $750,000 charge
in conjunction with an executive severance arrangement and
approximately $500,000 in merger and acquisition expenses
related to the Company's anticipated merger with Jackpot
Enterprises, Inc. This was partially offset by legal and
consulting expenses incurred during the first quarter of fiscal
1999 related to the "boat-in-a-moat" proceedings of
approximately $250,000.
Net interest expense decreased approximately $750,000 in the
first quarter of fiscal 2000 as compared to the first quarter of
fiscal 1999, primarily due to reductions in the amounts
outstanding under the Company's line of credit.
-11-
Additional Factors Affecting Future Operating Income
On May 26, 1999, the Missouri Gaming Commission proposed a
regulation change that would eliminate the existing restrictions
on boarding times on riverboat casinos in the state. State
regulators voted on July 28, 1999 to test "open boarding" on the
eastern side of the state, including the Company's Maryland
Heights facility. Effective August 16, 1999, the Company will
begin its 60-day test program allowing continuous boarding.
A bill that had been approved by the Missouri State
Legislature that would have permitted gaming patrons to play slot
machines using credits received in exchange for currency inserted
into slot machine bill acceptors was vetoed by the Governor of
Missouri in July, 1999.
Capital Resources and Liquidity
During the three months ended June 30, 1999, cash generated
by operations was used to reduce the amount outstanding under the
Company's line of credit from $5 million as of March 31, 1999 to
$0 as of June 30, 1999. In addition, the Company's capital
expenditures for the quarter totaled approximately $5 million.
On June 30, 1999, a note receivable in the amount of
$1,500,000 matured without payment. On July 13, 1999, the maker
of the note entered into a Loan Modification and Forbearance
Agreement with the Company, under which the maker paid the
Company $900,000 against the note, which payment was used to
satisfy approximately $300,000 of accrued and unpaid interest,
and approximately $600,000 of unpaid principal. Under the terms
of the agreement, the maker was to satisfy the approximate
$900,000 remaining principal balance, with interest, in three
equal consecutive monthly installments, with full payment of the
note to be made by September 30, 1999. The first of the three
monthly installments was received on August 2, 1999. On August
9, 1999, the maker of the note accelerated the terms of the
agreement and paid the remaining principal and interest due on
the loan.
Contingencies
In April, 1997, a federal investigation of former Louisiana
Governor Edwin Edwards, his son Stephen Edwards, Richard D.
Shetler and others with respect to their involvement in the
riverboat gaming industry and other matters became public. Upon
learning of the investigation, the Company immediately began
cooperating with the federal authorities. (Stephen Edwards is a
former outside attorney and Richard D. Shetler is a former
consultant to and lobbyist for the Company in Louisiana.) In
August, 1998, the Company was advised in writing by the United
States Attorney that neither the Company nor its current or
former employees were subjects or targets of the federal
investigation. On October 9, 1998, Richard D. Shetler pleaded
guilty to conspiracy to commit extortion of the Company. On
November 6, 1998, a grand jury of the United States District
Court for the Middle District of Louisiana returned an indictment
against Edwin Edwards, Stephen Edwards, and four other defendants
for matters relating to the riverboat casino industry. The
indictment charges Edwin Edwards and Stephen Edwards with
extorting and conspiring to extort the Company in violation of
the Racketeer Influenced Corrupt Organizations Act and interstate
travel in aid of racketeering. On November 12, 1998, the
defendants pleaded not guilty to the allegations set forth in the
indictment. The Missouri Gaming Commission, the Illinois Gaming
Board and the Louisiana Gaming Control Board are each aware of
and are each investigating the involvement of the Company in the
Shetler and Edwards cases to determine the suitability of the
Company and its subsidiaries for continued licensure. The
Company has and will continue to cooperate with the gaming
regulatory authorities in their investigations. To date, none of
the gaming regulatory authorities has commenced any disciplinary
action against the Company or any of its employees as a result of
the Shetler and Edwards cases or other related matters.
Assurances cannot be given that disciplinary action will not be
commenced or that licenses will be renewed. The Company is
unable at this stage to determine the likely outcome of these
gaming regulatory investigations or estimate the amount or range
of potential loss, if any.
Year 2000
The "Year 2000" problem refers to the inability of computer
hardware, software, and embedded chips to recognize and properly
process data fields containing a two digit year. As a result,
date sensitive systems may recognize dates using "00" as the year
1900 rather than the year 2000. A system which is not Year 2000
-12-
compliant would not be able to correctly process date-based
information, and in extreme situations, could cause entire
systems to be disabled.
In its initiative to become Year 2000 compliant, the Company
has conducted a comprehensive review of its hardware, software,
systems relying on embedded chips, and its vendor affiliates.
For purposes of this process, the Company identified five phases
in its Year 2000 Readiness Plan, which include awareness,
assessment, renovation, testing and implementation. The
awareness and assessment phases have been completed and the
Company is now in the process of completing the upgrade cycle for
its major Information Technology, or IT, systems. The Company
does not rely on internally developed, proprietary systems, but
rather on "canned" software solutions purchased from third party
vendors. As part of the upgrade process, testing and
implementation of new IT systems will be completed. All critical
operating systems have been updated and deemed compliant with the
exception of the Company's slot accounting system at its Lake
Charles facility. The Lake Charles facility is currently
installing a new Year 2000 compliant slot accounting system as
part of its planned change in operating platforms. Installation
of this new system should be complete by August 31, 1999.
A complete inventory and identification of embedded systems
and vendor affiliates has been completed. The Company is
currently in the process of testing its embedded systems for Year
2000 compliance and performing follow-up communication with its
critical vendors to assess their respective Year 2000 compliance
status. The Company's current focus is on the testing phase and
any necessary renovation of assets identified as critical. The
Company anticipates completing its testing as well as its overall
Year 2000 readiness by September 30, 1999.
The Company has initiated the design of a comprehensive
contingency plan to address alternative solutions for any
remaining potential Year 2000 exposure or possible unforeseen
system failures. Critical operating systems are backed up by
detailed manual procedures that are initiated during periods of
system malfunctions. Nonetheless, the Company believes there are
a number of external risk factors that are out of the Company's
control, which could have a material effect on results of
operations or financial position. The most serious of these
external risk factors include, but are not limited to, the
failure of utility providers to continue service (including
electricity, gas, water, sewer and similar services), the
disruption of banking services (including the Company's access to
cash and the ability of customers to access cash through the use
of automated teller machines), and the U.S. Coast Guard imposed
waterway closures. Like all other businesses, the Company's
ability to predict the eventual outcome of the Year 2000 problem
is hampered by the breadth and the depth of the issue and the
unprecedented nature of the problem. However, the Company
believes it is taking the necessary steps within its power to
mitigate any potential disruption in operations and financial
losses that could result.
As of July 31, 1999, the Company had either expended or
committed approximately $660,000 on its Year 2000 compliance
efforts and expects to expend no more than $1.0 million in the
aggregate. Estimated completion dates and total costs are
reflective of management's best estimates; however, actual
results could differ.
Forward Looking Information
Certain information included in this section and elsewhere
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
and 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 approval and
subsequent closing of the merger between the Company and Jackpot,
the effects of competition, the resolution of pending or
threatened litigation or regulatory proceedings, I-10 road
construction in Lake Charles, dockside gaming in Illinois, Year
2000 compliance efforts and costs, future borrowing and capital
costs, plans for future expansion and property enhancements,
business development activities, capital expenditure programs and
requirements, financing sources and the effects of legislation
and regulation (including possible gaming legislation, gaming
licensure and regulation, state and local regulation, tax
regulation, and the potential for regulatory reform). Forward
looking statements can generally be identified by the use of
forward-looking terminology such as "may", "will", "expect",
"intend", "estimate", "believe", or "continue" or the negative
thereof or variations thereon or similar terminology. Such
forward-looking information is based upon management's current
plans or expectations and is subject to a number of uncertainties
-13-
and risks that could significantly affect current plans,
anticipated actions, and the Company's future financial condition
and results of operations. These uncertainties and risks
include, but are not limited to, those relating to the approval
and subsequent closing of the merger between the Company and
Jackpot, conducting operations in an increasingly competitive
environment, changes in state and local gaming laws and
regulations, development and construction activities, leverage
and debt service requirements (including sensitivity to
fluctuation in interest rates), general economic conditions, the
results of various gaming regulatory authorities' investigations
as to the Company's suitability for continued licensure, changes
in federal and state tax laws, the disruption to Lake Charles
operations caused by road construction, dockside gaming in
Illinois, Year 2000 compliance efforts and costs, 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. As a consequence, current plans, anticipated
actions, and future financial condition and results from
operations may differ from those expressed in any forward-looking
statements made by or on behalf of the Company and no assurance
can be given that such statements will prove to be correct.
Item 3. Quantitative and Qualitative Disclosure About Market
Risk.
- -----------------------------------------------------------------
Not Applicable
-14-
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.
- ----------------------------
Coushatta Tribe of Louisiana Threatened Action
The Company received a letter from counsel purporting to
represent the Coushatta Tribe of Louisiana and threatening to
file on July 15, 1999, a civil action alleging restraint of
trade, unfair trade practices and violations of the Racketeer
Influenced Corrupt Organizations Act arising out of alleged
attempts by the Company to prevent the Tribe from opening its
land-based casino, which opened in 1995. The draft complaint
that was included with this letter seeks damages in the amount of
$30 million, plus treble damages and recovery of attorney's fees
and costs. As of the date of this document, no complaint has
been filed. If a complaint is eventually filed, the Company
would vigorously defend the action.
Item 5. Other Information.
- ----------------------------
Effective July 12, 1999, Howard A. Goldberg, the
Company's Acting Chairman of the Board, President and Chief
Executive Officer resigned all of his positions with the Company,
pursuant to an agreement between Mr. Goldberg and the Company.
John Groom, the Company's Executive Vice President and Chief
Operating Officer, was appointed President and Chief Executive
Officer to fill the vacancies created by Mr. Goldberg's
resignation. Mr. Groom joined the Company in 1996 and has over
20 years of casino management experience. Mr. Groom will
continue as Chief Operating Officer and a member of the Board of
Directors.
Item 6. Exhibits and Reports on Form 8-K.
- -------------------------------------------
Exhibits filed with this Form 10-Q:
Exhibit No. Exhibit Description
- ----------- -------------------
10.1 Separation Agreement dated July 1, 1999, between
Howard A. Goldberg and Players International, Inc.
27.0 Financial Data Schedule
Reports on Form 8-K filed during the quarter:
None
-15-
SIGNATURE
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: August 11, 1999 By: /s/ Raymond A. Spera, Jr.
-------------------------------
Raymond A. Spera, Jr.
Vice President, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
-16-
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0616302.08
SEPARATION AGREEMENT
This Separation Agreement (the "Agreement"), dated as of
July 1, 1999 is entered into by and between HOWARD A. GOLDBERG
(the "Executive"), and PLAYERS INTERNATIONAL, INC., on behalf of
itself and all of its parents, subsidiaries, divisions,
affiliates, successors and assigns (hereinafter collectively
referred to as the "Company").
W I T N E S S E T H:
WHEREAS:
(1) The Executive and the Company entered into an amended
employment agreement dated as of October 1, 1996 (which
agreement, as amended and modified, is referred to herein as the
"Employment Agreement");
(2) The Company and Jackpot Enterprises, Inc. and JEI
Merger Corp. (the "Jackpot Entities") have previously entered
into a merger agreement on February 8, 1999 (the "Merger
Agreement") which calls for the resignation of the Executive upon
the consummation of the merger and the payment to him of all
payments required to be made upon a change in control.
(3) The Executive and the Company believe a termination of
the Executive's employment with the Company by mutual consent and
his resignation as a director by mutual consent to be beneficial
for both the Executive and the Company;
(4) With the consent of the Jackpot Entities, the Executive
and the Company desire to settle fully and finally any and all
differences between them, including, but in no way limited to,
any differences that might arise, or might have arisen, under the
Employment Agreement or out of the Executive's employment with
the Company and his resignation from employment with the Company.
(5) The Board of Directors of the Company (the "Board") has
reviewed and approved the terms of this Agreement at a meeting
duly held and called for such purpose.
NOW, THEREFORE, in consideration of the promises, releases,
covenants and agreements contained herein and for other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties hereto, it is hereby agreed as
follows:
1. Termination Date. The Executive and the Company
mutually agree that this Agreement shall become effective (the
"Effective Date") at 5:00 p.m. E.D.T. on the last day of the
Revocation Period, as hereinafter defined, and that the Executive
shall resign from his employment with the Company effective as of
the close of business on the second business day following the
expiration of the Revocation Period (the "Termination Date").
The Executive further agrees to resign, as of the Termination
Date, from any and all directorships, committee memberships,
offices and any other positions with the Company. The Executive
further agrees that subsequent to the Termination Date he shall
not represent or hold himself out as an officer, director,
employee or member of any committee of the Company.
2. Settlement Payments.
(a) Upon the first business day prior to the
Termination Date, the Executive shall receive a lump-sum payment
equal to $495,000, representing that part of the Initial Payment
referenced in Exhibit A hereto which is made in respect of bonus
earned but not yet paid for the Company's fiscal year ended
March 31, 1999 under paragraph 9(c)(iii) of his Employment
Agreement and bonus payable in satisfaction of Paragraph 9(c)(ii)
of his Employment Agreement;
(b) Upon the Termination Date, the Executive shall
receive
(i) a lump sum payment equal to $450,000,
representing the balance of the Initial Payments
referenced in Exhibit A pursuant to paragraph 9(c)(i)
of his Employment Agreement.
(ii) the immediate vesting of all stock options
held by the Executive pursuant to paragraph 9(c)(v) of
his Employment Agreement notwithstanding the terms of
any such grant to the contrary, with the ability to
exercise any such options for 12 months following the
Termination Date, or for such shorter period as is
expressly permitted by the Merger Agreement, or for
such longer period as will permit the Executive to
exercise his options in connection with any transaction
resulting from a Follow-On Agreement, as hereinafter
defined, but in no event after the earlier of (A) the
expiration of the originally applicable five or ten-
year option term, as the same may have been previously
extended, or (B) September 30, 2000; and
(iii) continuation coverage rights from the
Company under the Federal Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, which shall
commence on the Termination Date pursuant to paragraph
9(c)(vi) of his Employment Agreement.
Notwithstanding the foregoing paragraph 2(b)(ii),
Executive agrees that upon a Merger, as hereinafter defined, the
Company may, if required in the Follow-On Agreement, as
hereinafter defined, require that Executive surrender for
cancellation all of Executive's outstanding options in exchange
for a cash payment equal to the amount (if any) by which the
Change in Control price of the stock underlying Executive's
options exceeds the applicable option price, and, in that event,
all such options will be canceled (without regard to whether the
fair market value of the stock exceeds the option price at such
time).
(c) In the event of, and immediately upon the closing
of, a Merger, as hereinafter defined, the Executive or, in the
event of his death, the beneficiary or beneficiaries whom the
Executive has identified to the Company for this purpose, or, in
the event notice from the Executive to the Company identifying
his beneficiaries has not been received prior to the Executive's
date of death, the Executive's estate shall receive an additional
lump-sum payment, pursuant to paragraph 9(d) of his Employment
Agreement, equal to $2,285,000 representing the contingent
payments referenced in Exhibit A.
For purposes of this paragraph 2(b), a Merger shall
mean the consummation of a transaction constituting a "Change of
Control", as defined under paragraph 1(g) of the Employment
Agreement (a "Change in Control"), with Jackpot Enterprises,
Inc., or any subsidiary thereof, occurring at any time after the
Effective Date, or with any other entity identified on Exhibit B
hereto, provided a definitive agreement to complete such
transaction shall have been entered into by the Company with such
other entity within six months following the termination of the
Merger Agreement but in no event later than September 30, 2000 (a
"Follow-On Agreement").
(d) The Company shall be entitled to withhold from the
benefits and payments described herein (and in Exhibit A) all
income and employment taxes required to be withheld by applicable
law.
3. Vacation. The Executive acknowledges and agrees that,
upon receipt of the amount as set forth in paragraph 2(a) hereof,
the Company shall have fully satisfied its obligations to the
Executive with respect to vacation days through the Termination
Date and that the Executive shall not be entitled to accrue any
days off in the nature of vacation days, personal days or
holidays subsequent to the Termination Date.
4. Benefit Plans; Business Expenses. Any amounts to which
the Executive is entitled under the Company's 401(k) Plan shall
be payable in accordance with, and subject to the terms and
conditions of, such plan. The Executive shall be entitled to
receive reimbursement from the Company, upon submission of
appropriate documentation, for all reasonable, out-of-pocket
ordinary and necessary business expenses incurred by him in
performing services for the Company prior to the Termination
Date.
5. Release by the Executive. As a material inducement to
the Company to enter into this Agreement, and in consideration of
its agreements and obligations under this Agreement and for other
good and valuable consideration, the receipt of which is hereby
acknowledged by the Executive, the Executive hereby irrevocably,
unconditionally and generally releases the Company and its
respective parents, affiliates, shareholders, officers,
directors, employees, lenders and attorneys, and the heirs,
executors, administrators, receivers, successors and assigns of
all of the foregoing (collectively, the "Company Releasees"),
from, and hereby waives and/or settles, any and all, actions,
causes of action, suits, debts, sums of money, agreements,
promises, damages, or any liability, claims or demands, known or
unknown and of any nature whatsoever and which the Executive ever
had, now has or hereafter can, shall or may have, for, upon, or
by reason of any matter, cause or thing whatsoever from the
beginning of the world to the date of this release (collectively,
the "Executive Claims") arising directly or indirectly pursuant
to or out of his employment with or service as a director of the
Company, the performance of services for the Company or any
Releasee or the termination of such employment or services and,
specifically, without limitation, any rights and/or the Executive
Claims (a) arising under or pursuant to any contract, express or
implied, written or oral, including, without limitation, the
Employment Agreement; (b) for wrongful dismissal or termination
of employment; (c) arising under any federal, state, local or
other statutes, orders, laws, ordinances, regulations or the like
that relate to the employment relationship and/or that
specifically prohibit discrimination based upon age, race,
religion, sex, national origin, disability, sexual orientation or
any other unlawful bases, including, without limitation, the Age
Discrimination in Employment Act of 1967, as amended, the Civil
Rights Act of 1991, as amended, the Civil Rights Acts of 1866 and
1871, as amended, the New Jersey labor and employment laws, and
any related New Jersey laws, and applicable rules and regulations
promulgated pursuant to or concerning any of the foregoing
statutes; and (d) for damages, including, without limitation,
punitive or compensatory damages or for attorneys' fees,
expenses, costs, wages, injunctive or equitable relief. This
paragraph shall not apply to any rights or claims that the
Executive may have for a breach of this Agreement, including,
without limitation, paragraph 14(b) hereof.
6. Release by the Company. The Company hereby
irrevocably, unconditionally and generally releases the Executive
and his heirs, executors, administrators, attorneys and assigns
(collectively, the "Executive Releasees") from, and hereby waives
and/or settles, any and all actions, causes of action, suits,
debts, sums of money, agreements, promises, damages, or any
liability, claims or demands, known or unknown and of any nature
whatsoever and which the Company ever had, now has or hereafter
can, shall or may have, for, upon, or by reason of any matter,
cause or thing whatsoever from the beginning of the world to the
date of this release (collectively, "Company Claims") arising
directly or indirectly pursuant to or out of the Executive's
employment with or service as a director of the Company, his
performance of services for the Company or any Company Releasee
or the termination of such employment or services and, including,
without limitation, any rights and/or Company Claims (a) arising
under or pursuant to any contract, express or implied, written or
oral, including, without limitation, the Employment Agreement;
and (b) for damages, including punitive or compensatory damages
or for attorneys' fees, expenses, costs, injunctive or equitable
relief. This paragraph shall not apply to any rights or claims
that the Company may have for a breach of this Agreement,
including, without limitation, the Executive's undertaking
referred to in paragraph 14(b) hereof.
7. No Litigation. The Executive represents and warrants
that he has not filed, commenced or participated in any way in
any complaints, claims, actions or proceedings of any kind
against any Company Releasee with any federal, state or local
court or any administrative, regulatory or arbitration agency or
body and he agrees not to file, assert or commence any complaint,
claim, action or proceeding of any kind against any Releasee with
any federal, state or local court or any administrative,
regulatory or arbitration agency or body with respect to any
matter from the beginning of the world to the Termination Date.
The Company represents and warrants that it has not filed,
commenced or participated in any way in any complaints, claims,
actions or proceedings of any kind against the Executive Releasee
with any federal, state or local court or any administrative,
regulatory or arbitration agency or body and the Company agrees
not to file, assert or commence any complaint, claim, action or
proceeding of any kind against the Executive or any Executive
Releasee with any federal, state or local court or any
administrative, regulatory or arbitration agency or body with
respect to any matter from the beginning of the world to the
Termination Date. This paragraph shall not apply to any rights
or claims that the Executive or the Company may have for a breach
of this Agreement, including, without limitation, paragraph 14(b)
hereof and the undertaking referred to therein.
8. No Right to Reinstatement. The Executive hereby waives
any right to, and agrees not to, seek reinstatement of employment
with the Company.
9. Representation by Counsel/Revocation.
(a) By executing this Agreement, the Executive
acknowledges that: (i) he has been advised by the Company to
consult with an attorney before executing this Agreement and has
consulted and been represented by Stephen T. Lindo, Esq., of
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019, and James P. Clark, Esq. of Gibson, Dunn & Crutcher LLP,
2029 Century Park East, Suite 4000, Los Angeles, California 90067-
3026 in connection therewith; (ii) he has been provided with at
least a twenty-one (21) day period to review and consider whether
to sign this Agreement and that by executing and delivering this
Agreement to the Company, he is waiving any remaining portion of
such twenty-one (21) day period; and (iii) he has been advised
that he has seven (7) days following execution of the Agreement,
to revoke this Agreement. Such seven day period is referred to
herein as the "Revocation Period".
(b) Subject to the last sentence of this subparagraph,
this Agreement will not be effective or enforceable against the
Executive until the Revocation Period has expired. Such
revocation shall only be effective if an originally executed
written notice thereof is delivered to the Company on or before
5:00 p.m. on the last day of the Revocation Period. If so
revoked, this Agreement shall be deemed to be void ab initio and
of no further force and effect. The parties have agreed that the
Agreement (i) will be delivered for execution by the Executive
only after it has been fully executed by the Company , (ii) will
not be subject to revocation by the Company at any time after
execution, and (iii) will be effective and fully enforceable
against the Company unless the Agreement is revoked by the
Executive prior to the expiration of the Revocation Period.
10. Representation. The Company hereby represents and
warrants to the Executive that (i) it has received all corporate
authorizations necessary for the execution of this Agreement on
the terms and conditions set forth herein, (ii) there are no
regulatory approvals that are necessary for the execution and
performance of this Agreement by the Company (other than those
conditions which are required to be satisfied under
Sections 6.1(c) and 7.1(c) of the Merger Agreement, insofar as
they affect the Company's obligation to make the payments due
under paragraph 2(c) hereof), and (iii) its entering this
Agreement and the performance of its obligations under this
Agreement will not violate any agreement between the Company and
any other person, firm or organization or any law or governmental
regulation.
11. No Admissions. This Agreement shall not in any way be
construed as an admission by the Company that the Company acted
wrongfully with respect to the Executive or that the Executive
has any rights whatsoever against the Company, and the Company
specifically disclaims any liability for any wrongful acts
against the Executive on the part of itself, its affiliates,
employees, or agents. This Agreement shall not in any way be
construed as an admission by the Executive that he acted
wrongfully with respect to the Company or that the Company has
any rights whatsoever against the Executive, and the Executive
specifically disclaims any liability for any wrongful acts
against the Company.
12. Non-Derogation; Public Comment. The Executive agrees
that, except as required by applicable law, or compelled by
process of law, neither he, nor anyone acting on his behalf,
shall hereafter (a) make any derogatory, disparaging or critical
statement about any Releasee or any of the Company's current
officers, directors, employees, shareholders or lenders or any
persons who were officers, directors, employees, shareholders or
lenders of the Company since May 19, 1993, or engaged in business
on behalf of the Company during the period from May 19, 1993,
through the Termination Date; or (b) without the Company's prior
written consent, communicate, directly or indirectly, with the
press or other media, concerning the past or present employees or
business of the Company or of any Releasee. The Company agrees
that, except as required by applicable law, or compelled by
process of law, neither it, nor anyone acting on its behalf,
shall hereafter (a) make any derogatory, disparaging or critical
statement about the Executive; or (b) without the Executive's
prior written consent, communicate, directly or indirectly, with
the press or other media, concerning the Executive.
13. Covenant Not to Compete; Covenants to Protect
Confidential Information. Paragraphs 10 and 11 of the Employment
Agreement shall survive the execution of this Agreement in its
entirety. Unless payments are made to the Executive under
paragraph 2(c) hereof, the non-competition period shall expire
one year from the Termination Date. If payments are made to the
Executive under paragraph 2(c) hereof, the non-competition period
shall expire on the third anniversary of the Termination Date.
14. Indemnification.
(a) The Company shall extend to the Executive the
benefits of Section 5.9 of the Merger Agreement, provided that
the merger with the Jackpot Entities occurs. If the merger with
the Jackpot Entities does not occur, and a Follow-On Agreement is
hereafter entered into, and a transaction constituting a Change
in Control thereafter occurs, the Company shall extend to the
Executive the benefits of any provision that is included in any
such agreement that is similar to Section 5.9 of the Merger
Agreement.
(b) The Company agrees that it will continue to
advance promptly to the Executive, following his termination of
employment from the Company (or to pay directly), all amounts
reasonably incurred by the Executive for attorney's fees and
expenses in defending, or appearing as a witness in, any and all
civil, criminal, administrative, or investigative actions, suits,
or proceedings, including grand jury and/or regulatory
proceedings, without regard to the jurisdiction(s) in which such
proceedings may occur ("Proceedings"), until the final
disposition of such Proceedings, in each case subject to the
Executive's prior written undertaking (the "Undertaking") to
repay to the Company amounts so advanced in accordance with the
terms thereof.
(c) The Executive agrees to cooperate fully, at
reasonable times and subject to reimbursement from the Company of
all related expenses, with the Company and any governmental
authority regarding the Proceedings until the final disposition
of the Proceedings.
(d) The Company represents that (i) it has
independently investigated the Company's activities from May 1993
to date in connection with the Louisiana riverboat casino
complexes, (ii) as part of such investigation, the Executive has
been debriefed regarding his activities in connection therewith,
and (iii) it has reported the information learned from such
investigation to the Board. The Executive represents that he has
fully and accurately disclosed such activities to the Company.
The Company agrees to use its best efforts to oppose any finding
by a regulatory agency or authority that would adversely affect
the Executive's ability to become licensed by the applicable
gaming authorities in any jurisdiction, unless such finding was
reached after a formal hearing at which the Company acted in a
manner consistent with the foregoing obligations and the
Executive was given an opportunity to participate in full.
(e) Paragraph 12(b) and (d) of the Employment
Agreement, are retained without change; Paragraphs 12(a) and (c)
of the Employment Agreement are revised to read as follows
(changed language in bold); the following new paragraphs (e) and
(f) are added to Paragraphs 12 of the Employment Agreement at the
end, and all such provisions, as so continued, modified or added,
shall survive the execution of this Agreement in their entirety:
(a) The Company shall indemnify the Executive to the
fullest extent permitted by Nevada law in effect as of the date
hereof against all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments,
fines, penalties, ERISA excise taxes, and amounts paid in
settlement) reasonably incurred by the Executive in connection
with a Proceeding. For the purposes of this Paragraph 12, "Term
of Employment" shall mean the period commencing May 19, 1993, and
ending on the Termination Date specified in paragraph 1 of the
Agreement of which this amendment is a part, and a "Proceeding"
shall mean any action, suit or proceeding, whether civil,
criminal, administrative, regulatory, or investigative, in which
the Executive is made, or is threatened to be made, a party to,
or a witness in, such action, suit, or proceeding by reason of
the fact that he is or was an officer, director, or employee of
the Company, or is or was serving as an officer, director,
member, employee, trustee, or agent of any other entity at the
request of the Company.
(c) The Executive shall not be entitled to
indemnification under this Paragraph 12 unless he meets the
standard of conduct specified in the Nevada General Corporation
Law. Notwithstanding the foregoing, to the extent permitted by
law, neither Section 78.751 of the Nevada General Corporation
Law, nor any similar provision shall apply to indemnification
under this Paragraph 12, so that if the Executive in fact meets
the applicable standard of conduct, he shall be entitled to such
indemnification whether or not the Company (whether by the board
of directors, the shareholders, independent legal counsel or
other party) determines that indemnification is proper because he
has met such applicable standard of conduct. Neither the failure
of the Company to have made such a determination prior to the
commencement by the Executive of any suit or arbitration
proceeding seeking indemnification, nor a determination by the
Company that he has not met such applicable standard of conduct,
shall create a presumption that he has not met the applicable
standard of conduct.
(e) The Company shall give at least three days prior
notice to the Executive, and an opportunity to comment thereon
and/or react thereto, before proposing or consummating any
settlement for resolution of any Proceedings that adversely
affect the Executive or his reputation.
(f) The foregoing provisions of this Paragraph 12
shall be in addition to and shall in no way limit any rights
which the Executive may have under: (i) Nevada Revised Statutes,
Title 7, Chapter 78, 751; (ii) Article IX of the Company's By-
laws, as in effect on the date hereof; (iii) the Undertaking;
(iv) the Merger Agreement; (v) this Agreement; and
(vi) directors' and officers' and all other liability insurance
policies maintained by the Company."
15. Settlement of Disputes. Paragraph 20 of the Employment
Agreement shall survive the execution of this Agreement in its
entirety, such that this Agreement shall be treated as the
"Agreement" for purposes of such Paragraph. The Company agrees
that it will promptly pay all legal fees and expenses incurred by
the Executive in connection with the negotiation and
implementation of this Agreement.
16. Executive's Continued Availability and Cooperation;
Cooperation and Consultation With The Executive By The Company;
Access to Records.
(a) The Executive shall continue to make himself
reasonably available to the Company for a period of six months
from the Termination Date to advise on transition matters as to
which the Executive has knowledge; provided however that the
Executive may provide such services at reasonable times so as not
to interfere with his obligations resulting from employment or
self-employment activities following his termination of
employment from the Company. In consideration of the performance
by the Company of its obligations under this Agreement, the
Executive agrees to provide such services without additional
compensation from the Company; provided, however, that the
Company shall reimburse the Executive for his reasonable out-of-
pocket expenses incurred in the performance of services rendered
hereunder.
(b) Without limitation on the rights set forth in
Paragraph 12(e) of the Employment Agreement, as herein amended,
the Company represents and warrants that it will not communicate
with regulatory, civil and/or criminal agencies or authorities in
any jurisdiction concerning the Executive, whether orally or in
writing, without: (i) promptly, and in no event later than three
business days thereafter, giving the Executive notice of the
occurrence of such communications, together with copies of any
such written materials furnished to such agencies and
authorities, and discussing and reviewing with the Executive the
nature and content of those communications; and (ii) subject to
any necessary consents of the agency or authority involved,
permitting the Executive and/or, at his election, his legal
counsel, to take part in those communications.
(c) The Company shall continue to provide the
Executive with reasonable access to the Company's records, at
reasonable times and subject to reasonable conditions, where
relevant to any proceeding in which the Executive is a
participant, to the extent such proceeding involves the
Executive's employment with the Company.
17. Survival. The covenants, representations and
acknowledgments contained herein shall survive the execution and
delivery of this Agreement and the completion of the payments set
forth in paragraph 2 hereof. The last paragraph of
Paragraph 9(d) of the Employment Agreement shall survive the
execution of this Agreement and the parties agree that Ernst &
Young, LLP is the Accounting Firm referenced therein. Payments
made under this Agreement shall be treated as "Agreement
Payments" for purposes of such Paragraph 9(d).
18. Specific Performance. The parties hereto each agree
that if any of the provisions of this Agreement are not performed
in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be
caused. It is hereby agreed that, in addition to any remedies
not precluded by this Agreement, each party shall be entitled to
seek an injunction restraining any violation or threatened
violation of such provisions of this Agreement or to specific
performance or other equitable relief with respect to any of the
provisions of this Agreement. If any provision of this Agreement
is found to be illegal or unenforceable by an arbitrator or by a
court of competent jurisdiction, the remaining terms of the
Agreement shall continue in full force and effect and the
offending provision(s) shall be deemed reformed and amended to
the minimum extent necessary to bring it or them within the legal
requirements for enforceability.
19. Further Assurances. Each party hereto shall promptly
execute, acknowledge and deliver any and all documents and take
any and all actions, as any of the other party shall reasonably
request in order to carry out the intent and meaning of, and to
give full effect to, this Agreement and each provision hereof.
20. Assignment. This Agreement is personal to the
Executive and the Executive may not assign his rights or delegate
any of his duties or obligations hereunder. The Company may
assign its rights and delegate its duties under this Agreement or
any of its interests herein (a) to any entity which is a party to
a merger or consolidation with the Company, (b) to any affiliate
of the Company or (c) to any entity acquiring substantially all
of the assets of the Company, provided that no such assignment
shall relieve the assignor of its obligations hereunder. The
Company shall give the Executive prompt notice of any such
assignment.
21. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given (i) on the date of service if
served personally on the party to whom notice is to be given,
(ii) on the day of transmission if sent via facsimile
transmission to the facsimile numbers given below, (iii) on the
day after delivery to Federal Express or similar overnight
courier or the Express Mail service maintained by the U.S. Postal
Service, or (iv) on the fifth day after mailing, if mailed to the
party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed,
to the party at the following addresses (or at such other address
as a party may specify by notice to the other):
(a) If to the Executive, to him at:
117 Cheltenham Avenue
Linwood, NJ 08221
Telecopy: (609) 927-6077
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attn: Stephen T. Lindo, Esq.
Telecopy: (212) 728-8111
and to:
Gibson, Dunn & Crutcher LLP
2020 Century Park East
Suite 4000
Los Angeles, CA 90067-3026
Attn: James P. Clark, Esq.
Telecopy: (310) 552-7014
(b) If to the Company, to it at:
Players International, Inc.
Citicenter Building
Suite 800
1300 Atlantic Avenue
Atlantic City, NJ 08401
Attn: Chief Financial Officer
Telecopy: (609) 449-7772
with a copy to
Sterns & Weinroth
2901 Atlantic Avenue
Atlantic City, NJ 08401
Attn: Nicholas Casiello, Jr., Esq.
Telecopy: (609) 340-8722
and to:
The Bachelder Group
780 Third Avenue
New York, NY 10017
Attn: Sara Champion Adams, Esq.
Telecopy: (212) 319-3900
22. Miscellaneous. This Agreement: (a) constitutes the
sole and complete understanding and agreement between the parties
hereto with respect to the matters set forth herein and there are
no other agreements or understandings, whether written or oral
and whether made contemporaneously or otherwise, that are binding
upon the parties hereto, other than those paragraphs of
agreements which are expressly incorporated herein by reference;
(b) fully supersedes the Employment Agreement except as otherwise
provided for herein; (c) shall be subject to, governed by and
construed and enforced in accordance with the internal laws of
the State of New Jersey, without regard to New Jersey's conflict-
of-laws principles; (d) shall inure to the benefit of and be
binding upon the Executive and the Company and their respective
heirs, devisees, legatees, executors, administrators, successors
and permitted assigns and each Releasee; and (e) may not be
amended or modified except by written agreement duly executed by
the Company and the Executive.
23. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first above written.
/s/ Howard A. Goldberg
-------------------------------
HOWARD A. GOLDBERG
PLAYERS INTERNATIONAL, INC.
By: /s/ Lawrence Cohen
---------------------------
Name: Lawrence Cohen
Title: Director
Exhibit A
SCHEDULE OF PAYMENT TO BE MADE PURSUANT TO SEPARATION AGREEMENT
INITIAL PAYMENTS - due on first business day following expiration of
Revocation Period.
Payments accrued but unpaid:
Mar '99 bonus $170,000
Unused Vacation 25,000
Payments under Employment Agreement Section
9(c) because of termination without cause,
with agreed reductions:
Settlement of salary continuation 390,000
Settlement of bonus continuation 325,000
Settlement of first year benefits
continuation 35,000
--------
$945,000
========
CONTINGENT PAYMENTS - due at closing of
merger
Payments under 9(d):
Balance settlement of salary continuation 945,000
Balance settlement of bonus continuation 1,250,000
Balance settlement of benefit continuation 90,000
----------
$2,285,000
==========
Total: $3,230,000
==========
Exhibit B
The following is a list of enterprises with respect to which
a change in control transaction has received active consideration
by the Board of Directors of Players International, Inc. prior to
the Termination Date:
Apollo/Michael Ashner
Aztar
Boyd Gaming Corp.
Colony Capital/Harvey's
Harrah's Entertainment
Hollywood Park
Horseshoe Gaming, Inc./Binion
Insignia Financial/Andrew Farkas
Jackpot Enterprises, Inc.
Jacobs Entertainment/Black Hawk Gaming
Ladbroke Group/Colorado Gaming
Thomas H. Lee Company
MacAndrew & Forbes/Ronald Perelman
North Star Capital Partners/Ed Sheetz & David Hamamoto
Penn-National Gaming
Sun International
Note: For purposes of this Exhibit, a transaction with an
affiliate of any of the above-listed companies or named
individuals will be treated in the same manner as a transaction
with one of the above-listed companies itself.
