38
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 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.)
Suite 800, 1300 Atlantic Avenue, Atlantic City, New Jersey
(Address of principal executive offices)
08401
(Zip Code)
(609) 449-7777
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.005 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of June 18, 1999, the aggregate market value of the
registrant's Common Stock held by non-affiliates of the
registrants was not less than $180,000,000.
As of June 18, 1999, there were 32,032,737 shares of the
registrant's Common Stock outstanding.
Documents Incorporated by Reference:
None.
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PART I
Item 1. Business
_______ ________
General
Players International, Inc. (the "Company") is a
multi-jurisdictional gaming company with operations in Illinois,
Louisiana, Missouri and Kentucky. The Company operates a cruising
riverboat casino in Metropolis, Illinois, two cruising riverboat
casinos in Lake Charles, Louisiana, two dockside riverboat
casinos in Maryland Heights, Missouri and the Players Bluegrass
Downs horse racetrack in Paducah, Kentucky. The Metropolis
riverboat, which is the only riverboat operating in southern
Illinois, attracts patrons from its target markets in Illinois,
Indiana, Kentucky, Missouri and Tennessee. The Lake Charles
riverboats serve the Houston, Texas and southwest Louisiana
markets. The Company and Harrah's Entertainment, Inc. each
operate two dockside riverboat casinos and jointly own a landside
hotel and entertainment facility in Maryland Heights, Missouri.
The Maryland Heights casino serves the St. Louis, Missouri
market.
The Company's marketing and operational strategy is designed
to provide its guests with superior customer service and
entertainment value for their gaming dollar and focuses on the
more profitable, mid-level drive-in customers who live within a
150-mile radius of the Company's facilities. The Company's sites
are conveniently located near frequently traveled interstate
highways and have easy access and parking to satisfy the demands
of local and frequent visitors. On-site customer service efforts
are intended to establish personal relationships with patrons
that result in ongoing loyalty to, and repeat patronage of, the
Company's casinos. The Company has developed extensive employee
training programs designed to improve customer service and better
prepare its personnel to communicate with and reward its in-house
guests. Player tracking systems record gaming activity and
corresponding complimentary expenses in a player database from
which each property targets its best players with special offers
through cost effective direct mail programs.
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. The merger is anticipated to close
in the second half of calendar 1999.
Metropolis Operations
The Metropolis facility commenced operations on February 23,
1993, and is the only riverboat casino operating in southern
Illinois. The Company holds one of ten statutorily authorized
gaming licenses in Illinois. Under Illinois law, licenses are
renewed annually after the first three years of operation. The
Metropolis gaming license was conditionally renewed for a
one-year period in February, 1999, subject to the outcome of a
special investigation. See "Gaming Regulation; Illinois Gaming
Regulation" below.
The Metropolis facility offers a four deck historical
replica of a paddlewheel riverboat. The riverboat features a
fully-equipped Las Vegas style casino that contains approximately
22,000 square feet of gaming space. The casino is equipped with
915 slot machines and 40 table games for a total of approximately
1,040 gaming positions as defined by Illinois regulation.
The docking site at the Metropolis facility includes a
dining and entertainment facility which was added in December,
1997. This 27,000 square foot barge has a tropical theme and
offers a 300-seat buffet facility, a 140-seat fine dining
facility, an entertainment lounge, a queuing and guest services
area and a VIP area. The Metropolis facility has approximately
1,400 automobile and bus parking spaces.
The Company also holds a 12.5% limited partnership interest
in a joint venture which constructed a 120-room hotel adjacent to
the Metropolis facility. The hotel opened in March, 1994. The
Company is entitled to a discounted rate for a specified number
of hotel rooms used for casino guests. The Company also leases,
under a ten-year agreement, a 350-seat cabaret style theater
adjacent to the hotel, which is used for special events and
promotions.
The Metropolis facility is located approximately three miles
from U.S. Interstate 24, a major highway through Illinois,
Kentucky and Tennessee. Passenger counts are higher during warmer
weather (from late spring through early fall) than during the
winter months. The Company anticipates that this seasonal
passenger count trend will continue in the future.
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Lake Charles Operations
The Lake Charles facility commenced operations in the City
of Lake Charles, Louisiana on December 8, 1993, with one
riverboat casino, the Players Lake Charles Riverboat. In January,
1995, the Company acquired all interests in a partnership that
owned another fully-equipped Las Vegas style riverboat casino,
the Star Riverboat, which previously operated for one and
one-half years on Lake Pontchartrain near New Orleans. The
Company relocated the Star Riverboat to Lake Charles and reopened
it in April, 1995. The Company presently holds two of a current
maximum of fifteen statutorily authorized riverboat casino
licenses in Louisiana. Under Louisiana law, licenses are
initially issued for a term of five years and then considered for
renewal annually thereafter. The initial Players Lake Charles
Riverboat license was to expire on December 6, 1998, but was
conditionally renewed, subject to a full suitability
investigation and approval by the Louisiana Gaming Control Board,
on October 20, 1998. The initial Star Riverboat license was to
expire on August 9, 1998, but was conditionally renewed, subject
to a full suitability investigation and approval by the Louisiana
Gaming Control Board, on July 21, 1998. See "Gaming Regulation;
Louisiana Gaming Regulation" below.
The Players Lake Charles Riverboat and the Star Riverboat
are docked at a common docking site. The Players Lake Charles
Riverboat is a fully-equipped three deck Las Vegas style casino
that has approximately 29,200 square feet of gaming space and is
equipped with 947 slot machines and 60 table games for a total of
approximately 1,300 gaming positions. The Star Riverboat is a
fully-equipped three deck Las Vegas style casino that has
approximately 21,730 square feet of gaming space and is equipped
with 710 slot machines and 36 table games for a total of
approximately 926 gaming positions. Both the Players Lake Charles
Riverboat and the Star Riverboat operate staggered three-hour
cruises up to 24 hours a day. While each riverboat is required by
state law to cruise, the staggered cruise schedules allow the
Company to offer patrons the equivalent of dockside gaming, since
a riverboat is almost continually available for boarding by
patrons at the docking site.
The Lake Charles facility features a 60,000 square foot
floating entertainment "Island." Riverboat casino passengers walk
through the Island, which is connected to the Company parking
garage by a covered walkway, to board the Players Lake Charles
Riverboat and the Star Riverboat. The Island offers a tropical
theme with lush foliage, waterfalls and rockscapes. The Island
includes a gift shop, a 150-seat upscale restaurant, a 350-seat
buffet restaurant, a 145-seat sports bar, and a 50-seat Asian
restaurant. The Company also maintains a permanently moored barge
of approximately 10,000 square feet adjacent to the Island, which
houses an employee breakroom, administrative offices and
mechanical rooms.
In January, 1998, the Company acquired a 269-room hotel
formerly operated as the Lake Charles Holiday Inn. This
acquisition has allowed the Company to enhance its Lake Charles
gaming operations by offering better quality hotel rooms as part
of its marketing programs and increasing the length of stay of
traveling patrons, thereby increasing traffic to the casinos. The
hotel, which is located adjacent to the Company's Lake Charles
property, is not operated as a Holiday Inn-franchised hotel. As a
result of this acquisition and in response to a need for
additional parking, the Company demolished the former Players
Hotel to accommodate increased surface parking.
Parking facilities at the Lake Charles facility consist of a
500 space, on-site multi-story parking garage, a 270-space
surface parking area and several off-site surface parking
facilities that provide approximately 900 additional automobile
and bus parking spaces. Construction of approximately 250
additional paved surface parking spaces on the site of the former
Players Hotel adjacent to the Island was substantially completed
by Memorial Day weekend, 1999, with the balance of the work to be
completed by the end of June, 1999.
The City of Lake Charles and the surrounding area have a
population of approximately 300,000 adults of legal gaming age
within a 50-mile radius. The Lake Charles facility's primary
market area also includes such population centers as Houston,
Beaumont, Galveston, Orange and Port Arthur, Texas and Lafayette
and Baton Rouge, Louisiana. Approximately 4.4 million adults of
legal gaming age reside within 150 miles of the Lake Charles
facility. The Lake Charles facility is situated immediately
adjacent to U.S. Interstate 10 ("I-10") which connects Houston,
Beaumont and Lake Charles and provides easy access to the
casinos. The Lake Charles riverboats draw more than 70% of their
patrons from Texas, due in large part to the current absence of
legalized casino gaming in Texas. The facility faces direct
competition from the Isle of Capri casino, situated approximately
one mile from the Lake Charles facility, and the land-based
Coushatta Indian casino situated in Kinder, Louisiana,
approximately 35 miles away.
Road construction is underway on I-10 near the Company's
Lake Charles facility. The construction has resulted in lanes of
I-10 being closed for periods of time, although the Company has
been advised that, whenever possible, one eastbound lane and one
westbound lane will remain open, permitting access to and from
the casino. Traffic delays and inconvenience caused by road
construction have negatively impacted patronage to the Company's
facility and may continue to do so through, and perhaps beyond,
the completion of this project. The first phase of I-10 road
construction has been completed, and the second phase is expected
to be completed by October 1, 1999.
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
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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, or RICO 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. See "Gaming Regulation" below. 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. 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.
Maryland Heights Operations
On March 11, 1997, the Company and Harrah's opened a
riverboat casino entertainment facility in Maryland Heights,
Missouri, a suburb of St. Louis. The Maryland Heights facility
offers four permanently moored, dockside riverboat casinos
totaling approximately 120,000 square feet of gaming space. The
four casinos at the Maryland Heights facility are permanently
moored to a land-based 95,000 square foot entertainment facility,
which has a turn-of-the-century St. Louis theme and includes
retail shops, two 125-seat specialty restaurants (the Company and
Harrah's each operate one of the specialty restaurants), a
540-seat buffet, a 125-seat entertainment lounge, a variety of
retail stores, a child care facility, 10,000 square feet of
convention/meeting space, a 9,000 square-foot sports bar and a
1,850 space parking garage and 2,650 surface parking spaces. The
Maryland Heights facility also offers a 291-room hotel with 12
luxury suites. The hotel and the entertainment facility are
referred to together as the landside facility.
The Company and Harrah's each individually manage, operate
and market two of the four permanently moored, dockside casinos
pursuant to separate gaming licenses. The Company's Maryland
Heights casinos have total gaming space of approximately 60,000
square feet and are equipped with, in the aggregate, 1,608 slot
machines and 48 table games for a total of approximately 1,900
gaming positions. The Company's Maryland Heights casinos feature
a tropical island theme with lush foliage, waterfalls and
rockscape. In accordance with Missouri gaming regulations, one of
the Company's two casinos remains open for patron boarding for a
45 minute period while the other casino is closed to boarding,
and only one casino facility is open for boarding at any given
time. Only one of the Harrah's casinos at the Maryland Heights
Facility is likewise open for boarding at any given time. The
Company's Maryland Heights casinos pay Harrah's a ground lease
payment based upon a percentage of their annual net gaming
revenue.
Both the Company and Harrah's are 50% owners of the Maryland
Heights joint venture, the entity which (i) owns the Maryland
Heights entertainment facility and the Maryland Heights hotel and
(ii) owns the dockside barges that house each of Harrah's and the
Company's casino operations at the Maryland Heights facility.
Under the agreement governing the Maryland Heights joint venture,
each of the Company and Harrah's (i) is entitled to 50% of all
profits, and is responsible for 50% of all losses, from the
landside properties (excluding profits and losses from each
entity's separately operated specialty restaurant), (ii) was
responsible for the fit-out, furnishings and equipment at its own
specialty restaurant and casinos, and (iii) derives all profits,
and is responsible for all losses, from its separately operated
specialty restaurant and casinos.
Pursuant to a separate management agreement, an affiliate of
Harrah's manages the Maryland Heights hotel and the Maryland
Heights entertainment facility, with the exception of the
Company's specialty restaurant and retail space. The management
agreement has a basic term that expires on December 31, 2005,
with fourteen renewal terms of five years each.
The Maryland Heights facility is strategically located to
attract patrons from a local population base of approximately 2.3
million in the greater St. Louis metropolitan region. The site
features easy accessibility, a high level of drive-by traffic,
and is located adjacent to the Riverport Amphitheater, which
currently attracts 500,000 visitors per year.
The Company maintains separate riverboat casino licenses,
issued by the Missouri Gaming Commission, for each of its two
casinos. The licenses were renewed effective March 11, 1999, for
terms of two years. See "Gaming Regulation; Missouri Gaming
Regulation" below. Missouri gaming regulations limit patron
gaming to $500 per two hour cruise session. In addition, while
the Company's two riverboat casinos are permanently moored, state
law requires the Company to simulate two hour cruises.
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Players Bluegrass Downs Operations
Players Bluegrass Downs, a racetrack located in Paducah,
Kentucky, was acquired by the Company in 1993 and holds live
racing meets each fall as well as year-round simulcasting of
horse racing events. During the year when live race meets are not
scheduled, the racetrack facilities are leased for special events
and activities. During fiscal 1999, the Company began operating
Players Bluegrass Downs as a harness racetrack and discontinued
the thoroughbred racing that previously had been conducted.
Competition
The casino gaming industry includes land-based casinos,
dockside casinos, cruising riverboat casinos and land-based
casinos on Indian reservations. The gaming industry is highly
competitive and is composed of a large number of companies.
Numerous states have legalized gaming and several other states
are considering the legalization of gaming in designated areas.
Indian gaming on tribal land also continues to expand. As a
result of the proliferation of gaming, the Company's operations
have been adversely affected. New gaming facilities that have
opened in markets served by the Company's facilities have diluted
the market by competing for existing patrons of the Company's
facilities. The Company anticipates this trend will continue as
new competition comes on line and existing competitors enhance
their facilities. In addition, many of the Company's direct
competitors have significantly greater resources as compared to
those of the Company. Competitors with greater resources than the
Company enjoy a competitive advantage since they have more
flexibility in the manner in which they manage, operate and
expand their facilities.
The Metropolis facility's closest gaming competitor is the
City of Evansville riverboat casino, located approximately 110
miles away in Evansville, Indiana. Another competing riverboat
casino, the City of Caruthersville, operates in Caruthersville,
Missouri, which is approximately 120 miles southwest of the
Metropolis facility. Caesars opened the Glory of Rome riverboat
casino in November, 1998, in Corydon, Indiana, across from
Louisville, Kentucky, approximately 200 miles from Metropolis,
and has announced plans for a hotel and other resort facilities
at that location. While to date the Caesar's facility has had
limited direct impact on Metropolis, the introduction of
additional capacity could intensify competition among existing
gaming operators in southern Illinois and Indiana for patrons
residing in common shared outer markets, specifically patrons
residing in Tennessee. The Metropolis facility faces further
competition as additional riverboats become licensed in southern
Indiana and Missouri. Metropolis also experiences significant
competition for Tennessee patrons, as well as some Illinois and
Missouri patrons, from ten dockside casinos in Tunica,
Mississippi. Casinos operating in Tunica, Mississippi enjoy a
competitive advantage over the Company's Metropolis facility
since they offer permanently moored, dockside facilities while
the Company's riverboat is currently required to cruise by state
law.
The Lake Charles facility faces direct competition from Isle
of Capri, which opened with one Las Vegas style riverboat casino
on July 29, 1995, in Westlake, Louisiana, approximately one mile
from the Company's facility. In May, 1996, the Isle of Capri
opened a 105,000 square foot pavilion which offers a 489-seat
buffet, a live entertainment facility, retail operations and a
1,400 space parking garage. In July, 1996, the Isle of Capri
opened a second Las Vegas style riverboat casino. The first of
the Isle of Capri's two riverboat casinos presently offers
approximately 24,700 square feet of gaming space with 892 slot
machines and 43 table games, while the other riverboat casino
offers approximately 24,200 square feet of gaming space with 944
slot machines and 48 table games. A 241-room hotel and a
restaurant constructed by Isle of Capri opened in September,
1997. Construction of a 250-room deluxe hotel, at a cost of
approximately $35 million, has also been announced. Eastbound
travelers from Texas and western Louisiana on Interstate 10 are
able to access the Isle of Capri prior to reaching the Company's
facility.
The Lake Charles facility also faces direct competition from
the land-based Coushatta Indian casino facility in Kinder,
Louisiana. The Coushatta facility, which opened in January, 1995,
and expanded in August, 1995, is a Las Vegas style casino that
currently offers approximately 100,000 square feet of gaming
space, 3,000 slot machines and 75 table games. Grand Casinos,
Inc. manages the facility, which also includes a buffet, an
upscale restaurant and a 200-pad RV park. The facility also
includes a 260-room hotel and an event center. Two additional
restaurants are expected to open in the summer of 1999. Plans
for construction of a golf course and an additional 400-room
hotel have also been announced. In addition to the Coushatta
facility, the Lake Charles facility competes to a lesser degree
with riverboat operators in Baton Rouge, approximately 125 miles
east of Lake Charles, the New Orleans area, approximately 200
miles east of Lake Charles, and the Shreveport/Bossier City area,
which is approximately 180 miles north of Lake Charles.
In the 1997 Regular Session of the Louisiana Legislature, a
law was passed authorizing the operation of slot machines at
three horse racing tracks in Louisiana, including a racetrack
situated in Calcasieu Parish (the same Parish as the Company's
Lake Charles facility), Delta Downs. Under the law, before slot
machines can be operated at Delta Downs (i) voter approval is
required through a local referendum election in Calcasieu Parish
and (ii) companion legislation must be passed by the Louisiana
Legislature to establish the tax rate to be levied on slot
machine revenues. In the Fall of 1997, voters in Calcasieu Parish
voted not to authorize the operation of slot machines at Delta
Downs. In addition, the Louisiana Legislature, in its 1998 Fiscal
Session, failed to pass the required companion tax legislation.
However, the law provides that another local referendum may be
conducted every two years, and companion tax legislation may be
considered in any future session of the Louisiana Legislature.
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The Company's Maryland Heights casinos compete with all of
the gaming operators in the greater St. Louis market, including
the Company's joint venture partner, Harrah's; the nearby St.
Charles Station in St. Charles, Missouri; the President Riverboat
in downtown St. Louis, Missouri; the Alton Belle in Alton,
Illinois; and the Casino Queen in East St. Louis, Illinois. The
riverboats operated by the Company's joint venture partner,
Harrah's, have a total of 1,676 slot machines and 48 table games.
The President facility operates a single gaming facility with
1,230 slot machines and 62 table games. The St. Charles facility
consists of two riverboat gaming facilities with 1,860 slot
machines and 76 table games. Additionally, St. Charles has
announced a $190 million expansion project, for which
construction has been temporarily halted. Casino Queen operates a
single riverboat with 1,066 slots and 64 table games. Alton Belle
has 700 slots and 32 table games. As Illinois operators, neither
the Casino Queen nor the Alton Belle are subject to the same loss
limits per passenger imposed in Missouri. The Company's Maryland
Heights casinos may compete with additional riverboats in the St.
Louis metropolitan area to the extent that additional licenses,
if any, are granted by the Missouri Gaming Commission.
Employees
As of June 12, 1999, the Company had approximately 3,500
employees, including 817 employed in Metropolis, 1,580 employed
in Lake Charles, 985 employed in Maryland Heights, 42 employed at
Players Bluegrass Downs and 34 employed in the Company's
corporate and administrative offices. In Lake Charles, the
Company also contracts with a third party for its maritime
operations (approximately 89 employees) and its valet operations
(approximately 90 employees). The Company believes its relations
with its employees are generally good.
Gaming Regulation
The Company is subject to state and Federal laws which
regulate businesses generally and the gaming business
specifically. Below is a description of some of the more
significant regulations to which the Company is subject. All laws
are subject to change and different interpretations. This is
especially true with respect to current laws regulating the
gaming industry, since in many cases these laws and the
regulatory agencies applying them are relatively new. Changes in
laws or their interpretation may result in the imposition of more
stringent, burdensome and expensive requirements, or the outright
prohibition of an activity.
Illinois Gaming Regulation
The Riverboat Gambling Act of Illinois (the "Illinois
Riverboat Act") currently authorizes a five-member Illinois
Gaming Board to issue up to ten riverboat gaming licenses. Nine
licensees are currently operating in Illinois. A tenth license
was not renewed by the Board. The status of this license renewal
remains pending until final action by the Board after
administrative procedures are completed. On May 25, 1999, the
Illinois General Assembly passed legislation to allow dockside
gaming, to remove the Cook County site prohibition and relocate
the tenth license there and to allow licensees to have more than
10% ownership in a second license, among other changes. This
legislation is subject to the approval of the Governor. Each
owner's license entitles the licensee to own and operate up to
two riverboats (with a combined maximum of 1,200 "gaming
positions," as such term is defined under Illinois law) and
equipment thereon from a specified dock site. The duration of the
license initially runs for a period of three years. Thereafter,
the license is subject to renewal on an annual basis upon, among
other things, a determination by the Illinois Gaming Board that
the licensee continues to meet all of the requirements of the
Illinois Riverboat Act and the Illinois Gaming Board's Rules,
including continued suitability of the licensee, parent/holding
company and key persons in light of their conduct in other
jurisdictions. The Illinois Gaming Board issued an owner's
license to a wholly-owned subsidiary of the Company for its
Metropolis facility in February, 1993. All licensees have a
continuing duty to maintain suitability for licensure. The
Illinois Riverboat Act and Illinois Gaming Board Rules grant the
Illinois Gaming Board extensive jurisdiction and specific powers
and duties for the purposes of administering, regulating and
enforcing the system of riverboat gaming. These powers are far
reaching and include the power to limit, proscribe or effectively
rescind the payment of dividends or the repayment of indebtedness
to the Company in certain circumstances, including any adverse
financial condition, default, non-compliance or insolvency of the
Company or any of its subsidiaries. The Illinois Gaming Board may
revoke, suspend or place conditions on licenses or fine
licensees, in any case as the Illinois Gaming Board may see fit
and in compliance with applicable laws of the State of Illinois
regarding administrative procedures and may suspend an owner's
license, without notice or hearing, upon a determination that the
safety or health of patrons or employees is jeopardized by
continuing a riverboat's operation. The suspension may remain in
effect until the Illinois Gaming Board determines that the cause
for suspension has been abated. The Illinois Gaming Board may
revoke the owner's license upon a determination that the owner
has not made satisfactory progress toward abating the hazard.
A holder of an owner's license is required to obtain all
licenses from the Illinois Gaming Board necessary for the
operation of a riverboat, including a liquor license, a license
to prepare and serve food, and all other necessary licenses. All
sales, use, occupation and excise taxes which apply to food and
beverages apply to sales aboard riverboats. All riverboats must
be accessible to disabled persons, must be either a replica of a
19th century Illinois riverboat or be of a casino cruise ship
design, and must comply with applicable Federal and state laws,
including U.S. Coast Guard regulations. A person employed at a
riverboat gaming operation must hold an occupation license from
the Illinois Gaming Board, which permits the holder to perform
only activities included within such holder's level of occupation
license or any lower level of occupation license. The Illinois
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Gaming Board also requires that officers, directors and other key
persons of a gaming operation be licensed. In addition, a
riverboat licensee can purchase or lease gaming equipment or
supplies only from a supplier who has been issued a supplier's
license by the Illinois Gaming Board. As a condition to
maintaining an owner's license, the licensee must, among other
things, submit detailed financial information and other
information to the Illinois Gaming Board including an annual
audit by an independent certified public accountant, selected by
the Administrator of the Illinois Gaming Board, of the financial
transactions and conditions of the total operations of a holder
of an owner's license, including the condition of the licensee
and its internal control system. The holder of an owner's license
must prepare and send to the Administrator, and the independent
certified public accountant selected by the Administrator, a
written response to issues raised by such accountant's reports
on: (i) the procedures required to be performed by such
accountant on a quarterly basis with respect to certain aspects
of the licensee's operations; and (ii) the annual audit referred
to above. Among other continuing obligations, the holder of an
owner's license has a duty to promptly disclose any material
changes in the information it provides to the Illinois Gaming
Board. The holder of an owner's license must report promptly to
the Administrator of the Illinois Gaming Board any facts which
the holder has reasonable grounds to believe indicate a violation
of law (other than minor traffic violations), an Illinois Gaming
Board Rule, or a holder's internal controls committed by
suppliers or licensed employees including, without limitation,
the performance of licensed activities different than those
permitted under their license. The duty to disclose changes in
information previously provided to the Illinois Gaming Board
continues throughout the period of licensure. A duty exists to
promptly disclose the identity of a compensated agent acting on
behalf of the holder of an owner's license with regard to action
by the Illinois Gaming Board. A holder of an owner's license is
subject to the imposition of fines, suspension or revocation of
its license for any act or failure to act on the part of the
licensee or its agents or employees that is injurious to the
public health, safety, morals, good order or general welfare of
the people of the State of Illinois or that would discredit or
tend to discredit the Illinois gaming industry or the State of
Illinois, including, without limitation: (i) failing to comply
with or make provision for compliance with applicable legal
requirements including the Illinois Riverboat Act, the rules
promulgated thereunder or any other applicable Federal, state or
local law or regulation or order or failure by the holder of an
owner's license to comply with or make provisions for complying
with the holder's internal controls; (ii) failing to comply with
any rule, order or ruling of the Illinois Gaming Board or its
agents pertaining to gaming; (iii) receiving goods or services
from a person or business entity which does not hold any required
supplier's license; (iv) being suspended or ruled ineligible for
a gaming license or having a gaming license revoked or suspended
in any state or gaming jurisdiction; (v) associating with, either
socially or in business affairs, or employing persons of
notorious or unsavory reputation or who have extensive police
records or who have failed to cooperate with any officially
constituted investigatory or administrative body, if public
confidence and trust in gaming would thereby be adversely
affected; and (vi) employing in any Illinois riverboat gaming
operation any person known to have been found guilty of cheating
or using any improper device in connection with any game. The
Illinois Gaming Board has taken the position that conduct that
may not violate a statute or rule in other jurisdictions may
nevertheless be grounds for revocation, suspension, disciplinary
fines and/or failure to renew a license in Illinois.
Minimum and maximum wagers on games are not established by
regulation but are left to the discretion of the licensee;
however, wagering may not be conducted with money or other
negotiable currency. Riverboat cruises are limited to a duration
of four hours, and pursuant to the language of the Illinois
Riverboat Act, no gaming may be conducted while the riverboat is
docked. Illinois Gaming Board Rule, Section 3000.500, currently
permits gaming during the 30-minute time periods at the beginning
and end of a cruise while the passengers are embarking and
disembarking (total gaming time per cruise is limited to four
hours, however, including the pre- and post-docking periods). In
addition, pursuant to Illinois Gaming Board Rule, Section
3000.510, dockside gaming is permitted if the captain of the
riverboat reasonably determines that it is unsafe to cruise due
to inclement weather, mechanical or structural problems or river
icing. In such event, the riverboat must be cleared at least once
every four hours, at which time a new gaming session may
commence; patrons may leave the vessel at any time but may only
board the vessel during the first 30 minutes of the gaming
session. Pronouncements by the Illinois Gaming Board indicate
that the explanations for failure to cruise pursuant to Illinois
Gaming Board Rule, Section 3000.510 will be closely scrutinized
and that any abuse of the rule will result in disciplinary
actions, which may include, among other things, any of the
following: cancellation of future cruises, penalties, fines and
suspensions or revocation of license. No person under the age of
21 is permitted to wager, and wagers may only be taken from a
person present on a licensed riverboat. With respect to
electronic gaming devices, the payout percentage may not be less
than 80% nor more than 100%.
Effective January 1, 1998, the Illinois Riverboat Act
enacted a graduated wagering tax, from 15% to 35% of adjusted
gross receipts from gaming. The tax is calculated at the
following rates per calendar year: 15% up to and including $25
million; 20% in excess of $25 million but not exceeding $50
million; 25% in excess of $50 million but not exceeding $75
million; 30% in excess of $75 million but not exceeding $100
million; and 35% in excess of $100 million. The tax imposed is to
be paid by the licensed owner to the Illinois Gaming Board on the
day after the gaming day when the wagers were made. Prior to
1998, the wagering tax rate was a flat 20% of adjusted gross
receipts from gaming. The Illinois legislation also requires that
licensees pay a $2.00 admission tax for each person admitted to a
gaming cruise.
An ownership interest in a business entity (other than a
publicly traded corporation) which has an interest in a holder of
an owner's license may only be transferred or pledged as
collateral with the permission of the Illinois Gaming Board. Any
person or entity who or which, individually or in association
with others, acquires directly or indirectly, beneficial
ownership of more than 5% of any class of voting securities or
non-voting securities convertible into voting securities of a
publicly traded corporation which holds an ownership interest or
a beneficial interest in the holder of an owner's license is
required to file a Personal Disclosure Form 1. The Illinois
Gaming Board, however, takes the position that it may require any
individual or entity seeking a transfer of an ownership interest
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in an owner's license to file a Personal Disclosure Form 1 and
the Business Entity Form 1. The Personal Disclosure Form 1 and
the Business Entity Form 1 form the basis of investigation by the
Illinois Gaming Board to determine suitability of the person or
entity seeking transfer of an ownership interest. If the Illinois
Gaming Board denies an application for such a transfer,
commencing as of the date the Illinois Gaming Board issues a
notice that it denies such application, it will be unlawful for
such applicant to receive any dividends or interest on his
shares, to exercise, directly or indirectly, any right conferred
by such shares, or to receive any remuneration from any person or
entity holding any license under the Illinois Riverboat Act for
services rendered. If the Illinois Gaming Board denies an
application for such a transfer and if no hearing is requested or
if the Illinois Gaming Board issues a final order of
disqualification, the holder of an owner's license shall purchase
all of the disqualified person's or entity's shares at the lesser
of either the market price or the purchase price for such shares.
A holder of an owner's license can only make distributions to
stockholders to the extent such distributions wold not impair the
financial viability of the gaming operation. Factors to be
considered should include, but not be limited to, the following:
(i) working capital requirements; (ii) debt service requirements;
(iii) repairs and maintenance requirements; and (iv) capital
expenditure requirements.
Holders of an owner's license must immediately inform the
Illinois Gaming Board and obtain formal approval from the
Illinois Gaming Board whenever a change is proposed in the
following areas: key persons; type of entity; equity and debt
capitalization of entity; investors and/or debt holders; sources
of funds; applicant's economic development plan; riverboat
capacity or significant design change; gaming positions;
anticipated economic impact; or pro forma budgets and financial
statements.
The Illinois Gaming Board renewed the gaming license for the
Company's Illinois subsidiary which operates the Metropolis
facility on February 16, 1999, but, as a condition of renewal of
the license, commenced a special investigation pursuant to
Illinois Gaming Board Rule Section 3000.155 regarding the Shetler
and Edwards cases in Louisiana. The purpose of the special
investigation is to determine whether the Company and certain key
persons of its Illinois subsidiary can demonstrate their
continued suitability in light of the Shetler and Edwards cases
in Louisiana. The Illinois Gaming Board, in deciding upon the
Illinois subsidiary's license renewal, did not waive or in any
way limit its ability to revoke, not renew or otherwise take
action against the Company's owner's license due to conclusions
reached as a result of the special investigation.
Louisiana Gaming Regulation
In July, 1991, the Louisiana legislature adopted legislation
permitting riverboat casinos on certain rivers and waterways in
Louisiana (the "Riverboat Act"). In addition to riverboat
casinos, there are many other forms of legalized gaming in
Louisiana including the lottery, racetracks and video lottery
terminals ("VLTs") at various types of facilities in the state,
including bars, truckstops, racetracks and off-track betting
parlors.
The Riverboat Act authorizes the issuance of up to 15
licenses to conduct gaming activities on a riverboat of new
construction in accordance with applicable law. However, no more
than six licenses may be granted to riverboats operating from any
one parish. Pursuant to legislation passed in a Special Session
of the Louisiana Legislature in March, 1996, authority to
supervise riverboat gaming activities is vested in the Louisiana
Gaming Control Board, the successor regulatory agency to the
Louisiana Riverboat Gaming Commission. The Louisiana Gaming
Control Board, by regulation, has delegated certain
responsibilities relating to investigations, issuance and renewal
of certain licenses and permits, audits and enforcement of
Louisiana riverboat gaming laws to the Riverboat Gaming
Enforcement Division of the Louisiana State Police (the
"Louisiana Enforcement Division"). The Louisiana Enforcement
Division has broad powers over licensees and such powers,
together with the provisions of the Riverboat Act, could operate
to limit, proscribe or effectively rescind the payment of
dividends or the repayment of indebtedness to the Company in
certain circumstances, including any adverse financial condition,
default, non-compliance or insolvency of any subsidiary or the
Company.
In issuing a license, the Louisiana Gaming Control Board
must find that the applicant is a person of good character,
honesty and integrity and a person whose prior activities,
criminal record, if any, reputation, habits, and associations do
not pose a threat to the public interest of the State of
Louisiana or to the effective regulation and control of gaming,
or create or enhance the dangers of unsuitable, unfair or illegal
practices, methods and activities in the conduct of gaming or the
carrying on of business and financial arrangements in connection
therewith. The Louisiana Gaming Control Board cannot grant a
license unless it finds that: (i) the applicant is capable of
conducting gaming operations, which means that the applicant can
demonstrate the capability, either through training, education,
business experience, or a combination of the above, to operate a
gaming casino; (ii) the proposed financing of the riverboat and
the gaming operation is adequate for the nature of the proposed
operation and from a source suitable and acceptable to the
Louisiana Gaming Control Board; (iii) the applicant demonstrates
a proven ability to operate a vessel of comparable size, capacity
and complexity to the proposed riverboat so as to ensure the
safety of its passengers; (iv) the applicant submits a detailed
plan of design of the riverboat in its application for a license;
(v) the applicant designates the docking facilities to be used by
the riverboat; (vi) the applicant shows adequate financial
ability to construct and maintain a riverboat; and (vii) the
applicant has a good faith plan to recruit, train and upgrade
minorities in all employment classifications.
Certain persons affiliated with a riverboat gaming licensee,
including directors and officers of the licensee, directors and
officers of any holding company of the licensee involved in
gaming operations, persons holding 5% or greater interests in the
licensee, and persons exercising influence over a licensee,
including key gaming employees ("Affiliated Gaming Persons"), are
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subject to the application and suitability requirements of the
Riverboat Act and the rules and regulations adopted pursuant
thereto ("Louisiana Gaming Law") and approval by the Louisiana
Gaming Control Board.
The Louisiana Gaming Law specifies certain restrictions and
conditions relating to the operation of riverboat gaming,
including the following: (i) gaming is not permitted while a
riverboat is docked, other than the forty-five minutes between
excursions, and during times when dangerous weather or water
conditions exist; (ii) each round-trip riverboat cruise may not
be less than three nor more than eight hours in duration, subject
to specified exceptions; (iii) agents of the Louisiana Gaming
Control Board and the Louisiana Enforcement Division are
permitted on board at any time during gaming operations;
(iv) gaming devices, equipment and supplies may only be purchased
or leased from permitted suppliers; (v) gaming may only take
place in the designated gaming area while the riverboat is upon a
designated river or waterway; (vi) gaming equipment may not be
possessed, maintained or exhibited by any person on a riverboat
except in the specifically designated gaming area, or a secure
area used for inspection, repair or storage of such equipment;
(vii) wagers may be received only from a person present on a
licensed riverboat; (viii) persons under 21 are not permitted in
designated gaming areas; (ix) except for slot machine play,
wagers may be made only with tokens, chips or electronic cards
purchased from the licensee aboard a riverboat; (x) licensees may
only use docking facilities and routes for which they are
licensed and may only board and discharge passengers at the
riverboat's licensed berth; (xi) licensees must have adequate
protection and indemnity insurance; (xii) licensees must have all
necessary Federal and state licenses, certificates and other
regulatory approvals prior to operating a riverboat; and
(xiii) gaming may only be conducted in accordance with the terms
of the license and the Louisiana Gaming Law.
An initial license to conduct riverboat gaming operations is
valid for a term of five years, with annual renewals thereafter.
A subsidiary of the Company was issued an initial operator's
license by the Louisiana Enforcement Division for the Players
Lake Charles Riverboat on December 6, 1993. Another subsidiary of
the Company holds an operator's license for the Star Riverboat
(which was acquired by the Company in 1995) which was issued on
August 9, 1993. The Louisiana Gaming Law provides that a renewal
application for each one year period succeeding the initial five
year term of the operator's license must be made to the Louisiana
Enforcement Division. The application for renewal consists of a
statement under oath of any and all changes in information,
including financial information, provided in the previous
application. The Louisiana Gaming Control Board conditionally
renewed the Star Riverboat license on July 21, 1998 and the
Players Lake Charles Riverboat license on October 20, 1998, in
each case subject to full suitability investigation and approval.
As part of that investigation, the Louisiana Gaming Control
Board is conducting an investigation of the suitability of the
Company in light of the Shetler and Edwards cases. If the
Louisiana Gaming Control Board determines to do so, it has the
authority to take disciplinary action against the Company and
seek sanctions, including license revocation. While the Company
is prepared to vigorously defend any disciplinary action that may
be commenced, no assurances can be given that the Louisiana
Gaming Control Board will not take disciplinary action against
the Company or impose sanctions upon the Company, either before
or after the Jackpot merger is approved, or that the Louisiana
Gaming Control Board will approve the Jackpot merger.
The transfer of a license or permit is prohibited and the
transfer of an interest in a license or permit is prohibited
absent prior approval. The sale, purchase, assignment, transfer,
pledge or other hypothecation, lease, disposition or acquisition
(a "Transfer") by any person of securities which represent 5% or
more of the total outstanding shares issued by a corporation that
holds a license is subject to prior approval by the Louisiana
Gaming Control Board. A security issued by a corporation that
holds a license must generally disclose these restrictions. Prior
approval of the Louisiana Gaming Control Board is required for
the Transfer of any ownership interest of 5% or more in any
non-corporate licensee or for the Transfer of any "economic
interest" of 5% or more in any licensee or Affiliated Gaming
Person. An "economic interest" is defined for purposes of a
Transfer as any interest whereby a person receives or is entitled
to receive, by agreement or otherwise, a profit, gain, thing of
value, loan, credit, security interest, ownership interest or
other economic benefit.
Riverboat gaming licensees and their Affiliated Gaming
Persons are required to notify the Louisiana Gaming Control Board
60 days prior to the receipt by any such persons of any loans or
extensions of credit, or modifications thereof on behalf of the
licensees. The Louisiana Gaming Control Board is required to
investigate the reported loan, extension of credit or
modification thereof and to determine whether an exemption exists
from the requirement of prior written approval and, if no
exclusion applies, to either approve or disapprove the
transaction. If disapproved, the transaction cannot be entered
into by the licensee or Affiliated Gaming Person. The Company is
an Affiliated Gaming Person of its Louisiana subsidiaries that
are the licensees of the Players Lake Charles Riverboat and the
Star Riverboat.
Fees for conducting gaming activities on a riverboat
include: (i) $50,000 per riverboat for the first year of
operation and $100,000 per year per riverboat thereafter; (ii) 18
1/2% of net gaming proceeds; plus (iii) certain investigative
costs.
The Company reached an agreement with the City of Lake
Charles (the "City") both to settle litigation and to establish a
permanent method of calculating the City admission fee on
Players' riverboats. Under the new agreement, which commenced
March 1, 1998, the payments to the City will be calculated as a
percentage of gaming revenue in lieu of a passenger admission
-9-
fee. In addition, the settlement calls for a payment of
$544,000 per year for ten years. The present value of the fixed
annual payments, including expenses, was accounted for as a one-
time charge of $4.2 million in the fourth quarter of 1998.
In the 1996 Special Session of the Louisiana Legislature,
legislation was enacted providing for local option elections in
November, 1996, on a parish-by-parish basis which gave voters in
communities across the state the opportunity to decide the fate
of certain forms of gaming in their parishes. In Calcasieu
Parish, where the Company's Lake Charles facility is located, the
referendum determined whether VLTs and riverboat gaming would
continue to be permitted. In November, 1996, voters in Calcasieu
Parish voted favorably to permit the continuation of both forms
of gaming. Another election requested by petition in Calcasieu
Parish on the issue of continuation of riverboat gaming cannot be
held for at least three years following an earlier election
concerning that issue.
In the 1996 Special Session, legislation was also enacted
placing a constitutional amendment on the October, 1996, election
ballot to limit the expansion of gaming in Louisiana. In October,
1996, voters favorably passed the constitutional amendment. The
constitutional amendment requires local option elections before
new forms of gaming can be brought into a parish. The measure
also requires a local option referendum before a riverboat can
move into a parish that has not already authorized riverboat
gaming. In the 1997 Regular Session of the Louisiana Legislature,
a law was passed authorizing the operation of slot machines at
three horse racing tracks in Louisiana, including Delta Downs, a
racetrack situated in Calcasieu Parish (the same Parish as the
Company's Lake Charles facility). Under the law, before slot
machines can be operated at Delta Downs both voter approval is
required through a local referendum election in Calcasieu Parish
and the passage of companion legislation by the Louisiana
Legislature to establish the tax rate to be levied on slot
machine revenues. In the Fall of 1997, voters in Calcasieu Parish
voted not to authorize the operation of slot machines at Delta
Downs. In addition, the Louisiana Legislature, in its 1998 Fiscal
Session, failed to pass the required companion tax legislation.
However, the law provides that another local referendum may be
conducted every two years, and companion tax legislation may be
considered in any future session of the Louisiana Legislature.
Missouri Gaming Regulation
In November, 1992, the voters of Missouri approved a
referendum authorizing riverboat gaming in Missouri. In 1993, the
Missouri Legislature enacted legislation which substantially
revised the referendum legislation regarding riverboat gaming and
its regulation (the "Missouri Gaming Act"). The Missouri Gaming
Act established the Missouri Gaming Commission, which has broad
jurisdiction over and supervisory powers concerning gaming
operations conducted under the Missouri Gaming Act. These powers
are far reaching and include the power to limit, proscribe or
effectively rescind the payment of dividends or the repayment of
indebtedness to the Company in certain circumstances, including
any adverse financial condition, default, non-compliance or
insolvency of any subsidiary or the Company.
Following a challenge to legislation authorizing riverboat
casino gaming, a January, 1994, Missouri Supreme Court ruling
created uncertainties regarding the extent to which casino gaming
is constitutional in Missouri. In February, 1994, the Missouri
Legislature passed legislation which permitted voters to amend
the State Constitution to permit legislation reauthorizing
riverboat casino gaming consistent with the State Constitution.
The vote on the proposed State Constitutional amendment was held
in April, 1994, to permit games of chance on riverboat casinos.
In the April, 1994, vote, the State Constitutional amendment was
narrowly defeated. As a result of the Missouri legislature's
actions in February, 1994, several municipalities in Missouri
which had previously approved local ordinances permitting gaming,
including the City of Maryland Heights, resubmitted the local
gaming activities ordinances to the voters in April, 1994, as
well. The Maryland Heights ordinance was approved by municipal
voters in the April, 1994, vote. Subsequently, at the statewide
general election held November 8, 1994, a second proposal to
amend the Missouri Constitution to permit games of chance on
riverboats and floating facilities on the Missouri and
Mississippi Rivers was adopted. As a result thereof, effective
December 8, 1994, reel slot machines and other games of chance
were authorized for use in Missouri casinos.
The Missouri Gaming Act calls for licensure of casino
operators (Class A license), suppliers and gaming-related
occupations. On March 11, 1997, a subsidiary of the Company
received two licenses in Maryland Heights to operate its two
permanently moored riverboat casinos. In addition, the Maryland
Heights Joint Venture was issued four Class A licenses, one for
each of the four riverboat casinos permanently moored at Maryland
Heights, Missouri.
The Missouri Gaming Act provides a maximum loss limit of
$500 per individual player per gaming excursion. Gaming
excursions are required by regulation to be no less than two
hours and no more than four hours in duration. Excursion gaming
boats are required to cruise, unless the Missouri Gaming
Commission determines under applicable criteria to permit gaming
at a continuously docked boat. Such criteria include, among other
items, danger to the boat's passengers because of the location of
the dock or excursion cruising conditions, disruption of
interstate commerce, violation of another state's laws or Federal
law, or possible interference with railway or barge
transportation. On March 11, 1997, the Missouri Gaming Commission
authorized the Company's Maryland Heights casinos to remain
continuously docked at its present Maryland Heights location. In
accordance with Missouri gaming regulations, one of the Company's
two casinos is open for patron boarding at different times than
the other Players casino, so that only one of the Company's
casino is boarding at any given time. Harrah's casinos at the
Maryland Heights facility operate in a similar manner.
-10-
Under the Missouri Gaming Act, gaming is permitted in
Missouri only on the Missouri and Mississippi Rivers. There is no
statewide numerical limit to the number of licenses which may be
granted to permit riverboat casino operations. Under the May,
1994, amendments to the Missouri Gaming Act, any city or county
may be granted more than one license if the "home dock" city or
county has authorized more than one excursion gaming boat.
However, within all cities and counties in Missouri, the Missouri
Gaming Commission has the ultimate responsibility for setting the
number, location and type of licensed boats. Excursion gaming
boats also must be authorized by the local home dock city or
county.
Licensees must establish financial responsibility sufficient
to meet adequately the requirements of the proposed enterprise.
Additionally, the Missouri Gaming Commission's regulations
prohibit withdrawals of capital by, or the making of loans,
advances, or distributions of any type of assets to its owner(s),
in excess of 5% of such entity's accumulated earnings without
Missouri Gaming Commission approval.
The Missouri Gaming Act also requires that the excursion
gaming boat resemble historic Missouri riverboats, encourages use
of Missouri resources, goods and services in the operation of the
boat, and requires that the boat provide for non-gaming areas,
food service and a Missouri theme gift shop. There is no size
limit on Missouri gaming boats and no minimum or maximum space
prescribed for gaming areas.
The Missouri Gaming Act directly subjects the gaming
enterprises to various Missouri taxes. An admission fee of $2.00
per ticket per excursion must be paid to the Missouri Gaming
Commission. Licensees may charge any admission fee they desire.
Gaming enterprises in Missouri are also subject to an "adjusted
gross receipts tax" equal to 20% of the gross receipts from
licensed gaming games and devices less winnings paid to wagerers.
Licensees are subject to all other income taxes, sales taxes,
earnings taxes, use taxes, property taxes or any other tax or fee
levied by local, state or Federal governments.
Transfer of a Class A gaming license (the type of license
obtained in connection with the operation of the Maryland Heights
facility) is not permitted without approval of the Missouri
Gaming Commission, nor may such interests be pledged as
collateral without the approval of the Missouri Gaming
Commission. No transfer of an interest of 5% or greater, directly
or indirectly, in a publicly traded company holding a Class A
license may occur without notice to the Missouri Gaming
Commission. Additionally, the Missouri Gaming Commission may
require a licensee to maintain cash or cash equivalents, in an
amount sufficient to protect patrons against defaults in gaming
debts owed by the licensee. Application fees are based upon costs
of investigation and approval of licenses. The minimum
nonrefundable application fee is $50,000. Initial Class A
licenses are granted for a term of one year, with one 1-year
renewal. License renewals are thereafter granted for a term of
two years. The annual fee for licensure is $25,000.
On February 23, 1999, the Missouri Gaming Commission renewed
the two riverboat casino licenses of the Company for terms of two
years effective March 11, 1999. The Missouri Gaming Commission is
conducting an investigation of the suitability of the Company in
light of the Shetler and Edwards cases. If the Missouri Gaming
Commission determines to do so, it has the authority to take
disciplinary action against the Company and seek sanctions,
including license revocation. While the Company is prepared to
vigorously defend any disciplinary action that may be commenced,
no assurances can be given that the Missouri Gaming Commission
will not take disciplinary action against the Company or impose
sanctions upon the Company, either before or after the Jackpot
merger is approved, or that the Missouri Gaming Commission will
approve the Jackpot merger.
Kentucky Gaming Regulation
The Company presently owns and operates Players Bluegrass
Downs. Pursuant to the Kentucky statutes governing horse racing,
the Kentucky Racing Commission (the "Racing Commission") has
plenary power to promulgate administrative regulations
prescribing conditions under which all legitimate horse racing
and wagering thereon is conducted. The Racing Commission issues
race track licenses on an annual basis and awards racing dates
subsequent to an annual application required to be filed with the
Racing Commission. The Racing Commission may revoke or suspend a
license if the Racing Commission has reason to believe that any
provision of the Kentucky statutes, administrative regulations,
or conditions established by the Racing Commission has not been
satisfied.
Proposed Texas Gaming Legislation
Since the original Players Lake Charles Riverboat began
operating on December 8, 1993, more than half of its patrons have
come from Texas, with a significant portion coming from the
metropolitan Houston area. Although casino gaming is not
currently permitted in Texas, and the Attorney General of Texas
has issued an opinion that gaming in Texas would require an
amendment to the State's Constitution, the Texas legislature has
considered various proposals to authorize casino gaming. To date,
no bill authorizing casino gaming has passed. Bills may be
introduced from time to time, however, whenever the legislature
is in session. Since the Texas legislature (which meets every two
years in odd-numbered years) did not pass legislation to amend
the Texas State Constitution during the 1997 regular session, any
such legislation will have to await the next regular session in
1999, or a special session of the legislature. Special sessions
can only be called by the Governor for matters that were pending
in the regular legislative session. Governor George Bush has
-11-
taken a public position against legalized casino gaming in Texas.
A constitutional amendment requires a two-thirds vote of those
present and voting in each house of the Texas state legislature
and approval by the electorate at a referendum.
National Gambling Impact Study Commission
In August, 1996, President Clinton signed legislation
creating the National Gambling Impact Study Commission (the
"NGISC") to study the economic and social impact of all forms of
gambling in the United States. The NGISC is composed of both
individuals who are associated with the gaming industry and
individuals opposed to it. The NGISC commenced its hearings in
June, 1997, and issued its report in June, 1999. The recommenda-
tions from this report, which are non-binding, were generally
considered neutral with respect to their impact on gaming. However,
it is possible that legislation could develop as a result of this
report which, if enacted into law, could adversely impact the
gaming industry and have a material adverse effect on the Company's
business or results of operations.
U.S. Coast Guard
Each cruising riverboat also is regulated by the U.S. Coast
Guard, whose regulations affect boat design and stipulate
on-board facilities, equipment and personnel (including
requirements that each vessel be operated by a minimum complement
of licensed personnel) in addition to restricting the number of
persons who can be aboard the boat at any one time. All vessels
operated by the Company must hold, among other things, a valid
Certificate of Inspection and a valid Certificate of
Documentation. Loss of either Certificate would preclude a
vessel's use as an operating riverboat. Cruising vessels such as
those operated by the Company must be inspected every five years
at a U.S. Coast Guard-approved dry-dock facility, which could
cause a temporary loss of service that could last one month or
longer, unless the U.S. Coast Guard determines that an
alternative to drydocking is acceptable. The next such inspection
is scheduled to occur in the Fall of 2000 for the Metropolis
Riverboat, the Fall of 2000 for the Players Lake Charles
Riverboat and the Fall of 2003 for the Lake Charles Star
Riverboat. Less stringent rules apply to permanently moored
vessels such as the dockside barges used by the Company in
Maryland Heights, Missouri. The Company believes that these
regulations, and the requirements of operating and managing
cruising gaming vessels generally, make it more difficult to
conduct riverboat gaming than to operate land-based casinos.
Employees of navigable vessels, even those who have nothing
to do with the actual operation of the vessel, such as dealers,
cocktail hostesses and security personnel, may be able to claim
the benefit of seamen status under the Jones Act, 46 U.S.C. 688
et seq., which, among other things, provides such employees with
a claim for negligence against the employer for injuries
sustained in the course of their employment and exempts those
employees from state limits on worker's compensation awards. The
Company believes that it has adequate insurance to cover employee
claims.
Shipping Act of 1916
In order for the Company's vessels to have United States
flag registry, the Company must maintain "United States
citizenship" as defined in the Shipping Act of 1916, as amended
(the "Shipping Act"), and other applicable statutes. A
corporation operating any vessel between points within the United
States, such as the Company, is not considered a United States
citizen unless, among other things, United States citizens own
75% of its outstanding capital stock.
Company Repurchase Rights with Respect to Company Securities
There are various regulations on the ownership of the
Company's common stock. The Company's articles of incorporation
provide that if any governmental commission, regulatory
authority, entity, agency or instrumentality (collectively, an
"Authority") having jurisdiction over the Company or any
affiliate of the Company or that has granted a license,
certificate of authority, franchise or similar approval
(collectively, a "License") to the Company or any affiliate of
the Company, orders or requires any stockholder to divest any or
all of the shares of the Company common stock (or options,
convertible securities or warrants to purchase common stock
(collectively, together with common stock, "Securities")) owned
by such stockholder (a "Divestiture Order") and the stockholder
fails to do so by the date required by the Divestiture Order
(unless the Divestiture Order is stayed), The Company will have
the right to acquire the Securities from the stockholder that the
stockholder failed to divest as required by such Divestiture
Order. If, after reasonable notice and an opportunity for
affected parties to be heard, any Authority determines that
continued ownership of the Company's Securities by any
stockholder shall be grounds for the revocation, cancellation,
non-renewal, restriction or withholding of any License granted to
or applied for by the Company or any affiliate of the Company, or
shall be grounds for limiting the activities of such entity, such
stockholder shall divest the Securities that provide the basis
for such determination, and if such stockholder fails to divest
Securities within 10 days after the date the Authority's
determination becomes effective (unless the determination is
stayed), the Company shall have the right to acquire such
Securities from the stockholder. If the Company determines that
persons who are not citizens of the United States as determined
under the Shipping Act or other applicable statutes own more than
25% of the Company outstanding common stock, the Company may
require the foreign citizen(s) who most recently acquired the
shares that bring total foreign citizen ownership to more than
25% of the outstanding common stock to divest the excess shares
to persons who are United States citizens. If the foreign
citizen(s) so directed fail to divest the excess shares to United
States citizens within 30 days after the date on which the
-12-
Company gives a written notice to the foreign citizen(s) to
divest the excess shares, the Company shall have the right to
acquire the shares that the foreign citizen(s) failed to divest
as required by the Company's notice.
Whenever the Company has the right to acquire Securities
from a stockholder pursuant to the provisions described in the
preceding paragraph, the Company will pay the stockholder $.10
per share or such higher price as may be required by applicable
legal requirements. Some state gaming regulations require a
purchase price equal to the fair market value of the Securities
under certain circumstances described above. If there is no other
applicable legal requirement, any amount payable to the
stockholder in excess of $.10 per share will be paid in five
equal annual installments with interest at the lower of the prime
rate or the LIBOR rate, as published from time to time in the
Wall Street Journal.
Forward Looking Information
Certain information included in this section and elsewhere
in this Annual Report on Form 10-K 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, plans for future
riverboat hull inspections, I-10 road construction in Lake
Charles, dockside gaming in Illinois, the bill-to-meter
initiative in Missouri, regulatory approval of the Patron Fee Buy-
Out Agreements, 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.
See Item 7: "Management's Discussion and Analysis of Financial
Condition and Results of Operation". 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
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, those
relating to 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 state and local laws and regulations,
development and construction activities, leverage and debt
service requirements (including sensitivity to fluctuation in
interest rates), general economic conditions, the results of
various gaming regulatory authorities' investigations as to the
Company's suitability for continued licensure, the U.S. Coast
Guard's acceptance of underwater hull inspections as an
alternative to dry docking and inspection, changes in federal and
state tax laws, the disruption to Lake Charles operations caused
by road construction, the approval of bill-to-meter initiative in
Missouri, dockside gaming in Illinois, regulatory approval of the
Patron Fee Buy-Out Agreements, 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 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.
-13-
Item 2. Properties
_______ __________
Metropolis, Illinois
The Company leases its docking facilities in Metropolis,
which cover 1,810 linear feet of riverfront, from the city of
Metropolis pursuant to a 20-year lease with a 20-year renewal
option at an annual rent of approximately $7,000. Under a
separate 20-year lease with the city of Metropolis, the Company
leases additional riverfront property immediately adjacent to its
docking facilities for surface parking at an annual rate of
$2,500. The Company also owns several parcels of land in
Metropolis, some with buildings, aggregating approximately eight
acres, and leases an additional two acres. The owned or leased
area is used primarily for customer parking or as office space.
Some of the land is being held for development, and some of the
current parking area may be developed, in which event the Company
believes suitable replacement parking space could be obtained.
The Ohio River occasionally overflows its banks at the
Metropolis facility, most often during late winter and early
spring. Such flooding may cover a portion of the Company's
closest parking location, although the Company believes that it
still has adequate available parking within reasonable walking
distance of its landing during typical flooding periods. If
flooding is especially severe, it may be impractical for
passengers to board the riverboat at its normal dock site. The
Company has developed an emergency plan that would permit gaming
activities to continue in such circumstances. Any use of an
alternate landing because of flooding may result in some loss of
service.
Lake Charles, Louisiana
On August 16, 1995, the Company entered into an agreement
with the Beeber Corporation ("Beeber") to purchase the former
Players Hotel and approximately three acres of real estate
comprising the landside facility for the Players Lake Charles
Riverboat and the Star Riverboat. Under this agreement, as
amended, the Company paid a total consideration of $6.7 million.
As additional consideration, the Company was required to continue
making certain payments to Beeber and a third party, which
payments were related to a lease agreement dated May 19, 1993
between the Company and Beeber, as amended. In furtherance of
this arrangement, the Company and such parties entered into an
agreement, dated July 27, 1995, whereby the Company became
obligated to pay a total of $2.95 for each passenger who
patronizes the Company's Lake Charles riverboats, subject to
certain conditions (the "Patron Fee"). Subsequently, rights to
receive a portion of the Patron Fee were assigned to certain
individuals, with the Company's permission and in accordance with
the provisions of the said agreement.
Pursuant to the terms of two agreements (the "Patron Fee Buy-
Out Agreements"), each dated as of March 1, 1999, with Beeber
(together with certain individuals affiliated with Beeber) and
Karl Boellert ("Boellert"), respectively, the Company has agreed
to acquire those portions of the Patron Fee owned by Beeber and
Boellert, such portions together comprising approximately 48% of
the Company's total Patron Fee payment obligation. Under the
Patron Fee Buy-Out Agreements, the Company is obligated to pay
approximately $16.8 million (subject to adjustment as provided in
the respective Patron Fee Buy-Out Agreements), in the aggregate,
for the portions of the Patron Fee being purchased. The Company's
obligations under the Patron Fee Buy-Out Agreements are
contingent upon receipt of regulatory approval for the
transactions described therein. Each of Beeber, Boellert and the
individuals who are parties to the Patron Fee Buy-Out Agreements
is required to deliver to the Company a release and non-compete
agreement at the time of closing of the above-described
transactions. Upon closing, the Patron Fee will decrease to
approximately $1.53 for each passenger who patronizes the
Company's Lake Charles riverboats.
In January, 1998, the Company acquired a 269-room hotel
formerly operated as the Lake Charles Holiday Inn. The hotel,
which is located adjacent to the Company's Lake Charles property,
is not operated as a Holiday Inn-franchised hotel. As a result
of this acquisition and in response to a need for additional
parking, the Company recently demolished the former Players Hotel
to accommodate increased surface parking.
Parking facilities at the Lake Charles facility consist of a
500 space on-site multi-story parking garage, a 270-space surface
parking area and several off-site surface parking facilities that
provide approximately 900 additional automobile and bus parking
spaces. Construction of 250 additional paved surface parking
spaces on the site of the former Players Hotel was recently
completed.
Maryland Heights, Missouri
On November 2, 1995, the Company entered into the Maryland
Heights joint venture agreement with Harrah's to form a joint
venture and co-develop the Maryland Heights facility on an
approximately 215 acre site in Maryland Heights, Missouri. An
affiliate of Harrah's owns the property underlying the Maryland
Heights facility. The Maryland Heights joint venture agreement
provides for joint decision making with respect to major
decisions for the Maryland Heights joint venture, such as matters
relating to the approval of the annual operating budgets and
annual plans, the incurrence of debt beyond amounts set forth in
the operating budget and the construction of improvements to the
Maryland Heights joint venture. Each of the Company and Harrah's
have an eighty (80) year lease with the Harrah's affiliate for
the property underlying their respective casinos. The leases for
the Company and Harrah's are substantially identical, except that
the Company pays rent and Harrah's does not pay rent. The
Company's rent consists of a percentage rent equal to the
-14-
following specified percentages multiplied by the relevant
specified incremental levels of annual net gaming revenues at the
Company's Maryland Heights casinos: 2% of annual net gaming
revenue up to $50 million, 3% of annual net gaming revenue
between $50 million and $100 million, and 4% of annual net gaming
revenue in excess of $100 million. Pursuant to the management
agreement, a Harrah's affiliate manages the Maryland Heights
hotel and the Maryland Heights entertainment facility except for
the Company's specialty restaurant and retail operations.
Bluegrass Downs, Kentucky
In November, 1993, the Company acquired Players Bluegrass
Downs located in Paducah, Kentucky, in anticipation that the
Kentucky legislature would enact legislation to authorize
casino-type gaming, such as slot machines and table games, at
licensed racetracks. If any legislation is adopted permitting
additional forms of gaming at racetracks, the Company will
consider development of its track into a facility that would
offer all permitted forms of gaming. To date, there has been no
such legislation created, and there can be no assurance any such
legislation will be enacted. The racetrack is approximately ten
miles from the Company's Metropolis facility. The next closest
Kentucky racetrack to the Metropolis facility is Ellis Park,
which is approximately 100 miles from each of Paducah and
Metropolis. Players Bluegrass Downs consists of approximately
69.6 acres. The Company owns 58.3 acres and leases the remaining
11.3 acres. Players Bluegrass Downs includes a 5/8 mile oval
harness racetrack, an enclosed 17,000 square foot clubhouse
housing dining and wagering facilities, administrative areas,
barns and related buildings that can accommodate 725 horses, and
a parking area for more than 1,400 cars.
-15-
Item 3. Legal Proceedings
_______ _________________
Poulos, Ahern and Schreier 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 Rico 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.
On or about October 27, 1995, the Company was served with a
purported class action captioned Schreier, et. al. v. Players
International, et al. in the United States District Court for the
District of Nevada, which is essentially identical to the Poulos
and Ahern litigation, except for certain variations in the
definition of the purported class. The matter has also been
consolidated with the Poulos and Ahern litigation.
These matters are currently in the discovery stage, after
which substantive motions for dismissal will be filed by the
defendants. The Company believes that the plaintiffs' 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.
J.A. Miller, et. al. v. Showboat Star Partnership, et al.
Showboat Star Partnership, a subsidiary of the Company, was
served with a petition captioned J.A. Miller, et. al. v. Showboat
Star Partnership, et. al. on or about February 27, 1997, Docket
No. 10-14544, in the 38th Judicial District Court, Parish of
Cameron, State of Louisiana. The plaintiffs, a group of oyster
fishermen, allege in the petition that on or about February 2,
1997, the Star Riverboat discharged raw sewage and other
hazardous and toxic substances from the bilge of the vessel into
Lake Charles. Plaintiffs further allege that, since 1994, the
Star Riverboat and the Players Lake Charles Riverboat have
discharged raw sewage and other hazardous and toxic substances
into Lake Charles which is part of the Calcasieu Estuary.
Plaintiffs claim that alleged acts of the Company have resulted
in great damage to natural oyster beds forty-three (43) miles
down river in Cameron Parish, resulting in oysters situated
thereon to become dangerous and unfit for human consumption
and/or preventing the oyster fishermen from harvesting oysters.
The oyster fishermen are claiming both compensatory and punitive
damages. The matter is in the early stages of litigation. The
Company has filed several motions in response to the petition
including motions to dismiss the action. The Company has also
requested certain discovery in connection with the motions. The
Company intends to vigorously defend this action.
Douglas Joseph McNeely v. Showboat Star Partnership, et al.
The Company's Louisiana operating subsidiaries and several
other casino operators (collectively, the "Casino Operators")
have been named in a lawsuit filed on August 13, 1997 by Douglas
J. McNeely in U.S. District Court for the Eastern District of
Louisiana (Civil Action No. 97-2518(B)(4)). In his original and
amended complaints, Mr. McNeely alleges that (1) for at least
approximately 20 years, he has suffered from a psychological
condition that includes "compulsive gambling" as one of its
manifestations, (2) the Casino Operators knew of such condition
after August 15, 1996, (3) after August 15, 1996, the Casino
Operators exploited such condition by enticing and allowing him
to gamble in their casinos, and (4) as a consequence of the
foregoing, Mr. McNeely suffered significant financial and
emotional damages, including direct gambling losses, business
losses, the collapse of his marriage and an unfavorable result in
the distribution of the marital estate in the attendant divorce
action. The Company disputes many of the aspects of Mr.
McNeely's complaint, both as to the facts alleged and the amount
of damages allegedly incurred by Mr. McNeely. In addition, the
Company has raised as a defense Mr. McNeely's failure to follow
the statutory "self-exclusion" process available by the filing of
an affidavit with the Louisiana gaming regulators (La.R.S.
27:60). The Company intends to vigorously defend this action.
Item 4. Submission of Matters to a Vote of Security Holders
_______ ___________________________________________________
During the fourth quarter ended March 31, 1999, no matter
was submitted to a vote of the Company's stockholders.
-16-
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
______ _____________________________________________________
The Company's Common Stock is traded on the Nasdaq National
Market under the symbol "PLAY". The following table sets forth
the high and low prices of the Company's Common Stock, as reported
by the Nasdaq National Market, during the periods indicated.
High Low
____ ___
Fiscal 1998
First Quarter $4 -13/16 $2 - 7/8
Second Quarter $4 - 9/16 $2 -21/64
Third Quarter $4 - 5/8 $2 - 7/16
Fourth Quarter $5 - 1/8 $ 3
Fiscal 1999
First Quarter $5 - 3/4 $4 - 3/8
Second Quarter $5 -15/32 $3 - 5/16
Third Quarter $6 - 7/16 $3 - 3/16
Fourth Quarter $6 -57/64 $5 - 3/8
Fiscal 2000
First Quarter (through June
18, 1999) $6 -27/32 $5 -15/16
The last reported sales price of the Common Stock on the Nasdaq
National Market on June 18, 1999, was $6.75 per share.
On that date, there were approximately 473 holders of record of the
Company's Common Stock.
The Company has never declared or paid cash dividends on its
Common Stock. Under the terms of the covenants of its Senior
Notes and its Credit Line, the Company cannot pay cash dividends
to the holders of its Common Stock. The Company presently
intends to retain earnings to finance the operation and expansion
of its business. See "Gaming Regulation" and "Business-Company
Repurchase Rights with Respect to Company Securities" with regard
to certain regulations and provisions affecting the Company's
securities.
-17-
Item 6. Selected Financial Data
_______ ________________________
Selected financial data for, and as of the end of, each of
the years in the five-year period ended March 31, 1999, are
presented below.
1999 1998 1997 1996 1995
________ ________ ________ ________ ________
(dollars in thousands, except per share data)
Operations Data:
Total revenues $331,078 $323,218 $291,210 $291,395 $223,695
Operating income (loss) $ 24,275 $ 26,612 $(56,028) $ 43,871 $ 70,549
Net income (loss) $ 1,570 $ 1,951 $(46,298) $ 22,320 $ 45,755
Per Share Data:
Basic earnings (loss) per
common share $ .05 $ .06 $ (1.56) $ .75 $ 1.68
Diluted earnings (loss) per
common share $ .05 $ .06 $ (1.56) $ .70 $ 1.47
Dividends on common stock $ - $ - $ - $ - $ -
Balance Sheet Data:
Cash, cash equivalents and
marketable securities,net $ 25,687 $ 17,223 $ 20,567 $ 23,247 $ 50,332
Total assets $389,135 $409,587 $421,289 $ 413,432 $223,790
Long term debt, net of
current portion $155,000 $180,541 $187,500 $ 153,000 $ 5,532
Total stockholders' equity $159,812 $157,914 $155,881 $ 193,627 $176,143
Other Data:
Net cash provided by
operating activities $ 43,943 $ 53,265 $ 28,458 $ 20,748 $ 52,104
Net cash used in
investing activities $ 8,565 $ 37,877 $ 73,224 $ 155,054 $ 49,970
Net cash used in (provided
by) financing activities $ 26,914 $ 18,732 $(46,547) $(129,206)$ (7,795)
Capital expenditures $ 9,416 $ 40,216 $ 46,499 $ 147,119 $ 62,419
-18-
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation
_______ _____________________________________________________
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the consolidated results of operations and
financial condition of Players (the "Company") and its
subsidiaries. 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 operated a land-based casino resort in
Mesquite, Nevada (the "Mesquite facility") until June 30, 1997.
The Company also owns and operates a harness horseracing track in
Paducah, Kentucky ("Bluegrass Downs"). Since the Company's
fiscal year ends on March 31, references to the years 1999, 1998,
and 1997, mean the twelve month periods ended March 31, 1999,
March 31, 1998, and March 31, 1997, respectively, unless
otherwise noted.
Agreement and Plan of Merger
____________________________
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. The merger is anticipated to close
in the second half of calendar 1999.
Results of Operations
Financial Highlights
%Increase/(Decrease)
____________________
Years ended March 31, 1999 1998 1997 99 vs. 98 98 vs. 97
_____________________________________________________________________________
(Dollars in thousands, except per share amounts)
Casino Revenues
Metropolis $ 78,177 $ 80,225 $ 76,373 (2.6) 5.0
Lake Charles 144,917 149,099 159,039 (2.8) (6.3)
Maryland Heights 91,341 68,575 3,876 33.2 (c)
Mesquite - 4,438 23,372 (d) (d)
___________________________________________________________________________
$314,435 $302,337 $262,660 4.0 15.1
___________________________________________________________________________
Total Revenues
Metropolis $ 81,146 $ 83,430 $ 79,501 (2.7) 4.9
Lake Charles 153,933 157,102 167,107 (2.0) (6.0)
Maryland Heights 95,114 73,127 4,383 30.1 (c)
Mesquite - 8,700 38,945 (d) (d)
Other 885 859 1,274 3.0 (32.6)
___________________________________________________________________________
$331,078 $323,218 $291,210 2.4 11.0
___________________________________________________________________________
Operating Income (Loss)
Metropolis $ 18,302 $ 22,030 $ 21,619 (16.9) 1.9
Lake Charles 26,075 24,692 25,828 5.6 (4.4)
Maryland Heights (a) 5,896 (4,309) (10,545) 236.8 (c)
Mesquite - (528) (8,073) (d) (d)
Corporate, development,
preopening and other (15,204) (11,691) (18,453) (30.0) 36.6
Loss on demolition of
hotel (6,095) - - - -
Patron fee buy-out
agreements (4,699) - - - -
City of Lake Charles
agreement - (4,153) - - -
Loss on sale of Mesquite - 571 (57,397) (e) (e)
Restructuring charge - - (9,007) - -
____________________________________________________________________________
$ 24,275 $ 26,612 $(56,028) (8.8) 147.5
____________________________________________________________________________
Other Information
Depreciation and
amortization (b) $ 19,699 $ 20,806 $ 21,806 (5.3) (4.6)
Interest expense (net) $ 21,158 $ 23,466 $ 15,761 (9.8) 48.9
Net income (loss) $ 1,570 $ 1,951 $(46,298) 19.5 104.2
Net income (loss) per
share assuming
dilution $ 0.05 $ 0.06 $ (1.56) (16.7) 103.8
-19-
%Increase/(Decrease)
____________________
Years ended March 31, 1999 1998 1997 99 vs. 98 98 vs. 97
____________________________________________________________________________
(Dollars in thousands, except per share amounts)
Operating Margin (operating
income/total revenues)(f)
Metropolis 22.6% 26.4% 27.2% (3.8)pts (0.8)pts
Lake Charles 16.9% 15.7% 15.5% 1.2 pts 0.2 pts
Maryland Heights 6.2% (5.9%) (240.6%) 12.1 pts (c)
Mesquite - (6.1%) (20.7%) (d) (d)
Consolidated 7.3% 8.2% (19.2%) (0.9)pts 27.4 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 $10.7 million, $11.2 million and $1.9 million for
1999, 1998 and 1997, respectively.
(b) Amount excludes the Company's share of the Maryland Heights
joint venture depreciation and amortization of approximately $4.8
million, $4.5 million, and $400,000 for 1999, 1998 and 1997,
respectively, which are included in the joint venture operating
losses as shown above.
(c) The Maryland Heights facility opened on March 11, 1997, and
was operational for less than one month in 1997.
(d) The Mesquite facility was sold during the fourth quarter of
1997, however, the Company operated the facility until the close
of the transaction on June 30, 1997.
(e) The 1998 amount represents reversals of accruals taken with
respect to the 1997 loss on sale of Mesquite.
(f) The "% Increase/(Decrease)" for operating margin represents
the absolute difference in percentage points (pts) between the
two periods.
Results of Operations
Revenues
Increases in casino and total revenues in 1999 as compared
to 1998 resulted from substantial revenue growth at the Company's
Maryland Heights facility. Revenue increases from this facility
more than offset year-to-year decreases in revenues at the
Company's Metropolis and Lake Charles facilities and the absence
of any revenues from Mesquite after the sale/transfer of the
facility on June 30, 1997.
The revenue decrease in 1999 as compared to 1998 at the
Metropolis facility was a result of lower table games play due in
part to tighter credit issuance standards. This decrease was
partially offset by increased year-over-year slot win.
Competition for Metropolis customers has also intensified during
1999, contributing to revenue decreases.
The revenue decrease experienced at the Lake Charles
facility during 1999 was primarily a result of lost patronage due
to U.S. Interstate 10 ("I-10") road construction. The
construction has resulted in lanes of I-10 being closed for
periods of time, although the Company has been advised that,
whenever possible, one eastbound lane and one westbound lane will
remain open, permitting access to and from the casino. Traffic
delays and inconvenience caused by the road construction have
negatively impacted patronage and resulting revenues at the
facility. The first phase of I-10 road construction has been
completed and the second phase is expected to be completed by
October 1, 1999. In addition, 1999 revenues were impacted by
severe weather during the second quarter of 1999.
The significant revenue increase at the Maryland Heights
facility in 1999 as compared to 1998 was due to continued growth
in the St. Louis gaming market. Year-over-year growth, from 1998
to 1999, was approximately 12% for the overall St. Louis gaming
market and approximately 33% for the Company's facility. The
facility also benefited throughout 1999 from technology, approved
by the Missouri Gaming Commission in March, 1998, that allows
customers to purchase gaming tokens directly at the slot machine
rather than requiring them to purchase gaming tokens from a slot
attendant, thereby reducing customer wait time and increasing
slot play while still allowing accurate tracking of the $500 per
cruise loss limitation.
Total food and beverage ("F&B") revenues have decreased each
year, over the three-year period, as a result of the sale of the
Mesquite facility which was partially offset by F&B revenues
generated from the opening of the Maryland Heights facility. F&B
revenues were approximately $6.5 million, $1.6 million and $0 in
Mesquite in 1997, 1998 and 1999, respectively, while in Maryland
Heights, F&B revenues were approximately $260,000, $3.3 million
and $3.0 million in 1997, 1998 and 1999, respectively.
-20-
Increases in casino and total revenues in 1998 as compared
to 1997 resulted primarily from the opening of the Company's
Maryland Heights facility in March, 1997. Revenues from this
facility more than offset decreases experienced at the Company's
Lake Charles facility and the absence of a full year of revenues
from the Mesquite facility.
The year over year increase in revenues at the Metropolis
facility was due to the new dining and entertainment complex
which was placed in service during December, 1997, the mild
winter experienced in 1998, and the absence of flooding which
adversely impacted Metropolis results in March, 1997.
In Lake Charles, the Company experienced year over year
revenue decreases from 1998 as compared to 1997, due to the
opening of a second riverboat by its primary Lake Charles
competitor in July, 1996, bringing the total number of riverboats
in the Lake Charles market to four. In addition, the Company
significantly curtailed its bus programs at the Lake Charles
facility in the last quarter of 1998 to eliminate programs which
did not contribute to operating income. Hotel revenues increased
in the last quarter of 1998 due to the Company's acquisition of
the former Lake Charles Holiday Inn.
The Maryland Heights facility opened on March 11, 1997, and
contributed revenues for three weeks in 1997 versus an entire
year in 1998. The mild winter in 1998 and the continued growth
of the St. Louis gaming market have resulted in sequential
quarterly increases in revenues.
The Mesquite facility operated for three months in 1998
prior to its sale on June 30, 1997, compared to an entire year in
1997.
Operating Income (Loss)
Decreases in total operating income in 1999 as compared to
1998 were attributable to decreases in operating income at the
Metropolis facility, a loss related to the demolition of the
former Players Hotel in Lake Charles, a charge relating to the
anticipated buy-out of a portion of the Lake Charles per Patron
Fee payment obligation (as defined and explained below) and an
increase in corporate expenses primarily due to merger and
acquisition ("M & A") related expenses. The effect of these
items was partially offset by improved operating performance in
Maryland Heights and Lake Charles in 1999 as compared to 1998.
The decline in operating income at the Metropolis facility
in 1999 versus 1998 was a result of increased operating
expenditures necessary to prevent further revenue erosion in
light of increased competition. In addition, gaming taxes paid
by the facility were higher in 1999 due to a new graduated
wagering tax, which became effective January 1, 1998. For 1999,
the Company's effective tax rate was 20.9% as compared to the pre-
January, 1998 flat rate of 20%.
The increase in operating income experienced at the Lake
Charles facility during 1999 was a result of operating expense
reductions despite an increase in the Lake Charles city gaming
tax. Lake Charles operating income excludes the effect of
certain one-time charges taken in 1999 and 1998, as noted above
and described below.
During the fourth quarter of 1999, the former Players Hotel
located in Lake Charles was demolished to make way for a 250
space surface parking lot. This resulted in a $6.1 million
charge to earnings which represented the net book value of the
hotel.
In August 1995, the Company acquired the former Players
Hotel in Lake Charles for $6.7 million plus future payments based
on the number of passengers boarding the riverboat casinos
contiguous to it over the ensuing 28 years (the "Patron Fee").
The estimated future payments were discounted at 11% and recorded
at their net present value of $25.6 million (the "Payment
Obligation"). Actual annual payments in excess of the
amortization of the net present value of the Payment Obligation
are expensed as incurred. On March 1, 1999, the Company entered
into agreements (the "Patron Fee Buy-Out Agreements") with two of
the parties receiving approximately 48% of the Patron Fee. The
Company will terminate its obligation to make future Patron Fee
payments to these parties through a one-time lump sum payment.
The Payment Obligation related to the Patron Fee Buy-Out
Agreements was $12.1 million. Under the Patron Fee Buy-Out
Agreements, the Company is obligated to pay $16.8 million in the
aggregate, subject to adjustments. The excess of the payment
amount over the proportionate Payment Obligation approximates
$4.7 million, and has been charged to earnings in 1999.
On March 1, 1998, the Company reached an agreement with the
City of Lake Charles (the "City") both to settle litigation and
to establish a permanent method of calculating the City admission
fee on Players' riverboats. Under the new agreement, the
admission fee payments to the City will be calculated as a
percentage of gaming revenue in lieu of a passenger admission
fee. In addition, the settlement calls for a payment of $544,000
per year for ten years. The present value of the fixed annual
payments, including expenses, was accounted for as a one-time
charge of $4.2 million in the fourth quarter of 1998.
-21-
The Maryland Heights facility's operating income for 1999
and operating loss for 1998 include the Company's casino and
food and beverage operating results and the Company's 50% share
in the operating losses of the Maryland Heights joint venture.
The year-over-year improvement is primarily due to increased
casino revenue and a reduction in the operating loss of the joint
venture. 1999 and 1998 comparative information is as follows
(dollars in thousands):
1999 1998
____ ____
Players Maryland Heights:
Operating income $16,582 $ 6,903
50% Share of Joint Venture:
Operating loss (10,686) (11,212)
________ ________
Total operating income (loss)(a) $ 5,896 $(4,309)
======== ========
(a) The 1999 and 1998 total operating income (loss) include
depreciation and amortization of approximately $4.1 million
and $3.9 million, respectively, attributable to the Company's
casino and food and beverage operations at Maryland Heights
and approximately $4.8 million and $4.5 million, respectively,
of depreciation and amortization attributable to the Company's
share of the Maryland Heights joint venture.
Increases in operating income in 1998 as compared to 1997,
excluding the loss on the sale of Mesquite and restructuring
charge, were primarily attributable to decreased losses for
Maryland Heights, the absence of operating losses for Mesquite
after June 30, 1997, and a significant reduction in corporate,
development, pre-opening and other expenses.
The Metropolis facility's operating income for 1998 as
compared to 1997 remained stable. Although revenues increased
during the comparable periods, increases in promotional and other
expenses reduced operating margins in 1998 as compared to 1997.
The Lake Charles facility's operating income for 1998 was
$24.7 million as compared to $25.8 million resulting in operating
margins of 15.7% and 15.5%, respectively. The year-over-year
operating margin increase was the result of cost containment
efforts and the elimination of certain marketing programs.
The Maryland Heights facility commenced operations in the
last month of 1997. The operating loss for 1997 included the
first three weeks results of the Company's casino and food and
beverage operations, the first three weeks results of the
Company's 50% share in the operations of the joint venture, pre-
opening costs, and the write-down of land contributed to the
joint venture.
In 1997, the Company entered into a definitive agreement to
sell the assets comprising the Mesquite facility for a total
purchase price of $30.5 million. The agreement was structured to
take place in two closings. The initial closing was completed on
March 18, 1997, at which time the Company received $22.0 million
in cash for the non-gaming property and equipment. The closing
for the gaming and other furniture and equipment of the property
was consummated on June 30, 1997, at which time the Company
received $7.0 million in cash and a two-year promissory note for
$1.5 million. The Company entered into a lease agreement with
the purchaser in which the Company leased the property between
the first and the second closings and absorbed any income or loss
related to the operation of the facility during such period. As
a result of this sale transaction, the Company recorded a pre-tax
loss approximating $57.4 million in 1997.
In 1997, the Company made the decision to significantly
reduce its pursuit of development opportunities in new or
emerging jurisdictions, and concentrate instead on improving its
existing operations. This decision resulted in the sale of
assets used in development activities or held for future
development and the downsizing of corporate personnel engaged in
developmental activities. As a result, a one-time charge of
approximately $9.0 million, consisting of the net loss on
disposal of assets and the cost of employee severance
arrangements, was recorded in 1997.
Corporate, development, pre-opening & other expenses
increased in 1999 as compared to 1998 principally due to M & A
related initiatives. In 1999, M & A related expenses totaled
approximately $3.7 million. In addition, the Company incurred
expenses of approximately $900,000 related to its successful
efforts in conjunction with the "Boat-in-a-Moat" referendum in
Missouri. In 1998 as compared to 1997, corporate, development,
pre-opening and other expenses decreased substantially due to the
absence of development activities in 1998 (approximately $2.0
million of development related expense was incurred in 1997), a
$1.3 million decrease in corporate administrative expenses, the
absence in 1998 of a $2.6 million write-down for the impairment
of Bluegrass Downs, and a difference of $1.3 million in 1998 as
compared to 1997 in the amount of unamortized financing costs
written off.
Effective April 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, ("SFAS 121") Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed. During the fourth quarter of fiscal 1997, the
Company reevaluated its investment in Bluegrass Downs and
committed to a plan to remove from service and replace the
-22-
Metropolis dining and entertainment barge. In accordance with
SFAS 121, impairment losses for Bluegrass Downs and the
Metropolis barge of $2.6 million and $700,000 respectively, were
recorded in 1997.
The decrease in depreciation and amortization expense in
1999 as compared to 1998 was primarily a result of a reduction in
amortization expense. In 1998, $1.3 million in unamortized
financing costs were written off in conjunction with the closing
of a new credit facility. In 1998 as compared to 1997,
depreciation and amortization expense decreased due to the
absence of Mesquite depreciation in 1998 which was partially
offset by a full year of depreciation in Maryland Heights. This
was coupled with a decrease in unamortized financing costs
written off of $1.4 million between the two periods.
Interest Expense (Net)
Interest expense, net of interest income, decreased in 1999
as compared to 1998 due to reductions in the Company's bank
borrowings and average borrowing rate. The lower interest rates
are contained in a new $80 million, five year bank credit
agreement that closed in March, 1998. Interest expense, net of
interest income, increased in 1998 as compared to 1997 due to
additional borrowings to complete the Maryland Heights facility
and to acquire the former Lake Charles Holiday Inn, an increase
in the Company's average borrowing rate, and a decrease in the
amount of capitalized interest. The interest rate increase
resulted from revisions to the Company's bank credit agreement in
December, 1996. There was no capitalized interest in 1999, and
in 1998 and 1997, capitalized interest totaled $381,000 and $6.7
million, respectively.
Effective Income Tax Rate
The effective income tax rate increased in 1999 to 49.6% as
compared to 38% in 1998. This increase is primarily the result
of the non-deductibility of expenses related to the "Boat-in-a-
Moat" referendum, as previously described. In 1997, the Company
recorded a significant loss related to the sale of the Mesquite
facility resulting in a tax benefit of 36%.
Additional Factors Affecting Future Operating Income
Road construction is underway on I-10 near the Company's
Lake Charles facility. The construction has resulted in lanes
of 1-10 being closed for periods of time, although the Company
has been advised that, whenever possible, one eastbound lane and
one westbound lane will remain open, permitting access to and
from the casino. Traffic delays and inconvenience caused by road
construction have negatively impacted patronage to the Company's
facility and may continue to do so through, and perhaps beyond,
the completion of this project. The first phase of I-10 road
construction has been completed, and the second phase is expected
to be completed by October 1, 1999.
On May 25, 1999, the Illinois State Legislature approved a
bill that would allow dockside gaming for all Illinois casinos.
Dockside gaming would, in effect, allow continuous entry and exit
from riverboat casinos and eliminate current cruising
requirements. If approved by the Governor, dockside gaming could
go into effect during the second quarter of fiscal 2000.
On May 15, 1999, the Missouri State Legislature approved a
bill that would permit gaming patrons to play slot machines using
credits received in exchange for currency inserted into slot
machine bill acceptors. Currently, Missouri gaming regulations
require tokens to be dispensed when bills are inserted for play.
The bill has been sent to the Governor for approval. If approved,
this change could go into effect during the second quarter of
fiscal 2000.
Investments and Capital Expenditures
During the fourth quarter of 1999, the Company demolished
the former Players Hotel in Lake Charles. Construction of
approximately 250 additional paved parking spaces on the site of
the former hotel was substantially completed by Memorial Day
weekend, 1999, with the balance of the work to be completed by
the end of June, 1999. The cost of the demolition and the
surface parking lot is estimated to approximate $2.3 million, of
which $312,000 was incurred as of March 31, 1999.
In January, 1998, the Company acquired a 269-room hotel,
formerly operated as the Lake Charles Holiday Inn, for a total
purchase price of approximately $19.2 million.
In December, 1997, the Company opened a new dining and
entertainment barge at the Metropolis facility. The total
project cost, excluding capitalized interest, was approximately
$9.6 million.
In March, 1997, the Company opened its Maryland Heights
facility. The Company's share of the total project cost,
excluding capitalized interest, approximated $141.0 million.
-23-
Capital Resources and Liquidity
The Company's balance sheet at March 31, 1999, as compared
to March 31, 1998, reflects normal maintenance capital
expenditures and a decrease in bank debt funded from cash
provided by operations. The balance sheet at March 31, 1998, as
compared to March 31, 1997, reflects capital expenditures in
Maryland Heights and Metropolis, the acquisition of the former
Lake Charles Holiday Inn, the associated increase in bank debt,
and tax refunds received in 1998 related to the loss on the sale
of Mesquite.
During 1999, cash generated by operations was primarily used
to reduce bank borrowings. The bank credit facility's
outstanding balance on March 31, 1999, and March 31, 1998, was
$5.0 million and $30.0 million, respectively. During 1998, cash
generated by operations, cash from the sale of the Mesquite
facility and the associated tax refund, net bank borrowings, and
equipment financing were the sources of funds for investments in
Maryland Heights, the construction of the new dining and
entertainment facility in Metropolis, and the acquisition of the
former Lake Charles Holiday Inn. In July 1997, the Company
received approximately $7.0 million in cash from the completion
of the sale of the Mesquite facility and $23.8 million from a
Federal income tax refund for the fiscal year ended March 31,
1997.
In March, 1998, the Company closed an $80 million five year
bank credit agreement with Wells Fargo and a group of
participating banks. The terms of this agreement specify current
borrowing rates of 2.10% over LIBOR or 0.60% over the prime rate.
Applicable borrowing rates are based on the Company's financial
performance against bank benchmarks. Maximum borrowing rates
under this agreement are 2.50% over LIBOR or 1.00% over prime.
The Company makes the decision to borrow at either prime or LIBOR-
based rates in view of pricing and flexibility considerations.
The agreement contains covenants that, among other things, place
restrictions on additional indebtedness, dividends, capital
expenditures, and limit share repurchases to $10 million plus 50%
of net income during the term of the facility.
The Company believes that expected cash flow from operations
will be sufficient to meet working capital requirements
(including the buy-out of the per Patron Fee obligation) through
March 31, 2000. Cash requirement needs beyond what is available
from operating cash flow, such as significant capital expenditure
projects, if any, can be met through the Company's $80.0 million
bank credit facility of which $5.0 million was outstanding as of
March 31, 1999. The Company currently has no plans for
significant capital expenditures beyond its normal maintenance
capital expenditures.
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, or RICO 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. 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.
The U.S. Coast Guard regulates each cruising riverboat.
U.S. Coast Guard regulations require that hulls of vessels of the
type being operated by the Company in Lake Charles and Metropolis
be inspected every five years at a U.S. Coast Guard approved dry
docking facility which will cause a temporary loss of service
that could last one month or longer, unless the U.S. Coast Guard
determines that an alternative to dry docking is acceptable. The
next inspections scheduled to occur are in the fall of calendar
2000 for the Metropolis Riverboat, the fall of calendar 2000 for
the Lake Charles Players III Riverboat, and the fall of calendar
2003 for the Lake Charles Star Riverboat. In the fall of
calendar 1998, the Company received approval from the U.S. Coast
Guard to conduct an underwater onsite inspection of the hull of
the Lake Charles Star Riverboat as an alternative to dry docking.
However, after conducting an analysis of the options, the Company
chose dry docking, which lasted approximately one week.
Circumstances and the option to perform an underwater inspection
may differ at the time inspection is required for the Metropolis
Riverboat and the Players III Riverboat. An underwater hull
inspection would likely involve a minimal disruption in
operations, however, no assurance can be given that dry docking
will not be required. If underwater inspection is not approved
-24-
for future inspections and dry docking is necessary, the
resultant loss of service of the respective riverboat could have
a material adverse effect on the Company's results of operations.
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
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 ("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.
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 mid-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 operations and the
financial results thereto. 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 March 31, 1999, the Company had either expended or
committed approximately $550,000 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.
Effects of Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued
Statement on Financial Accounting Standards ("SFAS") No. 131,
Disclosure about Segments of an Enterprise and Related
Information, and was adopted for 1999. The Company presently has
one reportable segment, riverboat casinos. The horse racetrack
facility is not considered to be material to the operations of
the Company. The adoption of SFAS 131 did not affect the
Company's results of operations or financial position.
In April, 1998, the American Institute of Certified Public
Accountants' Accounting Standards Committee issued Statement of
Position No. 98-5, Reporting on the Costs of Start-Up Activities,
which is effective for fiscal years beginning after December 15,
1998. This standard provides guidance on the financial reporting
of start-up activities and organization costs. It requires these
costs to be expensed as incurred. The Company's accounting
policy has always been and will continue to be to expense start-
up and organization costs as incurred; therefore, Statement of
Position 98-5 will not have an effect on the Company's financial
position or results of operations.
Forward Looking Information
Certain information included in this section and elsewhere
in this Annual Report on Form 10-K 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
-25-
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, plans for future
riverboat hull inspections, I-10 road construction in Lake
Charles, dockside gaming in Illinois, the bill-to-meter
initiative in Missouri, regulatory approval of the Patron Fee Buy-
Out Agreements, 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 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, conducting operations at a newly or recently
developed site or in a jurisdiction for which gaming has recently
been permitted, 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, the U.S.
Coast Guard's acceptance of underwater hull inspections as an
alternative to dry docking and inspection, changes in federal and
state tax laws, the disruption to Lake Charles operations caused
by road construction, dockside gaming in Illinois, the approval
of bill-to-meter in Missouri, regulatory approval of the Patron
Fee Buy-Out Agreements, 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 7A. Quantitative and Qualitative Disclosures about Market
Risk
_________ ______________________________________________________
Except for the Company's bank credit agreement, under which
$5.0 million was outstanding at March 31, 1999, all of the
Company's other long-term debt bears interest at fixed rates. At
March 31, 1999, the average interest rate applicable to the bank
credit agreement was 7.29%. An increase of one percentage point
in the average interest rate applicable to the bank credit
agreement outstanding at March 31, 1999, would increase the
Company's annual interest costs by approximately $50,000.
Although the Company manages its short-term cash assets with
a view to maximizing return with minimal risk, the Company does
not invest in market rate sensitive instruments for trading or
other purposes, including so-called derivative securities, and
the Company is not exposed to foreign currency exchange risks or
commodity price risks in its portfolio transactions.
-26-
Item 8. Financial Statements and Supplementary Data
_______ ___________________________________________
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors 28
Consolidated Balance Sheets as of March 31, 1999 and 1998 29
Consolidated Statements of Operations for the Years Ended
March 31, 1999, 1998 and 1997 30
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1999, 1998 and 1997 31
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1999, 1998 and 1997 32
Notes to Consolidated Financial Statements 34
-27-
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Players International, Inc.
We have audited the accompanying consolidated balance sheets
of Players International, Inc. and Subsidiaries as of March 31,
1999 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1999. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Players International, Inc.
and Subsidiaries at March 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the
three years in the period ended March 31, 1999, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
May 19, 1999
-28-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
ASSETS
March 31,
_____________________
1999 1998
_________ _________
Current assets:
Cash and cash equivalents $ 25,687 $ 17,223
Accounts receivable, net of allowance for
doubtful accounts of $461 at March 31,
1999 and $786 at March 31, 1998 1,882 3,559
Inventories 1,164 1,476
Notes receivable 1,500 -
Deferred income tax 3,281 2,010
Income taxes refundable 634 6,580
Prepaid expenses and other current assets 2,081 2,285
__________ _________
Total current assets 36,229 33,133
__________ _________
Property and equipment, net of accumulated
depreciation and amortization of $59,846 at
March 31, 1999 and $44,405 at March 31, 1998 222,437 237,478
_________ _________
Notes receivable - 1,500
_________ _________
Intangibles, net of accumulated amortization of
$4,535 at March 31, 1999 and $3,572
at March 31, 1998 34,344 35,302
_________ _________
Investment in joint venture 91,034 96,587
_________ _________
Other assets 5,091 5,587
_________ _________
Total assets $389,135 $409,587
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 541 $ 2,008
Accounts payable 3,627 4,590
Accrued liabilities 31,197 29,600
Other liabilities 19,555 3,007
________ ________
Total current liabilities 54,920 39,205
________ ________
Deferred income tax 2,959 2,930
_________ _________
Long-term debt, net of current portion 155,000 180,541
_________ _________
Other long-term liabilities 16,444 28,997
_________ _________
Commitments and contingencies (Note 19)
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 at March 31, 1999 and
32,613,498 shares at March 31, 1998 163 163
Additional paid-in capital 132,666 132,338
Treasury stock, at cost; 672,100 shares (7,294) (7,294)
Retained earnings 34,277 32,707
_________ _________
Total stockholders' equity 159,812 157,914
_________ _________
Total liabilities and stockholders' equity $389,135 $409,587
========= =========
The accompanying notes are an integral part of these consolidated statements.
-29-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Years ended March 31,
_____________________________
1999 1998 1997
________ ________ ________
Revenues:
Casino $314,435 $302,337 $262,660
Food and beverage 9,799 11,978 14,139
Hotel 3,042 3,159 6,608
Other 3,802 5,744 7,803
________ ________ ________
331,078 323,218 291,210
________ ________ ________
Costs and expenses:
Casino 142,155 141,755 122,250
Food and beverage 8,426 10,654 14,185
Hotel 1,279 1,208 3,144
Other operating expenses 41,958 41,076 37,895
Selling, general and administrative 59,307 58,531 56,246
Corporate and other non-operating costs 12,499 7,782 9,102
Allocated amounts of joint venture 10,686 11,212 1,934
Patron fee buy-out agreements 4,699 - -
Loss on demolition of hotel 6,095 - -
City of Lake Charles agreement - 4,153 -
Loss on sale of Mesquite property - (571) 57,397
Restructuring charge - - 9,007
Impairment and write-down of assets - - 7,357
Pre-opening and gaming development costs - - 6,915
Depreciation and amortization 19,699 20,806 21,806
_______ ________ ________
306,803 296,606 347,238
_______ ________ ________
Income (loss) before other income
(expense) and provision (benefit)
for income taxes 24,275 26,612 (56,028)
_______ ________ _________
Other income (expense):
Interest income 438 651 237
Interest expense (21,596) (24,117) (15,998)
________ ________ _________
(21,158) (23,466) (15,761)
________ ________ ________
Income (loss) before provision (benefit)
for income taxes 3,117 3,146 (71,789)
Provision (benefit) for income taxes 1,547 1,195 (25,491)
_______ _______ __________
Net income (loss) $ 1,570 $ 1,951 $ (46,298)
======= ======= ==========
Earnings (loss) per common share
Basic and diluted $0.05 $0.06 ($1.56)
The accompanying notes are an integral part of these consolidated statements.
-30-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED MARCH 31, 1999
(dollars in thousands)
Additional
Common Stock Paid-In Unrealized Treasury Stock Retained
Shares Amount Capital Loss Shares Amount Earnings
______ ______ _______ __________ ________ ______ ________
Balance, March 31,
1996 29,187,480 $149 $123,719 $ (1) 672,100 $7,294 $77,054
Shares issued for
warrants exercised 2,100,000 11 5,590 - - - -
Shares issued
pursuant to
retirement agreement 603,768 3 2,996 - - - -
Expired put options - - (49) - - - -
Change in unrealized
loss on marketable
securities, net of tax - - - 1 - - -
Net loss - - - - - - (46,298)
__________ ____ ________ ________ _______ ______ ________
Balance, March 31,
1997 31,891,248 163 132,256 - 672,100 7,294 30,756
Shares issued under
stock option plans 50,150 - 82 - - - -
Net income - - - - - - 1,951
__________ ____ ________ ________ _______ ______ ________
Balance, March 31,
1998 31,941,398 163 132,338 - 672,100 7,294 32,707
Shares issued under
stock option plans 91,375 - 287 - - - -
Stock option
compensation - - 41 - - - -
Other (36) - - - - - -
Net income - - - - - - 1,570
__________ ____ ________ ________ _______ ______ ________
Balance, March 31,
1999 32,032,737 $163 $132,666 $ - 672,100 $7,294 $34,277
========== ==== ======== ======== ======= ====== =======
The accompanying notes are an integral part of these consolidated statements.
-31-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Years ended March 31,
__________________________
1999 1998 1997
________ _______ ________
Cash flows from operating activities:
Net income (loss) $ 1,570 $ 1,951 $(46,298)
Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 19,699 20,806 21,806
Loss (gain) on disposition of property and
equipment 6,515 (98) 60,321
Impairment and write-down of assets - - 7,357
Equity in allocated amounts of joint venture 4,806 4,497 1,934
City of Lake Charles agreement - 4,000 -
Patron fee buy-out agreements 4,699 - -
Stock issued pursuant to retirement agreements - - 3,000
Deferred income taxes (1,242) 7,455 1,332
Other 413 1,059 924
Changes in assets and liabilities:
Accounts and notes receivable 1,302 (1,476) 3,551
Inventories 312 479 (1,269)
Income taxes payable (refundable) 5,946 20,954 (27,462)
Prepaid expenses and other current assets 204 1,712 975
Other assets (183) 159 1,141
Accounts payable (963) (1,876) (270)
Accrued liabilities 1,597 (4,369) 80
Other liabilities (732) (1,988) 1,336
________ _______ ________
Net cash provided by operating activities 43,943 53,265 28,458
________ ________ ________
Cash flows from investing activities:
Purchases of property and equipment (9,416) (40,216) (46,499)
Proceeds from disposal of property and
equipment 76 7,718 30,749
Proceeds from sale of marketable securities - - 4,401
Investment in joint venture 775 (5,379) (61,875)
________ ________ ________
Net cash used in investing activities (8,565) (37,877) (73,224)
________ ________ ________
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,000 48,000 65,500
Repayments of long-term debt (47,008) (65,356) (22,500)
Debt issuance costs (193) (1,458) (2,051)
Proceeds from exercise of stock options and
warrants 287 82 5,598
________ ________ ________
Net cash provided by (used in) financing
activities (26,914) (18,732) 46,547
________ ________ ________
Net increase (decrease) in cash and
cash equivalents 8,464 (3,344) 1,781
Cash and cash equivalents at beginning of year 17,223 20,567 18,786
_________ ________ ________
Cash and cash equivalents at end of year $ 25,687 $ 17,223 $ 20,567
========= ======== ========
The accompanying notes are an integral part of these consolidated statements.
-32-
PLAYERS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Supplemental cash flow disclosure:
Years ended March 31,
_________________________
1999 1998 1997
_______ _______ _______
Interest paid $21,283 $24,507 $22,637
Income taxes paid 1,835 9 4,159
Debt incurred to purchase land and equipment - 3,905 -
Note receivable on sale of Mesquite property - 1,500 -
Assets acquired through capital leases - 715 -
The accompanying notes are an integral part of these consolidated statements.
-33-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Fiscal Year
Players International, Inc. (the "Company") has a fiscal
year that ends on March 31. References to 1999, 1998 or 1997
refer to the fiscal year ending March 31, 1999, 1998 or 1997
respectively.
Basis of Presentation
The Company, through wholly owned subsidiaries, operates
five riverboat casinos, a horse racetrack facility and, through a
joint venture, a riverboat casino entertainment complex. All
operations include food and beverage facilities and a retail gift
shop. Two of the facilities include hotel operations. During
1997, the majority of the assets comprising the Mesquite, Nevada
facility ("Mesquite") were sold. The remaining assets of that
facility were sold in the first quarter of 1998.
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated. The investment in joint venture is accounted for by
the equity method.
Reclassifications
Certain reclassifications have been made to the consolidated
financial statements as previously presented to conform to the
current classifications.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash includes the minimum cash balances required to be
maintained by certain state gaming commissions, which totaled
approximately $6,030,000 and $3,872,000 at March 31, 1999 and
1998, respectively. Cash equivalents are highly liquid
investments with a maturity of less than three months and are
stated at the lower of cost or market value which approximates
fair value.
Revenues and Promotional Allowances
Casino revenues are the net of gaming wins less losses.
Revenues exclude the retail value of complimentary admissions,
food and beverage, hotel and other items furnished to customers,
which totaled approximately $23,308,000, $24,616,000 and
$27,238,000 for the years ended March 31, 1999, 1998 and 1997,
respectively.
The estimated costs of providing such complimentary services
are included in casino costs and expenses through inter-
department allocations from the department granting the services
as follows:
Years ended March 31,
___________________________
(dollars in thousands)
1999 1998 1997
________ ________ ________
Food and beverage $ 16,353 $ 17,661 $ 20,736
Hotel 945 767 1,281
Other 564 778 1,527
________ ________ ________
$ 17,862 $ 19,206 $ 23,544
======== ======== ========
Pre-opening and Gaming Development Costs
The Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants has issued Statement of
Position ("SOP") 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 requires that the costs of all start-up
activities, as defined in the SOP, be expensed as incurred. The
SOP is effective for fiscal years beginning after December 15,
1998. This SOP will have no effect on the Company because all
pre-opening and development costs are expensed as incurred.
-34-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Credit Risk
Historically, credit losses have not been material to the
results of operations. The financial instruments that subject the
Company to credit risk consist principally of accounts
receivable. Ongoing credit evaluations are performed and
potential credit losses are expensed at the time a receivable is
deemed to be uncollectible.
Inventories
Inventories consisting of food, beverage and retail items
are stated at the lower of cost (first-in, first-out) or market.
Property, Equipment, Depreciation and Amortization
Property and equipment are stated at cost. Improvements and
extraordinary repairs that extend the life of the asset are
capitalized. Maintenance and repairs are expensed as incurred.
Interest expense is capitalized on major construction projects.
Capitalized interest amounted to $381,000 and $6,714,000 in 1998
and 1997, respectively. There was no capitalized interest in
1999.
The Company computes depreciation for property and equipment
using primarily the straight-line method over the estimated
useful life of the assets. Amortization of leasehold and land
improvements is computed using the straight-line method over the
lesser of the estimated useful life or the lease term.
The following estimated useful lives are used:
Riverboats and barges 30 - 40 years
Buildings 20 - 40 years
Furniture, fixtures
and equipment 5 - 7 years
Leasehold and land
improvements Lesser of useful life or lease term
Depreciation expense of $17,868,000, $17,181,000 and
$16,405,000 was recorded for the fiscal years ended March 31,
1999, 1998 and 1997, respectively. Amortization expense amounted
to $1,831,000, $3,625,000 and $5,401,000 in 1999, 1998 and 1997,
respectively.
The Company periodically assesses the recoverability of
property and equipment and evaluates such assets for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Asset
impairment is determined to exist if estimated future cash flows,
undiscounted and without interest charges, are less than the
carrying amount.
Intangibles
Costs in excess of fair value of tangible assets acquired
are recorded as intangibles on the accompanying consolidated
balance sheets and are being amortized using the straight-line
method.
Unamortized Loan Costs
Costs incurred in connection with the issuance of debt are
being amortized using the straight-line method over the term of
the related debt issue or loan.
Earnings Per Share
Basic earnings per share is computed by dividing net income
(loss) by the number of weighted average common shares
outstanding during the year. Diluted earnings per share is
computed by dividing net income (loss) by the number of weighted
average common shares outstanding during the year, including
common stock equivalents (see Note 17).
Recently Issued Accounting Standard
The Financial Accounting Standards Board has issued
Statement on Financial Accounting Standards ("SFAS") No. 131,
Disclosure about Segments of an Enterprise and Related
Information, and was adopted for 1999. The Company presently has
one reportable segment, riverboat casinos. The horse racetrack
facility is not considered to be material to the operations of
the Company. The adoption of SFAS 131 did not affect the
Company's results of operations or financial position.
-35-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 2 - Agreement and Plan of Merger
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. The merger is anticipated to close
in the second half of calendar 1999.
Note 3 - Patron Fee Buy-Out Agreements
In August 1995, the Company acquired the former Players
Hotel in Lake Charles for $6,700,000 plus future payments based
on the number of passengers boarding the riverboat casinos
contiguous to it over the ensuing 28 years (the "Patron Fee").
The estimated future payments were discounted at 11% and recorded
at their net present value of $25,568,000 (the "Payment
Obligation"). Actual annual payments in excess of the
amortization of the net present value of the Payment Obligation
are expensed as incurred. On March 1, 1999, the Company entered
into agreements (the "Patron Fee Buy-Out Agreements") with two of
the parties receiving approximately 48% of the Patron Fee. The
Company will terminate its obligation to make future Patron Fee
payments to these parties through a one-time lump sum payment.
The Payment Obligation related to the Patron Fee Buy-Out
Agreements was $12,060,000. Under the Patron Fee Buy-Out
Agreements, the Company is obligated to pay $16,760,000 in the
aggregate, subject to adjustments. The excess of the payment
amount over the proportionate Payment Obligation approximates
$4,700,000, and has been charged to earnings in 1999.
Note 4 - Accrued Liabilities
A summary of accrued liabilities is as follows:
March 31,
______________________
(dollars in thousands)
1999 1998
_________ _________
Insurance claims $ 1,555 $ 1,404
Accrued payroll and related expenses 9,162 9,814
Accrued interest expense 7,556 7,476
Accrued bonus points 2,544 1,831
Accrued gaming taxes 1,833 2,142
Progressive jackpot liabilities 1,010 843
Other accruals 7,537 6,090
_________ _________
$ 31,197 $ 29,600
========= =========
Note 5 - Other Liabilities
A summary of other liabilities is as follows:
March 31,
______________________
(dollars in thousands)
1999 1998
_________ __________
Patron Fee Buy-Out Agreement obligation
(See Note 3) $ 16,760 $ -
Other 2,795 3,007
_________ __________
$ 19,555 $ 3,007
========= ==========
-36-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 6 - Property and Equipment
A summary of property and equipment is as follows:
March 31,
_______________________
(dollars in thousands)
1999 1998
__________ __________
Land and buildings $ 84,183 $ 91,144
Riverboats and barges 125,922 124,277
Furniture, fixtures and equipment 65,470 60,143
Leasehold and land improvements 4,109 4,089
Construction in progress 2,599 2,230
Less - accumulated depreciation (59,846) (44,405)
__________ __________
$ 222,437 $ 237,478
========== ==========
Included in furniture, fixtures and equipment at March 31,
1999, is $715,000 of computer equipment related to a capital
lease obligation with accumulated depreciation of $267,000.
In 1999, the Company demolished a hotel to accommodate
additional parking. The net book value of the demolished hotel
was approximately $6,095,000.
Note 7 - City of Lake Charles Agreement
On March 1, 1998, the Company reached an agreement with the
City of Lake Charles (the "City") both to settle litigation and
to establish a permanent method of calculating the City admission
fee on Players' riverboats. Under the new agreement, the
admission fee payments to the City will be calculated as a
percentage of gaming revenue in lieu of a passenger admission
fee. In addition, the settlement calls for a payment of $544,000
per year for ten years. The present value of the fixed annual
payments, including expenses, was accounted for as a one-time
charge of $4,153,000 in the fourth quarter of 1998.
Note 8 - Sale of Mesquite Property
In 1997, the Company entered into a definitive agreement to
sell the assets comprising the Mesquite casino resort for a total
purchase price of $30,500,000. The agreement was structured to
take place in two closings. The initial closing was completed on
March 18, 1997, at which time the Company received $22,000,000 in
cash for primarily the non-gaming property and equipment. The
closing for the gaming and other furniture and equipment of the
property was consummated on June 30, 1997, at which time the
Company received $7,000,000 in cash and a two-year promissory
note for $1,500,000.
The Company entered into a lease with the purchaser pursuant
to which the Company leased the property for the period between
the first and second closings and absorbed any income or loss
related to the operation of the facility during such period.
As of March 31, 1997, the Company recorded a loss on the
sale of Mesquite totaling $57,397,000. Such loss included a
write-down to fair value of the assets which were sold in the
second closing. The loss is summarized as follows (dollars in
thousands):
Carrying value of property
and equipment, net $ 84,232
Inventories and other assets 2,208
Expenses related to sale 1,457
Proceeds from sale (30,500)
__________
$ 57,397
==========
During 1998, the estimated remaining liabilities associated
with the Mesquite facility were re-evaluated and reduced by
$571,000.
For the years ended March 31, 1998 and 1997, revenues for
Mesquite were $8,700,000 and $38,945,000, respectively and income
(losses) before other income (expense) were $43,000 and
($65,473,000), respectively, inclusive of the loss on sale.
-37-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 9 - Impairment and Write-down of Assets
During 1997, the Company re-evaluated its investment in its
horse racetrack facility, committed to a plan to remove from
service and replace a barge utilized by one of its riverboat
facilities and wrote-down to fair value land that was contributed
to the joint venture. Impairment losses and the write-down of
assets totaling $7,357,000 were recorded in the year ended March
31, 1997, and are detailed below.
The Company incurred losses operating the racetrack since
its acquisition, and determined that due to flat or declining
demand for both live and simulcast pari-mutuel race wagering that
such operating losses would continue in the future in the absence
of additional forms of gaming at the facility. Due to this and
the continued lack of consensus within the State of Kentucky
governing body relating to the expansion of legalized gaming, the
Company determined that its investment in the racetrack was
impaired. Prior to the impairment, the book value of the
property and equipment of the racetrack was $3,142,000. Based on
an April, 1997 appraisal, the land was valued at $475,000. It is
management's opinion that this represented the approximate fair
value of the property.
The barge at the Metropolis riverboat facility was removed
from service and replaced in 1998. A replacement barge was
purchased in 1997. The book value for the barge prior to the
impairment was $676,000. It was estimated that, net of disposal
costs, the fair value of the barge was zero.
In 1995, Players contributed land with a carrying value of
$4,944,000 to the joint venture. The land was originally
purchased as the potential gaming site for the Company. In the
fourth quarter of 1997, an audit of the joint venture was
completed which included an appraisal of the land determining its
fair market value to be $930,000. This value was used as the
basis for recording the contribution of the land in the joint
venture records. As a result, the Company reduced its investment
in the joint venture by $4,014,000 in the fourth quarter of 1997.
The reduction in value of the land by the joint venture did not
affect the 50% interest the Company holds in the joint venture.
Note 10 - Allocated Amounts of Joint Venture
In 1995, the Company formed a joint venture to co-develop a
riverboat casino complex, which includes a hotel and other
entertainment and dining facilities, with Harrah's in Maryland
Heights, Missouri. The facility opened in March, 1997. The
Company holds a 50% interest in the joint venture. The
investment in the joint venture portion of the project is
accounted for using the equity method of accounting.
Summary condensed financial information for the joint
venture is as follows (dollars in thousands):
Years ended March 31,
____________________________
(unaudited)
1999 1998 1997
________ ________ ________
Net revenues $ 20,570 $ 18,520 $ 952
Depreciation and amortization $ 9,613 $ 8,996 $ 847
Net loss $ 21,372 $ 22,424 $ 3,869
March 31,
__________________________
(unaudited)
1999 1998
_________ _________
Current assets $ 5,127 $ 10,481
Current liabilities $ 4,640 $ 5,948
Total assets $ 188,333 $ 200,917
Partners' capital $ 183,693 $ 194,960
-38-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 11 - Income Taxes
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities are as follows:
Years ended March 31,
_____________________
(dollars in thousands)
1999 1998
________ _________
Deferred tax assets:
Contribution carryforward $ 121 $ -
Excess capital loss over capital gain 253 10
Net operating loss carryforwards 3,732 1,051
Excess intangible assets basis 420 447
Pre-opening, development and other costs 1,068 3,412
Accrued liabilities and prepaid expenses 6,624 5,107
Deferred revenue 223 215
Accrual of directors' option expense 443 428
Alternative minimum tax credits 5,234 2,133
________ _________
Total deferred tax assets 18,118 12,803
Valuation allowance (1,463) (1,149)
_________ _________
Deferred tax assets, net of
valuation allowance 16,655 11,654
Deferred tax liabilities:
Excess tax depreciation (15,930) (11,262)
Prepaid expenses (403) (1,312)
_________ _________
Total deferred tax liabilities (16,333) (12,574)
_________ _________
Net deferred tax assets (liabilities) $ 322 $ (920)
========= =========
The Company has state net operating losses available, which
if fully utilized, would reduce state income taxes payable by
approximately $1,600,000, for various states that will expire
between the years 2004 and 2019. The Company has a Federal net
operating loss available to offset future taxable income of
approximately $5,900,000 that will expire in the year 2019. The
Company has an Alternative Minimum Tax credit carryforward of
approximately $5,234,000, which can be used to reduce future
Federal tax liabilities. This tax credit does not have an
expiration date. The valuation allowance on the deferred tax
assets consists primarily of an allowance for state tax net
operating loss carryforwards and deferred tax assets related to
various states.
Significant components of the provision for (benefit of)
income taxes attributable to operations are as follows:
Years ended March 31,
______________________________
(dollars in thousands)
1999 1998 1997
_________ _________ _________
Current:
Federal $ 2,913 $ (5,441) $ (25,777)
State (124) (819) (1,045)
_________ _________ _________
Total current 2,789 (6,260) (26,822)
Deferred:
Federal (1,301) 6,776 624
State 59 679 707
_________ _________ _________
Total deferred (1,242) 7,455 1,331
_________ _________ _________
Total provision (benefit) $ 1,547 $ 1,195 $ (25,491)
========= ========= =========
The 1998 and 1997 net tax losses have been carried back to
previous tax years and result in refunds of taxes previously
paid.
-39-
Players Inernational, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The reconciliation of income tax attributable to continuing
operations computed at the Federal statutory rates to income tax
expense is:
Years ended March 31,
_____________________________
1999 1998 1997
______ ______ _______
Federal statutory rate (benefit) 35.0% 35.0% (35.0%)
State taxes on income, net of
Federal income tax benefit (1.4%) (3.0%) (1.0%)
Non-deductible expenses 14.5% 2.0% -
Other 1.5% 4.0% -
______ ______ _______
Financial statement provision rate (benefit) 49.6% 38.0% (36.0%)
====== ====== =======
In 1999, the non-deductible expenses included approximately
$900,000 in lobbying expenses related to the Company's successful
efforts in conjunction with the "Boat in a Moat" referendum in
Missouri.
Note 12 - Restructuring Charge
The restructuring charge in 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. 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. This resulted from 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. In 1999, 1998 and 1997, approximately $67,000, $800,000
and $7,800,000, respectively, were charged against the reserve
established by the restructuring. As of March 31, 1999, $337,000
remained in the restructuring liability. This liability relates
entirely to future medical care benefits for certain retired
executives.
Note 13 - Other Long-Term Liabilities
A summary of other long-term liabilities follows:
March 31,
______________________
(dollars in thousands)
1999 1998
_________ _________
Net present value of Patron Fee obligation (See
Note 3) $ 12,738 $ 24,990
Long-term portion of agreement with the City of
Lake Charles 3,696 3,696
Capital lease related to the purchase of
computer equipment - 252
Other 10 59
_________ _________
$ 16,444 $ 28,997
========= =========
Note 14 - Long-Term Debt
A summary of long-term debt is as follows:
March 31,
_______________________
(dollars in thousands)
1999 1998
__________ __________
Senior Notes, interest at 10-7/8% payable semi-
annually on April 15 and October 15, due
2005 (fair value based on quoted market price is
approximately $159,750 and $163,500 as of
March 31, 1999 and 1998, respectively) $ 150,000 $ 150,000
Note payable under bank credit agreement, weighted
average interest rate of 7.29% and 9.5% as of
March 31, 1999 and 1998, respectively
(carrying amount approximates fair value) 5,000 30,000
Note payable, secured by slot machines, interest at
12%, due June 23, 1999 (carrying amount
approximates fair value) 541 2,549
_________ _________
155,541 182,549
Less current portion (541) (2,008)
_________ _________
$ 155,000 $ 180,541
========= =========
In March, 1998, the Company closed an $80,000,000 five year
bank credit agreement with Wells Fargo and a group of
participating banks. The terms of this agreement specify
current borrowing rates of 2.10% over LIBOR or 0.60% over the
prime rate. Applicable borrowing rates are based on the
Company's financial performance against bank benchmarks. Maximum
-40-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
borrowing rates under this agreement are 2.50% over LIBOR or
1.00% over prime. The Company makes the decision to borrow at
either prime or LIBOR-based rates in view of pricing and
flexibility considerations. The agreement contains covenants
that, among other things, place restrictions on additional
indebtedness, dividends, capital expenditures, and limit share
repurchases to $10,000,000 plus 50% of net income during the term
of the facility.
The Company wrote-off loan costs related to its prior bank
credit agreements in the amount of $1,078,000 and $2,744,000 in
1998 and 1997, respectively.
As of March 31, 1999, aggregate annual principal maturities
were (dollars in thousands):
2000 $ 541
2003 $ 5,000
Thereafter $ 150,000
Note 15 - Stockholders' Equity
On January 27, 1997, the Company announced that its Board of
Directors had approved the adoption of a Stockholders' Rights
Plan ("Rights Agreement"). The Rights Agreement is designed to
ensure that all stockholders of the Company receive fair value
for their Common Shares in the event of any proposed takeover and
to guard against the use of partial tender offers or other
coercive tactics to gain control of the Company without offering
fair value to stockholders. Pursuant to the Rights Agreement,
holders of record as of October 27, 1997, received one Right for
each Common Share, with each Right representing the right to
purchase one one-hundredth of a preferred share or, upon the
happening of certain events, Common Shares or other securities
and property.
The Company amended the Rights Agreement on February 8, 1999,
to provide that Jackpot would not be considered an acquiring
person under the Rights Agreement and that the merger with Jackpot
would not trigger any of the provisions of the Rights Agreement.
For this reason, the Company's stock purchase rights will not
become exercisable as a result of the contemplated merger with
Jackpot.
Note 16 - Common Stock Options and Warrants
The Company has three stock option plans, the 1990 Incentive
Stock Option and Non-Qualified Option Plan covering 1,200,000
shares of common stock ("1990 Plan"), the 1993 Incentive Stock
Option and Non-Qualified Option Plan covering 3,000,000 shares of
common stock ("1993 Plan"), and the 1994 Directors Stock
Incentive Plan ("1994 Plan") covering 900,000 shares of common
stock. As of March 31, 1999, the Company had 295,049 shares
under the 1990 Plan, 1,528,000 shares under the 1993 Plan and
257,500 shares under the 1994 Plan available for issuance in
connection with future stock options that may be granted.
Although options are available for issuance under the various
plans, the merger agreement with Jackpot limits the future
issuance of stock options. Options granted are generally
exercisable between three and ten years from date of grant.
-41-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
In addition to the foregoing plans, 164,127 other options
and 150,000 warrants were outstanding as of March 31, 1999.
Summarized information for all stock options and warrants is as
follows:
1999 1998 1997
___________________ ___________________ __________________
Weighted- Weighted- Weighted-
Average Average Average
Options/ Exercise Options/ Exercise Options/ Exercise
Warrants Price Warrants Price Warrants Price
_________ ________ _________ _________ _________ ________
Outstanding
at beginning
of year 2,946,802 $ 7.90 3,278,278 $ 9.58 6,335,502 $ 9.54
Granted:
Exercise price
equals market
price 609,000 $ 5.53 709,000 $ 3.20 491,750 $ 7.65
Exercise price
exceeds market
price - - - - 1,082,300 $ 8.17
Exercised (91,375) $ 3.15 (50,150) $ 1.63 (2,100,000) $ 2.67
Expired or
cancelled (481,900) $10.21 (990,326) $10.41 (2,531,274) $14.24
Outstanding
at end of
year 2,982,527 $ 7.19 2,946,802 $ 7.90 3,278,278 $ 9.58
Options
exercisable
at end of
year 1,899,157 $ 8.00 1,854,522 $ 9.07 2,076,351 $10.04
During 1999, options to certain directors were amended by
the Company to extend the expiration date of said options to no
later than February 28, 2000. In total, 539,127 options with an
average exercise price of $7.26 were extended. Of these options,
164,127 with an exercise price of $6.25 were extended when the
market price of the Company's common stock was $6.50, resulting
in a charge to earnings of approximately $41,000.
Options granted and cancelled during 1997 include the
activity resulting from a special program approved by the Company
which enabled certain option holders to consent to the
cancellation of certain outstanding options, whether vested or
unvested, in exchange for a grant of new stock options with an
option price based on a minimum of 110% of the current market
price of the Company's stock. The new options vest in five equal
annual installments commencing September 19, 1996. In total,
1,442,900 options with an average exercise price of $13.59 per
share were cancelled in exchange for 842,300 new options with an
average exercise price of $7.91 per share.
The following table summarizes information regarding stock
options and warrants outstanding at March 31, 1999.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
_________________________________ ___________________
Weighted
Average Weighted Weighted
Range of Remaining Average Number Average
Exercise Number Contractual Exercise Exercis- Exercise
Prices Outstanding Life Price able Price
_____________ ___________ ___________ ________ _________ ________
$3.13 - $4.31 738,000 8.33 $ 3.45 344,500 $ 3.41
$4.88 - $6.00 443,000 9.22 $ 5.98 137,000 $ 5.98
$6.25 - $7.70 1,086,027 1.73 $ 7.37 842,807 $ 7.35
$8.47 -$19.33 715,500 1.42 $ 11.53 574,850 $ 12.19
_________ _________
2,982,527 1,899,157
========= =========
The Company adopted Statement of Financial Accounting
Standards No. 123-Accounting for Stock Based Compensation ("SFAS
123") on April 1, 1996. SFAS 123 provides, among other things,
that companies may elect to account for employee stock options
using a fair value method or continue to apply the intrinsic
value method prescribed by Accounting Principles Board Opinion
No. 25 ("APB 25"). The Company applies APB 25, and related
interpretations in accounting for its plans. Accordingly, no
material compensation expense has been recognized for its stock
option plans.
The following table discloses the Company's pro forma net
income (loss) and net income (loss) per share assuming
compensation cost for employee stock options had been determined
using the fair value-based method prescribed by SFAS 123. The
table also discloses the weighted-average assumptions used in
estimating the fair value of each option grant on the date of
-42-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
grant using the Black-Scholes option pricing model. The model
assumes no expected future dividend payments on the Company's
common stock for the options granted in 1999, 1998 and 1997.
Years ended March 31,
________________________________
(Dollars in thousands,
except per share data)
1999 1998 1997
________ ________ _________
Net income (loss)
As reported $ 1,570 $ 1,951 $ (46,298)
Pro forma $ 248 $ 1,159 $ (48,156)
Basic earnings (loss) per share
As reported $ 0.05 $ 0.06 $ (1.56)
Pro forma $ 0.01 $ 0.04 $ (1.62)
Diluted earnings (loss) per share
As reported $ 0.05 $ 0.06 $ (1.56)
Pro forma $ 0.01 $ 0.04 $ (1.62)
Weighted-average assumptions
Expected stock price volatility 57.57% 60.20% 57.48%
Risk-free interest rate 5.21% 5.70% 6.38%
Expected option lives 4.0 years 6.6 years 3.4 years
Estimated fair value of options
granted equal to market price $ 3.50 $ 2.01 $ 3.82
Estimated fair value of options
granted greater than market price$ 0.66 $ - $ 2.75
Estimated fair value of options
granted less than market price $ 1.60 $ - $ -
Because the provisions of SFAS 123 have not been applied to
options granted prior to April 1, 1995, and due to the issuance
in fiscal year 1997 of a large option grant under the special
program discussed above, the resulting pro forma compensation
cost for the years presented may not be representative of that to
be expected in future years.
Note 17 - Earnings Per Share
There are no adjustments required to be made to net income
(loss) for purposes of computing basic and diluted earnings per
share ("EPS").
The following is a reconciliation of basic weighted average
shares outstanding to diluted weighted average shares
outstanding:
Years ended March 31,
__________________________________
1999 1998 1997
__________ __________ __________
Weighted average common
shares outstanding for
basic EPS calculation 31,964,578 31,904,658 29,765,483
Dilutive effect of stock
options and warrants 164,838 44,970 -
__________ __________ __________
Weighted average common
shares outstanding for diluted EPS 32,129,416 31,949,628 29,765,483
========== ========== ==========
The calculation of diluted earnings per share excludes
certain options to purchase common stock. These options have
been excluded as they would be antidilutive to the diluted
earnings per share calculation. The weighted average number of
options excluded were 2,104,235, 2,901,451, and 5,302,425 for the
years ended March 31, 1999, 1998 and 1997, respectively.
Note 18 - Employee Benefit Plans
The Company has a defined contribution plan that provides
retirement benefits for participating employees. Eligible
employees may elect to participate by contributing a percentage
of their pre-tax earnings to the plan. Employee contributions to
the plan, up to certain limits, are matched at 25% by the
Company. The Company's contribution expense for the plan was
$421,000, $269,000 and $385,000 for the years ended March 31,
1999, 1998 and 1997, respectively.
-43-
Players International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 19 - Commitments and Contingencies
The Company leases office space, land and equipment under
operating and capital leases expiring at various dates through
December 2015. The minimum annual payments under non-terminable
lease agreements at March 31, 1999 are as follows (dollars in
thousands):
Years ending March 31, Capital Lease Operating Leases
______________________ _____________ ________________
2000 $ 282 $ 1,790
2001 - 754
2002 - 378
2003 - 375
2004 - 215
Thereafter - 819
_____________ ________________
Total minimum lease payments 282 $ 4,331
================
Less: Amount representing
interest at 11% (15)
_____________
Present value of minimum capital
lease payments 267
Less: Current installments (267)
_____________
Obligations under capital leases-
less current liabilities $ 0
=============
Rent expense for all operating leases and contingent
payments was as follows:
Years ended March 31,
____________________________
(Dollars in thousands)
1999 1998 1997
_________ _________ ________
Minimum rentals $ 4,662 $ 4,569 $ 2,016
Contingent payments (See Note 3) 1,819 2,447 3,807
_________ _________ ________
$ 6,481 $ 7,016 $ 5,823
========= ========= ========
The Company and its subsidiaries are defendants in certain
litigation. In the opinion of management, based upon the advice
of counsel, the aggregate liability, if any, arising from such
other litigation will not have a material adverse effect on the
accompanying consolidated financial statements.
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, or RICO 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. 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.
Note 20 - Transactions with Related Parties
The Company purchased promotional items from a company owned
by Edward Fishman, former Chairman of the Company. During the
year ended March 31, 1997, the Company paid $312,000 for such
items. There were no purchases in 1999 or 1998.
-44-
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
________ _____________________________________________________
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
________ __________________________________________________
The directors and executive officers of the Company are as
follows:
PRESENT POSITION DIRECTOR
NAME WITH THE COMPANY SINCE AGE
_______________ ____________________________ ________ ___
Howard Goldberg Chairman of the Board 1986 53
(Acting), President and Chief
Executive Officer
John Groom Executive Vice President, 1997 54
Chief Operating Officer and
Director
Marshall S. Geller Director 1989 60
Lee Seidler Director 1987 64
Charles Masson Director 1996 46
Earl Webb Director 1996 42
Lawrence Cohen Director 1996 40
Vincent J. Naimoli Director 1997 61
Alan R. Buggy Director 1997 50
Raymond A. Spera, Jr.Vice President, Chief - 42
Financial Officer, Treasurer
and Secretary
Howard Goldberg became President and Chief Operating
Officer of the Company in May, 1993, and then became Chief
Executive Officer in December, 1995. Upon the resignation of Mr.
Edward Fishman on September 1, 1998, Mr. Goldberg became acting
Chairman of the Board of Directors of the Company. Prior to
joining the Company as an officer, Mr. Goldberg was a director,
and was the managing shareholder practicing law in the Atlantic
City, New Jersey law firm of Horn, Goldberg, Gorny, Plackter,
Weiss & Perskie (now known as Fox, Rothschild, O'Brien & Frankel,
LLP), which has represented the Company since its inception.
Since the advent of casino gaming in Atlantic City, Mr. Goldberg
specialized in representing casinos in New Jersey and other
jurisdictions for development and regulatory matters. Mr.
Goldberg currently serves as a director of iMall, Inc.
John Groom joined the Company as Executive Vice President,
Operations in January, 1996, and became Chief Operating Officer
of the Company in September, 1996. From 1979 until 1995, Mr.
Groom served in various executive management positions within the
Caesars organization at Caesars Atlantic City and Caesars Palace
Las Vegas.
Marshall S. Geller is the Chairman and Chief Executive
Officer of Geller & Friend Capital, a merchant banking investment
company. He was formerly interim President and Chief Operating
Officer of the Company from November, 1992, through April, 1993.
From 1991 through 1995, Mr. Geller was the Senior Managing
Partner and founder of Golenberg & Geller, Inc., a merchant
banking investment company. Mr. Geller served as Vice Chairman
of Gruntal & Co. Inc., an investment banking firm, from 1988 to
1990. From 1967 until 1988, he was a Senior Managing Director of
Bear Stearns & Co. Inc., an investment banking firm ("Bear
Stearns"). He is currently a director, and was formerly the
interim Co-Chairman, of Hexcel Corporation. Mr. Geller is a
director of Value Vision International, Inc. and serves as
Chairman of its Investment Committee. He also serves on the
Boards of Ballantyne of Omaha, Inc., iMall, Inc., Cabletel
Communications Corporation and Stroud's, Inc.
Lee Seidler is a private investor. He is affiliated with
Bear Stearns as Managing Director Emeritus. From 1981 to 1989,
he was a Senior Managing Director of Bear Stearns. He is a
director of Synthetic Industries, Inc., The Shubert Organization,
Inc. and The Shubert Foundation. Mr. Seidler was a Professor of
Accounting and Price Waterhouse Professor of Auditing at New York
University from 1965 to 1985.
Charles M. Masson is a Partner of Leary, Masson &
Associates, a consulting firm that assists clients in improving
recovery from their underperforming or distressed investments.
-45-
Prior to forming Leary, Masson & Associates, from 1993 through
1998, Mr. Masson was President of McCloud Partners, a private
advisory firm based in New York City. He served as the Chairman
of the Board of Directors of Cadillac Fairview Corporation
Limited, a real estate management and development company from
1994 to 1995, as a director of Salomon Brothers Inc from 1991 to,
1993, and as Vice President of Salomon Brothers Inc from 1990 to
1993. Mr. Masson served as a director of Griffin Gaming &
Entertainment, Inc. ("GG&E") (formerly Resorts International,
Inc.) from 1993 until 1996. Mr. Masson served as a director of
Color Tile, Inc. from 1996 until 1997. He currently serves on
the Board of Directors of Maidenform, Inc.
Earl E. Webb is the Chief Executive Officer of Jones Lang
LaSalle's Americas region. Jones Lang LaSalle is the preeminent
provider of services to owners and occupiers of real estate on a
global basis. He serves on the Board of Directors of Jones Lang
LaSalle and is a member of its European and Hotel Boards and its
Management Committee.
Lawrence Cohen has served as President and Chief Executive
Officer of The Griffin Group, Inc. since July 1, 1997. From 1988
to 1997, he served as Executive Vice President and Chief
Financial Officer of The Griffin Group, Inc. From 1986 to 1988,
he was Assistant Corporate Controller of Columbia Pictures
Entertainment, Inc. Prior to 1986, Mr. Cohen was with the
accounting firm of Paneth, Haber & Zimmerman. He also served as
a director of Resorts International Hotel, Inc. from 1994 to
1996. From 1994 until 1996, Mr. Cohen served as a director of
Liberty Broadcasting, Inc., a privately held broadcasting
company.
Vincent J. Naimoli has served as Chairman, President and
Chief Executive Officer of Anchor Industries International, Inc.,
a multi-industry, operating, holding and financial services
company since 1989 and as the Managing General Partner and Chief
Executive Officer of the Tampa Bay Devil Rays since 1995. Mr.
Naimoli served as a director of GG&E from 1994 to 1996, as
Chairman, President and Chief Executive Officer of Doehler-
Jarvis, Inc., a designer and manufacturer of precision aluminum
castings, from 1991 to 1995, as Chairman, President and Chief
Executive Officer of Harvard Industries, Inc., an automotive
components company, from 1993 to 1997, and as Chairman, President
and Chief Executive Officer of Ladish Company, Inc., a
manufacturer of forged titanium and other metal components, from
1993 to 1995. He serves on the Board of Directors of Florida
Progress Corporation and Russell-Stanley Corporation.
Alan R. Buggy has served as the President and Chief
Executive Officer of The Chalfont Group, an investment company,
since 1997. From 1994 to 1997, Mr. Buggy served as Managing
Director of Price Waterhouse. From 1990 to 1993, Mr. Buggy
served as Executive Chairman of ITC Entertainment Group. Mr.
Buggy also served as Managing Director of Samuel Montagu, Inc., a
merchant banking firm, from 1983 to 1990. From 1982 to 1983, he
served as Senior Vice President of American Scandinavian Bank,
managing the corporate finance and treasury divisions.
Raymond A. Spera, Jr. joined the Company in April, 1998 as
Vice President of Finance - Operations. In January, 1999, Mr.
Spera was appointed Vice President, Chief Financial Officer and
Treasurer to the Company and became Secretary in April, 1999.
From December 1989 to September 1997, Mr. Spera served as Chief
Financial Officer of the Claridge Casino Hotel in Atlantic City,
New Jersey.
Howard Goldberg and Lee Seidler are brothers-in-law.
Section 16(a) - Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as
amended, requires the Company's executive officers and directors
to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Executive
officers and directors are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
the Company and written representations from the Company's
executive officers and directors, the Company believes that none
of its executive officers and directors failed to comply with
Section 16(a) reporting requirements in fiscal year 1999 except
that Messrs. Buggy, Cohen, Geller, Goldberg, Groom, Madamba,
Masson, Naimoli, Seidler and Webb did not timely file Form 5's
with respect to stock options granted during fiscal 1999 and, in
the case of Mr. Groom, with respect to a stock option exercise
effected during fiscal 1999 and Mr. Spera did not file a Form 3
upon becoming an executive officer.
-46-
Item 11. Executive Compensation
________ ______________________
Summary Compensation Table
The following summary compensation table sets forth, for the
Company's last three fiscal years, the cash compensation paid by
the Company, as well as certain other compensation paid or
accrued for those years, to Howard Goldberg, the Company's Chief
Executive Officer and to each of the Company's other most highly
compensated executive officers and former executive officers as
of March 31, 1999 (collectively, the "Named Executives"):
Summary Compensation Table
Annual Long-Term
Compensation Compensation
____________ ____________
Fiscal
Year Securities
Name and Ending Underlying All Other
Principal Position March 31, Salary Bonus Options/SARs Compensation
__________________ _________ ________ ________ ____________ ____________
Howard Goldberg 1999 $506,250 $350,000 230,000(1) -
President, Chief 1998 $462,500 $476,250 230,000(2) -
Executive Officer 1997 $475,000 - 600,000(3) -
and Acting Chairman
of the Board
John Groom 1999 $364,500 $330,000 140,000(1) -
Executive Vice 1998 $315,000 $300,000 140,000(2) -
President, Chief 1997 $300,000 - 100,000(4) -
Operating Officer and
Director
Raymond A. Spera 1999 $130,822(5) $ 40,000 12,000(6) -
Vice President, 1998 - - - -
Chief Financial 1997 - - - -
Officer, Treasurer
and Secretary
Peter J. Aranow 1999 $293,425(7) $120,000 - $150,000(8)
Former Executive 1998 $262,500 $150,000 40,000(2) -
Vice President 1997 $300,000 - 150,000(9) -
Patrick Madamba, Jr. 1999 $175,000 $100,000 30,000(1) $87,500(10)
Former Vice President 1998 $156,250 $110,000 30,000(2) -
and General Counsel 1997 $139,829 - 15,000(11) -
______________
(1) Relates to options granted on November 12, 1998, with an
exercise price of $6.00 per share. The options vest 25% on the
date of the grant and on each of the first through third
anniversaries of the date of the grant.
(2) Relates to options granted on November 19, 1997, with an
exercise price of $3.125 per share. The options vest 25% on
the date of the grant and on each of the first through third
anniversaries of the date of the grant.
(3) Includes 375,000 shares subject to options granted on
September 19, 1996, with an exercise price of $7.70 per
share which vests 100% on date of issuance and 225,000
shares subject to options granted on September 19, 1996,
with an exercise price of $8.47 which vests 20% on date of
the grant and on each of the first through fourth
anniversaries of the date of grant.
(4) Includes 100,000 shares subject to options granted on
September 19, 1996, with an exercise price of $7.00 per
share. The options vest 20% on each of the first through
fifth anniversaries of the date of the grant.
(5) Reflects fiscal year compensation following April 20, 1998,
the date of Mr. Spera's employment.
(6) Includes 4,000 options granted on April 27, 1998, with an
exercise price of $4.875 per share and 8,000 options granted on
September 10, 1998, with an exercise price of $4.313 per share.
The options vest 25% on the date of the grant and on each of the
first through third anniversaries of the date of the grant.
(7) Reflects fiscal year compensation through March 23, 1999,
the date Mr. Aranow's employment terminated.
(8) Reflects six months severance pay in accordance with Mr.
Aranow's employment agreement, as amended.
-47-
(9) Includes 50,000 shares subject to options and 100,000 Stock
Appreciation Rights ("SARs") granted on September 19, 1996, with
an exercise price of $7.70 per share. The options vest 20% on
the date of the grant and on each of the first through fourth
anniversaries of the date of the grant. The SARs vest upon a
change of control.
(10) Mr. Madamba's employment with the Company terminated on
April 7, 1999. Other compensation reflects six months
severance pay in accordance with Mr. Madamba's employment
agreement, as amended.
(11) Includes 15,000 shares subject to options granted on
September 19, 1996, with an exercise price of $7.70 per
share. The options vest 20% on date of the grant and on
each of the first through fourth anniversaries of the date
of grant.
No other annual compensation or long-term incentive plan payouts
were paid during the fiscal year ending March 31, 1999.
Stock Option Grants
The following table relates to options granted to the
Named Executives during the fiscal year ended March 31, 1999.
Option Grants in Last Fiscal Year
Individual Grants Potential
_________________ Realizable Value
at Assumed
% of Total Annual Rates of
Options Stock Price
Granted to Exercise Appreciation for
Employees Price Expir- Option Terms
Options in Fiscal Per ation ____________________
Name Granted (1) Year Share Date 5% 10%
____ ___________ __________ _______ ________ ________ __________
Howard
Goldberg 230,000 40.07 $6.00 11/12/08 $867,875 $2,199,365
John Groom 140,000 24.39 $6.00 11/12/08 $528,271 $1,338,744
Raymond A. 4,000 .70 $4.88 04/27/08 $ 12,263 $ 31,078
Spera 8,000 1.39 $4.31 09/10/08 $ 21,699 $ 54,990
Patrick
Madamba, Jr. 30,000 5.23 $6.00 11/12/08 $113,201 $ 286,874
(1) The options in this table were granted in fiscal year 1999
and have an exercise price equal to the fair market value of the
Company's common stock on the date of grant.
Stock Option Exercises
The following table relates to options exercised during
the fiscal year ended March 31, 1999, and options outstanding at
year end.
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year End Option Values
Number of Value of Unexercised
Unexercised In-the-Money
Options at Options at March 31,
March 31, 1999 1999(1)
______________ __________________
Shares
Acquired
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
____ ________ ________ ______ _______ ________ ________
Howard
Goldberg - - 738,750 377,500 $373,750 $402,500
John Groom 70,000 $214,410 135,000 275,000 $ 8,750 $245,000
Raymond A.
Spera - - 3,000 9,000 $ 5,249 $ 15,747
Peter J.
Aranow - - 137,500 100,000 $125,000 -
Patrick
Madamba, Jr. 7,500 $ 14,063 24,000 43,500 $ 25,313 $ 52,500
(1) Based upon the aggregate sum of the positive difference
between the Nasdaq National Market closing quotation for the
Common Stock on March 31, 1999, and the exercise price for
each option.
-48-
COMPENSATION OF DIRECTORS
Each director not employed by the Company ("Non-Employee
Director") is paid a retainer at an annual rate of $25,000,
payable in quarterly installments. Each Non-Employee Director
who is a Chairman of a Board Committee is paid a Chairman's fee
at an annual rate of $5,000, also payable in quarterly
installments. In addition, directors are paid an attendance fee
of $1,000 for actual attendance at Board or Committee meetings
and $250 for attendance by telephone at any such meetings. Fees
for Committee meetings are limited to one fee per day, in
addition to any fee for attendance at a Board meeting on that
day. The Company reimburses the directors for reasonable
expenses incurred in attending Board or Committee meetings.
Upon election to the Board, Non-Employee Directors receive
an initial stock option grant of 22,500 shares, exercisable at a
price equal to the fair market value per share of common stock on
the date of grant. Fifty percent (50%) of the initial grant will
vest as of the date of the grant with the balance vesting upon
the first re-election to the Board after completion of the first
full year of service as a director. Subsequent future annual
grants ("Future Annual Grant") of 5,000 stock options are granted
upon each re-election to the Board. Future Annual Grants are
immediately exercisable as of the date of the grant.
In 1999, 107,877 options to certain Non-Employee Directors
that would have otherwise expired on March 31, 1999, were
extended. These options will now expire on the earliest of the
closing of the merger with Jackpot, the date the Board of
Directors determines that the merger will not occur, or February
28, 2000.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company has an employment agreement in effect with
Howard A. Goldberg. The Company had in effect employment
agreements with two other executives who are no longer with the
Company, Peter J. Aranow and Patrick Madamba, Jr. The Company
has entered into change in control agreements with two
executives, John Groom and Raymond A. Spera, Jr.
Employment Agreement for Howard A. Goldberg. Howard A.
Goldberg's employment with the Company extends to September 30,
1999, provided that if a change in control occurs, the term of
employment will continue for 24 months beyond the month in which
the change in control occurs. During the term of the employment
agreement, Mr. Goldberg will serve as Chief Executive Officer
and his base compensation will be not less than $450,000 per
year. The Board may grant discretionary bonuses and
stock-based compensation. Mr. Goldberg and his spouse and
dependents will be provided with welfare and retirement
benefit coverages pursuant to the employment agreement.
If the Company terminates Mr. Goldberg's employment without
cause, for a reason other than death or disability, or in the
event of constructive termination, Mr. Goldberg will be entitled
to receive severance compensation upon his execution of a release
of the Company as to all matters arising in connection with his
employment and termination. If the employment agreement expires
at the end of its present term or at the expiration of any
renewal and the Company has not given six months prior notice of
its intention not to renew, Mr. Goldberg will receive severance
compensation upon execution of a release of the Company. The
severance compensation payable upon expiration of Mr. Goldberg's
employment agreement on September 30, 1999, will consist of
continued base compensation for a period of six months, less the
number of months of non-renewal notice provided by the Company.
The severance compensation payable in the other circumstances
described above will consist of continued base compensation and
performance bonuses for a period of 12 months following his
termination of employment or, if longer, to the end of the term
of the employment agreement. Mr. Goldberg may elect to have the
present value of the base compensation payments paid in a lump
sum after his termination of employment. In addition, Mr.
Goldberg will immediately vest in all stock options previously
granted to him and may exercise the options for 12 months
following his date of termination, but in no event beyond the
expiration of the option term. Mr. Goldberg will continue to
participate in the Company's applicable employee benefit programs
during the period for which he receives severance compensation
(without regard to whether payments are made in a lump sum),
unless the Company provides him with a payment equal to the cost
of such coverage.
If a change in control (such as the proposed Jackpot merger)
occurs and Mr. Goldberg's employment is terminated without cause
(including constructive termination), or if Mr. Goldberg
terminates employment within 180 days following a change in
control because there has been a change in circumstances that
affects his position or responsibilities such that he is no
longer able to discharge his duties and responsibilities
effectively, Mr. Goldberg will be entitled to receive severance
compensation. In addition, if a change in control occurs and Mr.
-49-
Goldberg's employment is terminated without cause (including
constructive termination), or upon expiration of his employment
agreement, within six months before the change in
control, Mr. Goldberg will be entitled to receive severance
compensation. As severance compensation in connection with a
change in control, Mr. Goldberg will receive a lump sum payment
equal to the present value of the base compensation that would be
due him for a period of 36 months following his termination of
employment, based on his average annual base compensation for the
36-month period preceding his termination, and a lump sum payment
equal to the present value of the aggregate performance bonuses
that he received for the 36-month period preceding his
termination, or, if greater, 150% of the largest performance
bonus paid to him during the 36-month period. Mr. Goldberg will
immediately vest in all stock options previously granted to him
and may exercise the options for 12 months following his date of
termination, but in no event beyond the expiration of the option
term. Mr. Goldberg will continue to participate in applicable
employee benefit programs during the period for which he receives
severance compensation (without regard to whether payments are
made in a lump sum), unless the Company provides him with a
payment equal to the cost of such coverage.
The benefits provided under the employment agreement in the
event of a change in control will be limited by the Internal
Revenue Code ("Code") parachute provisions. If and to the extent
that the benefits to be provided under the agreement are
considered "excess parachute payments" under section 280G of the
Code, the benefits will be reduced to the maximum amount that may
be paid under section 280G without resulting in the imposition of
penalties on "excess parachute payments."
For purposes of the employment agreement, the occurrence of
any of the following events will be considered a change in
control: (i) any person (except The Griffin Group, Inc., the
Company's management as of the effective date of the agreement,
the Company or any employee benefit plan of the Company), will
become the beneficial owner of 30% or more of the Company's
voting stock; (ii) consummation by the Company of a merger or
similar transaction with respect to which the persons who were
the beneficial owners of the Company voting stock immediately
before the transaction do not, following the transaction,
beneficially own more than 50% of the then outstanding shares of
voting stock in substantially the same proportion as their
ownership before the transaction; (iii) a complete liquidation
or dissolution of the Company; (iv) a sale or other disposition
of all or substantially all the assets of the Company other than
to a corporation with respect to which, following such sale or
disposition, more than 50% of the voting stock is owned
beneficially by the persons who were the beneficial owners of the
Company's voting stock immediately before such sale or
disposition in substantially the same proportion as their
ownership before the sale or disposition; (v) individuals who, as
of the beginning of any 24-month period, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any individual who
becomes a director after the beginning of such period and whose
election or nomination was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection
with an actual or threatened Board election contest; or (vi) a
"change in control" (as defined in the form of indenture
governing any indebtedness of the Company) will have occurred.
The proposed merger of the Company with Jackpot will
constitute a change in control for purposes of the employment
agreement. It is expected that Mr. Goldberg's employment will
terminate upon the consummation of the Jackpot merger and that
Mr. Goldberg will be entitled to receive the change in control
severance benefits described above.
If the Company terminates Mr. Goldberg's employment because
of the termination of his license to take part in the casino and
gaming business in any state in which the Company conducts
business, Mr. Goldberg will receive continued base compensation
for six months after his termination (or 12 months if the loss of
license was not the result of an activity that Mr. Goldberg knew
or should have known would result in the loss of his license).
If Mr. Goldberg voluntarily terminates employment or the
Company terminates his employment for cause, Mr. Goldberg will be
prohibited from engaging in competition with the Company for one
year following such termination. If Mr. Goldberg is terminated
on any other basis resulting in payments under the employment
agreement (without regard to whether the payments are made in a
lump sum), Mr. Goldberg will be prohibited from engaging in
competition with the Company for a period equal to the payment
period. The Company will indemnify Mr. Goldberg against
liabilities reasonably incurred by him in connection with any
proceeding relating to his employment with the Company.
-50-
Employment Agreement for Peter J. Aranow. Peter J. Aranow's
employment with the Company terminated on March 23, 1999. In
accordance with the terms of Mr. Aranow's employment agreement,
as amended in 1998 and 1999, subject to Mr. Aranow executing a
release and his compliance with the confidentiality and
non-competition covenants of the employment agreement, upon his
termination of employment, Mr. Aranow became entitled to receive
(i) a lump sum payment equal to the base compensation that would
have been paid for a period of six months following his
termination of employment (this amount totals $150,000); (ii)
$20,000, which represents the balance of the annual performance
bonus for the Company's fiscal year ending March 31, 1999; (iii)
immediate vesting of all unvested stock options held by Mr.
Aranow, with the ability to exercise such options for a period of
12 months following his termination of employment (but not beyond
the expiration of the option term); and (iv) continuation of
coverage under applicable employee benefit programs through
September 22, 1999 (except that, in lieu of continued coverage,
the Company may elect to make a payment equal to the cost of such
coverage).
In addition, if the Company enters into an agreement on or
before September 30, 1999, to effect a change in control
transaction that received active consideration by the Board
before March 23, 1999, Mr. Aranow will have the right to receive
change in control benefits. The proposed Jackpot merger will
constitute a pre-October 1999 agreement for this purpose. If Mr.
Aranow is entitled to change in control benefits, he will receive
the following payments upon a change in control: (i) a lump sum
payment equal to the present value of the base compensation that
would be due for a period of 36 months following his termination
of employment, determined on the basis of the average base
compensation paid for 36 months preceding his termination
(reduced by any payments described under the foregoing
paragraph); (ii) a lump sum payment equal to the present value of
the aggregate performance bonuses received for the period of 36
months preceding his termination; (iii) the immediate vesting of
all stock options (including related stock appreciation rights)
then held by Mr. Aranow, with the ability to exercise the options
for 12 months following the change in control, but in no event
after the expiration of the option term; and (iv) continuation of
coverage under applicable employee benefits plans during the
36-month period following the change in control, reduced by the
period during which he receives continued coverage as described
in the foregoing paragraph (except that, in lieu of continued
coverage, the Company may elect to make a payment equal to the
cost of such coverage). Upon a change in control, the Company
may require that Mr. Aranow surrender for cancellation all of his
outstanding options and stock appreciation rights in exchange for
a payment equal to the amount (if any) by which the fair market
value of the stock underlying his options and stock appreciation
rights exceeds the applicable option price (or base price, in the
case of stock appreciation rights).
The benefits provided under Mr. Aranow's employment
agreement in the event of a change in control are limited by the
Code's parachute provisions, as described in the section above
entitled "Employment Agreement for Howard A. Goldberg," and the
term "change in control" has the meaning described in the section
above entitled "Employment Agreement for Howard A. Goldberg."
Mr. Aranow will provide consulting services to Players as
requested by the Chief Executive Officer through the date of the
special meeting of stockholders to approve the Jackpot merger.
Mr. Aranow will receive $5,000 per month for his consulting
services, with appropriate adjustment if he performs services for
more than an average of two days per week. Mr. Aranow will
remain entitled to indemnification by the Company under his
employment agreement for matters relating to services performed
for the Company.
Employment Agreement for Patrick Madamba, Jr. Patrick
Madamba, Jr.'s employment with the Company terminated on April 7,
1999. In accordance with the terms of his employment agreement,
as amended in 1998 and 1999, Mr. Madamba became entitled to
receive severance compensation, upon executing a release of the
Company, which consists of (i) a lump sum payment of his base
compensation that would be payable for six months after
termination of employment (this amount totals $87,500), (ii) a
$25,000 payment attributable to the balance of his annual
performance bonus for the fiscal year ended March 31, 1999, (iii)
the immediate vesting of all unvested stock options held by Mr.
Madamba, with the ability to exercise such options for a period
of 12 months following the date of his termination (but not
beyond the expiration of the option term) and (iv) continuation
of coverage under applicable employee benefit programs for six
months following termination of employment (except that, in lieu
of continued coverage, the Company may elect to make a payment
equal to the cost of such coverage).
In addition, if the proposed Jackpot merger is consummated
or if the Company otherwise enters into an agreement on or before
September 30, 1999, to effect a change in control transaction
that received active consideration by the Board before April 7,
1999, Mr. Madamba will have the right to receive change in
control benefits. If Mr. Madamba is entitled to receive change
in control benefits, he will receive the following payments upon
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a change in control: (i) a lump sum payment equal to the present
value of the base compensation that would be due him for a period
of 36 months following his termination of employment, based on
his average annual base compensation for the 36-month period
preceding his termination (reduced by any payments described in
the foregoing paragraph), (ii) a lump sum payment equal to the
present value of the aggregate performance bonuses that he
received for the 36-month period preceding his termination, (iii)
the immediate vesting of all stock options then held by Mr.
Madamba, with the ability to exercise the options for 12 months
following the change in control, but in no event after the
expiration of the option term, (iv) continuation of coverage
under applicable employee benefit programs during the 36-month
period following the change in control, reduced by the period
during which he receives continued coverage as described in the
foregoing paragraph (except that, in lieu of continued coverage,
the Company may elect to make a payment equal to the cost of such
coverage). Upon a change in control, the Company may require
that Mr. Madamba surrender for cancellation all of his
outstanding options in exchange for a payment equal to an amount,
if any, by which the fair market value of the stock underlying
his options exceeds the applicable option price.
The benefits provided under the employment agreement in the
event of a change in control are limited by the Code's parachute
provisions, as described in the section above entitled
"Employment Agreement for Howard A. Goldberg," and the term
"change in control" has the meaning described in the section
above entitled "Employment Agreement for Howard A. Goldberg."
The executive indemnification provisions of the Jackpot
merger agreement, and any similar provisions in a subsequent
agreement, will apply to Mr. Madamba, and the Company will
continue to advance to Mr. Madamba amounts reasonably incurred by
Mr. Madamba in defending civil, criminal and other proceedings
relating to the Company's development and operation of riverboat
casino complexes in Louisiana. Mr. Madamba will make himself
available to the Company to advise on transition matters for one
year after his termination of employment, without additional
compensation.
Change in Control Agreement for John Groom. The Company has
entered into a change in control agreement with John Groom that
will provide severance benefits in the event his employment is
terminated as a result of a change in control of the Company.
The proposed Jackpot merger will constitute a change in control
under Mr. Groom's agreement. It is anticipated that Mr. Groom
will be appointed Chief Operating Officer of Jackpot after the
consummation of the Company's merger with Jackpot.
If Mr. Groom's employment is terminated other than for cause
within two years after a change in control or within six months
before a change in control, or if Mr. Groom terminates employment
for good reason within such period, Mr. Groom will be entitled to
receive severance benefits. The severance benefits include (i) a
lump sum payment equal to the present value of Mr. Groom's base
compensation that would be due him for a period of 36 months
following his termination of employment, based on Mr. Groom's
average annual base compensation for the 36-month period
preceding his termination, (ii) a lump sum payment equal to the
present value of the aggregate performance bonuses that Mr. Groom
received for the 36-month period preceding his termination,
(iii) the immediate vesting of all stock options then held by Mr.
Groom, with the ability to exercise the options for 12 months
following the date of termination, but in no event after the
expiration of the option term, and (iv) continuation of coverage
under applicable employee benefit programs during the period for
which Mr. Groom receives severance benefits (without regard to
whether payments are made in a lump sum), unless the Company
provides Mr. Groom with a payment equal to the cost of such
coverage.
The benefits under the agreement are limited by the Code's
parachute provisions, as described in the section above entitled
"Employment Agreement for Howard A. Goldberg," and the term
"change in control" has the meaning described in the section
above entitled "Employment Agreement for Howard A. Goldberg."
Mr. Groom's agreement will continue through December 31, 1999,
provided that if a change in control occurs during the term of
the agreement, the agreement will automatically continue in
effect for 24 months after the month in which the change in
control occurs.
Change in Control Agreement for Raymond A. Spera, Jr. The
Company entered into a change in control agreement with Raymond
A. Spera in 1999, which will provide benefits in the event of a
change in control of the Company. The proposed Jackpot merger
will constitute a change in control under Mr. Spera's agreement.
If a change in control occurs and Mr. Spera continues to
provide his customary service to the Company through the
effective date of the change in control, or if Mr. Spera
terminates employment without good reason and the Board
determines to treat such termination as if it occurred after the
change in control, Mr. Spera will be entitled to receive, at the
time of the change of control, a lump sum payment equal to the
base compensation that would be due him for a period of six
-52-
months following the effective date of the change in control. If
Mr. Spera's employment is terminated other than for cause within
two years after a change in control or within six months before a
change in control, or if Mr. Spera terminates employment for good
reason within such period, Mr. Spera will be entitled to receive
severance benefits. The severance benefits include a lump sum
payment equal to the base compensation that would be due him for
a period of 12 months following his termination of employment
(less any amounts paid to him as described above at the time of
the change in control).
For purposes of the agreement, the term "change in control"
has the meaning described in the section above entitled
"Employment Agreement for Howard A. Goldberg." The agreement
will continue through December 31, 2000, provided that if a
change in control occurs during the term of the agreement, the
agreement will automatically continue in effect for 24 months
after the month in which the change in control occurs.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
_________ ____________________________________________________
The following table sets forth, as of the close of business
on June 18, 1999, certain information with respect to the
beneficial ownership of Common Stock: (i) by each director and
executive officer of the Company; (ii) by all executive officers
and directors, as a group; and (iii) by each stockholder who was
known to the Company to be the beneficial owner, as defined in
Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), of more than 5% of the Common Stock. As noted
below, certain ownership information is presented as of December
31, 1998, the last date for reporting significant ownership
positions by certain institutions under Securities and Exchange
Commission ("SEC") rules. Each of the persons listed below has
sole voting and investment power with respect to such shares,
unless otherwise indicated.
Number of Percent
Shares of Class
Beneficially Beneficially
Name of Beneficial Owner (1) Owned Owned
_____________________________ ____________ ____________
The Griffin Group, Inc. 4,367,350(2) 13.63%
Howard Goldberg 1,104,330(3) 3.37%
John Groom 346,500(4) 1.08%
Lawrence Cohen 253,600(5) *
Marshall S. Geller 194,127(6) *
Lee Seidler 177,750(7) *
Charles M. Masson 42,500(8) *
Earl E. Webb 32,500(8) *
Vincent Naimoli 29,500(9) *
Alan Buggy 27,500(9) *
Raymond A. Spera 4,000(10) *
All directors and executive officers as a
group (10 persons) 2,212,307 6.64%
Legg Mason, Inc. 2,487,300(11) 7.76%
Dimensional Fund Advisors, Inc. 2,046,100(12) 6.39%
___________
* Less than 1%.
(1) The address of The Griffin Group, Inc. is 780 Third Avenue,
Suite 1801, New York, New York 10017. The address for Legg
Mason is 100 Light Street, Baltimore, Maryland 21202. The
address for Dimensional Fund Advisors, Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401. The
address for all other persons is c/o Players International,
Inc., 1300 Atlantic Avenue, Suite 800, Atlantic City, New
Jersey 08401.
(2) Based upon information contained in Amendment No. 5 to
Schedule 13D, dated February 6, 1999, as filed with the SEC.
The holdings do not include the holdings of Lawrence Cohen,
President and Chief Executive Officer of The Griffin Group.
(3) Includes 18,400 shares held in trust and in the name of Mr.
Goldberg's family members and 738,750 shares that are
subject to options that are exercisable within 60 days of
June 18, 1999 ("currently exercisable"). Options to purchase
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56,250 shares and 375,000 shares which would have otherwise
expired on March 31, 1999 and October 1, 1999, respectively,
were extended by board action to expire on the earliest of
the closing of the merger, the date on which the Players
board determines that the merger will not occur, or
February 28, 2000.
(4) Includes 135,000 shares that are subject to currently
exercisable options and 196,500 shares in which Mr. Groom has
shared voting and investment power.
(5) Includes 32,500 shares that are subject to currently
exercisable options.
(6) Includes 129,127 shares that are subject to currently
exercisable options. Options to purchase 51,627 shares which
would have otherwise expired on March 31, 1999, were
extended by board action to expire on the earliest of the
closing of the merger, the date on which the Players board
determines that the merger will not occur, or February 28,
2000.
(7) Includes 133,750 shares that are subject to currently
exercisable options. Options to purchase 56,250 shares which
would have otherwise expired on March 31, 1999, were
extended by board action to expire on the earliest of the
closing of the merger, the date on which the Players board
determines that the merger will not occur, or February 28,
2000.
(8) Includes 32,500 shares that are subject to currently
exercisable options.
(9) Includes 27,500 shares that are subject to currently
exercisable options.
(10) Includes 4,000 shares that are subject to currently
exercisable options.
(11) Reflects holdings as of December 31, 1998 reported in
Schedule 13G filed with the SEC. 2,485,000 shares are held
by Legg Mason Special Investment Trust, Inc., with Legg
Mason Fund Advisor, Inc. having power to dispose thereof.
The remainder are held by various clients of Legg Mason Wood
Walker, Inc., which have power to dispose thereof.
(12) Reflects holdings as of December 31, 1998 reported in
Schedule 13G filed with the SEC. Dimensional Fund Advisors,
Inc. ("Dimensional"), an investment advisor registered under
the Investment Advisors Act of 1940, furnishes investment
advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment
manager to certain other investment vehicles, including
commingled group trusts. These investment companies and
investment vehicles are referred to as the "Portfolios". In
its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over
the securities of Players described in the Schedule 13G that
are owned by the Portfolios. All securities reported are
owned by the Portfolios, and Dimensional disclaims
beneficial ownership of such securities.
Item 13. Certain Relationships and Related Transactions
________ ______________________________________________
During fiscal year 1999, the Company had no transactions in
which any director of the Company or any member of the immediate
family of any such director had a material direct or indirect
interest reportable under the applicable rules of the SEC.
-54-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
________ ___________________________________________________
(a)(1) Financial Statements
Players International, Inc.
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 1999 AND 1998
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED MARCH 31, 1999:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(a)(2) Financial Statement Schedules
Riverside Joint Venture: Page
____
INDEPENDENT AUDITORS' REPORT............................ 62
BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997......... 63
STATEMENTS OF OPERATIONS-YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996.......................................... 64
STATEMENTS OF PARTNERS' CAPITAL-YEARS ENDED DECEMBER 31,
1998, 1997 AND 1996.................................... 65
STATEMENTS OF CASH FLOWS-YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996.......................................... 66
NOTES TO FINANCIAL STATEMENTS........................... 67
All other schedules have been omitted because they are not
applicable or not required or the required information is
included in the Consolidated Financial Statements or Notes
thereto.
(a)(3) Listing of Exhibits:
Exhibit
Number Description
_______ ___________
2.1(22) Agreement and Plan of Merger dated as of February 8,
1999 among Jackpot Enterprises, Inc., JEI Merger Corp.
and Players International, Inc.
3.1(1) Articles of Incorporation, as amended, of Players
International, Inc. (the "Company").
3.2(2) By-laws of the Company, as amended.
4.1(1) Indenture among certain subsidiaries of the Company and
First Fidelity Bank, National Association, as Trustee,
including form of Note (the "Senior Note Indenture").
4.2(1) Form of First Supplemental Indenture to the Senior Note
Indenture.
4.3(1) Form of Second Supplemental Indenture to the Senior
Note Indenture.
4.4(11) Form of Third Supplemental Indenture to the Senior Note
Indenture.
4.5(17) Form of Fourth Supplemental Indenture to the Senior
Note Indenture.
-55-
4.6(17) Form of Fifth Supplemental Indenture to the Senior Note
Indenture.
4.7(17) Form of Sixth Supplemental Indenture to the Senior Note
Indenture.
4.8(21) Rights Agreement dated as of January 27, 1997, between
Players International, Inc. and Interwest Transfer
Company, Inc. as Rights Agent.
10.1(3) The Company's 1985 Incentive Stock Option Plan.
10.2(4) Amendment No. 1 to the Company's 1985 Incentive Stock
Option Plan.
10.3(5) The Company's 1990 Incentive Stock Option and Non-
Qualified Stock Option Plan, as amended.
10.4(2) The Company's 1993 Stock Incentive Plan.
10.5(2) Form of Registration Rights Agreement dated as of June
23, 1992 by and among the Company, Southern Illinois
Riverboat/Casino Cruises, Inc., and the purchasers
named therein.
10.6(2) Agreement dated February 12, 1993 by and between
Jebaco, Inc. and the Company with respect to the
assignment of an option agreement relating to the
Downtowner Hotel (now known as the Players Hotel).
10.7(2) Option Agreement dated December 24, 1991 by and among
The Beeber Corporation and Elisabeth S. Woodward and
Jebaco, Inc. with respect to the Downtowner Hotel (now
known as the Players Hotel).
10.8(2) Amendment to Option Agreement dated March 9, 1993 by
and among The Beeber Corporation and Elisabeth S.
Woodward and Players Lake Charles, Inc., a subsidiary
of the Company, with respect to the Downtowner Hotel
(now known as the Players Hotel).
10.9(2) License and Services Agreement dated December 8, 1992
by and among The Griffin Group, Inc., the Company and
Southern Illinois Riverboat/Casino Cruises, Inc., as
amended.
10.10(2) Joint Venture Agreement dated May 1993 between
Amerihost and a subsidiary of the Company with respect
to a hotel in Metropolis, Illinois adjacent to the
Company's Metropolis riverboat.
10.11(6) Lease dated March 19, 1993 by and among the Beeber
Corporation and Players Lake Charles, Inc., a
subsidiary of the Company.
10.12(7) Agreement of Purchase and Sale dated June 16, 1994,
between Gem Mesquite, Ltd. and Players Nevada, Inc., a
subsidiary of the Company (including form of letter
Agreement from the Company to Gem Mesquite, Ltd.
relating to registration rights).
10.13(7) Transfer of Data Agreement dated June 16, 1994, between
Gem Gaming, Inc. and Players Nevada, Inc. (including
form of Promissory Note).
10.14(7) Development Consulting Agreement dated June 16, 1994,
between Gem Gaming, Inc. and Players Nevada, Inc.
(including form of 1994 Series G Warrant).
10.15(7) Option Transfer Agreement dated June 16, 1994, between
Gem Gaming, Inc., Gem Mesquite, Ltd. and Players
Nevada, Inc.
10.16(8) The Company's 1994 Directors Stock Incentive Plan, as
adopted April 14, 1994, and as amended July 14, 1994.
10.17(9) Agreement for Sale of Partnership Interests among the
Company and certain of its subsidiaries and Showboat,
Inc. and certain of its subsidiaries.
10.18(1) Asset Purchase Agreement dated August 16, 1995 among
the Company, Players Lake Charles, Inc. and the Beeber
Corporation.
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10.19(1) Form of Credit Agreement ("Credit Agreement") among the
Company, First Interstate Bank of Nevada, N.A., Bankers
Trust Company, BT Securities Corporation, and certain
other Lenders party thereto.
10.20(1) Form of Revolving Promissory Notes made by the Company
in favor of the Lenders party to the Credit Agreement.
10.21(1) Form of Swing Line Promissory Note made by the Company
in favor of First Interstate Bank of Nevada, N.A.
10.22(1) Form of Guaranty made by Players Lake Charles, Inc.,
Players Nevada, Inc., Southern Illinois
Riverboat/Casino Cruises, Inc., Players Bluegrass
Downs, Inc., Players Riverboat Management, Inc.,
Players Riverboat, Inc., Players Mesquite Golf Club,
Inc., Players Indiana, Inc., Players Riverboat, LLC,
Players Mesquite Land, Inc., Players Maryland Heights,
Inc., River Bottom Inc. and Showboat Star Partnership
in favor of First Interstate Bank of Nevada, N.A.
10.23(1) Form of Company Pledge Agreement between the Company
and First Interstate Bank of Nevada, N.A.
10.24(1) Form of Company Pledge Agreement (Nevada) between the
Company and First Interstate Bank of Nevada, N.A.
10.25(1) Form of First Amendment to Company Pledge Agreement
(Nevada) between the Company and First Interstate Bank
of Nevada, N.A.
10.26(1) Form of LLC Membership Interest Security Agreement
between the Company and First Interstate Bank of
Nevada, N.A.
10.27(1) Form of Company Security Agreement between the Company
and First Interstate Bank of Nevada, N.A.
10.28(1) Form of Subsidiary Security Agreement (Nevada) among
Players Nevada, Inc., Players Mesquite Golf Club, Inc.,
Players Mesquite Land, Inc. and First Interstate Bank
of Nevada, N.A.
10.29(1) Form of Subsidiary Security Agreement (Louisiana) among
Players Lake Charles, Inc., Showboat Star Partnership,
Players Riverboat LLC and First Interstate Bank of
Nevada, N.A.
10.30(1) Form of Subsidiary Security Agreement (Illinois)
between Southern Illinois Riverboat/Casino Cruises,
Inc. and First Interstate Bank of Nevada, N.A.
10.31(1) Form of Partnership Interest Security Agreement between
Players Riverboat Management, Inc. and First Interstate
Bank of Nevada, N.A.
10.32(1) Form of Collateral Account Agreement between the
Company and First Interstate Bank of Nevada, N.A.
10.33(1) Form of Nevada Deed of Trust, Fixture Filing and
Security Agreement with Assignment of Rents relating to
the Credit Agreement.
10.34(1) Form of Louisiana Act of Mortgage, Fixture Filing and
Security Agreement between Players Lake Charles, Inc.
and First Interstate Bank of Nevada, N.A.
10.35(1) Form of Illinois Mortgage Fixture Filing and Security
Agreement with Assignment of Rents relating to the
Credit Agreement.
10.36(1) Form of First Preferred Ship Mortgage made by Showboat
Star Partnership (an entity owned, directly or
indirectly, by the Company and its subsidiaries) to
First Interstate Bank of Nevada, N.A.
10.37(1) Form of Environmental Indemnity made by the Company to
First Interstate Bank of Nevada, N.A.
-57-
10.38(1) Form of Master Vessel and Collateral Trust Agreement
between First Interstate Bank of Nevada, N.A. as
Administrative Agent and First Interstate Bank of
Nevada, N.A. as Trustee and acknowledged and accepted
by the Company.
10.39(10) Partnership Agreement dated November 2, 1995, by and
between Harrah's Maryland Heights Corporation and
Players MH, L.P.
10.40(10) Guaranty of Players International, Inc. dated November
2, 1995.
10.41(10) Management Agreement dated November 2, 1995 by and
between Riverside Joint Venture and Harrah's Maryland
Heights Operating Company.
10.42(10) License Agreement dated November 2, 1995 by and among
Players International, Inc., Riverside Joint Venture
and Harrah's Maryland Heights Operating Company.
10.43(10) Ground Lease dated November 3, 1995 by and between
Harrah's Maryland Heights LLC and Riverside Joint
Venture.
10.44(10) Lease Agreement dated as of November 3, 1995 by and
between Riverside Joint Venture and Players MH, L.P.
10.45(10) Parent Guaranty of Players International, Inc. dated
November 3, 1995.
10.46(10) Right of First Refusal to Purchase dated November 3,
1995 by and between Harrah's Maryland Heights LLC and
Players MH, L.P.
10.47(10) Option Agreement dated November 3, 1995 by and between
Riverside Joint Venture and Harrah's Maryland Heights,
L.L.C.
10.48(10) Development of Agreement (Earth City Expressway
Extension) by and between the City of Maryland Heights
and Riverside Joint Venture.
10.49(11) Form of Agreement between the Company and Lake Charles
Construction Corporation dated November 15, 1995 for
the Players Island-Entertainment Barge.
10.50(11) Agreement between the Company and Lake Charles
Construction Corporation dated February 16, 1996 for
the Players Island-Entertainment Barge.
10.51(13) Retirement Agreement and General Release dated
September 9, 1996 between the Company and Edward
Fishman.
10.52(13) Retirement Agreement and General Release dated
September 9, 1996 between the Company and David
Fishman.
10.53(14) Amended and Restated Credit Agreement, dated as of
December 16, 1996, among the Company and the Lenders
party thereto, Wells Fargo Bank, N.A., Bankers Trust
Company and BT Securities Corporation.
10.54(15) Purchase Agreement by and among Players Nevada, Inc.,
Players Mesquite Land, Inc., Players Mesquite Golf
Club, Inc. and RBG, LLC.
10.55(16) March 17, 1997 Letter Agreement to the Asset Purchase
Agreement Extending Closing Date.
10.56(16) March 18, 1997 Letter Agreement to the Asset Purchase
Agreement Regarding Application of Due of Due Diligence
Fee.
10.57(16) March 18, 1997 Letter Agreement to the Asset Purchase
Agreement Regarding Certain Matters Incident to
Closing.
10.58(18) Asset Purchase Agreement dated as of September 30, 1997
by and between Lakeshore Hotels, Ltd. and Players
International, Inc.
10.59(18) November 13, 1997 Amendment No. 1 to Asset Purchase
Agreement.
-58-
10.60(18) December 17, 1997 Amendment No. 2 to Asset Purchase
Agreement.
10.61(17) January 9, 1998 Letter Agreement with Wells Fargo Bank
regarding terms of Reducing Revolving Credit Agreement.
10.62(18) Second Amended and Restated Credit Agreement, dated as
of March 11, 1998, among the Company and the Lenders
party thereto and Wells Fargo Bank, N.A.
10.63(18) March 24, 1998 Letter Agreement regarding execution of
the Settlement and Admission Fee Agreement.
10.64(18) Settlement and Admission Fee Agreement dated May 15,
1998 among Players Lake Charles, L.L.C., Showboat Star
Partnership and the City of Lake Charles.
10.65(19) Howard A. Goldberg Employment Agreement dated October
1, 1996.
10.66(19) Peter J. Aranow Employment Agreement dated October 1,
1996.
10.67(19) Patrick Madamba Employment Agreement dated March 31,
1997.
10.68(19) John Groom Change of Control Agreement dated August 1,
1997.
10.69(20) Amendment to Peter J. Aranow Employment Agreement dated
September 29, 1998.
10.70(21) Amended and Restated 1993 Stock Incentive Plan, as
amended through November 12, 1998.
10.71(21) Amendment dated as of August 31, 1998, to Agreement
dated as of August 1, 1997, between Players
International, Inc. and John Groom.
10.72(21) Amendment dated as of August 31, 1998, to Employment
Agreement dated as of March 31, 1997, between Players
International, Inc. and Patrick Madamba, Jr.
10.73(21) Amendment dated November 12, 1998, to Employment
Agreement dated October 1, 1996, between Players
International, Inc. and Howard A. Goldberg.
10.74(21) Amendment dated as of November 12, 1998, to Employment
Agreement dated as of March 31, 1997, between Players
International, Inc. and Patrick Madamba, Jr.
10.75(21) Restated Amendment dated as of January 6, 1999, between
Players International, Inc. and Peter J. Aranow.
10.76(21) Restated Amendment dated January 29, 1999, between
Players International, Inc. and Peter J. Aranow.
10.77 Raymond A. Spera Change of Control Agreement dated
April 12, 1999.
10.78 Purchase Agreement dated March 1, 1999, between The
Beeber Corporation, William D. Woodward, Timothy J.
Vaughan and Players Lake Charles, LLC.
10.79 Purchase Agreement dated March 1, 1999, between Karl
E. Boellert and Players Lake Charles, LLC.
10.80 Letter Agreement with Peter J. Aranow dated March 23,
1999.
10.81 Amendment dated as of March 23, 1999, to Employment
Agreement dated as of March 31, 1997, between Players
International, Inc. and Patrick Madamba, Jr.
21 Subsidiaries of Players International, Inc.
27 Financial Data Schedule
-59-
(1) Filed as an exhibit to the Company's Registration
Statement on Form S-4, File No. 33-60085, and
incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration
Statement on Form S-3, File No. 33-61026, and
incorporated herein by reference.
(3) Filed as an exhibit to the Company's Registration
Statement on Form 10 filed on August 13, 1986, File No.
0-14897, as amended on Form 8 filed October 17, 1987,
and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1988, and
incorporated herein by reference.
(5) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1991, and
incorporated herein by reference.
(6) Filed as an exhibit to the Company's Registration
Statement on Form S-3, as amended by Form S-3, File No.
33-75006, and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Current Report on
Form 8-K filed on June 24, 1994, and incorporated herein
by reference.
(8) Filed as an exhibit to the Company's Registration
Statement on Form S-3 filed on July 24, 1994, and
incorporated herein by reference.
(9) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995, and
incorporated herein by reference.
(10) Filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1995,
and incorporated herein by reference.
(11) Filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, and
incorporated herein by reference.
(12) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996,
and incorporated herein by reference.
(13) Filed as an exhibit to the Company's Form 8-K dated
September 17, 1996, and incorporated herein by reference.
(14) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1996, and
incorporated herein by reference.
(15) Filed as an exhibit to the Company's Form 8-K/A. Filing
dated March 18, 1997, and incorporated herein by
reference.
(16) Filed as an exhibit to the Company's Form 8-K. Filing dated
March 18, 1997, and incorporated herein by
reference.
(17) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1997, and
incorporated herein by reference.
(18) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1998, and
incorporated herein by reference.
(19) Filed as an exhibit to the Company's Annual Report on Form
10-K/A-2 for the fiscal year ended March 31, 1998,
and incorporated herein by reference.
(20) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998,
and incorporated herein by reference.
(21) Filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1998, and
incorporated herein by reference.
(22) Filed as an exhibit to the Company's Current Report on
Form 8-K filed on February 9, 1999, and incorporated
herein by reference.
___________
(b) Reports on Form 8-K filed during the last quarter of the
period covered by this report:
On February 9, 1999, a Form 8-K was filed announcing the
Agreement and Plan of Merger with Jackpot Enterprises, Inc.
(c) Exhibits required by Item 601 of Regulation S-K:
The exhibits incorporated by reference herein are set forth in
Item 14(a)(3) above.
(d) Included below are separate financial statements of
subsidiaries not consolidated and 50% or less owned.
-60-
RIVERSIDE JOINT VENTURE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
-61-
Independent Auditors' Report
The Partners
Riverside Joint Venture:
We have audited the accompanying balance sheets of Riverside
Joint Venture, a Missouri general partnership, as of December 31,
1998 and 1997 and the related statements of operations and
partners' capital, and cash flows for each of the years in the
three-year period ended December 31, 1998. These financial
statements are the responsibility of the General Partners of the
Partnership. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by the General Partners of the
Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Riverside Joint Venture as of December 31, 1998 and 1997, and
the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Memphis, Tennessee
March 12, 1999
-62-
RIVERSIDE JOINT VENTURE
BALANCE SHEETS
ASSETS
December 31,
--------------------------
1998 1997
------------ ------------
Current assets:
Cash and cash equivalents $ 3,292,181 $ 9,935,538
Receivables 2,636,831 3,151,091
Inventories 501,104 473,409
Prepaid expenses and other 73,297 69,565
------------ ------------
Total current assets 6,503,413 13,629,603
------------ ------------
Fixed assets, at cost:
Land 10,406,453 10,996,224
Land improvements 30,059,486 28,549,609
Buildings 99,280,405 98,939,095
Boats 40,104,483 40,104,483
Furniture, fixtures and equipment 12,367,797 12,074,190
Construction in progress 309,800 -
------------ ------------
192,528,424 190,663,601
Less: accumulated depreciation (16,183,597) (7,297,726)
------------ ------------
Total fixed assets 176,344,827 183,365,875
------------ ------------
Other assets, net of accumulated amortization
of $845,517 and $254,153 at December 31,
1998 and 1997, respectively 9,019,384 8,910,778
------------ ------------
Total assets $191,867,624 $205,906,256
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 1,179,409 $ 1,107,209
Accrued expenses 2,061,569 2,294,655
Due to partner 973,583 3,330,555
------------ ------------
Total liabilities 4,214,561 6,732,419
------------ ------------
Commitments and contingencies (notes 5 and 7)
Partners' capital 187,653,063 199,173,837
------------ ------------
Total liabilities and partners' capital $191,867,624 $205,906,256
============ ============
See accompanying notes to financial statements.
-63-
RIVERSIDE JOINT VENTURE
STATEMENTS OF OPERATIONS
Years ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------- -----------
Revenues:
Property rental to partners $ 12,161,031 $ 11,830,054 $ -
Food and beverage 11,299,958 8,283,773 -
Lodging 5,936,506 3,818,375 -
Other 3,085,597 2,316,231 -
Interest income 399,835 800,001 1,241,954
Less: casino promotional
allowances (569,876) (342,907) -
------------ ------------- -----------
Total revenues 32,313,051 26,705,527 1,241,954
------------ ------------- -----------
Direct operating expenses:
Food and beverage 10,561,045 8,257,157 -
Lodging 3,052,996 2,112,214 -
Other 2,000,449 1,715,204 -
------------ ------------- -----------
Total operating expenses 15,614,490 12,084,575 -
------------ ------------- -----------
Operating profit before
undistributed expenses 16,698,561 14,620,952 1,241,954
------------ ------------- -----------
Undistributed expenses:
General and administrative 4,817,826 5,772,585 -
Depreciation and amortization 9,502,975 7,567,189 -
Property taxes and insurance 5,954,043 4,195,900 -
Facility operations 5,230,013 3,939,158 -
Management fees 346,532 119,487 -
Entertainment 269,468 518,948 -
Interest 78,140 51,866 -
------------ ------------- -----------
Total undistributed
expenses 26,198,997 22,165,133 -
------------ ------------- -----------
Preopening costs - 3,774,139 -
------------ -------------- -----------
Net (loss) earnings $ (9,500,436) $ (11,318,320) $ 1,241,954
============ ============== ===========
See accompanying notes to financial statements.
-64-
RIVERSIDE JOINT VENTURE
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1998, 1997 and 1996
Harrah's
Maryland
Heights Players
Corp. MH, L.P. Total
------------ ------------ ------------
Balance, December 31, 1995 $ 21,022,058 $ 21,422,873 $ 42,444,931
Capital contributions 55,000,000 57,800,000 112,800,000
Net income 620,977 620,977 1,241,954
------------ ------------ ------------
Balance, December 31, 1996 76,643,035 79,843,850 156,486,885
Capital contributions 29,415,689 24,589,583 54,005,272
Net loss (5,659,160) (5,659,160) (11,318,320)
----------- ------------ ------------
Balance, December 31, 1997 100,399,564 98,774,273 199,173,837
Capital contributions (1,010,169) (1,010,169) (2,020,338)
Net loss (4,750,218) (4,750,218) (9,500,436)
----------- ------------ ------------
Balance, December 31, 1998 $94,639,177 $ 93,013,886 $187,653,063
=========== ============ ============
Ownership percentages 50% 50% 100%
=========== ============ ============
See accompanying notes to financial statements.
-65-
RIVERSIDE JOINT VENTURE
STATEMENTS OF CASH FLOWS
Years ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------- ------------
Cash flows from operating activities:
Net income (loss) $(9,500,436) $(11,318,320) $ 1,241,954
Depreciation and amortization 9,502,975 7,567,189 -
Changes in assets and liabilities:
Receivables 514,260 (3,061,917) 8,286
Inventories (27,695) (473,409) -
Prepayments and other (3,732) 2,834 (72,399)
Preopening costs - 1,366,429 -
Accounts payable and accrued
expenses (160,886) (19,336,493) (53,403)
Due to partner (2,356,972) 2,695,056 -
------------ ------------ ------------
Net cash (used in) provided by
operating activities (2,032,486) (22,558,631) 1,124,438
------------ ------------ ------------
Cash flows from investing activities:
Fixed asset expenditures (1,890,563) (39,370,484) (102,218,122)
Increase in other assets (699,970) (2,430,082) (1,030,159)
Expenditures for other assets - - (681,751)
------------ ------------ ------------
Net cash used in investing
activities (2,590,533) (41,800,566) (103,930,032)
------------ ------------ ------------
Cash flows from financing activities:
Capital contributions - 54,005,272 112,800,000
Distributions (2,020,338) - -
Payment of note payable - - (3,700,000)
----------- ------------- ------------
Net cash provided by (used in)
financing activities (2,020,338) 54,005,272 109,100,000
----------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents: (6,643,357) (10,353,925) 6,294,406
Cash and cash equivalents at
beginning of year 9,935,538 20,289,463 13,995,057
----------- ------------ ------------
Cash and cash equivalents at end
of year $ 3,292,181 $ 9,935,538 $ 20,289,463
=========== ============ ============
See accompanying notes to financial statements.
-66-
Riverside Joint Venture
Notes to Financial Statements
(1) Organization
Riverside Joint Venture, a Missouri general partnership (the
Partnership), was formed on November 2, 1995 for the purpose
of constructing, developing and owning Riverport Casino
Center which includes a hotel, four riverboat casinos,
restaurants and other entertainment offerings. The
Partnership was considered a development stage enterprise
prior to the commencement of operations in March 1997.
The Partnership acquired certain rights, title and interest
under all agreements, plans, drawings and studies relating to
the development from its general partners, Harrah's Maryland
Heights Corporation (HMHC) and Players MH, L.P. (PMHLP).
Leasing Arrangements and Operation of the Riverboat Casinos
HMHC is a wholly-owned indirect subsidiary of Harrah's
Entertainment Inc. (Harrah's). PMHLP is a wholly-owned
indirect subsidiary of Players International, Inc. (Players).
Each parent has guaranteed certain obligations of each
partner. Harrah's, through a subsidiary, owns the land upon
which the facility, known as Riverport Casino Center, is
located, and has leased the land to the Partnership under a
Ground Lease. The Ground Lease has an eighty-year lease
term. A subsidiary of Harrah's and PMHLP each sublease space
from the Partnership for casino, specialty restaurant and
office purposes. Each sub-tenant pays rent to the
Partnership equal to 50% of the Partnership's monthly
operating losses, as defined. PMHLP is additionally
obligated to pay the Partnership a percentage of gaming
revenues as percentage rent. The Partnership pays this
percentage rent to Harrah's pursuant to the Ground Lease.
The Partnership is not responsible for and does not assume
any liability in connection with the activities and
operations of the subleased premises.
A subsidiary of Harrah's manages the operations of the hotel,
restaurants and parking operations at Riverport Casino Center
for the Partnership pursuant to a management contract. PMHLP
manages the operation of retail shops at Riverport Casino
Center for the Partnership pursuant to a management contract.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
The accompanying financial statements have been prepared
on the accrual basis of accounting. During 1996, the
Partnership financial statements were prepared as a
development stage enterprise.
(b) Cash and Cash Equivalents
The Partnership considers all highly liquid investments
purchased with an original term to maturity of three
months or less to be cash equivalents.
(c) Preopening Costs
Preopening costs, representing primarily salaries and
wages, advertising, training and other costs which were
incurred prior to the opening of the Riverport Casino
Center, were deferred as incurred and expensed upon the
opening of the facility.
(d) Fixed Assets
Fixed assets are stated at cost and are depreciated using
the straight-line method over their estimated useful
lives.
(e) Income Taxes
No provision for state or federal income taxes has been
made as the liability for such taxes is that of the
individual partners rather than the Partnership.
-67-
(f) Inventories
Inventories are stated at the lower of cost or market and
consist primarily of food, beverage and operating
supplies.
(g) Revenue Recognition
Food and beverage and lodging revenues include aggregate
amounts generated by each department.
(h) Promotional Allowances
Promotional allowances consist principally of the retail
value of complimentary food and beverage, lodging and
entertainment provided to patrons of Riverport Casino
Center. The estimated costs of providing such
complimentary services are classified as direct operating
expenses.
(i) Management Estimates
In preparing the financial statements, management is
required to make estimates and assumptions that affect
the reported balances of assets and liabilities as of the
date of the statements of financial position and income
and expenses for the period. Actual results could differ
significantly from these estimates.
(j) Reclassifications
Certain prior year amounts have been reclassified to
conform to the 1998 presentation.
(3)Partnership Agreement
The ownership percentage of each partner is 50%. In
accordance with the partnership agreement and the first
amendment to it dated June 28, 1996, each partner made an
initial cash contribution of $20,000,000 and has made
additional cash contributions pursuant to a Cost Budget.
Each partner also contributed an agreed upon amount of pre-
development costs consisting of land, lock-up costs for
negative easements, land covenant payments and design and
construction fees. These contributed assets were recorded at
their estimated fair value at the date of contribution.
The Partnership Agreement contains restrictions on "Transfer"
of a partner's partnership interest and related property.
These transfer restrictions are incorporated by reference in
the Management Agreement and Operating Leases. For purposes
of these restrictions, "Transfer" specifically excludes the
sale of publicly traded capital stock of Harrah's and Players
on a stock exchange or the sale or other disposition of all
or substantially all of the assets of either of Harrah's or
Players. Each partner is given a right of first refusal in
connection with any proposed Transfer of the other partner's
partnership interest and/or related property. Each partner
is also given the option to purchase the other partner's
partnership interest and related property, on the occurrence
of specified events involving bankruptcy, insolvency, default
under the agreement or certain adverse regulatory
determinations by Missouri gaming regulators, in each case
concerning the other partner. The agreement also provides
for a "shotgun" buy-sell remedy where one partner reasonably
determines that it will suffer, or might likely suffer, an
adverse regulatory impact because of its affiliation with the
other partner. If there is a transfer of HMHC's partnership
interest and/or related property, or suffers one of the
specified bankruptcy or insolvency events, and PMHLP does not
exercise its right of first refusal, PMHLP nonetheless has
the additional right to buy out the Management Agreement at
its fair value. HMHC has an additional right, for five years
expiring November 2, 2002, to acquire PMHLP's partnership
interest and related property, if any of four specified
parties acquires more than 49% of the capital stock or voting
power in any Players entity. There are several remedies for
defaults, which include enforcement against each partner and
enforcement against parental guarantors.
(4)Other Assets
Included in other assets at December 31, 1998 is
approximately $5,479,000 that represents payments to third
parties to obtain restrictive covenants which were assigned
to the Partnership from HMHC as part of the Partnership
Agreement. These covenants are being amortized over a 30-
year period commencing with the opening date of the Riverport
Casino Center. The Partnership in 1998 completed its final
payment of $650,000 as part of assuming the covenants from
HMHC.
-68-
(5)Commitments and Contingencies
The Partnership conditionally agreed to loan $2,250,000,
purchase bonds, and guarantee for five years after issuance,
gaming tax revenues to the City which would be used to fund
the City's debt service for bonds issued for certain
improvements to the Earth City Expressway. The agreement
requires that the City satisfy certain conditions in order to
obligate the Partnership. The City did not satisfy these
conditions prior to the deadline established by the
agreement. The City has not officially released Riverside
Joint Venture from these obligations.
The Partnership has agreed to pay the Howard Bend Levee
District between $600,000 and $700,000 per year to fund debt
service on bonds or costs to fund the second phase of off-
site levee improvements beginning in 1997. Under this
agreement with the Howard Bend Levee District, the
Partnership shall pay no more than 20 annual installments of
the Phase II installment assessments. The Partnership has
made payments of $600,000 and $483,288 related to their 1998
and 1997 Phase II installment assessments, respectively.
(6)Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 (SFAS
107), Disclosures about Fair Value of Financial Instruments,
requires entities to disclose the fair value of all financial
assets and liabilities for which it is practicable to
estimate. Fair value is defined in SFAS 107 as the amount at
which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced
or liquidation sale. The Partnership believes the carrying
amount of such financial assets and liabilities approximate
their fair value at December 31, 1998 and 1997.
(7)Litigation with Missouri Gaming Commission
The Partnership was involved in certain litigation regarding
the constitutionality of its Riverport Casino Center gaming
facility, which is located upon artificial basins fed by the
Missouri River. On November 25, 1997, the Missouri Supreme
Court ruled that gaming may occur only in artificial basins
that are contiguous to the surface stream of the Missouri and
Mississippi Rivers. Subsequently, the Missouri Gaming
Commission attempted to issue disciplinary resolutions that
effectively would have amended the gaming licenses of the
Partnership's casinos to preclude games of chance. The
Partnership's casino partners filed countersuits seeking
declaratory judgment that the Riverport Casino Center met the
state constitutional mandates as established by the Missouri
Supreme Court. On November 3, 1998, the voters of Missouri
approved a referendum that amended their constitution to
expressly permit gaming facilities in artificial basins
within 1,000 feet of the Missouri and Mississippi Rivers.
Subsequent to the November 1998 referendum, which
constitutionally authorized the Riverport Casino Center, the
disciplinary proceedings before the Missouri Gaming
Commission and the suit by the Partnership's casino partners
seeking a declaratory judgment have been dismissed and
withdrawn.
(8)Year 2000 (unaudited)
The Partnership's Year 2000 ("Y2K") assessment and
remediation plan is part of Harrah's company-wide Y2K
assessment and remediation process. Harrah's Y2K assessment
process includes a task force and support office responsible
for implementing this company-wide process. Remediation
efforts on business critical systems are scheduled for
completion by July 1999 with related contingency plans
scheduled for completion by December 1999. Harrah's is also
evaluating the Y2K readiness of vendors and supplies that
support business critical systems. The Partnership believes
that its business critical systems are compliant or will be
made compliant by mid-1999.
-69-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Players International, Inc.
Date: June 18, 1999 By: /s/ Howard Goldberg
----------------------------------
Howard Goldberg
Acting Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this annual report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated below. This annual report may be signed in
multiple identical counterparts all of which, taken together,
shall constitute a single document.
Dated: June 18, 1999 /s/ Howard Goldberg
----------------------------------------
Howard Goldberg
Acting Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Dated: June 18, 1999 /s/ Raymond A. Spera, Jr.
----------------------------------------
Raymond A. Spera, Jr.
Vice President, Chief Financial Officer,
Treasurer and Secretary (Principal
Financial and Accounting Officer)
Dated: June 18, 1999 /s/ John Groom
----------------------------------------
John Groom
Executive Vice President, Chief
Operating Officer and Director
Dated: June 18, 1999 /s/ Vincent J. Naimoli
----------------------------------------
Vincent J. Naimoli, Director
Dated: June 18, 1999 /s/ Alan R. Buggy
----------------------------------------
Alan R. Buggy, Director
Dated: June 18, 1999 /s/ Lawrence Cohen
----------------------------------------
Lawrence Cohen, Director
Dated: June 18, 1999 /s/ Lee Seidler
----------------------------------------
Lee Seidler, Director
Dated: June 18, 1999 /s/ Marshall S. Geller
----------------------------------------
Marshall S. Geller, Director
Dated: June 18, 1999 /s/ Earl Webb
----------------------------------------
Earl Webb, Director
Dated: June 18, 1999 /s/ Charles Masson
----------------------------------------
Charles Masson, Director
-70-
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<PERIOD-END> MAR-31-1999
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<RECEIVABLES> 2343
<ALLOWANCES> 461
<INVENTORY> 1164
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<PP&E> 282283
<DEPRECIATION> 59846
<TOTAL-ASSETS> 389135
<CURRENT-LIABILITIES> 54920
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0
0
<COMMON> 163
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<TOTAL-LIABILITY-AND-EQUITY> 389135
<SALES> 0
<TOTAL-REVENUES> 331078
<CGS> 0
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<OTHER-EXPENSES> 154943
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<INCOME-PRETAX> 3117
<INCOME-TAX> 1547
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<EPS-BASIC> .05
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</TABLE>
Exhibit 21
PLAYERS INTERNATIONAL, INC.
SUBSIDIARIES OF THE COMPANY
Subsidiary State of Incorporation or Organization
---------- --------------------------------------
Metropolis, IL 1292 Limited Partnership Illinois
PCI, Inc. Nevada
Players Bluegrass Downs, Inc. Kentucky
Players Development, Inc. Nevada
Players Entertainment, Inc. Nevada
Players Holding, Inc. Nevada
Players International, Inc. Nevada
Players Lake Charles, LLC Louisiana
Players Lake Charles Riverboat, Inc. Louisiana
Players LC, Inc. Nevada
Players Maryland Heights, Inc. Missouri
Players MH, L.P. Missouri
Players Maryland Heights Nevada, Inc. Nevada
Players Mesquite Golf Club, Inc. Nevada
Players Mesquite Land, Inc. Nevada
Players Nevada, Inc. Nevada
Players Resources, Inc. Nevada
Players Riverboat, LLC Louisiana
Players Riverboat, Inc. Nevada
Players Riverboat Management, Inc. Nevada
Players Services, Inc. New Jersey
Riverfront Realty Corporation Illinois
Riverside Joint Venture Missouri
Showboat Star Partnership Louisiana
Southern Illinois Riverboat/Casino Cruises, Inc. Illinois
196347/2
Exhibit 10.77
AGREEMENT
THIS AGREEMENT, dated as of April 12, 1999 among PLAYERS
INTERNATIONAL, INC., a Nevada corporation ("PII"); PLAYERS
SERVICES, INC., a New Jersey corporation (the "Company"), jointly
and severally; and RAYMOND A. SPERA, JR., an individual (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of PII, a
publicly held Nevada corporation; and
WHEREAS, the Company and PII consider it essential to the
best interest of their respective stockholders to foster the
continuous employment of key management personnel;
WHEREAS, the board of directors of the Company and the Board
(as hereinafter defined) of PII recognize that, as is the case
with many publicly held corporations and their subsidiaries, the
possibility of a change in control may exist and that such
possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of
management personnel to the detriment of PII, the Company and
their respective stockholders;
WHEREAS, the board of directors of the Company and the Board
of PII have determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of
certain members of PII's and the Company's management, including
Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a "Change in Control" (as hereinafter defined) of
PII and/or the Company; and
WHEREAS, in order to induce Executive to remain in the
employ of the Company and in consideration of Executive's
undertakings set forth herein, PII and the Company agree that
Executive shall receive the severance benefits set forth in this
Agreement under the circumstances as described below.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, PII, the Company and Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(b) "Base Compensation" shall mean the Executive's
annual base compensation payable by PII or the Company.
(c) "Beneficial Owner" of any securities shall mean:
(i) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right
to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not
be deemed the "Beneficial Owner" of securities tendered pursuant
to a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange;
(ii) that such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right
to vote or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including without limitation
pursuant to any agreement, arrangement or understanding, whether
or not in writing; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of any security under this
subparagraph (ii) as a result of an oral or written agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding (A) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (B) is not then reportable by such Person
on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) where voting securities are beneficially
owned, directly or indirectly, by any other Person (or any
Affiliate or Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii)
above) or disposing of any voting securities of PII or the
Company;
provided, however, that nothing in this Paragraph 1(c) shall
cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a
firm commitment underwriting until the expiration of forty days
after the date of such acquisition.
(d) "Board" shall mean the Board of Directors of PII.
(e) "Cause" shall mean (i) Executive is convicted of a
felony involving moral turpitude; (ii) Executive uses alcohol or
any unlawful controlled substance to an extent that it interferes
on a continuing and material basis with the performance of his or
her duties under the Agreement; (iii) Executive engages in the
willful, unauthorized disclosure of Confidential Information, as
defined in Paragraph l(g), concerning PII, the Company or any
Subsidiary, unless such disclosure was (A) believed in good faith
by Executive to be appropriate in the course of properly carrying
out his or her duties, or (B) required by an order of a court
having jurisdiction over the subject matter or a summons,
subpoena or order in the nature thereof of any legislative body
(including any committee thereof) or any governmental or
administrative agency; (iv) Executive, other than in the course
of properly carrying out his or her duties as assigned by PII or
the Company, performs services for any other corporation or
Person that competes with PII or the Company or any Subsidiary;
(v) Executive, in carrying out his or her duties as assigned by
PII or the Company, engages in willful neglect or willful
misconduct resulting, or reasonably likely to result, in either
case, in material economic harm to PII or the Company, unless
such act, or failure to act, resulted from Executive's reasonable
belief that such act or failure to act was in the best interests
of PII or the Company; or (vi) Executive is found disqualified or
not suitable to hold a casino key employee license or other such
license by a gaming authority in any jurisdiction where PII, the
Company or any Subsidiary operates a casino and Executive is
required to be found qualified, suitable or licensed, as the case
may be.
(f) "Change in Control" shall mean the occurrence of
any one of the following events:
(i) any Person (except the Griffin Group or its
Affiliates and Associates, Company or PII management as of the
Effective Date and their Affiliates and Associates or the Company
or PII, or any employee benefit plan of the Company or PII, or of
any Affiliate, any Person or entity organized, appointed or
established by PII or the Company for or pursuant to the terms of
any such employee benefit plan), together with all Affiliates and
Associates of such Person, shall become the Beneficial Owner in
the aggregate of 30% or more of the Voting Stock of PII or the
Company then outstanding; provided, however, that no "Change in
Control" shall be deemed to occur during any period in which any
such Person, and its Affiliates and Associates, are bound by the
terms of a standstill agreement under which such parties have
agreed not to acquire more than 30% of the Voting Stock then
outstanding or to solicit proxies;
(ii) consummation by PII or the Company of a
reorganization, merger or consolidation (a "Business
Combination"), in each case, with respect to which all or
substantially all of the individuals and entities who were the
respective Beneficial Owners of the Voting Stock of PII or the
Company outstanding immediately prior to such Business
Combination do not, following such Business Combination,
Beneficially Own, directly or indirectly, more than 50% of the
then outstanding shares of Voting Stock of the corporation
resulting from such Business Combination in substantially the
same proportion as their ownership immediately prior to such
Business Combination of the outstanding Voting Stock;
(iii) consummation of a complete liquidation
or dissolution of PII or the Company;
(iv) sale or other disposition of all or
substantially all of the assets of PII or the Company other than
to a corporation with respect to which, following such sale or
disposition, more than 50% of the then outstanding shares of
Voting Stock is then owned beneficially, directly or indirectly,
by all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the outstanding
Voting Stock immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Voting Stock immediately prior to such sale or
disposition;
(v) individuals who, as of the beginning of any
twenty-four (24) month period, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a
director subsequent to the beginning of such period whose
election or nomination for election by PII's stockholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of members of the Board (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(vi) a "change of control" as defined in the form
of indenture governing any indebtedness of PII shall have
occurred.
(g) "Confidential Information" shall include, but not
be limited to, PII's or the Company's financial, real estate,
marketing and promotional plans and strategies. Confidential
Information does not include information that becomes available
to the public other than through a breach of the Agreement on the
part of Executive.
(h) "Disability" shall mean if, as a result of
Executive's incapacity due to physical or mental illness,
Executive shall have been absent from the full-time performance
of Executive's duties with PII or the Company for six consecutive
months and within thirty days after written notice of termination
is given Executive shall not have returned to the full-time
performance of Executive's duties.
(i) "Good Reason" shall mean, without Executive's
express written consent and without Cause, the occurrence within
twenty-four (24) months after a Change in Control, or within six
(6) months before a Change in Control, of any of the following:
(i) The assignment to Executive of any duties
inconsistent with Executive's status as an executive officer of
PII or the Company or a substantial adverse alteration in the
nature or status of Executive's responsibilities from those in
effect immediately prior to the date that is six months before
the Change in Control;
(ii) Executive's Base Compensation is decreased by
PII or the Company in other than an across-the-board salary
adjustment of similarly situated executives, or Executive's
benefits under any material employee benefit plan or program of
PII or the Company, or Executive's incentive or equity
opportunity under any material incentive or equity program of PII
or the Company is or are reduced, after taking into account the
discretion of the Board to determine the level at which Executive
participates in any performance compensation program, on a basis
not shared in common with other senior executives of PII or the
Company as a group; or
(iii) The failure of PII or the Company, as
applicable, to obtain a satisfactory agreement from any successor
to assume and agree to perform this Agreement, as contemplated in
Paragraph 6 hereof; provided that
(iv) Executive's termination of employment for
Good Reason must occur within 90 days after Executive learns of
the occurrence of the event constituting Good Reason and during
the term of the Agreement.
(j) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(k) "Subsidiary" shall mean any corporation in which
PII or the Company owns 50% or more of the Voting Stock or any
other venture in which it owns 50% or more of the equity.
(l) "Termination Upon a Change in Control" shall mean
that within twenty-four (24) months following a Change in
Control, or within six (6) months prior to a Change in Control,
and during the term of the Agreement, (i) PII or the Company
terminates Executive's employment without Cause or (ii) Executive
terminates Executive's employment for Good Reason, as described
in Subparagraph 3(a).
(m) "Voting Stock" shall mean capital stock of any
class or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the
directors of a corporation.
2. Term of Agreement. This Agreement shall commence on and as
of January 1, 1999 and shall continue in effect through December
31, 2000; provided that if a Change in Control occurs during the
term of this Agreement, this Agreement shall automatically
continue in effect for a period of twenty-four (24) months beyond
the month in which such Change in Control occurs.
3. Change in Control.
(a) Service Through Effective Date. Subject to the
provisions of subsection (b) hereof, if a Change in Control (as
defined in Subparagraph 1(f)) occurs, and Executive remains
employed by and provides Executive's customary service to PII and
the Company through and including the effective date of such
Change in Control, then Executive shall be entitled to the
benefits provided in Paragraph 4(a) hereof by reason of such
employment and services through such effective date. For
purposes of this Paragraph 3(a), if Executive terminates his or
her employment without Good Reason before the effective date of
the Change in Control, the Board may nevertheless, in its sole
discretion, for purposes of this Agreement determine to treat
such termination by the Executive as if it did not occur until
after the effective date of the Change in Control.
(b) Termination. If a Termination Upon a Change in
Control occurs, then Executive shall be entitled to the benefits
provided in Paragraph 4(b) hereof by reason of such Termination
Upon a Change in Control.
(c) Disability. Notwithstanding anything in this
Agreement to the contrary, if Executive's employment terminates
on account of Disability, Executive shall be entitled to receive
disability benefits under any disability program maintained by
PII and/or the Company that covers Executive, and Executive shall
not be considered to have terminated employment under this
Agreement and shall not receive benefits pursuant to Paragraph 4
hereof.
(d) Notice of Termination. Any purported termination
of Executive's employment by PII or the Company or by Executive
shall be communicated by written Notice of Termination to the
other party hereto in accordance with Paragraph 14 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated.
4. Compensation Payable in the Event of Change in Control.
(a) Employment Through Effective Date. If a Change in
Control (as defined in Subparagraph 1(f)) occurs, and Executive
remains employed by and provides Executive's customary service to
PII and/or the Company through and including the effective date
of such Change in Control, then Executive shall be entitled to
receive promptly following the Change in Control, a lump-sum
payment equal to Executive's Base Compensation that would be due
him or her for a period of six (6) months following the effective
date of the Change in Control, determined at the rate of the
Executive's Base Compensation at the time of such Change in
Control.
(b) Termination. If a Termination Upon a Change in
Control occurs, Executive shall be entitled to receive promptly
following the later of Executive's termination of employment or
the Change in Control, the amount of any unpaid Base Compensation
earned or accrued through his or her date of termination and a
lump-sum payment equal to Executive's Base Compensation that
would be due him or her for a period of twelve (12) months
following termination of his or her employment, determined at the
rate of the Executive's Base Compensation at the time of his or
her termination; less any amounts already paid or to be paid to
Executive under Section 4(a), above.
(c) Other Obligations of PII and Company. Nothing
herein shall alter or impair, or constitute a waiver or accord
and satisfaction of, any other obligations and/or liabilities of
PII and/or the Company to Executive, and all compensation payable
to Executive under this Agreement shall be in addition to and not
in lieu of any bonuses, stock options or other payments or
compensation granted by or due from PII and/or the Company to
Executive.
(d) No Mitigation; No Offset. In the event of any
termination of Executive's employment under the Agreement, he or
she shall be under no obligation to seek other employment, and
there shall be no offset against amounts due him or her under the
Agreement on account of any remuneration attributable to any
subsequent employment that he or she may obtain.
(e) Nature of Payments. Any amounts due Executive
under the Agreement in the event of any termination of his or her
employment with PII or the Company are in the nature of severance
payments, or liquidated damages which contemplate both direct
damages and consequential damages that may be suffered as a
result of the termination of his or her employment, or both, and
are not in the nature of a penalty.
5. Intentionally Omitted.
6. Successors, Binding Agreement.
(a) Assumption. The Company and PII will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of PII or the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company and PII would be required to perform
it if no such succession had taken place. Failure of the Company
and/or PII to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from PII
and the Company in the same amount and on the same terms as
Executive would be entitled to hereunder if there occurred a
Termination Upon a Change in Control with respect to the
Executive, except that for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the date of termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. As used in this Agreement, "PII"
shall mean PII as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(b) Successors and Assigns. This Agreement shall
inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If
Executive should die after Executive's termination of employment
under circumstances entitling Executive to benefits hereunder and
while any amount would still be payable to Executive hereunder if
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devisees, legatees or
other designee or, if there is no such designee, to Executive's
estate.
7. Representation. The Company, PII and Executive respectively
represent and warrant to each other that, subject to any approval
that may be necessary from any pertinent regulatory authority,
each respectively is fully authorized and empowered to enter into
the Agreement and that its, her or his entering into this
Agreement and the performance of its, her or his respective
obligations under the Agreement will not violate any agreement
between the Company, PII or Executive respectively and any other
person, firm or organization or any law or governmental
regulation.
8. Entire Agreement. The Agreement contains the entire
agreement between the parties concerning the subject matter
hereof and supersedes all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or
oral, between the parties with respect thereto.
9. Amendment or Waiver. The Agreement cannot be changed,
modified or amended without the consent in writing of all of
Executive, PII and the Company. No waiver by any Party at any
time of any breach by the other Party of any condition or
provision of the Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior
or subsequent time. Any waiver must be in writing and signed by
Executive or an authorized officer of PII or the Company, as the
case may be.
10. Severability. In the event that any provision or portion of
the Agreement shall be determined to be invalid or unenforceable
for any reason, in whole or in part, the remaining provisions of
the Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.
11. Survivorship. The respective rights and obligations of the
Parties hereunder shall survive any termination of the Agreement
to the extent necessary to the intended preservation of such
rights and obligations.
12. Governing Law. The Agreement shall be governed by and
construed and interpreted in accordance with the laws of the
State of New Jersey without reference to principles of conflict
of laws.
13. Settlement of Disputes. In the event of any dispute under
the provisions of this Agreement other than a dispute in which
the primary relief sought is an equitable remedy such as an
injunction, the parties shall be required to have the dispute,
controversy or claim settled by arbitration in the Atlantic City,
New Jersey in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American
Arbitration Association, before a panel of three arbitrators, two
of whom shall be selected by the Company and Executive,
respectively, and the third of whom shall be selected by the
other two arbitrators. Any award entered by the arbitrators
shall be final, binding and nonappealable and judgment may be
entered thereon by either party in accordance with applicable law
in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. The arbitrators
shall have no authority to modify any provision of this Agreement
or to award a remedy for a dispute involving this Agreement other
than a benefit specifically provided under or by virtue of the
Agreement. If Executive prevails on any material issue which is
the subject of such arbitration or lawsuit, PII and the Company
shall be responsible for all of the fees of the American
Arbitration Association and the arbitrators and any expenses
relating to the conduct of the arbitration and the Executive's
reasonable legal fees and expenses. Otherwise, each party shall
bear his, her or its own expenses relating to the conduct of the
arbitration (including attorneys' fees and expenses) and shall
share the fees of the American Arbitration Association.
14. Notices. Any notice given to either Party shall be in
writing and shall be deemed to have been given when delivered
personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed
address as such Party may subsequently give notice of:
If to PII or the Company:
Players International, Inc.
1300 Atlantic Avenue
Suite 800
Atlantic City, NJ 08401
Attention: Chief Executive Officer
If to Executive:
Raymond A. Spera, Jr.
101 Flyatt Road
Shamong, New Jersey 08088
15. Heading. The heading of the paragraphs contained in the
Agreement are for convenience of reference only, do not
constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
16. Counterparts. The Agreement may be executed in two or more
counterparts.
IN WITNESS WHEREOF, the undersigned have executed the
Agreement as of the date first above.
COMPANY
Players Services, Inc.
_________________________
By: Howard A. Goldberg
Its: President
PII:
Players International, Inc.
_________________________
By: Howard A. Goldberg
Its: President
EXECUTIVE:
_________________________
Raymond A. Spera, Jr.
Exhibit 10.80
Mr. Peter J. Aranow
March 23, 1999
[PLAYERS INTERNATIONAL, INC. LETTERHEAD]
March 23, 1999
Mr. Peter J. Aranow
Players International, Inc.
Citicenter Building, Suite 800
1300 Atlantic Avenue
Atlantic City, NJ 08401
Re: Employment Agreement
Dear Peter:
As you know, your Employment Agreement with Players
International, Inc. (together with its successors in interest,
the "Company") dated as of August 1, 1996, as amended by the
Restated Amendment dated as of January 29, 1999 (collectively,
the "Employment Agreement"), will not be extended beyond its
expiration on March 23, 1999.
This letter agreement supplements your Employment Agreement with
respect to the payments and benefits which you are entitled to
receive upon your termination of employment from the Company on
March 23, and thereafter, if a Change in Control occurs with any
entity referenced on Exhibit C to this letter (a "Completed
Change of Control Transaction"). This letter also sets forth our
agreement as to the terms and conditions on which you are being
retained to provide consulting services to the Company following
your termination of employment. Defined terms not otherwise
defined in this letter shall have the same meaning as set forth
in your Employment Agreement.
A. Termination Arrangements
We are confirming that, subject to your executing and not
revoking the release attached as Exhibit A (the "Release") and
subject to your compliance with the confidentiality and non-
competition covenants of Paragraph 10 of the Employment
Agreement, you will be entitled to the following payments under
the Employment Agreement within three business days after the
expiration of the revocation period for the Release unless
otherwise indicated below:
1. Any unpaid base compensation, earned or accrued, through
your date of termination.
2. A lump sum cash payment equal to your base compensation
payments, at the rate in effect at the time of termination, that
would have been paid for a period of six months following
termination of your employment, with no reduction for present
value. This amount totals $150,000.
3. A lump sum cash payment representing the balance of your
annual performance bonus for the Company's fiscal year ended
March 31, 1999, in an agreed amount of $20,000.
4. Reimbursement for expenses incurred but not yet reimbursed
as of March 23, 1999 as provided in Paragraph 8 of your
Employment Agreement.
5. The immediate vesting of all unvested Company stock options
held by you, with the rights provided in Paragraph 9(c)(v) of the
Employment Agreement and, if a Change in Control Transaction
thereafter occurs, Paragraph 9(d) of your Employment Agreement.
Notwithstanding the foregoing, you agree that upon a Change in
Control (as defined in the Employment Agreement), the Company
may, if required by the Change in Control agreement, require that
you surrender for cancellation all of your outstanding options
and stock appreciation rights in exchange for a cash payment
equal to the amount (if any) by which the Change in Control Price
of the stock underlying your options and stock appreciation
rights exceeds the applicable option price (or base price, in the
case of stock appreciation rights), and, in that event, all such
options and stock appreciation rights will be canceled (without
regard to whether the fair market value of the stock exceeds the
option price or base price at such time).
6. Any other compensation and benefits to which you may be
entitled with respect to your service before March 23, 1999 under
applicable plans, programs and agreements of the Company.
7. Continuation of coverage under the employee benefit programs
listed on Exhibit B through September 22, 1999 (except that, in
lieu of continued coverage, the Company may elect to make a
payment to you equal to the Company's cost of such coverage
without regard to tax effect (a "Benefit Commutation Payment")).
The COBRA health care continuation coverage period under Section
4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), shall commence, as applicable, on (i) September 23,
1999, (ii) such earlier date as the Company shall have made a
Benefit Commutation Payment to you, or (iii) notwithstanding
clause (ii) above, if a Completed Change in Control Transaction
occurs, upon the expiration of the period for which continued
Employee Benefits are required to be provided under
Paragraph 9(d) of your Employment Agreement, or on such earlier
date as the Company shall have made a Benefit Commutation Payment
with respect to such Paragraph 9(d) benefits.
8. The Merger Agreement with Jackpot dated February 9, 1999 is
a "Pre-October 1999 Agreement" for purposes of Paragraph 9(d) of
the Restated Amendment. Thus, you will retain the right to
receive the Change in Control benefits provided under
Paragraph 9(d) of the Employment Agreement with respect to the
Jackpot transaction if it occurs and any other Completed Change
in Control Transaction if it does not. Thus, you will receive
the following additional payments upon the occurrence of a
Completed Change in Control Transaction:
(a) A lump sum payment equal to the Present Value of the
Base Compensation that would be due you for a period of
36 months following your termination of employment,
determined on the basis of the average Base
Compensation paid to you for 36 months preceding
March 24, 1999, determined by treating the payment
called for by paragraph 1 above as though it were made
on March 23, 1999. This payment shall be reduced by
any payments made to you under paragraph 2 above.
(b) A lump sum payment equal to the Present Value of the
aggregate performance bonus amounts that you received
for the period of 36 months preceding March 24, 1999,
determined by treating the payment called for by
paragraph 3 above as through it were made on March 23,
1999.
(c) The immediate vesting of all Company stock options then
held by you, with the ability to exercise the options
for the period set forth in Paragraphs 9(c)(v) and 9(d)
of the Employment Agreement (subject to the
inapplicability of the last sentence of Paragraph 5
above).
(d) Continuation of coverage under the employee benefit
programs described on Exhibit B during the 36-month
period following the Change in Control, reduced by a
period equal to the period with respect to which you
receive continued coverage, or a Benefit Commutation
Payment, under the first sentence of paragraph 7 above
(except that, in lieu of continued coverage, the
Company may elect to make a Benefit Commutation Payment
to you). The COBRA health care continuation coverage
period under Section 4980B of the Code shall commence
upon the date determined in clause (iii) of the last
sentence of paragraph 7 above.
(e) The foregoing benefits will be limited as provided in
Paragraph 9(d) of the Employment Agreement with respect
to Section 280G of the Code.
9. All of the foregoing payments will be made subject to any
required tax withholding.
10. Your rights under your Employment Agreement shall continue
in effect for the period set forth in Paragraph 18 thereof.
B. Consulting Arrangements
The following paragraphs set forth our agreement as to the terms
and conditions upon which you are being retained to provide
consulting services to the Company (the "Consulting
Arrangement"). The terms of your Consulting Arrangement are
included in this letter as a matter of convenience and the
Consulting Arrangement described below is separate and
independent from your Employment Agreement and the preceding
provisions of this letter which supplement your Employment
Agreement.
1. Unless sooner terminated as provided in paragraph 4 below,
you will provide consulting services on matters within your
expertise from March 24, 1999 through the date of the Special
Meeting of the Company's Stockholders to approve the Change in
Control transaction with Jackpot Enterprises, Inc. (the
"Stockholders Meeting"). The actual period over which consulting
services are provided under the Consulting Arrangement is
referred to below as the "Consulting Period".
2. Your services will be provided at the request of the
Company's Chief Executive Officer. In general, your services
during the Consulting Period will not exceed an average of two
days per week. If at the end of the Consulting Period, you have
performed consulting services for more than an average of two
days per week, your compensation as provided in Paragraph 3 below
will be appropriately adjusted. Except as provided in the
following sentence, you may provide such services at times and
places which are reasonably convenient to you so as not to
interfere with any employment or self-employment which you may
pursue following your termination of employment from the Company.
However, provided the Company gives you reasonable advance
notice, taking into account your actual obligations and prior
commitments to employment and self-employment, you agree to use
your best efforts to provide your services at such sites and
times as are requested by the Chief Executive Officer.
3. Unless otherwise agreed in writing, you will be compensated
at the rate of $5,000 per month, payable in arrears on the 30th
day following your termination of employment and on the
corresponding day of each succeeding month through the date of
the Shareholder's Meeting, unless the Consulting Arrangement is
terminated earlier as provided in Paragraph 4 below. If the
Consulting Arrangement is terminated prior to a monthly payment
date, the final payment will be pro-rated based on the number of
days from the beginning of the most recent monthly payment period
until the date of termination. All such payments will be made
regardless of the number of days during any month that the
Company requests that any services be provided. All such
payments will be made without withholding for taxes, which shall
be your sole responsibility.
4. Either you or the Company may terminate the Consulting
Arrangement on 30 days prior written notice to the other,
delivered in the same manner as provided under Paragraph 21 of
your Employment Agreement.
5. You shall not be entitled to participate in any Company
employee benefit plans as a result of payments for consulting
services; provided, however, that this shall not affect your
entitlement to Employee Benefits as set forth in Paragraphs 7 and
8(d) of Part A of this letter.
6. You shall be entitled to indemnification by the Company
until the expiration of the Consulting Period on the same basis
as set forth in Paragraph 12 of your Employment Agreement,
notwithstanding that your employment will terminate on March 23,
1999. The foregoing provisions of this Paragraph 6 shall be in
addition to and shall in no way limit any rights which you may
have under (i) Nevada Revised Statutes, Title 7, Chapter 78.751,
(ii) Article IX of the Company's Capital By-Laws, (iii) your
Employment Agreement, (iv) the Agreement and Plan of Merger dated
as of February 8, 1999 among the Company, Jackpot Enterprises,
Inc. and JEI Merger Corp., and (v) all directors' and officers'
and all other liability insurance policies maintained by the
Company.
7. The Company will continue to reimburse you for all
reasonable expenses which you incur prior to the termination of
this Consulting Arrangement on matters relating to the Company on
the same basis as was being done immediately prior to your
termination of employment.
Sincerely,
PLAYERS INTERNATIONAL, INC.
By:___________________________________
Chief Executive Officer
Agreed and Accepted:
_________________________ Date:_______________
Peter J. Aranow
Exhibit 10.81
Madamba Agreement
-5-
AMENDMENT
THIS AMENDMENT, dated as of March 23, 1999, is between
Players International, Inc. (together with its successors and
assigns, the "Company") and Patrick Madamba, Jr. ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive are parties to an
Employment Agreement dated as of March 31, 1997 as amended by
Amendments dated as of August 31, 1998 and November 12, 1998 (the
"Employment Agreement"); and
WHEREAS, the Company, Jackpot Enterprises, Inc. and JEI
Merger Corp. are parties to an Agreement and Plan of Merger dated
as of February 8, 1999 (the "Merger Agreement"), Section 5.11(d)
of which calls for the resignation of Executive as of the
effective date of the merger contemplated by the Merger Agreement
(the "Merger");
WHEREAS, the Executive and the Company, with the consent of
Jackpot Enterprises, Inc. and JEI Merger Corp. wish to accelerate
the effective date of Executive's resignation to April 7, 1999,
while preserving Executive's right to receive the compensation
and benefits to which he would have been entitled had his
employment continued through the effective date of the Merger;
and
WHEREAS, the Company and Executive now wish to amend the
Employment Agreement to memorialize the arrangements that will
apply to Executive's Termination of Employment from the Company.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the Company and Executive agree to amend the
Employment Agreement as follows:
1. The following new definition is added at the end of
Paragraph 1:
"(n) "Termination by Mutual Consent in Anticipation of
a Change in Control" shall mean Executive's termination of
employment from the Company in anticipation of the consummation
of a merger transaction, with the consent of all parties to the
operative merger agreement."
2. Paragraph 9(c) is amended in its entirety to read as
follows:
(a)
(b)
(c) Termination Without Cause; Constructive
Termination without Cause; Termination by Mutual
Consent in Anticipation of a Change in Control. In the
event Executive's employment is terminated by the
Company without Cause (which shall not include a
termination pursuant to Paragraph 9(a) or 9(d)) or in
the event of a Constructive Termination Without Cause,
or in the event of a Termination by Mutual Consent in
Anticipation of a Change in Control, Executive, upon
executing and not revoking a release of the Company as
to all matters arising in the course of his employment
by the Company and the termination thereof, in the form
attached as Exhibit A to this Amendment, shall be
entitled to receive:
(i) unpaid Base Compensation earned or
accrued through his date of termination and an
additional payment equal to the payments of Base
Compensation that would have been made over the
six month period immediately following termination
of employment, had Executive's employment with the
Company continued, at the rate in effect at the
time of his termination, in a cash lump-sum, not
later than three (3) days following the later of
termination of Executive's employment or
expiration of the Revocation Period provided for
in paragraph 1(a) of the Release annexed hereto as
Exhibit A;
(ii) a lump sum cash payment representing
the balance of your annual performance bonus for
the Company's fiscal year ended March 31, 1999, in
an agreed amount of $25,000, at the same time as
the payment made under clause (i) above;
(iii) reimbursement for expenses incurred
but not yet reimbursed by the Company pursuant to
Paragraph 8, promptly following submission of
request for same;
(iv) the immediate vesting of all stock
options held by Executive, notwithstanding the
terms of any such grant to the contrary, with the
ability to exercise any such options for 12 months
following the date of termination or, if there is
a Pre-October 1999 Agreement, as hereinafter
defined, for such longer or shorter period as is
provided in Section 9(d) hereof, but in no event
after the fifth anniversary of the date of grant;
and
(v) for a period of six months following
termination of employment (or for any longer
period provided under Paragraph 9(d) of the
Employment Agreement, as herein amended, (the
"Continuation Period")), continued payment or
provision of all executive medical, dental and
long-term disability benefits to which he would
have been entitled had his employment with the
Company continued (provided, however, that in the
event the Company is precluded from providing
coverage under any such program by applicable law
or regulation, it may choose to provide Executive
with a payment equal to the Company's cost of such
coverage, without regard to tax effect (a "Benefit
Commutation Payment")). The Company shall provide
Executive with continuation coverage rights under
the Federal Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, which
shall commence, as applicable, on (i) October 6,
1999, (ii) such earlier date as the Company shall
have made a Benefit Commutation Payment to
Executive, or (iii) notwithstanding clause (ii)
above, if a Completed Change in Control
Transaction occurs, as hereinafter defined, upon
the expiration of the period for which continued
Employee Benefits are required to be provided
under Paragraph 9(d) of Executive's Employment
Agreement, or on such earlier date as the Company
shall have made a Benefit Commutation Payment with
respect to such Paragraph 9(d) benefits.
Notwithstanding the foregoing, Executive agrees
that upon a Change in Control (as defined in the
Employment Agreement), the Company may, if
required by the Change in Control agreement,
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).
3. Paragraph 9(d) is amended by adding a new paragraph to
the end to read as follows:
If Executive's employment terminates by reason of
a Termination by Mutual Consent in Anticipation of a
Change in Control pursuant to Paragraph 9(c) and the
Merger thereafter occurs, or if such Merger is not
consummated and the Company has entered into a
definitive merger agreement on or before September 30,
1999 to effect a Change in Control transaction with a
party which received active consideration by the Board
before April 7, 1999 (a "Pre-October 1999 Agreement"),
a list of which parties is attached on Exhibit B to
this Agreement, the consummation of any such Change in
Control (a "Completed Change in Control Transaction")
shall be considered a "Termination Upon a Change in
Control" for purposes of this Agreement, and Executive
shall be entitled to receive the payments and benefits
described in this Paragraph 9(d) upon the Change in
Control. The payments and benefits described in this
Paragraph 9(d) shall be provided promptly following the
consummation of the Change in Control and, unless
otherwise agreed by the parties in writing, shall be
determined by reference to the benefit that would have
been paid assuming a Termination Upon a Change in
Control had occurred on April 7, 1999. Any amounts
previously paid to Executive upon his termination of
employment under Paragraph 9(c)(i) relating to periods
following his termination of employment, or under
Paragraph (9)(c)(v) relating to continuation of certain
benefits, shall be credited against the payments to be
made under this Paragraph 9(d). For purposes of
subparagraph (v) of this Paragraph 9(d) and
subparagraph (iv) of Paragraph 9(c) above, all of
Executive's outstanding stock options shall,
notwithstanding any provision of the option agreements
to the contrary, continue in effect and Executive
shall, unless such options are sooner canceled in
accordance with the provisions of the Merger Agreement
(or any similar provision of any other merger
agreement), have the ability to exercise his
outstanding stock options until the date which is 12
months following the Change in Control, but in no event
shall the options remain in effect after the fifth
anniversary of the date of grant.
4. The Company shall extend to Executive the benefits of
Section 5.9 of the Merger Agreement, provided the Merger occurs.
If the Merger does not occur and a Pre-October 1999 Agreement is
hereafter entered into and a merger pursuant to such agreement
occurs, the Company shall extend to Executive the benefits of any
provision that is included in such Pre-October 1999 Agreement
that is similar to Section 5.9 of the Merger Agreement. The
Company agrees that it will continue to advance promptly to
Executive, following his termination of employment from the
Company, all amounts reasonably incurred by Executive for
attorney's fees and expenses in defending any and all civil,
criminal, administrative or investigative actions, suits or
proceedings, including grand jury proceedings, related to the
Company's development and operation of riverboat casino complexes
in Louisiana ("Proceedings"), until the final disposition of such
Proceedings, in each case subject to Executive's Undertaking
dated June 16, 1998 (the "Undertaking") to repay to the Company
amounts so advanced in accordance with the terms thereof and
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. The Company represents that the Executive has been
debriefed by Company's outside counsel regarding all of his
activities from January 1993 to date in connection with the
Louisiana Riverboat Casino Complexes. The Company represents and
warrants that, as of the date of this Amendment, (i) it has no
knowledge that any wrongful acts have been committed by Executive
and (ii) it has not filed, asserted or commenced any complaints,
claims, actions or proceedings of any kind against Executive with
any federal, state or local court, or with any administrative,
regulatory or arbitration agency or body. The Company further
agrees that it will not file, assert or commence any complaint,
claim, action or proceeding of any kind against Executive with
any federal, state or local court with or any administrative,
regulatory or arbitration agency or body with respect to any
matter from the beginning of the world to the date of his
termination of employment, other than to enforce its rights under
the provisions of the Release, the Undertaking, the Amendment or
the Employment Agreement. The foregoing provisions of this
Paragraph 4 shall be in addition to and shall in no way limit any
rights which Executive may have under (i) Nevada Revised
Statutes, Title 7, Chapter 78.751, (ii) Article IX of the
Company's By-laws, (iii) the Employment Agreement, (iv) the
Undertaking, (v) the Merger Agreement, and (vi) directors' and
officers' and all other liability insurance policies maintained
by the Company.
5. Executive shall continue to make himself reasonably
available to the Company for a period of one year from
Executive's termination of employment to advise on transition
matters as to which Executive has knowledge; provided however
that (i) Executive's services shall not exceed 15 hours per month
and (ii) 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, Executive agrees to provide such services without
additional compensation from the Company; provided, however, that
the Company shall reimburse Executive for his reasonable out-of-
pocket expenses incurred in the performances of services rendered
hereunder.
6. Defined terms used in this Amendment and not otherwise
defined shall have the same meanings as set forth in the
Employment Agreement.
7. In all respects not amended, the Employment Agreement
is hereby ratified and confirmed, including, without limitation,
Paragraphs 9 through 22 thereof, inclusive.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first above written.
PLAYERS INTERNATIONAL, INC.
Howard A. Goldberg
Chief Executive Officer
Patrick Madamba, Jr.
AGREED AND ACCEPTED: JACKPOT ENTERPRISES, INC.
By: Don R. Kornstein
Its: Chief Executive Officer
JEI MERGER CORP.
By: Don R. Kornstein
Its: Chief Executive Officer
Exhibit A
RELEASE AGREEMENT
1. Representation by Counsel/Revocation. (a) By executing
this Release, 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 the law firm of Willkie Farr & Gallagher 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 to revoke it (such seven day
period being the "Revocation Period").
(b) This Agreement will not be effective or
enforceable 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 seventh day after execution of this Release. If
so revoked, this Agreement shall be deemed to be void ab initio
and of no further force and effect.
2. Release. As a material inducement to the Company to
enter into the Amendment to which this Release is annexed, and in
consideration of its agreements and obligations under the
Amendment dated as of March 23, 1999 to which this Release is
attached (the "Amendment") and for other good and valuable
consideration, the receipt of which is hereby acknowledged by
Executive, Executive hereby irrevocably, unconditionally and
generally releases, remises and forever discharges, as to all
matters set forth below which are not within the "Release
Exclusions" as defined in Paragraph 3 below, the Company and its
subsidiaries and each of their respective affiliates, officers
and directors, and the heirs, executors, administrators,
receivers, successors and assigns of all of the foregoing
(collectively, "Releasee"), 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 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, to the extent not within the Release Exclusions
(collectively, "Claims"), arising directly or indirectly pursuant
to or out of his employment with 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 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, 29 U.S.C. 621 et. seq. ("ADEA") 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
(including, without limitation, the New Jersey Law Against
Discrimination), and applicable rules and regulations promulgated
pursuant to or concerning any of the foregoing statutes; (d) for
tort, tortious or harassing conduct, infliction of mental
distress, interference with contract, fraud, libel, defamation or
slander; and (e) for damages, including, without limitation,
punitive or compensatory damages or for attorneys' fees,
expenses, costs, wages, injunctive or equitable relief.
3. Release Exclusions. This Release shall not apply to
any rights or Claims that Executive has or may have (I) to
receive the benefits to which he is entitled under the Amendment,
(II) arising under Paragraphs 7 through 9 and 13 through 20 of
the Employment Agreement, (III) to indemnification pursuant to
Nevada Revised Statutes, Title 7, Chapter 78.751 and Article IX
of the Company's By-Laws, (IV) to seek coverage under directors'
and officers' liability insurance policies maintained or required
to be maintained by the Company and (V) to assert affirmative
defenses, other defenses, rights of contribution, and other
rights he may have in respect of claims asserted by any Releasee
or any other person or entity against Executive (the matters
referenced in this Paragraph 3 are referred to in Paragraph 2 as
the "Release Exclusions").
4. Notwithstanding Executive's termination of employment
in consideration of Executive's execution of this Agreement, the
Company shall pay or cause to be paid or provided to Executive,
subject to applicable employment and income tax withholdings and
deductions, all amounts and benefits required to be provided by
the Amendment.
5. Executive agrees and acknowledges that the Company, on
a timely basis, has paid, or agreed to pay, to Executive all
amounts due and owing based on his prior services in accordance
with the terms of the Employment Agreement and that the Company
has no obligation, contractual or otherwise, to Executive, except
as required to be provided by the Amendment, nor does it have any
obligation to hire, rehire or re-employ Executive in the future.
6. Executive agrees and reaffirms that Paragraphs 10(c)
and (d) of the Employment Agreement, as to Confidential
Information, shall continue to apply notwithstanding the
termination of Executive's employment, and that the Company shall
be entitled to all remedies available under Paragraph 11 of the
Employment Agreement in enforcing its rights hereunder as well as
under Paragraphs 10(c) and (d) of the Employment Agreement.
7. Executive further agrees and reaffirms that
Paragraphs 10(a), (b), (e), (f) and (g) of the Employment
Agreement, as to Non-Competition, non-solicitation and other
agreements shall continue to apply notwithstanding the
termination of Executive's employment, and that the Company shall
be entitled to all remedies available under Paragraph 11 of the
Employment Agreement in enforcing its rights hereunder as well as
under Paragraph 10 of the Employment Agreement.
8. Executive further agrees and covenants that, except as
may be required to enforce his rights under the Release
Exclusions, neither he, nor any person, organization or other
entity on his behalf, will file, charge, claim, sue or cause or
permit to be filed, charged, or claimed, any action, suit or
legal proceeding for personal relief (including without
limitation any action for damages, injunctive, declaratory,
monetary or other relief) against the Company, involving any
matter occurring at any time in the past up to and including the
date of this Agreement, or involving any continuing effects of
any actions or practices which may have arisen or occurred up to
and including the date of this Agreement, including without
limitation any charge of discrimination under ADEA, Title VII of
the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e et.
seq., the Workers' Compensation Act or state or local laws. In
addition, Executive further agrees and covenants that should he,
or any other person, organization or entity on his behalf, file,
charge, claim, sue or cause or permit to be filed, charged, or
claimed, any action for damages, including injunctive,
declaratory, monetary or other relief, despite his agreement not
to do so hereunder, or should he otherwise fail to abide by any
of the terms of this Agreement, the Employment Agreement or the
Amendment, then the Company will be relieved of all further
obligations owed hereunder, he will forfeit all monies paid to
him hereunder and he will pay all of the costs and expenses of
the Company (including without limitation reasonable attorneys'
fees) incurred in the defense of any such action or undertaking.
9. Executive hereby agrees and acknowledges that, under
this Agreement and the Amendment, the Company has agreed to
provide him with compensation and benefits that are in addition
to any amounts to which he otherwise would have been entitled
under the Employment Agreement or otherwise in the absence of
this Agreement, and that such additional compensation is
sufficient to support the covenants and agreements by Executive
herein.
10. Executive further agrees and acknowledges that the
undertakings of the Company as provided in this Agreement are
made to provide an amicable conclusion of Executive's employment
by the Company and, further, that Executive will not require the
Company to publicize anything to the contrary. Executive and the
Company, its officers, employees and directors, covenant and
agree that they will not disparage the name, business reputation
or business practices of the other.
11. Executive hereby certifies that he has read the terms
of this Agreement, that he has been advised by the Company to
consult with an attorney and that the understands its terms and
effects. Executive acknowledges, further, that he is executing
this Agreement of his own volition, without any threat, duress or
coercion and with a full understanding of its terms and effects
and with the intention, as expressed in Section 2 hereof, of
releasing all claims recited herein in exchange for the
consideration described herein, which he acknowledges is adequate
and satisfactory to him. The Company has made no representations
to Executive concerning the terms or effects of this Agreement
other than those contained in this Agreement.
12. Executive and the Company agree that if any part of
this Agreement is determined to be invalid, illegal or otherwise
unenforceable, the remaining provisions of this Agreement shall
not be affected and will remain in full force and effect.
13. This Agreement shall be interpreted and enforced under
the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the day and year first above written.
ATTEST: PLAYERS INTERNATIONAL, INC.
BY:
Secretary
Witness Patrick Madamba, Jr.
Exhibit B
To pursue any and all rights or Claims, the following
is a list of companies with respect to which a change in control
transaction has received active consideration by the Board as of
April 6, 1999:
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 the purposes of this Amendment, a transaction with an
affiliate of any of the above listed companies or entities will
be treated in the same manner as a transaction with the Company
itself.
Exhibit C
To pursue any and all rights or Claims, he following is
a list of companies with respect to which a change in control
transaction has received active consideration by the Board as of
March 23, 1999:
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
Sun International
Note: For the purposes of this Letter, a transaction with an
affiliate of any of the above listed companies or entities will
be treated in the same manner as a transaction with the Company
itself.
Exhibit 10.78
9
PURCHASE AGREEMENT
This Purchase Agreement is made as of March 1, 1999, by and
between:
THE BEEBER CORPORATION, a Louisiana corporation (the
"Corporation"), herein represented by William D. Woodward, its
duly authorized president, whose mailing address is 718 Ryan
Street, Lake Charles, Louisiana 70601;
WILLIAM D. WOODWARD ("WW") and TIMOTHY J. VAUGHAN ("TV"),
both persons of the age of majority and domiciled in Calcasieu
Parish, Louisiana, whose mailing address is 718 Ryan Street, lake
Charles, Louisiana 70601 (herein collectively referred to as the
"Individuals"; while the Corporation and the Individuals are
collectively referred to as "Beeber"); and
PLAYERS LAKE CHARLES, LLC (successor in interest to Players
Lake Charles, Inc.), a Louisiana limited liability company
("Players"), herein represented by Players Lake Charles
Riverboat, Inc., its duly authorized managing member, which
appears herein by and through Howard A. Goldberg, its duly
authorized president, whose mailing address is 2333 Broad Street,
Lake Charles, Louisiana 70601.
BACKGROUND
A. The Corporation is the holder of a Payment Interest
under the terms of that certain Settlement Agreement dated as of
the 27th day of July, 1995 (the "Settlement Agreement"), by and
among Players Lake Charles, Inc. (predecessor in interest to
Players), Beeber and certain other parties, pursuant to which
Settlement Agreement, Players agreed, among other things, to pay
to the Corporation the sum of $1.425 per Gaming Patron included
in the Coast Guard Count in any Rental Year (the "Payment
Interest"; each italicized term is used as defined in the
Settlement Agreement). As referenced in the Settlement
Agreement, the Payment Interest represents additional
consideration for the transactions contemplated by that certain
Asset Purchase Agreement dated August 16, 1995 by and between the
Corporation and Players Lake Charles, Inc.
B. On or after July 28, 1995, with the consent of Players,
the Corporation assigned a portion of the Payment Interest,
consisting of $0.25 per Gaming Patron included in the Coast Guard
Count in any Rental Year, to Karl E. Boellert ("Boellert"). Said
assignment reduced the Corporation's Payment Interest to $1.175
per Gaming Patron included in the Coast Guard Count in any Rental
Year (the "Remaining Payment Interest"). Each month, Beeber
receives payment from Players (the "Monthly Payments") in an
amount determined by multiplying the Remaining Payment Interest
by the number of Gaming Patrons included in the Coast Guard Count
during the immediately preceding month.
C. On or about February 8, 1999, Players' parent
corporation, Players International, Inc. ("PII"), entered into a
merger agreement with Jackpot Enterprises, Inc. ("Jackpot")
pursuant to which, among other things, a subsidiary of Jackpot is
to merge with and into PII (the "Merger Transactions").
D. Players has offered to purchase from Beeber and Beeber
has agreed to sell and convey to Players the Remaining Payment
Interest (including any and all interest of the Individuals in
such Remaining Payment Interest by virtue of the Individuals'
ownership of the stock of the Corporation), all subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions
above are incorporated herein by this reference as if set forth
at length. Players and Beeber hereby acknowledge the truth and
accuracy of the Background provisions.
2. Purchase and Sale of Remaining Payment Interest. On
the third business day of the month next following the receipt of
Regulatory Approval (as hereinafter defined) (the "Closing
Date"), Players shall purchase from Beeber, and Beeber shall sell
to Players the Remaining Payment Interest. If the Closing Date
does not occur on or before January 5, 2000, this Agreement and
the rights and obligations of the parties hereunder shall
terminate; provided, however, that if any of the parties shall
have acted in bad faith in seeking Regulatory Approval, then this
Agreement shall be deemed breached by any such party and the
other parties hereto shall have such rights and remedies as may
be available at law.
3. Purchase Price.
(a) Subject to the receipt of Regulatory Approval, as
of the date of this Agreement, and in consideration of the
purchase of the Remaining Payment Interest, Players shall pay to
the Corporation, or such of the Individuals as the Corporation
may direct, the sum of Thirteen Million Five Hundred Thousand and
No/100 Dollars ($13,500,000.00) (the "Purchase Price"), subject
to adjustment in accordance with the terms of subparagraph 3(b).
(b) From and after the date of this Agreement, (i) the
Purchase Price shall accrue interest at the rate of seven percent
(7%) per annum, and (ii) each Monthly Payment (from and after
that accrued during February of 1999) shall be applied to the
Purchase Price; first to the payment of accrued interest, and
second to the reduction of the Purchase Price. On the Closing
Date, the resultant balance of the Purchase Price (the "Adjusted
Purchase Price") plus accrued but unpaid interest shall be paid
by Players in immediately available funds. In the event that
Closing occurs on the Closing Date, Players shall have no
obligation to make any Monthly Payment or any pro rated portion
thereof to Beeber for any portion of the month in which Closing
occurs.
4. Release and Non-Compete Agreement. In consideration of
the receipt of the Adjusted Purchase Price, Beeber shall execute
and deliver to Players a Release and Non-Compete Agreement in
substantially the form attached hereto as Exhibit "A" (the
"Release and Non-Compete Agreement").
5. Conditions Precedent.
(a) Players' obligation to purchase the Remaining
Payment Interest shall be contingent upon the earlier to occur
of:
(i) Players' receipt of approval of the
transactions contemplated by this Agreement from the Louisiana
Gaming Control Board or any other Louisiana gaming regulatory
authorities having jurisdiction over the operations of Players
(the "Louisiana Regulators"); and
(ii) the failure of the Louisiana Regulators
to respond within sixty (60) days after Players' submission to
the Louisiana Regulators of a request for a determination of
whether the transactions contemplated by this Agreement require
the approval of the Louisiana Regulators; and
(iii) Players' receipt of a written
determination from the Louisiana Regulators to the effect that
approval of the transactions contemplated by this Agreement is
not required (the happening of any event described in
subparagraph (i), (ii) or (iii) shall be referred to as
"Regulatory Approval").
(b) Players shall diligently pursue Regulatory
Approval in conjunction with its efforts to obtain approval of
the Merger Transactions. However, if the Merger Transactions
(and consequently, the transactions contemplated by this
Agreement) have not been approved by the Louisiana Regulators on
or before September 30, 1999, then Players, with the assistance
and cooperation of the Corporation and the Individuals, as
needed, shall make independent application for Regulatory
Approval. Players shall diligently pursue all such approvals.
6. Time of Closing; Closing Deliveries. Closing of the
purchase and sale of the Remaining Payment Interest ("Closing")
shall take place on the Closing Date at a time and a place
mutually convenient to the parties. At Closing, Players shall
deliver to the Corporation, or such of the Individuals as the
Corporation may direct, the Adjusted Purchase Price plus any
accrued but unpaid interest, and Beeber shall deliver to Players
the Release and Non-Compete Agreement.
7. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
8. Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Purchase Agreement before the undersigned, competent witnesses,
and the notaries shown below, as of the date first above written.
WITNESSES: THE BEEBER CORPORATION
By:___________________________
William D. Woodward, President
____________________________
____________________________
Notary Public
WITNESSES:
____________________________ _____________________________
William D. Woodward
____________________________
___________________________
Notary Public
[SIGNATURES CONTINUE ON NEXT PAGE]
WITNESSES:
____________________________ __________________________________
Timothy J. Vaughan
____________________________
____________________________
Notary Public
ATTEST: PLAYERS LAKE CHARLES, LLC
By:Players Lake Charles Riverboat,
Inc., Managing Member
____________________________ By:__________________________
Howard A. Goldberg, President
____________________________
____________________________
Notary Public
EXHIBIT "A"
RELEASE AND NON-COMPETE AGREEMENT
This Release and Non-compete Agreement is made on the _____
day of __________, _____, by and between THE BEEBER CORPORATION,
a Louisiana corporation (the "Corporation"), William D. Woodward
("WW") and Timothy Vaughan ("TV"; WW and TV are collectively
referred to as the "Individuals"; the Corporation and the
Individuals are collectively referred to as "Beeber") and PLAYERS
LAKE CHARLES, LLC (successor in interest to Players Lake Charles,
Inc.), a Louisiana limited liability company ("Players").
BACKGROUND
A. Pursuant to the terms of that certain Purchase
Agreement dated as of the first (1st) day of March, 1999, by and
between Players and Beeber (the "Purchase Agreement"), Players
offered to purchase from Beeber and Beeber agreed to sell and
convey to Players, Beeber's "Remaining Payment Interest" (as that
term is defined in the Purchase Agreement) arising under that
certain Settlement Agreement dated as of the 27th day of July,
1995, by and among Players Lake Charles, Inc. (predecessor in
interest to Players), Beeber and certain other parties (the
"Settlement Agreement"), all subject to the terms and conditions
of the Purchase Agreement. As referenced in the Settlement
Agreement, the Remaining Payment Interest represents additional
consideration for the transactions contemplated by that certain
Asset Purchase Agreement dated August 16, 1995 by and between the
Corporation and Players Lake Charles, Inc.
B. Beeber is entering into this Agreement with Players in
consideration of its receipt of the consideration stated in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and legal sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions
above are incorporated herein by this reference as if set forth
at length. Players and Beeber hereby acknowledge the truth and
accuracy of the Background provisions.
2. Acknowledgment of Receipt of Funds. Beeber
acknowledges that on even date herewith, Beeber received from
Players the sum of
_______________________________________________
($______________________) (the "Purchase Price"), such sum paid
to Beeber by Players in full and complete satisfaction of
Players' obligations under the Purchase Agreement.
3. Release.
(a) In full and complete settlement of (i) any and all
obligations of Players to Beeber (and any party claiming under
Beeber) arising under or out of the Settlement Agreement and (ii)
any claims that Beeber may have against Players, and for and in
consideration of the undertakings of Players described herein and
in the Purchase Agreement, including the payment of the Purchase
Price, Beeber does hereby REMISE, RELEASE AND FOREVER DISCHARGE
Players, its affiliates and assigns, directors, shareholders,
partners, employees and agents, and their respective successors
and assigns, heirs, executors and administrators (hereinafter all
included within the term "Players Parties"), of and from any and
all manner of actions and causes of actions, suits, debts, claims
and demands whatsoever at law or in equity, which it ever had,
now has, or hereafter may have, or which its heirs, executors,
administrators, successors or permitted assigns hereafter may
have, by reason of any action, matter, cause or thing whatsoever
from the beginning of time to the date of execution hereof; and
particularly, but without limitation of the foregoing general
terms, any claims arising from or relating in any way to the
Settlement Agreement and the Purchase Agreement, including but
not limited to, any claims which have been asserted, could have
been asserted, or could be asserted now or in the future under
any federal, state or local laws, and any common law claims now
or hereafter recognized and all claims for counsel fees and
costs, and any claims relating in any way to the Settlement
Agreement or the Purchase Agreement. Notwithstanding the
foregoing, nothing contained in this Paragraph 3(a) shall be
deemed to limit the enforceability of any provision of this
Agreement.
(b) In full and complete settlement of (i) any and all
obligations of Beeber to Players (and any party claiming under
Players) arising under or out of the Settlement Agreement and
(ii) any claims that Players may have against Beeber, and for and
in consideration of the undertakings of Beeber described herein
and in the Purchase Agreement, Players does hereby REMISE,
RELEASE AND FOREVER DISCHARGE Beeber, its affiliates and assigns,
directors, shareholders, partners, employees and agents, and
their respective successors and assigns, heirs, executors and
administrators (hereinafter all included within the term "Beeber
Parties"), of and from any and all manner of actions and causes
of actions, suits, debts, claims and demands whatsoever at law or
in equity, which it ever had, now has, or hereafter may have, or
which its heirs, executors, administrators, successors or
permitted assigns hereafter may have, by reason of any action,
matter, cause or thing whatsoever from the beginning of time to
the date of execution hereof; and particularly, but without
limitation of the foregoing general terms, any claims arising
from or relating in any way to the Settlement Agreement and the
Purchase Agreement, including but not limited to, any claims
which have been asserted, could have been asserted, or could be
asserted now or in the future under any federal, state or local
laws, and any common law claims now or hereafter recognized and
all claims for counsel fees and costs, and any claims relating in
any way to the Settlement Agreement or the Purchase Agreement.
Notwithstanding the foregoing, nothing contained in this
Paragraph 3(b) shall be deemed to limit the enforceability of any
provision of this Agreement.
4. Covenant Not to Sue. Beeber and Players further agree
and covenant that, except as may be necessary to enforce their
respective rights hereunder, neither will, directly or
indirectly, file, charge, claim, sue or cause or permit to be
filed, charged or claimed, any action for damages, including
injunctive, declaratory, monetary or other relief against the
other, involving any matter occurring at any time in the past up
to the date hereof in connection with Beeber or Players, as the
case may be, or involving any continuing effects of any actions
or practices which may have arisen or occurred prior to the date
hereof. Beeber and Players further agree and covenant that
should either of them, directly or indirectly, file, charge,
claim, sue or cause or permit to be filed, charged or claimed,
any action for damages, including injunctive, declaratory,
monetary or other relief, in each case as prohibited by the
preceding sentence, despite such party's agreement not to do so
hereunder, then such breaching party will repay to the other all
amounts (or the value of benefits) paid hereunder, and pay all of
the costs and expenses of the nonbreaching party (including
reasonable attorneys' fees) incurred in the defense of any such
action or undertaking.
5. Covenant Not to Compete. Beeber hereby agrees that for
a term of two (2) years, it shall not, directly or indirectly
(individually or for, with or through any other person, firm,
joint venture, corporation or other entity), carry on or engage
in any casino gaming business within Calcasieu Parish, or solicit
customers of Players within Calcasieu Parish; provided, however,
that subject to the terms of this Paragraph 5, nothing contained
herein shall limit the ability of Beeber to distribute, own or
operate, or to provide services to any manufacturer, distributor,
or operator of, "Video Draw Poker Devices" as that term is
defined in La.R.S. 33:4862.1(B)(15) ("VDPDs"). The phrase "carry
on or engage in any casino gaming business within Calcasieu
Parish" shall mean being or acting, in any capacity (whether
legal or beneficial), as an owner, landlord of, broker of or for,
operator, employee, agent, consultant, lobbyist, spokesperson or
representative of the interests of any person, firm, joint
venture, corporation or other entity engaged in, or preparing to
engage in, gaming operations or other casino gaming enterprises
within the geographical boundaries of Calcasieu Parish (any such
person, firm, joint venture, corporation or other entity being
referred to as a "Calcasieu Gaming Operator"). Notwithstanding
the provisions of the first sentence of this Paragraph 5, and as
a limited specific exception thereto, any party may (i) own or
operate VDPDs, so long as the subject VDPDs are not owned or
operated, directly or indirectly, with, for or on behalf of any
Calcasieu Gaming Operator, and (ii) distribute VDPDs, or provide
services to any person or entity who manufactures, distributes,
or operates VDPDs, so long as such distributee or recipient of
such services is not, now or in the future, a Calcasieu Parish
Operator. If, after the execution of this Agreement, any party
hereto is engaged in the distribution of VDPDs or the provision
of services to any person or entity who manufactures,
distributes, or operates VDPDs, and such distributee or recipient
of services becomes a Calcasieu Parish Operator, such party(ies)
shall immediately cease its(their) association with such
Calcasieu Parish Operator to the extent of such Calcasieu Parish
Operator's activities in Calcasieu Parish.
6. Indemnification.
(a) Beeber agrees to indemnify, hold harmless and
defend Players, and the Players Parties, from and against any
losses, liabilities, damages, charges, expenses, costs
(including, without limitation, attorneys' fees, court costs and
other legal costs and expenses), penalties, fines, injunctions,
suits, claims, judgments, or demands suffered by or made against
or imposed at any time upon any of the Players Parties, directly
or indirectly, arising as a result of or in connection with its
breach of any term of this Agreement, including its violation of
any of the terms and conditions of Paragraphs 4 or 5 of this
Agreement. If Players shall incur any fees, costs, expenses, or
charges (including, without limitation, attorneys' fees, court
costs and other legal costs or expenses) in order to enforce the
terms of this Agreement, Beeber agrees to pay directly, or at
Players' option to reimburse Players for, such fees, costs, and
expenses no later than thirty (30) days after receiving written
notice of said fees, costs, expenses, or charges.
(b) Players agrees to indemnify, hold harmless and
defend Beeber, and the Beeber Parties, from and against any
losses, liabilities, damages, charges, expenses, costs
(including, without limitation, attorneys' fees, court costs and
other legal costs and expenses), penalties, fines, injunctions,
suits, claims, judgments, or demands suffered by or made against
or imposed at any time upon any of the Beeber Parties, directly
or indirectly, arising as a result of or in connection with its
breach of any term of this Agreement, including its violation of
any of the terms and conditions of Paragraph 4 of this Agreement.
If Beeber shall incur any fees, costs, expenses, or charges
(including, without limitation, attorneys' fees, court costs and
other legal costs or expenses) in order to enforce the terms of
this Agreement, Players agrees to pay directly, or at Beeber's
option to reimburse Beeber for, such fees, costs, and expenses no
later than thirty (30) days after receiving written notice of
said fees, costs, expenses, or charges.
7. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
8. Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Release and Non-Compete Agreement as of the date first above
written.
WITNESSES: THE BEEBER CORPORATION
____________________________ By:_______________________________
William D. Woodward, President
____________________________
____________________________
Notary Public
WITNESSES:
____________________________ __________________________________
William D. Woodward
____________________________
____________________________
Notary Public
WITNESSES:
____________________________ __________________________________
Timothy Vaughan
____________________________
____________________________
Notary Public
[SIGNATURES CONTINUE ON NEXT PAGE]
ATTEST: PLAYERS LAKE CHARLES, LLC
By:Players Lake Charles Riverboat,
Inc., Managing Member
____________________________ By:_______________________________
Howard A. Goldberg, President
____________________________
____________________________
Notary Public
Exhibit 10.79
10
PURCHASE AGREEMENT
This Purchase Agreement is made as of March 1, 1999, by and
between:
KARL E. BOELLERT, a person of the age of majority and
domiciled in Calcasieu Parish, Louisiana, whose mailing address
is P.O. Box 4385, Lake Charles, Louisiana 70606-4385 (the
"Individual"); and
PLAYERS LAKE CHARLES, LLC (successor in interest to Players
Lake Charles, Inc.), a Louisiana limited liability company
("Players"), herein represented by Players Lake Charles
Riverboat, Inc., its duly authorized managing member, which
appears herein by and through Howard A. Goldberg, its duly
authorized president, whose mailing address is 2333 Broad Street,
Lake Charles, Louisiana 70601.
BACKGROUND
A. The Individual is the holder of a Payment Interest
under the terms of that certain Settlement Agreement dated as of
the 27th day of July, 1995 (the "Settlement Agreement"), by and
among Players Lake Charles, Inc. (predecessor in interest to
Players), The Beeber Corporation ("Beeber") and certain other
parties, pursuant to which Settlement Agreement, Players agreed,
among other things, to pay to Beeber the sum of $1.425 per Gaming
Patron included in the Coast Guard Count in any Rental Year (the
"Payment Interest"; each capitalized term is used as defined in
the Settlement Agreement).
B. On or after July 28, 1995, with the consent of Players,
Beeber assigned a portion of the Payment Interest, consisting of
$0.25 per Gaming Patron included in the Coast Guard Count in any
Rental Year (the "Boellert Payment Interest"), to the Individual.
Each month, the Individual receives payment from Players (the
"Monthly Payments") in an amount determined by multiplying the
Boellert Payment Interest by the number of Gaming Patrons
included in the Coast Guard Count during the immediately
preceding month.
C. On or about February 8, 1999, Players' parent
corporation, Players International, Inc. ("PII"), entered into a
merger agreement with Jackpot Enterprises, Inc. ("Jackpot")
pursuant to which, among other things, a subsidiary of Jackpot is
to merge with and into PII (the "Merger Transactions").
D. Players has offered to purchase from Boellert and
Boellert has agreed to sell and convey to Players the Boellert
Payment Interest, all subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions
above are incorporated herein by this reference as if set forth
at length. Players and the Individual hereby acknowledge the
truth and accuracy of the Background provisions.
2. Purchase and Sale of Boellert Payment Interest. On the
third business day of the month next following the receipt of
Regulatory Approval (as hereinafter defined) (the "Closing
Date"), Players shall purchase from the Individual, and the
Individual shall sell to Players the Boellert Payment Interest.
If the Closing Date does not occur on or before January 5, 2000,
this Agreement and the rights and obligations of the parties
hereunder shall terminate; provided, however, that if any of the
parties shall have acted in bad faith in seeking Regulatory
Approval, then this Agreement shall be deemed breached by any
such party and the other party hereto shall have such rights and
remedies as may be available at law.
3. Purchase Price. In consideration of the purchase of
the Boellert Payment Interest, on the Closing Date, Players shall
(i) pay to the Individual the sum of One Hundred Thousand and
No/100 Dollars ($100,000.00) in immediately available funds (the
"Cash Obligation"), and (ii) purchase a fixed annuity contract
for the benefit of the Individual (the "Annuity"), which Annuity
shall provide for monthly payments in the amounts and at the
times provided below:
(a) monthly payments in the gross amount of Twenty
Five Thousand and No/100 Dollars ($25,000.00) each, for a period
of one hundred twenty (120) consecutive months commencing on the
first day of the month immediately following the Closing Date
(the "First Tier Payments");
(b) monthly payments in the gross amount of Fifteen
Thousand and No/100 Dollars ($15,000.00) each, for a period of
one hundred twenty (120) consecutive months commencing on the
first day of the month immediately following the date of the last
First Tier Payment (the "Second Tier Payments"); provided,
however, that the Second Tier Payments shall be reduced in
accordance with the following calculation:
(1) For the purposes of this provision, the
principal balance of Players' obligations to the Individual as of
the date of this Agreement shall be deemed to be Three Million
Two Hundred Sixty Thousand and No/100 Dollars ($3,260,000.00)
(the "Principal Balance"). Interest shall accrue on the unpaid
portion of the Principal Balance from and after the date of this
Agreement at the rate of five and sixty one-hundredths percent
(5.60%) per annum (the "Applicable Rate").
(2) Each Monthly Payment accrued from and after
the date of this Agreement shall be applied first to pay interest
accrued on the Principal Balance, and then to reduce the
Principal Balance (such reduced Principal Balance referred to as
the "Adjusted Principal Balance"). Provided that Closing occurs
on the Closing Date, Players shall have no obligation to make any
Monthly Payment or any pro rated portion thereof to the
Individual for any portion of the month in which Closing occurs.
(3) On the Closing Date, the Adjusted Principal
Balance shall be subtracted from the Principal Balance, and the
resultant sum shall be referred to as the "Amortized Principal".
(4) The present value of the Second Tier Payments
shall be determined using a discount rate equal to the Applicable
Rate.
(5) Second Tier Payments shall be eliminated
until the present value of all Second Tier Payments so eliminated
is equal to the Amortized Principal.
As a condition to the Individual's obligation to sell the
Boellert Payment Interest hereunder, Players must provide to the
Individual the opinion of a tax advisor reasonably satisfactory
to the Individual to the effect that, notwithstanding the
purchase of the Annuity, the Individual shall not be deemed to
have realized, as income, the principal amount of the Annuity.
The terms of the Annuity shall be acceptable to the Individual in
his reasonable discretion; provided, however, that there shall be
no increase in the cost of the Annuity to Players as a result of
any such terms.
4. Release and Non-Compete Agreement. In consideration of
the receipt of the Cash Obligation and the purchase of the
Annuity, the Individual shall execute and deliver to Players a
Release and Non-Compete Agreement in substantially the form
attached hereto as Exhibit "A" (the "Release and Non-Compete
Agreement").
5. Conditions Precedent.
(a) Players' obligation to purchase the Boellert
Payment Interest shall be contingent upon the earlier to occur
of:
(i) Players' receipt of approval of the
transactions contemplated by this Agreement from the Louisiana
Gaming Control Board or any other Louisiana gaming regulatory
authorities having jurisdiction over the operations of Players
(the "Louisiana Regulators"); and
(ii) the failure of the Louisiana Regulators
to respond within sixty (60) days after Players' submission to
the Louisiana Regulators of a request for a determination of
whether the transactions contemplated by this Agreement require
the approval of the Louisiana Regulators; and
(iii) Players' receipt of a written
determination from the Louisiana Regulators to the effect that
approval of the transactions contemplated by this Agreement is
not required (the happening of any event described in
subparagraph (i), (ii) or (iii) shall be referred to as
"Regulatory Approval").
(b) Players shall diligently pursue Regulatory
Approval in conjunction with its efforts to obtain approval of
the Merger Transactions. However, if the Merger Transactions
(and consequently, the transactions contemplated by this
Agreement) have not been approved by the Louisiana Regulators on
or before September 30, 1999, then Players, with the assistance
and cooperation of the Individual, as needed, shall make
independent application for Regulatory Approval. Players shall
diligently pursue all such approvals.
6. Obligation to Renegotiate. If, at 5:00 p.m. EST on the
first day of the month in which the Closing Date is to occur,
there is a difference of greater than 100 basis points between
the rate on the 30-year United States Treasury Bond then in
effect and the Applicable Rate, then at the option of either
party, this Agreement and the rights and obligations of the
parties hereunder shall terminate; provided, however, that for a
period of thirty (30) days thereafter, the parties shall have an
obligation to negotiate in good faith toward an agreement that
would provide the parties with the relative benefits and
obligations described herein, while minimizing the economic
impact of the change in interest rates.
7. Time of Closing; Closing Deliveries. Closing of the
purchase and sale of the Boellert Payment Interest ("Closing")
shall take place on the Closing Date at a time and a place
mutually convenient to the parties. At Closing, Players shall
deliver to the Individual the Cash Obligation, evidence of the
purchase of the Annuity and the opinion of a tax adviser as
referenced in paragraph 3, above, and the Individual shall
deliver to Players the Release and Non-Compete Agreement.
8. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
9. Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Purchase Agreement before the undersigned, competent witnesses,
and the notaries shown below, as of the date first above written.
WITNESSES:
____________________________ __________________________________
Karl E. Boellert
____________________________
___________________________
Notary Public
ATTEST: PLAYERS LAKE CHARLES, LLC
By:Players Lake Charles Riverboat,
Inc., Managing Member
____________________________ By:__________________________
Howard A. Goldberg, President
____________________________
____________________________
Notary Public
EXHIBIT "A"
RELEASE AND NON-COMPETE AGREEMENT
This Release and Non-compete Agreement is made on the _____
day of __________, _____, by and between KARL E. BOELLERT, an
individual (the "Individual") and PLAYERS LAKE CHARLES, LLC
(successor in interest to Players Lake Charles, Inc.), a
Louisiana limited liability company ("Players").
BACKGROUND
A. Pursuant to the terms of that certain Purchase
Agreement dated as of the first (1st) day of March, 1999, by and
between Players and the Individual (the "Purchase Agreement"),
Players offered to purchase from the Individual and the
Individual agreed to sell and convey to Players, the "Boellert
Payment Interest" (as that term is defined in the Purchase
Agreement) arising under that certain Settlement Agreement dated
as of the 27th day of July, 1995, by and among Players Lake
Charles, Inc. (predecessor in interest to Players) and certain
other parties (the "Settlement Agreement"), all subject to the
terms and conditions of the Purchase Agreement.
B. The Individual is entering into this Agreement with
Players in consideration of its receipt of the consideration
stated in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein, and other good and valuable
consideration, the receipt and legal sufficiency of which is
hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Incorporation of Background. The Background provisions
above are incorporated herein by this reference as if set forth
at length. Players and the Individual hereby acknowledge the
truth and accuracy of the Background provisions.
2. Acknowledgment of Receipt of Funds. The Individual
acknowledges that on even date herewith, the Individual received
from Players (i) the Cash Obligation (as that term is defined in
the Purchase Agreement) and (ii) evidence of Players' purchase of
the Annuity (as that term is defined in the Purchase Agreement),
in full and complete satisfaction of Players' obligations under
the Purchase Agreement.
3. Release.
(a) In full and complete settlement of (i) any and all
obligations of Players to the Individual (and any party claiming
under the Individual) arising under or out of the Settlement
Agreement and (ii) any claims that the Individual may have
against Players, and for and in consideration of the undertakings
of Players described herein and in the Purchase Agreement,
including the payment of the Cash Obligation and the purchase of
the Annuity, the Individual does hereby REMISE, RELEASE AND
FOREVER DISCHARGE Players, its affiliates and assigns, directors,
shareholders, partners, employees and agents, and their
respective successors and assigns, heirs, executors and
administrators (hereinafter all included within the term "Players
Parties"), of and from any and all manner of actions and causes
of actions, suits, debts, claims and demands whatsoever at law or
in equity, which it ever had, now has, or hereafter may have, or
which its heirs, executors, administrators, successors or
permitted assigns hereafter may have, by reason of any action,
matter, cause or thing whatsoever from the beginning of time to
the date of execution hereof; and particularly, but without
limitation of the foregoing general terms, any claims arising
from or relating in any way to the Settlement Agreement and the
Purchase Agreement, including but not limited to, any claims
which have been asserted, could have been asserted, or could be
asserted now or in the future under any federal, state or local
laws, and any common law claims now or hereafter recognized and
all claims for counsel fees and costs, and any claims relating in
any way to the Settlement Agreement or the Purchase Agreement.
Notwithstanding the foregoing, nothing contained in this
Paragraph 3(a) shall be deemed to limit the enforceability of any
provision of this Agreement.
(b) In full and complete settlement of (i) any and all
obligations of the Individual to Players (and any party claiming
under Players) arising under or out of the Settlement Agreement
and (ii) any claims that Players may have against the Individual,
and for and in consideration of the undertakings of the
Individual described herein and in the Purchase Agreement,
Players does hereby REMISE, RELEASE AND FOREVER DISCHARGE the
Individual, its heirs, executors and administrators (hereinafter
all included within the term "the Individual Parties"), of and
from any and all manner of actions and causes of actions, suits,
debts, claims and demands whatsoever at law or in equity, which
it ever had, now has, or hereafter may have, or which its heirs,
executors, administrators, successors or permitted assigns
hereafter may have, by reason of any action, matter, cause or
thing whatsoever from the beginning of time to the date of
execution hereof; and particularly, but without limitation of the
foregoing general terms, any claims arising from or relating in
any way to the Settlement Agreement and the Purchase Agreement,
including but not limited to, any claims which have been
asserted, could have been asserted, or could be asserted now or
in the future under any federal, state or local laws, and any
common law claims now or hereafter recognized and all claims for
counsel fees and costs, and any claims relating in any way to the
Settlement Agreement or the Purchase Agreement. Notwithstanding
the foregoing, nothing contained in this Paragraph 3(b) shall be
deemed to limit the enforceability of any provision of this
Agreement.
4. Covenant Not to Sue. The Individual and Players
further agree and covenant that, except as may be necessary to
enforce their respective rights hereunder, neither will, directly
or indirectly, file, charge, claim, sue or cause or permit to be
filed, charged or claimed, any action for damages, including
injunctive, declaratory, monetary or other relief against the
other, involving any matter occurring at any time in the past up
to the date hereof in connection with the Individual or Players,
as the case may be, or involving any continuing effects of any
actions or practices which may have arisen or occurred prior to
the date hereof. The Individual and Players further agree and
covenant that should either of them, directly or indirectly,
file, charge, claim, sue or cause or permit to be filed, charged
or claimed, any action for damages, including injunctive,
declaratory, monetary or other relief, in each case as prohibited
by the preceding sentence, despite such party's agreement not to
do so hereunder, then such breaching party will repay to the
other all amounts (or the value of benefits) paid hereunder, and
pay all of the costs and expenses of the nonbreaching party
(including reasonable attorneys' fees) incurred in the defense of
any such action or undertaking.
5. Covenant Not to Compete. The Individual hereby agrees
that for a term of two (2) years, it shall not, directly or
indirectly (individually or for, with or through any other
person, firm, joint venture, corporation or other entity), carry
on or engage in any casino gaming business within Calcasieu
Parish, or solicit customers of Players within Calcasieu Parish;
provided, however, that subject to the terms of this Paragraph 5,
nothing contained herein shall limit the ability of the
Individual to distribute, own or operate, or to provide services
to any manufacturer, distributor, or operator of, "Video Draw
Poker Devices" as that term is defined in La.R.S.
33:4862.1(B)(15) ("VDPDs"). The phrase "carry on or engage in
any casino gaming business within Calcasieu Parish" shall mean
being or acting, in any capacity (whether legal or beneficial),
as an owner, landlord of, broker of or for, operator, employee,
agent, consultant, lobbyist, spokesperson or representative of
the interests of any person, firm, joint venture, corporation or
other entity engaged in, or preparing to engage in, gaming
operations or other casino gaming enterprises within the
geographical boundaries of Calcasieu Parish (any such person,
firm, joint venture, corporation or other entity being referred
to as a "Calcasieu Gaming Operator"). Notwithstanding the
provisions of the first sentence of this Paragraph 5, and as a
limited specific exception thereto, any party may (i) own or
operate VDPDs, so long as the subject VDPDs are not owned or
operated, directly or indirectly, with, for or on behalf of any
Calcasieu Gaming Operator, and (ii) distribute VDPDs, or provide
services to any person or entity who manufactures, distributes,
or operates VDPDs, so long as such distributee or recipient of
such services is not, now or in the future, a Calcasieu Parish
Operator. If, after the execution of this Agreement, any party
hereto is engaged in the distribution of VDPDs or the provision
of services to any person or entity who manufactures,
distributes, or operates VDPDs, and such distributee or recipient
of services becomes a Calcasieu Parish Operator, such party(ies)
shall immediately cease its(their) association with such
Calcasieu Parish Operator to the extent of such Calcasieu Parish
Operator's activities in Calcasieu Parish.
6. Indemnification.
(a) The Individual agrees to indemnify, hold harmless
and defend Players, and the Players Parties, from and against any
losses, liabilities, damages, charges, expenses, costs
(including, without limitation, attorneys' fees, court costs and
other legal costs and expenses), penalties, fines, injunctions,
suits, claims, judgments, or demands suffered by or made against
or imposed at any time upon any of the Players Parties, directly
or indirectly, arising as a result of or in connection with its
breach of any term of this Agreement, including its violation of
any of the terms and conditions of Paragraphs 4 or 5 of this
Agreement. If Players shall incur any fees, costs, expenses, or
charges (including, without limitation, attorneys' fees, court
costs and other legal costs or expenses) in order to enforce the
terms of this Agreement, the Individual agrees to pay directly,
or at Players' option to reimburse Players for, such fees, costs,
and expenses no later than thirty (30) days after receiving
written notice of said fees, costs, expenses, or charges.
(b) Players agrees to indemnify, hold harmless and
defend the Individual, and the Individual Parties, from and
against any losses, liabilities, damages, charges, expenses,
costs (including, without limitation, attorneys' fees, court
costs and other legal costs and expenses), penalties, fines,
injunctions, suits, claims, judgments, or demands suffered by or
made against or imposed at any time upon any of the Individual
Parties, directly or indirectly, arising as a result of or in
connection with its breach of any term of this Agreement,
including its violation of any of the terms and conditions of
Paragraph 4 of this Agreement. If the Individual shall incur any
fees, costs, expenses, or charges (including, without limitation,
attorneys' fees, court costs and other legal costs or expenses)
in order to enforce the terms of this Agreement, Players agrees
to pay directly, or at the Individual's option to reimburse the
Individual for, such fees, costs, and expenses no later than
thirty (30) days after receiving written notice of said fees,
costs, expenses, or charges.
7. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject
matter contained herein.
8. Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute
one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Release and Non-compete Agreement as of the date first above
written.
WITNESSES:
____________________________ __________________________________
Karl E. Boellert
____________________________
____________________________
Notary Public
ATTEST: PLAYERS LAKE CHARLES, LLC
By:Players Lake Charles Riverboat,
Inc., Managing Member
____________________________ By:_______________________________
Howard A. Goldberg, President
____________________________
____________________________
Notary Public
