<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1996
REGISTRATION NO. 333-7517
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CASINO AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 41-1659606
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION
NUMBER)
(ADDITIONAL REGISTRANTS ARE LISTED ON THE FOLLOWING PAGE)
711 WASHINGTON LOOP
BILOXI, MISSISSIPPI 39530
(601) 436-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES FOR EACH OF THE
REGISTRANTS)
ALLAN B. SOLOMON
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
2200 CORPORATE BOULEVARD, N.W.
BOCA RATON, FLORIDA 33431
(407) 995-6660
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE FOR EACH OF THE REGISTRANTS)
---------------
COPIES TO:
PAUL W. THEISS THEODORE H. LATTY
MAYER, BROWN & PLATT HUGHES HUBBARD & REED
190 SOUTH LASALLE STREET 350 SOUTH GRAND AVENUE
CHICAGO, ILLINOIS 60603 LOS ANGELES, CALIFORNIA 90071
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_] .
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_] .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
I.R.S. EMPLOYER
EXACT NAME OF REGISTRANT AS SPECIFIED STATE OF IDENTIFICATION
IN ITS CHARTER INCORPORATION NUMBER
------------------------------------- ------------- ---------------
<S> <C> <C>
Riverboat Corporation of Mississippi.............. Mississippi 64-0795563
Riverboat Corporation of Mississippi--Vicksburg... Mississippi 42-1400605
Riverboat Services Incorporated................... Iowa 42-1360145
CSNO, Inc......................................... Louisiana 72-1228496
Louisiana Riverboat Gaming Partnership............ Louisiana 72-1235811
St. Charles Gaming Company, Inc................... Louisiana 72-1235262
LRG Hotels, L.L.C................................. Louisiana 72-1243404
Grand Palais Riverboat, Inc....................... Louisiana 72-1235423
LRGP Holdings, Inc................................ Louisiana 64-0863948
P.P.I., Inc....................................... Florida 65-0585198
ASMI Management Inc............................... Florida 65-0605311
Isle of Capri Casino Colorado, Inc................ Colorado 64-0863907
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 18, 1996
PROSPECTUS
$300,000,000
CASINO AMERICA, INC.
% SENIOR SECURED NOTES DUE 2003 LOGO
-----------
Interest on the % Senior Secured Notes due 2003 (the "Notes") of Casino
America, Inc. (the "Company") will be payable semiannually on each and
, commencing , 1997. The Notes will mature on , 2003. Payment
of principal of and interest on the Notes is unconditionally guaranteed on a
senior secured basis by all existing and future Significant Restricted
Subsidiaries (as defined) of the Company (the "Subsidiary Guarantors"). The
Notes are redeemable at the option of the Company, in whole or in part, on or
after , 2000, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. Upon a Change of Control
(as defined), each holder of the Notes will have the right to require the
Company to repurchase such holder's Notes at % of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
In the event the Company consummates a Qualified Public Equity Offering (as
defined) on or before , 1999, the Company may redeem, at its option, up
to $100 million principal amount of the outstanding Notes at % of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of redemption, provided that, after any such redemption, at least $200 million
in principal amount of the Notes remains outstanding.
The Notes will be senior obligations of the Company, and the Subsidiary
Guarantees will be senior obligations of the Subsidiary Guarantors, senior in
right of payment to all existing and future Subordinated Indebtedness (as
defined) of the Company and the Subsidiary Guarantors, respectively. The Notes
and the Guarantees will be secured by a first priority lien on substantially
all assets of the Company and its subsidiaries other than (i) the Isle-Biloxi
Hotel, the Grand Palais riverboat and Pompano Park, as to which junior priority
liens will be granted and (ii) certain Excluded Assets (as defined). The excess
cash flow of the Isle-Bossier City and the Isle-Lake Charles will be subject to
the Cash Sweep (as defined) in the event of an adverse vote on the continuation
of gaming in Bossier and Calcasieu Parishes, respectively. As of June 30, 1996,
after giving effect to the Recent Transactions (as defined) and the offering of
the Notes (the "Offering") and the application of the net proceeds therefrom,
Indebtedness of the Company would have been approximately $375.9 million,
approximately $68.4 million of which would have been secured by a first
priority lien on certain assets as to which a junior priority lien will be
granted to the holders of the Notes.
Concurrently with the consummation of the Offering, the Company intends to
seek to retire or defease all of its outstanding 11 1/2% First Mortgage Notes
due November 15, 2001 (the "First Mortgage Notes") pursuant to the First
Mortgage Notes Retirement (as defined). As of June 30, 1996, $105 million
principal amount of the First Mortgage Notes was outstanding, plus
approximately $1.5 million of accrued and unpaid interest thereon. The Company
expects to use approximately $116.5 million of the net proceeds of the Offering
to effect the First Mortgage Notes Retirement. See "Prospectus Summary--First
Mortgage Notes Retirement."
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN EVALUATING AN
INVESTMENT IN THE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NEITHER THE MISSISSIPPI GAMING COMMISSION NOR
THE LOUISIANA GAMING CONTROL BOARD OR GAM-
ING ENFORCEMENT DIVISION HAS PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PRO-
SPECTUS.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Note........ % % %
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Total........... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
-----------
The Notes are being offered by the Underwriters, subject to prior sale, when,
as and if issued to and accepted by them, subject to approval of certain legal
matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in New York, New York on or about , 1996.
-----------
MERRILL LYNCH & CO. SALOMON BROTHERS INC
NOMURA SECURITIES INTERNATIONAL, INC. DEUTSCHE MORGAN GRENFELL
-----------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES OF EACH OF THE PROPERTIES]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Prospective purchasers should consider
all of the information contained in this Prospectus before making an investment
in the Notes, including, among other things, the matters set forth under "Risk
Factors." Unless indicated or the context otherwise requires, all references
herein to Casino America or the Company refer to Casino America, Inc. and its
consolidated subsidiaries. Unless otherwise indicated, the Prospectus gives
effect to the following transactions consummated by the Company since June
1995, or to be consummated in connection with the Offering (collectively, the
"Recent Transactions"): (i) the issuance of 4,296,085 shares of Common Stock
(as defined) pursuant to the Rights Offering (as defined), assuming a full
subscription thereto, expected to be consummated in July 1996, (ii) the
acquisition of the Grand Palais riverboat (the "Grand Palais") and the related
gaming license (the "Grand Palais Acquisition") in May 1996, (iii) the
acquisition of a 50% interest in St. Charles Gaming Company, Inc. ("SCGC") in
May 1996 (the "SCGC Acquisition"), (iv) the Goldstein Family Equity Purchase
(as defined) in March 1996, (v) the acquisition of Pompano Park (as defined) in
June 1995, (vi) the acquisition of the initial 50% interest in SCGC by the
Louisiana Riverboat Gaming Partnership ("LRGP") in June 1995 (at which time the
Company held a 50% interest in LRGP) and, in connection and expected to occur
simultaneously with the consummation of the Offering, (vii) the acquisition by
the Company of the remaining 50% interest in LRGP and LRG Hotels, L.L.C. ("LRG
Hotels" and such acquisition referred to herein as the "LRGP Acquisition")
which owns the 50% interest in SCGC not owned by the Company and 100% of the
Company's Bossier City, Louisiana facility and (viii) the First Mortgage Notes
Retirement. The Recent Transactions are described in further detail herein.
THE COMPANY
Casino America is a leading developer, owner and operator of dockside and
riverboat casinos and related facilities in the United States. Giving effect to
the Recent Transactions, the Company owns 100% of, and operates, four dockside
or riverboat casino facilities. All of the Company's properties are based on a
tropical island theme and operate under the "Isle of Capri Casino" name. The
Company owns and operates a dockside riverboat casino and hotel in Bossier
City, Louisiana (the "Isle-Bossier City"), two riverboat casinos at a single
facility on a site one mile from Lake Charles, Louisiana (the "Isle-Lake
Charles"), a dockside casino and hotel in Biloxi, Mississippi (the "Isle-
Biloxi") and a dockside casino and recreational vehicle park in Vicksburg,
Mississippi (the "Isle-Vicksburg"). Shreveport/Bossier City is currently the
closest casino gaming market to the Dallas/Ft. Worth, Texas metropolitan area
and Lake Charles is currently the closest casino gaming market to the Houston,
Texas metropolitan area. The Company also owns and operates Pompano Park, a
harness racing track in Pompano Beach, Florida, midway between Miami and West
Palm Beach off of Interstate 95. For the 12 months ended April 30, 1996, as
adjusted to reflect the Recent Transactions, the Company generated total
revenue of $363.5 million and EBITDA of $79.8 million.
The Company's business strategy, which has been implemented in its existing
operations, emphasizes the operation and development of value-oriented gaming
facilities and complementary amenities with a tropical island theme using the
"Isle of Capri Casino" brand name. Management believes that the consistent use
of the Isle of Capri Casino name and associated theme has created a readily
identifiable brand image connoting excitement, quality and value, which the
Company complements by emphasizing customer service and non-gaming
entertainment amenities. The Company seeks to encourage repeat visitors to its
gaming facilities by identifying slot-oriented customers and active casino
patrons through its use of database marketing. Management believes that its
strategy fosters customer loyalty, enhances the Company's ability to compete
effectively in its existing markets, and facilitates the efficient and cost-
effective development of gaming facilities in new markets.
The Company has historically identified and entered new gaming markets which
it believes provide attractive long-term opportunities, sometimes entering
those markets with the assistance of a joint venture partner. The Company is
now consolidating its ownership interests in these facilities and anticipates
that most of its near-term development activities will focus on expanding its
existing facilities. Proceeds from the Offering
3
<PAGE>
are expected to be used to finance the LRGP Acquisition, retire indebtedness to
simplify the Company's capital structure and, together with the net proceeds of
the Rights Offering, fund development of its existing properties. See "Use of
Proceeds."
The Company anticipates adding complementary amenities at its existing
facilities, such as hotels and additional restaurants, in order to compete
effectively in its markets and provide customers with a complete entertainment
and resort experience designed to increase a customer's length of stay at and
use of the Company's facilities. The Company also expects to continue reviewing
gaming opportunities in new markets on the basis of demographic, regulatory,
competitive and other factors. The Company's strategy when entering new markets
has been to develop its projects in phases when appropriate. By reducing the
amount of its initial capital commitment, the Company is able to utilize cash
flow from operations to help fund subsequent phases and increase the funds
available for its other projects. Phased development also allows the Company to
better assess market size, customer preferences and competitive factors and
adapt the nature and scope of new facilities accordingly. The Company's
strategy of making investments through joint ventures, followed by
consolidation of its ownership interests (such as through the LRGP Acquisition
and the SCGC Acquisition), may be implemented in connection with the further
development of its existing properties and the entry into new gaming markets if
the Company believes that such a strategy is appropriate, and if it is able to
identify suitable joint venture partners which provide supplemental expertise
and resources.
CURRENT OPERATIONS
The Isle-Bossier City. The Isle-Bossier City, which commenced operations on
May 20, 1994, is among the highest revenue-producing dockside and riverboat
casino facilities in the United States. The Isle-Bossier City, one of only
three licensed gaming facilities currently operating in the Shreveport/Bossier
City market, is located on a 26-acre site along the Red River approximately 1/4
mile from an exit off Interstate 20. The Isle-Bossier City consists of a 51,000
square-foot dockside riverboat casino containing approximately 30,000 square
feet of gaming space with 942 slot machines and 64 table games on three levels
and an adjacent 72,200 square-foot, land-based entertainment and support
pavilion containing a variety of non-gaming amenities and administrative
offices. The facility offers parking for approximately 1,200 vehicles, of which
940 are accommodated in an attached parking garage. The Company also owns, and
has recently remodeled, the 234-room Isle of Capri Hotel, located approximately
2.5 miles east of the Isle-Bossier City along Interstate 20. Shreveport/Bossier
City is currently the closest casino gaming market to Dallas/Ft. Worth, Texas,
a metropolitan area with a population of approximately 4.5 million located
approximately 180 miles west on Interstate 20. Gaming revenue in the
Shreveport/Bossier City market was $470.8 million for the 12 months ended April
30, 1996. For the 12 months ended April 30, 1996, the Isle-Bossier City
generated total revenue of $154.6 million (including $145.6 million of casino
revenue) and EBITDA of $41.2 million.
The Isle-Lake Charles. The Isle-Lake Charles, which commenced operations with
one riverboat on July 29, 1995, is one of only two riverboat gaming facilities
currently operating in the Lake Charles, Louisiana area. On July 12, 1996, the
Isle-Lake Charles began operating its second riverboat casino, the Grand
Palais, which is the fourth licensed riverboat casino in the Lake Charles
market. A land-based, Indian-owned casino is located approximately 35 miles to
the northeast of the Isle-Lake Charles. The Isle-Lake Charles is located on a
16-acre site along the Calcasieu River adjacent to Interstate 10 in Calcasieu
Parish, one mile from the City of Lake Charles. The Isle-Lake Charles consists
of two riverboats, an approximately 27,500 square-foot riverboat casino
containing approximately 24,700 square feet of gaming space with 891 slot
machines and 43 table games on three levels and the Grand Palais, an
approximately 41,700 square-foot riverboat casino containing approximately
24,200 square feet of gaming space with 880 slot machines and 48 table games on
two levels. The Grand Palais also contains a spacious third level where the
Company may provide a variety of non-gaming and entertainment amenities. The
Isle-Lake Charles recently opened a new 105,000 square-foot land-based pavilion
containing a variety of non-gaming amenities and a four-level attached parking
garage providing, together with its paved lots, parking for more than 2,000
vehicles. Lake Charles is currently the closest casino gaming market to
Houston, Texas, a metropolitan area with a population of approximately 4.2
million located approximately 145 miles west on Interstate 10. The Company's
sole riverboat competitor in the Lake Charles market operates two riverboat
4
<PAGE>
casinos from the same location approximately four miles from the site of the
Isle-Lake Charles. With the addition of the Grand Palais, the Company, like its
riverboat casino competitor, now offers cruising schedules such that one
riverboat casino will be available at dockside for customers while the other
riverboat cruises to comply with cruising requirements. Riverboat gaming
revenue in the Lake Charles market was $228.8 million for the 12 months ended
April 30, 1996; total gaming revenue for the southwestern Louisiana market,
including gaming revenue at the land-based casino (which information is
estimated by the Company, because that casino is not required to publish such
information, based on a market analysis prepared for the Company by Economic
Consulting Services) was $445.5 million for the 12 months ended December 31,
1995. For fiscal 1996, the Isle-Lake Charles (operating for nine months with
one riverboat) had total revenue of $57.3 million (including $56.6 million of
casino revenue) and EBITDA of $6.3 million.
The Isle-Biloxi. The Isle-Biloxi, which commenced operations on August 1,
1992, was the first gaming facility to open in Mississippi. The Isle-Biloxi,
located on an eight-acre site, is the easternmost of four casino facilities
clustered together along U.S. Highway 90 at the eastern end of Biloxi (such
cluster is locally known as "Casino Row"). Casino Row offers the only
concentration of casinos, each offering a distinct theme, within walking
distance from each other along the Mississippi Gulf Coast. The Isle-Biloxi
consists of a 50,000 square-foot dockside casino containing 32,500 square feet
of gaming space with 1,149 slot machines and 42 table games on two levels, an
adjacent land-based pavilion and on-site parking for more than 1,100 vehicles.
In 1995 the Company completed an approximately $50 million capital improvement
program at the Isle-Biloxi (the "Biloxi Improvement Program") that added a 367-
room hotel tower and a 32,000 square-foot entertainment pavilion providing a
variety of non-gaming amenities and enhancements to the casino. The new hotel
is flagged as a Crowne Plaza Resort and is included in the Holiday Inn
worldwide reservation system. Biloxi is currently the closest casino gaming
market to Mobile, Alabama, a metropolitan area with a population of
approximately 525,000 located approximately 45 miles east on Interstate 10, and
to Florida. Gaming revenue in the Mississippi Gulf Coast market was $744.7
million for the 12 months ended April 30, 1996. For the 12 months ended April
30, 1996, the Isle-Biloxi had total revenue of $74.8 million (including $66.3
million of casino revenue) and EBITDA of $17.5 million.
The Isle-Vicksburg. The Isle-Vicksburg, which commenced operations on August
9, 1993, was the first of four gaming facilities to open in Vicksburg,
Mississippi. The Isle-Vicksburg is located on an 18-acre site along the
Mississippi River approximately one mile north of Interstate 20. The Isle-
Vicksburg consists of a 32,000 square-foot dockside casino containing 24,000
square feet of gaming space with 773 slot machines and 47 table games and a
12,000 square-foot, multi-level, land-based entertainment and support pavilion
containing a variety of non-gaming amenities and administrative offices. The
Isle-Vicksburg provides on-site parking for 900 vehicles, and a 13-acre site
located approximately 1/2 mile from the casino provides off-site parking for
200 vehicles and a 67-space recreational vehicle park. Vicksburg is currently
the closest casino gaming market to Jackson, Mississippi, a metropolitan area
with a population of approximately 420,000 located approximately 45 miles east
on Interstate 20. Gaming revenue in the Vicksburg market was $199.4 million for
the 12 months ended April 30, 1996. For the 12 months ended April 30, 1996, the
Isle-Vicksburg had total revenue of $59.6 million (including $57.7 million of
casino revenue) and EBITDA of $16.2 million.
RECENT DEVELOPMENTS
LRGP Acquisition
The Company has agreed to acquire the remaining 50% interest in LRGP held by
Louisiana River Site Development, Inc. ("LRSD"). The consideration for the LRGP
Acquisition will be (i) $85 million in cash payable at closing, (ii) five-year
warrants to purchase 500,000 shares of the Company's common stock (the "Common
Stock") at an exercise price of $10.50 per share delivered at closing and (iii)
$1.5 million per year for seven years, payable monthly beginning on October 1,
1998. The Company escrowed 625,000 shares of Common Stock (for which the
Company has the right to substitute $5 million in cash), some or all of which
will be forfeited if the Company does not fulfill its obligation to close the
transaction by October 1, 1996, as such date may be extended. The Company has
the right to extend the deadline to December 1, 1996, provided that it
5
<PAGE>
pays to LRSD its 50% share of LRGP's net income for the period from and after
October 1, 1996 until closing or termination, plus $166,667 per month.
Concurrently with the closing of the Offering, the Company intends to use a
portion of the net proceeds of the Offering to consummate the LRGP Acquisition.
See "Use of Proceeds" and "Business--Recent Acquisitions--LRGP Acquisition."
Grand Palais Acquisition
On May 3, 1996, the Company purchased all of the outstanding common stock of
Grand Palais Riverboat, Inc. ("GPRI") in a bankruptcy proceeding under Chapter
11 of the United States Bankruptcy Code. GPRI owns the Grand Palais, gaming
equipment, certain other furniture, fixtures and equipment, all necessary
gaming licenses issued by the State of Louisiana and other permits and
authorizations. The aggregate consideration paid by the Company in connection
with the Grand Palais Acquisition was approximately $62.4 million, consisting
of approximately $8.4 million in cash, approximately $37.9 million in
promissory notes and assumed indebtedness and 2,250,000 shares of Common Stock
and five-year warrants to purchase an additional 500,000 shares of Common Stock
at an exercise price of $10.00 per share. See "Business--Recent Acquisitions--
Grand Palais Acquisition" and "Description of Certain Indebtedness--Grand
Palais Notes." On July 12, 1996, the Gaming Board (as defined) authorized the
commencement of gaming on the Grand Palais and, pursuant to such approval, the
Grand Palais opened on such date. See "Risk Factors--Recent Changes in
Louisiana Regulatory Structure." The Company has agreed with the State of
Louisiana to hold the excess cash flow (as defined in such agreement) generated
by GPRI during its first six months of operation in a special escrow account.
SCGC Acquisition
On May 3, 1996, the Company purchased from Crown Casino Corporation ("Crown
Casino") the remaining 50% interest in SCGC (the other 50% of which is owned by
LRGP), in exchange for 1,850,000 shares of Common Stock, a five-year warrant to
purchase an additional 416,667 shares of Common Stock at an exercise price of
$12.00 per share which can be exercised only by exchanging up to $5 million
principal amount of the B Note (as defined) for any such shares and the
restructuring of certain indebtedness owed to Crown Casino. See "Business--
Recent Acquisitions--SCGC Acquisition" and "Description of Certain
Indebtedness--Crown Notes."
Goldstein Family Equity Purchase and Rights Offering
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of its
Common Stock, at a price of $5.875 per share, to Bernard Goldstein, the
Chairman and Chief Executive Officer of the Company, and three members of his
family (the "Goldstein Family Equity Purchase"). Proceeds from the sale totaled
approximately $6.0 million. A portion of the proceeds was used to retire
approximately $1.6 million in loans payable to Mr. Goldstein and a related
party, which amount includes accrued interest.
In connection with the Goldstein Family Equity Purchase, the Company issued
to its shareholders (other than those shareholders participating in the
Goldstein Family Equity Purchase), and certain other of its security-holders,
rights ("Rights") to purchase up to 4,296,085 shares of Common Stock (pursuant
to a registration statement declared effective by the Securities and Exchange
Commission (the "Commission") on July 2, 1996) at the same price, and in the
same pro rata amount, as shares purchased in the Goldstein Family Equity
Purchase (the "Rights Offering"). The Rights will expire on July 26, 1996
(except with respect to certain Rights exercisable by Crown Casino, as to which
the Company has agreed that the exercise period shall commence on the date that
the underlying shares of Common Stock are registered for resale with the
Commission). In the event the Rights Offering is fully subscribed, the Company
will receive net proceeds of approximately $25.1 million.
Hotel Joint Venture
On June 18, 1996, the Company entered into a letter of intent to form a joint
venture (the "Hotel Joint Venture") with H.I. Development Corporation, an
experienced developer of hotel properties, and certain of its
6
<PAGE>
affiliates ("HID"). The purpose of the Hotel Joint Venture will be to develop,
own and operate hotel properties adjacent to the Isle-Bossier City and the
Isle-Lake Charles and, in the event the Company elects to develop a casino
there, in Cripple Creek, Colorado. The letter of intent provides that the
Company and HID will each contribute approximately $10 million in assets to the
Hotel Joint Venture. The Company's contribution is expected to consist of cash,
certain land or other property. See "Business--Future Development
Opportunities--Hotel Joint Venture."
First Mortgage Notes Retirement
The Company has contacted a holder of more than a majority in aggregate
principal amount of First Mortgage Notes to obtain its consent (the "Consent")
to amend (the "Amendment") the defeasance provisions of the Indenture governing
the First Mortgage Notes (the "First Mortgage Notes Indenture") and to
negotiate an agreement for the purchase of such holder's First Mortgage Notes.
The Amendment would allow the Company to effect a defeasance or covenant
defeasance of the First Mortgage Notes concurrently with the closing of the
Offering by depositing in trust (with the First Mortgage Notes trustee)
proceeds therefrom sufficient to repay the First Mortgage Notes outstanding,
which would result in a release of the security interest in collateral securing
the First Mortgage Notes. Upon obtaining the Consent, the Company intends to
privately negotiate with certain other holders of First Mortgage Notes to enter
into agreements for the purchase of their First Mortgage Notes. Concurrently
with the closing of the Offering, the Company intends to consummate each
agreement to purchase First Mortgage Notes and to effect a covenant defeasance
of any of the First Mortgage Notes not so purchased. Completion of the First
Mortgage Notes Retirement would be subject to certain conditions, including,
but not limited to, execution of a supplemental indenture giving effect to the
Amendment and consummation of the Offering. The consummation of the Offering is
subject to the execution of the supplemental indenture giving effect to the
Amendment and the repurchase and defeasance of all of the First Mortgage Notes
(collectively, the "First Mortgage Notes Retirement"). The total cost to effect
the First Mortgage Notes Retirement is expected to be approximately $116.5
million. See "Use of Proceeds."
7
<PAGE>
SUMMARY PROPERTY INFORMATION
The following table sets forth, for each of the Company's current operations,
certain information concerning its gaming facilities, non-gaming amenities,
market and relative market position. Data for gaming facilities and non-gaming
amenities for current operations are approximate due to reconfiguration of
casino floor space in the normal course of business.
<TABLE>
<CAPTION>
ISLE-LAKE
ISLE-BOSSIER CITY CHARLES(1) ISLE-BILOXI ISLE-VICKSBURG
----------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
GAMING FACILITIES:
Casino square footage. 30,000 48,900 32,500 24,000
Slot machines......... 942 1,771 1,149 773
Table games........... 64 91 42 47
Gaming positions(2)... 1,390 2,408 1,443 1,102
NON-GAMING AMENITIES:
Hotel rooms........... 234 0 367 0
Restaurant and bar
seating.............. 610 709 630 302
Parking spaces........ 1,200 2,000 1,100 1,100
RV spaces............. 0 0 0 67
MARKET POPULATION (IN
THOUSANDS)(3):
Within 50 miles....... 550 480 660 530
Within 100 miles...... 1,790 1,560 2,900 1,490
Within 200 miles...... 9,720 10,260 6,410 N/M
MARKET POSITION(4):
% of slot machines.... 32% 32% 8% 27%
% of table games...... 37% 38% 9% 30%
% of gaming
positions(2)......... 33% 34% 8% 27%
% of fiscal 1996
gaming revenues(5)... 31% N/A 9% 29%
% of average market
gaming square
footage.............. 33% 29% 6% 22%
</TABLE>
- --------
(1) Includes the operations of the Grand Palais.
(2) Assumes each slot machine represents one gaming position and each table
game represents seven gaming positions.
(3) Population statistics are based on 1996 estimates derived from demographic
data compiled by Urban Decision Systems, Inc. The Company does not consider
the market population statistic within 200 miles of Vicksburg to be
meaningful because the population base beyond 100 miles of Vicksburg is
more readily served by other gaming markets.
(4) Market position percentages reflect average historical data. The market for
the Isle-Biloxi is considered to be the Coastal Region of Mississippi,
which also includes casinos in Gulfport, Bay St. Louis and Lakeshore. The
market information for the Isle-Lake Charles includes data for, in addition
to Lake Charles, the land-based, Indian-owned casino located in Kinder,
Louisiana, which information has been estimated by the Company, because
that casino is not required to publish such information, based on a market
analysis prepared for the Company by Economic Consulting Services.
(5) The 12-month period ended April 30, 1996.
8
<PAGE>
THE OFFERING
Securities Offered.................... $300 million principal amount of
% Senior Secured Notes due 2003.
Maturity Date......................... , 2003.
Interest Payment Dates................ and , commencing
, 1997.
Optional Redemption................... The Notes will be redeemable, at
the option of the Company, in whole
or in part, on or after
, 2000, at the redemption prices
set forth herein, plus accrued and
unpaid interest, if any, to the
date of redemption. See
"Description of the Notes--
Redemption and Repurchase Offers--
Optional Redemption."
In the event the Company
consummates a Qualified Public
Equity Offering on or before
, 1999, the Company may
redeem, at its option, up to $100
million principal amount of the
outstanding Notes at % of the
principal amount thereof, plus
accrued and unpaid interest, if
any, to the date of redemption,
provided that, after any such
redemption, at least $200 million
in principal amount of the Notes
remains outstanding. See
"Description of the Notes--
Redemption and Repurchase Offers--
Equity Proceeds Redemption."
Excess Louisiana Cash Repurchase In the event of an adverse vote on
Offers................................ the continuation of gaming in
Bossier Parish or Calcasieu Parish,
the Isle-Bossier City Cash Flow (as
defined) and the Isle-Lake Charles
Cash Flow (as defined),
respectively, will be deposited
into a collateral account pursuant
to the Cash Sweep (as defined). At
each such time as the Excess
Louisiana Cash (as defined) in the
collateral account equals $10
million, the Company will be
obligated to make an offer to
purchase, at 100% of the principal
amount of the Notes, plus accrued
and unpaid interest, if any, to the
date of repurchase, an amount of
Notes equal to the Excess Louisiana
Cash less the accrued and unpaid
interest on such Notes. See
"Description of Notes--Collateral
Accounts--Excess Louisiana Cash
Account" and "Description of
Notes--Redemption and Repurchase
Offers--Excess Louisiana Cash
Repurchase Offers."
Regulatory Redemption................. The Notes will be subject to
mandatory disposition and
redemption requirements following
certain determinations by the
Gaming Authorities of any
jurisdiction in which the Company
conducts gaming operations. See
"Description of the Notes--
Redemption and Repurchase Offers--
Gaming Redemption."
9
<PAGE>
Change of Control..................... In the event of a Change of
Control, the Company will be
required to offer to repurchase all
Notes then outstanding at a
redemption price equal to 101% of
the aggregate principal amount of
the Notes, plus accrued and unpaid
interest, if any, to the date of
purchase. There can be no assurance
that the Company will have
sufficient cash to purchase the
Notes in the event that a Change of
Control occurs. See "Description of
the Notes--Redemption and
Repurchase Offers--Change of
Control Repurchase Offer."
Ranking............................... The Notes will rank senior in right
of payment to all existing or
future Subordinated Indebtedness of
the Company and pari passu in right
of payment with any other existing
or future Indebtedness of the
Company.
Guarantees............................ The Company's obligations under the
Notes and the Indenture will be
jointly, severally and
unconditionally guaranteed (the
"Subsidiary Guarantees") on a
senior secured basis by all
existing and future Significant
Restricted Subsidiaries (as
defined) of the Company, subject to
the receipt of the required
approval of any applicable Gaming
Authority. The Subsidiary
Guarantees will rank senior in
right of payment to all existing or
future Subordinated Indebtedness of
the Subsidiary Guarantors and pari
passu in right of payment to all
other existing or future
Indebtedness of the Subsidiary
Guarantors. The obligations of the
Restricted Subsidiaries under the
Subsidiary Guarantees will be
guaranteed by the Company. See
"Description of the Notes--
Subsidiary Guarantees."
Security..............................
The Notes will be secured by a
first priority Lien on
substantially all of the assets of
the Company, and the Subsidiary
Guarantees will be secured by a
first priority Lien on
substantially all of the assets of
the Subsidiary Guarantors, other
than (i) the Isle-Biloxi Hotel, the
Grand Palais and Pompano Park, as
to which junior priority liens will
be granted, and (ii) the Excluded
Assets (which are comprised of
certain assets of the Company not
used in casino operations). See
"Description of the Notes--
Collateral Security."
Certain Covenants..................... The Indenture pursuant to which the
Notes will be issued (the
"Indenture") will contain certain
covenants with respect to, among
others, the following matters: (i)
limitation on indebtedness, (ii)
limitation on liens, (iii)
limitation on restricted payments,
(iv) limitation on dividends and
other payment restrictions
affecting Restricted Subsidiaries,
10
<PAGE>
(v) limitation on asset sales and
events of loss, (vi) limitation on
disposition of stock of Restricted
Subsidiaries, (vii) limitation on
transactions with affiliates and
(viii) restrictions on
consolidations, mergers and
transfers of assets. See
"Description of the Notes--Certain
Covenants."
Use of Proceeds.......................
The gross proceeds of the Offering
will be $300 million. The net
proceeds of the Offering are
estimated to be approximately
$289.3 million. The Company will
use approximately $116.5 million to
effect the First Mortgage Notes
Retirement, $85 million to
consummate the LRGP Acquisition,
approximately $80.7 million to
retire other indebtedness and the
balance of approximately $7.1
million for general corporate
purposes. See "Use of Proceeds."
RISK FACTORS
Prospective purchasers of the Notes should consider all of the information
contained in this Prospectus before making an investment in the Notes. In
particular, prospective purchasers should consider the factors set forth herein
under "Risk Factors."
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information has been derived
from the consolidated financial statements of the Company and should be read in
conjunction with such consolidated financial statements, including the notes
thereto, included elsewhere in this Prospectus. The following pro forma
financial information should be read in conjunction with the unaudited pro
forma consolidated financial statements, including the notes thereto, included
elsewhere in this Prospectus.
The Company believes the results of operations for each of the years in the
three-year period ended April 30, 1996 are not readily comparable to each other
because (i) the Isle-Vicksburg commenced operations on August 9, 1993, (ii) the
Isle-Bossier City commenced operations on May 20, 1994, (iii) the Isle-Lake
Charles commenced operations with a single riverboat facility on July 29, 1995
and (iv) the Isle-Biloxi has faced substantially increasing competition since
opening and was substantially expanded in June 1993 and again in July 1995.
The Company also believes that its historical results may not be indicative
of its future results of operations primarily because, in the past, the Company
has reported its interests in the operations of the Isle-Bossier City and the
Isle-Lake Charles using the equity method of accounting. Upon consummation of
the LRGP Acquisition, the Company will consolidate the results of operations of
the Isle-Bossier City and the Isle-Lake Charles. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The pro forma
financial information reflects the Company's consolidated results of
operations, giving effect to the LRGP Acquisition and the SCGC Acquisition. The
Company believes, however, that the pro forma income statement is not
necessarily indicative of the Company's future operations because it does not
reflect the impact of opening the Grand Palais, which opened on July 12, 1996.
See "Unaudited Pro Forma Financial Data."
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------------
ACTUAL PRO FORMA(1)
---------------------------- ------------
1994 1995 1996 1996
-------- -------- -------- ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Casino............................ $140,994 $117,613 $123,936 $326,129
Rooms, food, beverage and other... 3,639 5,311 27,719 37,344
Management fees--joint ventures... -- 4,613 6,308 --
-------- -------- -------- --------
Total revenue................... 144,633 127,537 157,963 363,473
Operating expenses:
Casino and gaming taxes........... 59,641 59,963 65,026 155,009
Marketing and administrative...... 26,113 26,895 33,167 78,852
Depreciation and amortization..... 5,450 8,945 12,111 25,697
One-time charge(2)................ -- -- 11,798 11,798
Preopening expenses............... 3,475 483 1,311 5,507
Loss on disposal of equipment..... 22 178 1,217 1,217
Other............................. 10,017 10,877 30,140 49,790
-------- -------- -------- --------
Total operating expenses........ 104,718 107,341 154,770 327,870
-------- -------- -------- --------
Operating income.................... 39,915 20,196 3,193 35,603
Interest expense, net(3)............ (6,119) (10,046) (13,924) (42,568)
Equity in income (loss) of
unconsolidated joint ventures...... (2,241) 19,904 16,434 --
Income (loss) before income taxes... 31,555 30,054 5,703 (6,965)
Net income (loss)................... 20,353 18,069 1,555 (6,965)
OTHER FINANCIAL DATA AND RATIOS:
EBITDA(4)........................... $ 46,621 $ 49,706 $ 46,064 $ 79,822
Capital expenditures(5)............. 59,043 50,999 26,517 75,587
EBITDA to net interest expense...... 7.6x 4.9x 3.3x 1.9x
Total debt to EBITDA................ 2.7x 2.8x 3.0x 4.7x
Ratio of earnings to fixed
charges(6)......................... 3.9x 2.6x 1.2x 1.1x
BALANCE SHEET DATA (AT END OF
PERIOD):
Current assets........................................ $ 27,379 $ 57,716
Total assets.......................................... 226,474 515,511
Long-term debt, including current portion............. 139,778 377,817
Stockholders' equity.................................. 50,270 93,819
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------
1994 1995 1996
------- -------- --------
(IN THOUSANDS, EXCEPT
DAILY WIN DATA)
<S> <C> <C> <C>
OPERATING STATISTICS:
BOSSIER CITY
Casino revenue........................................ -- $142,265 $145,604
EBITDA(4)............................................. -- 50,156 41,228
Daily win/slot machine................................ -- 291 303
Daily win/table game.................................. -- 2,053 1,887
LAKE CHARLES
Casino revenue........................................ -- -- $ 56,589
EBITDA(4)............................................. -- -- 6,305
Daily win/slot machine................................ -- -- 139
Daily win/table game.................................. -- -- 1,566
BILOXI
Casino revenue........................................ $81,049 $ 54,217 $ 66,270
EBITDA(4)............................................. 27,255 13,256 17,479
Daily win/slot machine................................ 124 93 125
Daily win/table game.................................. 1,523 972 1,291
VICKSBURG
Casino revenue........................................ $59,945 $ 63,396 $ 57,666
EBITDA(4)............................................. 27,721 21,060 16,238
Daily win/slot machine................................ 243 181 163
Daily win/table game.................................. 1,805 937 750
</TABLE>
- --------
(1) Adjusted to give effect to LRGP's purchase of a 50% interest in SCGC in
June 1995, the SCGC Acquisition, the LRGP Acquisition, the Grand Palais
Acquisition (except no pro forma effect of the Grand Palais Acquisition is
reflected in the pro forma income statement, other than interest on the
debt incurred to effect the Grand Palais Acquisition), the Rights Offering
(assuming a full subscription thereto) and the Offering and the application
of the net proceeds therefrom as if such transactions had occurred on May
1, 1995, with respect to the pro forma consolidated income statement data,
and as of April 30, 1996, with respect to the pro forma consolidated
balance sheet data. See "Unaudited Pro Forma Financial Data."
(2) During the third quarter of fiscal 1996, the Company recorded an $11.8
million pre-tax one-time charge. The components of the one-time charge
include (i) $9.3 million related to the write-down of two riverboats, a
barge and certain gaming equipment, all of which were reclassified during
the quarter as being held for sale, (ii) $2.0 million related to costs
associated with the recent change in executive management and (iii) $0.5
million related to costs associated with certain abandoned projects.
(3) Net of interest income.
(4) EBITDA, or "earnings before interest, income taxes, depreciation and
amortization," is a supplemental financial measurement used by the Company
in the evaluation of its gaming business. EBITDA is calculated by adding
net interest expense, income taxes, depreciation and amortization,
preopening expense, one-time charge and loss on disposal of equipment to
net income. However, EBITDA should only be read in conjunction with all of
the Company's financial data summarized above and its Consolidated
Financial Statements, including the Notes thereto, prepared in accordance
with GAAP appearing elsewhere herein, and should not be construed as an
alternative either to income from operations (as determined in accordance
with GAAP) as an indicator of the Company's operating performance or to
cash flows from operating activities (as determined in accordance with
GAAP) as a measure of liquidity.
(5) Includes $13.1 million, $4.4 million, $4.3 million and $4.4 million of
property and equipment acquired by issuing debt for the years ended April
30, 1994, 1995, 1996 and April 30, 1996 on a pro forma basis, respectively.
(6) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of earnings before provision for income taxes plus fixed
charges (excluding capitalized interest). Fixed charges consist of interest
on indebtedness (including capitalized interest) plus that portion of
rental expense which is considered to be interest.
13
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following factors,
together with other information in this Prospectus, in evaluating an
investment in the Notes.
LOCAL OPTION REFERENDUM REGARDING CONTINUATION OF LEGALIZED GAMING IN
LOUISIANA
On April 19, 1996, the Louisiana legislature approved legislation mandating
local option elections on a parish-by-parish basis to determine whether to
prohibit or continue to permit three individual forms of gaming in Louisiana.
The referendum is scheduled to be brought before the Louisiana voters on a
parish-by-parish basis at the time of the 1996 presidential election and will
determine whether each of the following forms of gaming will be prohibited or
permitted: (i) the operation of video draw poker devices in each parish; (ii)
the conduct of riverboat gaming in each parish that is contiguous to a
statutorily designated river or waterway; or (iii) the conduct of land-based
casino gaming operations in Orleans Parish. Accordingly, on November 5, 1996,
it is expected that voters in Bossier Parish (the site of the Isle-Bossier
City) and Calcasieu Parish (the site of the Isle-Lake Charles) will be voting
"yes" or "no" on the following proposition (and in appropriate parishes as to
similar propositions regarding land-based casino gaming and video draw poker
devices): "Within [name of parish], shall riverboat gaming activities be
permitted?"
The legislation requires that a majority of the votes cast on such
proposition be cast in favor of a particular form of gaming in order to
continue that form of gaming in the affected parish. Accordingly, the
continuation of gaming activities at the Isle-Bossier City requires such
approval from a majority of voters in Bossier Parish voting on such
proposition and the continuation of gaming activities at the Isle-Lake Charles
requires such approval from a majority of voters in Calcasieu Parish voting on
such proposition. In the event that the riverboat gaming proposition is
defeated in a parish, the legislation permits a licensee operating therein to
continue operations in that parish through the expiration of its current
license. The current license of the Isle-Bossier City expires in December
1998, and the two licenses of the Isle-Lake Charles expire in March 1999 and
May 2001, respectively. Alternatively, a licensee operating in a parish where
riverboat gaming is defeated may seek permission to relocate its vessel and
license to a parish where the continuation of riverboat gaming has been
approved, if any (excluding certain portions of Lake Ponchartrain). In the
event that voters do not elect to continue riverboat gaming in Bossier Parish
or Calcasieu Parish, the Indenture provides that all excess cash flow
generated by the Isle-Bossier City or the Isle-Lake Charles, as the case may
be, shall be deposited into a special collateral account for the later
repurchase of Notes (the "Cash Sweep"). See "Description of the Notes--
Collateral Accounts--Excess Louisiana Cash Account."
The discontinuation of riverboat gaming in Bossier Parish or Calcasieu
Parish would have a material adverse effect on the Company and may affect the
ability of the Company to make interest payments on the Notes when due or to
repay the principal thereof on the maturity date. In the event that the
continuation of riverboat gaming is not approved in the November 5, 1996
election in either Bossier Parish or Calcasieu Parish, there can be no
assurance that the Company will be able to obtain the necessary approvals to
relocate its riverboat gaming facilities at the Isle-Bossier City or the Isle-
Lake Charles, as the case may be, to parishes where the continuation of
riverboat gaming was approved, or that any such relocation will be cost-
effective for the Company. In addition, to the extent the Cash Sweep is
required, the Company's ability to make necessary capital expenditures in
order for its remaining facilities to compete effectively in their respective
markets would be significantly limited. Moreover, in the event that the
continuation of riverboat gaming is approved in Bossier Parish or Calcasieu
Parish, but not in another parish where riverboat gaming is presently
conducted, licensees presently conducting riverboat gaming in such parishes
may seek to relocate their operations to Bossier Parish or Calcasieu Parish,
leading to increased competition for the Company. See "--Competition."
LEVERAGE AND DEBT SERVICE
Upon consummation of the Offering, the Company will have significant
interest expense and principal repayment obligations in connection with the
Notes and other debt obligations. See "Description of Certain
14
<PAGE>
Indebtedness." As of April 30, 1996, as adjusted to give effect to the Recent
Transactions and the Offering and the application of the net proceeds
therefrom as set forth herein, the Company's total indebtedness and
stockholders' equity would have been $377.8 million and $93.8 million,
respectively. See "Use of Proceeds" and "Capitalization." The Company will be
entirely dependent upon distributions from its operating subsidiaries to meet
its interest expense and principal repayment obligations under the Notes and
its other debt obligations. The Indenture contains numerous restrictions,
including restrictions relating to the incurrence of additional indebtedness,
the distribution of cash to stockholders, the making of certain investments
and restricted payments, mergers and sales of assets and the creation of
liens. See "Description of the Notes--Certain Covenants." In addition,
substantially all of the Company's property is pledged to the trustee under
the Indenture (the "Trustee") for the benefit of the holders of the Notes and,
in certain cases, holders of certain other indebtedness of the Company and its
subsidiaries. See "Description of the Notes--Collateral Security."
The ability of the Company to meet its debt service requirements and to
engage in various significant corporate transactions that may be important to
its business will be dependent upon its future operating performance, which is
subject to financial, economic, competitive, regulatory and other factors
affecting the Company, many of which are beyond the Company's control. While
the Company expects that its cash flow from operations will be sufficient to
cover its expenses, including interest expense, there can be no assurance with
respect thereto. If the Company is unable to generate sufficient cash flow, it
could be required to adopt one or more alternatives, such as reducing or
delaying planned capital expenditures, selling assets, restructuring debt or
obtaining additional capital. There can be no assurance that any of such
alternatives will be feasible on satisfactory terms, and resorting to such
alternatives could impair the Company's competitive position and reduce its
future cash flow. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In this regard, the Company anticipates
that it will need to make significant capital expenditures with respect to its
current operations in order for those facilities to remain competitive with
existing and expected new competitors in those markets. The Indenture contains
certain restrictions which may limit the Company's ability to incur
indebtedness to make such capital expenditures. See "Description of the
Notes--Certain Covenants." In addition, the highly leveraged position of the
Company may adversely affect its ability to obtain additional financing to
make investments in its current operations or to pursue future gaming
opportunities. See "--Potential Need for Additional Financing."
COMPETITION
General. Competition in the gaming industry is intense in the markets where
the Company operates gaming facilities. As new gaming opportunities arise in
existing gaming jurisdictions, in new gaming jurisdictions and on Indian-owned
lands, new or expanded operations by others can be expected to increase
competition for the Company's existing and future operations and could limit
new opportunities for the Company or result in the saturation of certain
gaming markets. Casino gaming does not have a long operating history in the
jurisdictions where the Company operates gaming facilities and, therefore, the
effects of competition in these jurisdictions cannot be predicted with any
degree of certainty. Many of the Company's competitors have more gaming
industry experience, are larger and have greater financial resources than the
Company. As a result, increased competition could have a material adverse
effect on the Company.
Bossier City Operations. The Isle-Bossier City is one of three comparably
sized gaming facilities currently licensed and operating in the
Shreveport/Bossier City market, all of which opened between April and July
1994 and each of which has comparable amenities. The Isle-Bossier City will
face increased competition from existing competitors to the extent that they
add to or enhance existing amenities. In that regard, Binion's Horseshoe
Casino recently broke ground on a 606-room all suites hotel at its dockside
riverboat casino location in Bossier City. In addition to existing
competition, the granting of additional gaming licenses in the
Shreveport/Bossier City market or the relocation of existing licenses to that
market from elsewhere in the State of Louisiana would increase competition for
the Isle-Bossier City. In that regard, Casino Magic Corp. was recently granted
a license to operate a gaming facility in the Shreveport/Bossier City market,
which facility is to be located less than
15
<PAGE>
1/2 mile from the site of the Isle-Bossier City. In addition, the Company
believes that Binion's Horseshoe Casino will seek approval to obtain a license
to operate an additional dockside riverboat casino at its existing site, making
it likely in management's opinion that at least a fifth dockside riverboat
casino (operated by Binion's Horseshoe Casino or another operator) eventually
will be operating in the Shreveport/Bossier City market, where only three
currently operate. Moreover, the legalization of casino gaming in Texas would
have a material adverse effect on the Isle-Bossier City.
Lake Charles Operations. The Isle-Lake Charles is one of two riverboat gaming
facilities operating in the Lake Charles, Louisiana market. The Isle-Lake
Charles' riverboat competitor, Players International, operates two riverboats
and a 134-room hotel facility from a single location in the City of Lake
Charles approximately two miles from the site of the Isle-Lake Charles. In
addition, a land-based, Indian-owned casino with approximately 68,500 square
feet of gaming space is operating in Kinder, Louisiana, approximately 35 miles
to the northeast of the Isle-Lake Charles. Riverboats in the Lake Charles
market are subject to cruising requirements, which makes a land-based casino
more desirable to many gaming customers. Players International and the Company
each hold two gaming licenses and operate two riverboats from a single
facility. (Louisiana, unlike certain other jurisdictions, does not permit
license holders to operate a second boat out of the same location without a
gaming license for each boat.) However, because of a limited operating history
at the Isle-Lake Charles with a temporary land-based pavilion and because,
prior to July 12, 1996, only one riverboat operated at the site of the Isle-
Lake Charles, the Company's expectations regarding such operation are not based
on historical operating results. In addition to existing competition, the
granting of additional gaming licenses in the Lake Charles market or the
relocation of existing licenses from elsewhere in the State of Louisiana to
that market would increase competition for the Isle-Lake Charles. Moreover, the
legalization of casino gaming in Texas would have a material adverse effect on
the Isle-Lake Charles. See "--Legislative and Regulatory Considerations."
Biloxi Operations. Twelve gaming facilities (including the Isle-Biloxi), with
an aggregate of approximately 560,000 square feet of casino floor space, are
located along the Mississippi Gulf Coast. Eight facilities are located in
Biloxi and collectively account for approximately 360,000 square feet of casino
floor space. Two of the other four facilities are located in Gulfport,
approximately 10 miles from Biloxi, and the other two are located in Bay St.
Louis and Lakeshore (the gaming operations of such casino have been temporarily
suspended as of July 16, 1996), each approximately 30 miles from Biloxi.
Because Mississippi law does not limit the number of gaming licenses that may
be granted, there may be increases in the number of gaming facilities along the
Mississippi Gulf Coast and the surrounding areas, which could have a material
adverse effect on the Isle-Biloxi. In addition, the Company believes that many
of its competitors will add to or enhance their existing amenities and new
competitors will enter the Mississippi Gulf Coast market. Mirage Resorts, Inc.
has announced plans and received a gaming license to open a "Golden Nugget"
casino and resort complex in Biloxi, at a site approximately two miles from the
Isle-Biloxi, in late 1997. In addition, an "Imperial Palace" casino is
currently being built and will be located on the Back Bay in Biloxi,
approximately three miles from the Isle-Biloxi. Both such developments are
expected to include substantial hotel facilities. Certain existing and future
competitors have more extensive financial resources than does the Company.
Intense competition on the Mississippi Gulf Coast has contributed to the
closure of two gaming facilities (and the temporary closure of a third) in that
area and two others are operating under bankruptcy protection. In addition, the
legalization of casino gaming in Alabama would increase competition for, and
would have a material adverse effect on, the Isle-Biloxi.
Vicksburg Operations. The Isle-Vicksburg is one of four gaming facilities
currently operating an aggregate of approximately 105,000 square feet of casino
floor space in the Vicksburg area. The Isle-Vicksburg is the second largest
casino in the Vicksburg area. Two competitors have hotels on their site and the
competitor closest to the Isle-Vicksburg has a hotel within 1/2 mile of its
casino. (The Isle-Vicksburg does not contain a hotel, but operates a 67-space
recreational vehicle park located 1/2 mile from its facilities.) Other local
casino competition includes one gaming facility in Natchez, Mississippi
(approximately 60 miles south of Vicksburg and 80 miles southwest of Jackson);
two gaming facilities in Greenville, Mississippi, with another under
construction (approximately 80 miles north of Vicksburg and 90 miles northwest
of Jackson); and a land-based, Indian-owned casino near Philadelphia,
Mississippi (approximately 115 miles northeast of Vicksburg and 70 miles
northeast of
16
<PAGE>
Jackson). Because Mississippi does not limit the number of gaming licenses
that may be granted, there may be increases in the number of gaming facilities
in Vicksburg and elsewhere in counties bordering the Mississippi River, which
could have a material adverse effect on the Isle-Vicksburg. While the
Mississippi statutes specify that gaming may only be held on the Mississippi
River and on navigable waters within counties bordering the Mississippi River,
several controversies have arisen concerning the exact permissible locations
of casinos within this statutory language. Specifically, there have been
several attempts to expand gaming as far east of the Mississippi River as
possible, including a recent request for the Mississippi Gaming Commission to
consider approving the location of a casino on the eastern border of Warren
County. It is likely that these controversies and efforts to expand gaming
east of the Mississippi River will continue. In the event sites are approved
in the eastern part of Warren County, in which the Isle-Vicksburg is located,
the Isle-Vicksburg could be adversely affected.
LEGISLATIVE AND REGULATORY CONSIDERATIONS
Texas and Alabama Legalization Risks. Casino gaming is currently prohibited
in several jurisdictions adjacent to Louisiana and Mississippi. As a result,
residents of these jurisdictions, principally Texas and Alabama, comprise a
significant portion of the customers of the Isle-Bossier City and the Isle-
Lake Charles (in the case of Texas) and the Isle-Biloxi (in the case of
Alabama).
Although casino gaming is not currently permitted in Texas and the Texas
Attorney General has issued an opinion that gaming in Texas would require an
amendment to the Texas Constitution, the Texas legislature has considered
various proposals to authorize casino gaming. No gaming legislation was
enacted in the most recent legislative session ended May 29, 1995. A
constitutional amendment would require a two-thirds vote of those present and
voting in each house of the Texas legislature and approval by the electorate
in a referendum. The legalization of casino gaming in Texas at or near the
primary market areas of the Isle-Bossier City or the Isle-Lake Charles,
including the Dallas/Ft. Worth and Houston areas, would have a material
adverse effect on the Company.
Casino gaming is currently illegal in Alabama due to a constitutional
prohibition against lotteries. Several attempts have been made to pass a
resolution of the Alabama legislature providing for a statewide referendum on
the repeal of the pertinent section of the Alabama Constitution prohibiting
lotteries (and thereby gaming). This action would require a three-fifths vote
of each house of the legislature, followed by a statewide referendum. Both the
Governor and the Attorney General of Alabama have stated their opposition to
legalized casino gaming, even though pari-mutuel wagering and limited
charitable bingo exist within the state. The legalization of casino gaming in
Alabama would have a material adverse effect on the Isle-Biloxi, both because
the Mobile metropolitan area is a major market for the Isle-Biloxi and because
a substantial portion of the Isle-Biloxi's customers are residents of areas
east of Mobile, including Florida and Georgia, and pass through the Mobile
area when traveling to Biloxi.
Expansion of Louisiana Gaming Activities and Possible Relocation of Existing
Licenses. Current Louisiana law limits to 15 the number of riverboat casino
licenses that may be granted. Four licenses have been allocated to the
Shreveport/Bossier City market (including the license allocated to the Isle-
Bossier City) and four licenses have been allocated to the Lake Charles market
(including the two licenses allocated to the Isle-Lake Charles); the
Shreveport/Bossier City market is comprised of two parishes. Under current
Louisiana law, up to six licenses may be granted to riverboats operating from
any one parish. There can be no assurance that future Louisiana legislation
(or any judicial determination) will not increase the total number of
authorized riverboat casino licenses or the number of licenses permitted in
any parish. In addition, even without a change in Louisiana law increasing the
number of authorized riverboat casino licenses, existing licenses may be
relocated to other markets within Louisiana. Management believes that the
relative success of gaming operations in the Shreveport/Bossier City and Lake
Charles markets, as compared to other Louisiana markets, may increase the
possibility that existing licenses may be awarded in or relocated to these
markets, especially in the event other local parishes do not permit riverboat
gaming to continue in such parishes. See "--Local Option Referendum Regarding
Continuation of Legalized Gaming in Louisiana." However, the relocation of
existing licenses to another parish
17
<PAGE>
or of riverboats within the same parish may be restricted by a constitutional
amendment to be submitted to a vote in Louisiana on September 21, 1996, which
seeks to require, among other things, a local parish-wide election to approve,
by a majority of those voting on the matter, the licensing of any additional
riverboats in a parish with existing licensed riverboats or relocating any
operating riverboat to a different berth in the same parish.
Limitation on New Gaming Venues. The Company intends to continue to pursue
potential gaming opportunities in states and other jurisdictions that have not
yet legalized gaming. The availability of new gaming opportunities is largely
dependent on the legalization of gaming in new jurisdictions; however, gaming
is prohibited throughout most of the United States and the recent trend toward
legalization has slowed and may continue to do so. There can be no assurance
that legislation to legalize gaming will be enacted or that gaming will be
permitted in any other states. No assurance can be given that attractive
opportunities to develop new operations will be available to the Company.
Nevertheless, due to the severe competition for potential new gaming
opportunities it is often necessary to commit resources before there can be
any assurance that gaming will be legalized at all or on terms that will
enable the Company to benefit from its activities and investments.
Accordingly, the Company may need to make investments which do not ultimately
yield a gaming opportunity.
Need to Renew Licenses and Adverse Changes in Laws and Regulations. The
Company must obtain a gaming license for each location at which it operates a
casino facility. Generally, such licenses are for a fixed term and are subject
to renewal periodically. Licenses in Mississippi are issued for two-year terms
and new licenses must be obtained at the end of such terms. Licenses in
Louisiana are issued for an initial five-year term with annual renewals
thereafter. The Company and each of its officers, directors, managers and
principal stockholders are subject to strict scrutiny and approval by the
gaming regulatory bodies of each jurisdiction in which the Company conducts or
seeks to conduct gaming operations. The issuance of a gaming license is
considered a privilege, not a right, and gaming licenses are subject to
suspension, limitation or revocation if regulatory requirements are not met.
In addition to licenses from state gaming regulatory agencies, casino
operations also typically require various local governmental approvals and
riverboats require Federal and state environmental approvals and approvals
relating to operations in navigable waters. The Company's license to operate
the Isle-Bossier City will expire in December 1998; the Company's license to
operate the Isle-Biloxi will expire in April 1998; the Company's license to
operate the Isle-Vicksburg will expire in February 1997; and the Company's
licenses to operate the two riverboats constituting the Isle-Lake Charles will
expire in March 1999 and May 2001. The loss or suspension of any present or
future gaming license held by the Company, the failure to obtain a gaming
license from any state in which the Company plans to open a gaming facility in
the future, or the failure to obtain a new license or the renewal of any
license would have a material adverse effect on the Company's business. In
some circumstances, the loss of a license in one jurisdiction may trigger the
loss of a license or affect eligibility for a license in another jurisdiction.
Recent Changes in Louisiana Regulatory Structure. In May 1996, the
regulatory oversight of riverboat gaming was transferred to the Louisiana
Gaming Control Board (the "Gaming Board"). The Gaming Board oversees all
licensing matters for riverboat casinos, the land-based casino in New Orleans,
video poker, and certain aspects of Indian gaming. The Gaming Board will be
composed of nine voting members appointed by the governor, five of whom have
been appointed. The Gaming Board held its first meeting on July 10, 1996, at
which it adopted a set of emergency rules conferring certain authority to the
Chairman. On July 12, 1996, the Gaming Board (acting through the Chairman)
issued all necessary approvals to operate the Grand Palais and formally
authorized the commencement of gaming on the Grand Palais. Pursuant to that
approval, the Grand Palais opened on July 12, 1996.
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
The Notes will be secured, directly or indirectly, by substantially all of
the assets of the Company, the Subsidiary Guarantors and certain other of the
Company's subsidiaries, but not the Excluded Assets. In addition, the lien on
certain significant assets of the Company to be granted in favor of the
holders of the Notes will be
18
<PAGE>
junior to the liens of certain existing indebtedness. If an acceleration were
to occur with respect to the Notes and the Trustee were to foreclose on the
collateral securing the Notes, there can be no assurance that the liquidation
of the collateral would produce proceeds in an amount sufficient to pay the
principal of and accrued interest on the Notes. See "Description of the
Notes--Collateral Security."
In any foreclosure sale, the Trustee's ability to foreclose upon collateral
representing casino assets would be limited because the purchaser or operator
of such facility (or stock of any subsidiary holding such facility) would need
to be licensed under applicable state gaming laws and the regulations
promulgated thereunder in order to operate the facility (or own such stock).
If the Trustee were to acquire collateral representing casino assets in a
foreclosure sale and was unable to, or chose not to, qualify to operate such
assets under such state gaming laws, the Trustee would have to either sell or
lease such assets to an entity licensed under such gaming laws to operate such
assets. In addition, in any foreclosure sale or subsequent resale by the
Trustee, licensing requirements under state gaming laws may limit the number
of potential bidders, delay any sale and adversely affect the sale price of
such collateral.
The ability to take possession and dispose of the collateral securing the
Notes upon acceleration or foreclosure is likely to be significantly impaired
or delayed by applicable bankruptcy law if a bankruptcy proceeding were to be
commenced by or against the Company or the subsidiary owning such collateral.
CERTAIN FRAUDULENT CONVEYANCE AND BANKRUPTCY CONSIDERATIONS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if a court were to find that the
Company received less than reasonably equivalent value or fair consideration
for incurring the indebtedness represented by the Notes and, at the time of
the incurrence, the Company was (i) insolvent or rendered insolvent by reason
of the issuance of the Notes or (ii) engaged in a business or transaction or
was about to engage in a business or transaction for which the assets of the
Company constituted unreasonably small capital or (iii) intended to incur, or
believed or reasonably should have believed that it would incur, debts beyond
its ability to pay such debts as they mature, such court could, among other
things, (a) void all or a portion of the Company's obligations to the holders
of the Notes or (b) subordinate the Company's obligations to the holders of
the Notes to other existing and future indebtedness of the Company, the effect
of which would be to entitle such other creditors to be paid in full before
any payment could be made on the Notes. In addition, if a court were to find
that any Guarantor received less than reasonably equivalent value or fair
consideration for its guarantee or liens securing such guarantee and, at the
time the guarantee or liens securing such guarantee were issued, the Guarantor
was (i) insolvent or rendered insolvent by reason of the issuance of its
guarantee or the liens securing the guarantee or (ii) engaged in a business or
transaction or was about to engage in a business or transaction for which the
assets of such Guarantor constituted unreasonably small capital or (iii)
intended to incur, or believed or reasonably should have believed that it
would incur, debts beyond its ability to pay such debts as they mature, such
court could, among other things, (a) void all or a portion of the Guarantor's
obligations to the holders of the Notes or (b) subordinate the Guarantor's
obligations to the holders of the Notes to other existing and future
indebtedness of such Guarantor, the effect of which would be to entitle such
other creditors to be paid in full from such Guarantor's assets before any
payment could be made on the Notes.
In the event that a proceeding under federal bankruptcy law were to be
commenced by or against the Company or a Guarantor within 90 days after the
Company or a Guarantor makes a payment on or pledges collateral to secure the
Notes or a person becomes a Guarantor, some or all of the payments received,
or collateral pledged, during such 90-day period may be avoidable as a
preference under the federal bankruptcy law. The Indenture provides that
certain subsidiaries formed or acquired after the issuance of the Notes will
be required to guarantee the Notes and the stock and assets of such Guarantor
must be pledged as security for such guarantee. Such pledge and guarantees may
be avoidable as a preference if a bankruptcy proceeding concerning the Company
or a Guarantor, as applicable, were to be commenced within the applicable
statutory period. Any payment made, or collateral received, which is avoided
as a preference would be required to be returned to the bankruptcy estate of
the Company or such Guarantor.
19
<PAGE>
CONSTRUCTION AND DEVELOPMENT RISKS
Construction and development projects, such as any future hotel developments
or other land-based capital improvement projects that may be undertaken by the
Company, either alone or pursuant to a joint venture, entail significant
risks, including shortages of materials or skilled labor, unforeseen
engineering, environmental and geological problems, work stoppages, weather
interference and unanticipated cost increases. There can be no assurance that
the Company will be able to enter into contracts for the construction of
future projects or that such contracts will be on terms favorable to the
Company. Moreover, the Company believes that the development of hotel
facilities and other capital improvement projects are important to the
economic success of its properties. Unexpected development concessions
required by local, state or federal regulatory authorities could involve
significant additional costs and delay the scheduled opening of any planned
facilities and any other facilities that the Company may seek to develop in
the future.
HOTEL BUSINESS AND JOINT VENTURE RISKS
The Company opened a 367-room hotel facility at the Isle-Biloxi on August 1,
1995. The Company anticipates that additional hotels will need to be developed
at its existing gaming facilities in order to remain competitive in those
markets. The Company intends to develop additional hotels either alone or with
a business partner or partners, such as through the Hotel Joint Venture. The
Company has limited experience in hotel development or operations and
undertaking such development, if any, will be subject to all of the risks
inherent in the establishment of a new enterprise. In addition, numerous
permits and approvals are required for the development of hotel projects, and
no assurance can be given that such permits and approvals can or will be
obtained. Although the Company may enter into management contracts with
experienced hotel management companies with respect to future hotels, there
can be no assurance that such contracts will be entered into or entered into
on terms favorable to the Company. Moreover, to the extent the Company
undertakes to develop hotel facilities at its properties with a business
partner or partners, the Company will be exposed to certain risks inherent in
joint ventures. The Company has expanded its operations in the past into new
venues by entering into joint venture relationships, such as the LRGP and SCGC
joint ventures. In any future joint venture arrangement, the Company may not
have authority to control or make unilateral decisions with respect to the
activities of such joint venture. As a result, any management dispute between
the Company and any joint venture partner, or any financial problems of the
joint venture partner, may have a material adverse effect on any such joint
venture project and, accordingly, on the Company's business.
LOSS OF FACILITIES FROM SERVICE
The Company's profitability is dependent upon the operations of its
riverboat casino and pavilion facilities. A gaming vessel could be lost from
service due to casualty, mechanical failure or extended or extraordinary
maintenance or inspection. Business activity at any location would also be
adversely affected by a flood, hurricane, tornado or other severe weather
conditions. Areas along the Gulf of Mexico (the site of the Isle-Biloxi), the
Mississippi River (the site of the Isle-Vicksburg), the Red River (the site of
the Isle-Bossier City) and the Calcasieu River (the site of the Isle-Lake
Charles) are subject to storms and hurricanes and the Company's facilities
have been closed from time to time as a result. In addition, each riverboat
operated by the Company in Louisiana must hold a Certificate of Documentation
and Inspection issued by the U.S. Coast Guard, the loss of which could
preclude its use as a riverboat casino. A prolonged or total loss of any
gaming vessel would have a material adverse effect on the Company. The Company
maintains limited business interruption insurance, but the proceeds therefrom
may be insufficient to compensate the Company in the event that one or more of
its casinos is lost from service.
EFFECT OF LOCAL ECONOMIC AND WEATHER RELATED FACTORS
The Company's results of operations may be adversely affected by local
economic and weather-related factors. If the local economy in a market in
which the Company operates one or more casinos suffered a downturn, the casino
or casinos located within that market could be adversely affected as the
disposable income
20
<PAGE>
of consumers in that market declined, resulting in a decrease in the number of
patrons at the Company's casino or casinos or a decrease in the amount that
patrons are willing to wager. In addition, storms or hurricanes that destroy a
large amount of personal and real property may result in patrons spending time
and money cleaning up and restoring property and less time and money in the
Company's casinos.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is largely dependent upon the efforts and skills
of a few key executive officers and the experience of its property managers.
The loss of the services of any of such key executive officers or senior-level
property managers could have a material adverse effect on the Company. There
can be no assurance that the Company would be able to attract and hire
suitable replacements in the event of any such loss of services. In this
regard, the Company's Chief Operating Officer and Vice President of Marketing
and the general manager of the Isle-Vicksburg recently resigned from the
Company and have indicated that they intend to seek positions with one of the
Company's competitors. The Company does not maintain "key man" life insurance
on any of its employees.
DIFFICULTY IN ATTRACTING AND RETAINING QUALIFIED EMPLOYEES
The operation of the Company's business requires qualified executives,
managers and skilled employees with gaming industry experience. The Company
believes that a shortage of skilled labor exists in the gaming industry which
will make it increasingly difficult and expensive to attract and retain
qualified employees. Increasing competition in the Company's markets is
expected to lead to higher costs in order to retain and attract qualified
employees. In addition, to the extent the Company enters new markets, the
Company may incur higher labor costs to attract qualified employees from
gaming facilities existing in those markets. While the Company believes that
it will be able to attract and retain qualified employees, there can be no
assurance that the Company will be able to do so.
ABSENCE OF PUBLIC MARKET FOR THE NOTES; LACK OF LIQUIDITY
There is no existing market for the Notes and there can be no assurance as
to the liquidity of any markets that may develop for the Notes, the ability of
holders of the Notes to sell their Notes or the price at which holders would
be able to sell their Notes. Future trading prices of the Notes will depend on
many factors, including, among other things, prevailing interest rates, the
Company's operating results and the market for similar securities. The Company
has been advised by the Underwriters that, subject to applicable laws and
regulations, the Underwriters currently intend to make a market in the Notes
after the consummation of the Offering, although they are not obligated to do
so and may discontinue any market-making activities with respect the Notes at
any time without notice.
POTENTIAL NEED FOR ADDITIONAL FINANCING
The Company believes that it will have sufficient funds to finance its
anticipated capital expenditure requirements. However, the Company is
exploring, and will continue to explore, multiple projects or larger-scale
development activities, either at its existing locations or in new markets,
that may require additional debt or equity financing. The lack of sufficient
financing on acceptable terms to further renovate or expand existing projects
may put such properties or projects at a substantial competitive disadvantage
with their competitors. There can be no assurance that such financing will be
available given the highly leveraged position of the Company or, if available,
that it would be available on terms satisfactory to the Company.
TAXATION
The Company believes that the prospect of significant additional revenue is
one of the primary reasons that jurisdictions have legalized gaming. As a
result, gaming companies are typically subject to significant taxes and fees
in addition to normal federal and state corporate income taxes; such taxes and
fees are subject to increase at any time and are not within the control of the
Company. Any material increase in these taxes or fees could have a material
adverse effect on the Company. See "Regulatory Matters."
21
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than statements of historical facts
included in this Prospectus, including without limitation, statements under
"--Leverage and Debt Service," "--Competition," "Business--Current
Operations," "--Future Development Opportunities" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," regarding the Company's financial position, business
strategy, capital resources, and plans and objectives of management of the
Company for future operations are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations
will prove to have been correct. Important factors that could cause actual
results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed under "Risk Factors" and elsewhere in this
Prospectus, including, without limitation, in conjunction with the forward-
looking statements included in this Prospectus. All subsequent written and
oral forward-looking statements attributable to the Company or persons acting
on its behalf are expressly qualified in their entirety by the Cautionary
Statements.
22
<PAGE>
USE OF PROCEEDS
The gross proceeds of the Offering will be $300 million. The net proceeds to
the Company from the Offering are estimated to be $289.3 million. The Company
currently anticipates that the uses of the gross proceeds of the Offering as
of June 30, 1996 will be approximately as follows (in millions):
<TABLE>
<S> <C>
First Mortgage Notes Retirement(1)................................ $116.5
Repayment of other existing debt(2)............................... 80.7
LRGP Acquisition.................................................. 85.0
General corporate purposes........................................ 7.1
Offering expenses................................................. 10.7
------
$300.0
======
</TABLE>
- --------
(1) The First Mortgage Notes bear interest at 11 1/2% and mature on November
15, 2001. See "Prospectus Summary--First Mortgage Notes Retirement."
(2) Represents repayment of (i) $38.4 million of indebtedness, for which LRGP
and SCGC are co-obligors, due July 27, 1996, bearing interest at an
increasing rate (currently 12.75%), with an option for the issuers to
extend maturity up to an additional 12 months (together with an additional
payment of up to $1.7 million relating to the prepayment of such
indebtedness), (ii) $3.6 million of indebtedness of the Company, due
November 1996, bearing interest at 12%, (iii) $13.7 million of
indebtedness of LRGP, due in monthly principal payments of $625,000
through April 1998, bearing interest at prime plus 1% (9.25% at April 30,
1996), (iv) $10.0 million of indebtedness of LRGP, due June 2001, bearing
interest at 11.5%, (v) $8.3 million of indebtedness of GPRI, payable on
consummation of the Offering, bearing interest at prime plus 1% (9.25% at
April 30, 1996) and (vi) $5.0 million of indebtedness of GPRI, payable on
consummation of the Offering, bearing interest at 6%.
CAPITALIZATION
The following table sets forth the actual cash and cash equivalents, short-
term debt and capitalization of the Company as of April 30, 1996, and as
adjusted to give effect to the SCGC Acquisition, the LRGP Acquisition, the
Grand Palais Acquisition, the Rights Offering (assuming a full subscription
thereto) and the sale of the Notes offered hereby and the application of the
net proceeds therefrom. See "Use of Proceeds" and "Unaudited Pro Forma
Financial Data."
<TABLE>
<CAPTION>
APRIL 30, 1996
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................. $ 18,585 $ 48,349
======== ========
Short-term debt, including current portion of long-term
debt..................................................... $ 8,884 $ 16,359
======== ========
Long-term debt:
Notes payable........................................... $ 21,835 $ 53,147
Biloxi hotel loan....................................... 14,670 14,670
11 1/2% First Mortgage Notes(1)......................... 103,273 --
Crown Note.............................................. -- 10,000
% Senior Secured Notes................................ -- 300,000
-------- --------
139,778 377,817
Less: current portion................................... 8,884 16,359
-------- --------
Total long-term debt.................................. 130,894 361,458
Stockholders' equity:
Common Stock, par value $.01 per share, 45,000,000
shares
authorized, 16,038,882 shares issued and outstanding
actual, and 24,434,967 as adjusted(2).................. 160 244
Additional paid-in capital.............................. 13,857 68,937
Retained earnings....................................... 36,253 24,638
-------- --------
Total stockholders' equity............................ 50,270 93,819
-------- --------
Total capitalization...................................... $181,164 $455,277
======== ========
</TABLE>
- --------
(1) Excludes unamortized discount of $1,727,000.
(2) Excludes 3,348,778 shares of Common Stock (4,765,445 as adjusted) issuable
upon exercise of options and warrants outstanding as of April 30, 1996.
23
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of the Company
adjusted to give effect to LRGP's purchase of a 50% interest in SCGC on June
9, 1995 (the "Initial Acquisition"), the SCGC Acquisition, the LRGP
Acquisition, the Grand Palais Acquisition, the Rights Offering (assuming a
full subscription thereto) and the Offering and the application of the net
proceeds therefrom. The unaudited pro forma condensed consolidated balance
sheet as of April 30, 1996 gives effect to the SCGC Acquisition, the LRGP
Acquisition, the Grand Palais Acquisition, the Rights Offering (assuming a
full subscription thereto) and the Offering and the application of the net
proceeds therefrom as if such transactions had occurred on April 30, 1996. The
unaudited pro forma condensed consolidated statement of income for the year
ended April 30, 1996 gives effect to the Initial Acquisition, the SCGC
Acquisition, the LRGP Acquisition, the Grand Palais Acquisition, to the extent
of interest on debt assumed or issued in connection with the acquisition, the
Rights Offering and the Offering and the application of the net proceeds
therefrom, as if such transactions had occurred on May 1, 1995.
The Initial Acquisition, the SCGC Acquisition, the LRGP Acquisition and the
Grand Palais Acquisition have been or will be accounted for by the Company
using the purchase method of accounting. The pro forma adjustments are based
upon currently available information and certain assumptions that management
believes are reasonable. The actual purchase price adjustments will be
determined based on the fair market value of the assets and liabilities
acquired and may differ significantly from the amounts reflected in the pro
forma adjustments.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the financial position or results of operation which
would have been achieved had the above mentioned transactions occurred on the
indicated dates, nor are they necessarily indicative of the results of future
operations. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the financial statements and
related notes of the Company, LRGP and SCGC included elsewhere in this
Prospectus.
On May 3, 1996, the Company purchased all of the common stock of GPRI as
reorganized. The business of GPRI consisted entirely of developing and
operating the Grand Palais riverboat casino in New Orleans, Louisiana. The
Grand Palais began gaming operations on March 29, 1995 and, due to poor
operating results, ceased operations on June 6, 1995. GPRI was forced into
involuntary bankruptcy on July 26, 1995 and was completely non-operational
between the date of its closing on June 6, 1995 and July 11, 1996. Other than
interest on debt incurred to effect the Grand Palais Acquisition, adjustments
related to the Grand Palais Acquisition have not been included in the
following unaudited pro forma condensed consolidated statement of income
because GPRI was not operating between June 6, 1995 and July 11, 1996, and
because the pre-bankruptcy operations of GPRI were very limited and
substantially different than the post-acquisition operations.
24
<PAGE>
CASINO AMERICA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS REPORTED
---------------------------------
CASINO LRGP AND TOTAL PRO FORMA
ASSETS AMERICA, INC. LRG HOTELS SCGC HISTORICAL ADJUSTMENTS PRO FORMA
------ ------------- ---------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 18,585 $ 6,576 $ 4,808 $ 29,969 $ 18,380 (1) $ 48,349
Accounts receivable.... 4,935 678 582 6,195 (3,171)(2) 3,024
Other current assets... 3,859 731 1,753 6,343 -- 6,343
-------- -------- -------- -------- --------- --------
Total current assets. 27,379 7,985 7,143 42,507 15,209 57,716
Property and equipment--
net.................... 129,306 52,968 69,919 252,193 43,000 (3) 295,193
Other assets:
Investment in and ad-
vances to joint
ventures.............. 34,281 61,961 -- 96,242 (96,242)(4) --
Notes
receivable/advances
due from affiliates... 4,700 5,871 -- 10,571 (10,571)(5) --
Unallocated purchase
price................. -- -- -- -- 114,235 (6) 114,235
Other investments...... 2,250 -- -- 2,250 -- 2,250
Property held for de-
velopment or sale..... 15,840 -- -- 15,840 -- 15,840
Other non current
assets................ 12,718 1,177 10,125 24,020 6,257 (7) 30,277
-------- -------- -------- -------- --------- --------
69,789 69,009 10,125 148,923 13,679 162,602
-------- -------- -------- -------- --------- --------
Total assets......... $226,474 $129,962 $ 87,187 $443,623 $ 71,888 $515,511
======== ======== ======== ======== ========= ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS'
EQUITY/PARTNERS' CAPITAL
- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Current liabilities:
Notes payable and cur-
rent maturities of
long-term debt........ $ 8,884 $ 17,252 $ 79,426 $105,562 $ (89,203)(8) $ 16,359
Accounts payable....... 6,169 3,101 5,235 14,505 (5,340)(2) 9,165
Accrued liabilities.... 23,258 8,803 8,483 40,544 (12,833)(9) 27,711
-------- -------- -------- -------- --------- --------
Total current
liabilities......... 38,311 29,156 93,144 160,611 (107,376) 53,235
Long term debt.......... 130,894 33,559 637 165,090 196,368 (10) 361,458
Deferred income taxes... 6,999 -- -- 6,999 -- 6,999
Stockholders'
equity/partners' capi-
tal:
Common stock........... 160 -- 5,600 5,760 (5,516)(11) 244
Additional paid-in
capital............... 13,857 -- 13,985 27,842 41,095 (11) 68,937
Retained
earnings/partners'
capital............... 36,253 67,247 (26,179) 77,321 (52,683)(12) 24,638
-------- -------- -------- -------- --------- --------
Total stockholders'
equity/partners'
capital............. 50,270 67,247 (6,594) 110,923 (17,104) 93,819
-------- -------- -------- -------- --------- --------
Total liabilities and
stockholders'
equity/partners'
capital............. $226,474 $129,962 $ 87,187 $443,623 $ 71,888 $515,511
======== ======== ======== ======== ========= ========
</TABLE>
See accompanying notes.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Represents $1,666,000 of the proceeds of the Notes to be used for
general corporate purposes and $25,114,000 of net proceeds from the Rights
Offering, net of $8,400,000 of cash paid in the Grand Palais Acquisition.
(2) Represents the elimination of miscellaneous intercompany balances due to
the Company from LRGP and SCGC and amounts due to LRGP from SCGC.
(3) Adjustment related to the Grand Palais Acquisition purchase price
allocation. See Note 6.
(4) Represents the elimination of the Company's investment in and advances
to LRGP and LRG Hotels, and the elimination of LRGP's investment in and
advances to SCGC.
(5) Represents the elimination of notes receivable/advances due to the
Company and LRGP from SCGC and LRG Hotels.
(6) Represents the excess of cost over the estimated fair value of the net
assets acquired in the Initial Acquisition, the SCGC Acquisition, the Grand
Palais Acquisition and the LRGP Acquisition. Such excess cost related to the
Initial Acquisition, the SCGC Acquisition and the LRGP Acquisition and totaled
approximately $94,835,000. The Company has tentatively allocated the Grand
Palais Acquisition purchase price as follows:
<TABLE>
<S> <C>
Riverboat and equipment.................................... $ 43,000,000
Unallocated purchase price................................. 19,400,000
Liabilities assumed or contributed as part of the purchase
price..................................................... (37,900,000)
------------
Total cash and equity paid by the Company................ $ 24,500,000
============
</TABLE>
(7) Represents $10,700,000 of issuance costs related to the Notes, less the
write-off of $3,677,000 of unamortized debt issuance costs related to the
First Mortgage Notes and $766,000 of unamortized debt issuance costs related
to other debt which will be retired with proceeds from the Notes. See "Use of
Proceeds".
(8) Represents (i) the retirement of the current portion of certain
indebtedness (see "Use of Proceeds") of the Company, LRGP and SCGC using a
portion of the net proceeds from the Notes, (ii) the elimination of certain
intercompany indebtedness and (iii) the addition of the current portion of the
debt issued or assumed to complete the Grand Palais Acquisition, as follows:
<TABLE>
<S> <C>
Retirement of certain indebtedness of the Company--current
portion.................................................... $ (3,600,000)
Retirement of certain indebtedness of LRGP--current portion. (15,900,000)
Retirement of certain indebtedness of SCGC--current portion. (30,000,000)
Elimination of advances from LRGP to SCGC................... (41,703,000)
Elimination of the note issued by the Company to SCGC....... (4,700,000)
Current portion of debt incurred to effect the Grand Palais
Acquisition................................................ 6,700,000
------------
Total adjustment to current portion of long-term debt..... $(89,203,000)
============
</TABLE>
26
<PAGE>
(9) Adjusted to reflect:
<TABLE>
<S> <C>
Payment of accrued interest on debt assumed to be retired
using the proceeds from the Notes......................... $ (5,634,000)
Tax benefit related to the premium on the First Mortgage
Notes Retirement and retirement of certain other
indebtedness and the write-off of unamortized debt
issuance costs and original issue discount ............... (6,255,000)
Elimination of amounts due to the Company and LRGP from LRG
Hotels.................................................... (944,000)
------------
$(12,833,000)
============
</TABLE>
(10) Adjusted to reflect:
<TABLE>
<S> <C>
Total principal amount of the Notes....................... $ 300,000,000
Long-term portion of debt incurred to effect the Grand
Palais Acquisition....................................... 31,200,000
Present value of the deferred payments to be made in
connection with the LRGP Acquisition..................... 5,300,000
Retirement of the First Mortgage Notes (net of unamortized
discount of $1,727,000).................................. (103,273,000)
Retirement of certain indebtedness of LRGP................ (17,500,000)
Retirement of certain indebtedness of GPRI................ (13,300,000)
Elimination of amounts due to the Company and LRGP from
LRG Hotels............................................... (6,059,000)
-------------
Total adjustment to long-term debt.................... $ 196,368,000
=============
</TABLE>
(11) Adjusted to reflect (i) the elimination of SCGC's common stock and
additional paid in capital, (ii) issuance of 1,850,000 shares of Common Stock,
valued at $12,950,000, in connection with the SCGC Acquisition, (iii) issuance
of 2,250,000 shares of Common Stock and warrants to purchase an additional
500,000 shares of Common Stock at $10.00 per share, all valued at $16,100,000,
in connection with the Grand Palais Acquisition, (iv) the issuance of warrants
to purchase 500,000 shares of Common Stock at an exercise price of $10.50 per
share, valued at $1,000,000, in connection with the LRGP Acquisition and (v)
the issuance of 4,296,085 shares of Common Stock, resulting in net proceeds of
$25,114,000 in connection with the Rights Offering.
(12) Adjusted to reflect:
<TABLE>
<S> <C>
Write-off of unamortized debt issuance costs related
primarily to redemption of the First Mortgage Notes..... $ (4,443,000)
Write-off of the unamortized discount related to the
First Mortgage Notes.................................... (1,727,000)
Premium on the First Mortgage Notes Retirement and the
retirement of certain other indebtedness................ (11,700,000)
Tax benefit related to the above items................... 6,255,000
Elimination of LRGP's, LRG Hotels' and SCGC's retained
earnings/partners' capital.............................. (41,068,000)
------------
$(52,683,000)
============
</TABLE>
27
<PAGE>
CASINO AMERICA, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED APRIL 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS REPORTED
--------------------------------
CASINO LRGP AND TOTAL PRO FORMA
AMERICA, INC. LRG HOTELS SCGC HISTORICAL ADJUSTMENTS PRO FORMA
------------- ---------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Casino................. $123,936 $145,604 $56,589 $326,129 $ -- $326,129
Rooms, food, beverage
and other............. 27,719 8,951 674 37,344 -- 37,344
Management fees--joint
ventures.............. 6,308 -- -- 6,308 (6,308)(1) --
-------- -------- ------- -------- -------- --------
Total revenue........ 157,963 154,555 57,263 369,781 (6,308) 363,473
Operating expenses:
Casino and gaming
taxes................. 65,026 66,088 23,895 155,009 -- 155,009
Marketing and
administrative........ 33,167 25,872 19,813 78,852 -- 78,852
Depreciation and
amortization.......... 12,111 5,728 3,289 21,128 4,569 (2) 25,697
One-time charge........ 11,798 -- -- 11,798 -- 11,798
Preopening expenses.... 1,311 -- 4,196 5,507 -- 5,507
Loss on disposal of
equipment............. 1,217 -- -- 1,217 -- 1,217
Other.................. 30,140 18,709 7,249 56,098 (6,308)(1) 49,790
-------- -------- ------- -------- -------- --------
Total operating
expenses............ 154,770 116,397 58,442 329,609 (1,739) 327,870
Operating income (loss). 3,193 38,158 (1,179) 40,172 (4,569) 35,603
Interest expense, net... (13,924) (1,948) (6,210) (22,082) (20,486)(3) (42,568)
Equity in income (loss)
of joint ventures...... 16,434 (2,658) -- 13,776 (13,776)(4) --
Other................... -- -- -- -- -- --
-------- -------- ------- -------- -------- --------
Income (loss) before
income taxes........... 5,703 33,552 (7,389) 31,866 (38,831) (6,965)
Income taxes............ (4,148) -- 1,056 (3,092) 3,092 (5) --
-------- -------- ------- -------- -------- --------
Income (loss) before
extraordinary loss..... $ 1,555 $ 33,552 $(6,333) $ 28,774 $(35,739) $ (6,965)
======== ======== ======= ======== ======== ========
Income (loss) before
extraordinary loss per
common and common
equivalent share....... $ 0.10 $ 0.10 $ (0.29)
Weighted average common
and common equivalent
shares................. 15,721 15,721 8,396 (6) 24,117
</TABLE>
See accompanying notes.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME
(1) Represents elimination of the management fee charged by the Company to
LRGP and SCGC.
(2) Reflects the amortization of the excess of the cost over the fair value
of the net assets acquired in the Initial Acquisition, the SCGC Acquisition,
the LRGP Acquisition and the Grand Palais Acquisition. Amortization has been
calculated using the straight-line method over an estimated useful life of 25
years.
(3) Adjusted to reflect:
<TABLE>
<S> <C>
Interest expense on the Notes............................... $36,750,000
Amortization of issuance costs related to the Notes......... 1,529,000
Incremental interest expense on the 11 1/2% $20 million note
issued by LRGP in connection with the Initial Acquisition.. 249,000
Interest expense on GPRI debt incurred to effect the Grand
Palais Acquisition (net of $13,300,000 of GPRI debt
redeemed using the proceeds from the Notes)................ 2,035,000
Imputed interest on the deferred payments to be made in
connection with the LRGP Acquisition....................... 685,000
Less interest on debt retired with the proceeds from the
Notes...................................................... (19,438,000)
Less amortization of debt issuance costs and original issue
discount related to debt retired with the proceeds from the
Notes...................................................... (1,324,000)
-----------
$20,486,000
===========
</TABLE>
(4) Represents elimination of the Company's equity in the earnings and
losses of LRGP and LRG Hotels, respectively, and elimination of LRGP's equity
in the losses of SCGC.
(5) Reflects the income tax effects of the pro forma adjustments.
(6) Represents the issuance of 1,850,000 shares of Common Stock in
connection with the SCGC Acquisition, the issuance of 2,250,000 shares of
Common Stock in connection with the Grand Palais Acquisition and the issuance
of 4,296,085 shares of Common Stock in connection with the Rights Offering.
29
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical financial information has been derived
from the consolidated financial statements of the Company. The financial
statements for each of the four years in the period ended April 30, 1996,
included elsewhere in this Prospectus, have been audited by Ernst & Young LLP,
independent auditors. The financial statements for the periods prior to April
30, 1993 have been audited by other independent auditors. The following
information should be read in conjunction with the consolidated financial
statements and notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
The Company believes the results of operations for periods prior to May 1,
1992 are not readily comparable to subsequent periods because the business
operations of the Company in prior periods, although related to gaming, were
substantially different from the Company's present casino operations. The
Company believes the results of operations for each of the four fiscal years
in the period ended April 30, 1996 are not readily comparable to each other
because (i) the Isle-Vicksburg commenced operations on August 9, 1993, (ii)
the Isle-Bossier City commenced operations on May 20, 1994, (iii) the Isle-
Lake Charles commenced operations on July 29, 1995 and (iv) the Isle-Biloxi
commenced operations on August 1, 1992 and has faced substantially increasing
competition since opening and was substantially expanded in June 1993 and
again in July 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED YEAR ENDED APRIL 30,
DECEMBER 31, APRIL 30, -------------------------------------
1991 1992 1993 1994 1995 1996
------------ ----------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (IN THOUSANDS, EXCEPT RATIOS)
- ----------------------
Revenue:
Casino................. $ -- $ -- $50,904 $140,994 $117,613 $123,936
Rooms, food, beverage
and other............. 128 10 2,199 3,639 5,311 27,719
Management Fees--Joint
ventures.............. -- -- -- -- 4,613 6,308
Consulting--Related
parties............... 3,115 498 5,561 -- -- --
------ ------ ------- -------- -------- --------
Total revenue......... 3,243 508 58,664 144,633 127,537 157,963
Operating expenses:
Casino and gaming
taxes................. -- -- 19,711 59,641 59,963 65,026
Marketing and
administrative........ 3,739 768 11,024 26,113 26,895 33,167
Depreciation and
amortization.......... -- -- 2,046 5,450 8,945 12,111
One-time charge(1)..... -- -- -- -- -- 11,798
Preopening expenses.... -- -- 2,119 3,475 483 1,311
Loss on disposal of
equipment............. -- -- -- 22 178 1,217
Other.................. -- -- 6,177 10,017 10,877 30,140
------ ------ ------- -------- -------- --------
Total operating
expenses............. 3,739 768 41,077 104,718 107,341 154,770
------ ------ ------- -------- -------- --------
Operating income (loss). (496) (260) 17,587 39,915 20,196 3,193
Interest expense, net
(2).................... 5 -- (2,505) (6,119) (10,046) (13,924)
Equity in income (loss)
of unconsolidated joint
ventures............... -- -- (131) (2,241) 19,904 16,434
Other................... -- -- 500 -- -- --
Income (loss) before
income taxes........... (491) (260) 15,451 31,555 30,054 5,703
Net income (loss)....... (491) (260) 10,042 20,353 18,069 1,555
BALANCE SHEET (AT END OF
PERIOD) AND OTHER DATA:
- ------------------------
Current assets.......... $ 702 $ 879 $10,045 $ 26,960 $ 25,361 $ 27,379
Total assets............ 758 1,133 58,484 176,538 211,899 226,474
Long-term debt,
including current
portion................ -- 200 34,051 126,649 138,857 139,778
Stockholders' equity
(deficit).............. (42) 19 14,945 23,650 42,015 50,270
Ratio of earnings to
fixed charges(3)....... N/A N/A 6.1x 3.9x 2.6x 1.2x
</TABLE>
- --------
(1) During the third quarter of fiscal 1996, the Company recorded an $11.8
million pre-tax one-time charge. The components of the one-time charge
include (i) $9.3 million related to the write-down of two riverboats, a
barge and certain gaming equipment, all of which were reclassified during
the quarter as being held for sale, (ii) $2.0 million related to costs
associated with the recent change in executive management and (iii) $0.5
million related to costs associated with certain abandoned projects.
(2) Net of interest income.
(3) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of earnings before provision for income taxes plus fixed
charges (excluding capitalized interest). Fixed charges consist of
interest on indebtedness (including capitalized interest) plus that
portion of rental expense which is considered to be interest.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified
in its entirety by, the consolidated financial statements, including the notes
thereto, included elsewhere in this Prospectus.
GENERAL
The Company's results of operations for the fiscal year ended April 30, 1996
reflect the Company's equity in the income of the Isle-Bossier City and the
Isle-Lake Charles, which commenced operations on July 29, 1995. In addition,
the fiscal 1996 results of operations were impacted by the substantial
expansion of the Isle-Biloxi, which included adding a hotel and enhancements to
the land-based pavilion and the casino, completed in August 1995 and the
acquisition of Pompano Park in June 1995. The results of operations for the
fiscal year ended April 30, 1995 reflect a full year of operations for the
Isle-Biloxi and the Isle-Vicksburg and the Company's equity in the income of
the Isle-Bossier City, which commenced operations on May 20, 1994. The results
of operations for the fiscal year ended April 30, 1994 reflect a full year of
operations of the Isle-Biloxi and almost three full quarters of operations of
the Isle-Vicksburg.
The Company believes that the results of operations for the fiscal years
ended April 30, 1996, 1995 and 1994 may not be indicative of the results of
operations for future periods primarily because, in the past, the Company has
reported its interests in the Isle-Bossier City and the Isle-Lake Charles using
the equity method of accounting. Upon consummation of the LRGP Acquisition, the
Company will consolidate the results of operations of the Isle-Bossier City and
the Isle-Lake Charles. In addition, the Company believes that its historical
results may not be comparable to future results of operations because of the
substantial present and expected future increase in gaming competition for
gaming customers in each of the Company's markets as new casinos open and as
existing casinos add to or enhance their facilities. Furthermore, the
historical results of operations reflect the Isle-Lake Charles as a single
riverboat operation, whereas the Isle-Lake Charles operates two riverboats as
of July 12, 1996. In addition, the land-based pavilion at the Isle-Lake Charles
was recently expanded. The Company believes that seasonality does not have a
significant effect on its business.
RESULTS OF OPERATIONS
Fiscal Year Ended April 30, 1996 Compared to Fiscal Year Ended April 30, 1995
Total revenue was $158.0 million for the fiscal year ended April 30, 1996, as
compared to $127.5 million for the fiscal year ended April 30, 1995,
representing an increase of 24%. Casino revenue, in total, increased by 5% to
$123.9 million from $117.6 million compared to the prior year, due mainly to a
$12.1 million increase in casino revenue at the Isle-Biloxi attributable
primarily to increased casino traffic as a result of the opening of a 367-room
hotel on site, partially offset by a $5.7 million decrease in casino revenue at
the Isle-Vicksburg attributable to increased promotional activity by
competitors in that market. The Company has not consolidated the revenue of the
Isle-Bossier City and Isle-Lake Charles, which totaled $150.8 million and $57.3
million, respectively, for fiscal 1996, compared to $147.0 million for the
Isle-Bossier City in the prior fiscal year (the Isle-Lake Charles was not in
operation during fiscal 1995), but will consolidate that revenue following the
LRGP acquisition.
Revenue for fiscal 1996 includes room revenue of $4.4 million from the new
hotel and entertainment pavilion at the Isle-Biloxi. Room revenue does not
reflect the value of any complementaries.
The Company received management fees of $6.3 million for fiscal 1996,
compared to $4.6 million for fiscal 1995, representing an increase of 37%. In
addition to fees under the Company's management agreement with LRGP with
respect to the Isle-Bossier City, $1.6 million in fees were received under the
Company's management agreement with SCGC with respect to the Isle-Lake Charles
in fiscal 1996. As a result of the LRGP Acquisition and SCGC Acquisition,
future fees from its management agreements will not be reported because such
amounts will be eliminated in consolidation.
31
<PAGE>
Fiscal 1996 revenue includes pari-mutuel commissions, simulcast fees and
admissions of $15.1 million generated by Pompano Park.
Food, beverage and other revenue was $8.2 million for fiscal 1996, compared
to $5.3 million for fiscal 1995, representing an increase of 55%. Food,
beverage and other revenue does not reflect the value of any complementaries.
Of the $2.9 million increase, $1.5 million is attributable to revenue
generated at Pompano Park. The remainder of the increase in food, beverage and
other revenue is attributable to the opening of the new hotel at the Isle-
Biloxi on August 1, 1995.
Casino expenses for fiscal 1996 totaled $49.9 million, as compared to $46.0
million for fiscal 1995. Casino expenses consist primarily of salaries, wages
and benefits, and operating and certain promotional expenses of the casinos.
Casino expenses as a percentage of casino revenues increased from 39% to 40%
in fiscal 1996 due to the cost of complementaries.
Fiscal 1996 operating expenses also include room expenses of $2.6 million
from the new hotel and entertainment pavilion at the Isle-Biloxi. These
expenses are those directly relating to the cost of providing hotel rooms.
Other costs of the hotel are shared with the casino and are presented in their
respective expense categories.
Gaming taxes paid to the State of Mississippi, cities and counties totaled
$15.1 million for fiscal 1996, as compared to $13.9 million in fiscal 1995,
and are consistent with the aforementioned increase in casino revenue. Gaming
taxes in both years represented 12% of casino revenue as required by
Mississippi law.
Pari-mutuel operating costs of Pompano Park totaled $11.4 million in fiscal
1996. Such costs consist primarily of compensation, benefits, purses,
simulcast fees and other direct costs of track operations.
Food and beverage expenses of $5.4 million in fiscal 1996 reflect a $1.7
million increase, or 46%, over fiscal 1995, consistent with the percentage
increase in food and beverage revenues. Of the $1.7 million increase, $1.2
million was attributable to Pompano Park, while the remainder occurred at the
Isle-Biloxi due to the opening of its hotel.
Marine and facilities expenses totaled $10.8 million in fiscal 1996,
representing an increase of 50% over the $7.2 million reported in fiscal 1995.
Of the $3.6 million increase, $1.8 million relates to facilities and
maintenance costs of Pompano Park, while an additional $1.3 million relates to
the expansion at the Isle-Biloxi and the associated labor, rent expense,
utility and maintenance costs of that expanded facility.
Marketing and administrative expenses totaled $33.2 million for fiscal 1996,
a 23% increase over the $26.9 million for the prior fiscal year. Of the $6.3
million increase, $1.9 million represented additional promotions at the Isle-
Biloxi and the Isle-Vicksburg in response to increased competition in those
markets. The remaining increase of $4.4 million primarily reflects the $1.5
million charge for costs associated with the September 1995 withdrawal of the
Company's registration statement and cancellation of its previously planned
public offering of securities and $2.5 million in administrative and
promotional expenses for Pompano Park.
Depreciation and amortization expense was $12.1 million for fiscal 1996,
representing a 35% increase over depreciation and amortization expense of $8.9
million in the prior fiscal year. The increase was primarily attributable to
the new hotel and entertainment pavilion at the Isle-Biloxi.
Preopening expenses of $1.3 million in fiscal 1996 represent salaries,
benefits, training, marketing and other non-capitalizable costs which were
expensed as incurred in connection with the opening of the new hotel at the
Isle-Biloxi. Fiscal 1995 preopening expenses of $0.5 million relate to the
expansion of facilities at the Isle-Vicksburg.
32
<PAGE>
Interest expense--Other was $15.2 million, net of capitalized interest of
$1.5 million, in fiscal 1996, as compared to $14.0 million, net of capitalized
interest of $1.0 million, in fiscal 1995. This $1.2 million increase was
primarily due to additional debt incurred to finance the new hotel and
pavilion and furniture, fixtures and equipment at the Isle-Biloxi, as well as
additional indebtedness relating to land purchased for new development and the
acquisition of Pompano Park.
Interest income--Unconsolidated joint ventures was $0.7 million in fiscal
1996 as compared to $3.0 million in fiscal 1995. Interest at the rate of 11.5%
was being charged to LRGP with respect to the Company's loan to the joint
venture, which was repaid in full in May 1995.
The Company had net income of $1.6 million for fiscal 1996, as compared to
net income of $18.1 million for fiscal 1995, representing a decrease of 91%.
This decrease was due mainly to an $11.8 million pretax one-time charge which
included $9.3 million related to the write-down of two riverboats, a barge and
certain gaming equipment, all of which were reclassified during the year as
being held for sale, as well as $2.5 million related to abandoned projects and
certain other costs associated with the recent change in executive management.
In addition, the Company incurred a $0.3 million charge in connection with
accounting for deferred taxes related to its investment in SCGC and a $1.2
million pretax loss on disposal of an airplane and other equipment. The
Company's net income for fiscal 1996 includes $16.4 million, representing the
Company's equity in the income of LRGP and SCGC (which includes $1.3 million
for the Company's share of the net losses of SCGC), compared to $19.9 for
fiscal 1995. The Company also incurred a pretax charge of approximately $1.5
million for legal, printing and accounting costs associated with the September
1995 withdrawal of the Company's registration statement and the proposed
transactions relating thereto. The Company's effective income tax rate was 73%
for fiscal 1996 as compared to 40% for fiscal 1995. The increase in the
effective tax rate was due to a $0.7 million fourth quarter adjustment to
prior years' taxes and the exclusion of the Company's share of the net loss of
SCGC in its calculation of income taxes. Earnings per share decreased 91% from
$1.16 in fiscal 1995 to $0.10 in fiscal 1996.
Fiscal Year Ended April 30, 1995 Compared to Fiscal Year Ended April 30, 1994
Total revenue was $127.5 million for the fiscal year ended April 30, 1995,
as compared to $144.6 million for the fiscal year ended April 30, 1994,
representing a decrease of 12%. Casino revenue for fiscal 1995 totaled $117.6
million, a 17% decrease over fiscal 1994 casino revenue of $141.0 million. The
decrease in casino revenue in fiscal 1995 resulted from increased competition
in the Biloxi and Vicksburg markets, as well as ongoing construction of the
367-room Crowne Plaza hotel and entertainment pavilion at the Isle-Biloxi. The
Company does not consolidate the revenue of the Isle-Bossier City, which was
$147.0 million in fiscal 1995, but will consolidate this revenue following the
LRGP Acquisition.
The Company received a management fee of $4.6 million in fiscal 1995 under
its management agreement with LRGP with respect to the Isle-Bossier City, as
opposed to no revenue from management fees in fiscal 1994.
Food, beverage and other revenue totaled $5.3 million in fiscal 1995,
representing a 47% increase over the fiscal 1994 level of $3.6 million.
Revenue does not reflect the value of any complimentaries. The increase was
attributable primarily to the opening of the restaurant at the Isle-Vicksburg
in February 1994.
Casino expenses for fiscal 1995 totaled $46.0 million, as compared to casino
expenses of $42.7 million for fiscal 1994. The expenses are primarily
comprised of salaries, wages and benefits, and operating and promotional
expenses of the casinos. Casino expenses increased in total from fiscal 1994
to fiscal 1995 due primarily to a full year of operations in fiscal 1995 at
the Isle-Vicksburg as well as to the opening of the restaurant in Vicksburg
which increased casino expenses (beyond the increase in food and beverage
expenses) due to the cost of complimentaries. Casino expenses as a percentage
of casino revenue were 39% in fiscal 1995, as compared to 30% in fiscal 1994.
Casino expenses tend to increase as a percentage of revenue when casino
revenue decreases because of the relatively fixed nature of casino expenses.
Preopening expenses totaled $0.5 million in fiscal 1995, as compared to $3.5
million in fiscal 1994. The fiscal 1994 preopening expenses related to the
opening of the Isle-Vicksburg and the expansion and opening of
33
<PAGE>
the floating pavilion facility at the Isle-Biloxi; the fiscal 1995 amount
related to the opening of the new floating pavilion facility at the Isle-
Vicksburg in May 1994. The fiscal 1995 equity in net income of unconsolidated
joint ventures includes expenses relating to the opening of the Isle-Bossier
City. The Company's share of these preopening expenses was $1.6 million in
fiscal 1995 as compared to $1.8 million in fiscal 1994.
Gaming taxes paid to the State of Mississippi, cities and counties totaled
$13.9 million in fiscal 1995, as compared to $16.9 million in fiscal 1994,
reflecting lower casino revenue in fiscal 1995. Gaming taxes in both years
represented 12% of casino revenue, as required by Mississippi law.
Food and beverage expenses totaled $3.7 million in fiscal 1995 as compared
to $2.3 million in fiscal 1994, an increase of 63%. These expenses consist
primarily of the salaries, wages, benefits and operating expenses of the food
and beverage operations. The increase in these expenses from fiscal 1994 to
fiscal 1995 was primarily due to the fact that the restaurant at the Isle-
Vicksburg was open for only a portion of the 1994 fiscal year, as opposed to
the full 1995 fiscal year. The Company's food and beverage operations are
designed to draw customers to the casinos and are not expected to produce
operating income.
Marine and facilities expenses totaled $7.2 million in fiscal 1995, as
compared to $7.8 million in fiscal 1994. These expenses include the salaries,
wages, benefits and operating expenses of the marine crews for Coast Guard-
certified riverboats, and insurance, housekeeping and general maintenance of
the facilities. The decline in fiscal 1995 was primarily attributable to the
elimination of the marine crew at the Isle-Vicksburg in fiscal 1995.
Marketing and administrative expenses totaled $26.9 million in fiscal 1995
as compared to $26.1 million in fiscal 1994. The increase in these expenses
was primarily attributable to an increase in marketing activities in response
to increased competition in the Company's markets. Administrative expenses,
which include general administrative and office expenses, professional fees,
property taxes, rent and new development projects were also higher due
primarily to one full year of operations at the Isle-Vicksburg and increased
expenses at the corporate level due to increased activity in the new
development area. See "Business--Future Development Opportunities."
Depreciation and amortization expense was $8.9 million in fiscal 1995,
representing an increase of 62% over depreciation and amortization expense of
$5.5 million in fiscal 1994. This increase was primarily attributable to the
Company's growth in depreciable fixed assets from fiscal 1994 to fiscal 1995,
principally relating to the addition of a new floating pavilion casino and
gaming equipment, restaurant and administrative office building at the Isle-
Vicksburg.
Interest expense--Related parties was $1.3 million in fiscal 1994, as
compared to none in fiscal year 1995. This expense primarily represented
interest paid to affiliated companies in connection with capital leases of
certain property and equipment in fiscal 1994, which arrangements were
discontinued prior to the beginning of the 1995 fiscal year.
Interest expense--Other was $14.0 million in fiscal 1995, as compared to
$6.9 million in fiscal 1994, an increase of $7.1 million. The Company's
interest expense increased significantly in fiscal 1995 due primarily to a
full year of interest expense relating to its First Mortgage Notes, which were
outstanding for only a portion of fiscal 1994.
Interest income--Unconsolidated joint ventures was $3.0 million in fiscal
1995, as compared to $1.1 million in fiscal 1994. Interest at the rate of 11
1/2% was being charged to LRGP and LRG Hotels with respect to the Company's
loan to such joint ventures, which had an outstanding principal balance of
$2.3 million at April 30, 1995.
Interest income--Other was $1.0 million in fiscal 1995, essentially
unchanged from fiscal 1994, reflecting slightly lower cash balances during
fiscal 1995, offset by higher interest rates.
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The Company had net income of $18.1 million in fiscal 1995, as compared to
$20.4 million in fiscal 1994, representing a decrease of 11%. This decrease
was due primarily to a decrease in casino revenue and operating income at the
Isle-Biloxi and the Isle-Vicksburg and an increase in interest expense due to
a full year of interest on the First Mortgage Notes. Earnings per share
decreased 9% from $1.28 in fiscal 1994 to $1.16 in fiscal 1995. The Company's
fiscal 1995 net income includes $19.9 million of equity in the income of the
Isle-Bossier City, which opened in May 1994.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had cash and cash equivalents of $18.6
million compared to $19.0 million at April 30, 1995 and approximately $3.5
million available under lines of credit. Fiscal 1996 operating activities
provided $11.8 million of cash flow to the Company as compared to $8.5 million
in fiscal 1995. In addition, in fiscal 1996, the Company received $3.0 million
in distributions and repayments from LRGP, primarily related to the repayment
of a note receivable, as well as $12.2 million borrowed for the construction
of the hotel at the Isle-Biloxi and $2.8 million in proceeds from the sale of
its aircraft and other equipment. The Company invested $34.5 million in
property and equipment in fiscal 1996, primarily to build the new hotel at the
Isle-Biloxi and to acquire Pompano Park and property held for future
development in Colorado.
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of
Common Stock. Proceeds from the sale totaled approximately $6.0 million. A
portion of the proceeds was used to retire a total of $1.6 million in loans
payable to the Chairman and a related party, including accrued interest. In
addition, the Company issued to certain shareholders Rights to purchase shares
of Common Stock. In the event that the Rights Offering is fully subscribed,
the Company would receive net proceeds of approximately $25.1 million.
On May 3, 1996, the Company purchased all of the common stock of GPRI. The
aggregate consideration paid by the Company in the Grand Palais Acquisition
was approximately $62.4 million, consisting of cash in the amount of
approximately $8.4 million, notes and the assumption of indebtedness of
approximately $37.9 million, 2,250,000 shares of Common Stock and warrants to
purchase an additional 500,000 shares of Common Stock at an exercise price of
$10.00 per share. On the same date, the Company consummated the SCGC
Acquisition for 1,850,000 shares of Common Stock and restructured the terms of
an existing $20.0 million note previously issued to Crown Casino. See
"Description of Certain Indebtedness--Crown Notes."
The Company anticipates that its principal near-term capital requirements
will relate to the consolidation of its Louisiana joint ventures, the
expansion of its operations at the Isle-Lake Charles in connection with the
Grand Palais Acquisition and investments in the Hotel Joint Venture. The
Company also anticipates that capital improvements approximating $20 million
will be made during fiscal 1997 to maintain its existing facilities and remain
competitive in its markets. The Company expects to receive approximately
$289.3 million in net proceeds from the Offering and intends to finance the
LRGP Acquisition and retire approximately $184 million of indebtedness,
including the First Mortgage Notes, with a portion of the net proceeds from
the Offering. See "Use of Proceeds."
Although the Company is not presently committed to making any significant
capital expenditures or investment into a new gaming market, the Offering and
the Rights Offering are intended to provide capital for making improvements
and enhancements to the Company's existing facilities and other general
corporate purposes. The Company believes that it will be necessary to make
certain capital improvements to its land-based facilities at the Isle-Bossier
City and the Isle-Vicksburg and that enhancements to its non-gaming amenities
at all facilities will be important to its operations. The Company may, in the
future, also consider expanding its casino square footage at the Isle-Biloxi.
In addition, the Company may consider making investments in jurisdictions
where gaming is not presently permitted, but in which it believes that gaming
may be legalized in the future.
An important component of the Company's operating strategy will be to
develop, open and operate, either directly, through the Hotel Joint Venture or
otherwise, hotel facilities at its gaming facilities in order to attract
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additional gaming patrons and encourage longer visits to and a greater level
of play at the Company's casinos. The Company has entered into a letter of
intent to form the Hotel Joint Venture. The letter of intent provides that the
Company and HID will each contribute approximately $10 million in assets to
the Hotel Joint Venture. The Company's contribution is expected to consist of
cash, certain land located near the Isle-Bossier City, the Isle-Lake Charles
and, in the event the Company elects to develop a casino there, in Cripple
Creek, Colorado, or other property. No assurance can be made that the Company
will enter into the Hotel Joint Venture, or if it does, that the Company will
not be required to make significant investments of cash into the Hotel Joint
Venture to accomplish its objectives.
The Company expects that available cash, net proceeds from the Rights
Offering and the Offering and cash from future operations will be adequate to
fund the aforementioned transactions, planned capital expenditures, debt
service and working capital requirements. No assurance can be made that the
Company will have sufficient capital resources to expand into new gaming
markets or make significant capital expenditures at its existing properties.
In addition, the Indenture governing the Notes will place certain limits on
the Company's ability to incur additional indebtedness and to make certain
investments. Following the Offering, the Company will be highly leveraged and,
as a result, may be unable to obtain debt or equity financing on terms
acceptable to the Company. Limitations on the Company's capital resources
would likely delay any plans with respect to entry into new markets or
significant capital improvements at its existing properties.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the asset carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company will adopt Statement 121 in the first quarter of fiscal 1997 and,
based on current circumstances, does not believe the effect of adoption will
be material.
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BUSINESS
GENERAL
Casino America is a leading developer, owner and operator of dockside and
riverboat casinos and related facilities in the United States. Giving effect
to the Recent Transactions, the Company owns 100% of, and operates, four
dockside or riverboat casino facilities. All of the Company's properties are
based on a tropical island theme and operate under the "Isle of Capri Casino"
name. The Company owns and operates a dockside riverboat casino and hotel in
Bossier City, Louisiana, two riverboat casinos at a single facility on a site
one mile from Lake Charles, Louisiana, a dockside casino and hotel in Biloxi,
Mississippi and a dockside casino and recreational vehicle park in Vicksburg,
Mississippi. The members of the management teams at each of the Company's four
casino locations generally have been at such facility from the time of its
opening. Shreveport/Bossier City is currently the closest casino gaming market
to the Dallas/Ft. Worth, Texas metropolitan area and Lake Charles is currently
the closest casino gaming market to the Houston, Texas metropolitan area. The
Company also owns and operates Pompano Park, a harness racing track in Pompano
Beach, Florida, midway between Miami and West Palm Beach off of Interstate 95.
STRATEGY
The Company's business strategy, which has been implemented in its existing
operations, emphasizes the operation and development of value-oriented gaming
facilities and complementary amenities with a tropical island theme using the
"Isle of Capri Casino" brand name. Management believes that the consistent use
of the Isle of Capri Casino name and associated theme has created a readily
identifiable brand image connoting excitement, quality and value, complemented
by the Company's emphasis on customer service and non-gaming entertainment
amenities. The Company seeks to identify slot-oriented customers and active
casino patrons through its use of database marketing and generate repeat
visitors to the Company's gaming facilities. Management believes that its
strategy fosters customer loyalty, enhances the Company's ability to compete
effectively in its existing markets, and facilitates the efficient and cost-
effective development of gaming facilities in new markets. The Company also
believes that good community relations are fundamental to its success and, as
a result, takes an active role in community activities in each jurisdiction in
which it has gaming facilities.
The Company has historically identified and entered new gaming markets which
it believes provide attractive long-term opportunities, sometimes entering
those markets with the assistance of a joint venture partner. The Company is
now consolidating its ownership interests in these facilities and anticipates
that most of its near-term development activities will focus on expanding its
existing facilities. The Company anticipates adding complementary amenities,
such as hotels and additional restaurants, in order to compete effectively in
its markets and provide customers with a complete entertainment and resort
experience designed to increase a customer's length of stay at and use of the
Company's facilities. The Company also expects to continue reviewing gaming
opportunities in new markets on the basis of demographic, regulatory,
competitive and other factors. The Company's strategy when entering new
markets has been to develop its projects in phases when appropriate. By
reducing the amount of its initial capital commitment, the Company is able to
utilize cash flow from operations to help fund subsequent phases and increase
the funds available for its other projects. Phased development also allows the
Company to better assess market size, customer preferences and competitive
factors and adapt the nature and scope of new facilities accordingly. The
Company's strategy of making investments through joint ventures, followed by
consolidation of its ownership interests (such as through the LRGP Acquisition
and the SCGC Acquisition) may be implemented in connection with the
development of its existing properties and the entry into new gaming markets
if the Company believes that such a strategy is appropriate, and if it is able
to identify suitable joint venture partners which provide supplemental
expertise and resources.
MARKETING
The Company attracts customers to its casinos by designing and implementing
marketing strategies and promotions that emphasize their tropical island theme
and promote repeat visitation and customer loyalty. For example, the Company
offers membership in its Island Gold Players Club to its customers and
"V.I.P." services
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to higher wagering and repeat gaming patrons. The Island Gold Players Club is
a promotional activity in which members accumulate points that can be
exchanged for benefits such as casino cash tokens, prizes and complimentary
services. In addition, Island Gold Players Club members receive tournament
priority and monthly newsletters and a daily "free pull" on a slot machine
offering awards up to $100,000. It is anticipated that (to the extent
permitted by law) Island Gold Players Club membership cards will be usable on
an interchangeable basis at the Company's gaming facilities. Further, the
Company uses the Island Gold Players Club to track patron slot play and
develop a customer database, which the Company utilizes in its marketing
programs. As of April 30, 1996, the Company had enrolled approximately 1.6
million members in the Island Gold Players Club.
To encourage group sales, the Company utilizes bus programs, corporate and
hotel sales programs and golf package programs with hotels and golf courses
located near its casinos. The Company's Biloxi hotel is included in the
Holiday Inn worldwide reservations system which the Company believes provides
the hotel with significant marketing benefits.
The Company has increased its reliance on database marketing in order to
best identify the segments of the population that are most likely to be
attracted to the Company's facilities, and intends to emphasize food and
entertainment amenities to enhance its customer-friendly atmosphere with a
view toward attracting repeat customers. Database marketing helps the Company
to identify those customers and potential customers that are most likely to be
attracted by the Company's emphasis on slot machine play. The Company also
places significant emphasis on attracting local residents and seeks to
maintain a strong local identity in each market in which it operates by
staging and supporting special events. The Company further enhances its
facilities' appeal to local patrons by offering liberal rules on its table
games and by encouraging enrollment in the Island Gold Players Club.
The Company uses television, radio, outdoor and print media to promote its
services and to achieve greater name recognition. To further enhance the Isle
of Capri Casino tropical theme, the Company engaged Geoffrey Holder, a well-
known actor and television personality popularly known as the "Uncola(R)/1/
Man," as a celebrity spokesperson for certain of the Company's television and
print media advertisements.
CURRENT OPERATIONS
The Isle-Bossier City
The Isle-Bossier City, which commenced operations on May 20, 1994, is among
the highest revenue-producing dockside and riverboat casino facilities in the
United States. The Isle-Bossier City, one of only three licensed gaming
facilities currently operating in the Shreveport/Bossier City market, the
closest gaming market to the Dallas/Ft. Worth, Texas metropolitan area, is
located on a 26-acre site along the Red River approximately 1/4 mile from the
Isle of Capri Boulevard exit off Interstate 20. The Isle-Bossier City consists
of a dockside riverboat casino, a land-based entertainment and support
pavilion and parking on-site for 1,200 cars, of which 940 are accommodated in
an attached parking garage. Additional overflow parking is available nearby on
weekends. The Isle-Bossier City features the Company's festive tropical island
theme throughout the facility. The features of the land-based pavilion include
towering palm trees, exotic rock formations and a waterfall. The riverboat
also features a tropical decor, including signage and lighting fixtures. To
enhance the tropical island experience, patrons are served by friendly,
attentive support staff dressed in tropical attire.
The riverboat offers 30,000 square feet of gaming space on three levels with
942 slot machines and 64 table games, including a poker room and video poker
bars. The 72,200 square-foot land-based pavilion offers a variety of non-
gaming amenities, including three restaurants, a gift shop, an entertainment
lounge area, a giant nine-screen television wall featuring live races from
Louisiana Downs and other sporting events, an Island Gold Players Club Booth
and administrative offices. Restaurant offerings include Calypso's, a 348-seat
buffet style restaurant; Coral Reef, a 102-seat casual dining restaurant; and
Tradewinds, a 24-seat delicatessen and fast food outlet. Live entertainment is
featured in the Caribbean Cove, a 136-seat entertainment lounge.
- --------
/1/The Uncola(R) trademark is owned by Dr. Pepper/Seven-Up Companies, Inc.
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The Isle-Bossier City is readily accessible from an exit off Interstate 20
onto Isle of Capri Boulevard, a four-lane road leading directly to the
entrance of the facility. Approaching the Isle-Bossier City, customers enter a
multi-lane porte cochere providing convenient access to free valet parking, an
attached parking garage or surface parking lots.
The Shreveport/Bossier City market is among the leading riverboat gaming
markets in the United States. The Company believes that the Isle-Bossier City
attracts customers from three primary groups: (a) local residents; (b)
residents of northeastern Texas; and (c) residents of the Dallas/Ft. Worth
metropolitan area. Approximately 550,000 and 1.8 million people live within 50
and 100 miles, respectively, of the Isle-Bossier City. The Company believes
that approximately 65% of the Isle-Bossier City's business is derived from
Texas; approximately 30% of the Isle-Bossier City's business comes from
northeastern Texas, including Tyler, Longview and Texarkana, and 26% of the
Isle-Bossier City's business comes from the Dallas/Ft. Worth metropolitan area
with a population of approximately 4.5 million located 180 miles west on
Interstate 20.
The Isle-Bossier City is one of three comparably sized facilities currently
operating in the Shreveport/Bossier City market, all of which opened between
April and July 1994. Overall, there is currently an aggregate of approximately
90,000 square feet of casino floor space in use in the Shreveport/Bossier City
market. See "Risk Factors--Competition" and "Risk Factors--Legislative and
Regulatory Considerations."
The Company owns and operates the 234-room Isle of Capri Hotel, located
approximately 2.5 miles east of the Isle-Bossier City on Interstate 20, from
which the Company offers shuttle service to the Isle-Bossier City. The Company
recently completed a $1.1 million renovation of the Isle of Capri Hotel that
management believes has significantly improved the hotel's appearance and
competitive position in the market.
The Shreveport/Bossier City hotel market consists of approximately 5,350
hotel/motel rooms. Hotel occupancy during 1993, prior to the introduction of
gaming, averaged approximately 43.1%. During 1994, occupancy rates rose to
approximately 70.2% with the heaviest demand during the peak summer months.
During 1995, occupancy increased to 72.5%. Several of the area's hotels have
incorporated cosmetic upgrades to their facilities due to the increasing
demand for quality, overnight accommodations. The Company believes that the
Isle of Capri Hotel is well positioned to take advantage of increasing demand
in the Shreveport/Bossier City hotel market.
The Isle-Lake Charles
The Isle-Lake Charles, which commenced operations on July 29, 1995, is one
of two riverboat gaming facilities (each comprised of two licensed riverboats)
in the Lake Charles, Louisiana market and one of three gaming facilities in
southwest Louisiana (a land-based Indian-owned casino is located in Kinder,
Louisiana 35 miles northeast of Lake Charles). On July 12, 1996, the Isle-Lake
Charles began operating its second riverboat casino, the Grand Palais, which
is the fourth licensed riverboat casino in the Lake Charles market. Lake
Charles is currently the closest casino gaming market to Houston, Texas, a
metropolitan area with a population of approximately 4.2 million located
approximately 145 miles west on Interstate 10. The Isle-Lake Charles is
located on a 16-acre site along the Calcasieu River adjacent to Interstate 10
in Calcasieu Parish, one mile from the City of Lake Charles. The Isle-Lake
Charles commenced operations with an approximately 27,500 square-foot
riverboat casino which presently contains approximately 24,700 square feet of
gaming space with 891 slot machines and 43 table games on three levels. A
fourth level of that riverboat contains approximately 9,000 square feet of
entertainment space. The Grand Palais consists of an approximately 41,700
square foot riverboat casino containing approximately 24,200 square feet of
gaming space with 880 slot machines and 48 table games on two levels. The
Grand Palais offers a large bar and foyer when customers enter the boat and a
spacious third level where the Company may provide a variety of non-gaming and
entertainment amenities.
The Isle-Lake Charles opened a new $30 million, 105,000 square foot land-
based pavilion in May 1996. The new pavilion is based on a tropical theme,
including rock formations, waterfalls, water arches with jets of water
shooting up to 30 feet in the air, ponds with porcelain sea life and flower
beds landscaped in the shape of
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playing card suits. The expansion of the Isle-Lake Charles' land-based non-
gaming amenities is intended to attract Texas patrons previously drawn to
similar amenities at the land-based casino in Kinder. The pavilion provides
panoramic views of the lake and the city of Lake Charles with separate
entrances to each of the riverboats. In addition, the lighted rooftop rotunda
is topped by the Isle of Capri parrot, reaching approximately 145 feet above
the ground and visible from the interstate.
The new pavilion offers a wide variety of non-gaming amenities, including
Calypso's, a 489-seat buffet style restaurant; Tradewinds grill and restaurant
and Caribbean Cove, which share 220 seats in the pavilion and feature a free,
live Caribbean-themed revue entitled "Island Fever"; the Tropics bar; the
Banana Cabana gift shop and the Island Gold Players Club booth. The pavilion
is scheduled to include a 14,000 square foot activity center, built for live
boxing to be broadcast on television and other special events, concerts,
banquet and meeting facilities and administrative offices. The Isle-Lake
Charles provides free valet parking or free self-parking for more than 2,000
vehicles, including approximately 1,400 spaces in an attached parking garage
from which patrons can access the casino by elevator.
The Company believes that the Isle-Lake Charles attracts customers from
three primary groups: (a) residents of southeast Texas, particularly from the
Houston metropolitan area, located 145 miles to the west on Interstate 10, and
the population centers of Beaumont, Galveston, Orange and Port Arthur, Texas;
(b) local area residents; and (c) tourists. Approximately 480,000 and 1.6
million people live within 50 and 100 miles, respectively, of the Isle-Lake
Charles. Like the Isle-Bossier City, a significant portion of the business of
the Isle-Lake Charles is (and will continue to be) derived from residents of
Texas, where casino gaming has not been legalized. See "Regulatory Matters."
The Isle-Lake Charles was the second gaming facility to enter the Lake
Charles, Louisiana market and the third gaming facility to enter the southwest
Louisiana market. Two riverboats, containing an aggregate of approximately
55,000 square feet of casino floor space, are currently operated by Players
International from a single location in the City of Lake Charles approximately
four miles from the site of the Isle-Lake Charles. In addition, a land-based,
Indian-owned casino opened in January 1995 in Kinder, Louisiana, approximately
35 miles northeast of the site of the Isle-Lake Charles. As a new entrant into
the Lake Charles market, the Isle-Lake Charles has faced the additional
challenge of competing for established customers of its competitors.
Management believes that the Isle-Lake Charles has several competitive
advantages in the Lake Charles gaming market. The Isle-Lake Charles, with its
location at the western end of the Lake Charles gaming market, is the first
gaming facility reached by patrons arriving from the west, including Texas.
The Company is attempting to capitalize on its superior location by
advertising with three back-to-back billboards immediately preceding the exit
to the Isle-Lake Charles. Moreover, management believes that its convenient,
free on-site parking facilities further enhance the advantages of the Isle-
Lake Charles' location. The Company believes that adding the Grand Palais to
the site of the Isle-Lake Charles will enable the Company to more effectively
compete with the existing two-boat operation in Lake Charles and the land-
based casino in Kinder. See "Risk Factors--Competition" and "Risk Factors--
Legislative and Regulatory Considerations." In addition, although land-based
casinos are generally preferred by gaming customers to riverboat casinos
(because, among other things, the requirement of cruising), the two-boat
operation at the Isle-Lake Charles will provide at least one boat at dockside
at all times. Moreover, the land-based casino requires a total of
approximately 70 miles more per round trip for patrons from Texas.
The Isle-Biloxi
The Isle-Biloxi, which commenced operations on August 1, 1992, was the first
gaming facility to open in Mississippi. The Isle-Biloxi currently consists of
a 50,000 square-foot dockside casino containing 32,500 square feet of gaming
space with 1,149 slot machines and 42 table games on two levels, an adjacent
land-based pavilion and on-site parking for more than 1,100 vehicles. During
fiscal 1996, the Company completed an approximately $50 million Biloxi
Improvement Program, which began in October 1994 and culminated with a grand
opening of its new facilities in August 1995. The Company implemented the
Biloxi Improvement Program in order to enhance its long-term competitive
position in the Mississippi Gulf Coast market. The major components of the
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Biloxi Improvement Program included the addition of a 367-room, 15-story hotel
tower and a 32,000 square-foot land-based pavilion providing a variety of non-
gaming amenities and enhancements to the casino. The improvements focused on
the transformation of the Isle-Biloxi into a more customer-friendly resort
destination that the Company believes has resulted in a significant increase
in the number of its casino visitors. The enhancement of the island-themed
decor in the casino and the themed amenities are designed to further increase
identification of the Isle of Capri Casino brand name and distinguish the
Isle-Biloxi from its competitors, most of which offer a distinctive theme in
the Mississippi Gulf Coast market.
As an integral part of the Biloxi Improvement Program, the 367-room Isle of
Capri Casino Crowne Plaza hotel facility and the casino are directly
accessible through the pavilion. The Company believes that the hotel fills an
important niche in the Mississippi Gulf Coast market where a lack of quality
hotel rooms has been cited as an impediment to the further development of that
market as a resort destination. The hotel is included in the Crowne Plaza and
Holiday Inn Worldwide reservation system. Recently named Crowne Plaza Resort
of the Year for 1995, the hotel offers spacious rooms, most with balconies
overlooking Point Cadet Marina, and provides amenities including meeting
rooms, full room service, a heated pool and access to exercise facilities
(which include a jacuzzi, dry sauna and massage facility). The Company
reserves a portion of the rooms for selected casino patrons at all times. The
Company directly markets organizations to attract convention and group
traffic, which the Company believes accounted for approximately 5% of the
Isle-Biloxi's casino revenue. The hotel offers more than 15,000 square feet of
meeting space for such events. The Company is party to a management agreement
with a subsidiary of Ocean Hospitalities, Inc. ("Ocean Hospitalities"), an
experienced developer and manager of hotels in the United States, which is
responsible for managing the front desk and housekeeping.
The other major component of the Biloxi Improvement Program is a 32,000
square-foot, 50-foot high atrium-style pavilion offering a wide variety of
non-gaming amenities. The pavilion features three dining facilities:
Calypso's, a 280-seat buffet style restaurant; Coral Reef, a 146-seat fine
dining facility; and Tradewinds Grill, where visitors can enjoy a
"Cheeseburger in Paradise," and Caribbean Cove, which together share 88 seats.
Calypso's and Coral Reef provide panoramic views of the Gulf of Mexico and
Deer Island. The Caribbean Cove is an open-air lounge area located at the
center of the pavilion, surrounded by a dramatic fountain and an entertainment
stage, which offers seating for an additional 116 people. The pavilion's
entertainment area features a Las Vegas-style revue, performances of which are
scheduled several times daily. Musical performances by other groups and
artists are also scheduled throughout the day. The pavilion also features
Banana Cabana, a gift shop, and a lounge area designed to provide a
comfortable waiting area for bus patrons.
The renovated casino provides customers with the impression of a traditional
land-based casino, rather than that of a floating pavilion casino. Guests
approach the facility on a four-lane ramp divided by a series of cascading
waterfalls featuring four sculptured dolphins and enter a four-lane porte
cochere, which serves as the main valet parking and bus drop off area. The
casino is also directly accessible through an entrance which is situated
adjacent to the primary self-parking areas. The refurbished casino is highly
visible and directly accessible from the pavilion and features 40-foot high
ceilings and a dramatic waterfall to enhance the visual experience. Further
enhancing the tropical ambiance, music from the pavilion's entertainment area,
which features steel drums and Caribbean-oriented melodies, is audible
throughout the casino.
The Company believes that the Isle-Biloxi attracts customers from four
primary groups: (a) local area residents; (b) Alabama, Florida and Georgia
residents, primarily from along the Gulf Coast; (c) tourists; and (d)
residents of southeastern Louisiana, including those from the New Orleans and
Baton Rouge metropolitan areas. There are approximately 660,000 and 2.9
million people residing within 50 and 100 miles, respectively, of Biloxi and
the Company believes that this population base has provided a significant
portion of the Isle-Biloxi's business. Biloxi is the easternmost city on the
Mississippi Gulf Coast where casino gaming is presently permitted. As a
result, Biloxi is currently the closest gaming market to Mobile, Alabama,
located approximately 45 miles east of Biloxi on Interstate 10. The Company
believes that approximately 23% of the Isle-Biloxi's customer base is derived
from Alabama, particularly the Mobile metropolitan area. The Mississippi Gulf
Coast,
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with its 26 miles of white sand beaches and approximately 18 golf courses open
to the public, is a major regional tourist destination which attracted
approximately six million visitors in 1995. The tourist season is heaviest
from May to September, which the Company believes contributes to some
seasonality in the Isle-Biloxi's business.
At present, 12 gaming facilities (including the Isle-Biloxi), comprising
approximately 560,000 square feet of casino floor space, are located along the
Mississippi Gulf Coast. Eight facilities are located in Biloxi and
collectively account for approximately 360,000 square feet of casino floor
space. Two other facilities are located in Gulfport, approximately 10 miles
west of Biloxi, and two are located in Bay St. Louis and Lakeshore (the gaming
operations of such casino have been temporarily suspended as of July 16,
1996), each approximately 30 miles west of Biloxi. Management believes that
the location of the Isle-Biloxi affords it several significant competitive
advantages. The Isle-Biloxi is located on Casino Row, a cluster of four
casinos at the eastern end of U.S. Highway 90, affording visitors the
convenience and visual impact of four gaming facilities located within walking
distance. With its location at the eastern end of Biloxi, Casino Row is the
first area reached by visitors from Alabama, Florida and Georgia. The Biloxi
Improvement Program was designed to position the Isle-Biloxi to more fully
realize the benefits of its superior location through the revitalization of
the casino enhanced by its physical, visual and operational integration with
the new hotel, pavilion and related amenities. The Company believes that, as a
result, the Isle-Biloxi offers customers a resort destination, instead of a
day-trip site, where customers can extend their use of the casino.
A number of the Company's competitors in the Mississippi Gulf Coast have
either purchased existing hotels in the area or have announced plans to build
additional hotels. The Mississippi Gulf Coast hotel market consists of
approximately 9,175 hotel/motel rooms, with the greatest concentration located
in Biloxi and Gulfport. More than 5,000 additional hotel/motel rooms have been
proposed or are currently under construction in the Mississippi Gulf Coast
market. Hotel occupancy is generally highest in the peak tourist months
between May and September. In 1995, hotel occupancy rates in the market
averaged approximately 69%. Occupancy at the Isle-Biloxi since the opening of
its hotel in August 1995 has averaged approximately 87%.
The Isle-Vicksburg
The Isle-Vicksburg, which commenced operations on August 9, 1993, was the
first of four gaming facilities to open in the Vicksburg, Mississippi area.
The Isle-Vicksburg is located on a site consisting of approximately 18 acres
along the Mississippi River, approximately one mile north of Interstate 20.
The Isle-Vicksburg originally opened with a riverboat and barge casino
containing 21,000 square feet of gaming space and a temporary land-based
facility. The temporary facilities were subsequently replaced in May 1994 with
a 32,000 square-foot dockside casino, a 12,000 square-foot land-based pavilion
containing a variety of non-gaming amenities and administrative offices. The
Isle-Vicksburg provides on-site parking for 900 vehicles, and a 13-acre site
located approximately 1/2 mile from the casino provides off-site parking for
200 vehicles and a 67-space recreational vehicle park.
The land-based pavilion features Calypso's, a 206-seat buffet-style
restaurant (as well as 36 seats on a patio overlooking the Mississippi River),
and the Tradewinds delicatessen, which includes seating for 60 people and live
entertainment. Other amenities include a reception area, an Island Gold Club
Players booth and a Banana Cabana gift shop. Patrons are provided easy access
to the second level of the floating pavilion casino from the land-based
pavilion by means of either escalator or a wide stairway which offers patrons
panoramic views of the Mississippi River through a wall of windows. The
floating pavilion casino provides a spacious and exciting gaming environment
on two levels containing 773 slot machines and 47 table games, including a
poker room with seven tables. The casino features a tropical island theme and
decor including exotic rock formations, cascading waterfalls, towering palm
trees and tropical-themed slot machine signage and lighting fixtures, the
Caribbean's Sports Bar and the High Roller Hut (with $5, $25 and $100 slots).
The 67-space recreational vehicle park features amenities including a 1,200
square-foot guest services facility, swimming pool and hot tub, shower and
laundry facilities, cable television and telephone capability and a message,
fax and mail center. Recreational vehicle park guests receive a complimentary
breakfast, free shuttle service to the Isle-Vicksburg and a casino coupon
book. The recreational vehicle park is heavily marketed
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through the casino, an outdoor billboard campaign on major interstates and
monthly and annual advertisements in recreational vehicle park publications.
The recreational vehicle park frequently is fully occupied on weekends and
holidays and offers the Isle-Vicksburg a substitute to a hotel facility.
The Company believes that the Isle-Vicksburg attracts customers from three
primary groups: (a) local and area residents, primarily from Vicksburg and
Jackson, Mississippi; (b) northeastern Louisiana residents; and (c) tourists.
Vicksburg is approximately 45 miles west of Jackson, Mississippi, a
metropolitan area with a population of approximately 420,000. The Isle-
Vicksburg is directly accessible from Jackson on Interstate 20, and a
significant portion of the Isle-Vicksburg's business comes from Jackson
residents. Approximately 530,000 and 1.5 million people live within 50 and 100
miles, respectively, of the Isle-Vicksburg. Vicksburg, a river port city best
known as the site of an historic Civil War battle and the home of the
Vicksburg National Military Park and Cemetery, drew approximately 900,000
visitors in 1995.
The Isle-Vicksburg is one of four gaming facilities currently operating an
aggregate of approximately 105,000 square feet of casino floor space in the
Vicksburg area. The Isle-Vicksburg is the second largest casino in the
Vicksburg area. Other regional casino competition includes one dockside gaming
facility in Natchez, Mississippi (approximately 60 miles south of Vicksburg
and 80 miles southwest of Jackson); two dockside gaming facilities in
Greenville, Mississippi, with another under construction (approximately 80
miles north of Vicksburg and 90 miles northwest of Jackson); and a land-based,
Indian-owned casino near Philadelphia, Mississippi (approximately 115 miles
northeast of Vicksburg and 70 miles northeast of Jackson). Management believes
that the Isle-Vicksburg enjoys certain competitive advantages in the Vicksburg
gaming market based on its convenient location. The Isle-Vicksburg is located
approximately one mile from an exit off Interstate 20 which provides easy
access from Jackson and the surrounding areas. Only one other competitor in
Vicksburg is located closer to the Interstate than the Isle-Vicksburg. The
Isle-Vicksburg also offers ample parking on-site and immediately adjacent to
the facility. Management further believes that the gaming and non-gaming
facilities and the distinctive tropical theme provide one of the most exciting
and spacious gaming environments in the Vicksburg market. See "Risk Factors--
Competition" and "--Legislative and Regulatory Considerations."
Pompano Park
On June 30, 1995, the Company acquired Pompano Park, a harness racing track
located in Pompano Beach, Florida, midway between Miami and West Palm Beach.
Pompano Park is the only racetrack licensed to conduct harness racing in
Florida. Pompano Park also broadcasts its racing events through simulcast and
off-track betting facilities. Pompano Park is comprised of approximately 180
acres of owned land used for harness racing operations and 143 acres of leased
land used for training operations. The Company has a four-year option to
purchase the leased land at a cost of $12 million, plus cost of living
adjustments. The Company believes that, because of its size and location,
Pompano Park would be an attractive location for casino gaming if casino
gaming is ever legalized in Florida and the site is available for gaming under
applicable law. Pompano Park competes against numerous other pari-mutuel
facilities, including thoroughbred and dog race tracks and jai alai frontons,
located throughout south Florida. For the 10 months ended April 30, 1996,
total revenue at Pompano Park was approximately $17.3 million, derived
primarily from pari-mutuel wagering of approximately $40.0 million wagered on-
track and approximately $42.4 million wagered at other pari-mutuel facilities
receiving Pompano Park's simulcast transmission. During fiscal 1996, Pompano
Park conducted approximately 200 live racing programs.
In connection with the acquisition of Pompano Park, the Company agreed to
pay to the sellers specified additional consideration if, and for so long as
(i) casino gaming may legally be conducted by the Company at Pompano Park or
(ii) as a result of the purchase of the pari-mutuel license acquired in
connection with the acquisition of Pompano Park, the Company may legally
conduct casino gaming at any other location. The additional consideration
would be an amount equal to $25 million plus 5% of the gaming net win (as
defined), payable monthly. The $25 million portion of such amount would be
payable $10 million at such time as the Company receives all licenses, permits
or approvals necessary to conduct such casino gaming operations and
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$15 million at such time as the Company opens such a casino gaming facility to
the public. The Company's obligation to pay any such additional consideration
will terminate if casino gaming has not been legally permitted in Florida
within six years after the closing of the acquisition of Pompano Park.
Pompano Park can accommodate up to 14,500 customers and parking for up to
4,000 automobiles. The six-story, air-conditioned facility includes a box seat
area, clubhouse and dining room accommodations, a large grandstand area and
food and beverage facilities which range from fast food stands to indoor dining
areas. The grandstand building also contains the Company's executive and
administrative offices. The grounds surrounding the grandstand are extensively
landscaped and the track is easily accessible from surrounding communities from
an extensive freeway system.
In connection with recent changes to Florida law, the Company expects to
operate limited stakes (with a maximum $10 pot) poker rooms at Pompano Park,
beginning January 1, 1997, subject to county approval. Such activities will not
constitute casino gaming or create any obligation for additional consideration
in connection with the acquisition of Pompano Park. Although the Company
believes that Broward County, the county in which Pompano Park is located, will
approve the operation of such poker rooms, no assurance can be given in that
regard.
The Company plans to open and operate a minimum of 50 tables from 5 p.m. to 2
a.m. on each evening that live racing is held at Pompano Park. Pompano Park has
received approval to conduct 183 live evening racing performances during the
1996-97 racing season and intends to seek approval to increase such number. The
Company expects that it will receive $.25 per player per game plus $.50 per
pot. The Company must distribute at least 50% of the net proceeds (reflecting
its direct costs of operating poker rooms) to supplement its purses for harness
races and breeders' awards. See "Regulatory Matters--Florida."
Effective July 1, 1996, Pompano Park offers "full card" simulcasting of
harness races from any harness track outside of Florida for wagering at Pompano
Park, even on days in which no races are held at Pompano Park. Florida recently
reduced both its tax rate on retransmission of its simulcast signal from 3.3%
to 2.4% of "handle" (i.e., the aggregate contributions to pari-mutuel pools)
and the surcharge applied to simulcast races from $100 per race to a fixed fee
of $500 per day, regardless of the number of races. Because Pompano Park
typically broadcasts more than five races per day, the reduction in the
surcharge as well as the reduction in the out of state signal tax is expected
to favorably impact operating results at Pompano Park. See "Regulatory
Matters--Florida."
RECENT ACQUISITIONS
The Company has recently completed, or entered agreements contingent on the
Offering to complete, the following acquisitions as part of its overall
strategy to consolidate its ownership interests in its gaming facilities.
LRGP Acquisition
The Company has agreed to acquire the remaining 50% interest in LRGP held by
LRSD. The consideration for the LRGP Acquisition will be (i) $85 million in
cash payable at closing, (ii) five-year warrants to purchase 500,000 shares of
Common Stock at an exercise price of $10.50 per share delivered at closing and
(iii) $1.5 million per year for seven years, payable monthly beginning on
October 1, 1998. The Company has escrowed 625,000 shares of Common Stock (for
which the Company has the right to substitute $5 million in cash), some or all
of which will be forfeited if the Company does not fulfill its obligation to
close the transaction by October 1, 1996, as such date may be extended. The
Company has the right to extend the deadline to December 1, 1996, provided that
it pays to LRSD its 50% share of LRGP's net income for the period from and
after October 1, 1996 until closing or termination, plus $166,667 per month.
The Company intends to use a portion of the net proceeds of the Offering to
consummate the LRGP Acquisition. See "Use of Proceeds."
Grand Palais Acquisition
On May 3, 1996, the Company purchased all of the outstanding common stock of
GPRI in a bankruptcy proceeding under Chapter 11 of the United States
Bankruptcy Code. GPRI owns the Grand Palais, gaming
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equipment, certain other furniture, fixtures and equipment, all necessary
gaming licenses issued by the State of Louisiana, and other permits and
authorizations. The aggregate consideration paid by the Company in connection
with the Grand Palais Acquisition was approximately $62.4 million, consisting
of cash in the amount of approximately $8.4 million, approximately $37.9
million in notes and assumed indebtedness and 2,250,000 shares of Common Stock
and five-year warrants to purchase an additional 500,000 shares of Common
Stock at an exercise price of $10.00 per share. See "Certain Indebtedness--
Grand Palais Notes." In connection with the Grand Palais Acquisition, Bernard
Goldstein, the Chairman of the Company, and three of his sons (including
Robert Goldstein, a director of the Company) pledged certain of their assets
for the issuance of a letter of credit to secure the repayment of a portion of
the principal of certain notes issued to effect the Grand Palais Acquisition.
The Company issued to two of Mr. Goldstein's sons (other than Robert
Goldstein) a five-year warrant to purchase 12,500 shares of Common Stock at an
exercise price of $5.875 per share. On July 12, 1996, the Gaming Board
authorized the commencement of gaming on the Grand Palais and, pursuant to
such approval, the Grand Palais opened on such date. See "Risk Factors--Recent
Changes in Louisiana Regulatory Structure." The Company has agreed with the
State of Louisiana to hold the excess cash flow (as defined in such agreement)
generated by GPRI during its first six months of operation in a special escrow
account.
SCGC Acquisition
On May 3, 1996, the Company purchased from Crown Casino the remaining 50%
interest in SCGC (the other 50% of which is owned by LRGP), in exchange for
1,850,000 shares of Common Stock, a five-year warrant to purchase an
additional 416,667 shares of Common Stock at an exercise price of $12.00 per
share which can be exercised only by exchanging up to $5 million principal
amount of the B Note for any such shares and the restructuring of certain
indebtedness owed to Crown Casino. See "Certain Indebtedness--Crown Notes."
FUTURE DEVELOPMENT OPPORTUNITIES
Although the Company intends to focus primarily on the development of its
existing properties in the near term, the Company also intends to continue to
pursue new development opportunities in jurisdictions where gaming has been
legalized and may be legalized in the future. There can be no assurance if or
when necessary approvals for existing or future development opportunities will
be obtained. In addition, there are significant regulatory, financial,
business and other risks inherent in the development, construction and
operation of any new gaming facility. There can be no assurance that the
Company will be successful in dealing with such matters. The Company believes
that its financial position following the Offering, its operating experience
and its ability to enter new markets quickly will enable it to compete for new
gaming opportunities.
Hotel Joint Venture
On June 18, 1996, the Company entered into a letter of intent to form a
joint venture with HID. The purpose of the Hotel Joint Venture will be to
develop, own and operate hotel properties adjacent to the Isle-Bossier City
and the Isle-Lake Charles and, in the event the Company elects to develop a
casino there, in Cripple Creek, Colorado. Preliminary plans are for the Hotel
Joint Venture to build a 350-room hotel on the site of the Isle-Bossier City,
a 400-room hotel on the site of the Isle-Lake Charles and a 147-room hotel in
Cripple Creek, Colorado, where the Company would lease space from the Hotel
Joint Venture to operate a casino and restaurant. The letter of intent
provides that the Company and HID will each contribute approximately $10
million in assets to the Hotel Joint Venture. The Company's contribution is
expected to consist of cash, certain land or other property. The Hotel Joint
Venture may pursue other similar such projects in addition to or instead of
the aforementioned. HID will be principally responsible for designing and
building the hotels, subject to the Company's approval. The Hotel Joint
Venture will attempt to obtain non-recourse construction and permanent
financing for the hotels without any guarantee by the Company or HID, although
no assurance can be given that it will be able to do so. The Company expects
to agree to rent a portion of the rooms, at favorable rates, at each hotel for
its gaming customers. Formation of the Hotel Joint Venture is subject to
execution of a definitive agreement, obtaining all necessary approvals and
consents and commitments for financing, as to which no assurance can be given.
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Cripple Creek, Colorado
The Company owns 1.6 acres of land and leases an additional 1.3 acres of
land in Cripple Creek, Colorado for use in connection with a possible gaming
development in Cripple Creek. The property is located at the eastern end of
the Cripple Creek gaming market, and would be the first gaming facility
reached by patrons from Colorado Springs and other areas to the east. The
Company intends to contribute its property at Cripple Creek to the Hotel Joint
Venture for the construction of a 147-room hotel. The Company expects to lease
from the Hotel Joint Venture a portion of the hotel built at Cripple Creek to
operate a casino and restaurant. In the event the Hotel Joint Venture does not
pursue the construction of a hotel at Cripple Creek, the Company may build
such a hotel either alone or with another joint venture partner or sell its
interest in such Colorado property.
EMPLOYEES
As of June 30, 1996, the Company employed approximately 5,950 employees. A
marine crew at the Isle-Lake Charles has elected union representation by the
Seafarer's International Union. None of the Company's other employees is
subject to a collective bargaining agreement. The Company believes that its
relationship with its employees is satisfactory.
PROPERTIES
The Company owns the three floating pavilions at the Isle-Biloxi location as
well as the floating pavilion at the Isle-Vicksburg location. LRGP owns the
riverboat casino at the Isle-Bossier City location. SCGC and GPRI,
respectively, own the riverboat casinos at the Isle-Lake Charles. The Company
also owns or leases all of its gaming and non-gaming equipment.
The Company leases its executive offices in Biloxi, Mississippi pursuant to
two leases. The first term of the first lease terminates on July 20, 1997.
Monthly rent is $2,442 plus an annual increase of 4%. The Company has the
option to renew for two additional three-year periods. The first term of the
second lease terminates on May 17, 1997. Monthly rent is $3,333 plus an annual
increase of 4%. The Company has the option to renew for two additional three-
year terms.
The Company leases the Biloxi berth (the "Berth Lease") from the Biloxi Port
Commission at an initial annual rent of the greater of $500,000 (the "Minimum
Rent") or 1% of the gross gaming revenues received from the operations at the
site, net of state and local gaming taxes. The lease terminates on July 1,
1999, but is renewable at the option of the Company for eight additional terms
of five years each. For each of the renewal terms, the amount of the Minimum
Rent is adjusted to reflect any increase in the cost of living index, limited
to 6% for each renewal period.
The Company leases land-based facilities in Biloxi from the City of Biloxi
(the "Casino Lease") at an annual rent of (i) $500,000 per year (the "Base
Rent"), plus (ii) 3% of the gross gaming revenues received from the operations
at the site, net of state and local gaming taxes and fees, in excess of $25
million. The lease terminates on July 1, 1999 but is renewable at the option
of the Company for six additional terms of five years each and a seventh
option renewal term, concluding on January 31, 2034. For each of the renewal
terms, the amount of the Base Rent is adjusted to reflect any increase in the
Consumer Price Index limited to 6% for each renewal period. The Company was
required to make certain parking, landscaping, utilities and other related
improvements, amounting to $1.4 million, the payments for which are being
applied as a rent credit ratably over the initial term of the Casino Lease. In
addition, in order to lease the property subject to the Casino Lease, the
Company acquired the leasehold interest of Coastal Cruise Lines, Inc. and The
Factory, Inc., the original lessee, for consideration of $1,000,000 per year
for ten years resulting in monthly installments of $83,333.
In April 1994, the Company entered an Addendum to the Casino Lease, which
requires the Company to pay 4% of gross non-gaming revenues received from
operations at the Isle-Biloxi, net of sales tax, comps and discounts.
Additional rent will be due to the City of Biloxi for the amount of any
increase from and after January
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1, 2016 in the rent due to the State Institutions of Higher Learning under a
lease between the City of Biloxi and the State Institutions of Higher Learning
(the "IHL Lease") and for any increases in certain tidelands leases between
the City of Biloxi and the State of Mississippi.
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land adjoining the Isle-Biloxi. The Company
first acquired the leasehold interest of Sea Harvest, Inc., the original
lessee, for consideration of $8,000 per month for a period of ten years. The
Company's lease is with the City of Biloxi, Mississippi, for an initial term
of 25 years, with options to renew for six additional terms of 10 years each
and a final option period with a termination date commensurate with the
termination date of the IHL Lease, but in no event later than December 31,
2085. Annual rent (which includes payments to be made pursuant to the purchase
of a related leasehold interest) is $404,000, plus 4% of gross non-gaming
revenue, as defined. The annual rent is adjusted after each five-year period
based on increases in the Consumer Price Index, limited to a 10% increase in
any five-year period. The annual rent will increase 10 years after the
commencement of payments pursuant to a termination of lease and settlement
agreement to an amount equal to the sum of annual rent had it been $500,000
annually plus adjustments thereto based on the Consumer Price Index.
In June 1993, the Company entered into a lease for the exclusive use of
approximately 133 parking spaces and the additional use of 169 spaces in
another parking lot from the hours of 6:00 p.m. to 6:00 a.m. daily on property
adjacent to the Isle-Biloxi. The rent is $50,000 per year and the lease
expires in June 1997. The Company has also entered a joint venture arrangement
to sub-lease property for the construction of a two-level parking garage next
to the Isle-Biloxi. The Company pays 50% of the rent, which is (i) $96,000 per
year until November 2000 to acquire the leasehold interest of the original
lessee of the property, plus (ii) $25,000 per month to the City of Biloxi, the
lessor, plus annual increases attributable to the Consumer Price Index
(limited to 3% per rental year) until the first option renewal period ends on
November 30, 1995 and, thereafter, $25,000 per month, plus annual increases
attributable to the Consumer Price Index (limited to 3% per rental year) until
the second option renewal period ends on November 30, 2000. If the property is
leased to a third party, with the consent of the Company and its joint venture
partner, for use of the property as a gaming site, certain expenses, up to a
maximum of $940,000, will be refunded.
The Company owns approximately 13.1 acres of land in the City of Vicksburg,
Mississippi for use in connection with the Isle-Vicksburg. The Company owns an
additional 13 acres in Vicksburg on which it has off-site parking for 260
vehicles and operates a 67-vehicle recreational vehicle park. The Company
entered a lease for approximately five acres of land adjacent to the Isle-
Vicksburg to be used for additional parking.
LRGP owns approximately 26 acres in Bossier City, Louisiana for use in
connection with the Isle-Bossier City. LRG Hotels owns a 234-room hotel
located on approximately 10.5 acres of land on Interstate 20 in Bossier City,
Louisiana. The hotel is located 2.5 miles east of the Isle-Bossier City and
five miles west of the Louisiana Downs horse racing track.
The Company owns approximately 180 acres, and leases an additional 143
acres, at Pompano Park. The lease ends on July 1, 1999. The annual rent is
$1.00 plus all maintenance and operating expenses of the premises. The Company
has the exclusive option to purchase the premises during the term of the lease
for not less than $12 million.
The Company also owns two additional riverboat casinos and one floating
pavilion that are currently held for sale. The riverboat casinos and the
floating pavilions were previously used by the Company at the Isle-Biloxi and
one of the riverboats and the floating pavilion were previously used by the
Company at the Isle-Vicksburg.
SCGC owns approximately 2.7 acres and leases approximately 10.5 acres of
land in Calcasieu Parish, Louisiana for use in connection with the Isle-Lake
Charles, which it also intends to use in connection with the Grand Palais. The
lease commenced on March 24, 1995 and has an initial term of five years. The
annual rent on the leased property is $750,000 for the first four years and
$900,000 for the fifth year of the initial term. The Company has the option to
renew the lease for seven additional terms of five years each. For the first
renewal
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term, the rent increases each year by 5% or the percentage increase in the
average consumer price index for Calcasieu Parish, Louisiana for the previous
12 month period, whichever is higher. Rent for the second and all subsequent
renewal terms will be no less than the rent for the last year of the preceding
term, subject to market adjustments upward based upon the rent paid by other
riverboat gaming operators in Louisiana and Mississippi for comparable property
usages. The rent for the fourth and all subsequent renewal terms will not be
less than $1.5 million per year. The Company also leases an additional 5.75
acres of land in Calcasieu Parish. The lease commenced on July 17, 1995 and has
an initial term of five years. The annual rent on the leased property is
$100,000 for the initial term. The Company has the option to renew the lease
for seven additional terms of five years each. For the first renewal term, the
rent increases each year by 5% or the percentage increase in the average
consumer price index for Calcasieu Parish, Louisiana for the previous 12-month
period, which ever is higher. Rent for the second and all subsequent renewal
terms will be no less than the rent for the last year of the preceding term,
subject to market adjustments upward based upon the rent paid by other
riverboat gaming operators in Louisiana and Mississippi for comparable property
usage.
The Company owns 1.6 acres and leases 1.3 acres of land in Cripple Creek,
Colorado. The lease has an initial term of 25 years, with options to renew for
seven additional terms of 10 years each. Annual rent under the lease for the
first year of the lease is $250,000 and increases at the rate of $10,000 per
year to a maximum annual rent of $300,000. The amount of the rent is also
adjusted seven years after the rent commencement date and every two years
thereafter to reflect any increase in the Consumer Price Index (limited to 4%
for each year), applied cumulatively and in the aggregate. The Company has an
option to purchase the leased land at a price, depending on the date of
exercise, of $3.2 million to $5.0 million, or $5.0 million as adjusted by
increases in the Consumer Price Index if exercised after the year 2009.
Substantially all of the Company's property is presently pledged as
collateral for the First Mortgage Notes. See Note 3 of Notes to Consolidated
Financial Statements. The Company intends to make an offer to repurchase all of
the outstanding First Mortgage Notes using a portion of the proceeds of the
Offering. If any First Mortgage Notes remain outstanding after the Offering,
the Company intends to defease the covenants of such First Mortgage Notes,
including the covenants granting a first mortgage lien to the holders of such
First Mortgage Notes. See "Use of Proceeds."
LEGAL PROCEEDINGS
The Company has been named, along with two gaming equipment suppliers, 41 of
the country's largest gaming operators and four gaming distributors (the
"Gaming Industry Defendants") in a consolidated class action lawsuit pending in
Las Vegas, Nevada. The suit alleges that the Gaming Industry Defendants
violated the Racketeer Influenced and Corrupt Organizations Act by engaging in
a course of fraudulent and misleading conduct intended to induce people to play
their gaming machines based upon a false belief concerning how those gaming
machines actually operate, as well as the extent to which there is actually an
opportunity to win on any given play. The suit seeks unspecified compensatory
and punitive damages. The actions are in the early stages of discovery and
preliminary motions. The Company is unable at this time to determine what
effect, if any, the suit would have on its financial position or results of
operations.
The Company is engaged in various matters of litigation and has a number of
unresolved claims pending. While the ultimate liability with respect to such
litigation and claims cannot be determined at this time, it is the opinion of
management that such liability is not likely to be material to the Company's
consolidated financial position or results of operations.
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REGULATORY MATTERS
MISSISSIPPI
In June 1990, Mississippi enacted legislation legalizing dockside casino
gaming for counties along the Mississippi River, which is the western border
for most of the state, and the Gulf Coast, which is the southern border for
most of the state. The legislation gave each of those counties the opportunity
to hold a referendum on whether to allow dockside casino gaming within its
boundaries.
Mississippi law permits gaming licensees to offer unlimited stakes gaming on
a 24-hour basis and to issue house credit for qualifying patrons. The minimum
legal age for gaming is 21. The law does not restrict the amount or percentage
of space on a vessel that may be utilized for gaming.
The legislation also does not limit the number of licenses that the
Mississippi Gaming Commission can grant for a particular area and does not
impose different conditions on different licensees.
The ownership and operation of casino gaming facilities in Mississippi are
subject to extensive state and local regulation. The Company was required to
register as a publicly traded holding company under the Mississippi Act. The
Company's gaming operations are subject to regulatory control by the
Mississippi Gaming Commission, the state tax commission (the "Tax Commission")
and various other local, city and county regulatory agencies (hereinafter
collectively referred to as the "Mississippi Gaming Authorities").
Subsidiaries of the Company (the "Gaming Subsidiaries") have obtained gaming
licenses from the Mississippi Gaming Authorities to operate the Isle-Biloxi
and the Isle-Vicksburg. Effective October 29, 1991, the Mississippi Gaming
Commission adopted gaming regulations applicable to the Company and the Gaming
Subsidiaries.
The licenses held by the Gaming Subsidiaries have terms of two years and are
not transferable. New licenses will need to be obtained at the end of each
two-year period. There can be no assurance that new licenses can be obtained.
The Isle-Biloxi received a second license in April 1996 and the Isle-Vicksburg
obtained a second license in February 1995. The Mississippi Gaming Commission
may at any time revoke, suspend, condition, limit or restrict a license or
approval to own shares of stock in the Gaming Subsidiaries for any cause
deemed reasonable by such agency. Substantial fines for each violation of
gaming laws or regulations may be levied against the Gaming Subsidiaries, the
Company and the persons involved. A violation under the gaming license held by
a Gaming Subsidiary may be deemed a violation of all the other licenses held
by the Company.
A Gaming Subsidiary must submit detailed financial, operating and other
reports to the Mississippi Gaming Commission and/or the Tax Commission
periodically. Numerous transactions, including without limitation,
substantially all loans, leases, sales of securities and similar financing
transactions entered into by a Gaming Subsidiary must be reported to or
approved by the Mississippi Gaming Commission. The Company is also required to
periodically submit detailed financial and operating reports to the
Mississippi Gaming Commission and furnish any other information which the
Mississippi Gaming Commission may require.
The directors, officers and key employees of the Company and its
subsidiaries who are actively and directly engaged in the administration or
supervision of gaming, or who have any other significant involvement with or
influence over the activities of a Gaming Subsidiary, must be found suitable
therefor and may be required to be licensed by the Mississippi Gaming
Commission. The finding of suitability is comparable to licensing, and both
require submission of detailed personal financial information followed by a
thorough investigation. The applicant is required to pay all costs of
investigation. There can be no assurance that such persons will be found
suitable by such commission. An application for a finding of suitability of an
individual may be denied for any cause deemed reasonable by the issuing
agency. Changes in licensed positions must be reported to the issuing agency.
In addition to its authority to deny an application for a finding of
suitability, the Mississippi Gaming Commission has jurisdiction to disapprove
a change in corporate position. If the Mississippi Gaming Commission were to
find a director, officer or key employee unsuitable for licensing or
unsuitable to continue having a relationship with a Gaming Subsidiary, the
Gaming Subsidiary would have to suspend, dismiss and sever all relationships
with such person. The Gaming Subsidiary would have similar obligations with
regard to any person who refuses
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to file appropriate applications. Each gaming employee must obtain a work
permit which may be revoked upon the occurrence of certain specified events.
Any individual who is found to have a material relationship to, or material
involvement with, the Company may be required to be investigated in order to
be found suitable or be licensed as a business associate of a Gaming
Subsidiary. Key employees, controlling persons or others who exercise
significant influence upon the management or affairs of the Company may also
be deemed to have such a relationship or involvement.
Beneficial owners of more than 5% of the Company's voting securities must be
found suitable by the Mississippi Gaming Commission. Any person who acquires
more than 5% of the voting securities of the Company must report the
acquisition to the Mississippi Gaming Commission. Any beneficial owner of the
Company's voting securities (whether or not a controlling stockholder) may be
required to be found suitable if such commission has reason to believe that
such ownership, without a finding of suitability, would be inconsistent with
the declared policy of the State of Mississippi. If the stockholder who is
required to be found suitable is a corporation, partnership or trust, it must
submit detailed business and financial information including a list of
beneficial owners.
Any stockholder found unsuitable and who holds, directly or indirectly, any
beneficial ownership of shares of Common Stock beyond such period of time as
may be prescribed by the Mississippi Gaming Commission may be guilty of a
misdemeanor. Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do so by the
Mississippi Gaming Commission may be found unsuitable. The Company is subject
to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder of or to have any other relationship with it, a
Gaming Subsidiary or the Company (a) pays the unsuitable person any dividends
or interest upon any securities of the Gaming Subsidiary or any payments or
distribution of any kind whatsoever, (b) recognizes the exercise, directly or
indirectly, of any voting rights in its securities by the unsuitable person,
or (c) pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances.
In addition, if the Mississippi Gaming Commission finds any stockholder
unsuitable, such stockholder must immediately divest himself of all of such
stockholder's securities in the Gaming Subsidiary and/or the Company.
The regulations provide that a change in control of the Company may not
occur without the prior approval of the Mississippi Gaming Commission.
Mississippi law prohibits the Company from making a public offering of its
securities without the approval of the Mississippi Gaming Commission if any
part of the proceeds of the offering is to be used to finance the
construction, acquisition or operation of gaming facilities in Mississippi, or
to retire or extend obligations incurred for one or more such purposes. The
Mississippi Gaming Commission has the authority to grant a continuous approval
of securities offerings and has granted such approval for the Company, subject
to an annual renewal thereof.
Regulations of the Mississippi Gaming Commission prohibit certain
repurchases of securities of publicly traded corporations registered with the
Mississippi Gaming Commission, including holding companies such as the
Company, without prior approval of the Mississippi Gaming Commission.
Transactions covered by these regulations are generally aimed at discouraging
repurchases of securities at a premium over market price from certain holders
of greater than 3% of the outstanding securities of the registered publicly
traded corporation. The regulations of the Mississippi Gaming Commission also
require prior approval for a "plan of recapitalization" as defined in such
regulations.
The Company is required to maintain in the State of Mississippi current
stock ledgers, which may be examined by the Mississippi Gaming Authorities at
any time. If any securities are held in trust by an agent or by a nominee, the
record holder may be required to disclose the identity of the beneficial owner
to the Mississippi Gaming Authorities. A failure to make such disclosure may
be grounds for finding the record holder unsuitable. The Company also is
required to render maximum assistance in determining the identity of the
beneficial owner.
The Mississippi Act requires that certificates representing shares of Common
Stock bear a legend to the general effect that the securities are subject to
the Mississippi Act and regulations of the Mississippi Gaming
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<PAGE>
Commission. The Mississippi Gaming Commission has the authority to grant a
waiver from the legend requirement, which the Company has obtained. The
Mississippi Gaming Authorities, through the power to regulate licenses, have
the power to impose additional restrictions on the holders of the Company's
securities at any time.
The Mississippi Gaming Commission has enacted regulations requiring that, as
a condition to licensure or subsequent licensure, an applicant provide a plan
to develop infrastructure facilities amounting to 25% of the cost of the
casino and a parking facility capable of accommodating 500 cars.
"Infrastructure facilities" include any of the following: a 250-room hotel,
theme park, golf course, marina, tennis complex, or any other facilities
approved by the Mississippi Gaming Commission, but do not include parking
facilities, roads, sewage and water systems or civic facilities. The
Mississippi Gaming Commission may reduce the number of rooms required in a
hotel, where it is shown to the satisfaction of the Mississippi Gaming
Commission that sufficient rooms are available to accommodate the anticipated
number of visitors.
The Company's future gaming operations outside of Mississippi are also
subject to approval by the Mississippi Gaming Commission.
Gaming taxes aggregating 12% of the gross gaming revenues of the Company
with respect to its Biloxi operations and Vicksburg operations are payable to
the State of Mississippi and the cities of Biloxi and Vicksburg. These taxes
are payable monthly. Additionally, license fees and annual fees based on the
number of games made available for play are payable to the State of
Mississippi and the City of Vicksburg and Biloxi.
The laws and regulations permitting and governing Mississippi casino gaming
were recently adopted. Consequently, the interpretation and application of
such Mississippi laws and regulations will evolve over time. Changes in such
laws or regulations could have a material adverse effect on the Company.
LOUISIANA
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police (the "Louisiana Enforcement Division").
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission established regulations concerning authorized
routes, duration of excursions, minimum levels of insurance, construction of
riverboats and periodic inspections. The Louisiana Enforcement Division was
authorized to investigate applicants and issue licenses, investigate
violations of the statute and conduct continuing reviews of gaming activities.
However, in May 1996, the regulatory oversight of riverboat gaming was
transferred to the Gaming Board. In a special legislative session held in
March and April of 1996, the Louisiana legislature adopted the Louisiana
Gaming Control Law (the "Gaming Control Law"), which is designed to
consolidate the regulatory oversight of four forms of gaming--riverboat, video
poker, the land-based casino in New Orleans, and Indian gaming--into one
board, this being the Gaming Board. The Gaming Board will now oversee all
licensing matters for riverboat casinos, the land-based casino, video poker,
and certain aspects of Indian gaming other than those limited responsibilities
reserved to the Louisiana State Police (the "Louisiana State Police"). The
Gaming Board will be composed of nine voting members appointed by the
governor, five of whom have been appointed. The Gaming Board held its first
meeting on July 10, 1996, at which it adopted a set of emergency rules
conferring certain authority to the Chairman. On July 12, 1996, the Gaming
Board (acting through the Chairman) issued all necessary approvals to operate
the Grand Palais and formally authorized the commencement of gaming on the
Grand Palais. Pursuant to that approval, the Grand Palais opened on July 12,
1996.
The Gaming Control Law abolished the Louisiana Riverboat Gaming Commission,
effective May 1, 1996. Likewise, the Gaming Control Law removed all riverboat
licensing authority from the Louisiana Enforcement
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Division, reserving to the Louisiana State Police only the authority to
license "non-key gaming employees" and "nongaming vendors." The Gaming Board
will now make all licensing and permitting determinations--whether for
operators, key employees, or manufacturers and suppliers--with regard to
riverboat gaming. However, the Louisiana State Police will continue to be
involved broadly in gaming enforcement, reporting to the Gaming Board. The
Gaming Control Law provides that the Louisiana State Police will continue to
conduct suitability investigations, will continue to audit, investigate, and
enforce compliance with standing regulations, will initiate enforcement and
administrative actions, and will perform "all other duties and functions
necessary for the efficient, efficacious, and thorough regulation and control
of gaming activities and operations under the [Gaming] Board's jurisdiction."
The Gaming Control Law did not abolish the Louisiana Riverboat Economic
Development and Gaming Control Act, which is the 1991 statute that authorized
gaming on certain rivers and waterways in Louisiana (the "Riverboat Act"). The
Gaming Control Law has amended the Riverboat Act to the extent that it has
transferred licensing and regulatory authority to the Gaming Board; otherwise,
the Riverboat Act remains in effect, with the Gaming Board now being
authorized to enforce the Riverboat Act. (For instance, the fifteen licenses
that the Riverboat Act authorizes remain unaffected; the statutory terms of
those licenses remain unaffected; the taxation terms of the Riverboat Act
remain unaffected.) The Gaming Control Law also provides that any rules or
regulations "promulgated by entities whose powers have been transferred to the
[Gaming] Board shall be considered valid and remain in effect until repealed
by the [Gaming] Board...." Accordingly, the rules that the Louisiana Riverboat
Gaming Commission previously adopted still remain in effect. Meantime, the
Louisiana State Police continues to enforce the rules and regulations that the
Louisiana Enforcement Division previously adopted.
The Riverboat Act continues to authorize issuance of up to 15 licenses to
conduct gaming activities on riverboats of new construction in accordance with
applicable law. However, no more than six licenses may be granted to
riverboats operating from any one parish.
In issuing a license, the applicant must be found to be 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 Gaming Board will not 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 operations
is adequate for the nature of the proposed operation and from a source
suitable and acceptable to the Gaming Board; (iii) the applicant demonstrates
a proven ability to operate a vessel of comparable size, capacity and
complexity to a 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 ("Affiliated Gaming Persons"), are subject to the application and
suitability requirements of the Louisiana gaming law.
The Louisiana gaming law specifies certain restrictions relating to the
operation of riverboat gaming, including the following: (i) except in
Shreveport/Bossier City, gaming is not permitted while a riverboat is docked,
other than the 45 minutes between excursions, and during times when dangerous
weather or water conditions exist; (ii) except in Shreveport/Bossier City,
each round-trip riverboat cruise may not be less than three nor more than
eight hours in duration, subject to specific exceptions; (iii) agents of the
Louisiana State
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Police 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 rules
and regulations adopted by the Louisiana Enforcement Division.
An initial license to conduct riverboat gaming operations is valid for a
term of five years. LRGP was issued an initial operator's license by the
Louisiana Enforcement Division with respect to the Isle-Bossier City on
December 22, 1993, and SCGC was issued an initial operator's license by the
Gaming Board with respect to the Isle-Lake Charles on March 14, 1995. The
license to operate the Grand Palais was issued to a previous owner and the
Grand Palais ceased operations as a result of the bankruptcy of GPRI. The
Company acquired the Grand Palais and has been advised by the chief counsel to
the Gaming Board that it will treat the running of the five-year license
period as having been suspended from June 6, 1995 until the date gaming
operations commenced on the Grand Palais (July 12, 1996), providing 57 months
remaining on such license. The Louisiana gaming law provides that a renewal
application for the period succeeding the initial five-year term of the
operator's license must be made to the Gaming Board on an annual basis. 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 transfer of a license or permit or an interest in a license or permit is
prohibited. The sale, purchase, assignment, transfer, pledge or other
hypothecation, lease, disposition or acquisition (a "Transfer") by any person
of securities which represents 5% or more of the total outstanding shares
issued by a corporation that holds a license is subject to Gaming Board
approval. A security issued by a corporation that holds a license must
generally disclose these restrictions. Prior Gaming Board approval 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 benefit.
Accordingly, approval is being sought with respect to the LRGP Acquisition.
A licensee must notify the Gaming Board of any withdrawals of capital,
loans, advances or distributions in excess of 5% of retained earnings for a
corporate licensee, or of capital accounts for a partnership or limited
liability company licensee, upon completion of any such transaction. No prior
approval of any such withdrawal, loan, advance or distribution is required,
but any such transaction is ineffective if disapproved by the Gaming Board
within 120 days after the required notification. In addition, the Gaming Board
may issue an emergency order for not more than 10 days prohibiting payment of
profits, income or accruals by, or investments in a licensee.
Riverboat gaming licensees and their Affiliated Gaming Persons are required
to notify the Gaming Board within 30 days after the receipt by any such
persons of any loans or extensions of credit. The Gaming Board is required to
investigate the reported loan or extension of credit, and to either approve or
disapprove the transaction. If disapproved, the loan or extension of credit
must be rescinded by the licensee or Affiliated Gaming Person. The Company is
an Affiliated Gaming Person of LRGP and SCGC is therefore required to notify
the Gaming Board of the sale and issuance of the Notes offered hereby.
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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, plus (ii) 18 1/2% of net gaming proceeds.
Proposals to amend or supplement Louisiana's riverboat gaming statute are
frequently introduced in the Louisiana state legislature. No assurance can be
given that changes in Louisiana gaming law will not occur or that such changes
will not have a material adverse effect on the Company's business in
Louisiana. See "Risk Factors--Local Option Referendum Regarding Continuation
of Legalized Gaming in Louisiana" and "Risk Factors--Legislative and
Regulatory Considerations--Expansion of Louisiana Gaming Activities and
Possible Relocation of Existing Licenses."
FLORIDA
On June 15, 1995, the Florida Department of Business and Professional
Regulation, acting through its division of pari-mutuel wagering (the
"Division"), issued its final order (the "Order") approving PPI, Inc. ("PPI"),
a wholly owned subsidiary of the Company, as a pari-mutuel wagering permit
holder with respect to harness and quarter horse racing at Pompano Park.
Pursuant to the Order and the relevant provisions of Chapter 550 of the
Florida Statutes and the applicable rules and regulations thereunder (the
"Florida Statute"), PPI also was granted a license to conduct harness racing
at Pompano Park for the racing season commencing July 1, 1995 and ending June
30, 1996 on a total of 198 evening racing dates. The Division has approved
PPI's license to conduct a total of 183 live evening racing performances for
the season beginning July 1, 1996 to June 30, 1997. PPI intends to seek
approval to increase the number of live evening races. Although PPI does not
presently intend to conduct quarter horse racing operations at Pompano Park,
it may do so in the future, subject to Division approval. The transfer of 10%
or more of stock of a pari-mutuel racing permit holder such as PPI would
require the prior approval of the Division.
The Florida Statute establishes minimum purse requirements for breeders and
owners, license fees and the tax structure on pari-mutuel permit holders. The
Division may revoke or suspend any permit or license upon the willful
violation by the permit holder or licensee of any provision of the Florida
Statute. In lieu of suspending or revoking a permit or license, the Division
may impose various civil penalties against the permit holder or licensee.
Penalties so imposed may not exceed $1,000 for each count or separate offense.
Pursuant to Division order and recent enactments to the Florida Statute, PPI
is also authorized to conduct full-card pari-mutuel wagering at Pompano Park
on simulcast harness races from outside Florida throughout the racing season
and on night thoroughbred races within Florida if the thoroughbred
permitholder has decided to simulcast night races. Pompano Park has been
granted the exclusive right in Florida to conduct full-card simulcasting on
days in which no live racing is held at Pompano Park, although, on such days,
Pompano Park must offer to rebroadcast its simulcast signals to other pari-
mutuel facilities (other than thoroughbred parks). In addition, Pompano Park
may transmit its live races into any dog racing or jai alai facility
throughout Florida, including Dade and Broward counties, for intertrack
wagering. The Florida Statute establishes the percentage split between Pompano
Park and the other facilities receiving such signals. Recent legislation in
Florida provided certain reductions in applicable tax and license fees related
to intertrack wagering on broadcasts of simulcast harness racing and
thoroughbred racing. The Company believes that simulcast rights at Pompano
Park and the recent changes in the Florida Statute are important to the
results of operations of PPI.
Effective January 1, 1997, the Florida Statute permits pari-mutuel
facilities to be licensed by the Division to operate card rooms in those
counties in which a majority vote of the County Commission has been obtained
and a local ordinance has been adopted. Card rooms can only be operated at
pari-mutuel facilities on days that the facility is running live races. The
hours of operation extend from two hours before the post time of the first
live race and continue until two hours after the conclusion of the last live
race at the racing facility. Thoroughbred racing facilities must choose
between operating card rooms or simulcasting night races from outside the
state, but cannot do both (and if electing to simulcast night races, they will
be required to retransmit the night simulcast signal to certain other pari-
mutuel facilities, including Pompano Park).
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The card room operator will be the "house" and will deal the cards. The house
can charge a fee per player or establish a "rake" for each game. The only card
games that have been authorized are "nonbanking" games (i.e., those in which
the house is not allowed to play against the players). The winnings of any
player in a single round, hand or game may not exceed $10.00 and all card games
must be played with tokens or chips.
Card rooms may be operated and managed on behalf of the parimutuel permit
holder by card room management companies, which specifically require a special
license from the Division. Similarly, all employees of the card room management
company or the card room operator need to obtain a specific occupational
license ($50 per license) from the Division before they can work in the card
room. There is no statutory limit on the number of card tables allowed in a
card room, however, the annual license fee for the first card table is $1,000
and $500 for each table thereafter. The card room's annual occupational license
fee is $250.
Each card room operator is required to pay a tax of 10% of the card room
operator's monthly gross receipts from card room operations. "Gross receipts"
is defined as the total amount of money received by a card room from any person
for participation in authorized games. At least 50% of the monthly "net
proceeds," if any, at Pompano Park must be distributed as follows: 47% to
supplement purses for harness racing, and 3% to supplement breeders' awards
during the next ensuing race meet. "Net proceeds" are the total amount of gross
receipts received by a card room operator from card room operations, less
direct operating expenses as defined in the statute.
The Division is currently promulgating rules to give effect to the foregoing
provisions of the Florida Statute.
NON-GAMING REGULATION
The Company is subject to certain federal, state and local safety and health,
employment and environmental laws, regulations and ordinances that apply to
non-gaming businesses generally, such as the Clean Air Act, Clean Water Act,
Occupational Safety and Health Act, Resource Conservation Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act and the
Oil Pollution Act of 1990. The Company has not made, and does not anticipate
making, material expenditures with respect to such environmental laws and
regulations. However, the coverage and attendant compliance costs associated
with such laws, regulations and ordinances may result in future additional
costs to the Company's operations. For example, in 1990 the U.S. Congress
enacted the Oil Pollution Act of 1990 to consolidate and rationalize mechanisms
under various oil spill response laws. The Department of Transportation has
promulgated regulations requiring owners and operators of certain vessels to
establish through the Coast Guard evidence of financial responsibility for
clean-up of oil pollution. This requirement has been satisfied by proof of
adequate insurance.
The riverboats operated by the Company in Louisiana must comply with U.S.
Coast Guard requirements as to boat design, on-board facilities, equipment,
personnel and safety. The riverboats must hold Certificates of Documentation
and Inspection issued by the U.S. Coast Guard. The U.S. Coast Guard
requirements also set limits on the operation of the riverboats and require
individual licensing of certain personnel involved with the operation of the
riverboats. Loss of a riverboat's Certificate of Documentation and Inspection
could preclude its use as a riverboat casino.
Any permanently moored vessel used for casino operations in Mississippi must
meet the fire safety standards of the Mississippi Fire Prevention Code and the
Life Safety Code and the Standards for the Construction and Fire Protection of
Marine Terminals, Piers and Wharfs of the National Fire Protection Association.
Additionally, any establishment to be constructed for dockside gaming must meet
the Southern Building Code or the local building code, if such a local building
code has been implemented at the casino's site.
While permanently moored vessels, such as the Isle-Biloxi and the Isle-
Vicksburg casino barges, are not required to hold Certificates of Inspection
from the U.S. Coast Guard, the Mississippi Gaming Commission has engaged the
American Bureau of Shipping (the "ABS") to inspect and certify all casino
barges with respect to
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stability and single compartment flooding integrity, in accordance with
Mississippi regulations. All casino barges must be inspected prior to
licensing every two years. Inspections subsequent to initial licensing must be
performed by the ABS or other company approved by the Gaming Commission.
All shipboard employees of the Company, even those who have nothing to do
with its operation as a vessel, such as dealers, waiters and security
personnel, may be subject to the Jones Act which, among other things, exempts
those employees from state limits on workers' compensation awards.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information regarding the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------- --- -----------------------------------------------
<S> <C> <C>
Bernard Goldstein.... 67 Chairman, Chief Executive Officer and Director
John M. Gallaway..... 57 President, Chief Operating Officer and Director
Allan B. Solomon..... 60 Executive Vice President, Secretary, General
Counsel and Director
Robert S. Goldstein.. 40 Director
Martin Greenberg..... 56 Director
Emanuel Crystal...... 68 Director
Rexford A. Yeisley... 49 Vice President, Chief Financial Officer
Robert Boone......... 46 Vice President
</TABLE>
Bernard Goldstein has been Chairman of the Board of the Company since June
1992 and Chief Executive Officer of the Company since December 1995. From June
1992 until February 1993, Mr. Goldstein was also President and Chief Executive
Officer of the Company. Mr. Goldstein has been active in the development of
the riverboat gaming industry in a number of states. Mr. Goldstein has been
Chairman of the Board of Steamboat Development Corporation and Steamboat
Southeast, Inc., companies involved in the first legalized riverboat gaming
ventures in the United States, since their respective inceptions starting in
April 1991. In addition to his involvement in the riverboat gaming industry,
Mr. Goldstein has been involved in scrap metal recycling since 1951 and barge-
line transportation since 1960. Mr. Goldstein is the father of Robert
Goldstein.
John M. Gallaway has been President of the Company since December 1995 and
Chief Operating Officer since July 1996. From July 1995 to November 1995, Mr.
Gallaway was a professor at the University of Houston. Mr. Gallaway was Deputy
Managing Director, Gaming, of Sun International, a company engaged in owning
and operating casinos and resorts, from September 1992 to August 1994. Prior
to that, from 1984 to 1992, Mr. Gallaway was President and General Manager of
TropWorld Casino Resort in Atlantic City and, from 1981 to 1984, he was
President and General Manager of the Tropicana Casino Hotel in Las Vegas.
Allan B. Solomon has been Secretary and a director of the Company since June
1992, served as the Chief Financial Officer and Treasurer of the Company from
June 1992 to October 6, 1993, and was Chairman of the Executive Committee from
January 1993 to April 1995. Mr. Solomon became General Counsel of the Company
in May 1994 and became Executive Vice President in April 1995. Mr. Solomon is
President of Allan B. Solomon, P.A., which was a partner in the Florida law
firm of Broad and Cassel from 1986 to May 1994.
Robert S. Goldstein has been a director of the Company since February 1993.
Mr. Goldstein is the President of Alter Trading Corporation, a company engaged
in the business of scrap metal recycling, and has been associated with that
company since 1977. Additionally, Mr. Goldstein is a director, officer and
stockholder of the Steamboat Companies and has been an officer of several
affiliated river transportation companies engaged in stevedoring and equipment
leasing since 1980. Mr. Goldstein is the son of Bernard Goldstein.
Martin Greenberg has been a director of the Company since October 1993, and
is currently Chairman of the Board and President of Sterling Commodities
Corporation, a clearing firm for all five New York commodities exchanges. Mr.
Greenberg is the founder of and has been employed by Sterling Commodities
Corporation in various capacities since its inception in 1982. He was Chairman
of the Board of Commodity Exchange, Inc. ("Comex") from 1990 to 1992 and was
also a director of Comex and the National Futures Association. Mr. Greenberg
also serves as a director of the United Nations Development Corporation.
Emanuel Crystal has been a director of the Company since October 1993, and
is currently the Chief Executive Officer of Jackson Iron & Metal Company in
Jackson, Mississippi. He has held that position for over
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five years and has served in various positions with that company since 1949.
Mr. Crystal is on the board of directors of Omni Bank in Jackson, Mississippi
and also serves on the Board of Trustees of Tougaloo College in Mississippi.
Rexford A. Yeisley has been Chief Financial Officer of the Company since
December 1995. Mr. Yeisley was Senior Vice President and Chief Financial
Officer of Six Flags Theme Parks, Inc. from 1991 to 1995, and from 1987 to
1991, Mr. Yeisley was Vice President and Chief Financial Officer of that
company.
Robert Boone has been Vice President in charge of human resources and risk
management since August 1994. From 1991 to 1994, Mr. Boone was the Director,
Human Resources and Administration for Simon MOA Management Company, the
managing general partner at Mall of America, the nation's largest retail and
entertainment complex. From 1986 to 1991, Mr. Boone served as Director of
Human Resources for IDS American Express in Minneapolis, Minnesota.
DESCRIPTION OF CERTAIN INDEBTEDNESS
GRAND PALAIS NOTES
On May 3, 1996, GPRI, a wholly owned subsidiary of the Company, executed
certain credit agreements and promissory notes to consummate the Grand Palais
Acquisition. GPRI executed a $16.5 million promissory note (the "FNBC Note")
payable to First National Bank of Commerce ("FNBC") bearing interest at the
prime rate of Chase Manhattan Bank plus 1%. Interest is payable on a monthly
basis on the aggregate outstanding principal balance until principal becomes
payable, which is to occur at the earlier of (i) November 1, 1996 or (ii) 30
days after gaming operations begin at the Grand Palais. At such time,
principal and interest are payable in 58 equal monthly installments. If not
paid sooner, all outstanding principal and all accrued and unpaid interest is
due and payable 60 months after the date on which principal became payable.
The FNBC Note is secured by a first preferred ship mortgage on the Grand
Palais and the Company executed a guarantee for the obligations of GPRI under
the FNBC Note. In addition, the Company pledged to FNBC a $1.5 million
certificate of deposit issued by FNBC to the Company and all proceeds thereon.
Upon the occurrence of certain events, the FNBC Note is subject to mandatory
prepayment in the amount of the then outstanding principal amount less $8.25
million. Consummation of the Offering will require a mandatory payment to FNBC
of $8.25 million. See "Use of Proceeds."
On May 3, 1996, GPRI executed a $10.0 million promissory note (the
"Unsecured Creditors' Note") to the general unsecured creditors in the GPRI
bankruptcy proceeding. Principal and interest, accruing at a rate of 6% per
annum, are payable on the Unsecured Creditors' Note on a monthly basis, in
arrears, in 35 equal installments (calculated based on a 72-month amortization
schedule), commencing on the earlier of (i) 90 days from the date of the
Unsecured Creditors' Note or (ii) the first day of the month immediately
following the date gaming operations commence on the Grand Palais, with a
balloon payment due and payable at maturity. Within 180 days after receiving
state regulatory approval to operate the Grand Palais, the Company will be
required to make a $1.0 million payment of principal on the Unsecured
Creditors' Note. In addition, the Offering will require a mandatory prepayment
of 50% of the then outstanding principal amount of the Unsecured Creditors'
Note. See "Use of Proceeds." The Unsecured Creditors' Note is secured by a
second priority lien on the Grand Palais. GPRI also executed a separate
promissory note for $750,000 at the same interest rate and principal payment
terms (except that no mandatory repayment is required) to holders of WARN Act
claims allowed in connection with the GPRI bankruptcy proceeding. The Company
executed a guaranty for the obligations of GPRI under the Unsecured Creditor's
Note and the note to holders of the WARN Act claims.
BILOXI HOTEL FINANCING
In March 1995, RCM, a wholly owned subsidiary of the Company which owns and
operates the Isle-Biloxi, executed a loan agreement (the "Biloxi Hotel Loan")
and a $15 million promissory note in favor of The Peoples
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Bank, a Mississippi banking corporation. The $15 million was placed in a
collateral account for disbursement to fund hotel construction costs at the
Isle-Biloxi and upon completion of the hotel, the outstanding principal
balance was converted to a term loan. As of April 30, 1996, approximately
$14.7 million was outstanding on the Biloxi Hotel Loan, bearing interest at
the prime rate of Chase Manhattan Bank ("Chase Prime") plus 2%.
Principal and interest are payable in equal monthly installments based on a
12-year amortization with a balloon payment of all outstanding principal and
interest due on March 1, 2001. The indebtedness may be prepaid without
penalty. RCM's obligations under the Biloxi Hotel Loan are guaranteed by the
Company and secured by a first lien on the hotel at the Isle-Biloxi, RCM's
leasehold interest in the land on which the hotel is constructed and fixtures,
equipment and other personal property acquired by RCM after May 1, 1995 for
use in the hotel.
The Biloxi Hotel Loan restricts the ability of RCM to, among other things,
(i) enter into leases or other agreements affecting use of the hotel and
related parking for extended periods and (ii) incur additional indebtedness.
The Biloxi Hotel Loan also requires RCM and the Company, among other things,
to maintain minimum levels of tangible net worth, minimum debt service
coverage ratios, maximum debt to tangible net worth and minimum cash flow
coverage and contains cross-default provisions with regard to any other
indebtedness of RCM or the Company.
CROWN NOTES
In connection with the SCGC Acquisition, the Company, through LRGP,
restructured $20 million of indebtedness owed to Crown Casino with two notes,
each for $10 million (the "Crown Notes").
The first note (the "A Note") bears interest at a fixed rate of 11.5% per
annum. Interest is payable in arrears on the first business day of each month.
Principal is payable in 17 equal quarterly installments, beginning on June 2,
1997 and continuing on the first business day of each third month thereafter
and ending on June 1, 2001, on which date the remaining balance of principal
and accrued interest is due.
The second note (the "B Note") bears interest at a fixed rate of 11.5% per
annum. Interest is payable on the first business day of each month. The entire
principal amount is due and payable on June 1, 2001. Crown may convert up to
the lesser of (i) the outstanding principal amount of the B Note or (ii) $10
million of principal amount of the B Note into shares of Common Stock at a
conversion rate of $12.00 per share at any time that the B Note is
outstanding.
Both the A Note and B Note are secured by a security interest in and pledge
of 50% of the outstanding stock of SCGC. Upon consummation of the Offering,
the Company intends to repay the A Note and, as a result, the B Note,
according to its terms, will become an unsecured, subordinated obligation of
the Company. See "Use of Proceeds."
POMPANO PARK DEBT
In connection with its operations at Pompano Park, P.P.I., a subsidiary of
the Company, has a $5.0 million loan agreement with Capital Bank. Borrowings
are secured by a first mortgage on Pompano Park, an assignment of leases, a
first lien on all other P.P.I. assets and are guaranteed by the Company. As of
April 30, 1996, $4.9 million was outstanding under such loan. The loan bears
interest at the prime rate plus 1% per year, and is due in monthly
installments with a balloon payment due in June 2000.
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DESCRIPTION OF THE NOTES
The Notes will be issued under an Indenture dated as of , 1996 (the
"Indenture") among the Company, as issuer, and certain of the Company's
Subsidiaries, as Subsidiary Guarantors, and , as trustee (the
"Trustee"). A copy of the form of the Indenture will be filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and to all of
the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The definitions of
certain capitalized terms used in the following summary are set forth below
under "Certain Definitions."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be senior secured obligations of the Company, limited in an
aggregate principal amount to $ million. The Notes will mature on
, 2003. Interest on the Notes will accrue at the rate of % per
annum and will be payable semiannually on each and ,
commencing , 1996, to the holders of record of Notes at the close of
business on each and immediately preceding such
interest payment date. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
the original date of issuance (the "Issue Date"). Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Notes will be initially payable, and the
Notes will be initially transferable, at the office or agency of the Company
maintained for such purposes in the City of New York. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee at , New York, New York.
In addition, interest may be paid by wire transfer or check mailed to the
Person entitled thereto as shown on the register for the Notes. No service
charge will be made for any registration of transfer or exchange of the Notes,
except for any tax or other governmental charge that may be imposed in
connection therewith.
RANKING
The Notes will rank senior in right of payment to all existing or future
Subordinated Indebtedness of the Company and pari passu in right of payment
with any other existing or future Indebtedness of the Company. Under the
Indenture, the Company and its Restricted Subsidiaries may incur additional
Indebtedness, including Indebtedness which is pari passu in right of payment
with the Notes, subject to certain fixed charge coverage tests or certain
other limitations. See "Certain Covenants--Limitation on Indebtedness."
Additional Indebtedness to finance the development, construction and opening
of Preferred Hotel Facilities, permitted FF&E Financing or Capitalized Lease
Obligations and certain other Indebtedness may be secured by certain assets of
the Company or a Restricted Subsidiary, as applicable. See "Certain
Covenants--Limitation on Liens."
SUBSIDIARY GUARANTEES
The Company's obligations under the Notes and the Indenture will be jointly,
severally and unconditionally guaranteed on a senior secured basis by all
existing and future Significant Restricted Subsidiaries of the Company, other
than as set forth below, subject to the receipt of the required approval of
any applicable Gaming Authority, which the Company and its Restricted
Subsidiaries shall use all reasonable efforts to obtain, including without
limitation the payment of any costs, expenses or fees which may be required
therefor. The Subsidiary Guarantees will rank senior in right of payment to
all existing or future Subordinated Indebtedness of the Subsidiary Guarantors
and pari passu in right of payment to all other existing or future
Indebtedness of the Subsidiary Guarantors. The obligations of Subsidiary
Guarantors under their Subsidiary Guarantees will be guaranteed by the Company
under and pursuant to the Company Guarantee.
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The Indenture will provide that, except as otherwise provided therein, the
Company will, and will cause each future Subsidiary of the Company that
becomes a Subsidiary Guarantor to, grant to the Trustee a valid and perfected
first priority security interest in substantially all of its assets to the
extent required by the Collateral Documents, enforceable against all third
parties, and to execute and deliver all documents and to take all action
necessary or desirable to perfect and protect such a security interest in
favor of the Trustee.
Upon the redesignation of any Subsidiary Guarantor as an Unrestricted
Subsidiary in compliance with the Indenture, such Subsidiary Guarantor shall
be deemed automatically and unconditionally released and discharged from all
obligations under its Subsidiary Guarantee, its Collateral Documents (if any)
and the Indenture without any further action required on the part of the
Trustee or any holder.
COLLATERAL SECURITY
Except as provided below, the Notes will be secured by a first priority Lien
on substantially all of the assets of the Company, and the Subsidiary
Guarantees will be secured by a first priority Lien on substantially all of
the assets of the Subsidiary Guarantors, subject in each case to Permitted
Liens. Except as provided below, the Collateral will include, but not be
limited to, (i) all of the Capital Stock of existing and future Restricted
Subsidiaries held by the Company or a Subsidiary Guarantor, (ii) all
intercompany loans made by the Company or a Subsidiary Guarantor to a
Restricted Subsidiary (which shall include all proceeds from the Offering
advanced by the Company to, or applied against obligations of, Restricted
Subsidiaries), (iii) the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier
City and the Isle-Lake Charles, and all other real estate, vessels and related
improvements and personal property held by the Company and the Subsidiary
Guarantors, (iv) all material contracts, including management or similar
agreements, construction agreements and agreements for the purchase of assets
or Capital Stock, and (v) all dividends, distributions, interest and principal
payments made with respect to, and proceeds from, the Collateral.
Notwithstanding the foregoing, the Collateral will not include any Excluded
Assets. "Excluded Assets" means the following: (i) Assets Held for Sale or
Development, (ii) Non-Material Assets acquired after the Issue Date, (iii)
existing equipment subject to financing and any newly acquired or leased
assets financed with FF&E Financing permitted pursuant to clause (e) or (f) of
the covenant described under "Limitation on Indebtedness," in each case which
assets have been pledged as collateral security for the repayment of the
financing and where the terms of such financing prohibit the pledge of such
assets for the benefit of the holders of the Notes, and (iv) any agreements,
permits, licenses or the like that cannot be subjected to a Lien without the
consent of third parties, which consent cannot reasonably be obtained (which
includes all gaming licenses of the Company and its Restricted Subsidiaries),
provided that Excluded Assets will not include the proceeds of the assets
under clause (iii) or (iv). Also, the Hotel Properties, or any portion
thereof, will be released from the Collateral and become Excluded Assets from
and after such time that the Company notifies the Trustee in writing of its
intention, determined in the good faith judgment of the Board of Directors, to
develop a Preferred Hotel Facility thereon or to contribute such Hotel
Properties, or any portion thereof, to any business venture for the purpose of
developing one or more Preferred Hotel Facilities. In addition, the Notes or
Subsidiary Guarantees, as applicable, will be secured by a second priority
Lien only (or a fourth priority Lien only in the case of clause (iii) below)
on (i) existing equipment subject to financing and any newly acquired or
leased assets financed with FF&E Financing permitted pursuant to clause (e) or
(f) of the covenant described under "Limitation on Indebtedness," in each case
which assets have been pledged as collateral security for the repayment of the
financing and where the terms of such financing do not prohibit the pledge of
such assets for the benefit of the holders of the Notes, (ii) the Isle-Biloxi
Hotel, (iii) the Grand Palais and (iv) Pompano Park.
Although the Capital Stock, intercompany notes and other instruments
included in the Collateral will be delivered to and held by the Trustee,
unless and until an Event of Default shall have occurred and be continuing,
the Company shall be entitled to exercise any voting and consensual rights
thereunder and receive and retain interest principal, dividend and other
payments made with respect thereto. Unless and until an Event of Default shall
have occurred and be continuing, the Company will have the right to remain in
possession and retain exclusive control of all other Collateral, to freely
operate such other Collateral and to collect, invest and dispose of any income
thereon to the extent otherwise permitted by the Indenture.
The Company, the Subsidiary Guarantors and their respective Restricted
Subsidiaries will be prohibited, except as permitted pursuant to the covenant
described under "Limitation on Asset Sales and Events of Loss,"
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and the provisions described under "Subsidiary Guarantors", "Restricted and
Unrestricted Subsidiaries" and "Amendments and Waivers" from obtaining the
release of any of the Collateral, or, except as permitted pursuant to the
covenant described under "Limitation on Liens," from granting any additional
Liens on or substituting Collateral without the consent of the holders of the
Notes. The Company and its Restricted Subsidiaries will be required to deliver
to the Trustee, at their expense, one or more insurance policies from title
insurance companies (or reinsured by title insurance companies) of favorable
national reputation with a claims paying ability rating of A- or better from
S&P or A3 or better from Moody's, providing for title insurance for each fee
or leasehold interest in the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier
City and the Isle-Lake Charles (and replacements thereof) pledged to secure
the Notes or the Subsidiary Guarantee, naming the Trustee as an additional
insured on behalf of the holders of the Notes. The coverage provided under
such policies must aggregate at all times not less than the lesser of (i) the
insurable value of such real property and (ii) the original principal amount
of the Notes.
COLLATERAL ACCOUNTS
NET CASH PROCEEDS FROM ASSET SALES AND EVENTS OF LOSS. In the event of any
Asset Sale or Event of Loss, the Company or the relevant Restricted Subsidiary
shall cause the Net Cash Proceeds derived or resulting from any Asset Sale or
any Event of Loss to be deposited in a Collateral Account on or before the
business day following the day on which such Net Cash Proceeds are received by
the Company or such Restricted Subsidiary. Such Net Cash Proceeds shall be
released from the Collateral Account to make a Permitted Related Investment
and/or Excess Sale/Loss Proceeds Offer as permitted or required by the
covenant described under "Limitation on Asset Sales and Events of Loss." In
the event that the Company or the relevant Restricted Subsidiary engages in an
Asset Sale with respect to Collateral which is permitted by the Indenture and
the Collateral Documents (or the Company designates a Subsidiary Guarantor to
be an Unrestricted Subsidiary in accordance with the Indenture), the Trustee
shall execute and deliver such documents as requested by the Company to
evidence the release of the Liens of the Collateral Documents executed by the
Company or otherwise affecting the Company, such Restricted Subsidiary or
Subsidiary Guarantor, as the case may be. Net Cash Proceeds (including any
earnings thereon) may be released from the Collateral Account in order to, and
in only such amount as is required to (a) pay the principal amount of the
Notes tendered pursuant to an Excess Sale/Loss Proceeds Offer or, (b) make an
Investment, or purchase assets or properties to be used, in a Permitted Line
of Business, provided, that upon consummation of such Investment or purchase
the Trustee shall have received a perfected first priority security interest
in the property or assets acquired by the Company or any of its Subsidiaries
in connection therewith.
EXCESS LOUISIANA CASH ACCOUNT. In the event that as the result of an adverse
vote by the residents of Bossier Parish, Louisiana or Calcasieu Parish,
Louisiana on or about November 5, 1996 with respect to the conduct of
riverboat gaming in either such parish the Isle-Bossier City or the Isle-Lake
Charles must terminate their gaming operations (in their present locations) on
or before the expiration of their current gaming licenses for such facilities,
the Company or the relevant Restricted Subsidiary shall cause the Excess
Louisiana Cash generated by the Isle-Bossier City and/or the Isle-Lake
Charles, as applicable, to be deposited monthly commencing February 1, 1997 in
a Collateral Account. Such Excess Louisiana Cash shall be released from the
Collateral Account to purchase Notes tendered pursuant to an Excess Louisiana
Cash Offer required by the covenant described under "Excess Louisiana Cash
Repurchase Offers."
REDEMPTION AND REPURCHASE OFFERS
OPTIONAL REDEMPTION. The Notes are redeemable, in whole or in part, at the
option of the Company, at any time on or after , 2000 at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2000.......................... %
2001.......................... %
2002 and thereafter........... 100.00%
</TABLE>
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EQUITY PROCEEDS REDEMPTION. In the event that the Company consummates a
Qualified Public Equity Offering on or before , 1999, the Company
may redeem, at its option, up to $100 million in principal amount of the
outstanding Notes at a redemption price of % of the principal amount of the
Notes so redeemed plus accrued and unpaid interest to the redemption date,
provided that, after any such redemption, at least $200 million in principal
amount of the Notes remains outstanding.
CHANGE OF CONTROL REPURCHASE OFFER. In the event that a Change of Control
shall occur, the Company is obligated to make an offer to purchase all
outstanding Notes at a redemption price of 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the redemption date.
There can be no assurance, however, that the Company will have sufficient
funds to repurchase the Notes. If a Change of Control occurs, the Company is
obligated to notify the holders of Notes in writing of such occurrence and to
make an offer to purchase (the "Change of Control Offer"), on a business day
(the "Change of Control Payment Date") not later than 60 days following the
date of the Change of Control, all Notes then outstanding at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date. The Change of Control
Offer is required to remain open for at least 20 business days and until the
close of business on the Change of Control Payment Date. Neither the Board of
Directors nor the Trustee may waive or amend the Company's obligation to so
offer to purchase all outstanding Notes in the event of a Change of Control
without the holders of not less than a majority of the aggregate principal
amount of the outstanding Notes consenting to such waiver or amendment. See
"Amendments and Waivers."
EXCESS LOUISIANA CASH REPURCHASE OFFERS. At such time as the aggregate
amount of Excess Louisiana Cash equals $10 million, the Company will be
obligated to make an offer to purchase (an "Excess Louisiana Cash Offer") from
all holders of the Notes in accordance with the procedures set forth in the
Indenture up to a maximum principal amount (expressed as a multiple of $1,000)
of Notes equal to such Excess Louisiana Cash deposited in the Collateral
Account less the accrued and unpaid interest on such Notes. The offer price
for the Notes will be payable in cash in an amount equal to 100% of the
principal amount of the Notes plus accrued and unpaid interest, if any, to the
date of repurchase. Each Excess Louisiana Cash Offer shall remain open for a
period of at least 20 business days. To the extent an Excess Louisiana Cash
Offer is not fully subscribed to by the holders of the Notes, the Company may
withdraw the excess funds from the Collateral Account and retain the
unutilized portion of the Excess Louisiana Cash relating to such Excess
Louisiana Cash Offer.
GAMING REDEMPTION. Notwithstanding any other provision hereof, if any Gaming
Authority requires that a holder or beneficial owner of Notes must be
licensed, qualified or found suitable under any applicable gaming law and the
holder or beneficial owner fails to apply for a license, qualification or a
finding of suitability within 30 days after being requested to do so by the
Gaming Authority, or if such holder or such beneficial owner is not so
licensed, qualified or found suitable, the Company shall have the right, at
its option, (i) to require such holder or beneficial owner to dispose of such
holder's or beneficial owner's Notes within 30 days of receipt of such notice
of such finding by the applicable Gaming Authority or such earlier date as may
be ordered by such Gaming Authority or (ii) to redeem the Notes of such holder
or beneficial owner at the least of (a) the principal amount thereof, (b) the
price at which such holder or beneficial owner acquired the Notes and (c) the
Current Market Value of such Notes, together with, in either case, accrued and
unpaid interest, if any, to the earlier of the date of redemption or the date
of the finding of unsuitability, if any, by such Gaming Authority, which may
be less than 30 days following the notice of redemption, if so ordered by such
Gaming Authority. The Company shall notify the Trustee in writing of any such
redemption as soon as practicable. The holder or beneficial owner of Notes
applying for a license, qualification or a finding of suitability is obligated
to pay all costs of the licensure or investigation for such qualification or
finding of suitability.
SELECTION AND NOTICE. In the event that less than all of the Notes are to be
redeemed or repurchased at any time, selection of Notes for redemption or
repurchase will be made by the Trustee on a pro rata basis, by lot or by such
other method, if any, as the Trustee shall deem fair and appropriate; provided
that no Notes in a principal amount of $1,000 or less shall be redeemed or
repurchased in part. Unless otherwise specified herein, notice of a redemption
of or an offer to repurchase Notes shall be mailed by first class mail not
less than 30 days nor more than 60 days before the redemption or purchase date
to each holder of Notes at its registered address. If any
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Note is to be redeemed or repurchased in part only, the notice of redemption
or offer to repurchase that relates to such Note shall state the portion of
the principal amount thereof to be redeemed or repurchased. A new Note in a
principal amount equal to the unredeemed or unpurchased portion thereof will
be issued in the name of the holder thereof upon cancellation of the original
Note. On and after the redemption or purchase date, interest will cease to
accrue on Notes or portions thereof redeemed or repurchased or called for
redemption pursuant to the optional and mandatory redemption provisions and
not forwarded for redemption.
The Company will comply with Rule 14e-1 promulgated under the Securities
Exchange Act of 1934, as amended, in making any offer to repurchase Notes
described above.
Certain instruments, agreements or other documents evidencing, governing or
otherwise relating to Indebtedness of the Company and its Subsidiaries may
prohibit any such repurchases or redemptions unless such Indebtedness has been
repaid in full and such instruments, agreements or other documents have been
terminated. In addition, a Change of Control might constitute an event of
default with respect to such Indebtedness permitting the holder (or an agent
or other representative of such holder on its behalf) to accelerate the
maturity thereof. In the event of a Change of Control, the Company will likely
be required to refinance such Indebtedness and may need to incur additional
Indebtedness in order to make payments for Notes to be redeemed or
repurchased. There can be no assurance that the Company will be able to
refinance such Indebtedness or to incur additional Indebtedness in order to
make such payments.
RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Indenture provides that, subject to the exceptions described below, from
and after the Issue Date each of the Company's Subsidiaries in existence on
the Issue Date and any Subsidiary 80% or more of the Capital Stock of which
the Company, directly or indirectly, acquires or becomes the owner of after
the Issue Date will be a Restricted Subsidiary unless the Company designates
such Subsidiary to be an Unrestricted Subsidiary. Except as provided below,
the Company may designate any existing or future Subsidiary of the Company as
an Unrestricted Subsidiary, provided that (i) such Subsidiary does not own any
Indebtedness or Capital Stock or own or hold any Lien on any asset or property
of the Company or any other Restricted Subsidiary, (ii) either the Subsidiary
to be so designated has total assets of $100,000 or less or immediately before
and after giving pro forma effect to such designation, (a) the Company could
incur $1.00 of Indebtedness pursuant to the covenant described under
"Limitation on Indebtedness" (other than under clauses (a) through (i)
thereof), (b) no Default or Event of Default shall have occurred and be
continuing and (c) the Company could make, pursuant to the covenant described
under "Limitation on Restricted Payments," the Restricted Payment arising from
the designation as described in the next sentence and (iii) all transactions
between the Subsidiary to be so designated and its Affiliates remaining in
effect are permitted pursuant to the covenant described under "Limitation on
Transactions with Affiliates." Notwithstanding the foregoing, the Company may
not designate any existing or future Subsidiary that holds, owns or operates,
directly or indirectly, any assets or function directly relating to or
necessary for the conduct of casino gaming at the Isle-Biloxi, the Isle-
Vicksburg, the Isle-Bossier City or the Isle-Lake Charles as an Unrestricted
Subsidiary. Any Investment made by the Company or any Restricted Subsidiary in
a Restricted Subsidiary which is redesignated an Unrestricted Subsidiary shall
thereafter be considered as having been a Restricted Payment (to the extent
not previously included as a Restricted Payment) made on the day such
Subsidiary is designated an Unrestricted Subsidiary in the amount of the
greater of (i) the sum of the Fair Market Value of such Subsidiary on such
date as determined in accordance with GAAP and the amount of any obligation of
such Subsidiary which the Company or any Restricted Subsidiary has guaranteed
or for which it is in any other manner liable and (ii) the amount of the
Investments made by the Company and any of its Restricted Subsidiaries in such
Subsidiary. Any Subsidiary Guarantee entered into by a Restricted Subsidiary
which is subsequently redesignated an Unrestricted Subsidiary shall be
automatically released at such time as the Restricted Subsidiary becomes an
Unrestricted Subsidiary. Unless so designated as an Unrestricted Subsidiary,
any Subsidiary (whether or not a Subsidiary on the Issue Date) 80% or more of
the Capital Stock of which the Company, directly or indirectly, acquires or
becomes the owner of after the Issue Date shall be classified as a Restricted
Subsidiary thereof.
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An Unrestricted Subsidiary 80% or more of the Capital Stock of which is owned
by the Company directly or indirectly may be redesignated a Restricted
Subsidiary. The Company may not, and may not permit any Restricted Subsidiary
to, take any action or enter into any transaction or series of transactions
that would result in a Person becoming a Restricted Subsidiary (whether through
an acquisition, the redesignation of an Unrestricted Subsidiary or otherwise,
but not including through the creation of a new Restricted Subsidiary) unless,
immediately before and after giving pro forma effect to such action,
transaction or series of transactions, (a) the Company could incur at least
$1.00 of Indebtedness pursuant to the covenant described under "Limitation on
Indebtedness" (other than under clauses (a) through (i) thereof), and (b) no
Default or Event of Default shall have occurred and be continuing. In addition,
no Person may become a Restricted Subsidiary (by any means) unless at least 80%
of the Capital Stock of such Person is owned by the Company, directly or
indirectly.
The designation of an Unrestricted Subsidiary or the removal of such
designation is required to be made by the Board of Directors of the Company,
such designation to be evidenced by a Board Resolution stating that the Board
of Directors has made such designation in accordance with the Indenture, and
the Company is required to deliver to the Trustee such Board Resolution
together with an Officers' Certificate certifying that the designation complies
with the Indenture. Such designation will be effective as of the date specified
in the applicable Board Resolution, which may not be before the date the
applicable Officers' Certificate is delivered to the Trustee.
CERTAIN COVENANTS
Set forth below are summaries of certain covenants contained in the
Indenture.
LIMITATION ON INDEBTEDNESS. The Indenture provides that the Company may not,
and may not cause or permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume, suffer to exist, guarantee or in any manner
become liable for the payment of ("incur") any Indebtedness (including any
Acquired Indebtedness) or any Disqualified Stock unless (i) such Indebtedness
or Disqualified Stock is incurred by the Company or a Subsidiary Guarantor,
(ii) no Default or Event of Default shall have occurred and be continuing at
the time of, or would occur after giving pro forma effect to, such incurrence
of Indebtedness or Disqualified Stock and (iii) on the date of such incurrence
(the "Incurrence Date"), the Consolidated Coverage Ratio of the Company, after
giving pro forma effect to such incurrence of such Indebtedness, would be at
least 2.0 to 1 if the Incurrence Date is on or before July 31, 1998 or at least
2.25 to 1 if the Incurrence Date is after July 31, 1998, other than the
following:
(a) Indebtedness and Disqualified Stock issued to and held by the Company
or a wholly owned Restricted Subsidiary of the Company, provided that (i)
any subsequent issuance or transfer of any Capital Stock that results in
any such wholly owned Restricted Subsidiary ceasing to be a wholly owned
Restricted Subsidiary or (ii) any transfer of such Indebtedness to a Person
other than the Company or a wholly owned Restricted Subsidiary of the
Company, will be deemed to be the issuance of such Indebtedness or
Disqualified Stock by the issuer thereof;
(b) Indebtedness under the Notes, the Subsidiary Guarantees and the
Indenture;
(c) Indebtedness (i) outstanding on the Issue Date as set forth on
Schedule 1.01 to the Indenture on the Issue Date and (ii) (without
duplication of amounts included in clause (i)) which may be incurred under
one or more revolving bank credit facilities in an aggregate principal
amount not to exceed $15 million;
(d) Non-Recourse Indebtedness incurred by a Subsidiary Guarantor in
respect of Project Costs to develop, construct and open Preferred Hotel
Facilities, provided that (i) the principal amount of such Non-Recourse
Indebtedness (including any Refinancing Indebtedness with respect to such
Non-Recourse Indebtedness) shall not exceed 100% of such Project Costs and
(ii) the Consolidated Coverage Ratio of the Company, without giving pro
forma effect to such incurrence of such Non-Recourse Indebtedness, would be
at least 2.0 to 1;
(e) FF&E Financing and Capitalized Lease Obligations, provided that the
sum of the aggregate principal amount of FF&E Financing and Capitalized
Lease Obligations does not exceed, in the aggregate at any time
outstanding, the sum of (i) the principal amount of FF&E Financing and
Capitalized Lease
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Obligations outstanding on the Issue Date plus (ii) $10 million plus (iii)
the product of $7 million and the number of Casinos acquired or developed
by the Company and its Restricted Subsidiaries after the Issue Date plus
(iv) the product of $5 million and the number of Casino Hotels acquired or
developed by the Company or its Restricted Subsidiaries after the Issue
Date;
(f) Indebtedness in respect of performance bonds, letters of credit,
bankers' acceptances and surety and appeal bonds in the ordinary course of
business, other than such Indebtedness outstanding on the Issue Date (or
refinancings thereof permitted under clause (g) below), in an amount not to
exceed $5 million in the aggregate; Interest Rate and Currency Protection
Obligations entered into in connection with the incurrence of Indebtedness
otherwise permitted under the Indenture; and Indebtedness arising under
agreements providing for indemnification, adjustment of purchase price and
similar obligations in connection with the disposition of property or
assets in the ordinary course of business.
(g) Indebtedness issued in exchange for or to repay, prepay, repurchase,
redeem, defease, retire or refinance ("refinance") any Indebtedness
permitted by clauses (a) through (f) above, provided that (i) if the
principal amount of the Indebtedness so issued shall exceed the sum of the
principal amount of the Indebtedness so exchanged or refinanced plus any
prepayment premium and costs reasonably incurred to effect the exchange or
refinancing, then either (x) such excess shall be permitted only to the
extent that it is otherwise permitted to be incurred under this covenant or
(y) in the case of Indebtedness permitted by clause (e) above, such excess
shall be permitted if the principal amount of Indebtedness so issued does
not exceed the lesser of (A) the original principal amount of the
Indebtedness so exchanged or refinanced and (B) the fair value of the
property that is the subject of such FF&E Financing or Capitalized Lease
Obligations, as applicable; and (ii) the Indebtedness so issued (A) has a
stated maturity not earlier than the stated maturity of the Indebtedness so
exchanged or refinanced, (B) has an average life to stated maturity equal
to or greater than the remaining average life to stated maturity of the
Indebtedness so exchanged or refinanced, and (C) is subordinated to the
Notes to at least the same extent as the Indebtedness so exchanged or
refinanced;
(h) Indebtedness incurred by a Subsidiary Guarantor in respect of Project
Costs to make a Casino Improvement, provided such Indebtedness does not
exceed $5 million in the aggregate;
(i) Indebtedness, other than Indebtedness permitted by clauses (a)
through (h) above, which does not exceed $15 million (less any Indebtedness
incurred pursuant to this clause (i) retired with Net Cash Proceeds from
any Asset Sale or Event of Loss) in the aggregate at any time outstanding;
and
LIMITATION ON LIENS. The Indenture provides that the Company may not, and
may not cause or permit any Restricted Subsidiary, directly or indirectly, to
create, incur, assume or suffer to exist any Lien of any kind upon any of its
property or assets (including, without limitation, any income or profits) now
owned or acquired after the date of the Indenture by it, other than:
(a) Liens existing on the Issue Date and set forth on Schedule 1.02 to
the Indenture on the Issue Date;
(b) Liens securing FF&E Financing or Capitalized Lease Obligations
permitted pursuant to clause (e) of the covenant described under
"Limitation on Indebtedness"; provided that (i) the amount of such
Indebtedness incurred in any individual case secured by such a Lien, at the
time such Indebtedness is incurred, does not exceed the lesser of (A) the
cost and (B) the Fair Market Value of the property or assets acquired in
connection with such FF&E Financing or Capitalized Lease Obligation, (ii)
the Indebtedness secured by such Lien shall have otherwise been permitted
to be incurred under the Indenture, (iii) such Lien shall attach to such
property or assets upon their acquisition; and (iv) such Lien (other than a
Permitted Vessel Lien) shall not encumber or attach to any other assets or
property of the Company or any of its other Restricted Subsidiaries;
(c) Liens securing Non-Recourse Indebtedness incurred by a Subsidiary
Guarantor in respect of Project Costs to develop, construct and open
Preferred Hotel Facilities pursuant to clause (d) of the covenant described
under "Limitation on Indebtedness"; provided that (i) such Lien shall
attach to such Preferred Hotel Facilities upon construction or acquisition
of such property or assets and (ii) such Lien shall not encumber or attach
to any other assets or property of the Company or any of its other
Restricted Subsidiaries other than Permitted Shared Common Facilities;
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(d) Liens securing Indebtedness incurred pursuant to clause (i) of the
covenant described under "Limitation on Indebtedness"; provided that any
such Lien shall not encumber or attach to any assets or property owned by
the Company or any of its Restricted Subsidiaries as of the Issue Date;
(e) Liens that encumber or attach to any of the Excluded Assets but do
not encumber or attach to any other assets or property of the Company or
any of its Restricted Subsidiaries;
(f) the replacement, extension or renewal of any Lien permitted by
clauses (a) through (e) upon or in the same property theretofore subject
thereto or the replacement, extension or renewal (without increase in the
principal amount (other than to pay any prepayment premium and costs
reasonably incurred to effect the replacement, extension or renewal or, in
the case of a Lien securing Indebtedness incurred pursuant to clause (e) of
the covenant described under "Limitation on Indebtedness," as permitted by
clause (g) of such covenant) or change in any direct or contingent obligor)
of the Indebtedness secured thereby; and
(g) Permitted Liens.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
may not make, directly or indirectly, and may not permit any Restricted
Subsidiary to make, directly or indirectly, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving pro forma effect to such Restricted
Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to the covenant
described under "Limitation on Indebtedness" (other than under clauses (a)
through (i) thereof); and
(c) the aggregate amount of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (i) 50% of Consolidated Net
Income (or in the event such Consolidated Net Income shall be a deficit,
minus 100% of such deficit) accrued during the period (treated as one
accounting period) beginning on the first day of the first full fiscal
quarter commencing after the Issue Date and ending on the last day of the
Company's last fiscal quarter ending before the date of such proposed
Restricted Payment plus (ii) an amount equal to the aggregate Net Cash
Proceeds received by the Company from the issuance or sale (other than to a
Subsidiary) of its Capital Stock (excluding Disqualified Stock, but
including Capital Stock issued upon conversion of convertible Indebtedness
and from the exercise of options, warrants or rights to purchase Capital
Stock (other than Disqualified Stock) of the Company) (A) in the Goldstein
Family Equity Purchase or (B) otherwise on or after the Issue Date;
provided that, if no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Restricted Payment,
the foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of its declaration if, at the date of
declaration, such payment would be permitted by such provisions, (ii) the
redemption or repurchase of any Capital Stock or Indebtedness of the Company,
including the Notes, if required by any Gaming Authority or if determined, in
the good faith judgment of the Board of Directors, to be necessary to prevent
the loss or to secure the grant or reinstatement of any gaming license or
other right to conduct lawful gaming operations, (iii) the repurchase of
Capital Stock from directors, officers and employees (or their respective
estates or beneficiaries) upon death, disability, retirement or termination of
employment up to an amount not to exceed an aggregate of $1 million in any
fiscal year of the Company and (iv) Permitted Investments. The full amount of
any Restricted Payment made pursuant to the foregoing clause (i) or clause
(ii) of the definition of Permitted Investments, however, will be included in
the calculation of the aggregate amount of Restricted Payments available to be
made pursuant to clause (c) above.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company may not, directly or
indirectly, and may not permit any Restricted Subsidiary to, directly or
indirectly, create or otherwise cause or suffer to exist or enter into any
agreement with any Person that would cause any consensual encumbrance or
restriction of any kind on the ability of any Restricted
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Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on its Capital Stock or any other interest or participation in,
or measured by, its profits owned by, or pay any Indebtedness owed to, the
Company or a Restricted Subsidiary, (b) make any loans or advances to the
Company or any Restricted Subsidiary or (c) transfer any of its properties or
assets to the Company or any Restricted Subsidiary except, in each case, for
(i) restrictions imposed by the Notes, the Indenture the Subsidiary Guarantees
and the Collateral Documents, (ii) customary non-assignment provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practices, (iii) restrictions
imposed by applicable gaming laws or any applicable Gaming Authority, (iv)
restrictions under any agreement relating to any property, assets, or business
acquired by the Company or its Restricted Subsidiary, which restrictions
existed at the time of acquisition, were not put in place in anticipation of
such acquisition and are not applicable to any Person, other than the Person
acquired or to any property, assets or business other than the property,
assets and business of the Person acquired, (v) any such contractual
encumbrance in existence as of the Issue Date or imposed by or in connection
with the incurrence of any Permitted FF&E Financing, Capitalized Lease
Obligations or Non-Recourse Indebtedness permitted pursuant to clause (e) of
the covenant described under "Limitation on Indebtedness," provided such
encumbrance does not have the effect of restricting the payment of dividends
to the Company or any Restricted Subsidiary or the payment of Indebtedness
owed to the Company or any Restricted Subsidiary or reducing the amount of any
such dividends or payments, (vi) any restrictions with respect to Capital
Stock or assets, respectively, of a Restricted Subsidiary of the Company
imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary and (vii) replacements of restrictions imposed pursuant
to clauses (i) through (vi) that are no more restrictive than those being
replaced.
LIMITATION ON ASSET SALES AND EVENTS OF LOSS. The Indenture provides that
the Company may not, directly or indirectly, and may not permit any Restricted
Subsidiary to, directly or indirectly, make any Asset Sale unless (a) at the
time of such Asset Sale the Company or such Restricted Subsidiary, as the case
may be, receives consideration at least equal to the Fair Market Value of the
assets sold or otherwise disposed of, (b) the proceeds therefrom consist of at
least 75% cash or Cash Equivalents and (c) no Default or Event of Default
shall have occurred and be continuing at the time of or after giving pro forma
effect to such Asset Sale.
The Indenture provides that the Company and its Restricted Subsidiaries may,
on or before the 180th day after the date on which the Company or such
Restricted Subsidiary consummates an Asset Sale or suffers an Event of Loss,
apply the Net Cash Proceeds therefrom to make a Permitted Related Investment
(or enter into a binding agreement to make a Permitted Related Investment).
The amount of such Net Cash Proceeds not applied to make a Permitted Related
Investment within such 180-day period will constitute "Excess Sale/Loss
Proceeds." The Indenture provides that, when the aggregate amount of Excess
Sale/Loss Proceeds equals $10 million, the Company is obligated to make an
offer to purchase (a "Excess Sale/Loss Proceeds Offer") from all holders of
the Notes in accordance with the procedures set forth in the Indenture up to a
maximum principal amount (expressed as a multiple of $1,000) of Notes equal to
such Excess Sale/Loss Proceeds, less the accrued and unpaid interest on such
Notes. The offer price for the Notes will be payable in cash in an amount
equal to 100% of the principal amount of the Notes plus accrued and unpaid
interest, if any, to the date of repurchase. Each Excess Sale/Loss Proceeds
Offer shall remain open for a period of at least 20 business days. To the
extent an Excess Sale/Loss Proceeds Offer is not fully subscribed to by the
holders of the Notes, the Company may withdraw the excess funds from the
Collateral Account and retain such unutilized portion of the Excess Sale/Loss
Proceeds.
LIMITATION ON DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES. The Indenture
provides that the Company and its wholly owned Restricted Subsidiaries shall
at all times maintain ownership of not less than 80% of the Capital Stock of
each Restricted Subsidiary of the Company except any Restricted Subsidiary
that shall be disposed of in its entirety or consolidated or merged with or
into the Company or another Restricted Subsidiary, in each case in accordance
with the provisions described under the covenants described under
"Consolidation, Merger, Conveyance, Transfer or Lease" below and "Limitation
on Asset Sales and Events of Loss" above. No Restricted Subsidiary shall issue
any preferred stock or other Capital Stock having a preference as to
dividends,
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upon liquidation or otherwise over the Capital Stock of such Restricted
Subsidiary owned, directly or indirectly, by the Company.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company may not, and the Company may not permit, cause or suffer any
Restricted Subsidiary to, conduct any business or enter into any transaction
or series of transactions (including, without limitation, the sale, transfer,
disposition, purchase, exchange, lease or use of assets, property or services)
or enter into any contract, agreement, understanding, loan, advance or
guarantee with or for the benefit of any of their respective Affiliates,
including, without limitation, any Unrestricted Subsidiary, but not the
Company or another Restricted Subsidiary, (each an "Affiliate Transaction"),
except (a) such transactions that are set forth in writing and are entered
into in good faith and on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could have
been obtained in a comparable transaction on an arm's-length basis from a
Person not an Affiliate of the Company or such Restricted Subsidiary or, if in
the reasonable opinion of a majority of the Independent directors of the
Company, such standard is inapplicable to the subject Affiliate Transaction,
then that such Affiliate Transaction is fair to the Company or the Restricted
Subsidiary, as the case may be (or to the stockholders as a group in the case
of a pro rata dividend or other distribution to stockholders permitted under
"Limitation on Restricted Payments"), from a financial point of view, (b) such
transactions that are existing on the Issue Date and disclosed in this
Prospectus and (c) reasonable and customary compensation and indemnification
of directors, officers and employees. In addition, the Company and its
Restricted Subsidiaries may not enter into any Affiliate Transaction (or
series of related Affiliate Transactions that are similar or part of a common
plan) under clause (a) above involving aggregate payments or other Fair Market
Value (i) in excess of $500,000 unless, prior to the consummation thereof, the
Company has delivered to the Trustee an Officers' Certificate describing such
Affiliate Transaction and certifying that it complies with clause (a) above
and (ii) in excess of $2.5 million unless, prior to the consummation thereof,
the transaction is approved by the Board of Directors of the Company,
including a majority of the Independent directors, such approval to be
evidenced by a Board Resolution, delivered to the Trustee with the Officers'
Certificate required under clause (i), stating that such Board of Directors
has determined that such Affiliate Transaction complies with clause (a) above.
CHANGE IN NATURE OF BUSINESS. The Indenture provides that the Company may
not, and may not permit any of its Restricted Subsidiaries to, own, manage or
conduct any operation other than a Permitted Line of Business.
MAINTENANCE OF INSURANCE. The Indenture provides that, from and at all times
after the Issue Date, the Company and its Subsidiaries are required to have in
effect customary insurance for general liabilities, casualty and property
damage, and other risks, including business interruption coverage where
available on commercially reasonable terms, on terms and in amounts as are
customarily carried by similar businesses conducting gaming in the
jurisdictions of the gaming operations of the Company and its Subsidiaries and
reasonably sufficient to avoid a material adverse change in the financial
condition or results of operation of the Company and its Subsidiaries taken as
a whole. All insurance will name the Trustee as additional insured or loss
payee, as applicable. All such insurance shall be issued by carriers having an
A.M. Best & Company, Inc. rating of A- or higher, or if such carrier is not
rated by A.M. Best & Company, Inc., having the financial stability and size
deemed appropriate by a reputable insurance broker.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE. Neither the Company
nor any Restricted Subsidiary may consolidate with or merge with or into or
sell, assign, convey, lease or transfer all or substantially all of its
properties and assets to any Person or group of affiliated Persons in a single
transaction or through a series of transactions, except that:
(a) the Company may consolidate with or merge with or into or sell,
assign, convey, lease or transfer all or substantially all of its
properties and assets to any Person or group of affiliated Persons in a
single transaction or through a series of transactions if (i) the Company
is the continuing Person or the resulting, surviving or transferee Person
(the "surviving entity") is a corporation organized and existing under the
laws of the United States or any State thereof or the District of Columbia,
(ii) the surviving entity expressly assumes, by a supplemental indenture
(or similar instrument) executed and delivered to the Trustee (or
Collateral Agent), in form and substance reasonably satisfactory to the
Trustee (or Collateral Agent), all of
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the obligations of the Company under the Notes, the Indenture and the
Collateral Documents, (iii) immediately before and immediately after giving
pro forma effect to such transaction, or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing, (iv) the Company or the surviving entity (if the transaction or
series of transactions involves the Company), immediately before and after
giving effect to such transaction or series of transactions (including,
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of the transaction or series of
transactions), has a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction
or series of transactions, (v) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Company or
the surviving entity (if the transaction or series of transactions involves
the Company) could incur at least $1.00 of Indebtedness pursuant to the
covenant described under "Limitation on Indebtedness" (other than under
clauses (a) through (i) thereof), (vi) the Company or the surviving entity
has delivered to the Trustee an Officers' Certificate stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction or series of
transactions, such supplemental indenture complies with this covenant and
that all conditions precedent in the Indenture relating to the transaction
or series of transactions have been satisfied; (vii) such transaction will
not result in the loss of any gaming or other license necessary for the
continued operation of any Restricted Subsidiary as conducted immediately
prior to such consolidation, merger, conveyance, transfer or lease and
(viii) neither the Company nor any Restricted Subsidiary would thereupon
become obligated with respect to any Indebtedness, nor would any of its
property become subject to any Lien, unless the Company or such Subsidiary
could incur such Indebtedness or create such Lien under the Indenture and
(b) a Restricted Subsidiary may consolidate with or merge into or sell,
assign, convey, lease or transfer all or substantially all of its
properties and assets to the Company or to any Restricted Subsidiary of the
Company if (i) the surviving entity is the Company or a Restricted
Subsidiary of the Company, (ii) the surviving entity expressly assumes, by
a supplemental indenture (or similar instrument) executed and delivered to
the Trustee (or Collateral Agent), in form and substance reasonably
satisfactory to the Trustee (or Collateral Agent), all of the obligations
of such Restricted Subsidiary under the Notes, the Subsidiary Guarantees
(if applicable), the Indenture and the Collateral Documents, and (iii) such
transaction will not result in the loss of any gaming or other license
necessary for the continued operation of any Restricted Subsidiary as
conducted immediately prior to such sale, assignment, conveyance, transfer
or lease.
REPORTS TO HOLDERS OF NOTES. The Indenture provides that, whether or not the
Company is subject to the periodic reporting requirements under the Exchange
Act, it shall file reports with the Securities and Exchange Commission as if
it were subject to such periodic reporting requirements and shall furnish
copies of such reports to the Trustee and the holders of the Notes when filed.
In addition, the Company is required to furnish to the Trustee for the benefit
of the holders of Notes quarterly financial statements. Such financial
statements are required to be in the same form and concern the same matters as
the Company's financial statements filed with the Commission, if any, but are
required to be on a consolidated basis for the Company and its Restricted
Subsidiaries only. Such financial statements are required to be made available
to the holders of Notes upon their request. Such financial information may be
included as supplemental information with the Company's consolidated financial
statements.
EVENTS OF DEFAULT AND REMEDIES
EVENTS OF DEFAULT. The following are Events of Default under the Indenture:
(a) a default in the payment of any interest on the Notes when it becomes
due and payable and the continuance of any such default for a period of 30
days; or
(b) a default in the payment of the principal of or premium, if any, on
the Notes when due at maturity, upon acceleration, optional redemption,
required repurchase or otherwise; or
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(c) the default by the Company or any Subsidiary Guarantor in the
performance, or breach, of any term, covenant or agreement in the Indenture
(other than defaults specified in clause (a) or (b) above or clause (d)
below), and the continuance of such default or breach for a period of 30
days after written notice to the Company by the Trustee or to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Notes; or
(d) the default by the Company or any Subsidiary Guarantor in the
performance, or breach, of the covenant described under "Consolidation,
Merger, Conveyance, Transfer or Lease"; the failure of the Company to make
or consummate an Excess Sale/Loss Proceeds Offer in accordance with the
covenant described under "Limitation on Asset Sales and Events of Loss";
the failure of the Company to make or consummate an Excess Louisiana Cash
Repurchase Offer in accordance with the provisions under "Excess Louisiana
Cash Repurchase Offers"; or the failure of the Company to make or
consummate a Change of Control Offer in accordance with the provisions
described under "Change of Control Repurchase Offer"; or
(e) the failure by the Company or any Restricted Subsidiary to make any
payment when due which extends beyond any stated period of grace applicable
thereto with respect to any other Indebtedness, other than Non-Recourse
Indebtedness, in an aggregate principal amount of $7.5 million or more, or
the acceleration of the maturity of other Indebtedness, other than Non-
Recourse Indebtedness, in an aggregate principal amount of $7.5 million or
more for any other reason; or
(f) one or more judgments, orders or decrees for the payment of money not
covered by insurance in excess of $7.5 million, either individually or in
an aggregate amount, shall be entered against the Company or any Restricted
Subsidiary or any of their respective properties and not discharged, and
there shall have been a period of 60 days during which a stay of
enforcement of such judgment or order, by reason of pending appeal or
otherwise, shall not be in effect; or
(g) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any of its Significant Restricted Subsidiaries
shall have occurred; or
(h) the revocation, termination, suspension or cessation to be effective
of any gaming license or other right to conduct lawful gaming operations at
any Casino in any jurisdiction of the Company or any Subsidiary which shall
continue for more than 90 consecutive days (other than (i) as a result of
an adverse vote on or about November 5, 1996 with respect to the conduct of
riverboat gaming in Bossier Parish, Louisiana or Calcasieu Parish,
Louisiana or (ii) the voluntary relinquishment of any such gaming license
or right if, in the reasonable opinion of the Company (as evidenced by an
Officers' Certificate) such relinquishment (a) is in the best interest of
the Company and its Subsidiaries, taken as a whole, (b) does not adversely
affect the holders of the Notes in any material respect and (c) is not
reasonably expected to have, nor are the reasons therefor reasonably
expected to have, any material adverse effect on the Company's relationship
with any Gaming Authority in Missippippi or Louisiana, or the effectiveness
of any gaming license or similar right, or any right to renewal thereof, or
on the prospective receipt of any such license or right, in each case, in
Mississippi or Louisiana); or
(i) any of (i) a default or material breach by the Company or any
Restricted Subsidiary of its obligations under any Subsidiary Guarantee or
the Collateral Documents which continues for a period of 30 days after
written notice to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
outstanding Notes, (ii) the repudiation by the Company or any Restricted
Subsidiary of its obligations under the Subsidiary Guarantees or the
Collateral Documents or (iii) a judgment or decree by a court or
governmental agency of competent jurisdiction declaring the
unenforceability of the payment obligations under the Subsidiary Guarantee
or any of the Collateral Documents, subject to a 10-day grace period in the
case of any Collateral Document.
ACCELERATION. If an Event of Default (other than an Event of Default
specified in clause (g) above) occurs, then the Trustee or the holders of at
least 25% in aggregate principal amount of the outstanding Notes may, by
written notice, and the Trustee upon the request of the holders of not less
than 25% in aggregate principal amount
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of the outstanding Notes is obligated to, declare the principal of and accrued
interest on all the Notes to be due and payable immediately. Upon any such
declaration, such amounts are due and payable immediately. If an Event of
Default specified in clause (g) occurs, then the principal of and accrued
interest on all the Notes ipso facto becomes and is immediately due and payable
without any declaration or other act on the part of the Trustee or any holder.
After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Notes may, by notice to the Trustee, rescind
such declaration of acceleration if all existing Events of Default have been
cured or waived, other than nonpayment of principal of and accrued interest on
the Notes that has become due solely as a result of such acceleration and if
the rescission of acceleration would not conflict with any judgment or decree.
The holders of a majority in principal amount of the outstanding Notes also
have the right to waive past defaults under the Indenture except a default in
the payment of the principal of or interest on any Note, or in respect of a
covenant or a provision which cannot be modified or amended without the consent
of all holders.
In the event of a declaration of acceleration in respect of the Notes because
an Event of Default specified in clause (e) shall have occurred and be
continuing, such declaration of acceleration shall be automatically annulled if
the Indebtedness that is the subject of such Event of Default has been
discharged or the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness, and written notice of such
discharge or rescission, as the case may be, shall have been given to the
Trustee by the Company and countersigned by the holders of such Indebtedness or
a trustee, fiduciary or agent for such holders, within 30 days after such
declaration of acceleration in respect of the Notes, and no other Event of
Default has occurred during such 30-day period which has not been cured or
waived during such period.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in principal amount of the outstanding Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee, the Trustee has failed to institute such proceeding
within 15 days after receipt of such notice and the Trustee has not within such
15-day period received directions inconsistent with such written request by
holders of a majority in principal amount of the outstanding Notes. Such
limitations do not apply, however, to a suit instituted by a holder of a Note
for the enforcement of the payment of the principal of, premium, if any, or
accrued interest on, such Note on or after the Stated Maturity.
REMEDIES WITH RESPECT TO COLLATERAL
IN GENERAL. Specific rights and remedies of the Trustee under the Collateral
Documents ultimately include the right of the Trustee or another, appropriate
Person under federal or state law to sell the Collateral and to apply the net
proceeds to the Indebtedness evidenced by the Notes in accordance with the
terms of the Indenture and the Collateral Documents. The Collateral Documents
will generally provide for the application of the internal laws of the States
in which the Collateral is located or federal Admiralty law while the Indenture
and the Notes will provide for the application of the internal laws of the
State of New York. However, there is no certainty regarding which State's law
would be applied by any court with respect to the enforcement of remedies under
the Notes, the Indenture or the Collateral Documents.
GAMING LAW RESTRICTIONS. Due to restrictions on the ability to engage in
gaming activities in gaming jurisdictions, the Trustee may incur delays or
possibly frustration in its effort to sell all or a portion of the Collateral.
Operators of gaming facilities are required to be licensed by state authorities
and may be required by such authorities to file applications, to be
investigated and be found suitable as owners or landlords of a gaming
establishment. All the foregoing may effectively limit the number of potential
bidders and may delay such sales, either of which could adversely affect the
sale price of the Collateral. Moreover, the gaming industry could become
subject to different or additional regulations during the term of the Notes,
which could further adversely affect the practical rights and remedies that the
Trustee would have upon the occurrence of an Event of Default.
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OTHER GENERAL RESTRICTIONS. In addition to being subject to gaming law
restrictions, the Trustee's ability to foreclose upon and sell assets of the
Company's gaming establishments, stock of Restricted Subsidiaries, any loans
from the Company to its Restricted Subsidiaries, or other Collateral will be
subject to the procedural and other restrictions of the relevant state's real
estate law or Uniform Commercial Code or, in the case of gaming vessels, the
Federal Ship Mortgage Act. Further, certain limitations exist under the
Merchant Marine Act of 1936 on the ability of non-U.S. citizens to realize
upon collateral consisting of vessels documented under the laws of the United
States. In addition, the Collateral includes stock of Restricted Subsidiaries
that is not publicly traded and may only be sold in compliance with applicable
Federal and state securities laws. This may effectively limit the number of
potential bidders for such stock or other Collateral and may delay such sales,
either of which could adversely affect the sale price of such Collateral. In
addition, certain direct or indirect leasehold interests, contracts and other
assets may not be sold without the consent of certain third parties.
With regard to proceeding against any Subsidiary Guarantor and its assets,
the Trustee may either foreclose upon any intercompany loans outstanding to
such Subsidiary Guarantor or proceed under the Subsidiary Guarantee. If the
Trustee chooses to foreclose upon intercompany loans, the necessity of first
foreclosing on the pledge of such loans might result in delay and increase the
risk that a petition for relief under bankruptcy or insolvency law could be
filed by or against any one or more of the Company and the Subsidiary
Guarantors. If, on the other hand, the Trustee chose to proceed by demand and
foreclosure under the Subsidiary Guarantee, its ability to realize upon the
Collateral could be limited by the invocation of state-law suretyship defenses
and fraudulent transfer law.
BANKRUPTCY. The ability to take possession and dispose of the Collateral
directly or indirectly securing the Notes upon acceleration is also likely to
be significantly impaired or delayed by applicable bankruptcy laws if a
bankruptcy case were to be commenced by or against the Company or the
subsidiary owning the collateral. Under applicable bankruptcy laws, the
trustee and the holders would be prohibited from taking possession or
disposing of the collateral absent bankruptcy court approval. Moreover, the
Company or Subsidiary would be permitted to retain and use the collateral as
long as the trustee and the holders are being provided "adequate protection"
in the form of periodic cash payments or substitute liens or in some other
form approved by the court in its discretion. While this requirement is
generally intended to protect the value of the security, it cannot be
predicted what form of "adequate protection" might be approved by the court in
the particular case. The court has broad discretionary powers in all these
matters, including the valuation of the collateral. In addition, since the
collateral generally does not include cash and cash equivalents derived from
gaming and food and beverage operations, the holders of the Notes would not
have any consent rights with respect to the use of those funds by the Company
or subsidiary during the pendency of the proceedings. In view of these
considerations, it is not possible to predict for how long payments on the
Notes would be delayed following the filing of a bankruptcy case, whether or
when the trustee could take possession of or sell the collateral or to what
extent the holders of the Notes would be compensated for any delay in payment
or loss of value of the collateral.
JUDICIAL FORECLOSURE. Pursuant to the terms of the Collateral Documents, the
Trustee would also have the right to initiate a judicial foreclosure against
all or any portion of the Collateral. In such event, the Trustee would be
required to file a suit in the appropriate local court. If the court found in
favor of the Trustee, a judgment of foreclosure and order of sale would be
entered, and the court would order the sale of the affected Collateral.
INTERCREDITOR AGREEMENTS. The Company and the Restricted Subsidiaries in
certain circumstances have the right to incur pari passu Indebtedness that
would be secured by Liens ranking senior to, or equally in priority with the
Liens securing the Notes. The relative rights of the holders of the Notes and
the holders of such pari passu Indebtedness would be governed by the terms of
an intercreditor agreement the principal provisions of which are attached to
the Indenture. Generally, but subject to certain limitations set forth in such
intercreditor agreement, the holders of not less than a majority of the
aggregate principal amount of the then outstanding pari passu Indebtedness
(including the Notes) will be able to direct the actions of the Trustee with
respect to acceleration of the Notes, foreclosure and the exercise of other
rights and remedies. All proceeds of any enforcement action would be shared
pro rata with the holders of such other pari passu Indebtedness.
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FURTHER ASSURANCES
The Indenture will provide that the Company will (and will cause each of its
Restricted Subsidiaries to) execute, acknowledge, deliver, record, re-record,
file re-file, register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof, termination
statements, notices of assignments, transfers, certificates, assurances and
other instruments as reasonably may be required from time to time in order (i)
to carry out more effectively the purposes of the Collateral Documents, (ii) to
subject to the Liens created by any of the Collateral Documents any of the
properties, rights or interests required to be encumbered thereby, (iii) to
perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created thereby and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Trustee any of the rights granted or now or hereafter intended by the
parties thereto to be granted to the Trustee or the Company under the
Collateral documents or under any other instrument executed in connection
therewith.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect to
the Notes ("defeasance"), except for certain obligations, including those
regarding any trust established for a defeasance and obligations to register
the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain agencies in respect of Notes. The Company may at
any time terminate its obligations under certain covenants set forth in the
Indenture, including all of those described under "Certain Covenants," and any
omission to comply with such obligations will not constitute a Default or an
Event of Default with respect to the Notes issued under the Indenture
("covenant defeasance"). In order to exercise either defeasance or covenant
defeasance, the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the Notes, money or United States Government
Obligations, or a combination thereof, in such amounts as will be sufficient to
pay the principal of and premium, if any, and interest on the Notes to
redemption or maturity, together with all other sums payable by it under the
Indenture, and comply with certain other conditions, including the delivery of
an opinion as to certain tax matters. Defeasance of the Notes will result in
the termination of the obligations of the Subsidiary Guarantors under their
respective Subsidiary Guarantees and of the Company under the Company
Guarantee.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of
Notes) as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust) have been
delivered to the Trustee for cancellation or (b) (i) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable and the Company has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in the trust for this purpose an amount of
money sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal, premium,
if any, and accrued interest to the date of such deposit, (ii) the Company has
paid all sums payable by it under the Indenture and (iii) the Company has
delivered irrevocable instructions to the Trustee to apply the deposited money
toward the payment of the Notes at maturity or the redemption date, as the case
may be. In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel stating that all conditions precedent to satisfaction and
discharge have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by resolutions of its Board of
Directors, and the Trustee may, without the consent of the holders of the
Notes, amend, waive or supplement the Indenture, the Notes, the Subsidiary
Guarantees or the Collateral Documents for certain specified purposes,
including, among other things,
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curing ambiguities, defects or inconsistencies and making any change that does
not adversely affect the rights of any holder. Other amendments and
modifications of the Indenture, the Notes the Subsidiary Guarantees or the
Collateral Documents may be made by the Company and the Trustee (or Collateral
Agent) with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding Notes; provided that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby (a) reduce the principal amount outstanding
of, change the stated maturity of, or alter the redemption provisions of, the
Notes, (b) change the currency in which any Notes or any premium or the
accrued interest thereon is payable, (c) reduce the percentage in principal
amount outstanding of Notes whose holders must consent to an amendment,
supplement or waiver or consent to take any action under the Indenture or the
Notes, (d) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes or Subsidiary Guarantees, (e) modify
the ability to waive defaults or specified covenants, except to increase the
percentage of Notes required to effect a waiver, (f) reduce the rate or change
the time for payment of interest on the Notes, (g) subordinate the Notes or
the Guarantees to any other Indebtedness; (h) modify the terms of or release
any of the Subsidiary Guarantees, except as provided under "Subsidiary
Guarantees" and "Restricted and Unrestricted Subsidiaries," unless in each
case the holders of the particular Notes to be affected consent with respect
thereto, or (i) modify the priority or scope of the Lien created by the
Collateral Documents; provided, however, that any such modification arising in
connection with a Permitted Shared Common Facilities Agreement may be effected
with the consent of the holders of not less than a majority of the aggregate
principal amount of the outstanding Notes.
REGARDING THE TRUSTEE
Fleet National Bank will serve as Trustee under the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"Accounts Pledge Agreement" means the Accounts Pledge Agreement, dated the
date of the Indenture, among the Company, the Restricted Subsidiaries and the
Collateral Agent, securing the Secured Obligations and substantially in the
form attached to this Indenture, as may be amended from time to time as
permitted by the Indenture.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or that is assumed in
connection with an Asset Acquisition by such Person, but not Indebtedness
incurred in connection with, or in anticipation of, such Person becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any Person means any other Person that, directly or
indirectly, controls, is controlled by or is under direct or indirect common
control with, such Person and with respect to any natural Person, any other
immediate family member of such natural Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of Voting Stock or other equity interests, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing; provided that, in any event, any Person
that owns directly or indirectly 10% or more of the securities having ordinary
voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will
be deemed to control such corporation or other Person.
"Airplane" means the King Air 200 airplane owned by the Company on the Issue
Date.
"Asset Acquisition" means (a) any capital contribution (including, without
limitation, transfers of cash or other property to others or payments for
property or services for the account or use of others, or otherwise), or
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purchase or acquisition of Capital Stock or other similar ownership or profit
interest, by the Company or any of its Subsidiaries in any other Person, in
either case pursuant to which such Person shall become a Subsidiary of the
Company or any of its Subsidiaries or shall be merged with or into the Company
or any of its Subsidiaries or (b) any acquisition by the Company or any of its
Subsidiaries of the assets of any Person which constitute substantially all of
an operating unit or business of such Person.
"Assets Held for Sale or Development" means (i) the FFC Preferred Stock, (ii)
the Airplane, (iii) the Real Estate Options, (iv) the Cripple Creek Land and
(v) the Discontinued Assets.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(other than an operating lease) relating to assets, the fair market value of
which, determined in the good faith judgment of the Board of Directors, does
not exceed $2 million, assignment, issuance or other disposition (including,
without limitation, by means of a sale-leaseback transaction) by the Company or
any Restricted Subsidiary to any Person (other than the Company or a wholly
owned Restricted Subsidiary), in one transaction or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary or other
similar equity interest or (b) any other property or asset of the Company or
any Restricted Subsidiary (other than (s) Assets Held for Sale or Development,
(t) any Non-Material Assets acquired after the Issue Date, (u) any Hotel
Properties, (v) current assets, as defined in accordance with GAAP, in the
ordinary course of business, (w) damaged, worn out or other obsolete property
in the ordinary course of business if no longer necessary for the proper
conduct of such business, (x) property no longer used or useful in the ordinary
course of business or property replaced with similar property of similar
utility in the ordinary course of business, (y) each other disposition (or
series of related dispositions) that results in Net Cash Proceeds of less than
or equal to $1 million and (z) an Investment permitted under the covenant
described under "Certain Covenants--Limitation on Restricted Payments" or a
disposition made in accordance with the covenant described under "Certain
Covenants--Consolidation, Merger, Conveyance, Transfer or Lease").
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company, to have been duly adopted by the Board
of Directors of the Company, or any duly authorized committee thereof; and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests (including partnership and other equity interests), participations,
rights in, or other equivalents (however designated and whether voting or
nonvoting) of, such Person's capital stock, whether outstanding on the Issue
Date or issued after such date, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP, and, for the
purpose of the Indenture, the amount of such obligation at any date of
determination shall be the capitalized amount thereof at such date, determined
in accordance with GAAP.
"Cash Equivalents" means any of the following, to the extent owned by the
Company or any of its Restricted Subsidiaries free and clear of all Liens and
having a maturity of not greater than 270 days from the date of acquisition (a)
any evidence of Indebtedness issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof), (b) insured certificates of deposit or acceptances
of any commercial bank that is a member of the Federal Reserve System, that
issues (or the parent of which issues) commercial paper rated as described in
clause (c) below and that has combined capital and surplus and undivided
profits of not less than $500 million, (c) commercial paper issued by a
corporation (except an Affiliate of the Company) organized under the laws of
any state of the United States or the District of Columbia and rated at least
A-1 (or the then equivalent grade) by Standard & Poor's Corporation or at least
Prime-1 (or the then equivalent grade) by Moody's Investors Service, Inc., and
(d) repurchase agreements and reverse repurchase
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agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States government or any agency or other
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), provided that the terms of
such repurchase and reverse repurchase agreements comply with the guidelines
set forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency.
"Casino" means a gaming establishment owned, directly or indirectly, by the
Company and any building, restaurant, theater, amusement park or other
entertainment facility, parking or recreational vehicle facilities, retail
shops, land, equipment and other property or asset directly ancillary thereto
and used or to be used in connection therewith, other than a Casino Hotel.
"Casino Hotel" means any hotel or similar hospitality facility, including,
without limitation, a recreational vehicle park or marina serving a Casino,
owned, directly or indirectly, by the Company.
"Casino Improvement" means any capital addition, improvement, extension or
repair to the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier City or the
Isle-Lake Charles.
"Change of Control" means after the Issue Date, an event or series of events
by which:
(i) any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) (other than the Permitted Equity Holders) is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person or group shall be deemed to have
"beneficial ownership" of all shares that any such person or group has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of securities
representing the greater of (a) that percentage of the combined voting
power of the Company's outstanding Voting Stock held by Permitted Equity
Holders (including shares as to which the Company or a Permitted Equity
Holder holds an effective proxy to vote) or (b) 35% or more of the combined
voting power of the Company's outstanding Voting Stock, but excluding in
each case from the percentage of voting power held by any group, the voting
power of shares owned by the Permitted Equity Holders who are deemed to be
members of the group provided that such Permitted Equity Holders
beneficially own a majority of the voting power of the Voting Stock held by
such group, and at such time the Permitted Equity Holders together shall
fail to beneficially own, directly or indirectly, securities representing
at least the same percentage of voting power of such Voting Stock as the
percentage "beneficially owned" by such person or group;
(ii) during any period of 24 consecutive months, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new or replacement directors whose election by the Board of Directors,
or whose nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the directors then in office; or
(iii) the Company consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, pursuant to a transaction in which the outstanding Voting Stock of
the Company is changed into or exchanged for cash, securities or other
property (other than any such transaction where the outstanding Voting
Stock of the Company is (a) changed only to the extent necessary to reflect
a change in the jurisdiction of incorporation of the Company or (b) is
exchanged for (x) Voting Stock of the surviving corporation which is not
Disqualified Stock or (y) cash, securities and other property (other than
Capital Stock of the surviving corporation) in an amount which could be
paid by the Company as a Restricted Payment as described under the covenant
"Limitation on Restricted Payments" (and such amount shall be treated as a
Restricted Payment) and no person or group, other than Permitted Equity
Holders (including any Permitted Equity Holders who are part of a group
where such Permitted Equity Holders beneficially own a majority of the
voting power of the Voting Stock held by such group), owns immediately
after such transaction, directly or indirectly, more than 35% of the
combined voting power of the outstanding Voting Stock of the surviving
corporation; or
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(iv) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with
the provisions described under "Consolidation, Merger, Conveyance, Transfer
or Lease."
"Collateral" means any assets of the Company, the Subsidiary Guarantors or
any of their respective Restricted Subsidiaries defined as Collateral in any of
the Collateral Documents.
"Collateral Agent" means Fleet National Bank, as collateral agent for itself
and the holders under any of the Collateral Documents, or any successor
collateral agent.
"Collateral Account" means one or more deposit accounts in the name of the
Company or a Subsidiary Guarantor, but under the sole dominion and control of
the Trustee, in which the Company or a Subsidiary Guarantor shall deposit or
shall cause to be deposited Net Cash Proceeds from an Asset Sale or Event of
Loss or Excess Louisiana Cash.
"Collateral Documents" means, collectively, the Accounts Pledge Agreement,
the Company Pledge Agreement, the Company Security Agreement, the Subsidiary
Pledge Agreement, the Subsidiary Security Agreement, the Mortgages, the Ship
Mortgages and any other security document entered into by the Company or any
Subsidiary Guarantor to secure the Secured Obligations, in each case as amended
from time to time as permitted by the Indenture.
"Company Guarantee" means the guarantee of the Company with respect to the
obligations of Restricted Subsidiaries under their respective Subsidiary
Guarantees.
"Company Pledge Agreement" means the Company Pledge Agreement, dated as of
the date of the Indenture, between the Company and the Collateral Agent,
securing the Secured Obligations of the Company and substantially in the form
attached to the Indenture, as amended from time to time as permitted by the
Indenture.
"Company Security Agreement" means the Company Security Agreement, dated as
of the date of the Indenture, between the Company and the Trustee, securing the
Company's obligations under the Note Documents and substantially in the form
attached to the Indenture, as amended from time to time as permitted by the
Indenture.
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
"Consolidated Cash Flow" means, for any period, the sum of (a) the
Consolidated Net Income of the Company and its Restricted Subsidiaries for such
period plus (b) the sum of the following items (to the extent deducted in
determining Consolidated Net Income and without duplication): (i) all
Consolidated Interest Expense, (ii) Consolidated Non-cash Charges, (iii)
Consolidated Income Tax Expense, and (iv) any pre-opening expenses.
"Consolidated Coverage Ratio" means the ratio of (a) Consolidated Cash Flow
of the Company and its Restricted Subsidiaries for the period (the "Reference
Period") including the four full fiscal quarters for which financial statements
are available that immediately precede the date of the transaction or other
circumstances giving rise to the need to calculate the Consolidated Coverage
Ratio (the "Transaction Date") to (b) the Consolidated Interest Expense for
such Reference Period (based upon the pro forma amount of Indebtedness of the
Company and its Restricted Subsidiaries outstanding on the Transaction Date and
after giving effect to the transaction in question, unless otherwise provided
in the Indenture). For purposes of this definition, if the Transaction Date
occurs before the date on which the Company's consolidated financial statements
for the four full fiscal quarters after the Issue Date are first available,
Consolidated Cash Flow and Consolidated Interest Expense shall be calculated,
in the case of the Company and its Restricted Subsidiaries, after giving effect
on a pro forma basis as if the Notes outstanding on the Transaction Date were
issued on the first day of such four full fiscal quarter period. In addition,
Consolidated Cash Flow and Consolidated Interest Expense shall be calculated
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after giving effect on a pro forma basis for the period of such calculation to
(i) the incurrence or retirement of any Indebtedness of the Company and its
Restricted Subsidiaries at any time during the Reference Period, including,
without limitation, the incurrence of the Indebtedness giving rise to the need
to make such calculation (unless otherwise provided in the Indenture), as if
such Indebtedness were incurred or retired on the first day of the Reference
Period; provided that if the Company or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the above
clause shall give effect to the incurrence of such guaranteed Indebtedness as
if the Company or such Restricted Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sale, Event of Loss or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of the Company or any of its
Restricted Subsidiaries (including any Person who becomes a Subsidiary as
result of the Asset Acquisition) incurring Acquired Indebtedness) occurring
during the Reference Period and any retirement of Indebtedness in connection
with such Asset Acquisition, as if such Asset Sale, Event of Loss or Asset
Acquisition and/or retirement occurred on the first day of the Reference
Period, but giving effect to any adjustments set forth in the definition of
"Consolidated Net Income." Furthermore, in calculating Consolidated Interest
Expenses for purposes of this "Consolidated Coverage Ratio," interest on
Indebtedness determined on a fluctuating basis shall be deemed to accrue at
the rate in effect on the Transaction Date for such entire period.
"Consolidated Income Tax Expense" means, as applied to any Person for any
period, federal, state, local and foreign income taxes (including franchise
taxes imposed in lieu of or as additional income tax) of such Person and its
Restricted Subsidiaries for such period, determined in accordance with GAAP;
provided, that for purposes hereof, "income taxes" shall specifically exclude
any taxes paid to or imposed by a Gaming Authority.
"Consolidated Interest Expense" means as applied to any Person for any
period the sum of the following items (without duplication) (i) the aggregate
amount of interest recognized by such Person and its Restricted Subsidiaries
in respect of their Consolidated Indebtedness (including all interest
capitalized by such Person and its Restricted Subsidiaries during such period
and all commissions, discounts and other similar fees and charges owed by such
Person or any of its Restricted Subsidiaries for letters of credit and
bankers' acceptance financing and the net costs associated with Interest Rate
and Currency Protection Obligations of such Person and its Restricted
Subsidiaries, but excluding amortization of deferred financing cost and debt
discount or premium, (ii) the aggregate amount of the interest component of
rentals in respect of Capitalized Lease Obligations recognized by such Person
and its Restricted Subsidiaries, (iii) to the extent any Indebtedness of any
other Person is guaranteed by such Person or any of its Restricted
Subsidiaries, the aggregate amount of interest paid or accrued by such other
Person during such period attributable to any such guaranteed Indebtedness,
(iv) the interest portion of any deferred payment obligation, (v) an amount
equal to 1/3 of the base rental expense (i.e., not any rent expense paid as a
percentage of revenues) attributable to such Person and its Restricted
Subsidiaries and (vi) the amount of dividends payable by such Person and its
Restricted Subsidiaries in respect of Disqualified Stock (other than such
dividends payable to such Restricted Subsidiaries).
"Consolidated Net Income" means, for any period, the aggregate of the
consolidated Net Income (or net loss) of the Company and its Restricted
Subsidiaries (determined in accordance with GAAP), less (to the extent
included in such consolidated Net Income) (a) the Net Income (or net loss) of
any Person (the "other Person") (i) other than a Restricted Subsidiary or (ii)
in which the Company or any of its Restricted Subsidiaries has a joint
interest with a third party (which interest does not cause the Net Income (or
net loss) of such other Person to be consolidated into the Net Income (or net
loss) of the Company and its Restricted Subsidiaries in accordance with GAAP),
except in each such case such Net Income shall be included to the extent of
the amount of cash dividends or other cash distributions in respect of Capital
Stock or other interest owned actually paid (out of funds legally available
therefor) to and received by the Company or its Restricted Subsidiaries, (b)
items (other than the tax benefit of the utilization of net operating loss
carry forwards or alternative minimum tax credits) classified as
extraordinary, (c) except to the extent includible in clause (a) above, the
Net Income (or loss) of any other Person (other than SCGC, LRGP and LRGH, the
Net Income of which will be included for the entire period for which
Consolidated Net Income is being determined) accrued or attributable to any
period before the date on which it becomes a Restricted Subsidiary or is
merged into or consolidated with the Company or any of
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its Restricted Subsidiaries or such other Person's property or Capital Stock
(or a portion thereof) is acquired by the Company or any of its Restricted
Subsidiaries and (d) the Net Income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by such Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, law, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders;
provided, however, at any such time, Consolidated Net Income does not include
the amount attributable to the one-time charge incurred by the Company in its
third quarter of fiscal 1996.
"Consolidated Net Worth" means, at any date of determination, the sum of (i)
the consolidated equity of the common stockholders of such Person and its
Restricted Subsidiaries on such date plus (ii) the respective amounts reported
on such Person's most recent balance sheet with respect to any series of
preferred stock (other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect to the year of such declaration and
payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets
of a going concern business made within 12 months after the acquisition of
such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a Restricted Subsidiary of such Person, (y)
all investments in Persons that are not Restricted Subsidiaries and (z) all
unamortized debt discount and expense and unamortized deferred charges, all of
the foregoing determined in accordance with GAAP.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Restricted Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-cash charge which
requires an accrual or reserve for cash charges for any future period).
"Cripple Creek Land" means the real estate owned or leased by the Company in
Cripple Creek, Colorado.
"Current Market Value" means, with reference to the Notes, on any date the
arithmetic mean of the Quoted Price of the Notes for the 20 consecutive
trading days commencing 30 days before such date.
"Default" means any Event of Default or an event that would constitute an
Event of Default but for the requirement that notice be given or time elapse
or both.
"Discontinued Assets" means the following assets held for sale by the
Company as of the Issue Date: (i) the Emerald Lady riverboat and the Diamond
Lady riverboat, (ii) the Lucky Seven barge and two other barges (vessel
numbers 524872 and 511360), (iii) the Illinois Merchant tug boat, the Honey
Bear tug boat and the E.F. Barber tug boat and (iv) gaming equipment held for
sale.
"Disqualified Stock" means, with respect to any Person, any Capital Stock or
other similar ownership or profit interest that, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable),
or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is exchangeable for
Indebtedness, or is redeemable at the option of the holder thereof, in whole
or in part, on or before the Maturity Date of the Notes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal) that has a Fair Market Value of $2 million or
more, any of the following (i) any loss, destruction or damage of such
property or asset; (ii) any institution of any proceedings for the
condemnation or seizure of such property or asset or for the exercise of any
right of eminent domain or navigational servitude or (iii) any actual
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property or asset, or confiscation of such property or
asset or the requisition of the use of such property or asset.
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"Excess Louisiana Cash" means the sum of (a) Isle-Bossier City Cash Flow, in
the event of an adverse vote on or about November 5, 1996 with respect to the
conduct of riverboat gaming in Bossier Parish, Louisiana, and (b) Isle-Lake
Charles Cash Flow, in the event of an adverse vote with respect to the conduct
of riverboat gaming in Calcasieu Parish, Louisiana.
"Excess Sale/Loss Proceeds" and "Excess Sale/Loss Proceeds Offer" have the
meanings set forth in the covenant described under "Certain Covenants--
Limitation on Asset Sales and Events of Loss."
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither
of whom is under undue pressure or compulsion to complete the transaction.
Unless otherwise specified by the Indenture, Fair Market Value shall be
determined by the Board of Directors of the Company acting in good faith and
shall be evidenced by a Board Resolution delivered to the Trustee.
"FFC Preferred Stock" means the 23,681 shares of preferred stock, $100 par
value, of Freedom Financial Corporation owned by the Company as of the Issue
Date.
"FF&E" means furniture, fixtures and equipment used in the ordinary course
of business in the operation of a Permitted Line of Business.
"FF&E Financing" means Indebtedness, the proceeds of which will be used
solely to finance or refinance the acquisition or lease by the Company or a
Restricted Subsidiary of FF&E.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable from time to
time.
"Gaming Authority" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States federal or foreign government, any state, province or any city or other
political subdivision or otherwise and whether now or hereafter in existence,
or any officer or official thereof; with authority to regulate any gaming
operation (or proposed gaming operation) owned, managed, or operated by the
Company or any of its Subsidiaries.
"Goldstein Family Equity Purchase" means the sale to, and purchase by,
Bernard Goldstein, the Chairman and Chief Executive Officer of the Company,
and three members of his family, on or about March 11, 1996, of an aggregate
of 1,020,940 shares of the Company's common stock at a price of $5.875 per
share.
"GPRI" means Grand Palais Riverboat Inc., a Louisiana corporation.
"Grand Palais" means the Grand Palais riverboat owned on the Issue Date by
GPRI.
"Guarantees" means the Subsidiary Guarantees and the Company Guarantee.
"Hotel Properties" means the following real and personal property: (i)
approximately 6 acres of land owned by the Company as of the Issue Date
adjacent to the Isle-Bossier City, (ii) approximately 9 acres of land owned by
the U.S. Department of Housing and Urban Development as of the Issue Date east
of the Isle-Bossier City, in the event such property is acquired by the
Company, (iii) approximately 7 acres of land leased by the Company as of the
Issue Date adjacent to the Isle-Biloxi, (iv) approximately 2.7 acres of land
owned by the Company as of the Issue Date and approximately 5.75 acres of land
leased by the Company as of the Issue Date located north of the Isle-Lake
Charles and (v) the hotel and approximately 10.5 acres of land owned by LRGH
as of the Issue Date in Bossier City, Louisiana.
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"Indebtedness" of any Person means (a) any liability, contingent or
otherwise, of such Person (i) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a
portion thereof), (ii) evidenced by a note, bond, debenture or similar
instrument, letters of credit, acceptances or other similar facilities (other
than a trade payable or a current liability incurred in the ordinary course of
business) or (iii) for the payment of money relating to a Capitalized Lease
Obligation or other obligation relating to the deferred purchase price of
property or services (including a purchase money obligation but not including
any docking fees payable to Louisiana Downs, Inc. or guarantees thereof), (b)
any liability of others of the kind described in the preceding clause (a)
which such Person has guaranteed or which is otherwise its legal liability,
including, without limitation, (x) to pay or purchase such liability, (y) to
supply funds to or in any other manner invest in the debtor (including an
agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) and (z) to purchase, sell
or lease (as lessee or lessor) property or to purchase or sell services,
primarily for the purpose of enabling a debtor to make a payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (c)
any obligation secured by a Lien to which the property or assets of such
Person are subject, whether or not the obligations secured thereby shall have
been assumed by or shall otherwise be such Person's legal liability, (d) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Capital Stock of or other ownership or
profit interest in such Person or any of its Affiliates or any warrants,
rights or options to acquire such Capital Stock, valued, in the case of
Disqualified Stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (e) all Interest Rate and
Currency Protection Obligations and (f) any and all deferrals, renewals,
extensions and refundings of; or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses.
Notwithstanding the foregoing, Permitted Ancillary Investments shall be deemed
not to constitute Indebtedness.
"Independent", when used with respect to any Person, means such other Person
who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or in any
Affiliate of the Company and (c) is not an officer, employee, promoter,
underwriter, trustee, partner or person performing similar functions for the
Company or a spouse, family member or other relative of any such Person.
Whenever it is provided in the Indenture that any Independent Person's opinion
or certificate shall be furnished to the Trustee, such Person shall be
appointed by the Company and reasonably acceptable to the Trustee in the
exercise of reasonable care, and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent within
the meaning thereof.
"Interest Rate and Currency Protection Obligations" means the obligations of
any Person pursuant to any interest rate swap, cap or collar agreement,
interest rate future or option contract, currency swap agreement, currency
future or option contract and other similar agreement designed to hedge
against fluctuations in interest rates or foreign exchange rates.
"Investment" in any Person means any direct or indirect loan, advance,
guarantee or other extension of credit or capital contribution to (including,
without limitation, transfers of cash or other property to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of Capital Stock, warrants, rights, options, bonds,
notes, debentures or other securities or evidences of Indebtedness issued by,
such Person or Indebtedness of any other Person secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness. The amount of any
Investment shall be the original cost of such Investment, plus the cost of all
additions thereto, and minus the amount of any portion of such Investment
repaid to the Person making such Investment in cash as a repayment of
principal or a return of capital, as the case may be, but without any other
adjustments for increases or decreases in value, or write-ups, write-downs or
writeoffs with respect to such Investment. In determining the amount of any
Investment involving a transfer of any property other than cash, such property
shall be valued at its fair value at the time of such transfer, as determined
in good faith by the Board of Directors of the person making such transfer,
whose determination will be conclusive absent manifest error.
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"Isle-Biloxi" means the Isle of Capri Casino located in Biloxi, Mississippi.
"Isle-Biloxi Hotel" means the 367 room hotel facility owned and operated by
the Company at the Isle-Biloxi on the Issue Date.
"Isle-Bossier City" means the Isle of Capri Casino located in Bossier City,
Louisiana.
"Isle-Bossier City Cash Flow" means the sum of (a) that portion of
Consolidated Cash Flow of the Company attributable to the Isle-Bossier City
plus (b) the amount of management fees paid by the Isle-Bossier City to
Affiliates of the Company in excess of $2.5 million in any one year minus (c)
federal, state and local taxes attributable to the Isle-Bossier City minus (d)
required principal and interest payments on Indebtedness incurred by the owner
of and to directly benefit the Isle-Bossier City and owed to Persons other
than Affiliates; provided, that each such amount shall be calculated from and
after the period beginning on November 6, 1996.
"Isle-Lake Charles" means the Isle of Capri Casino located in Lake Charles,
Louisiana (including the Grand Palais).
"Isle-Lake Charles Cash Flow" means the sum of (a) that portion of
Consolidated Cash Flow of the Company attributable to the Isle-Lake Charles
plus (b) the amount of management fees paid by the Isle-Lake Charles to
Affiliates of the Company in excess of $2.5 million in any one year minus (c)
federal, state and local taxes attributable to the Isle-Lake Charles minus (d)
required principal and interest payments on Indebtedness incurred by the owner
of and to directly benefit the Isle-Lake Charles and owed to Persons other
than Affiliates; provided, that each such amount shall be calculated from and
after the period beginning on November 6, 1996.
"Isle-Vicksburg" means the Isle of Capri Casino located in Vicksburg,
Mississippi.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any
kind or nature whatsoever. For purposes of the Indenture, a Person shall be
deemed to own subject to a Lien any property which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
Person.
"LRGH" means L.R.G. Hotels, a Louisiana partnership.
"LRGP" means Louisiana Riverboat Gaming Partnership, a Louisiana
partnership.
"Marketable Securities" means Cash Equivalents or any fund investing
primarily in Cash Equivalents.
"Maturity" or "Maturity Date" when used with respect to any note, means the
date specified in such note as the fixed date on which the last installment of
principal of such note is due and payable.
"Mortgages" means mortgages or deeds of trust and related assignments of
rents between the Company or any Restricted Subsidiary Guarantor, in each case
if it owns or leases any significant real estate asset (initially the Isle-
Biloxi, the Isle-Biloxi Hotel, the Isle-Vicksburg, the Isle-Bossier City, the
Isle-Lake Charles and Pompano Park) and the Collateral Agent, granting a Lien
on such real estate securing the Secured Obligations of the Company or such
Subsidiary Guarantor, as the case may be, and substantially in the form
attached to the Indenture, as amended from time to time as permitted by the
Indenture.
"Net Cash Proceeds" means, with respect to any Asset Sale, Event of Loss,
issuance or sale by the Company of its Capital Stock or incurrence of
Indebtedness, as the case may be, the proceeds thereof in the form of cash or
Cash Equivalents received by the Company or any of its Restricted Subsidiaries
(whether as initial consideration, through the payment or disposition of
deferred compensation or the release of reserves), after deducting therefrom
(without duplication) (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finders fees and other similar
fees and expenses incurred in
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connection with such Asset Sale or Event of Loss; (b) provisions for all taxes
payable as a result of such Asset Sale or Event of Loss, (c) payments made to
retire Indebtedness (other than payments on the Notes) secured by the assets
subject to such Asset Sale or Event of Loss to the extent required pursuant to
the terms of such Indebtedness and (d) appropriate amounts to be provided by
the Company or any of its Restricted Subsidiaries, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale or Event of Loss and retained by the Company or any of its
Restricted Subsidiaries, as the case may be, after such Asset Sale or Event of
Loss, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale or Event of
Loss, in each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash or Cash Equivalents, actually
paid to a Person that is not an Affiliate of the Company or, in the case of
reserves, are actually established and, in each case, are properly attributable
to such Asset Sale or Event of Loss.
"Net Income" means, with respect to any Person for any period, the net income
(or loss) of such Person determined in accordance with GAAP.
"Non-Material Assets" means assets or a series of related assets (i) not
necessary for or used in the conduct of the Company's gaming business and (ii)
having a fair value of not more than $1 million.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which none of the
Company or any of its Restricted Subsidiaries provides any credit support or is
directly or indirectly liable for the payment of principal or interest thereof
and a default with respect to which would not entitle any party to cause any
other Indebtedness of the Company or a Restricted Subsidiary to be accelerated
or (b) incurred by the Company or a Restricted Subsidiary to develop, construct
and open Preferred Hotel Facilities or to purchase one or more assets from the
lending source, provided that the lender's only remedy against the obligor in
the event of a default with respect to such Indebtedness, whether as a result
of the failure to pay principal or interest when due or any other reason, is
limited to foreclosure on such Preferred Hotel Facilities or repossession of
such assets purchased.
"Permitted Equity Holders" means Bernard Goldstein and his three adult sons.
"Permitted Ancillary Investment" means any agreement, undertaking or other
arrangement to rent or otherwise pay for up to, and including, 40% of the rooms
available to the public for rent at or below the rates normally charged to the
public for such rooms in any Casino Hotel and to obtain a preference for
securing accommodations at such Casino Hotel.
"Permitted Investments" means (i) Investments in Marketable Securities, (ii)
loans or advances to employees in the ordinary course of business not to exceed
$250,000 in any fiscal year of the Company or $1 million in the aggregate,
(iii) Investments in a Permitted Line of Business by the Company or a
Restricted Subsidiary made in one or more persons in an aggregate amount not to
exceed the sum of $10 million plus the net proceeds received from the Rights
Offering and (iv) Permitted Ancillary Investments.
"Permitted Liens" means:
(i) Liens on property acquired by the Company or any Restricted
Subsidiary (including an indirect acquisition of property by way of a
merger of a Person with or into the Company or any Restricted Subsidiary or
the acquisition of a Person), provided that such Liens were in existence
prior to the contemplation of such acquisition, merger or consolidation,
and were not created in connection therewith or in anticipation thereof,
and provided that such Liens do not extend to any additional property or
assets of the Company or any Restricted Subsidiary;
(ii) statutory Liens (other than those arising under ERISA) to secure the
performance of obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature incurred in the ordinary course of
business (exclusive of obligations in respect of the payment of borrowed
money), or for taxes, assessments or governmental charges or claims,
provided that in each case the obligations are not yet
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delinquent or are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and any reserve or other
adequate provision as shall be required in conformity with GAAP shall have
been made therefor;
(iii) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any Restricted
Subsidiary;
(iv) any charter of a vessel, provided that (i) in the good faith
judgment of the Board of Directors of the Company such vessel is not
necessary for the conduct of the business of the Company or any of its
Restricted Subsidiaries as conducted immediately prior thereto; (ii) the
terms of the charter are commercially reasonable and represent the Fair
Market Value of the charter; and (iii) the Person chartering the assets
agrees to maintain the Vessel and evidences such agreement by delivering
such an undertaking to the Trustee;
(v) with respect to the property involved, easements, rights-of-way,
navigational servitudes, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances which do not interfere in
any material respect with the ordinary conduct of business of the Company
and its Subsidiaries as now conducted or as contemplated herein;
(vi) Liens in the ordinary course of business in connection with workers'
compensation, unemployment insurance or other types of social security
(other than those arising under ERISA);
(vii) any interest or title of a lessor in property subject to any
Capitalized Lease Obligation or an operating lease;
(viii) Liens arising from the filing of Uniform Commercial Code financing
statements with respect to leases;
(ix) Liens arising from any final judgment or order not constituting an
Event of Default;
(x) Liens on documents or property under or in connection with letters of
credit in the ordinary course of business, if and to the extent that the
related Indebtedness is permitted under clause ~(f) of "Limitation on
Indebtedness"; and
(xi) Liens arising out of conditional sale, title retention, consignment
or similar arrangements for the sale of goods in the ordinary course of
business.
"Permitted Line of Business" means, with respect to any Person, any casino
gaming business of such Person or any business that is related to, ancillary or
supportive of, connected with or arising out of the gaming business of such
Person (including, without limitation, developing and operating lodging,
dining, amusement, sports or entertainment facilities, transportation services
or other related activities or enterprises and any additions or improvements
thereto).
"Permitted Shared Common Facilities" means real and personal property serving
both a Casino and a Casino Hotel under a Permitted Shared Common Facilities
Agreement.
"Permitted Shared Common Facilities Agreement" means an agreement,
undertaking or arrangement providing for real or personal property to serve
both a Casino and a Casino Hotel substantially similar (with appropriate
changes to reflect the needs of the relevant facilities) to the Declaration of
Shared Facilities Agreement for the Isle of Capri Casino and Hotel, Biloxi,
Mississippi, dated April 26, 1995; provided, however, in no event shall any
such Permitted Shared Common Facilities Agreement grant any party thereto any
rights to foreclose on any Collateral.
"Permitted Related Investment" means the acquisition of property or assets by
a Person to be used in connection with a Permitted Line of Business of such
Person.
"Permitted Vessel Liens" means a Lien on a vessel to secure FF&E Financing or
Capitalized Lease Obligations where the holder or holders (or an agent, trustee
or other representative for such holder or holders) are parties to an
intercreditor agreement with the Trustee substantially similar to that
affecting the Grand Palais
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on the Issue Date under which such holder or holders (or such representative)
(i) agrees to release such Lien upon satisfaction of such FF&E Financing, (ii)
agrees to release such Lien upon payment (or promise of payment) to such
holder or holders (or such representative) of that portion of the proceeds of
the sale of such vessel attributable to the related FF&E and (iii)
acknowledges that such Lien does not create rights on the hull and other
equipment constituting such vessel (other than the related FF&E).
"Person" means an individual, partnership, corporation (including a business
trust), joint stock company, limited liability company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.
"Plans" means all drawings, plans and specifications prepared by or on
behalf of the Company or any of its Subsidiaries, as the same may be amended
or supplemented from time to time, and, if required by applicable law,
submitted to and approved by the building or other relevant department, that
describe and show a Casino and the labor and materials necessary for
construction thereof.
"Pompano Park" means the real and personal property comprising the Pompano
Park harness racing track and training facilities located in Pompano Beach,
Florida.
"Preferred Hotel Facilities" means new or expanded Casino Hotels located at
or adjacent to the Isle-Biloxi, the Isle-Vicksburg, the Isle-Bossier City, the
Isle-Lake Charles or located in Cripple Creek, Colorado.
"Project Costs" means, with respect to a Casino Improvement or construction
or development of Preferred Hotel Facilities, the aggregate costs required to
complete such Casino Improvement or construction or development of Preferred
Hotel Facilities as well as the f~urnishing and equipping thereof in
accordance with the Plans therefor and applicable legal requirements as set
forth in a statement submitted to, and receipted for by, the Trustee, setting
forth in reasonable detail all amounts theretofore expended and any
anticipated costs and expenses estimated to be incurred and reserves to be
established in connection with the construction and development of such Casino
Improvement or construction or development of Preferred Hotel Facilities,
including direct costs related thereto such as construction management,
architectural, engineering and interior design fees, site work, utility
installations and hook-up fees, construction permits, certificates and bonds,
land acquisition costs and the cost of furniture, fixtures, furnishings,
machinery and equipment, but excluding the following: principal or interest
payments on any Indebtedness (other than interest that is required to be
capitalized in accordance with GAAP, which shall be included in determining
Project Costs), or costs related to the operation of Preferred Hotel
Facilities including, but not limited to, non-construction supplies and pre-
operating payroll.
"Qualified Public Equity Offering" means a firm commitment underwritten
public offering of Common Stock of the Company for which the Company receives
net proceeds of at least $30 million, and after which the Common Stock is
traded on a national securities exchange or quoted on the Nasdaq National
Market.
"Quoted Price" means, for any day, the last reported sale price regular way
or, if no such reported sale takes place such day, the average of the closing
bid and asked prices regular way for such day, in either case on the principal
national securities exchange on which the Notes are listed or admitted to
trading, or if the Notes are not listed or admitted to trading on any national
securities exchange, but are traded in the over-the-counter market, the
closing sale price of the Notes or, in case no sale is publicly reported, the
average of the closing bid and asked prices, as furnished by two members of
the National Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose.
"Real Estate Options" means (i) all options held by the Company, directly or
indirectly, at the Issue Date and (ii) all options acquired by the Company,
directly or indirectly, after the Issue Date for an amount, in each case, not
exceeding $1.0 million, to purchase or lease land.
"Restricted Payment" means any of (a) the declaration or payment of any
dividend or any other distribution on Capital Stock of the Company or any
Subsidiary or any payment made to the direct or indirect holders (in
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their capacities as such) of Capital Stock of the Company or any Subsidiary
(other than (i) dividends or distributions payable solely in Capital Stock
(other than Disqualified Stock) otherwise permitted by the Indenture and (ii)
in the case of a Subsidiary, dividends or distributions payable to the Company
or to a Restricted Subsidiary of the Company); (b) the purchase, defeasance,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company or any Subsidiary (other than Capital Stock of such Subsidiary held
by the Company or any of its Restricted Subsidiaries); (c) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, before any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness
which is subordinated in any manner in right of payment to the Notes (other
than Indebtedness acquired in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition); and (d) the making of any Investment or
guarantee of any Investment by the Company or any Subsidiary in any Person
other than (x) in a Person that would be, directly or indirectly, a Subsidiary
80% or more of the Capital Stock of which is owned by the Company, directly or
indirectly, immediately after giving effect to such Investment, or (y) under a
plan of reorganization or similar proceeding under applicable bankruptcy law or
in connection with a workout involving creditors of such Person in exchange for
Indebtedness owing by such Person that did not violate the limitations set
forth under "Limitations on Restricted Payments."
"Restricted Subsidiary" means (a) any Subsidiary 80% or more of the Capital
Stock of which is owned by the Company, directly or indirectly, that exists on
the Issue Date and (b) any other Subsidiary, 80% or more of the Capital Stock
of which is owned by the Company, directly or indirectly, that the Company has
not designated as an Unrestricted Subsidiary or has redesignated a Restricted
Subsidiary.
"Rights Offering" means the issuance by the Company to certain of its
stockholders of rights to purchase, at the same price as sold pursuant to the
Goldstein Family Equity Purchase, up to 4,296,085 shares of the Company's
common stock.
"SCGC" means St. Charles Gaming Company, Inc., a Louisiana corporation.
"Secured Obligations" has the meaning specified in the Collateral Documents.
"Ship Mortgages" means the preferred ship mortgages between the Company or
any Restricted Subsidiary Guarantor, in each case if it owns or leases any
Vessel (initially, the Isle-Biloxi, Isle-Vicksburg, Isle-Bossier City and the
Isle-Lake Charles (including the Grand Palais)) and the Collateral Agent,
creating a Lien on such Vessel, securing the Secured Obligations of the Company
or such Subsidiary Guarantor, as the case may be, and substantially in the form
attached to the Indenture, as amended from time to time as permitted by the
Indenture.
"Significant Restricted Subsidiary" means any Restricted Subsidiary (i) the
assets of which (after intercompany eliminations) exceed 5% of the assets of
the Company and its consolidated Subsidiaries or (ii) the income from
continuing operations of which (before income taxes, extraordinary items and
intercompany management or similar fees payable by such Restricted Subsidiary)
exceeds 5% of such income of the Company and its consolidated Subsidiaries or
(iii) that holds a gaming license to conduct lawful gaming operations at any
Casino in any jurisdiction.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the principal of such security is due
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof).
"Subordinated Indebtedness" means Indebtedness that is subordinated in right
of payment to the Notes in all respects, matures at a date later than the
maturity date of the Notes and has an average life longer than that applicable
to the Notes.
"Subsidiary" of any Person means any corporation, partnership, joint venture,
trust or estate of which (or in which) more than 50% of (a) the issued and
outstanding Capital Stock having ordinary voting power to elect
87
<PAGE>
a majority of the Board of Directors of such corporation (irrespective of
whether at the time Capital Stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership
or joint venture or (c) the beneficial interest in such trust or estate is at
the time directly or indirectly owned or controlled by such Person.
"Subsidiary Guarantees" means the guarantees of the Guarantors with respect
to the Company's obligations under the Notes and the Indenture.
"Subsidiary Guarantors" means each existing and future Significant
Restricted Subsidiary of the Company.
"Subsidiary Pledge Agreement" means the Subsidiary Pledge Agreement, dated
as of the date of the Indenture, among the Subsidiary Guarantors and the
Collateral Agent, securing the Secured Obligations of the Subsidiary
Guarantors and substantially in the form attached to the Indenture, as amended
from time to time as permitted by the Indenture.
"Subsidiary Security Agreement" means the Subsidiary Security Agreement,
dated as of the date of the Indenture, among the Subsidiary Guarantors and the
Collateral Agent, securing the Secured Obligations of the Subsidiary
Guarantors and substantially in the form attached to the Indenture, as amended
from time to time as permitted by the Indenture.
"United States Government Obligations" means, securities which are (i)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America.
"Unrestricted Subsidiary" means any Subsidiary of the Company that (i) is
not a Wholly Owned Subsidiary, (ii) the Company has designated, pursuant to
provisions described under "Restricted and Unrestricted Subsidiaries," as an
Unrestricted Subsidiary and that has not been redesignated as a Restricted
Subsidiary pursuant to such paragraph, and (iii) is a Subsidiary of an
Unrestricted Subsidiary.
"Vessel" means any riverboat or barge, whether now owned or hereafter
acquired by the Company or any Restricted Subsidiary, useful for gaming,
administrative, entertainment or any other purpose whatsoever.
"Voting Stock" of any Person means~ Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only as
long as no senior class of securities has such voting power by reason of any
contingency.
88
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement (the
"Purchase Agreement"), among the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Salomon Brothers Inc, Nomura Securities International,
Inc. and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (the "Underwriters"),
the Company has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase from the Company, the aggregate principal amount
of Notes set forth opposite its name below. The Purchase Agreement provides
that the obligations of the Underwriters are subject to certain conditions
precedent and that the Underwriters will be obligated to purchase all of the
Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................
Salomon Brothers Inc........................................
Nomura Securities International, Inc........................
Deutsche Morgan Grenfell/C. J. Lawrence Inc.................
------------
Total.................................................. $300,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After
the initial public offering of the Notes, the public offering price,
concession and discount may be changed. In connection with a prior uncompleted
offering, the Company advanced Salomon Brothers Inc $255,000 for out-of-pocket
expenses, which amount will be credited against and reduce the amount of the
underwriting discount payable to the Underwriters in connection with the
Offering, and reimbursed Salomon Brothers Inc approximately $48,000 for out-
of-pocket expenses incurred on behalf of the Company in connection with
financial advisory services unrelated to the prior uncompleted offering. Until
June 30, 1997, Salomon Brothers Inc has been granted rights to participate as
co-manager in certain offerings of securities by the Company. In addition,
until the expiration of 12 months from the closing of the Offering, Nomura
Securities International, Inc. has been granted rights to participate as a co-
manager in certain offerings of debt securities by the Company.
There is no public market for the Notes and the Company does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes on the Nasdaq Stock Market. The Company has been
advised by the Underwriters that they presently intend to make a market in the
Notes after the consummation of the Offering contemplated hereby, although
they are under no obligation to do so and may discontinue any market-making
activities at any time without any notice. No assurance can be given, however,
as to the liquidity of the trading market for the Notes or that an active
public market for the Notes will develop. If an active public market for the
Notes does not develop, the market price and liquidity of the Notes may be
adversely affected.
The Purchase Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respect thereof.
In June 1995, an affiliate of Nomura Securities International, Inc. ("NSI")
purchased $38.4 million of increasing rate notes from an affiliate of the
Company in connection with which NSI and such affiliate received customary
compensation. Under the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), when more than 10% of the proceeds of a
public offering of debt securities are to be paid to members of the NASD or
affiliates thereof, the yield at which the debt securities are distributed to
the public must be no lower than that recommended by a "qualified independent
underwriter" meeting certain standards
89
<PAGE>
specified by the NASD. The affiliate of NSI will receive more than 10% of the
net proceeds from the Offering as a result of the use of a portion of the net
proceeds of the Offering to repay the outstanding increasing rate notes. See
"Use of Proceeds." Accordingly, Merrill Lynch, Pierce, Fenner & Smith
Incorporated is acting as a qualified independent underwriter in connection
with the Offering and has conducted due diligence in connection with its
responsibilities as a qualified independent underwriter. The yield on the
Notes, when sold at the initial public offering price set forth on the cover
of this Prospectus, is no lower than that recommended by Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
LEGAL MATTERS
The validity of the Notes being offered hereby will be passed upon for the
Company by Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters
relating to the Offering will be passed upon for the Underwriters by Hughes
Hubbard & Reed, Los Angeles, California.
EXPERTS
The consolidated financial statements of the Company and the financial
statements of LRGP at April 30, 1996 and 1995 and for each of the three years
in the period ended April 30, 1996 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein,
and are included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The balance sheets of St. Charles Gaming Company, Inc. as of April 30, 1995
and 1996, the statements of operations, stockholders' equity, and cash flows
for the period from June 25, 1993 (acquisition date) to April 30, 1994 and for
the years ended April 30, 1995 and 1996 included in this prospectus, the
balance sheets of St. Charles Gaming Company, Inc. as of December 31, 1995,
and April 30, 1995, the statements of operations, stockholder's equity, and
cash flows for the eight months ended December 31, 1995 and the year ended
April 30, 1995, the balance sheets of St. Charles Gaming Company, Inc. as of
April 30, 1995 and 1994, and the statements of operations, stockholder's
equity, and cash flows for the year ended April 30, 1995 and the period from
June 25, 1993 (acquisition date) to April 30, 1994, appearing in the Company's
Current Report on Form 8-K/A dated June 4, 1996 and amended on June 28, 1996,
incorporated by reference in this prospectus, have been incorporated herein in
reliance on the reports of Coopers & Lybrand, L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Reports,
proxy material and other information concerning the Company can be inspected
and copied at the office of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its regional offices, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates.
The Guarantors do not expect that they will be required to file separate
reports with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act. In this regard, the Guarantors will not make available separate annual
reports to security holders.
The Company and the Guarantors have filed with the Commission a registration
statement on Form S-3 (together with all amendments and exhibits, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Notes offered hereby. This prospectus
("Prospectus"),
90
<PAGE>
which constitutes a part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto, certain items of which are contained in exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the content of any
contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
Registration Statement, which may be inspected and copied in the manner and at
the sources described above.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference (File No. 0-20030):
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1995.
(2) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended July 31, 1995, October 31, 1995 and January 31, 1996 (as amended by
amendment thereto dated June 4, 1996).
(3) The Company's Current Report on Form 8-K, dated May 17, 1996 (as
amended by amendment thereto dated June 4, 1996 and June 28, 1996) (Date of
earliest event reported: May 3, 1996).
(4) The Company's Current Report on Form 8-K, dated July 3, 1996 (Date of
earliest event reported: July 3, 1996).
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering made hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein will be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated by reference herein modifies
or supersedes any such statement. Any such statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Common Stock, to whom this Prospectus is delivered, on the
request of such person, a copy of any of the foregoing documents incorporated
herein by reference (other than the exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Written or telephone requests should be directed to Casino America, Inc. at
its principal executive offices, 711 Washington Loop, Biloxi, Mississippi
39530, Attention: Chief Financial Officer (telephone number (601) 436-7000).
91
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CASINO AMERICA, INC.
Report of Independent Auditors........................................... F-1
Consolidated Balance Sheets, April 30, 1995 and 1996..................... F-2
Consolidated Statements of Income, Years ended April 30, 1994, 1995 and
1996.................................................................... F-4
Consolidated Statements of Stockholders' Equity, Years ended April 30,
1994, 1995 and 1996..................................................... F-5
Consolidated Statements of Cash Flows, Years ended April 30, 1994, 1995
and 1996................................................................ F-6
Notes to Consolidated Financial Statements............................... F-7
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
Report of Independent Auditors........................................... F-17
Balance Sheets, April 30, 1995 and 1996.................................. F-18
Statements of Operations, Years ended April 30, 1994, 1995 and 1996...... F-20
Statements of Partners' Capital (Deficit), Years ended April 30, 1994,
1995 and 1996........................................................... F-21
Statements of Cash Flows, Years ended April 30, 1994, 1995 and 1996...... F-22
Notes to Financial Statements............................................ F-23
ST. CHARLES GAMING COMPANY, INC.
Report of Independent Auditors........................................... F-29
Balance Sheets, April 30, 1995 and 1996.................................. F-30
Statements of Operations, Period from June 25, 1993 (acquisition date) to
April 30, 1994, Years ended April 30, 1995 and 1996..................... F-32
Statements of Stockholders' Equity (Deficit), Period from June 25, 1993
(acquisition date) to April 30, 1994, Years ended April 30, 1995 and
1996.................................................................... F-33
Statements of Cash Flows, Period from June 25, 1993 (acquisition date) to
April 30, 1994, Years ended April 30, 1995 and 1996..................... F-34
Notes to Financial Statements............................................ F-35
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Casino America, Inc.
We have audited the accompanying consolidated balance sheets of Casino
America, Inc. as of April 30, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended April 30, 1996. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Casino
America, Inc. at April 30, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
April 30, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
June 3, 1996
F-1
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
-------------------------
ASSETS 1995 1996
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 18,997,000 $ 18,585,000
Accounts receivable:
Related parties.................................. 2,409,000 3,171,000
Other............................................ 825,000 1,764,000
Income tax receivable.............................. 1,189,000 --
Deferred income taxes.............................. -- 1,001,000
Prepaid expenses and other assets.................. 1,941,000 2,858,000
------------ ------------
Total current assets........................... 25,361,000 27,379,000
Property and equipment--Net.......................... 133,485,000 129,306,000
Other assets:
Investment in and advances to joint ventures....... 20,861,000 34,281,000
Notes receivable--Related party.................... 4,700,000 4,700,000
Other investments.................................. 2,250,000 2,250,000
Property held for development or sale.............. 1,398,000 15,840,000
Restricted cash.................................... 12,171,000 --
Berthing, concession, and leasehold rights, net of
accumulated
amortization of $896,000 and $1,209,000,
respectively...................................... 5,373,000 5,060,000
Deferred financing costs, net of accumulated
amortization of $682,000 and $1,229,000,
respectively...................................... 4,089,000 4,327,000
Prepaid expenses................................... 955,000 743,000
Deposits and other................................. 1,256,000 2,588,000
------------ ------------
53,053,000 69,789,000
------------ ------------
Total assets................................... $211,899,000 $226,474,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996
------------------------------------ ------------ ------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt............... $ 6,793,000 $ 8,884,000
Accounts payable--Trade............................ 8,369,000 6,169,000
Accrued liabilities:
Interest......................................... 5,631,000 5,802,000
Payroll and payroll related...................... 5,670,000 6,333,000
Property and other taxes......................... 1,207,000 6,880,000
Progressive jackpots and slot club awards........ 2,232,000 1,851,000
Deferred income taxes............................ 1,477,000 --
Other............................................ 480,000 2,392,000
------------ ------------
Total current liabilities...................... 31,859,000 38,311,000
Long-term debt, less current maturities.............. 132,064,000 130,894,000
Deferred income taxes................................ 5,961,000 6,999,000
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued........................... -- --
Common stock, $.01 par value; 45,000,000 shares
authorized; shares
issued and outstanding: 14,853,124 and 16,038,882,
respectively...................................... 149,000 160,000
Class B common stock, $.01 par value; 3,000,000
shares authorized; none issued.................... -- --
Additional paid-in capital......................... 7,168,000 13,857,000
Retained earnings.................................. 34,698,000 36,253,000
------------ ------------
Total stockholders' equity..................... 42,015,000 50,270,000
------------ ------------
Total liabilities and stockholders' equity..... $211,899,000 $226,474,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Casino............................. $140,994,000 $117,613,000 $123,936,000
Rooms.............................. -- -- 4,422,000
Management fee--Joint ventures..... -- 4,613,000 6,308,000
Pari-mutuel commissions and fees... -- -- 15,063,000
Food, beverage, and other.......... 3,639,000 5,311,000 8,234,000
------------ ------------ ------------
Total revenue.................... 144,633,000 127,537,000 157,963,000
Operating expenses:
Casino............................. 42,726,000 46,039,000 49,910,000
Rooms.............................. -- -- 2,602,000
Gaming taxes....................... 16,915,000 13,924,000 15,116,000
Pari-mutuel........................ -- -- 11,375,000
Food and beverage.................. 2,253,000 3,678,000 5,382,000
Marine and facilities.............. 7,764,000 7,199,000 10,781,000
Marketing and administrative....... 26,113,000 26,895,000 33,167,000
One-time charge.................... -- -- 11,798,000
Preopening expenses................ 3,475,000 483,000 1,311,000
Loss on disposal of equipment...... 22,000 178,000 1,217,000
Depreciation and amortization...... 5,450,000 8,945,000 12,111,000
------------ ------------ ------------
Total operating expenses......... 104,718,000 107,341,000 154,770,000
------------ ------------ ------------
Operating income..................... 39,915,000 20,196,000 3,193,000
Interest expense:
Related parties.................... (1,333,000) -- (56,000)
Other.............................. (6,909,000) (14,029,000) (15,237,000)
Interest income:
Unconsolidated joint ventures...... 1,107,000 2,961,000 747,000
Other.............................. 1,016,000 1,022,000 622,000
Equity in income (loss) of
unconsolidated joint ventures....... (2,241,000) 19,904,000 16,434,000
------------ ------------ ------------
Income before income taxes........... 31,555,000 30,054,000 5,703,000
Income taxes......................... 11,202,000 11,985,000 4,148,000
------------ ------------ ------------
Net income........................... $ 20,353,000 $ 18,069,000 $ 1,555,000
============ ============ ============
Net income per common and common
equivalent share.................... $ 1.28 $ 1.16 $ 0.10
Weighted average common and common
equivalent shares................... 15,886,000 15,604,000 15,721,000
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL TOTAL
COMMON COMMON PAID-IN RETAINED STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS EQUITY
---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1993. 15,804,620 $158,000 $4,761,000 $ 10,026,000 $ 14,945,000
Exercise of stock
options.............. 102,869 1,000 301,000 -- 302,000
Purchase and
retirement of common
stock................ (1,125,000) (11,000) (489,000) (13,750,000) (14,250,000)
Issuance of warrants.. -- -- 2,300,000 -- 2,300,000
Net income............ -- -- -- 20,353,000 20,353,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1994. 14,782,489 148,000 6,873,000 16,629,000 23,650,000
Exercise of stock
options.............. 64,715 1,000 220,000 -- 221,000
Issuance of stock for
services............. 5,920 -- 75,000 -- 75,000
Net income............ -- -- -- 18,069,000 18,069,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1995. 14,853,124 149,000 7,168,000 34,698,000 42,015,000
Issuance of common
stock................ 1,020,940 10,000 5,988,000 -- 5,998,000
Exercise of stock
options.............. 145,218 1,000 566,000 -- 567,000
Issuance of stock for
compensation......... 18,100 -- 115,000 -- 115,000
Issuance of stock for
services............. 1,500 -- 20,000 -- 20,000
Net income............ -- -- -- 1,555,000 1,555,000
---------- -------- ----------- ------------ ------------
Balance, April 30, 1996. 16,038,882 $160,000 $13,857,000 $ 36,253,000 $ 50,270,000
========== ======== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CASINO AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................... $ 20,353,000 $ 18,069,000 $ 1,555,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 5,450,000 8,945,000 12,111,000
Amortization of bond discount and
deferred financing costs......... 311,000 786,000 705,000
Deferred income taxes............. 1,422,000 5,544,000 (1,440,000)
Equity in (income) loss of
unconsolidated joint ventures.... 2,241,000 (19,904,000) (16,434,000)
Write-down of assets held for
sale............................. -- -- 9,257,000
Other............................. 22,000 308,000 1,346,000
Changes in current assets and
liabilities, net of Pompano Park
acquisition:
Accounts receivable............. 68,000 (3,952,000) 179,000
Prepaid expenses and other
assets......................... 409,000 (932,000) 675,000
Accounts payable and accrued
expenses....................... 14,269,000 (321,000) 3,802,000
------------ ------------ ------------
Net cash provided by operating
activities......................... 44,545,000 8,543,000 11,756,000
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment.. (45,975,000) (46,584,000) (22,201,000)
Purchase of Pompano Park............ -- -- (7,959,000)
Increase in notes receivable and
other investments.................. -- (6,950,000) --
Proceeds from disposals of property
and equipment...................... 105,000 1,408,000 2,767,000
Advances to joint ventures.......... (33,319,000) (10,553,000) --
Repayments and distributions from
joint ventures..................... -- 43,413,000 3,014,000
(Increase) decrease in restricted
cash............................... (11,672,000) (499,000) 12,171,000
Deposits and other.................. 170,000 (986,000) (1,332,000)
------------ ------------ ------------
Net cash used in investing
activities......................... (90,691,000) (20,751,000) (13,540,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings............ 109,063,000 15,000,000 10,500,000
Principal payments on borrowings.... (37,397,000) (7,941,000) (14,908,000)
Deferred financing costs............ (2,045,000) (1,226,000) (785,000)
Proceeds from sale of stock and
exercise of options................ 243,000 221,000 6,565,000
Purchase and retirement of common
stock.............................. (7,000,000) -- --
------------ ------------ ------------
Net cash provided by financing
activities......................... 62,864,000 6,054,000 1,372,000
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents................... 16,718,000 (6,154,000) (412,000)
Cash and cash equivalents at
beginning of year.................. 8,433,000 25,151,000 18,997,000
------------ ------------ ------------
Cash and cash equivalents at end of
year............................... $ 25,151,000 $ 18,997,000 $ 18,585,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash payments for:
Interest, net of amounts
capitalized...................... $ 2,284,000 $ 13,259,000 $ 14,417,000
Income taxes--net................. 10,020,000 7,758,000 (341,000)
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Debt issued for:
Land.............................. $ 450,000 $ 2,290,000 $ --
Property and equipment............ 12,618,000 2,125,000 4,316,000
Purchase and retirement of common
stock............................ 7,250,000 -- --
Insurance premiums................ -- -- 855,000
Allocation of deferred financing
costs to unconsolidated joint
venture............................ 1,912,000 -- --
Bond discount recorded to reflect
the issuance of warrants........... 2,300,000 -- --
Underwriting discount on first
mortgage notes..................... 3,412,000 -- --
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Casino
America, Inc. and its wholly owned subsidiaries (the Company). All material
intercompany balances and transactions have been eliminated in consolidation.
The Company's investments in its 50%-owned joint ventures, Louisiana Riverboat
Gaming Partnership (LRGP) and LRG Hotels, LLC and LRGP's 50%-owned joint
venture, St. Charles Gaming Company, Inc. (SCGC) are accounted for using the
equity method of accounting. Certain reclassifications have been made to the
prior-year financial statements to conform to the 1996 presentation.
The Company is engaged in the business of developing, owning, and operating
riverboat and dockside casinos and related facilities. The Company commenced
operations in Biloxi, Mississippi, and Vicksburg, Mississippi, on August 1,
1992 and August 9, 1993, respectively. LRGP and SCGC commenced operations in
Bossier City, Louisiana and Lake Charles, Louisiana on May 20, 1994 and July
29, 1995, respectively.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily 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 as well as revenues and expenses during the reporting
period. Actual amounts when ultimately realized could differ from those
estimates.
Cash Equivalents and Concentrations of Cash
The Company considers cash and all highly liquid investments with a maturity
at the time of purchase of three months or less to be cash equivalents. Cash
and cash equivalents are placed primarily with one high-credit-quality
financial institution. At April 30, 1996, cash equivalents were invested in a
short-term certificate of deposit and an overnight repurchase agreement. The
carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Leasehold improvements.............................................. 10-31
Buildings and land improvements..................................... 25
Riverboats and floating pavilions................................... 25
Furniture, fixtures, and equipment.................................. 5-10
</TABLE>
Interest capitalized during the years ended April 30, 1994, 1995 and 1996
totaled $773,000, $1,006,000 and $1,525,000, respectively. Depreciation
expense for the years ended April 30, 1994, 1995 and 1996, totaled $5,134,000,
$8,632,000, and $11,788,000, respectively.
Debt Acquisition Costs
The costs of issuing long-term debt have been capitalized and are being
amortized using the bonds outstanding method.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense for the
years ended April 30, 1994, 1995 and 1996 totaled $6,373,000, $5,665,000 and
$7,085,000, respectively.
Berthing, Concession, and Leasehold Rights
Berthing, concession, and leasehold rights are recorded at cost and are
being amortized over approximately 20 years using the straight-line method.
F-7
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the difference
between gaming wins and losses. Casino revenues are net of accruals for
anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverage, and other
items provided gratuitously to customers, which totaled $10,169,000,
$9,987,000, and $13,797,000 for the years ended April 30, 1994, 1995 and 1996,
respectively. The estimated cost of providing such complimentary services,
which is included in casino expense, was $8,234,000, $7,960,000, and
$11,608,000 for the years ended April 30, 1994, 1995 and 1996, respectively.
Preopening Expenses
Preopening expenses, which consist principally of payroll and marketing
costs, are expensed as incurred.
Net Income per Common Share
Net income per common and common equivalent share is based on the weighted-
average number of common shares outstanding during the period plus, in periods
in which they have a dilutive effect, the effect of common shares contingently
issuable upon the exercise of warrants and stock options.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
Impairment of Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. The Company will adopt
Statement No. 121 in fiscal 1997 and, based on current circumstances, does not
believe the adoption will have a material effect on the Company's financial
statements.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
APRIL 30
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
Property and equipment:
Land and land improvements................... $ 18,687,000 $ 25,485,000
Leasehold improvements....................... 5,368,000 50,130,000
Buildings and improvements................... 5,203,000 6,099,000
Riverboats and floating pavilions............ 51,020,000 33,591,000
Furniture, fixtures, and equipment........... 35,211,000 35,835,000
Construction in progress..................... 33,082,000 375,000
------------ ------------
148,571,000 151,515,000
Less: Accumulated depreciation............... 15,086,000 22,209,000
------------ ------------
$133,485,000 $129,306,000
============ ============
</TABLE>
F-8
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
APRIL 30
-------------------------
1995 1996
------------ ------------
<S> <C> <C>
11 1/2% first mortgage notes, less unamortized
discount of $1,885,000 and $1,727,000,
respectively, due November 2001.................... $103,115,000 $103,273,000
Variable rate note (10.25% at April 30, 1996), due
in monthly installments of $188,000, including
interest, with the remaining principal and interest
due October 2000................................... 15,000,000 14,670,000
8% note payable, due in monthly installments of
$83,334, including interest, through July 2002..... 5,488,000 4,906,000
12% note payable, principal due in annual
installments of $1,812,500 and $3,625,000 through
November 1996...................................... 5,438,000 3,625,000
9 1/4% note payable to bank, due in monthly
installments of $172,333, including interest,
through February 1997.............................. 3,479,000 1,664,000
8% note payable due in monthly installments of
$11,365, including interest, commencing December
1995 through December 2015......................... 1,470,000 1,347,000
Variable rate note (9.25% at April 30, 1996), due in
monthly installments ranging from $11,458 to
$34,722, including interest, with the remaining
principal and interest due June 2000............... -- 4,861,000
9 1/4% note payable, due in monthly installments
ranging from $46,045 to $97,595, including
interest, through October 1999..................... -- 3,354,000
Other............................................... 4,867,000 2,078,000
------------ ------------
138,857,000 139,778,000
Less: Current maturities............................ 6,793,000 8,884,000
------------ ------------
Long-term debt...................................... $132,064,000 $130,894,000
============ ============
</TABLE>
In November 1993, the Company issued 105,000 units, consisting of $1,000
principal amount of 11 1/2% First Mortgage Notes due 2001 (the "First Mortgage
Notes" ) and 3.263 warrants (the Warrants) to purchase 1.5 shares of common
stock per warrant at an exercise price of $16 per share. The First Mortgage
Notes and the Warrants are separately transferable. Interest on the First
Mortgage Notes is payable semiannually on each May 15 and November 15 through
maturity.
The First Mortgage Notes are redeemable at the option of the Company, in
whole or in part, at any time after November 15, 1997, at the redemption
prices set forth in the indenture, plus accrued interest. The Company is
required to redeem, at par plus accrued interest, 20% of the original
aggregate principal amount of the First Mortgage Notes in November 1999 and
November 2000.
The First Mortgage Notes restrict, among other things: (i) the incurrence of
additional debt, except under certain circumstances including meeting certain
pro forma coverage tests; (ii) the payment of dividends on and redemptions of
capital stock; (iii) the businesses in which the Company may engage; (iv) the
use of proceeds from the sale of assets; (v) transactions with affiliates;
(vi) the creation of liens; and (vii) sale and leaseback transactions. At
April 30, 1995 and 1996, no dividends were permitted to be paid under these
restrictions.
The Company has $3,500,000 available in bank lines of credit. As of April
30, 1996, the Company had no outstanding balances under these lines of credit.
Substantially all of the Company's assets are pledged as collateral for
long-term debt.
F-9
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The aggregate principal payments due on a total long-term debt over the next
five years and thereafter are as follows:
<TABLE>
<S> <C>
Year ending April 30:
1997...................... $ 8,884,000
1998...................... 2,952,000
1999...................... 3,048,000
2000...................... 27,398,000
2001...................... 22,655,000
Thereafter................ 74,841,000
------------
$139,778,000
============
</TABLE>
The fair value of the 11 1/2% First Mortgage Notes, estimated based on
quoted market prices, was approximately $106,265,000 and $106,773,000 as of
April 30, 1995 and 1996, respectively. The carrying value of the Company's
other short- and long-term obligations approximates fair value at April 30,
1996.
4. LEASE COMMITMENTS
The Company has an agreement with the Biloxi Port Commission which provides
the Company with certain docking rights. This agreement expires July 1999,
with eight renewal options of five years each. Annual rentals are the greater
of $500,000 or 1% of gross monthly gaming revenue, as defined. Annual rent
during each renewal term is adjusted for increases in the Consumer Price
Index, limited to 6% for each renewal period.
In addition, the Company leases certain land, buildings, and other
improvements from the City of Biloxi under a lease and concession agreement.
This agreement expires on July 1999, with options to renew for seven
additional terms of five years each. Annual rent is $500,000 plus 3% of gross
gaming revenue, as defined, in excess of $25,000,000. Annual rent during each
renewal term is adjusted for increases in the Consumer Price Index, limited to
6% for each renewal period. This agreement also allows rent credits to be
amortized over the initial term of the lease, for costs and expenses incurred
by the Company for construction of certain improvements to the leased assets.
Such rent credits, net of accumulated amortization, are included in prepaid
expenses in the consolidated balance sheet.
In April 1994, the Company entered an Addendum to the lease with the City of
Biloxi, which requires the Company to pay 4% of gross non-gaming revenues
received as defined, net of sales tax, comps and discounts. Additional rent
will be due to the City of Biloxi for the amount of any increase from and
after January 1, 2016 in the rent due to the State Institutions of Higher
Learning under a lease between the City of Biloxi and the State Institutions
of Higher Learning (the "IHL Lease") and for any increases in certain
tidelands leases between the City of Biloxi and the State of Mississippi.
In April 1994, in connection with the construction of a hotel, the Company
entered a lease for additional land. The Company first acquired the leasehold
interest of Sea Harvest, Inc., the original lessee, for consideration of
$8,000 per month for a period of ten years. The Company's lease is with the
City of Biloxi, Mississippi, for an initial term of 25 years, with options to
renew for six additional terms of 10 years each and a final option period with
a termination date commensurate with the termination date of the IHL Lease,
but in no event later than December 31, 2085. Annual rent (which includes
payments to be made pursuant to the purchase of a related leasehold interest)
is $404,000, plus 4% of gross non-gaming revenue, as defined. The annual rent
is adjusted after each five-year period based on increases in the Consumer
Price Index, limited to a 10% increase in any five-year period. The annual
rent will increase 10 years after the commencement of payments pursuant to a
termination of lease and settlement agreement to an amount equal to the sum of
annual rent had it been $500,000 annually plus adjustments thereto based on
the Consumer Price Index.
F-10
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In February 1995, in conjunction with its planned Colorado operation, the
Company entered into a lease agreement for the use of land. The lease has an
initial term of 25 years, with options to renew for seven additional terms of
10 years each. The base rent is $250,000 per year increased by $10,000 each
year until the annual rent is $300,000. After seven years, and every two years
thereafter, the annual rent is adjusted based on increases in the Consumer
Price Index, limited to a 4% increase in any two-year period.
Minimum rental obligations under all noncancelable operating leases with
terms of one year or more as of April 30, 1996, are as follows:
<TABLE>
<S> <C>
Year ending April 30:
1997....................... $ 2,799,000
1998....................... 2,458,000
1999....................... 2,394,000
2000....................... 1,477,000
2001....................... 895,000
Thereafter................. 14,950,000
-----------
$24,973,000
===========
</TABLE>
Rent expense for operating leases was approximately $3,857,000, $3,085,000,
and $4,076,000 for the years ended April 30, 1994, 1995 and 1996,
respectively. Such amounts include contingent rentals of $1,619,000, $833,000,
and $1,288,000 for the years ended April 30, 1994, 1995 and 1996,
respectively.
5. RELATED PARTY TRANSACTIONS
During November 1993, in connection with two capital lease agreements with
certain related parties, the Company exercised a bargain purchase option and
purchased the equipment for approximately $17,161,000.
During the year ended April 30, 1994, the Company issued $3,000,000 of 10%
promissory notes to several directors of the Company which were repaid with
the proceeds of the First Mortgage Notes.
During the years ended April 30, 1994, 1995 and 1996, the Company incurred
construction costs of approximately $8,093,000, $3,501,000 and $2,391,000,
respectively, which were paid to related parties. As of April 30, 1996, there
were no outstanding amounts owed to related parties for construction services.
During 1995, the Company entered into a lease agreement for a tugboat with a
related party. The agreement provides for monthly rental payments that range
from $3,781 to $7,500. The Company has a purchase option on the vessel which
is exercisable at any time during the 10-year term of the lease, at a price
equal to the unamortized balance of the $450,000 original cost of the vessel
at the time of exercise of the purchase option.
During the year ended April 30, 1996, the Company repaid $1,556,000 in loans
and interest payable to the Chairman and Chief Executive Officer and a related
party.
The Company provides management services to LRGP and SCGC pursuant to
respective management agreements. Management fees for these services are based
upon a percentage of LRGP's and SCGC's revenue and operating income, as
defined in the management agreements. The revenue under the management
agreements is reflected as management fee--joint ventures in the accompanying
consolidated income statements.
The note receivable in the accompanying consolidated balance sheets bears
interest at 11 1/2% and is due from SCGC. The note is due three days after
certain debt of SCGC is repaid.
F-11
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal........................... $ 9,548,000 $ 4,501,000 $ 3,976,000
State............................. 232,000 1,940,000 1,612,000
----------- ----------- -----------
9,780,000 6,441,000 5,588,000
Deferred:
Federal........................... 1,422,000 5,599,000 (1,561,000)
State............................. -- (55,000) 121,000
----------- ----------- -----------
1,422,000 5,544,000 (1,440,000)
----------- ----------- -----------
$11,202,000 $11,985,000 $ 4,148,000
=========== =========== ===========
</TABLE>
A reconciliation of income tax expense to the statutory corporate federal tax
rate of 35% is as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------
1994 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
Statutory tax expense.................. $11,044,000 $10,519,000 $1,996,000
Effects of:
State taxes.......................... 151,000 1,225,000 1,048,000
Adjustment to prior years' taxes..... -- -- 720,000
Other--Net........................... 7,000 241,000 384,000
----------- ----------- ----------
$11,202,000 $11,985,000 $4,148,000
=========== =========== ==========
</TABLE>
Significant components of the Company's net deferred income tax liability are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment........................ $ 8,143,000 $12,866,000
LRGP.......................................... 2,399,000 940,000
Other......................................... 92,000 59,000
----------- -----------
Total deferred tax liabilities.................. 10,634,000 13,865,000
Deferred tax assets:
Dividends..................................... 920,000 680,000
Write-down of assets held for sale............ -- 3,240,000
Preopening costs.............................. 2,016,000 1,500,000
Accrued expenses.............................. 819,000 1,600,000
Alternative minimum tax credit................ -- 1,186,000
Other......................................... 361,000 341,000
----------- -----------
Total deferred tax assets....................... 4,116,000 8,547,000
Valuation allowance on deferred tax assets...... (920,000) (680,000)
----------- -----------
Net deferred tax asset.......................... 3,196,000 7,867,000
----------- -----------
Net deferred tax liability...................... $ 7,438,000 $ 5,998,000
=========== ===========
</TABLE>
F-12
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At April 30, 1996, the Company's alternative minimum tax credit can be
carried forward indefinitely to reduce future regular tax liabilities.
7. COMMON STOCK
Under the Company's 1992 and 1993 Stock Option Plans, as amended, a maximum
of 958,750 and 875,000 options, respectively, may be granted to directors,
officers, and employees. The plans provide for the issuance of incentive stock
options and nonqualified options which have a maximum term of 10 years and
are, generally, exercisable in yearly installments of 25%, commencing one year
after the date of grant.
Stock options outstanding are as follows:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE
--------- -----------
<S> <C> <C>
Outstanding options at April 30, 1995............. 1,327,599 $ .89-18.00
Options granted................................... 493,375 5.69- 6.25
Options exercised................................. (145,218) .89-13.33
Options canceled.................................. (157,568) .89-17.75
--------- -----------
Outstanding options at April 30, 1996............. 1,518,188 $ .89-18.00
========= ===========
</TABLE>
At April 30, 1996, 543,251 options are exercisable at prices ranging from
$.89 to $18.00.
In addition, the Company has the following outstanding warrants:
<TABLE>
<CAPTION>
NUMBER OF
---------------- EXERCISE
DATE ISSUED EXPIRATION DATE WARRANTS SHARES PRICE
- ----------- ----------------- -------- ------- --------
<S> <C> <C> <C> <C>
February 1993....................... October 31, 1997 900,000 900,000 $ 5.33
November 1993....................... November 15, 1996 342,615 513,923 16.00
June 1995........................... June 9, 2001 1 416,667 12.00
</TABLE>
On March 11, 1996, the Company sold an aggregate of 1,020,940 shares of its
common stock at a price of $5.875 per share to the Chairman and Chief
Executive Officer of the Company and three members of his family. On March 1,
1996, when the Board adopted resolutions authorizing the Company's officers to
consummate the sale of these shares, the last reported sales price on NASDAQ
was $5.75 per share. Proceeds from the sale totaled $5,998,000.
The Company's board of directors has authorized the offering (the
"Offering"), on a pro rata basis, of rights to purchase shares of the
Company's common stock at a price of $5.875 per share at a ratio of
approximately one share for every four shares owned to its shareholders of
record on March 15, 1996. The primary purpose of the Offering is to ensure
that all shareholders have the same opportunity to purchase shares of the
Company's common stock as has been afforded to the Chairman and Chief
Executive Officer of the Company and his family.
8. ACQUISITION OF POMPANO PARK
On June 30, 1995, the Company acquired 100% of Pompano Park ("Pompano
Park"), a harness racing track located in Pompano, Florida, for approximately
$8,000,000. The acquisition was accounted for as a purchase, and the results
of operations of Pompano Park have been included in the consolidated income
statement from the date of acquisition. Pro forma operating results giving
effect to the Pompano Park acquisition have not been provided because the pro
forma effect of the acquisition was not material to the operating results of
the Company. If casino gaming is legally permitted in Florida at the Pompano
Park site by June 30, 2001, the Company is required to pay additional
consideration to the seller amounting to $25,000,000 plus 5% of net gaming
win, as defined. The probability of the Company paying such additional
consideration is remote; however, if such payments are made in the future,
they would be accounted for as additional purchase price and allocated to
goodwill. Such goodwill will be amortized over a period to be determined at
date of payment not to exceed 40 years.
F-13
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ONE-TIME CHARGE
During January 1996, the Company recorded an $11,798,000 pretax one-time
charge. The components of the one-time charge include $9,257,000 related to
the write-down of two riverboats, a barge and certain gaming equipment all of
which were reclassified during the quarter as being held for sale, $1,991,000
related to costs associated with the recent change in executive management and
$550,000 related to costs associated with certain abandoned projects. The
write-down relates to two riverboats which are currently not being used in
operations and have been placed for sale. Each riverboat was written down to a
carrying value of approximately $5,000,000 based upon a recent purchase/lease
option agreement on one riverboat and a recent oral purchase offer received by
the Company. The amount of such offer and purchase/lease option range from
$5,000,000 to $6,000,000. The Company currently does not expect to take
further write-downs relating to these riverboats.
10. INVESTMENT IN LRGP
Summarized results of operations of LRGP are as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
--------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Total revenue..................... $ -- $147,012,000 $150,846,000
Operating income (loss)........... (3,625,000) 44,097,000 38,381,000
Net income (loss)................. (3,775,000) 40,162,000 34,453,000
</TABLE>
Summarized balance sheet information for LRGP is as follows:
<TABLE>
<CAPTION>
APRIL 30
------------------------
1995 1996
----------- ------------
<S> <C> <C>
Current assets................................... $ 6,549,000 $ 6,950,000
Property and equipment, net...................... 52,727,000 49,204,000
Investment in and advances to affiliates......... 4,289,000 67,832,000
Other assets..................................... 507,000 335,000
----------- ------------
Total assets................................. $64,072,000 $124,321,000
=========== ============
Current liabilities:
Note payable to the Company.................... $ 2,300,000 $ --
Other.......................................... 17,130,000 27,834,000
Long-term debt, less current maturities.......... 8,514,000 27,500,000
Partners' capital................................ 36,128,000 68,987,000
----------- ------------
Total liabilities and partners' capital...... $64,072,000 $124,321,000
=========== ============
</TABLE>
At April 30, 1996, the Company's retained earnings includes approximately
$20,627,000 of undistributed earnings of LRGP. Certain debt covenants restrict
LRGP from making dividend payments to the Company.
On June 9, 1995, LRGP acquired a 50% interest in SCGC, which operates a
riverboat casino in Lake Charles, Louisiana, for $1,000,000 cash and a
$20,000,000 note payable to the seller. The note bears interest at 11 1/2% and
requires equal quarterly principal payments commencing June 1996 through June
2000 with interest payable monthly. Additionally, the Company has issued a
warrant that allows the seller to convert 50% of the outstanding principal
balance of the note payable (up to a maximum of $5,000,000) into 416,667
shares of common stock of the Company at $12 per share. The difference between
the carrying amount of the investment and LRGP's equity in SCGC's net assets
is being amortized on a straight-line basis over 25 years. The purchase
agreement obligates LRGP to provide loans or a financing source to SCGC for
all expenses and development costs of the Lake Charles riverboat casino up to
a maximum of $45,000,000. As of April 30, 1996, advances to SCGC totaled
approximately $41,702,000.
F-14
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Summarized results of operations of SCGC from the date of acquisition to
April 30, 1996 are as follows:
<TABLE>
<S> <C>
Total revenue................................................ $57,263,000
Operating loss............................................... (643,000)
Net loss..................................................... (5,346,000)
</TABLE>
Summarized balance sheet information for SCGC as of April 30, 1995 and 1996
is as follows:
<TABLE>
<CAPTION>
APRIL 30
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Current assets................................. $ 1,125,000 $ 7,142,000
Property and equipment, net.................... 24,399,000 69,919,000
Other assets................................... 9,442,000 10,126,000
----------- -----------
Total assets............................... $34,966,000 $87,187,000
=========== ===========
Current liabilities:
Advances from and notes payable to related
parties..................................... $ 9,856,000 $48,787,000
Other........................................ 26,190,000 44,357,000
Long-term debt, less current maturities........ 2,266,000 637,000
Partners' deficit.............................. (3,346,000) (6,594,000)
----------- -----------
Total liabilities and partners' deficit.... $34,966,000 $87,187,000
=========== ===========
</TABLE>
11. EMPLOYEE BENEFIT PLAN
The Company has a defined-contribution, profit-sharing plan, including
401(k) plan provisions, covering substantially all of its employees. The
Company's contribution expense related to this plan was approximately
$220,000, $203,000, and $328,000 for the years ended April 30, 1994, 1995, and
1996, respectively. The Company's contribution is based on a percentage of
employee contributions and may include an additional discretionary amount.
12. LITIGATION
The Company has been named, along with two gaming equipment suppliers, 41 of
the country's largest gaming operators, and four gaming distributors (the
"Gaming Industry Defendants") in a consolidated class action lawsuit pending
in Las Vegas, Nevada. The suits alleges that the Gaming Industry Defendants
violated the Racketeer Influenced and Corrupt Organizations Act by engaging in
a course of fraudulent and misleading conduct intended to induce people to
play their gaming machines based upon a false belief concerning how those
gaming machines actually operate, as well as the extent to which there is
actually an opportunity to win on any given play. The suit seeks unspecified
compensatory and punitive damages. The actions are in the early stages of
discovery and preliminary motions. The Company is unable at this time to
determine what effect, if any, the suit would have on its financial position
or results of operations.
The Company is engaged in various matters of litigation and has a number of
unresolved claims pending. While the ultimate liability with respect to such
litigation and claims cannot be determined at this time, it is the opinion of
management that such liability is not likely to be material to the Company's
consolidated financial position or results of operations.
F-15
<PAGE>
CASINO AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS
Purchase of GPRI and SCGC
On May 3, 1996, the Company purchased all of the outstanding shares of
common stock of Grand Palais Riverboat, Inc. (GPRI) in a bankruptcy
proceeding. Pursuant to the Plan of Reorganization adopted in such bankruptcy
proceeding, the Company purchased 100% of the shares of the reorganized GPRI,
which at the time of closing owned the Grand Palais Riverboat, gaming
equipment, certain other furniture, fixtures and equipment, all necessary
gaming licenses issued by the State of Louisiana, and other permits and
authorizations. The Company intends to operate the Grand Palais vessel as part
of a two-riverboat operation with SCGC. The aggregate consideration paid by
the Company in connection with the GPRI acquisition was approximately $62.4
million, consisting of $8.4 million in cash, approximately $37.9 million in
promissory notes and assumed indebtedness. The Company also issued 2,250,000
shares of its common stock, and five-year warrants to purchase an additional
500,000 shares of common stock at an exercise price of $10 per share, to
GPRI's former secured debt holders.
At the time of the GPRI acquisition, the Company also purchased the
remaining 50% interest in SCGC not already owned by LRGP, in exchange for
1,850,000 shares of the Company's common stock and a five-year warrant. The
warrant allows the seller to convert its note payable to LRGP (up to a maximum
of $5,000,000) to 416,667 shares of common stock of the Company at an exercise
price of $12 per share. The purchase agreement also provides for the
restructuring of certain indebtedness owed to the seller.
14. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1995
------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue....................... $33,616,000 $32,017,000 $30,143,000 $31,761,000
Operating income.............. 6,073,000 4,945,000 5,001,000 4,177,000
Net income.................... 3,908,000 4,685,000 4,772,000 4,704,000
Net income per common and
common equivalent share...... 0.25 0.30 0.31 0.30
<CAPTION>
1996
------------------------------------------------
JULY 31 OCTOBER 31 JANUARY 31 APRIL 30
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue....................... $32,418,000 $35,691,000 $43,418,000 $46,436,000
Operating income (loss)....... 2,367,000 2,128,000 (7,315,000) 6,013,000
Net income (loss)............. 2,334,000 2,044,000 (6,547,000) 3,724,000
Net income (loss) per common
and common equivalent share.. 0.15 0.13 (0.44) 0.23
</TABLE>
The fourth quarter of 1996 was adversely affected by interest expense
totaling $400,000 that had been capitalized in the second quarter of 1996 and
a $720,000 adjustment to prior years' taxes.
F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Executive Management Committee
Louisiana Riverboat Gaming Partnership
We have audited the accompanying balance sheets of Louisiana Riverboat
Gaming Partnership (the Partnership) as of April 30, 1995 and 1996, and the
related statements of operations, partners' capital (deficit), and cash flows
for each of the three years in the period ended April 30, 1996. These
financial statements are the responsibility of the Partnership'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 financial statements referred to above present fairly,
in all material respects, the financial position of Louisiana Riverboat Gaming
Partnership at April 30, 1995 and 1996 and the results of its operations and
its cash flows for each of the three years in the period ended April 30, 1996,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
New Orleans, Louisiana
May 22, 1996
F-17
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
------------------------
ASSETS 1995 1996
------ ----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 5,627,656 $ 6,053,634
Accounts receivable................................. 218,784 226,264
Prepaid expenses.................................... 702,204 670,491
----------- ------------
Total current assets............................ 6,548,644 6,950,389
Property and equipment:
Land................................................ 3,788,742 3,811,845
Pavilion............................................ 23,176,694 23,194,612
Riverboat........................................... 17,391,154 17,534,400
Furniture, fixtures, and equipment.................. 12,338,308 12,805,529
----------- ------------
56,694,898 57,346,386
Less accumulated depreciation....................... 3,967,576 8,142,479
----------- ------------
52,727,322 49,203,907
Investments in and advances to joint venture.......... 2,515,574 61,961,132
Other assets:
Advances to affiliate............................... 1,773,813 5,871,128
Debt acquisition costs.............................. 20,670 6,079
Deposits and other.................................. 486,141 329,141
----------- ------------
2,280,624 6,206,348
----------- ------------
Total assets.................................... $64,072,164 $124,321,776
=========== ============
</TABLE>
See accompanying notes.
F-18
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30
------------------------
LIABILITIES AND PARTNERS' CAPITAL 1995 1996
--------------------------------- ----------- ------------
<S> <C> <C>
Current liabilities:
Revolving line of credit............................ $ 2,000,000 $ --
Current maturities:
Notes payable..................................... 4,497,568 17,252,266
Mortgage note payable to related party............ 2,300,000 --
Accounts payable:
Trade............................................. 2,971,708 2,917,329
Related parties................................... 1,667,158 53,418
Accrued liabilities:
Interest.......................................... 1,000 691,778
Payroll and payroll related....................... 3,056,625 2,751,138
Taxes............................................. 1,516,872 976,093
Progressive jackpots and slot club awards......... 949,565 1,992,549
Other............................................. 469,130 1,199,348
----------- ------------
Total current liabilities....................... 19,429,626 27,833,919
Long-term notes payable, less current maturities...... 8,514,618 27,500,000
Partners' capital..................................... 36,127,920 68,987,857
----------- ------------
Total liabilities and partners' capital......... $64,072,164 $124,321,776
=========== ============
</TABLE>
See accompanying notes.
F-19
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
---------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Revenue:
Casino.............................. $ -- $142,265,343 $145,603,545
Food and beverage................... -- 4,524,276 4,882,843
Other............................... -- 222,243 359,798
----------- ------------ ------------
Total revenue..................... -- 147,011,862 150,846,186
Operating expenses:
Casino.............................. -- 30,484,595 32,753,896
Gaming taxes........................ -- 32,097,530 33,334,435
Food and beverage................... -- 3,636,962 4,140,214
Marine and facilities............... -- 5,228,605 5,752,466
Marketing and administrative........ -- 14,036,536 22,716,817
Management fee--related party....... -- 4,613,078 4,708,995
Depreciation and amortization....... 108,710 5,779,627 4,950,683
Other............................... -- 3,834,474 4,107,583
Preopening expenses................. 3,515,904 3,203,641 --
----------- ------------ ------------
Total operating expenses.......... 3,624,614 102,915,048 112,465,089
----------- ------------ ------------
Operating income (loss)............... (3,624,614) 44,096,814 38,381,097
Interest income (expense), net:
Related parties..................... (150,154) (2,686,067) 1,355,432
Other............................... -- (1,248,687) (2,625,469)
----------- ------------ ------------
(150,154) (3,934,754) (1,270,037)
Equity in loss of unconsolidated joint
venture.............................. -- -- (2,657,648)
----------- ------------ ------------
Net income (loss)..................... $(3,774,768) $ 40,162,060 $ 34,453,412
=========== ============ ============
</TABLE>
See accompanying notes.
F-20
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
LOUISIANA
RIVERSITE
DEVELOPMENT,
CSNO, INC. INC. TOTAL
----------- ------------ -----------
<S> <C> <C> <C>
Partners' deficit, April 30, 1993...... $ (129,686) $ (129,686) $ (259,372)
Net loss............................. (1,887,384) (1,887,384) (3,774,768)
----------- ----------- -----------
Partners' deficit, April 30, 1994...... (2,017,070) (2,017,070) (4,034,140)
Net income........................... 20,081,030 20,081,030 40,162,060
----------- ----------- -----------
Partners' capital, April 30, 1995...... 18,063,960 18,063,960 36,127,920
Net income........................... 17,226,706 17,226,706 34,453,412
Distributions........................ (818,475) (775,000) (1,593,475)
----------- ----------- -----------
Partners' capital, April 30, 1996...... $34,472,191 $34,515,666 $68,987,857
=========== =========== ===========
</TABLE>
See accompanying notes.
F-21
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
----------------------------------------
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................... $ (3,774,768) $ 40,162,060 $ 34,453,412
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization...... 108,710 5,779,627 4,950,683
Equity in loss of unconsolidated
joint venture..................... -- -- 2,657,648
Changes in operating assets and
liabilities:
Accounts receivable.............. (3,150) (225,317) (7,480)
Inventories...................... (31,300) (217,034) 27,980
Prepaid expenses................. (262,281) (191,589) 3,733
Deposits and other............... 250,000 (486,141) 157,000
Accounts payable--trade.......... 1,663,530 1,291,541 (54,379)
Accounts payable--related
parties......................... -- 1,667,158 (1,613,740)
Accrued liabilities.............. 1,277,821 4,715,371 1,617,714
------------ ------------ ------------
Net cash provided by (used in)
operating activities................ (771,438) 52,495,676 42,192,571
CASH FLOWS FROM INVESTING ACTIVITIES
Net advances to affiliates........... (360,401) (1,401,729) (4,097,315)
Investment in and net advances to
joint venture....................... -- (2,515,574) (42,864,395)
Purchases of property and equipment.. (29,604,637) (20,528,638) (651,488)
------------ ------------ ------------
Net cash used in investing
activities.......................... (29,965,038) (24,445,941) (47,613,198)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) of
revolving line of credit............ -- 2,000,000 (2,000,000)
Proceeds from notes payable.......... 3,572,000 16,098,930 24,878,688
Payments on notes payable............ (3,572,000) (9,185,674) (13,138,608)
Proceeds from mortgage note payable.. 32,681,060 10,580,000 --
Payments on mortgage note payable.... (1,316,000) (42,514,737) (2,300,000)
Debt acquisition cost................ -- (29,182) --
Partner distributions................ -- -- (1,593,475)
------------ ------------ ------------
Net cash provided by (used in)
financing activities................ 31,365,060 (23,050,663) 5,846,605
------------ ------------ ------------
Net increase in cash and cash
equivalents......................... 628,584 4,999,072 425,978
Cash and cash equivalents:
Beginning of year.................. -- 628,584 5,627,656
------------ ------------ ------------
End of year........................ $ 628,584 $ 5,627,656 $ 6,053,634
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Investment in joint venture through
note payable........................ $ -- $ -- $ 20,000,000
============ ============ ============
Purchases of property and equipment
through accounts payable and notes
payable............................. $ 14,438,867 $ -- $ --
============ ============ ============
Debt acquisition costs funded by
mortgage note payable............... $ 1,912,250 $ -- $ --
============ ============ ============
Cash payments for interest, net of
amounts capitalized................. $ -- $ 5,220,775 $ 4,074,402
============ ============ ============
</TABLE>
See accompanying notes.
F-22
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Nature of Business
Louisiana Riverboat Gaming Partnership (the Partnership), a Louisiana
partnership formed January 4, 1993, is 50% owned by Louisiana Riversite
Development, Inc., a wholly owned subsidiary of Louisiana Downs, Inc., and 50%
owned by CSNO, Inc., a wholly owned subsidiary of Casino America, Inc. (Casino
America). The Partnership is engaged in the business of operating dockside
casinos and related facilities. The Partnership commenced gaming operations on
May 20, 1994, operating as the Isle of Capri Casino in Bossier City,
Louisiana. As further discussed in Note 2, in June 1995, the Partnership
purchased a 50% interest in St. Charles Gaming Company, Inc. (SCGC), which
owns and operates the Isle of Capri-Lake Charles in Lake Charles, Louisiana.
This investment is accounted for using the equity method of accounting with
the difference between the carrying amount of the investment and SCGC's equity
in net assets amortized using the straight-line method over 25 years. At April
30, 1996, accumulated amortization was approximately $761,000. The
recoverability of these costs is assessed annually to determine if such costs
should be completely or partially written off or the amortization period
accelerated. This riverboat casino commenced operations in Lake Charles on
July 29, 1995.
The Partnership and SCGC are managed by a wholly owned subsidiary (the
Manager) of Casino America, Inc. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks. The
Partnership considers all highly liquid investments with a maturity at the
time of purchase of three months or less to be cash equivalents. The carrying
amounts of cash and cash equivalents approximates fair value. The Partnership
deposits cash in an interest-bearing account with a financial institution. The
account is collateralized by securities issued by the United States Government
and other high-quality credit instruments.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Pavilion......................................................... 25 years
Riverboat........................................................ 25 years
Furniture, fixtures and equipment................................ 5 years
</TABLE>
F-23
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
The Partnership capitalized interest related to the construction of its
Bossier City facilities totaling $847,000 during the year ended April 30,
1994. No interest was capitalized during 1995 and 1996.
Debt Acquisition Costs
The Partnership defers debt acquisition costs and amortizes these costs
using the straight-line method over the expected term of the related debt. At
April 30, 1995 and 1996, accumulated amortization was approximately $1,920,761
and $1,935,400, respectively.
Preopening Expenses
Preopening expenses, which consist principally of payroll, marketing and
local licensing fees, are expensed as incurred.
Casino Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the difference
between gaming wins and losses. Casino revenues are net of accruals for
anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverage and other items
provided gratuitously to customers, which totaled approximately $8,816,000 in
1995 and $10,149,500 in 1996. The estimated cost of providing such
complimentary services, which is included in casino expense, was approximately
$7,299,000 in 1995 and $8,621,000 in 1996.
Income Taxes
No provision for income taxes has been made in the accompanying financial
statements since any liability is that of the individual partners and not of
the Partnership.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense totaled
$127,416 in 1994, $3,779,297 in 1995, and $4,627,200 in 1996.
Reclassifications
Certain amounts previously reported have been reclassified to conform to the
presentation at April 30, 1996.
Impairment of Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-
lived assets that are expected to be disposed of. The Partnership will adopt
Statement No. 121 in fiscal 1997 and, based on current circumstances, does not
believe the adoption will have a material effect on the Partnership's
financial statements.
F-24
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
2. INVESTMENT IN AND ADVANCES TO JOINT VENTURE
On June 9, 1995, the Partnership acquired a 50% interest in SCGC from Crown
Casino (Crown) for $1,000,000 cash and a $20,000,000 note payable to Crown.
Additionally, Casino America, Inc. has issued a warrant that allows Crown to
convert 50% of the outstanding principal balance of the note payable (up to a
maximum of $5,000,000) to common stock of Casino America, Inc. at $12 per
share. Further, the purchase agreement obligates the Partnership to provide
loans or a financing source to SCGC, for all expenses and development costs of
the Lake Charles riverboat casino up to a maximum of $45,000,000. At April 30,
1996, the Partnership had advanced to SCGC approximately $2,516,000 and
$41,702,000, respectively.
These advances earn interest ranging from 9.75% to 12% and are included,
along with the related accrued interest of approximately $12,000 in 1995 and
$2,169,000 in 1996, in investment in and advances to joint venture in the
accompanying balance sheet. See Note 3 for additional information regarding
financing for SCGC.
Condensed financial information for the joint venture as of April 30, 1996 and
for the period from the date of acquisition is summarized below:
<TABLE>
<S> <C>
Condensed financial information:
Current assets............................................... $ 7,142,000
Noncurrent assets............................................ $80,045,000
Current liabilities.......................................... $93,144,000
Noncurrent liabilities....................................... $ 637,000
Total revenue................................................ $57,263,000
Operating loss............................................... $ 643,000
Net loss..................................................... $ 5,346,000
</TABLE>
On May 3, 1996, Casino America purchased the stock of Grand Palais Riverboat
Inc. (Grand Palais) and intends to operate the Grand Palais vessel as part of
a two-riverboat operation with SCGC. In connection with the Grand Palais
acquisition and pursuant to a stock purchase agreement dated January 19, 1996
between Casino America and Crown, Casino America purchased the remaining 50%
interest in SCGC owned by Crown in exchange for 1,850,000 shares of Casino
America common stock. In addition, Casino America issued another five-year
warrant which allows Crown to convert its note payable to the Partnership (up
to a maximum of $5,000,000) for 416,667 shares of Casino America common stock
at $12 per share. Further the $20,000,000 note payable to Crown was
restructured into two $10,000,000 notes payable.
F-25
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
3. NOTES PAYABLE
Long-term notes payable consist of the following:
<TABLE>
<CAPTION>
APRIL 30
----------------------
1995 1996
---------- -----------
<S> <C> <C>
Senior secured increasing rate notes (12.5% at April 30,
1996), interest payable monthly with principal due July
1996................................................... $ -- $ 8,378,687
11.5% note payable to Crown, interest due monthly with
quarterly principal payments of $500,000 commencing
June 1996 with any remaining balance due February 2002,
collateralized by SCGC stock........................... -- 10,000,000
11.5% note payable to Crown, interest payable monthly
commencing May 1996, with principal due May 2001,
collateralized by SCGC stock........................... -- 10,000,000
Note payable to bank, interest at prime plus 1% (9.25%
at April 30, 1996) due in monthly principal payments of
$625,000 commencing May 1996, collateralized by
furniture, fixtures and equipment...................... -- 15,000,000
9.25% note payable, due in monthly installments of
$279,675, including interest, through September 1996,
collateralized by gaming equipment..................... 4,440,757 1,373,579
Note payable............................................ 8,571,429 --
---------- -----------
13,012,186 44,752,266
Less current maturities................................. 4,497,568 17,252,266
---------- -----------
Long-term notes payable................................. $8,514,618 $27,500,000
========== ===========
</TABLE>
In 1995, the Partnership entered into a $15,000,000 credit agreement with a
bank to be repaid in six monthly principal payments of $2,500,000 each
commencing in February 1996. In February 1996, this credit agreement was
amended to provide for the repayment of principal in 24 monthly payments of
$625,000 each commencing in May 1996. This credit agreement contains various
restrictive covenants, including certain financial covenants.
In July 1995, the Partnership and SCGC entered into an agreement to issue
$38,400,000 of senior secured increasing rate notes (0.25% every third month),
due July 1996, primarily to pay for certain development costs and operating
expenses of SCGC and pay certain debt obligations owed by the Partnership. The
Partnership received proceeds of approximately $8,400,000 from the issuance of
these notes to retire the note payable secured by a first preferred ship
mortgage on the Partnership's riverboat. Under the terms of the agreement, the
notes are due July 1996 but can be extended for two six-month periods at the
option of the issuers if the notes are not in default. Additionally, the
agreement provides if either the Partnership or SCGC is unable to pay its
portion of the notes as they become due, the other issuer will pay the
obligation upon demand. The agreement provides for contingent interest,
payable commencing May 1996, based on the consolidated cash flow, as defined,
of the Partnership and SCGC. The notes are collateralized by substantially all
the assets of the Partnership and SCGC and include various restrictive
covenants, including certain financial covenants, for both the Partnership and
SCGC.
In 1995, the Partnership entered into a revolving credit agreement with a
bank, whereby the bank committed to lend the Partnership up to $2,000,000
through October 1996. Amounts outstanding under the revolving line of credit
bear interest, payable monthly, at the prime rate (average rate of 8.69% in
1996) and are secured by a continuing security interest in all funds on
deposit or in certificates of deposit with the bank. Further, the credit
agreement contains certain restrictive covenants, including certain financial
covenants.
F-26
<PAGE>
LOUISIANA RIVERBOAT GAMING PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
APRIL 30, 1996
Maturities of long-term debt after April 30, 1996 are $17,252,266 in 1997,
$9,500,000 in 1998, $2,000,000 in 1999, $2,000,000 in 2000, $12,000,000 in
2001 and $2,000,000 thereafter.
The carrying value of the Partnership's short and long-term obligations
approximates fair value.
4. EMPLOYEE BENEFIT PLAN
Partnership employees who have completed 12 consecutive months of employment
and are at least 21 years of age may participate in the Casino America, Inc.
401(k) Plan (the "Plan"). The Partnership's contribution is based on a
percentage of employee contributions and may include an additional
discretionary amount. The Partnership's contribution expense related to the
Plan was $16,784 in 1994, $188,075 in 1995 and $219,690 in 1996.
5. RELATED PARTY TRANSACTIONS
Management services are provided to the Partnership pursuant to a management
agreement with the Manager. Management fees for these services are based upon
a percentage of revenue and operating income, as defined by the management
agreement. Additionally, the Partnership pays certain expenses, primarily
payroll, of the Manager. The Partnership incurred management fees of
$4,613,078 in 1995 and $4,708,995 in 1996 and other expenses on behalf of the
Manager of approximately $1,217,000 in 1995 and $1,726,000 in 1996. In 1994,
the Partnership paid $250,000 in management fees, classified as preopening
expense, in accordance with the terms of the management agreement.
During 1994 and 1995, the Partnership made advances to LRG Hotels, LLC, a
limited liability corporation owned by the partners for working capital, debt
payments and payments under a noncompete agreement entered into with the
former owner. The advances earn interest at 11.5%. These advances and related
accrued interest are reflected as advances to affiliate in the accompanying
balance sheets.
The Partnership incurred construction costs and construction management
fees, totaling approximately $21,000,000 through April 30, 1995, which were
paid to an affiliated company of Louisiana Riversite Development, Inc. These
expenditures are capitalized as property and equipment.
During 1995, the Partnership advanced approximately $673,000 for expansion
costs related to potential gaming jurisdictions in other states to an
affiliated company of Louisiana Riversite Development, Inc. In 1996, these
advances were recorded as distributions to CSNO, Inc. and Louisiana Riversite
Development, Inc. in the amounts of approximately $343,000 and $300,000
respectively.
F-27
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-28
<PAGE>
To the Stockholders
St. Charles Gaming Company, Inc.:
We have audited the accompanying balance sheets of St. Charles Gaming
Company, Inc. as of April 30, 1995 and 1996, and the related statements of
operations, stockholders' equity (deficit), and cash flows for the period from
June 25, 1993 (acquisition date) to April 30, 1994 and for the years ended
April 30, 1995 and 1996. 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 financial statements referred to above present fairly,
in all material respects, the financial position of St. Charles Gaming
Company, Inc. as of April 30, 1995 and 1996, and the results of its operations
and its cash flows for the period from June 25, 1993 (acquisition date) to
April 30, 1994 and for the years ended April 30, 1995 and 1996 in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
June 14, 1996
F-29
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
BALANCE SHEETS
APRIL 30, 1995 AND 1996
<TABLE>
<CAPTION>
ASSETS 1995 1996
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 9,522 $ 4,807,940
Accounts receivable:
Gaming, net of allowance for uncollectible
accounts of $92,649 in 1996..................... 496,827
Related parties.................................. 84,907
Inventories........................................ 393,940
Prepaid expenses................................... 769,527 592,370
Debt issuance costs, net of accumulated
amortization...................................... 345,963 766,242
----------- -----------
Total current assets........................... 1,125,012 7,142,226
----------- -----------
Property and equipment:
Building........................................... 248,232
Land and land improvements......................... 2,659,280
Leasehold improvements............................. 14,026,531
Furniture, fixtures and equipment.................. 7,618,268 11,705,940
Construction in progress........................... 1,539,627 26,324,321
Riverboat and barges............................... 15,256,140 17,868,033
----------- -----------
24,414,035 72,832,337
Less accumulated depreciation...................... (14,563) (2,913,496)
----------- -----------
24,399,472 69,918,841
----------- -----------
Other assets:
License costs, net of accumulated amortization..... 9,125,000 8,835,374
Noncompete agreement, net of accumulated
amortization...................................... 316,674 216,678
Other.............................................. 18,171
Deferred tax asset................................. 1,055,968
----------- -----------
9,441,674 10,126,191
----------- -----------
$34,966,158 $87,187,258
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
BALANCE SHEETS, CONTINUED
APRIL 30, 1995 AND 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT 1995 1996
------------------------------------- ----------- -----------
<S> <C> <C>
Current liabilities:
Progressive and casino liability........................ $ 620,806
Accounts payable:
Related parties....................................... 2,370,284
Trade................................................. $ 738,861 2,864,538
Accrued liabilities..................................... 768,834 7,862,979
Capital lease obligations............................... 2,871,104 2,814,749
Advances from Crown..................................... 3,076,887
Notes payable:
Related parties....................................... 6,779,083 46,416,273
Other................................................. 21,811,603 30,194,608
----------- -----------
Total current liabilities........................... 36,046,372 93,144,237
----------- -----------
Capital lease obligations, less current portion........... 2,265,641 637,107
Commitments and contingencies.............................
Stockholders' deficit:
Common stock, no par value, 100,000 shares authorized,
issued and outstanding................................. 5,600,000 5,600,000
Additional paid-in capital.............................. 10,900,000 13,985,388
Accumulated deficit..................................... (19,845,855) (26,179,474)
----------- -----------
Total stockholders' deficit......................... (3,345,855) (6,594,086)
----------- -----------
$34,966,158 $87,187,258
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JUNE 25, 1993 (ACQUISITION DATE)
TO APRIL 30, 1994 AND FOR THE
YEARS ENDED APRIL 30, 1995 AND 1996
<TABLE>
<CAPTION>
JUNE 25, 1993 YEAR ENDED
(ACQUISITION -------------------------
DATE) TO APRIL 30, APRIL 30,
APRIL 30, 1994 1995 1996
-------------- ------------ -----------
<S> <C> <C> <C>
Revenues:
Casino............................. $56,588,560
Food, beverage and other........... 674,371
-----------
Total revenue.................... 57,262,931
-----------
Operating expenses:
Pre-opening and development........ $ 1,181,551 $ 7,676,762 4,195,653
Buy out of management contract..... 4,000,000
St. Charles Parish site
abandonment....................... 3,131,359
Casino............................. 10,152,749
Gaming taxes....................... 13,742,267
Food, beverage and other........... 2,423,471
Marine and facilities.............. 3,224,484
Marketing and administrative....... 19,812,648
Management fees to related party... 1,602,482
Depreciation and amortization...... 334,329 111,326 3,288,555
----------- ------------ -----------
Total operating expenses......... 1,515,880 14,919,447 58,442,309
----------- ------------ -----------
Operating loss....................... (1,515,880) (14,919,447) (1,179,378)
Interest expense..................... 171 6,810,357 6,210,209
----------- ------------ -----------
Loss before income taxes............. (1,516,051) (21,729,804) (7,389,587)
Income tax benefit................... (572,517) (2,827,483) (1,055,968)
----------- ------------ -----------
Net loss......................... $ (943,534) $(18,902,321) $(6,333,619)
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-32
<PAGE>
ST. CHARLES GAMING COMPANY INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM JUNE 25, 1993
(ACQUISITION DATE) TO APRIL 30, 1994 AND
FOR THE YEARS ENDED APRIL 30, 1995 AND 1996
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED EQUITY
STOCK CAPITAL DEFICIT (DEFICIT)
---------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at June 25, 1993.... $5,600,000 $ 500,000 $ 6,100,000
Capital contribution........ 3,500,000 3,500,000
Net loss.................... $ (943,534) (943,534)
---------- ----------- ------------ ------------
Balance at April 30, 1994... 5,600,000 4,000,000 (943,534) 8,656,466
Capital contribution........ 6,900,000 6,900,000
Net loss.................... (18,902,321) (18,902,321)
---------- ----------- ------------ ------------
Balance at April 30, 1995... 5,600,000 10,900,000 (19,845,855) (3,345,855)
Capital contribution........ 3,085,388 3,085,388
Net loss.................... (6,333,619) (6,333,619)
---------- ----------- ------------ ------------
Balance at April 30, 1996... $5,600,000 $13,985,388 $(26,179,474) $ (6,594,086)
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-33
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JUNE 25, 1993 (ACQUISITION DATE) THROUGH APRIL 30, 1994 AND
FOR THE YEARS ENDED APRIL 30, 1995 AND 1996
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 25, 1993 --------------------------
(ACQUISITION DATE) APRIL 30, APRIL 30,
TO APRIL 30, 1994 1995 1996
----------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss...................... $ (943,534) $(18,902,321) $ (6,333,619)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating
activities:
Depreciation and
amortization............... 336,564 111,326 3,288,555
Provision for bad debts..... 92,649
Amortization of debt
issuance costs/discount.... 3,376,392 832,680
Write-down of assets........ 3,131,359
Deferred income taxes....... (572,517) (2,827,483) (1,055,968)
(Increase) decrease in:
Accounts receivable......... (674,383)
Inventories................. (393,940)
Prepaid expenses............ (55,962) (838,971) 177,157
Other assets................ (18,171)
(Decrease) increase in:
Accounts payable and accrued
liabilities................ (49,246) 1,416,151 11,590,106
Progressive and casino
liability.................. 620,806
------------ ------------ ------------
Net cash (used in)
provided by operating
activities............... (1,284,695) (14,533,547) 8,125,872
------------ ------------ ------------
Cash flows from investing
activities:
Purchase of property and
equipment.................... (11,196,868) (8,795,064) (48,290,177)
Purchase of assets............ (350,000)
------------ ------------ ------------
Net cash used in investing
activities............... (11,546,868) (8,795,064) (48,290,177)
------------ ------------ ------------
Cash flows from financing
activities:
Capital contributions from
Crown........................ 3,500,000 3,522,655
Advances from Crown........... 9,304,590 8,501
Payments to Crown............. (6,227,703)
Advances from LRGP............ 2,079,083 39,637,190
Issuance of debt.............. 32,700,000 30,194,608
Debt issuance costs........... (1,633,407) (1,252,959)
Payments of debt and capital
lease obligations............ (7,125,522) (23,624,617)
------------ ------------ ------------
Net cash provided by
financing activities..... 12,804,590 23,315,106 44,962,723
------------ ------------ ------------
(Decrease) increase in cash and
cash equivalents............... (26,973) (13,505) 4,798,418
Cash and cash equivalents,
beginning of period............ 50,000 23,027 9,522
------------ ------------ ------------
Cash and cash equivalents, end
of period...................... $ 23,027 $ 9,522 $ 4,807,940
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS:
St. Charles Gaming Company, Inc., a Louisiana corporation (the "Company"),
was incorporated on January 18, 1993 for the purpose of operating a riverboat
gaming casino to be based in St. Charles Parish, Louisiana (near New Orleans).
In January 1995, the Company changed its riverboat berthing site from St.
Charles Parish to Calcasieu Parish, Louisiana (near Lake Charles).
Effective June 25, 1993, the Company was acquired by Crown Casino
Corporation ("Crown"). Effective June 9, 1995, Crown sold a 50% interest in
the Company to Louisiana Riverboat Gaming Partnership ("LRGP"), a joint
venture owned 50% by Casino America, Inc. ("Casino America") and 50% by
Louisiana Downs, Inc. LRGP owns the Isle of Capri dockside riverboat casino in
Bossier City, Louisiana. Effective May 3, 1996, Crown sold its remaining 50%
interest in the Company to Casino America (see Note 11).
The Company commenced operations effective July 29, 1995. Prior to that
time, the Company's activities were focused on the pursuit of a riverboat
gaming license and other regulatory approvals, the raising of capital, the
construction of the riverboat casino and land based facilities, and the
development of the project in general. In previous financial statements, the
Company reported as a development stage enterprise.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers cash and all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
The Company is required to maintain cash or cash equivalents in sufficient
amount to protect patrons against defaults in gaming debts owed by the
Company. The Company's requirements are computed in accordance with Section
2713 of the regulations of the Louisiana State Police, Riverboat Gaming
Enforcement Division. At April 30, 1996, approximately $4,807,940 of cash and
cash equivalents was available to satisfy this requirement. Additionally, at
April 30, 1996, the Company had cash deposits concentrated primarily in two
financial institutions. The Company believes risk associated with these
concentrations is minimal.
Inventories
Inventories, which consist primarily of food, beverage, and gift shop items,
are stated at the lower of cost (determined by the first-in, first-out method)
or market.
Debt Issuance Costs
In conjunction with the issuance of the "New Notes" in August 1995 and
subsequent amendments to the agreement governing the "New Notes" (see Note 4),
the Company incurred debt issuance costs of approximately $1,500,000. These
costs are being amortized over the term of the New Notes using the effective
interest method.
In connection with the issuance of the "Senior Note" (see Note 4) and
subsequent amendments to the agreement governing the Senior Note, the Company
incurred debt issuance costs of $2,569,717. These costs were amortized over
the term of the Senior Note using the effective interest method and were fully
amortized upon the retirement of the Senior Note.
Property and Equipment
Property and equipment are stated at cost. Expenditures for additions,
renewals and improvements are capitalized. During periods of construction,
interest costs associated with borrowings utilized to fund construction are
capitalized. The capitalized interest is recorded as part of the asset to
which it relates and is depreciated over
F-35
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the asset's estimated useful life. Interest capitalized during the year ended
April 30, 1995 and 1996 was approximately $10,000 and $2,400,000,
respectively. Costs of repairs and maintenance are expensed as incurred.
Effective July 29, 1995, the Company began depreciating gaming related
equipment and facilities. Included in furniture, fixtures and equipment is
approximately $5,900,000 of equipment acquired under capital leases.
Substantially all equipment acquired under capital leases is gaming related.
In conjunction with the sale of 50% of the Company to LRGP, management
changed the estimated useful lives of certain assets from those previously
reported to match the estimated useful lives used at LRGP's other Louisiana
riverboat casino. As the Company had not commenced operations at the time of
the sale, no depreciation had been recorded on those assets. Accordingly, this
change in estimated useful lives had no significant impact on financial
statement amounts. Depreciation is computed using the straight-line method
over the following estimated useful lives.
<TABLE>
<S> <C>
Leasehold improvements........................................... 25 years
Building......................................................... 25 years
Furniture, fixtures and equipment................................ 5 years
Riverboat and barges............................................. 25 years
</TABLE>
Depreciation expense was $250,991, $11,330 and $2,898,933, respectively, for
the period from June 25, 1993 (acquisition date) to April 30, 1994 and in
fiscal years 1995 and 1996.
Included in leasehold improvements is approximately $3,600,000 of costs
incurred during the year ended April 30, 1996 for upgrades made to improve
access to the riverboat casino location. These costs arose from widening and
paving public roads and installing traffic signals. Such areas are not owned
or leased by the Company. In management's opinion, these costs do, and will
continue to contribute to the operating results of the casino and, as such,
have been capitalized.
Noncompete Agreement
In connection with the acquisition of the Company by Crown, the Company's
former owner agreed with Crown not to compete in the Louisiana market for a
period of five years. The noncompete agreement is stated at the cost allocated
to the agreement by Crown, at the time of its acquisition, net of accumulated
amortization. Amortization is recorded using the straight-line method over a
period of five years. The Company incurred amortization expense of $83,330 for
the period from June 25, 1993 (acquisition date) to April 30, 1994 and $99,996
for the years ended April 30, 1995 and 1996.
License Costs
License costs principally represent the excess purchase price Crown paid in
acquiring the Company's net identifiable assets. In conjunction with the sale
of 50% of the Company to LRGP, management of the Company changed the estimated
useful life of the license, as previously reported, to match the estimated
useful lives utilized on other long-lived gaming related assets. The Company
began amortizing these costs effective July 29, 1995 (commencement of
operations) over a twenty-five-year period using the straight-line method.
Twenty-five years is management's best estimate of the useful life of the
license costs. The Louisiana license was issued on March 29, 1994 and has a
five-year initial term, which is subject to renewal.
Income Taxes
Through June 8, 1995, the Company was included in Crown's consolidated
federal income tax return. As a result of the sale of 50% of SCGC to LRGP, the
Company will file a separate return. The provision for income taxes in the
accompanying financial statements is computed on a separate return basis for
all periods presented.
F-36
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between book bases and tax bases of
assets and liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Revenue and Promotional Allowances
Casino revenue is the net win from gaming activities which is the difference
between gaming wins and losses. Casino revenues are net of accruals for
anticipated payouts of progressive electronic gaming device jackpots.
Revenue does not include the retail amount of food, beverages, and other
items provided gratuitously to customers. These amounts totaled $3,331,070 for
the year ended April 30, 1996. The cost of sales in providing such
complementary services was approximately $1,220,683 of which approximately
$297,429 has been classified as food, beverage and other and the remainder has
been classified as casino expense.
Casino Pre-Opening and Development Costs
All casino pre-opening and development costs are expensed as incurred. Pre-
opening and development costs consist principally of personnel costs,
advertising, insurance, travel, consulting and professional fees.
Reclassifications
The accompanying financial statements for the period ended April 30, 1995
reflect certain reclassifications made to conform the presentation with
classifications presented as of April 30, 1996.
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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Other Accounting Issues
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
This statement requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of this standard, which the Company will adopt
effective May 1, 1996, has been assessed by management and should not have a
material effect on the Company's financial statements.
3. OPERATING ENVIRONMENT:
The Company operates in a highly regulated and competitive environment which
is currently facing political uncertainty. The Louisiana Riverboat Gaming
Commission and the Enforcement Division oversee virtually every aspect of
riverboat gaming in the State of Louisiana including the issuance and renewal
of riverboat gaming licenses. Management believes the Company's license will
be renewed at the end of the initial term.
F-37
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The gaming industry in the State of Louisiana has recently received national
media attention primarily as a result of the commencement of a federal
investigation of certain legislative members and the recent bankruptcy of a
gaming company in the Louisiana market. In response to these and other
incidents, the Louisiana governor called a special session of the State
legislature to consider the gaming statutes governing riverboat gaming, video-
poker and the New Orleans' land-based casino. The outcome of this session
resulted in a local option vote to be conducted on a parish by parish basis in
November 1996, with separate votes for riverboat gaming, video poker and the
New Orleans land-based casino. Based on recent published polls, management of
the Company believes that the riverboat gaming operations in Calcasieu Parish
will not be negatively impacted.
4. DEBT:
At April 30, 1995 and 1996, the Company had the following debt outstanding:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Senior Secured Increasing Rate Note, net of unamortized
discount of $118,397 ("Senior Note" $28,000,000)...... $21,811,603
Senior Secured Increasing Rate Notes ("New Notes"
$38,400,000).......................................... $30,021,313
Note payable to LRGP................................... 2,079,083 15,000,000
Note payable to LRGP................................... 26,716,273
Notes payable to Casino America (the "Casino America
Notes")............................................... 4,700,000 4,700,000
Other.................................................. 173,295
----------- -----------
$28,590,686 $76,610,881
=========== ===========
</TABLE>
In June 1994, the Company issued a $28,000,000 Senior Secured Increasing
Rate Note (the "Senior Note") to an institutional investor. The Senior Note
was initially due on June 3, 1995, but was subsequently extended to August 31,
1995 and carried a 12% coupon increasing 67 basis points each quarter up to a
maximum interest rate of 14%. The Senior Note was issued with a warrant to
purchase 508,414 shares of Crown's common stock. The proceeds from the private
placement were allocated between the Senior Note ($26,728,965) and the warrant
($1,271,035) based upon the relative fair value of each of the securities at
the time of issuance. The amount allocated to the warrant was recorded as an
increase to advances from Crown. The resulting original issue discount was
amortized over the life of the Senior Note using the effective interest
method.
On August 7, 1995, the Company and LRGP (collectively, the "Issuers")
jointly issued $38,400,000 of Senior Secured Increasing Rate Notes (the "New
Notes"), the proceeds of which were used to retire the Senior Note
($21,900,000) and certain LRGP obligations ($8,400,000). The balance of the
proceeds were used in the development of the Calcasieu Parish project. The New
Notes initially become due on July 27, 1996, but can be extended up to an
additional twelve months at the option of the Issuers provided no event of
default has occurred and is continuing, carry a 12% coupon which increases 25
basis points each quarter until maturity, and provide for contingent interest
beginning in June 1996 equal to 7.5% of the Issuers' consolidated cash flow,
as defined. The New Notes are collateralized by substantially all the assets
of the Issuers and contain covenants relating to certain business, operational
and financial matters including limitations on (i) incurring additional debt,
(ii) paying dividends, (iii) merging or consolidating with others, (iv)
changes in control, (v) capital expenditures, (vi) investments and joint
ventures, and (vii) the sale of assets, and financial covenants pertaining to
(a) minimum cash flow, (b) minimum fixed charge ratio, (c) maximum leverage
ratio, and (d) minimum net worth.
As of April 30, 1996, the Issuers were not in compliance with certain
financial covenants provided for in the Note Purchase Agreement pertaining to
the New Notes. However, effective May 3, 1996 the Company obtained waivers
from the institutional lender for the lack of compliance. The violations were
waived through the effective date of the waivers. Additionally, in conjunction
with the Company obtaining these waivers, the
F-38
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
New Note Agreement was amended to reflect less stringent financial covenants
going forward and to allow the Company to enter into and modify certain
agreements in conjunction with Casino America's purchase of Crown's remaining
50% interest in the Company and the Grand Palais Riverboat transaction.
Management believes the Company will be able to comply with the terms of the
amended agreement.
In the event the Company fails to comply with these amended covenants, the
Note Purchase Agreement provides that the lender has the right, upon the
giving of notice, to (among other things) cause an acceleration of the
maturity date of all amounts outstanding under the Note Purchase Agreement.
Management believes that the Company will be able to comply with these amended
covenants and as such acceleration of the repayment obligations is not
expected to occur. However, in the event the Company does fail to comply with
the amended and restated Note Purchase Agreement, and such repayment
obligations are accelerated, SCGC and LRGP will need to locate other sources
of capital in order to meet such repayment obligations, and there can be no
assurance that such sources will be available, or be available on terms
acceptable to LRGP and SCGC.
In May 1995, the Company issued a promissory note to LRGP to facilitate
advances of up to $15,000,000. The note bears interest at 11.5% per annum, and
is due three business days after the New Notes are paid in full. The proceeds
from the issuance of the note have been used to develop the Calcasieu Parish
project.
In October 1995, the Company issued a promissory note to LRGP to facilitate
additional advances of up to $25,000,000. The note bears interest at 11.5% per
annum and is due in four equal quarterly installments beginning three months
after retirement of the New Notes. However, the Company shall only be
obligated to make principal and interest payments to the extent the Company
has cash available to make such payments. The proceeds are currently being
utilized to develop the Calcasieu project.
In March 1995, the Company issued promissory notes aggregating $4,700,000 to
Casino America (the "Casino America Notes"). The Casino America Notes bear
interest at 11.5% per annum and are due three business days after the New
Notes are paid in full.
As noted above and in the accompanying balance sheet, the Company has
current debt obligations that significantly exceed its available cash
resources. As stated previously, management does not anticipate future events
of noncompliance and as such, does not believe payment of the New Notes will
be accelerated by the lender. Further, the related party notes payable are
subordinate to the New Notes. Management is currently pursuing a restructuring
of existing debt obligations. While management believes such restructuring can
be completed, there can be no assurance that restructuring options will be
available.
At April 30, 1996, based on the interest rates and the short-term duration
of the notes, management believes the carrying value of all notes payable
approximates the estimated fair value.
5. INCOME TAXES:
The components of the Company's income tax benefit for the period from June
25, 1993 (acquisition date) to April 30, 1994 and for the years ended April
30, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Current.............................. $ -- $ -- $ --
Deferred............................. (572,517) (2,827,483) (1,055,968)
--------- ----------- -----------
$(572,517) $(2,827,483) $(1,055,968)
========= =========== ===========
</TABLE>
F-39
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The benefit for income taxes is different from the amount computed by
applying the federal income tax rate to the loss before income taxes for the
period from June 25, 1993 (acquisition date) to April 30, 1994 and for the
years ended April 30, 1995 and 1996 for the following reasons:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate............................... (34)% (34)% (34)%
Valuation allowance.................................. 26 23
State income tax, net of federal benefit............. (3) (5) (5)
Other................................................ (1) 2
--- --- ---
(38)% (13)% (14)%
=== === ===
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
as of April 30, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Deferred tax liabilities:
License costs................................... $3,442,030 $ 3,436,716
Other........................................... 1,807
---------- -----------
Total deferred tax liabilities................ 3,443,837 3,436,716
---------- -----------
Deferred tax assets:
Pre-opening expenses............................ 6,149,255 6,538,935
Net operating loss carryforwards................ 2,719,000 4,906,000
Other........................................... 272,571 410,782
---------- -----------
Total deferred tax assets..................... 9,140,826 11,855,717
---------- -----------
Less valuation allowance.......................... 5,696,989 7,363,033
---------- -----------
Net deferred tax asset........................ $ -- $ 1,055,968
========== ===========
</TABLE>
At April 30, 1995 and 1996, valuation allowances totaling $5,696,989 and
$7,363,033, respectively, were provided against the Company's deferred tax
assets to reflect the uncertainties surrounding the realization of such
deferred tax assets. Realization of the net deferred tax asset at April 30,
1996 is dependent on the Company generating sufficient future taxable income.
Although realization is not assured, management believes it is more likely
than not that the amount of the deferred tax asset recorded for financial
statement purposes will be realized. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income are reduced. At April 30, 1996 the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$12,483,000 which expire in 2009 through 2011. These operating loss
carryforwards are subject to certain limitations due to the transaction
discussed in Note 11.
6. LEASES:
In March and July 1995, the Company entered into agreements to lease the two
parcels of land that comprise the Calcasieu Parish riverboat casino site. The
leases have an initial term of five years with seven five-year renewal
options. During the initial term, the leases require annual aggregate rental
payments of $850,000 in years one through four, and $1,000,000 in year five,
payable monthly. During the first renewal term, the rent will be increased
annually by the greater of (i) 5%, or (ii) the percentage increase in the
average consumer price index for Calcasieu Parish, Louisiana for the previous
twelve-month period. During the second through seventh renewal terms, the
lessor and the Company will attempt to set the rent equal to 100% of the rent
paid by other
F-40
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
riverboat gaming operators in Louisiana and Mississippi for comparable
property usage, or if no agreement can be made, then the parties will appoint
real estate appraisers to set the rent for such renewal term. However, in no
event shall the annual rent be less than $1,600,000 during the fourth and all
subsequent renewal terms. In addition, the Company will pay all real estate
taxes, except for taxes due on the unimproved value of the property.
In addition to the Calcasieu Parish site leases, the Company has entered
into various operating leases for equipment and office facilities. At April
30, 1996, future minimum lease payments to be made under these lease
agreements are as follows:
<TABLE>
<S> <C>
1997............................................................. $232,797
1998............................................................. 109,409
1999............................................................. 31,926
2000............................................................. 26,605
--------
$400,737
========
</TABLE>
Rent expense for the period from June 25, 1993 (acquisition date) to April
30, 1994 and for the years ended April 30, 1995 and 1996 was $15,483, $61,539
and $991,181, respectively.
The Company has also entered into various capital leases for equipment. As
of April 30, 1996 future minimum lease payments under capital leases were as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ----------
<S> <C>
1997.......................................................... $3,040,197
1998.......................................................... 613,531
1999.......................................................... 51,587
2000.......................................................... 614
----------
Total minimum lease payments.................................. 3,705,929
Less amount representing interest............................. 254,073
----------
Present value of future minimum lease payments................ 3,451,856
Less current portion.......................................... 2,814,749
----------
Capital lease obligations, less current portion............... $ 637,107
==========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
Commitments to Calcasieu Parish
In January 1995, the Company made a commitment to Calcasieu Parish to
provide certain payments to the Parish above and beyond the statutory
admissions tax. The Company committed to a $1,000,000 initial payment, which
was paid upon the opening of the casino, and a $1,000,000 annual payment for
as long as the casino is operating at its site in the Parish, but in no event
less than six years. In June 1995, the Company and the Parish entered into a
definitive development agreement whereby, in consideration for the payments to
be made by the Company to the Parish, the Parish is required to cooperate with
and provide assistance to the Company in obtaining and maintaining necessary
permits and approvals to operate its riverboat gaming casino.
Litigation
On September 21, 1994, an action was filed against Crown and the Company in
the 24th Judicial District Court for the Parish of Jefferson, Louisiana by
Avondale Industries, Inc. ("Avondale"). In this action, Avondale
F-41
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
alleges that Crown was contractually obligated to Avondale for the
construction of the Company's riverboat vessel based upon a letter of intent
(allegedly reaffirming a previous agreement entered into between Avondale and
the Company). Avondale alleges that Crown breached a duty to negotiate in good
faith toward the execution of a definitive vessel construction contract.
Alternatively, Avondale alleges that a separate, oral contract for the
construction of the vessel existed and that Crown committed unspecified unfair
trade practices and made certain misrepresentations. Avondale has specified
damages of approximately $2,500,000. In conjunction with the sale of 50% of
the Company to LRGP, Crown indemnified LRGP against future losses arising from
this litigation, and as such, even though no assurance can be given as to the
ultimate outcome of this litigation, the Company believes this litigation will
not have a material adverse effect on the financial position or results of
operations of the Company.
8. SITE CHANGE AND BUY OUT OF MANAGEMENT CONTRACT:
In January 1995, the Company made the decision to abandon its site in St.
Charles Parish, Louisiana in favor of the site currently occupied in Calcasieu
Parish, Louisiana. As a result of this decision the Company recorded a charge
of approximately $3,100,000 for the year ended April 30, 1995, which
represents the write-off of previously capitalized costs specific to the St.
Charles Parish site.
In March 1995, in connection with Crown's sale of a 50% interest in the
Company's common stock to LRGP, the Company bought out its existing casino
management agreement for $4,000,000.
9. RELATED PARTY TRANSACTIONS:
The Company entered into a management agreement with Riverboat Services,
Inc. ("RSI") a subsidiary of Casino America which has a term of 99 years and
provides for a management fee of (i) 2% of "Revenues," as defined in the
agreement (generally net gaming revenues less gaming and admission taxes plus
all other operating revenues), plus (ii) 10% of "Net Operating Income," as
defined in the agreement, provided however, the total management fee shall not
exceed 4% of "Revenues." Additionally, in accordance with the agreement, key
employees of the riverboat are employees of RSI who pays the salaries of these
employees and is reimbursed by the Company. As of April 30, 1996, the Company
had incurred management fee costs of approximately $1,602,482 and had incurred
salary costs and other charges associated with these key employees of
approximately $1,400,000. No amounts were due or accrued to RSI at April 30,
1995.
Debartolo Properties Management, Inc., a wholly-owned subsidiary of
Debartolo, Inc. which owns 50% of LRGP is the general contractor for the
construction of the riverboat gaming site. For the year ended April 30, 1996,
approximately $300,000 was paid to Debartolo Properties Management, Inc. and
other Debartolo related companies for construction services provided.
The Company had net advances from Crown of $3,076,887 as of April 30, 1995.
Advances from Crown were used to fund the construction of the riverboat and
support pre-opening and development activities. Included in net advances from
Crown at April 30, 1995 is $1,500,000 relating to Crown common stock issued as
payment for expenses of the Company. In June 1995, in connection with Crown's
sale of a 50% interest in the Company's common stock to LRGP, Crown
contributed the balance in its advance account ($3,085,388) to the Company.
F-42
<PAGE>
ST. CHARLES GAMING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental cash flow disclosures for the period from June 25, 1993
(acquisition date) to April 30, 1994 and for the years ended April 30, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---------- ----------
<S> <C> <C> <C>
Interest paid, net of amounts capitalized..... $171 $6,115,878 $2,461,299
Noncash financing and investing activities:
Capital contribution from Crown............. 3,377,345 3,085,388
Equipment acquired under capital leases..... 5,762,267 128,175
</TABLE>
11. SUBSEQUENT EVENTS:
In May 1996, Crown sold its remaining 50% interest in the Company to Casino
America.
Also in May 1996, Casino America obtained all necessary approvals for the
acquisition and relocation of Grand Palais Riverboat, Inc. ("GPRI") from
bankruptcy. The relocation of the riverboat to the Company's current site in
Calcasieu Parish occurred in June 1996. The Company anticipates the GPRI
riverboat to be operational by July 1996. In conjunction with this relocation
of GPRI to Calcasieu Parish, the Company and GPRI entered into a joint
operating agreement whereby GPRI will pay to the Company a monthly docking fee
of $250,000 for the use of the existing facilities. Additionally, the Company
and GPRI will share certain administrative services and the taxable
income/loss will be allocated to the respective entities based on the terms of
the agreement.
F-43
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS OR
ANY DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY OF THE NOTES IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 14
Use of Proceeds........................................................... 23
Capitalization............................................................ 23
Unaudited Pro Forma Financial Data........................................ 24
Selected Historical Consolidated Financial Information.................... 30
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 31
Business.................................................................. 37
Regulatory Matters........................................................ 49
Management................................................................ 57
Description of Certain Indebtedness....................................... 58
Description of the Notes.................................................. 60
Underwriting.............................................................. 89
Legal Matters............................................................. 90
Experts................................................................... 90
Available Information..................................................... 90
Incorporation by Reference................................................ 91
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
$300,000,000
CASINO AMERICA, INC.
% SENIOR SECURED
NOTES DUE 2003
--------------
PROSPECTUS
--------------
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
NOMURA SECURITIES INTERNATIONAL, INC.
DEUTSCHE MORGAN GRENFELL
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
The following are the estimated expenses in connection with the distribution
of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee........... $ 103,448
NASD Filing Fee...............................................
Printing and Engraving Expenses...............................
Accounting Fees and Expenses..................................
Attorneys' Fees and Expenses..................................
Transfer Agent's and Registrar's Fees.........................
Trustee's Fees................................................
Blue Sky Fees and Expenses (including attorneys' fees)........
Nasdaq Listing Fees...........................................
Miscellaneous.................................................
----------
Total..................................................... $
==========
</TABLE>
- --------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) The Delaware General Corporation Law ("GCL") (Section 145) gives
Delaware corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations against expenses
incurred in the defense of any lawsuit to which they are made parties by
reason of being or having been such directors or officers, subject to
specified conditions and exclusions, gives a director or officer who
successfully defends an action the right to be so indemnified, and authorizes
the Company to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those
indemnified may be entitled under any by-laws, agreement, vote of stockholders
or otherwise.
(b) Article 8 of the Certificate of Incorporation of the Company provides
for indemnification of directors and officers to the fullest extent permitted
by law.
(c) Reference is made to Section of the Purchase Agreement (the form of
which is included as Exhibit 1.1 to this Registration Statement) for
provisions regarding the indemnification under certain circumstances of the
Company, its directors and certain of its officers by the Underwriters.
(d) In accordance with Section 102(b)(7) of the Delaware GCL, the Company's
Certificate of Incorporation provides that directors shall not be personally
liable for monetary damages for breaches of their fiduciary duty as directors
except for (1) breaches of their duty of loyalty to the Company or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, (3) under Section 174 of
the Delaware GCL (unlawful payment of dividends) or (4) transactions from
which a director derives an improper personal benefit.
ITEM 16. EXHIBITS
A list of the exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this Offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Casino America, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
/s/ Robert S. Goldstein Director
___________________________________________
Robert S. Goldstein
/s/ Martin Greenberg Director
___________________________________________
Martin Greenberg
/s/ Emanuel Crystal Director
___________________________________________
Emanuel Crystal
</TABLE>
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Riverboat Corporation of
Mississippi, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Riverboat Corporation of
Mississippi, Inc.--Vicksburg
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Riverboat Services Incorporated
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
CSNO, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Louisiana Riverboat Gaming
Partnership
By: CSNO, Inc., its General Partner
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Member of the Executive Committee
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Member of the Executive Committee
___________________________________________
Bernard Goldstein
/s/ Allan B. Solomon Member of the Executive Committee
___________________________________________
Allan B. Solomon
/s/ Gerald Wiemann Member of the Executive Committee
___________________________________________
Gerald Wiemann
</TABLE>
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
St. Charles Gaming Company
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Grand Palais Riverboat, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
LRG Hotels, L.L.C.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
LRGP Holdings, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
P.P.I., Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
ASMI Management Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY CERTIFIES
THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS
FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BILOXI AND STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY, 1996.
Isle of Capri Casino Colorado, Inc.
/s/ Allan B. Solomon
By __________________________________
Allan B. Solomon
Executive Vice President,
Secretary and
General Counsel
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
John Gallaway, Rexford Yeisley and Allan B. Solomon and each of them, the true
and lawful attorneys-in-fact and agents of the undersigned, with full power of
substitution and resubstitution, for and in the name, place and stead of the
undersigned, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and hereby grants to
such attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 18TH DAY OF JULY, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ Bernard Goldstein Chairman of the Board, Chief Executive
___________________________________________ Officer and Director
Bernard Goldstein
/s/ John Gallaway President and Director
___________________________________________
John Gallaway
/s/ Rexford Yeisley Chief Financial Officer (Principal
___________________________________________ Financial and Accounting Officer)
Rexford Yeisley
/s/ Allan B. Solomon Executive Vice President, Secretary,
___________________________________________ General Counsel and Director
Allan B. Solomon
</TABLE>
II-15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ------------------------------------------------------------------------- ----------
<C> <S> <C>
1.1 Purchase Agreement....................................................... *
4.1 Certificate of Incorporation of Casino America, Inc., as amended
(Incorporated by reference to the Company's Registration Statement on
Form S-1 filed September 3, 1993, as amended (File No. 33-68434))
4.2 Bylaws of Casino America, Inc., as amended (Incorporated by reference to
the Company's Registration Statement on Form S-1 filed September 3, 1993,
as amended (File No. 33-68434))
4.3 Indenture dated November 1, 1993 between the Company and Shawmut Bank
Connecticut, National Association, as Trustee (Incorporated by reference
to the Company's Annual Report on Form 10-K for the fiscal year ended
April 30, 1994 (File No. 0-20538))
4.4 First Supplemental Indenture dated as of April 29, 1994 between the
Company and Shawmut Bank Connecticut, National Association, as Trustee
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1994 (File No. 0-20538))
4.5 Second Supplemental Indenture dated as of March 8, 1995 between the
Company and Shawmut Bank Connecticut, National Association, as Trustee
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1995 (File No. 0-20538))
4.6 Third Supplemental Indenture dated as of May 8, 1996 between the Company
and Fleet National Bank (successor to Shawmut Bank Connecticut, National
Association) as Trustee (Incorporated by reference to Amendment No. 2 to
the Company's Registration Statement on Form S-3 filed June 28, 1996
(File No. 333-2610))
4.7 Promissory Note, dated June 9, 1995, made by LRGP in favor of Crown
Casino Corporation (Incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1995 (File No. 0-
20538))
4.8 Form of Indenture........................................................ *
4.9 Casino America, Inc. hereby agrees to furnish to the Securities and
Exchange Commission, upon its request, the instruments defining the
rights of holders of long-term debt where the total amount of securities
authorized thereunder does not exceed 10% of Casino America, Inc.'s total
consolidated assets
5.1 Opinion of Mayer, Brown & Platt.......................................... *
10.1 Purchase Agreement, dated July 2, 1996, by and between CSNO Inc., LRGP
Holdings, Inc. and Louisiana River Site Development, Inc................. *
12.1 Computation of Ratio of Earnings to Fixed Charges........................
23.1 Consent of Ernst & Young LLP (Incorporated by reference to the Company's
Registration Statement on Form S-3 filed July 3, 1996 (File No. 333-
7517))
23.2 Consent of Coopers & Lybrand L.L.P. (Incorporated by reference to the
Company's Registration Statement on Form S-3 filed July 3, 1996 (File No.
333-7517))
23.3 Consent of Fred J. Bastie & Associates, P.C. (Incorporated by reference
to the Company's Registration Statement on Form S-3 filed July 3, 1996
(File No. 333-7517))
23.4 Consent of Mayer, Brown & Platt (contained in Exhibit 5.1)............... *
24.1 Power of Attorney (contained on the signature page to the initial
registration statement)
25.1 Statement of Eligibility of Trustee...................................... *
</TABLE>
- --------
*To be filed by amendment.
<PAGE>
EXHIBIT 12.1
CASINO AMERICA, INC.
COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
YEAR ENDED APRIL 30, FORMA
---------------------------------- -------
1993 1994 1995 1996 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes...... $15,451 $31,555 $30,054 $ 5,703 $ 4,706
Add:
Fixed charges identified
below........................ 3,009 10,490 17,955 22,823 23,829
Deduct:
Interest capitalized during
the period................... (30) (1,197) (1,006) (2,125) (2,125)
------- ------- ------- ------- -------
Adjusted earnings................. $18,430 $40,848 $47,003 $26,401 $26,410
======= ======= ======= ======= =======
Fixed Charges:
Interest expense................ $ 2,605 $ 8,329 $16,126 $19,582 $20,588
Interest capitalized............ 30 1,197 1,006 2,125 2,125
Interest portion of rent expense
(25%).......................... 374 964 823 1,116 1,116
------- ------- ------- ------- -------
Adjusted fixed charges.......... $ 3,009 $10,490 $17,955 $22,823 $23,829
======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges.......................... 6.1 3.9 2.6 1.2 1.1
======= ======= ======= ======= =======
</TABLE>
- --------
Note: Because the Company had no earnings and no fixed charges for fiscal
periods prior to 1993, the ratio of earnings to fixed charges is not
applicable for these periods.
