SHOWBOAT INC, S-3/A, 1994-07-08

SHOWBOAT INC
S-3/A, 1994-07-08
MISCELLANEOUS AMUSEMENT & RECREATION

Previous: SHOWBOAT INC, S-3/A, 1994-07-08

Next: SOUTHERN CO, U5S/A, 1994-07-08

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1994.

REGISTRATION NO. 33-54327

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

AMENDMENT NO. 1

TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

SHOWBOAT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

NEVADA 88-0090766
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

2800 FREMONT STREET
LAS VEGAS, NEVADA 89104
(702) 385-9141
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

COPY TO:
JOHN N. BREWER, ESQ. RAYMOND Y. LIN, ESQ.
KUMMER KAEMPFER BONNER & RENSHAW LATHAM & WATKINS
SEVENTH FLOOR 885 THIRD AVENUE
3800 HOWARD HUGHES PARKWAY NEW YORK, NEW YORK
LAS VEGAS, NEVADA 89109 10022-4802
(702) 792-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this Registration Statement becomes effective.

----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITY 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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JULY 8, 1994

PROSPECTUS
, 1994

3,100,000 SHARES

SHOWBOAT, INC.

COMMON STOCK

Of the 3,100,000 shares of common stock, $1.00 par value (the "Common
Stock"), of Showboat, Inc., a Nevada corporation (the "Company"), offered
hereby (the "Common Stock Offering"), 3,000,000 shares are being sold by the
Company and 100,000 shares are being sold by a shareholder of the Company (the
"Selling Shareholder"). See "Principal and Selling Shareholders." The Company
will not receive any of the proceeds from the sale of the shares by the Selling
Shareholder.

The Common Stock of the Company is traded on the New York Stock Exchange (the
"NYSE") under the symbol "SBO." On July 6, 1994, the last reported sale price
of the Common Stock on the NYSE was $17 3/8 per share.

Concurrently with the Common Stock Offering, the Company is offering (the
"Note Offering") $150 million aggregate principal amount of its % Senior
Subordinated Notes due 2009 (the "Notes"). Consummation of the Common Stock
Offering is not contingent upon consummation of the Note Offering, and there
can be no assurance that the Note Offering will be consummated.

SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE LOUISIANA RIVERBOAT GAMING
COMMISSION, NOR ANY OTHER GAMING REGULATORY AGENCY WITH WHICH THE COMPANY IS
LICENSED OR HAS APPLIED FOR A LICENSE, HAS PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERIT OF THE SECURITIES
OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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.

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Total (3).......................... $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses of the Common Stock Offering payable by the
Company, estimated at $ .
(3) The Company and the Selling Shareholder have granted to the Underwriters a
30-day option to purchase up to 465,000 additional shares of Common Stock
on the same terms and conditions as set forth above solely to cover over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to the Public, Underwriting Discounts and Commissions, Proceeds
to the Company and Proceeds to the Selling Shareholder will be $ ,
$ , $ and $ , respectively. See "Underwriting."

The shares are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters and subject to
certain prior conditions, including the right of the Underwriters to reject any
orders in whole or in part. It is expected that delivery of the shares will be
made in New York, New York on or about , 1994.

DONALDSON, LUFKIN & JENRETTE OPPENHEIMER & CO., INC.
SECURITIES CORPORATION
<PAGE>

[GRAPHIC NO.1 APPEARS HERE]

The Atlantic City Showboat casino expansion, completed in May 1994, permitted
the Company to add a total of 900 slot machines and 46 table games. The final
phase of the Atlantic City expansion will add a new 284-room hotel tower which
is scheduled to open in late 1994. (Artist's rendering)

- --------------------------------------------------------------------------------

The newly renovated Pacific
Avenue entrance to the
[GRAPHIC NO.2 APPEARS HERE] Atlantic City Showboat sets the
tone for the Mardi Gras theme
which is maintained
throughout the property.

- --------------------------------------------------------------------------------

The Showboat Star Casino
was New Orleans' first
legal casino and is located
on Lake Pontchartrain, only [GRAPHIC NO.3 APPEARS HERE]
15 minutes from downtown
New Orleans and the
famous French Quarter.

- --------------------------------------------------------------------------------

[GRAPHIC NO.4 APPEARS HERE]

The Sydney Harbour Casino will be located within one mile of the Sydney central
business district on an eight-acre waterfront site next to Darling Harbour. The
permanent casino will contain a 136,000 sq.ft. casino with 1,500 slot machines
and 200 table games. (Artist's rendering)

- --------------------------------------------------------------------------------

[GRAPHIC NO.5 APPEARS HERE]

The Sydney Harbour Casino will be decorated to capture Australia's natural
beauty and diverse geography and will contain cascading waterfalls. (Artist's
rendering)

- --------------------------------------------------------------------------------

[GRAPHIC NO.6 APPEARS HERE]

EXISTING SHOWBOAT EXPANSION OPPORTUNITIES
PROPERTIES ANNOUNCED AS OF JUNE 1994

. Atlantic City, NJ . Sydney, Australia
. Las Vegas, NV . East Chicago, IN
. Lake Pontchartrain, LA . St. Regis Mohawk, NY

- --------------------------------------------------------------------------------

The East Chicago riverboat site is located
approximately 20 minutes from downtown
[GRAPHIC NO.7 APPEARS HERE] Chicago and approximately three miles from
the Chicago city limits. The riverboat is
expected to have up to 60,000 sq.ft. of
casino space containing approximately 2,300
slot machines and 80 table games.

- --------------------------------------------------------------------------------

The St. Regis Casino, which Showboat is planning to
operate on tribal lands in Hogansburg, New York, [GRAPHIC NO.8
approximately 75 miles south of Montreal, Canada, will APPEARS HERE]
offer approximately 130 table games including blackjack,
craps, and roulette and keno.

- --------------------------------------------------------------------------------

The Showboat Hotel, Casino &
Bowling Center is a Las Vegas
institution. It has operated
continuously for 40 years, [GRAPHIC NO. 9 APPEARS HERE]
catering to the local market -
customers who are loyal to the
Showboat experience.

- --------------------------------------------------------------------------------

Showboat is planning to
renovate and expand the Las
Vegas Showboat.
Showboat's plans include the
addition of a 500-room
[GRAPHIC NO. 10 APPEARS HERE] hotel tower, 20,000 sq.ft. of
casino space with capacity
to add up to 1,100 slot
machines, a 900-space
parking garage and a
78,000 sq.ft. Entertainment
Center.
(Artist's rendering)

- --------------------------------------------------------------------------------

2
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; at the New York Regional
Office of the Commission, 7 World Trade Center, 13th Floor, New York, New York
10048; and at the Chicago Regional Office of the Commission, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661. 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 Company's Common
Stock is listed on the NYSE. Reports, proxy statements, and other information
concerning the Company may be inspected at the offices of the NYSE at 20 Broad
Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement on Form S-
3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the registration of the Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus or in any document
incorporated by reference as to the contents of any contract or other documents
referred to herein or therein are not necessarily complete and, in each
instance, reference is made to the copy of such documents filed as an exhibit
to the Registration Statement or such other documents, which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission. Each such statement is qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Commission, are hereby incorporated herein by reference:

(i) The Company's Annual Report on Form 10-K for the Year Ended December
31, 1993;

(ii) The Company's Quarterly Report on Form 10-Q for the Quarter Ended
March 31, 1994; and

(iii) The Company's Current Report on Form 8-K dated May 19, 1994.

In addition, each document filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(b) of the Exchange Act subsequent to the date of this
Prospectus and prior to termination of the Common Stock Offering shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date such document is filed.

Any statement contained herein, or any document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of the Registration Statement and
this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of the Registration Statement or this
Prospectus. All information appearing in this Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated herein by reference. This Prospectus
incorporates documents by reference which are not presented herein or delivered
herewith. These documents (other than exhibits thereto) are available without
charge, upon written or oral request by any person to whom this Prospectus has
been delivered, from H. Gregory Nasky, Secretary, Showboat, Inc., 2800 Fremont
Street, Las Vegas, Nevada 89104 (telephone (702) 385-9141).

IN CONNECTION WITH THE COMMON STOCK OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK AND OTHER SECURITIES OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
ON THE NYSE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.

3
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. As used in this Prospectus, unless the context
otherwise requires, the "Company" refers to Showboat, Inc. and its
subsidiaries. As used in this Prospectus, amounts in Australian dollars ("A$")
have been converted to United States dollars ("$") using an exchange rate of
$0.731 for each A$1.00 (the exchange rate as of July 6, 1994). See "Certain
Considerations" for factors a prospective investor should consider in
evaluating the Company before purchasing the Common Stock offered hereby.

THE COMPANY

Showboat, Inc., through its wholly owned subsidiaries, owns and operates the
Showboat Casino Hotel in Atlantic City, New Jersey (the "Atlantic City
Showboat") and the Showboat Hotel, Casino and Bowling Center in Las Vegas,
Nevada (the "Las Vegas Showboat"). The Company also owns a 50% partnership
interest in, and has a contract to manage, the Star Casino, a riverboat casino
in New Orleans, Louisiana (the "Showboat Star Casino"). In addition to its
existing facilities, the Company maintains an active development program to
identify and develop gaming opportunities in existing and emerging gaming
venues. The Company has announced expansion opportunities in Sydney, Australia,
East Chicago, Indiana and Hogansburg, New York. The Company had EBITDA/1/ of
$69.6 million, $68.5 million and $61.2 million during the years ended December
31, 1993, 1992 and 1991, respectively, and $15.1 million and $12.8 million for
the three months ended March 31, 1994 and 1993, respectively.

The Atlantic City Showboat, which commenced operations in March 1987, is a
516-room, 24-story casino hotel featuring a 95,000 square foot casino
containing approximately 3,000 slot machines and 116 table games. The Company
is currently in the final phase of a three-phase approximately $93 million
expansion project at the Atlantic City Showboat. The first phase of the
expansion was completed in June 1993 and added a 15,000 square foot horse race
simulcasting facility and 5,000 square feet of casino space, resulting in the
addition of approximately 340 slot machines and 28 table games. The second
phase of the expansion was completed in May 1994 and added 15,000 square feet
of casino space, resulting in the addition of approximately 560 slot machines
and 18 table games. The casino expansion permitted the Company to add a total
of approximately 900 slot machines and 46 table games. The final phase of the
expansion will add a new 284-room hotel tower which is currently under
construction and is scheduled to open in late 1994.

The Las Vegas Showboat, which commenced operations in September 1954, is a
482-room, 18-story casino hotel featuring a 78,000 square foot casino
containing approximately 1,900 slot machines, 33 table games and an
approximately 1,300-seat bingo parlor. In October 1990, the Las Vegas Showboat
completed an approximately $25 million expansion and upgrade of its casino,
restaurants and bingo parlor and constructed a 620-space parking garage. The
Company is beginning a $15 million renovation at the Las Vegas Showboat which
will upgrade the facility to current building codes, replace the existing power
plant facility and add a 900-space parking garage. In addition, the Company is
planning a $55 million expansion project which would add a 500-room hotel tower
and an approximately 78,000 square foot entertainment complex (the "Showboat
Entertainment Center"). The Showboat Entertainment Center is expected to
include seven restaurants, a midway arcade, two movie theatres, a food court,
retail shops and a dance hall, all surrounding a four-story atrium designed to
replicate a New Orleans square featuring a center-court "dancing" water
fountain, a laser light show and a simulated fireworks display. The expansion
will add 20,000 square feet of casino space, which will permit the Company to
add up to 1,100 slot machines. Construction on the renovation and expansion
projects is expected to begin before the end of 1994 and is anticipated to take
approximately 18 months to complete.

- --------------------
/1/EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from all
unconsolidated subsidiaries. EBITDA should not be construed as an alternative
to net income and is presented solely as supplemental disclosure because the
Company believes that it is a widely used measure of operating performance in
the gaming industry.

4
<PAGE>

The Showboat Star Casino, which commenced operations in November 1993, is a
riverboat located on the south shore of Lake Pontchartrain in New Orleans,
Louisiana, and features a 21,900 square foot casino which contains
approximately 780 slot machines and 42 table games. In addition to its 50%
equity interest, the Company manages the riverboat for a management fee of 5%
of net gaming revenues. During the first five months of 1994, the Company
earned management fees of $1.6 million and the Showboat Star Casino had net
earnings of $13.9 million. The current policy of Showboat Star Partnership is
to distribute at least 70% of net earnings to its partners on a monthly basis.

The Company is actively pursuing expansion opportunities in emerging gaming
markets throughout the United States and internationally, including land-based
casinos, riverboats and Indian gaming. Announced projects which the Company is
currently pursuing include the following:

Sydney, New South Wales, Australia. On May 6, 1994, the New South Wales
Casino Control Authority (the "NSWCCA") selected an affiliate of the Company as
the preferred applicant to build, manage and operate the sole full-service
casino in New South Wales, Australia (the "Sydney Harbour Casino"). The terms
of the proposed transaction provide for a 99-year site lease and casino
license, which will be the exclusive full-service casino license in the state
of New South Wales for a 12-year period, commencing with the opening of a
proposed temporary casino. Gaming operations are currently anticipated to begin
in mid- to late-1995 in the temporary casino, which is expected to contain
approximately 500 slot machines, 150 table games and, subject to certain
approvals, keno. The permanent Sydney Harbour Casino, expected to open in late
1997, will contain approximately 1,500 slot machines, 200 table games, 352
hotel rooms, 139 luxury condominium units in an adjacent tower, 14 themed
restaurants, 12 cocktail lounges, a 2,000-seat lyric theatre and a 700-seat
cabaret style theatre. The cost of the Sydney Harbour Casino, including
licensing fees, is anticipated to be approximately A$1.2 billion ($867.7
million). Firm commitments for the project have been received for all
anticipated external financing requirements. The Company has agreed to invest
A$135.0 million ($98.7 million) in Sydney Harbour Casino Holdings Limited
("SHCL"), the holding company for the Sydney Harbour Casino, for an
approximately 27% ownership interest in SHCL. In addition, an 85% owned
subsidiary of the Company has a 99-year management agreement to manage and
operate the Sydney Harbour Casino. The management fee will be based on both
revenues and earnings of the casino and the non-casino areas of the
entertainment complex. See "The Company--Expansion Opportunities--Sydney, New
South Wales, Australia."

East Chicago, Indiana. The Company owns a 55% interest in the Showboat Marina
Partnership (the "Indiana Partnership") which is the only applicant for the
sole riverboat gaming license allocated by statute to East Chicago, Indiana.
The riverboat will be located approximately 20 minutes from downtown Chicago,
Illinois and approximately three miles from the Chicago city limits. The
Company plans to invest approximately $30 million in the Indiana Partnership
and assist the Indiana Partnership in obtaining financing (currently estimated
to be $90 million) for the construction of the riverboat casino and related
dock-side facilities (collectively, the "East Chicago Riverboat"). Under the
current partnership agreement, the Company will receive a 12% preferred return
on its investment. The Indiana Partnership's application to the Indiana Gaming
Commission for the license to operate the East Chicago Riverboat proposes a
riverboat with up to 60,000 square feet of casino space containing
approximately 2,300 slot machines and 80 table games and substantial dock-side
amenities. Issuance of the gaming license is subject to the resolution of
certain legal challenges to the Indiana gaming statute. See "Certain
Considerations--New Gaming Jurisdictions and Expansion Opportunities."

St. Regis Mohawk Tribal Reservation, Hogansburg, New York. The Company has
entered into a management agreement and related agreements to manage a casino
(the "St. Regis Casino") on the St. Regis Mohawk Tribal Reservation in
Hogansburg, New York, located approximately 75 miles south of Montreal, Canada.
The agreements, which are subject to the approval of the National Indian Gaming
Commission (the

5
<PAGE>

"NIGC"), contemplate that a wholly owned subsidiary of the Company will lend
approximately $30 million for a term of five years, at a rate of 15% per annum,
to purchase and renovate an existing building which will house an approximately
30,000 square foot casino with approximately 130 table games, including
blackjack, craps, roulette, best hand poker, big six and keno. The proposed
management agreement provides for a fee of 20% of earnings before interest,
taxes and depreciation (subject to a maximum of 30% of earnings before taxes)
and has a term of five years. See "Company--Expansion Opportunities--St. Regis
Mohawk Tribal Reservation, Hogansburg, New York."

The Company's marketing and operating strategy is to develop a high volume of
traffic through its casinos. The Atlantic City Showboat targets the drive-in
customer by providing competitive games and excellent service in an attractive
and convenient facility. Customers are attracted to the Las Vegas Showboat by
competitive slot machines, bingo, moderately priced food and accommodations, a
friendly "locals" atmosphere and a 106-lane bowling center. The Showboat Star
Casino, like the Las Vegas Showboat, targets "locals" with its excellent
service, attractive and convenient facility and accessible location. At future
venues, the Company will modify its marketing strategies to maximize casino
revenues by focusing on a specific venue's unique location and demographics.

The Company's development strategy is to identify new and existing gaming
opportunities with strong demographics, in attractive and accessible locations,
and which the Company believes will exceed the Company's return on investment
objectives. In 1993, the Company created a Development and Management Services
Division to investigate and secure new properties in the United States and
around the world. The Company's Development and Management Services Division
also provides management services to support new facilities upon opening,
including human resources, marketing, design and construction, management
information systems, regulatory compliance and operating and financial
services. As of May 31, 1994, the Development and Management Services Division
employed approximately 40 full-time employees and, since its inception, has
actively pursued new projects in 16 states and four foreign countries. No
assurance can be given that any of the announced projects, or any project under
development, will be completed, licensed or result in any significant
contribution to the Company's cash flow or earnings. Casino gaming operations
are highly regulated and new casino development is subject to a number of
risks. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities," "--Regulatory Matters" and "--Development of New Facilities."

6
<PAGE>

THE OFFERING

Common Stock Offered by the
Company.................... 3,000,000 shares

Common Stock Offered by the
Selling Shareholder........ 100,000 shares

Common Stock to be
Outstanding after the
Offering(1)................ 18,372,254 shares

Concurrent Note Offering.... Concurrently with the Common Stock Offering, the
Company is offering $150 million aggregate prin-
cipal amount of the Notes. Consummation of the
Common Stock Offering is not contingent upon con-
summation of the Note Offering, and there can be
no assurance that the Note Offering will be con-
summated.

Use of Proceeds.............
The net proceeds to the Company from the Common
Stock Offering are expected to be approximately
$49.2 million. The Company currently intends to
apply such net proceeds, together with the net
proceeds of the Note Offering and available cash,
to (i) invest A$135.0 million ($98.7 million) for
an approximately 27% equity interest in SHCL,
(ii) renovate the Las Vegas Showboat in order to
upgrade the facility to current building codes,
replace the existing power plant facility and add
a 900-space parking garage at a cost of approxi-
mately $15 million, (iii) expand the Las Vegas
Showboat to add a 500-room hotel tower and the
Showboat Entertainment Center at a cost of ap-
proximately $55 million, (iv) invest approxi-
mately $30 million in the Indiana Partnership and
(v) provide a loan of approximately $30 million
to the St. Regis Mohawk Tribe for the purchase
and renovation of a building in which to operate
the St. Regis Casino. See "Use of Proceeds."

NYSE Trading Symbol......... SBO
- --------------------

(1) Excludes (a) 671,120 shares of Common Stock issuable upon exercise of
vested options which have not yet been exercised and (b) 150,000 shares of
Common Stock issuable upon exercise of outstanding warrants. Includes
363,500 restricted shares which were issued as of May 25, 1994.

7
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

SUMMARY OF CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- ----------------
1989 1990 1991 1992 1993 1993 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net revenues........... $342,354 $334,247 $331,560 $355,236 $375,727 $85,496 $88,779
Income from operations
of consolidated
subsidiaries.......... 31,107 27,765 35,501 46,508 46,269 7,685 7,848
Equity in income (loss)
from unconsolidated
affiliate............. -- -- -- -- (850) -- 3,240
Income from operations. 31,107 27,765 35,501 46,508 45,419 7,685 11,088
Interest expense,
net(1)................ 24,870 25,236 25,399 23,894 21,481 4,499 5,399
Income before
extraordinary items
and cumulative effect
adjustment(2)......... 7,066 1,081 6,014 15,857 13,464 1,921 3,440
Net income(2).......... 7,066 5,051 6,194 12,449 7,341 2,477 3,440
Income before
extraordinary items
and cumulative effect
adjustment per
share(2).............. 0.62 0.10 0.53 1.37 0.89 0.13 0.23
Net income per
share(2).............. 0.62 0.45 0.55 1.08 0.49 0.16 0.23
OTHER DATA:
EBITDA(3).............. $ 50,696 $ 50,138 $ 61,193 $ 68,520 $ 69,572 $12,825 $15,109
PRO FORMA DATA(4):
Interest expense, net.. $ 32,982 $ 8,030 $ 7,954
Income before
extraordinary items
and cumulative effect
adjustment............ 6,995 (208) 1,895
Income before
extraordinary items
and cumulative effect
adjustment per share . 0.39 (0.01) 0.10
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1994
--------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(5) ADJUSTED(6)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $107,458 $156,627 $301,502
Total assets................................. 482,475 531,644 681,644
Long-term debt (including current
maturities)................................. 279,570 279,570 429,570
Shareholders' equity......................... 138,561 187,730 187,730
</TABLE>
- --------------------
(1) Interest expense, net of capitalized interest and interest income.

(2) Results from 1989 include a pre-tax gain of $4.9 million on a sale of a
country club by the Company.

(3) EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from
unconsolidated subsidiaries. Cash distributions from unconsolidated
subsidiaries were $0 from 1989 through 1993 and were $0.9 million in the
three months ended March 31, 1994.

(4) The pro forma data give effect to (i) the Common Stock Offering at an
assumed offering price of $17 3/8 per share, the last reported sale price
of the Common Stock on the NYSE on July 6, 1994, (ii) the Note Offering at
an assumed interest rate of 11%, and (iii) the sale by the Company on May
18, 1993 of $275 million aggregate principal amount of 9 1/4% First
Mortgage Bonds due 2008 and the application of the net proceeds therefrom
to repay certain indebtedness, in each case as if such transaction had
occurred as of the first day of the period presented. The pro forma data
assume that interest income is earned on cash balances at a rate of 3.0% in
1993 and 3.5% in 1994. If the Note Offering is not consummated, the pro
forma data would be as follows:
<TABLE>
<CAPTION>

YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------ ---------------
1993 1993 1994
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
PRO FORMA DATA:
Interest expense, net......................... $20,316 $4,863 $4,969
Income before extraordinary items and
cumulative
effect adjustment............................ 14,119 1,701 3,700
Income before extraordinary items and
cumulative
effect adjustment per share.................. 0.78 0.09 0.20
</TABLE>

(5) Adjusted to give effect to the Common Stock Offering at an assumed offering
price of $17 3/8 per share.
(6) Adjusted to give effect to the Common Stock Offering and the Note Offering.

8
<PAGE>

THE COMPANY

Showboat, Inc., through its wholly owned subsidiaries, owns and operates the
Atlantic City Showboat and the Las Vegas Showboat. The Company also owns a 50%
partnership interest in, and has a contract to manage, the Showboat Star
Casino. In addition to its existing facilities, the Company maintains an
active development program to identify and develop gaming opportunities in
existing and emerging gaming venues. The Company has announced expansion
opportunities in Sydney, Australia, East Chicago, Indiana and Hogansburg, New
York. The Company had EBITDA/1/ of $69.6 million, $68.5 million and $61.2
million during the years ended December 31, 1993, 1992 and 1991, respectively,
and $15.1 million and $12.8 million for the three months ended March 31, 1994
and 1993, respectively.

The Company's marketing and operating strategy is to develop a high volume
of traffic through its casinos. The Atlantic City Showboat targets the drive-
in customer by providing competitive games and excellent service in an
attractive and convenient facility. Customers are attracted to the Las Vegas
Showboat by competitive slot machines, bingo, moderately priced food and
accommodations, a friendly "locals" atmosphere and a 106-lane bowling center.
The Showboat Star Casino, like the Las Vegas Showboat, targets "locals" with
its excellent service, attractive and convenient facility and accessible
location. At future venues, the Company will modify its marketing strategies
to maximize casino revenues by focusing on a specific venue's unique location
and demographics.

The Company's development strategy is to identify new and existing gaming
opportunities with strong demographics, in attractive and accessible
locations, and which the Company believes will exceed the Company's return on
investment objectives. In 1993, the Company created a Development and
Management Services Division to investigate and secure new properties in the
United States and around the world. The Company's Development and Management
Services Division also provides management services to support new facilities
upon opening, including human resources, marketing, design and construction,
management information systems, regulatory compliance and operating and
financial services. As of May 31, 1994, the Development and Management
Services Division employed approximately 40 full-time employees and, since its
inception, has actively pursued projects in 16 states and four foreign
countries. The Development and Management Services Division is currently
working on a number of projects in addition to the announced projects. No
assurance can be given that any of the announced projects, or any project
under development, will be completed, licensed or result in any significant
contribution to the Company's cash flow or earnings. Casino gaming operations
are highly regulated and new casino development is subject to a number of
risks. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities," "--Regulatory Matters" and "--Development of New Facilities."

The Company is actively pursuing expansion opportunities in emerging gaming
markets in the United States and internationally. The Company has announced
expansion opportunities which include (i) an approximately 27% interest in
SHCL, which was selected as the preferred applicant for the only full-service
casino license in New South Wales, Australia, (ii) a 55% interest in the
Indiana Partnership, which is the only applicant for the sole gaming license
to operate a riverboat casino in East Chicago, Indiana, located approximately
20 minutes from downtown Chicago, Illinois and three miles from the Chicago
city limits, and (iii) an agreement with the St. Regis Mohawk Tribe to
construct and operate the St. Regis Casino on the St. Regis Mohawk Tribal
Reservation in Hogansburg, New York, located approximately 75 miles south of
Montreal, Canada.

The Company's principal executive offices are located at 2800 Fremont
Street, Las Vegas, Nevada 89104. The telephone number is (702) 385-9141.

- ---------------------
/1/EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from all
unconsolidated subsidiaries. EBITDA should not be construed as an alternative
to net income and is presented solely as supplemental disclosure because the
Company believes that it is a widely used measure of operating performance in
the gaming industry.

9
<PAGE>

THE ATLANTIC CITY SHOWBOAT

The Atlantic City Showboat, a 516-room, 24-story hotel casino which commenced
operations in March 1987, is located at the eastern end of the "Boardwalk." The
casino features approximately 3,000 slot machines and 116 table games,
including 62 "21" tables, 18 poker tables, 14 craps tables, 11 roulette tables,
two baccarat tables, two mini-baccarat tables, two pai-gow poker tables, two
big six wheels, one red dog table, one sic bo table, one double down stud poker
table, keno and a simulcast horse racing facility. The Atlantic City Showboat
contains two public levels. On the ground level the public areas include the
casino, a show lounge, two cocktail lounges, six restaurants, an ice cream
parlor and three shops. On the second level the public areas include a 573-seat
buffet-style restaurant, a 383-seat coffee shop, a player's club lounge, a
beauty salon, a health spa, a video game arcade, 27,000 square feet of meeting
rooms, convention and exhibition space, and a 60-lane bowling center with a
snack bar and cocktail lounge. The themed interior of the facility replicates
the spirit and elegance of turn-of-the-century New Orleans.

The Atlantic City Showboat's attached nine-story parking garage facility,
with a New Orleans themed exterior, provides self-parking for approximately
2,000 cars and a 14-bus depot integrated with the casino. This design permits
Atlantic City Showboat's customers to enter the casino hotel protected from the
weather. In addition, on-site underground parking accommodates valet parking
for approximately 500 cars. The Company recently secured land for 500
additional parking spaces located approximately two blocks from the Atlantic
City Showboat to supplement customer parking during peak periods. Access to the
Atlantic City Showboat has improved with the completion of the expansion of
Delaware Avenue to four traffic lanes in May 1994. Delaware Avenue leads
directly to the Atlantic City Showboat from the White Horse Pike (U.S. Route
30), one of three major highways to Atlantic City.

The Company is in the final phase of a three-phase approximately $93 million
expansion project which commenced in 1993 at the Atlantic City Showboat. As a
result of the expansion, the Company will receive, at a minimum, $7.6 million
in credits from the Casino Reinvestment Development Authority which will be
applied to future funding obligations. The first phase of the expansion was
completed in June 1993 and added a 15,000 square foot horse race simulcasting
facility and 5,000 square feet of casino space, resulting in the addition of
approximately 340 slot machines and 28 table games. The second phase of the
expansion was completed in May 1994 and added 15,000 square feet of casino
space, resulting in the addition of approximately 560 slot machines and 18
table games. The casino expansion permitted the Company to add a total of
approximately 900 slot machines and 46 table games. The final phase of the
Atlantic City expansion will add a new 284-room hotel tower which is currently
under construction and is scheduled to open in late 1994.

The Atlantic City Showboat is connected to the Taj Mahal Casino Hotel, the
largest casino in Atlantic City, and Merv Griffin's Resorts International
Casino Hotel by pedestrian walkways. These three properties form an "uptown
casino complex" in which patrons can pass from property to property, either on
the ocean-front Boardwalk or through the pedestrian walkways.

THE LAS VEGAS SHOWBOAT

The Las Vegas Showboat, a 482-room, 18-story hotel casino which commenced
operations in September 1954, is located on 26 acres approximately 2 1/2 miles
from both the "Strip" and downtown Las Vegas. The Las Vegas Showboat casino
features approximately 1,900 slot machines and 33 table games, including 20
"21" tables, six poker tables, two craps tables, two roulette tables, two
Caribbean stud poker tables, one pai-gow poker table, a race and sports book,
an approximately 1,300-seat bingo parlor and a keno area. The hotel casino
complex also includes a 106-lane bowling center, a 408-seat buffet-style
restaurant, a 194-seat coffee shop, two specialty restaurants and 8,300 square
feet of meeting room space. The facility includes surface parking for 1,600
cars in addition to a 620-car six level parking garage. The Company also owns
and operates a 33-room motel directly across from the Las Vegas Showboat.

10
<PAGE>

The Company is beginning a $15 million renovation at the Las Vegas Showboat
which will upgrade the roof of the oldest portion of the Las Vegas Showboat in
order to comply with current building codes and replace the existing power
plant facility. The renovation will also add a 900-space parking garage which,
following the renovation, will permit direct access to the casino through
pedestrian walkways.

In addition, the Company is planning a $55 million expansion project which
would add a 500-room hotel tower and the approximately 78,000 square foot
Showboat Entertainment Center featuring seven restaurants (the three existing
restaurants and buffet will be relocated to the Showboat Entertainment Center
providing the Las Vegas Showboat with additional casino and meeting room
space), a midway arcade, two movie theatres, a food court, retail shops and a
dance hall, all surrounding a four-story atrium which will recreate the festive
atmosphere of a New Orleans square during Mardi Gras. The ceiling of the atrium
will be designed to simulate the sky as a day progresses from dawn to dusk. The
highlight of the atrium will be a center-court "dancing" water fountain, a
laser light show and a simulated fireworks display. The primary entrance to the
Showboat Entertainment Center will be through the casino. The Company believes
the expansion project will strengthen the Company's market niche with local Las
Vegas residents and registered hotel guests as well as attract casual tourists,
a market segment which is not currently emphasized by the Las Vegas Showboat.
Following the renovation and expansion, the hotel will contain 833 rooms and
have added casino capacity of 20,000 square feet, which will permit the Company
to add up to 1,100 slot machines. Construction on the renovation and expansion
is anticipated to commence before the end of 1994 and is expected to take
approximately 18 months to complete.

THE SHOWBOAT STAR CASINO

The Company owns a 50% equity interest in Showboat Star Partnership, the
owner of the Showboat Star Casino. The Showboat Star Casino riverboat, which
commenced gaming operations in November 1993, is located on the south shore of
Lake Pontchartrain in New Orleans, Louisiana, approximately seven miles from
New Orleans' "French Quarter." The riverboat, which measures 265 feet long and
78 feet wide, was built to resemble a traditional paddle-wheel riverboat. The
riverboat contains 21,900 square feet of casino space on three levels, with
approximately 780 slot machines and 42 table games, including 32 "21" tables,
six craps tables and four roulette tables. A cocktail lounge is located on each
of the three public levels of the riverboat.

Dock-side facilities include a 34,000 square foot terminal building, which
contains a restaurant, a cocktail lounge and administrative offices, and
provides parking for 1,150 cars. Passengers pass through the terminal area in
order to board the riverboat and embark on one of six daily three-hour
excursion cruises on Lake Pontchartrain. During inclement weather conditions,
the riverboat operates mock cruises while docked at the terminal facility. The
Showboat Star Casino currently operates between the hours of 10:00 a.m. and
4:00 a.m. every day of the week. For the five months ended May 31, 1994, the
total number of passenger visits to the Showboat Star Casino was 803,431 with
an average casino win per passenger per visit of $54.60. Since commencement of
operations, the Showboat Star Casino has been principally restricted to mock
cruises due to either inclement weather or underwater obstructions. The Company
believes that operating mock cruises has had a positive effect in attracting
customers.

The Company, through its subsidiary, Lake Pontchartrain Showboat, Inc.
("LPSI"), manages and operates the gaming areas of the Showboat Star Casino for
a management fee of 5% of gaming revenues, net of gaming taxes of 18.5% of
gaming revenue and boarding fees of $5.00 per passenger. During the first five
months of 1994, the Company earned a management fee of $1.6 million and the
Showboat Star Casino had net earnings of $13.9 million. The current policy of
Showboat Star Partnership is to distribute at least 70% of net earnings to its
partners monthly.

11
<PAGE>

EXPANSION OPPORTUNITIES

SYDNEY, NEW SOUTH WALES, AUSTRALIA

On May 6, 1994, the NSWCCA selected an affiliate of the Company as the
preferred applicant to develop, construct and operate the sole full-service
casino with slot machines and table games in New South Wales, Australia. The
terms of the proposed transaction provide for a 99-year site lease and casino
license, which will be the exclusive full-service casino license in the state
of New South Wales for a 12-year period, commencing with the opening of a
temporary casino. The preferred applicant is required to obtain various
development approvals for the construction of the Sydney Harbour Casino (the
"Development Period"). The Development Period is anticipated to be completed by
November 1994. Following, and subject to, satisfactory completion of the
Development Period, the NSWCCA is expected to issue the casino license to a
wholly owned subsidiary of SHCL.

The Sydney Harbour Casino will begin operations in a temporary casino, which
will be located at Pyrmont Bay on Wharves 12 and 13 in an existing building
which will be renovated to permit the operation of a casino. The temporary
casino is anticipated to open in August 1995 and is expected to contain
approximately 500 slot machines, 150 table games (30 of which are expected to
be located in a private gaming room) and, subject to certain approvals, keno.
Additional amenities are expected to include cocktail lounges, specialty
restaurants, retail shops and on-site parking for 428 cars.

The permanent Sydney Harbour Casino is expected to be open in late 1997.
Based on the maximum allowable number of table games, the permanent Sydney
Harbour Casino will rank as one of the largest casinos in the world. The Sydney
Harbour Casino will be located less than one mile from the Sydney central
business district on an eight-acre waterfront site on Pyrmont Bay next to
Darling Harbour. The Sydney Harbour Casino will feature approximately 136,000
square feet of casino space, including an approximately 20,000 square foot
private gaming area to be located on a separate level which will target a
premium clientele. The Sydney Harbour Casino will have approximately 1,500 slot
machines and 200 table games, including 20 slot machines and 30 table games in
the private gaming area. The Sydney Harbour Casino will be decorated to capture
Australia's natural beauty and diverse geography and will contain cascading
water fountains. Passage through the casino will allow patrons to experience
Australia's indigenous landscape from wall surfaces of brilliant oranges and
reds representing the cliffs and ranges of Australia's central desert, to an
Australian rain forest under a glass canopy and a Great Barrier Reef room with
a large aquarium of tropical fish. The Sydney Harbour Casino will also contain
14 themed restaurants, 12 cocktail lounges, a deluxe 2,000-seat lyric theatre,
a 700-seat cabaret style theatre and extensive public areas which include
landscaped gardens. The Sydney Harbour Casino complex will include a 352-room
hotel tower and an adjacent condominium tower containing 139 privately owned
luxury units with full hotel services. The complex will also include extensive
retail facilities, a station for Sydney's proposed light rail system, a bus
terminal, docking facilities for commuter ferries and parking for approximately
2,500 cars.

Approximately 5.5 million people live within a 120-mile radius of Sydney.
Additionally, 1.7 million international tourists and 4.4 million Australian
tourists visited Sydney in 1992. Slot machines are currently permitted in
approximately 1,500 non-profit private clubs in New South Wales, most of which
contain less than 25 slot machines. According to the Tasmanian Gaming
Commission, in 1992-1993 gambling expenditures per adult citizen in New South
Wales were approximately A$595 ($435), the largest gambling expenditures per
adult citizen in all of the Australian states. The following chart compares
gambling expenditures per adult citizen of the various Australian states in
1992-1993.

12
<PAGE>

AUSTRALIA GAMBLING EXPENDITURES 1992-1993

<TABLE>
<CAPTION>
PERCENTAGE PERCENT OF
GAMBLING OF TOTAL ADULT TOTAL EXPENDITURES
EXPENDITURES/1/ EXPENDITURES POPULATION POPULATION PER CAPITA
--------------- ------------ ----------- ---------- ------------
(MILLIONS) (THOUSANDS)
<S> <C> <C> <C> <C> <C>
New South Wales......... A$2,667.3 44.9 4,484 34.2 A$594.9
Victoria................ 1,112.7 18.7 3,345 25.5 332.7
Queensland.............. 984.4 16.6 2,270 17.3 433.7
South Australia......... 345.3 5.8 1,107 8.5 311.9
Western Australia....... 513.7 8.7 1,221 9.3 420.7
Tasmania................ 119.1 2.0 345 2.6 345.3
ACT..................... 139.5 2.3 218 1.7 542.1
Northern Territory...... 58.4 1.0 114 0.9 511.9
--------- ----- ------ -----
Total................. A$5,940.4 100.0 13,104 100.0
========= ===== ====== =====
</TABLE>

Source: Australian Gambling Statistics 1973 to 1993, The Tasmanian Gaming
Commission.

Leighton Properties Pty Limited ("Leighton Properties") has agreed to
construct the Sydney Harbour Casino (including the temporary casino) for
A$691.0 million ($505.1 million). Under the terms of the construction
contract, the temporary casino must be completed nine months, and the
permanent casino must be completed 38 months, after the issuance of the casino
license. In the event that the permanent Sydney Harbour Casino is not
completed within such time period, the construction contract provides for
liquidated damages of A$150,000 ($109,650) per day. Additionally, SHCL is
indemnified against any loss arising from the contractor's failure to perform
its obligations under the construction contract.

The cost of the Sydney Harbour Casino, including licensing fees, is
anticipated to be approximately A$1.2 billion ($867.7 million). The Company
and Leighton Properties have agreed to invest A$135.0 million ($98.7 million)
and A$25.0 million ($18.3 million), respectively, in SHCL for equity stakes of
approximately 27% and 5%, respectively. In addition, each of the Company and
Leighton Properties has options to purchase an additional 7% of the fully
diluted equity of SHCL. The options may be exercised no earlier than July 1,
1998, and expire June 30, 2000 and have an exercise price of A$1.15 per share.
Upon the issuance of the casino license, and prior to the exercise of any
outstanding options, SHCL will have 505,000,000 shares outstanding, consisting
of 135,000,000 ordinary shares owned by Showboat Australia Pty Limited
("Showboat Australia"), an indirect wholly owned subsidiary of the Company,
25,000,000 ordinary shares owned by Leighton Properties, and 345,000,000
preferred ordinary shares owned by certain institutional investors. SHCL is
expected to become a publicly listed company on the Australian Stock Exchange
within six months of receiving the casino license.

Additional funds for the construction of the Sydney Harbour Casino will be
obtained through bank financing of A$500.0 million ($365.5 million), a working
capital facility of A$50.0 million ($36.6 million), an offering of securities
to institutional investors of A$345.0 million ($252.2 million) for an
approximately 68% ownership in SHCL, and cash flow from the operation of the
temporary casino of approximately A$132.0 million ($96.5 million). SHCL has
received firm commitments for all of these anticipated financing requirements
which total approximately A$895.0 million ($654.3 million). In addition, SHCL
has granted options to certain parties that were involved in the preliminary
bidding for the New South Wales casino license to purchase approximately 4% of
the equity of SHCL. Options to purchase 15,150,000 preferred ordinary shares
have been granted and are exercisable at any time prior to the issuance of the
casino license at an exercise price of A$1.00 per share and options to
purchase 5,050,000 ordinary shares have been granted and are exercisable
between June 1, 1998 and June 30, 2000 at an exercise price of A$1.15 per
share.
- ---------------------

/1/As a measure of gambling expenditures, The Tasmanian Gaming Commission
includes both racing related gambling (racecourse and off-course betting on
horse and greyhound races) and gaming related gambling (lotteries, poker
machines, casino gaming and other minor gaming.)

13
<PAGE>

SHCL has entered into an agreement (the "Facility Agreement") with the
Commonwealth Bank of Australia ("CBA") to obtain a loan in the amount of
A$500.0 million ($365.5 million) to finance a portion of the development and
construction of the Sydney Harbour Casino. SHCL will also obtain from CBA a
working capital facility in the amount of A$50.0 million ($36.6 million) for
working capital purposes. The A$500.0 million construction facility will
convert to a seven-year term loan upon completion of the Sydney Harbour Casino.
The term loan will be amortized by mandatory repayments specified in the
Facility Agreement. The Facility Agreement also requires that the Company
remain the beneficial owner of not less than 10% of the issued ordinary shares
of SHCL for a period of not less than five years after completion of the
permanent Sydney Harbour Casino and remain the beneficial owner of not less
than 5% of the issued ordinary shares of SHCL for an additional two years
thereafter. The Facility Agreement further restricts SHCL's ability to declare
or pay any dividend (other than a permitted preferred ordinary dividend) or
make distributions to stockholders, except under certain conditions as
specified in the Facility Agreement. The Facility Agreement contains additional
customary financial covenants. In connection with the Facility Agreement, CBA
will receive options to acquire 17,250,000 preferred ordinary shares at an
exercise price of A$1.10 per share. These options may be exercised no earlier
than July 1, 1998 and expire five years from the date of the agreement granting
such options.

Institutional investors have committed to purchase 345,000,000 preferred
ordinary shares of SHCL for A$345.0 million ($252.2 million). The preferred
ordinary shares are entitled to a cumulative dividend of A$.05 per share per
annum for the three fiscal years ended June 30, 1997, 1998 and 1999.
Immediately prior to the issuance of the casino license, the underwriter for
the institutional investor offering of the preferred ordinary shares is
required to fund the underwritten amount to SHCL in immediately available
funds. The institutional investor offering has been fully committed by 24
institutional investors. Pursuant to the underwriting agreement, the
underwriter of the institutional investor offering has committed to list the
preferred ordinary shares on the Australian Stock Exchange within six months of
the issuance of the casino license to SHCL.

Sydney Harbour Casino Management Pty Limited (the "Manager"), a company which
is 85% owned by Showboat Australia and 15% owned by Leighton Properties, will
manage the temporary casino and the permanent Sydney Harbour Casino pursuant to
a 99-year management agreement (the "Management Agreement"). The terms of the
Management Agreement require the Manager to advise Sydney Harbour Casino Pty
Limited or Sydney Harbour Casino Properties Pty Limited, wholly owned
subsidiaries of SHCL, as to the casino design and configuration and the
placement of all gaming equipment. The Manager also has agreed to train all
employees of the Sydney Harbour Casino and to manage a high quality
international class casino in accordance with the operating standards required
by the NSWCCA. The NSWCCA requires a service audit to be conducted yearly by a
third party so that areas of non-compliance can be identified and remedied by
the Manager. The Manager will be paid a management fee equal to the sum of (i)
1 1/2% of casino revenue, (ii) 6% of casino gross operating profit, (iii) 3
1/2% of total non-casino revenue, and (iv) 10% of total gross non-casino
operating profit, for each fiscal year for services rendered by the Manager
pursuant to the Management Agreement. Under certain conditions, the Company has
agreed to forego management fees in an amount with a present value of
approximately A$19.0 million ($13.9 million). Gaming revenue from the Sydney
Harbour Casino will be taxed at a rate of (i) 22.5% of slot machine revenue and
(ii) 20% of the first $200 million of table game revenue, increasing 1% for
each additional $5 million of table game revenue, up to a maximum rate of 45%,
and will be subject to a community benefit levy of 2% of gross gaming revenue.

In addition, each of the Company and Leighton Holdings Limited, the parent of
Leighton Properties, has agreed to guarantee the obligations of Showboat
Australia and Leighton Properties pursuant to their agreements with the NSWCCA,
including the Company's obligation to invest an aggregate of A$135.0 million
($98.7 million) in SHCL, and to indemnify the NSWCCA for any loss as a result
of the failure by either of Showboat Australia or Leighton Properties to
perform their obligations under such agreements. The Company and Leighton
Holdings Limited will be released from their guarantees and indemnities upon
satisfaction of their obligations to invest in SHCL. The Company has secured
its guarantee and indemnity with an A$8.4 million ($6.1 million) line of
credit.

14
<PAGE>

EAST CHICAGO, INDIANA

On April 12, 1994, the Indiana Partnership, owned 55% by Showboat Indiana
Investment Limited Partnership, a wholly owned limited partnership ("SII"), and
45% by Waterfront Entertainment and Development, Inc., an unrelated Indiana
corporation, filed its gaming application with the Indiana Riverboat Gaming
Commission to operate the East Chicago Riverboat on Lake Michigan in East
Chicago, Indiana. The East Chicago Riverboat is located approximately 20
minutes from downtown Chicago and approximately three miles from the Chicago
city limits. Approximately 9.2 million adults reside within 120 miles of East
Chicago, Indiana. The Indiana Partnership is the sole applicant for the only
riverboat gaming license allocated by statute to East Chicago. The Company
expects to invest approximately $30 million in the Indiana Partnership and will
help the partnership obtain in excess of $75 million (currently estimated to be
$90 million) in debt financing. Under the current partnership agreement, the
Company will receive a 12% preferred return on its investment prior to
additional partnership distributions.

The Indiana Partnership is considering constructing a new vessel or
renovating an existing vessel for its proposed gaming operations. The Indiana
Partnership's application to the Indiana Riverboat Gaming Commission for the
license to operate the East Chicago Riverboat proposes a riverboat with up to
60,000 square feet of casino space containing approximately 2,300 slot machines
and 80 table games. The East Chicago Riverboat dock-side facility is also
expected to include up to three restaurants, a 5,000 square foot sports lounge
and a parking garage for 2,000 cars. The Company is continuing to evaluate the
East Chicago market and construction costs for the project and may modify the
riverboat configuration in the future.

The Indiana Riverboat Gaming Act permits the operation of up to 11
riverboats, of which five riverboats, including the Indiana Partnership's
vessel, will operate on Lake Michigan. The Company anticipates that, subject to
the successful resolution of the lawsuit challenging the constitutionality of
Indiana's Riverboat Gaming Act, the first licensed riverboat on Lake Michigan
will be located in Gary, Indiana, and that the East Chicago Riverboat will open
in 1996. See "Certain Considerations--New Gaming Jurisdictions and Expansion
Opportunities." No gaming facility is in operation in Indiana at this time.
Illinois has authorized four gaming licenses, each limited to 1,200 gaming
positions, to operate riverboat casinos in the Chicago metropolitan area.
Riverboat operators holding three of such licenses currently operate six
riverboats and an operator holding the fourth license is expected to commence
gaming operations in late 1994. Additionally, the Illinois legislature is
considering expanding gaming in the Chicago metropolitan area with the proposed
operation of five riverboats in downtown Chicago.

ST. REGIS MOHAWK TRIBAL RESERVATION, HOGANSBURG, NEW YORK

The Company, through Showboat Mohawk Investment Limited Partnership, a wholly
owned limited partnership ("SMI"), and the St. Regis Mohawk Tribe have entered
into agreements to develop, construct, manage and operate a Class III gaming
establishment on the St. Regis Mohawk Tribal Reservation in Hogansburg, New
York. On October 15, 1993, the Governor of the State of New York signed a
compact (the "New York Compact") with the St. Regis Mohawk Tribe, permitting
Class III gaming on the St. Regis Mohawk Tribe's reservation. Class III games
under the New York Compact include blackjack, craps, roulette, best hand poker,
big six, keno, and other authorized games but does not include slot machines.
The agreements were submitted to NIGC and must be approved prior to being
effective. The agreements contemplate that SMI will initially operate Class III
games in an approximately 30,000 square foot casino containing approximately
130 table games. The Company expects to lend approximately $30 million for a
term of five years, at a rate of 15% per annum, to the St. Regis Mohawk Tribe
for the purchase of an existing building which will be expanded to house the
casino, for certain improvements to the building and for working capital
purposes. SMI will receive a management fee of 20% of earnings before interest,
taxes and depreciation throughout the management term of five years, subject to
a maximum of 30% of earnings before taxes.

15
<PAGE>

The St. Regis Mohawk reservation is located on the New York State/Canadian
border approximately 75 miles south of Montreal. Approximately 4.6 million
adults live within 120 miles of Hogansburg, New York. For a five-year period,
the tribal management agreement restricts gaming on the reservation to one
other casino containing in excess of 5,000 square feet, three casinos
containing no more than 5,000 square feet of gaming space and the Mohawk Bingo
Palace, which is limited to Class II games, such as bingo, pull- tabs, tip
jars, lotto and certain non-banking card games. The St. Regis Mohawk Tribe has
entered into a management/construction agreement with a second operator to
construct a casino that is expected to be approximately 40,000 square feet. Any
additional casinos must be located east of the St. Regis Casino making the St.
Regis Casino the first Class III casino visitors will encounter upon entering
the St. Regis Mohawk Reservation from the International Bridge to Canada and
other major highways leading to the reservation. The casino will also compete
with a 35,000 square foot casino in Montreal containing 1,250 slot machines and
65 table games and a casino operated on the Oneida reservation in Verona, New
York, approximately 130 miles south of Hogansburg, New York, containing 136
table games. The Montreal casino has announced plans to expand its casino to
50,000 square feet containing 1,700 slot machines and 100 table games and
Ottawa, Canada has announced its intention to open a casino containing 35,000
square feet of gaming space in 1996-1997.

The St. Regis Mohawk Tribe is governed by a body of three chiefs, with one
chief elected annually for a three-year term. In June 1994, members of the St.
Regis Mohawk Tribe elected a chief who has indicated an intent to re-examine
the New York Compact and the agreements pending before the NIGC between the St.
Regis Mohawk Tribe and prospective gaming operators, including the Company. No
assurance can be given that the St. Regis Mohawk Tribe will not seek to modify
the New York Compact or its agreements with the Company, which may adversely
affect the proposal for the St. Regis Casino.

16
<PAGE>

CERTAIN CONSIDERATIONS

Each prospective investor should carefully consider the following factors,
among others, in evaluating the Company before purchasing the Common Stock
offered hereby.

Sydney Harbour Casino--Need to Obtain Permits and Financing; Risk of
Construction Delays. The Company has not yet received (i) a casino license to
operate the Sydney Harbour Casino or (ii) the approval and permits necessary
for the development and construction of temporary and permanent sites for the
Sydney Harbour Casino ("Development Approval"). The Company is currently in the
process of satisfying certain pre-conditions for the issuance of the casino
license from the NSWCCA and Development Approval from the Minister for Planning
and Housing. While the Company anticipates that it will secure the casino
license and Development Approval, there is no assurance that it will be able to
obtain such casino license, Development Approval, or other licenses, permits
and authorizations. Subsequent to receiving all requisite licenses, permits and
authorizations for the Sydney Harbour Casino, the project will be subject to
the risks of delay and higher expenses to which construction projects of this
type are exposed due to factors such as shortages of materials or skilled
labor, unforeseen engineering, environmental and/or geological problems, work
stoppages and weather interference. Accordingly, there can be no assurance that
the Sydney Harbour Casino will be completed or completed in a timely manner and
within budget.

The total cost for the Sydney Harbour Casino, including licensing fees, is
anticipated to be approximately A$1.2 billion ($867.7 million). The Company has
agreed to invest A$135.0 million ($98.7 million) for the development and
construction of the Sydney Harbour Casino. Additional funds for the
construction of the Sydney Harbour Casino will be obtained through bank
financing of A$500.0 million ($365.5 million), a working capital facility of
A$50.0 million ($36.6 million), a A$25.0 million ($18.3 million) equity
investment by Leighton Properties, an offering of securities to institutional
investors in Australia of A$345.0 million ($252.2 million) for an approximately
68% ownership in SHCL, and cash flow from the operation of the temporary casino
of approximately A$132.0 million ($96.5 million). While SHCL has received firm
commitments for its anticipated external financing requirements, in the event
that additional funds should become necessary to complete the Sydney Harbour
Casino, there can be no assurance that additional funds will be available on
acceptable terms, if at all, or that such funds will be sufficient to fund the
construction. Any such failure to secure additional financing sufficient to
fund the development and construction of the Sydney Harbour Casino, if
necessary, would have a material adverse impact upon the Company's expansion
plans and on the financial condition of the Company.

The NSWCCA retains the right to determine that SHCL is no longer capable of
fulfilling the terms of its agreement with the NSWCCA, primarily because of an
inability to obtain Development Approval. In such circumstances, a non-
preferred applicant would be given the opportunity to obtain development
approval for its project. If successful in such an endeavor, such non-preferred
applicant could be granted the casino license.

Competition. The Atlantic City Showboat competes with 11 other casino hotels
in Atlantic City containing, in the aggregate, approximately 788,000 square
feet of casino space and 8,420 rooms. In addition, the Atlantic City Showboat
competes with Foxwood's High Stakes Bingo and Casino on the Mashantucket Pequot
Indian Reservation in Ledyard, Connecticut. Competition among casino hotels in
Atlantic City is intense. Casino hotels in Atlantic City generally compete on
the basis of promotional allowances, entertainment, advertising, service
provided to patrons, caliber of personnel, attractiveness of the hotel and
casino areas and related amenities.

The Las Vegas Showboat competes generally with approximately 119 casinos in
Clark County, Nevada, which includes the cities of Las Vegas, Henderson,
Laughlin and Mesquite. Competition among casinos in Clark County is intense.
The Company has experienced increased competition from new and existing Las
Vegas hotel casinos which have also sought to attract slot machine players and
Las Vegas-area residents, including construction of a new hotel casino and
renovation of another hotel casino which are located on Boulder Highway near
the Las Vegas Showboat. The Company anticipates continuing increased
competition for these customers.

The Showboat Star Casino currently experiences direct competition in its
primary market area. As of March 31, 1994, the state of Louisiana had
authorized the licensing of 15 riverboat casinos, six of which will

17
<PAGE>

operate in the New Orleans area. The Showboat Star Casino and one other
riverboat located on Lake Charles in southwestern Louisiana were the only
riverboat casinos operating in Louisiana as of December 31, 1993. A third
riverboat opened in New Orleans on February 10, 1994. Additionally, a license
has been awarded to operate a single land-based casino in New Orleans, which is
expected to be one of the larger land-based casinos in the United States. The
land-based casino is anticipated to commence operations in a temporary facility
in late 1994. The Showboat Star Casino also competes with 13 casinos
approximately 50 miles away to the east on the Mississippi Gulf Coast.
Mississippi permits dock-side gaming and casinos in Mississippi, unlike the
Showboat Star Casino, do not have a state-imposed admissions tax. To compete
with the Mississippi casinos, the Showboat Star Casino pays the admissions tax
as a complimentary item to its patrons. The Company expects that greater
competition will occur as the emerging casino industry matures in Louisiana and
elsewhere in the Southern United States.

The Company believes that the growing legalization of casino gaming in states
other than New Jersey and Nevada, including Colorado, Connecticut, Illinois,
Iowa, Indiana, Louisiana, Mississippi, Missouri, and South Dakota, and on
various Indian reservations has not to date had a material adverse impact on
its operations. The legalization of casino and other gaming venues in states
close to Nevada, particularly California, or in or near New Jersey,
particularly Delaware, Maryland, New York or Pennsylvania, may have a material
adverse effect on the Company's business. Gaming legislation has been
introduced, but not passed, in Pennsylvania.

The Company expects that many riverboat casinos, land-based casinos, and
Indian gaming will be licensed eventually throughout the United States.
Moreover, each announced opportunity will compete with other nearby gaming
operations. See "The Company--Expansion Opportunities." Some of these gaming
operations may be owned by companies that are larger and have significantly
greater financial and other resources than the Company. Given these factors, it
is possible that substantial competition will arise which could adversely
affect the Company's existing and proposed operations. The Company's ability to
maintain its competitive position may require the expenditure of significant
funds on an ongoing basis at all of its casino properties.

New Gaming Jurisdictions and Expansion Opportunities. The Company is actively
pursuing potential gaming opportunities in certain jurisdictions where gaming
has recently been legalized, as well as jurisdictions where gaming is not yet,
but is expected soon to be legalized. There can be no assurance that
legislation to legalize gaming will be enacted in any additional jurisdictions,
that any properties in which the Company may have invested will be compatible
with any gaming legislation so enacted, that legalized gaming will continue to
be authorized in any jurisdiction or that the Company will be able to obtain
the required licenses in any jurisdiction. In addition, the constitutionality
of Indiana's Riverboat Gambling Act is currently being challenged by a lawsuit
seeking to declare the portion of the Riverboat Gambling Act that treated the
manner in which gaming was approved in Lake County, Indiana (the county in
which East Chicago is located) differently than certain other Indiana counties
unconstitutional. On May 19, 1994, the Porter County Superior Court issued a
ruling that such provisions of the Riverboat Gambling Act are unconstitutional
and ordered the Indiana Gaming Commission to cease all activity, except
background investigations, in the process of licensing riverboats until such
time as the legislature cures the constitutional defects in the legislation or
until further order of the Porter County Superior Court or the Indiana Supreme
Court. No assurance can be given that the order of the Porter County Superior
Court will be vacated by such court, overturned by the Indiana Supreme Court,
or cured by the Indiana legislature.

Furthermore, competition for the development of new gaming opportunities has
intensified as established and newly organized gaming companies compete for a
limited number of sites and licenses. There can be no assurance that attractive
opportunities to develop new gaming operations will be available to the
Company.

The Company may invest in real property related to potential gaming
opportunities. Such investments are subject to the risks generally incident to
the ownership of real property, including changes in economic conditions,
environmental risks, governmental regulations and other circumstances over
which the Company may have little or no control. There can be no assurance that
the Company will be able to recover its investment in any such property.

18
<PAGE>

Leverage and Debt Service. As of March 31, 1994, the Company had long-term
obligations of approximately $279.6 million, inclusive of current maturities,
and total stockholders' equity of approximately $138.6 million. After giving
effect to the Note Offering and the Common Stock Offering, the Company will
have long-term obligations of approximately $429.6 million, inclusive of
current maturities, and total shareholders' equity of approximately $187.7
million.

After giving effect to the Note Offering, the Company will have significant
interest expense. The Company's ratio of earnings to fixed charges was 1.67 to
1 and 1.60 to 1 for the year ended December 31, 1993 and the three months ended
March 31, 1994, respectively. On a pro forma basis after giving effect to the
Note Offering, the Company's ratio of earnings to fixed charges would have been
1.13 to 1 and 1.09 to 1 for the year ended December 31, 1993 and the three
months ended March 31, 1994, respectively. The Company's ability to satisfy its
obligations is dependent upon its future performance, which will be subject to
prevailing economic conditions and to financial, business and other factors,
including factors beyond the control of the Company, affecting the business
operations of the Company. If the Company is unable to generate sufficient cash
flow from operations in the future, it may be required to refinance all or a
portion of its existing debt or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained on terms that are favorable or acceptable to the
Company.

Risks of Potential Disruptions from Construction. Construction on the
proposed $15 million renovation and $55 million expansion of the Las Vegas
Showboat is expected to begin by the end of 1994 and will take approximately 18
months to complete. The construction of the renovation and expansion project
may disrupt casino operations and will require, from time to time, that
portions of the casino area be temporarily closed. In addition, construction of
the proposed expansion will require the closing of 150 existing hotel rooms in
the rear of the facility. Although the Company does not believe the resulting
decrease in hotel revenues will be significant, the resulting loss of casino
revenues from its hotel market segment could be significant. Any significant
disruption in casino operations, coupled with the expected decrease in hotel
and casino revenues, could have a material adverse effect on the Company's
business and results of operations.

Relationship With Tribes and Effect of Indian Sovereignty. Good relations
with the St. Regis Mohawk Tribe are critical to the success of the St. Regis
Casino. The Company believes that its ability to enter into agreements with the
St. Regis Mohawk Tribe has been attributable, in large part, to the reputation
it has achieved with tribe officials. Indian tribes are sovereign nations with
their own governmental systems. Tribal officials are subject to replacement by
appointment or election. The Company's relationship with the St. Regis Mohawk
Tribe may improve or deteriorate under new administrations. A deterioration of
the Company's reputation and relationships with officials of the St. Regis
Mohawk Tribe could have a material adverse effect upon the development and
operation of the St. Regis Casino.

In addition to all the usual risks associated with the development of the St.
Regis Casino, the Company faces certain risks peculiar to dealing with Indian
tribes, including the uncertain applicability of federal and state laws as they
relate to Indian tribes and the sovereignty of Indian tribes. With respect to
the anticipated loan of up to $30 million by SMI to the St. Regis Mohawk Tribe,
SMI must look exclusively to the future cash flow from casino operations as a
source of payment, rather than the general credit of the St. Regis Mohawk
Tribe.

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

19
<PAGE>

to significant taxes and fees in addition to normal federal and state income
taxes, and such taxes and fees are subject to increase at any time. The Company
pays substantial taxes and fees with respect to its operations and will likely
incur similar burdens in any other jurisdiction in which it may conduct gaming
operations in the future. In addition, there have been suggestions from time to
time to tax all gaming establishments at the federal level. Any increase in the
Company's tax rates would adversely affect the Company. See "Regulation."

Loss of a Riverboat From Service. A riverboat, such as the Showboat Star
Casino and the proposed East Chicago Riverboat, could be lost from service for
a variety of reasons, including casualty, mechanical failure or extended or
extraordinary maintenance or inspection. U.S. Coast Guard regulations require a
hull inspection for all riverboats at five-year intervals. The Showboat Star
Casino will be due for this inspection in late 1999. To comply with this
inspection requirement, which could take a substantial amount of time, the
Showboat Star Casino and any other riverboat that the Company operates in the
future must be taken to a U.S. Coast Guard approved dry docking facility.

Hotel/Gaming Business. The Company is subject to the risks inherent in the
hotel and gaming operations business. Gaming activity can vary significantly as
a result of a number of factors, including the competitive environment, hotel
occupancy rate, and general economic conditions, and is subject to substantial
governmental regulation. See "Regulation." Additionally, hotel and gaming
operations are subject to the imposition of special taxes or assessments by
regulatory bodies. Any new tax or assessment may have an adverse impact on the
Company's operations.

Regulatory Matters. The ownership and operation of the Las Vegas Showboat,
the Atlantic City Showboat and the Showboat Star Casino are subject to
extensive regulation by state and local gaming authorities in Nevada, New
Jersey, Louisiana and in other states and foreign countries the Company may
conduct business in the future (collectively, the "Gaming Authorities"). The
Company may be required to disclose to the Gaming Authorities, upon request,
the identities of the Company's stockholders. The Gaming Authorities may, in
their discretion, (i) require stockholders of the Company to file applications
in states in which the Company does business; (ii) investigate such
stockholders; and (iii) require such stockholders to be found suitable or
qualified to own such securities. Pursuant to the regulations of the Gaming
Authorities, the Company may be sanctioned, including the loss of its
approvals, if, without prior approval of the Gaming Authorities, it (i) pays to
the unsuitable or unqualified person any dividend, interest or other
distribution; (ii) recognizes any voting right by such unsuitable or
unqualified person in connection with the securities; (iii) pays the unsuitable
or unqualified person remuneration in any form; or (iv) makes any payments to
the unsuitable or unqualified person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction. See "Regulation."

Development of New Facilities. The development of any significant new venture
which requires the Company to make a substantial capital investment may require
additional debt or equity financing. There can be no assurance that the cash
flow generated by the operations of the Company or any other new venture will
be sufficient to service any additional debt which may be incurred in
connection therewith. In addition there can be no assurance that additional
financing can be obtained which is acceptable to the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

The opening of any new facility or expansion of an existing facility will be
contingent upon the completion of construction, hiring and training of
experienced management and sufficient personnel and receipt of all regulatory
licenses, permits, allocations and authorizations. The scope of the approvals
required to construct and open a new facility or expand an existing facility
may be extensive, and the failure to obtain such approvals could prevent or
delay the completion of construction or opening of all or part of such
facilities or otherwise affect the design and features of the project. Major
construction projects, such as a new casino development, entail significant
risks, including management's ability to control and manage such projects
effectively, shortages of materials or skilled labor, engineering,
environmental or regulatory problems,

20
<PAGE>

work stoppages, weather interference and unanticipated cost increases.
Accordingly, there can be no assurance that any project will be completed on
time or within budget or that unanticipated delays or cost increases will not
have a material adverse effect on any project.

The Company is pursuing a number of gaming opportunities. In many cases, the
Company is competing against other gaming companies, some of which may have
greater financial resources. There can be no assurance that these opportunities
will be realized by the Company. The Company reserves the right to cease
pursuing any of the gaming opportunities at any time.

USE OF PROCEEDS

The net proceeds to the Company from the Common Stock Offering, after
deducting underwriting discounts and commissions and estimated offering
expenses, are expected to be approximately $49.2 million. The Company currently
intends to apply such net proceeds, together with the net proceeds of the Note
Offering, estimated to be approximately $144.9 million, and approximately $34.6
million of available cash, to (i) invest A$135 million ($98.7 million) for an
approximately 27% equity interest in SHCL, which has been selected as the
preferred applicant to build, manage and operate the sole full-service casino
in Sydney, Australia, (ii) renovate the Las Vegas Showboat in order to upgrade
the facility to current building codes, replace the existing power plant
facility and add a 900-space parking garage at a cost of approximately $15
million, (iii) expand the Las Vegas Showboat to add a 500-room hotel tower and
the Showboat Entertainment Center at a cost of approximately $55 million, (iv)
invest approximately $30 million in the Indiana Partnership, the sole applicant
to obtain the only riverboat gaming license in East Chicago, Indiana, and (v)
provide a loan of approximately $30 million to the St. Regis Mohawk Tribe for
the purchase and renovation of a building in which to operate the St. Regis
Casino. In the event that the Company determines not to pursue any of the
expansion opportunities listed above, the Company will apply any remaining net
proceeds to invest in other expansion opportunities or for other general
corporate purposes.

The Company is required to place $100.0 million of the net proceeds of the
Note Offering into an escrow account, which may only be used to fund the
Company's investment in SHCL. In the event that Australian Gaming Approval or
Management Contract Approval (as defined in the indenture relating to the
Notes) has not occurred on or prior to December 31, 1995, the Company will be
obligated to make an offer to purchase an amount of Notes and certain other
indebtedness of the Company equal to the amount in the escrow account.

In the event that the Note Offering is not consummated, the Company will use
the net proceeds of the Common Stock Offering and available cash to invest in
SHCL. The Company will pursue other means to finance the other projects or will
delay their development in the event the Note Offering is not consummated.

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholder.

21
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of the Company
as of March 31, 1994, and as adjusted as of such date to give effect to the
Common Stock Offering and as further adjusted as of such date to give effect to
both the Common Stock Offering and the Note Offering. This table should be read
in conjunction with the attached consolidated financial statements and the
related notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
MARCH 31, 1994
---------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(2)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash......................................... $107,458 $156,627 $301,502
======== ======== ========
Current maturities of long-term debt......... $ 2,549 $ 2,549 $ 2,549
======== ======== ========
Long-term debt (excluding current maturities)
9 1/4% First Mortgage Bonds................ $275,000 $275,000 $275,000
Capitalized lease obligations.............. 2,021 2,021 2,021
% Senior Subordinated Notes............... -- -- 150,000
-------- -------- --------
Total long-term debt..................... 277,021 277,021 427,021
Shareholders' equity(3)
Common Stock, par value $1.00; 50,000,000
share authorized; 15,794,578 shares
issued; 18,794,578 shares issued as
adjusted; 18,794,578 shares issued as
further adjusted.......................... 15,795 18,795 18,795
Additional paid-in capital................. 71,437 117,606 117,606
Retained earnings.......................... 57,693 57,693 57,693
Cost of Common Stock in treasury; 809,383
shares.................................... (6,328) (6,328) (6,328)
Unearned compensation for restricted stock. (36) (36) (36)
-------- -------- --------
Total shareholders' equity............... 138,561 187,730 187,730
-------- -------- --------
Total capitalization.................... $415,582 $464,751 $614,751
======== ======== ========
</TABLE>
- ---------------------

(1) Adjusted to give effect to the Common Stock Offering at an assumed offering
price of $17 3/8 per share, the last reported sale price of the Common
Stock on the NYSE on July 6, 1994. The Company and the Selling Shareholder
have granted the Underwriters a 30-day option to purchase up to an
additional 450,000 and 15,000 shares of Common Stock, respectively, to
cover over-allotments, if any, in connection with the Common Stock
Offering. In the event that such option is exercised in full, cash, total
shareholders' equity and total capitalization would each increase by $7.4
million, and Common Stock and additional paid-in capital would increase by
$450,000 and $7.0 million, respectively.
(2) Adjusted to give effect to the Common Stock Offering and the Note Offering.

(3) Excludes (a) 671,120 shares of Common Stock issuable upon exercise of
vested options which have not yet been exercised and (b) 150,000 shares of
Common Stock issuable upon exercise of outstanding warrants granted as of
May 6, 1994.

22
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's common stock has been listed on the NYSE since May 30, 1984
under the symbol "SBO." The range of high and low sales prices per share as
reported on the NYSE Composite Tape, and the dividends declared by the Company,
for each quarter in 1992, 1993 and 1994 are as follows:

<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW DECLARED
------- ------ ---------
<S> <C> <C> <C>
Fiscal 1992 Quarter Ended:
March 31, 1992....................................... $14 7/8 $8 7/8 $0.025
June 30, 1992........................................ 14 5/8 11 3/4 0.025
September 30, 1992................................... 13 1/2 9 3/4 0.025
December 31, 1992.................................... 18 1/4 11 1/4 0.025
Fiscal 1993 Quarter Ended:
March 31, 1993....................................... 24 5/8 15 3/8 0.025
June 30, 1993........................................ 24 3/8 17 5/8 0.025
September 30, 1993................................... 21 1/2 15 3/8 0.025
December 31, 1993.................................... 23 3/8 15 5/8 0.025
Fiscal 1994 Quarter Ended:
March 31, 1994....................................... 21 16 1/4 0.025
June 30, 1994........................................ 22 7/8 15 3/8 0.025
September 30, 1994 (through July 6, 1994)............ 17 3/8 17 1/4
</TABLE>

On July 6, 1994, the last reported sale price of the Common Stock on the NYSE
Composite Tape was $17 3/8. On May 25, 1994, the Company's Board of Directors
declared a dividend of $0.025 per share to shareholders of record on June 15,
1994, which will be paid on July 8, 1994.

The Company has paid quarterly dividends since 1970. The declaration and
payment of dividends are at the discretion of the Board of Directors. The Board
of Directors considers, among other factors, the Company's earnings, financial
condition and capital spending requirements in determining an appropriate
dividend. For information concerning certain restrictions on the payment of
dividends and restrictions on the Company's subsidiaries to make distributions
to the Company, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

23
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below under the captions
"Statement of Operations Data" and "Balance Sheet Data" for, and as of the end
of, each of the years in the five-year period ended December 31, 1993 are
derived from the consolidated financial statements of Showboat, Inc. and
subsidiaries, which consolidated financial statements have been audited by
KPMG Peat Marwick, independent certified public accountants. The selected data
presented for the three months ended March 31, 1993 and 1994 are derived from
unaudited financial statements of the Company which, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the information set forth therein.
The consolidated financial statements referred to above are included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net revenues........... $342,354 $334,247 $331,560 $355,236 $375,727 $ 85,496 $ 88,779
Total expenses......... 311,247 306,482 296,059 308,728 329,458 77,811 80,931
-------- -------- -------- -------- -------- -------- --------
Income from operations
of consolidated
subsidiaries.......... 31,107 27,765 35,501 46,508 46,269 7,685 7,848
Equity in (loss) from
unconsolidated
affiliate............. -- -- -- -- (850) -- 3,240
-------- -------- -------- -------- -------- -------- --------
Income from operations. 31,107 27,765 35,501 46,508 45,419 7,685 11,088
Interest expense,
net(1)................ 24,870 25,236 25,399 23,894 21,481 4,499 5,399
Gain on sale of
property.............. (4,897) -- -- -- -- -- --
Income tax expense..... 4,068 1,448 4,088 6,757 10,474 1,265 2,249
-------- -------- -------- -------- -------- -------- --------
Income before
extraordinary items
and cumulative effect
adjustment............ 7,066 1,081 6,014 15,857 13,464 1,921 3,440
Extraordinary items and
cumulative effect
adjustment............ -- 3,970 180 (3,408) (6,123) 556 --
-------- -------- -------- -------- -------- -------- --------
Net income............. 7,066 5,051 6,194 12,449 7,341 2,477 3,440
Income before
extraordinary items
and cumulative effect
adjustment per share.. 0.62 0.10 0.53 1.37 0.89 0.13 0.23
Net income per share... 0.62 0.45 0.55 1.08 0.49 0.16 0.23
Cash dividends declared
per share............. 0.235 0.10 0.10 0.10 0.10 0.025 0.025
OTHER DATA:
EBITDA(2).............. $ 50,696 $ 50,138 $ 61,193 $ 68,520 $ 69,572 $ 12,825 $ 15,109
Depreciation and
amortization.......... 19,589 22,373 25,692 22,012 23,303 5,140 6,361
Capital expenditures... 20,497 44,020 13,203 23,092 63,600 17,769 20,488
PRO FORMA DATA(3):
Interest expense, net.. $ 32,982 $ 8,030 $ 7,954
Income before
extraordinary items
and cumulative effect
adjustment............ 6,995 (208) 1,895
Income before
extraordinary items
and cumulative effect
adjustment per share.. 0.39 (0.01) 0.10
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents........... $ 46,277 $ 37,550 $ 38,690 $ 99,601 $122,787 $ 34,767 $107,458
Total assets........... 322,808 331,950 320,032 384,900 470,700 333,576 482,475
Long-term debt
(including current
maturities)........... 225,812 231,591 213,004 209,116 280,617 158,036 279,570
Shareholders' equity... 55,663 58,848 64,133 126,018 135,158 128,375 138,561
</TABLE>
- -------------------
(1) Interest expense, net of capitalized interest and interest income.

(2) EBITDA is defined as income from operations of consolidated subsidiaries
before depreciation and amortization plus cash distributions from
unconsolidated subsidiaries. Cash distributions from unconsolidated
subsidiaries were $0 from 1989 through 1993 and were $0.9 million in the
three months ended March 31, 1994.

(3) The pro forma data give effect to (i) the Common Stock Offering at an
assumed offering price of $17 3/8 per share, the last reported sale price
of the Common Stock on the NYSE on July 6, 1994, (ii) the Note Offering at
an assumed interest rate of 11%, and (iii) the sale by the Company on May
18, 1993 of $275 million aggregate principal amount of 9 1/4% First
Mortgage Bonds due 2008 and the application of the net proceeds therefrom
to repay certain indebtedness, in each case as if such transaction had
occurred as of the first day of the period presented. The pro forma data
assume that interest income is earned on cash balances at a rate of 3.0%
in 1993 and 3.5% in 1994. If the Note Offering is not consummated, the pro
forma data would be as follows:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------ -------------------
1993 1993 1994
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
PRO FORMA DATA:
Interest expense, net.................. $20,316 $ 4,863 $ 4,969
Income before extraordinary items and
cumulative effect adjustment.......... 14,119 1,701 3,700
Income before extraordinary items and
cumulative effect adjustment per
share................................. 0.78 0.09 0.20
</TABLE>

24
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

GENERAL

The consolidated financial statements of the Company include the accounts of
the Company and its wholly owned subsidiaries, Showboat Development Company
("SDC"), Showboat Operating Company ("SBOC") and Ocean Showboat, Inc. ("OSI").
They also include SDC's wholly owned subsidiaries LPSI, Showboat Mohawk, Inc.
("SBM"), Showboat Indiana, Inc. ("SBI") and Showboat Louisiana, Inc. ("SBL")
and OSI's wholly owned subsidiaries, Atlantic City Showboat, Inc, ("ACSI") and
Ocean Showboat Finance Corporation ("OSFC"). The Company and its subsidiaries
operate the Atlantic City Showboat, the Las Vegas Showboat and the Showboat
Star Casino.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1994 Compared to Three Months Ended March 31,
1993

REVENUES

Net revenues for the Company increased to $88.8 million in the quarter ended
March 31, 1994 compared to $85.5 million in the same period in 1993, an
increase of $3.3 million or 3.8%. Casino revenues increased $1.6 million or
2.2% to $76.9 million in the quarter ended March 31, 1994 from $75.3 million in
1993. Nongaming revenues, which consist principally of food, beverage, room and
bowling revenues and management fees, were $18.9 million in the first quarter
of 1994, compared to $17.3 million in 1993, an increase of 9.1%.

The Atlantic City Showboat generated $66.3 million of net revenues in the
quarter ended March 31, 1994 compared to $64.8 million in the same period in
the prior year, an increase of $1.5 million or 2.3%. Casino revenues were $60.5
million in the three months ended March 31, 1994 compared to $59.7 million for
the same period in the prior year, an increase of $.8 million or 1.4%. The
increase in casino revenues was due primarily to poker revenue of $.7 million
and simulcasting revenue of $.5 million recognized for the three months ended
March 31, 1994. The poker and simulcasting facilities were not open in the same
period in the prior year. This increase was offset by a $.6 million or 1.3%
decrease in slot revenues to $44.1 million for the three months ended March 31,
1994 compared to $44.7 million for the same period in the prior year. During
the first quarter of 1993, slot revenues included the effect of a $.8 million
reversal for a progressive slot accrual. The decrease in slot revenue was also
affected by the harsh winter weather experienced during the first quarter of
1994. The inclement weather was a factor in the results for the total Atlantic
City market as gross slot revenues declined 3.7% in that market.

At the Las Vegas Showboat, net revenues increased to $21.6 million in the
quarter ended March 31, 1994 from $20.7 million in the same period in 1993, an
increase of $.9 million or 4.2%. The greatest improvement in revenues was
realized in the casino where revenues increased to $16.4 million in the first
quarter of 1994 from $15.6 million in the first quarter of 1993, an increase of
$.8 million or 5.1%. This is consistent with the increased customer volume as a
result of certain marketing activities. Slot revenues accounted for 81.7% of
casino revenues in the first three months of 1994 and 83.3% for the same period
in 1993. Improvements in nongaming revenues were due to increased hotel
occupancy resulting from increased effectiveness of certain marketing
activities.

LPSI generated $.9 million in management fee revenues in the first quarter of
1994. LPSI receives management fees of 5.0% of Showboat Star Casino's net
gaming revenues after gaming taxes of 18.5% and boarding fees totalling $5.00
per passenger boarding the vessel. The Showboat Star Casino, which began
operations in November 1993, generated net revenues of $27.5 million in the
first quarter of 1994 consisting primarily of casino revenues of $27.1 million.
During the first quarter of 1994 the total number of passengers boarding the
vessel was 485,726 with an average gaming win per passenger of $56.00.

25
<PAGE>

INCOME FROM OPERATIONS

The Company's income from operations increased to $11.1 million in the
quarter ended March 31, 1994 from $7.7 million in the same period in 1993, an
increase of $3.4 million or 44.3% primarily as a result of improved operating
results at the Atlantic City Showboat and the opening of the Showboat Star
Casino in November 1993.

The Company incurred approximately $2.3 million in expenses relating to the
pursuit of expansion opportunities in jurisdictions outside of Nevada and New
Jersey in the first three months of 1994 compared to $.5 million in the first
quarter of 1993.

Atlantic City Showboat's income from operations, before management fees,
increased to $7.0 million in the first quarter of 1994 compared to $5.6 million
for the same period in 1993, an increase of $1.4 million or 25.3%, primarily as
a result of the increase in net revenues. Total operating expenses at the
Atlantic City Showboat remained unchanged from the prior year at $59.2 million.
Increased depreciation expense resulting from recent facility expansion was
offset by a $1.1 million or a 15.2% decrease in promotional coin incentives
offered in conjunction with slot marketing programs and by a $1.2 million or
10.5% decrease in general and administrative costs.

Income from operations at the Las Vegas Showboat, which includes parent
company expenses, declined to $2.4 million in the first quarter of 1994 from
$2.6 million in the quarter ended March 31, 1993, a decrease of $.2 million or
9.5%. This decrease is primarily due to increased parent company expenses,
increased food costs and increases in payroll and benefits due to the increased
customer volume.

Until March 1, 1994 SBL owned 30% of Showboat Star Partnership. On March 1,
1994 SBL acquired an additional 20% equity interest in Showboat Star
Partnership giving SBL a total equity interest of 50%. SBL's equity in the
earnings of Showboat Star Partnership for the quarter ending March 31, 1994 was
$3.2 million. Showboat Star Partnership had net income of $9.1 million on net
revenues of $27.5 million. Showboat Star Partnership paid a management fee of
$.9 million to LPSI and distributed $.9 million to SBL as partner distributions
during the first quarter of 1994.

LPSI, which manages Showboat Star Partnership, had income from operations for
the quarter ended March 31, 1994 of $.8 million. Operating expenses for LPSI
for the first quarter of 1994 were $.1 million.

OTHER (INCOME) EXPENSE

Net interest expense increased to $5.4 million in the first quarter of 1994
up from $4.5 million in the same period in 1993, an increase of $.9 million or
20.0%. This increase is primarily the result of an increase in interest expense
of $1.5 million as a result of an increase in long-term debt. The increase in
interest expense was offset by a $.4 million increase in interest income as a
result of increased invested cash and a $.3 million increase in capitalized
interest costs associated with the Company's Atlantic City Showboat expansion.

INCOME TAXES

During the first quarter of 1994, the Company incurred income tax expense of
$2.2 million, or an effective tax rate of approximately 40%, compared to $1.3
million, or an effective tax rate of approximately 40% in the same period in
1993. Differences between the Company's effective tax rate and statutory
federal tax rates are due to permanent differences between financial and tax
reporting which consisted principally of the estimated tax reporting impact of
the financial reporting provision for loss on Casino Reinvestment Development
Authority obligations and disallowance of certain employee needs.

NET INCOME

The Company recognized net income of $3.4 million for the quarter ended March
31, 1994 or $.23 per share, compared to a net income before the cumulative
effect of the change in method of accounting for

26
<PAGE>

income taxes of $1.9 million or $.13 per share in the quarter ended March 31,
1993. Net income for the quarter ended March 31, 1993 was $2.5 million or $.16
per share.

Year Ended December 31, 1993 (1993) Compared to Year Ended December 31, 1992
(1992)

REVENUES

Net revenues for the Company increased to $375.7 million in 1993 from $355.2
million in 1992, an increase of $20.5 million or 5.8%. Casino revenues
increased $16.3 million or 5.2% to $329.5 million in 1993 from $313.2 million
in 1992. Nongaming revenues, which consist principally of food, beverage, room
and bowling revenues and management fees, were $78.3 million in 1993 compared
to $71.2 million in 1992, an increase of $7.1 million or 10.0%.

The Atlantic City Showboat generated $294.2 million of net revenues in 1993
compared to $277.3 million in 1992, an increase of $16.9 million or 6.1%.
Casino revenues were $268.8 million in 1993 compared to $254.7 million in 1992,
an increase of $14.1 million or 5.5%. The increase in casino revenues was due
to an increase in slot machine revenues of $14.7 million or 8.0% to $196.8
million in 1993 from $182.1 million in 1992. This compares to 4.8% growth in
slot machine revenues in the Atlantic City market in 1993 compared to 1992. The
improved slot revenue growth experienced by the Atlantic City Showboat is
attributed to an increase in slot units throughout the year to approximately
2,410 slot units at the end of 1993, up from approximately 2,070 slot units at
the end of 1992, an increase of 340 slot units or a weighted average rate of
9.9%. The increase in slot machine revenues was partially offset by the $4.0
million or 5.5% decrease in table games revenues which resulted primarily from
the 3.2% decline in table games revenues in the Atlantic City market during
1993 compared to 1992. Casino revenues were positively impacted by the addition
of simulcasting and poker as part of the opening of Jake's Betting Parlor in
the second quarter of 1993. These games contributed $2.2 million and $1.1
million, respectively, during the year ended December 31, 1993. Nongaming
revenues increased $5.6 million or 12.0% in 1993 to $52.7 million from $47.1
million in 1992. This increase was attributed to promotional programs offering
casino customers rooms, food and beverage at a reduced price as well as
increases in complimentary services.

At the Las Vegas Showboat, net revenues increased to $81.1 million in 1993
from $77.9 million in 1992, an increase of $3.2 million or 4.1%. Casino
revenues increased $2.2 million or 3.8% in 1993 to $60.7 million from $58.5
million in 1992. Slot machine revenues showed the greatest improvement in
casino revenues with an increase of $1.6 million or 3.4%. Slot machine revenues
accounted for 84.2% of casino revenues in 1993 and 84.5% of casino revenues in
1992. Increases in gaming revenues were primarily the result of higher patron
volume due to promotions and increased advertising. Nongaming revenues
increased $1.0 million or 4.3% in 1993 to $25.1 million from $24.1 million in
1992. These increases were principally in rooms and food and beverage resulting
from targeted marketing programs for rooms and promotional programs offering
food at a reduced price.

LPSI generated $.4 million in management fee revenues in 1993. LPSI receives
management fees of 5.0% of the Showboat Star Casino's net gaming revenues after
gaming taxes of 18.5% and boarding fees totalling $5.00 per passenger boarding
the vessel. The Showboat Star Casino opened November 8, 1993 and generated net
revenues of $12.0 million in 1993 consisting primarily of casino revenues of
$10.9 million.

INCOME FROM OPERATIONS

The Company's income from operations decreased to $45.4 million in 1993 from
$46.5 million in 1992, a decrease of $1.1 million or 2.3%.

The Company incurred approximately $3.8 million in expenses relating to the
pursuit of expansion opportunities in jurisdictions outside of Nevada and New
Jersey in 1993 compared to $.9 million in 1992.

Income from operations at the Atlantic City Showboat, before management fees,
was $44.0 million in 1993 compared to $39.6 million in 1992, an increase of
$4.4 million or 11.1%. The increase in income from

27
<PAGE>

operations was primarily due to increased revenues which were offset by a $12.5
million or 5.3% increase in operating expenses, before management fees, to
$250.3 million in 1993 compared to $237.7 million in 1992. The increase in
operating expenses was primarily due to the increased capacity and volume of
business. General and administrative expenses increased due to increases in
utilities and maintenance costs resulting from the expanded facility. General
and administrative expenses were also impacted by an $.8 million or 13.2%
increase in real estate taxes and an $.8 million parking assessment absorbed by
Atlantic City Showboat. In addition, depreciation expense increased $1.3
million or 7.4% in 1993 as a result of the expansion at the Atlantic City
Showboat.

Income from operations at the Las Vegas Showboat declined $1.3 million or
16.6% in 1993 to $6.5 million from $7.8 million in 1992. The decrease was
primarily due to a $4.5 million or 6.4% increase in operating expenses to $74.6
million in 1993 from $70.1 million in 1992. Increased operating expenses
resulted primarily from increases in payroll and payroll related expenses,
increased advertising and repairs and maintenance expenses.

LPSI incurred a loss from operations of $.4 million which was primarily the
result of administrative expenses incurred before the November 8, 1993 opening
of the Showboat Star Casino.

The loss from operations of SBL of $.9 million represents SBL's 30% share of
the net loss of SBL's unconsolidated affiliate, Showboat Star Partnership.
Showboat Star Partnership had a net loss of $2.8 million resulting primarily
from preopening costs of Showboat Star Casino of $4.2 million in 1993, of which
the SBL's share was $1.3 million. Before the write-off of preopening costs,
Showboat Star Partnership's income was $1.4 million of which SBL's share was
$.4 million.

OTHER (INCOME) EXPENSE

Other (income) expense consisted of $24.7 million interest expense, net of
$1.1 million of capitalized interest, and $3.2 million of interest income in
1993 compared to interest expense of $25.3 million and interest income of $1.4
million in 1992. Two offsetting factors impacted 1993 interest expense. In
January 1993, the Company repurchased all of its 13% Debentures and prepaid its
construction and term loan that had an outstanding balance of $17.2 million. In
June 1993, the Company repurchased all of its 11 3/8% Mortgage-Backed Bonds due
2002 (the "11 3/8% Bonds"). This resulted in a $14.4 million decrease in
interest expense. This decrease was offset by the issuance in May 1993 of
$275.0 million of 9 1/4% First Mortgage Bonds due 2008 (the "First Mortgage
Bonds") resulting in a $15.8 million increase in interest expense. In
connection with its expansion project at the Atlantic City Showboat, the
Company capitalized $1.1 million of interest costs.

INCOME TAXES

In 1993, the Company incurred, before the income tax benefit on an
extraordinary loss, income taxes of $10.5 million, or an effective rate of
43.8%, compared to $6.8 million, or an effective rate of 29.9% in 1992.
Differences between the Company's effective tax rate and statutory federal tax
rates are due to permanent differences between financial and tax reporting. In
1993, these differences consisted principally of $.9 million in state income
taxes resulting from the utilization, for financial reporting purposes, of New
Jersey net operating loss carryforwards, a $.6 million restricted interest
assessment, net of tax, resulting from an Internal Revenue Service audit of
prior years and $.4 million resulting from the increase in federal tax rates.

In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income
Taxes." The Company adopted the provisions of FAS 109 effective January 1, 1993
without restating prior years' financial statements. The adoption of FAS 109
resulted in a reduction of net deferred tax liability of $.6 million and this
amount was reported separately as a cumulative effect of the change in the
method of accounting for income taxes in the 1993 Consolidated Statement of
Income.

28
<PAGE>

NET INCOME

In 1993, the Company realized income before an extraordinary loss on the
extinguishment of debt and the cumulative effect of the change in the method of
accounting for income taxes of $23.9 million or $.89 per share. On June 18,
1993, the Company redeemed all of the outstanding 11 3/8% Bonds at 105.7% of
the principal amount plus accrued and unpaid interest up to and including the
redemption date. The Company recognized an extraordinary loss, before an income
tax benefit, of $11.2 million as a result of the write-off of unamortized debt
issue costs of $2.7 million and payment of a 5.7% redemption premium of $8.5
million. The after tax loss was $6.7 million or $.44 per share. The Company
also recognized a cumulative effect adjustment for the change in the method of
accounting for income taxes of $.6 million or $.04 per share. Net income for
1993 was $7.3 million or $.49 per share.

In 1992, the Company realized income before an extraordinary loss on the
extinguishment of debt of $15.9 million or $1.37 per share. As a result of the
repurchase of the Company's outstanding 13% Debentures, the Company recognized
an extraordinary loss, net of tax, of $3.4 million or $.29 per share. This loss
resulted from the write-off of original issue discount and issuance costs
associated with the 13% Debentures. Net income for 1992 was $12.4 million or
$1.08 per share.

Year Ended December 31, 1992 (1992) Compared to Year Ended December 31, 1991
(1991)

REVENUES

Net revenues for the Company increased to $355.2 million in 1992 from $331.6
million in 1991, an increase of $23.6 million or 7.1%. Casino revenues
increased $24.8 million or 8.6% to $313.2 million in 1992 from $288.4 million
in 1991. Nongaming revenues were $71.2 million in 1992 compared to $71.7
million in 1991, a decrease of $.5 million or .7%.

The Atlantic City Showboat generated $277.3 million of net revenues in 1992
compared to $260.8 million in 1991, an increase of $16.5 million or 6.3%.
Casino revenues were $254.7 million in 1992 compared to $237.2 million in 1991,
an increase of $17.5 million or 7.4%. The increase in casino revenues was due
primarily to an increase in slot machine revenues of $20.4 million or 12.6% to
$182.1 million in 1992 from $161.7 million in 1991. This compares to a 14.2%
growth in slot machine revenues in the Atlantic City market in 1992 compared to
1991. Slot machine revenues were also favorably impacted by a one-time reversal
of a $1.2 million slot progressive jackpot accrual. Slot machine revenues at
the Atlantic City Showboat accounted for 71.5% of casino revenues in 1992 and
68.2% of casino revenues in 1991. The increase in slot machine revenues was
partially offset by the $2.9 million or 3.8% decrease in table games revenues
to $72.6 million in 1992 from $75.5 million in 1991. The decrease in table
games revenues resulted primarily from the Company decreasing the number of
table games units by 24 tables in the third quarter of 1991 and by the 3.4%
decline in table games revenues in the Atlantic City market during 1992
compared to 1991. Nongaming revenues declined $1.0 million or 2.2% in 1992 to
$47.1 million from $48.1 million in 1991. This decrease was primarily
attributed to a $3.1 million or 9.4% decline in food and beverage revenues
associated with a reduction in promotional offers. The reduction in food and
beverage revenues were partially offset by a $1.3 million or 12.8% increase in
room revenues due to more effective room utilization and a $.9 million or 77.2%
increase in entertainment revenues.

At the Las Vegas Showboat, net revenues increased to $77.9 million in 1992
from $70.8 million in 1991, an increase of $7.1 million or 10.1%. Casino
revenues increased $7.3 million or 14.3% in 1992 to $58.5 million from $51.2
million in 1991. The most significant improvement in casino revenues occurred
in slot machine revenues which increased $5.7 million or 13.1% in 1992. Casino
revenues were also favorably impacted by a $1.1 million or 49.9% reduction in
bingo losses in 1992. Slot machine revenues continued to dominate casino
revenues at 84.5% of casino revenues in 1992 and 85.3% of casino revenues in
1991. Increases in casino revenues were due to an overall increase in the
volume of business, principally as a result of the continuation of certain
targeted marketing activities. Nongaming revenues increased $.5 million or 2.0%
in 1992 to $24.1 million from $23.6 million in 1991. Increases in food and
beverage revenues of $.9

29
<PAGE>

million or 6.5% and hotel revenues of $.3 million or 6.3% were offset by a
reduction of $.7 million in other revenues as a result of the recognition in
1991 of a one-time benefit of $.8 million from the reversal of an accrual.

INCOME FROM OPERATIONS

The Company's income from operations increased to $46.5 million in 1992 from
$35.5 million in 1991, an increase of $11.0 million or 31.0%.

Income from operations at the Atlantic City Showboat was $39.6 million in
1992 compared to $31.2 million in 1991, an increase of $8.4 million or 26.9%.
This increase was primarily due to improved casino revenues caused by the 14.2%
slot machine revenue growth experienced in the Atlantic City market in 1992.
Operating expenses increased $8.1 million or 3.5% to $237.7 million in 1992
compared to $229.6 million in 1991. The increase in operating expenses was
comprised of a $5.6 million or 28.9% increase in promotional coin incentives
offered in conjunction with slot marketing programs and a 6.8% increase in
general and administrative costs consisting primarily of a $3.0 million
increase in payroll and benefits. Increases in operating expenses were offset
by a $3.3 million or 16.0% decrease in depreciation and amortization expense to
$17.5 million in 1992 from $20.8 million in 1991. Improvements in income from
operations, excluding that realized from the reduction in depreciation and
amortization expense, occurred principally in the quarter ended March 31, 1992.

At the Las Vegas Showboat, income from operations, increased to $7.8 million
in 1992 from $4.3 million in 1991, an increase of $3.5 million or 81.4%. The
improvement in operating results reflected the continued implementation of cost
effective marketing programs which resulted in increased revenues of $7.2
million offset by a $3.7 million or 5.6% increase in operating expenses in 1992
to $70.1 million from $66.4 million in 1991. In general, increases in operating
expenses were consistent with increases in business volume.

Income from operations in 1992 was adversely impacted by $.9 million of
expenses incurred by the Company in conjunction with the investigation of new
gaming opportunities outside of Nevada and New Jersey.

OTHER (INCOME) EXPENSE

In 1992, other (income) expense consisted of $25.3 million of interest
expense and $1.4 million of interest income compared to $27.5 million and $2.1
million, respectively, in 1991. Reductions in interest expense of $1.4 million
were realized as a result of the fourth quarter 1991 repurchase of $12.1
million of the 11 3/8% Bonds. Other reductions in interest expense were
primarily a result of reduced principal balances due to scheduled principal
amortization.

INCOME TAXES

In 1992, the Company incurred income tax expense, before income tax benefit
on an extraordinary loss, of $6.8 million, or an effective tax rate of 29.9%,
compared to $4.1 million, or an effective tax rate of 40.5%, in 1991.
Differences between the Company's effective tax rate and statutory federal tax
rates are due to permanent differences between financial and tax reporting
which consisted principally of the estimated tax reporting impact of the
financial reporting provision for loss on Casino Reinvestment Development
Authority obligations and disallowance of certain employee meals.

NET INCOME

In 1992, the Company realized income before an extraordinary loss on the
extinguishment of debt of $15.9 million or $1.37 per share. The Company
recognized an extraordinary loss, net of tax, of $3.4 million or $.29 per share
as a result of the write-off of original issue discount and issuance costs
associated with the redemption of the Debentures. Net income for 1992 was $12.4
million or $1.08 per share.

30
<PAGE>

In 1991, the Company realized income before an extraordinary gain on the
extinguishment of debt of $6.0 million or $.53 per share. In 1991, the Company
purchased $12.1 million face value of the 11 3/8% Bonds and realized an
extraordinary gain, net of tax, of $.2 million or $.02 per share. Net income
for 1991 was $6.2 million or $.55 per share.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1994, the Company held cash and cash equivalents of $107.5
million compared to $122.8 million at December 31, 1993. On March 1, 1994 the
Company purchased from a partner an additional 20% equity interest in Showboat
Star Partnership for $9.0 million. The Company has expended approximately $2.3
million in the quarter ended March 31, 1994 in its investigation of expansion
opportunities in new jurisdictions.

During the quarter ended March 31, 1994 and the year ended December 31, 1993,
the Company expended approximately $19.7 million and $59.7 million,
respectively, on capital improvements at its Las Vegas and Atlantic City
facilities which were funded from operations. Costs associated with the
expansion project in Atlantic City were $15.2 million during the quarter ended
March 31, 1994. Capital expenditures relating to the expansion project in
Atlantic City are expected to be $36.2 million for the remainder of 1994 and
$2.3 million in 1995.

The Company has announced expansion opportunities, including foreign gaming
opportunities and renovation and expansion of the Las Vegas Showboat, which
will require additional expenditures of approximately $230 million. See
"Company--Expansion Opportunities." Concurrent with the Common Stock Offering,
the Company is offering $150 million aggregate principal amount of Notes in the
Note Offering. The Company believes that the proceeds from the Common Stock
Offering, the Note Offering and working capital from operations will be
sufficient to fund currently announced expansion opportunities, subject to
additional funding being provided from other entities for the development of
the Sydney Harbour Casino. The closing of the Common Stock Offering is not
contingent on the closing of the Note Offering. There can be no assurance that
funds will be available on acceptable terms to the Company to finance the
development of all announced or other gaming opportunities if the Note Offering
is not consummated.

The Company believes that is has sufficient capital resources to cover the
cash requirements of its existing operations. The ability of the Company to
satisfy its cash requirements, however, will be dependent upon the future
performance of its casino hotels which will continue to be influenced by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond the control of the Company.

CERTAIN INDEBTEDNESS

Lines of Credit

At March 31, 1994, ACSI had available an unsecured line of credit for general
working capital purposes totaling $15.0 million. Interest is payable monthly at
the bank's prime rate plus .5%. The bank's prime rate at March 31, 1994 was
6.75%. The line of credit is guaranteed by OSI and expires in August 1994.
Borrowings on this line of credit may not be used for the payment of management
fees or to fund ventures in other jurisdictions. At March 31, 1994, ACSI had
all the funds under this line of credit available for use.

On March 24, 1994, the Company secured a line of credit for A$8.4 million
($6.1 million) in compliance with NSWCCA's licensing requirements. This line of
credit is secured by a $6.3 million certificate of deposit. Interest on this
line of credit is payable at the bank's prime rate plus 2.0%. This line of
credit expires in December 1994. At March 31, 1994, all funds were available
under this line of credit.

31
<PAGE>

First Mortgage Bonds

On May 18, 1993, the Company issued $275 million aggregate principal amount
of 9 1/4% First Mortgage Bonds. The proceeds from the sale of the First
Mortgage Bonds were $268,468,750, net of underwriting discounts and
commissions. Proceeds from the sale of the First Mortgage Bonds were used to
redeem all of the outstanding 11 3/8% Bonds at 105.7% of the principal amount
plus accrued interest.

The First Mortgage Bonds are unconditionally guarantied by OSI, ACSI and
SBOC. Interest on the First Mortgage Bonds is payable semi-annually on May 1
and November 1 of each year commencing November 1, 1993. The First Mortgage
Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage
Bonds will be redeemable, in whole or in part, at redemption prices specified
in the Indenture for the First Mortgage Bonds (the "Bond Indenture"). The First
Mortgage Bonds are senior secured obligations of the Company and rank senior in
right of payment to all existing and future subordinated indebtedness of the
Company including the Notes, and pari passu with the Company's senior
indebtedness. The First Mortgage Bonds are secured by a deed of trust
representing a first lien on the Las Vegas Showboat (other than certain
assets), by a pledge of all outstanding shares of capital stock of OSI, an
intercompany note by ACSI in favor of the Company and a pledge of certain
intellectual property rights of the Company. OSI's obligation under its
guaranty is secured by a pledge of all outstanding shares of capital stock of
ACSI. ACSI's obligation under its guaranty is secured by a leasehold mortgage
representing a first lien on the Atlantic City Showboat (other than certain
assets). SBOC's guaranty is secured by a pledge of certain assets related to
the Las Vegas hotel casino.

The Bond Indenture places significant restrictions on the Company and its
subsidiaries, including restrictions on making loans and advances by the
Company to subsidiaries in which the Company owns less than 50% of the equity
of such subsidiary.

Notes

Upon consummation of the Note Offering, the Company will issue the Notes
pursuant to an indenture (the "Note Indenture"), which will contain covenants
restricting or limiting the ability of the Company to, among other things, pay
dividends or make other restricted payments, incur additional indebtedness and
issue preferred stock, create liens, create dividend and other payment
restrictions affecting subsidiaries, enter into mergers, consolidations or
sales of substantially all of the Company's assets, enter into transactions
with affiliates and engage in non-gaming lines of business. The Notes will bear
interest at a rate of % per annum and will mature on , 2009. The
Notes will be general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt (as defined) of the
Company. SBOC, OSI and ACSI will guaranty the Company's obligations under the
Notes and the Note Indenture on a senior subordinated basis. Reference is made
to the form of the Note Indenture, which has been filed as an exhibit to the
registration statement of which this Prospectus is a part, for the complete
terms relating to the Notes.

32
<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The table below sets forth certain information regarding beneficial
ownership of the Common Stock as of June 30, 1994 (except where noted), by
each director of the Company (including the Selling Shareholder), each
beneficial owner of, or institutional investment manager exercising investment
discretion with respect to, 5% or more of the outstanding Common Stock, and
all directors and officers as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES SHARES BENEFICIALLY
COMMON TO OWNED AFTER COMMON
STOCK OFFERING BE SOLD STOCK OFFERING(1)
------------------------ ------- -------------------------
NAME
---- NUMBER(2) PERCENTAGE NUMBER(2) PERCENTAGE
<S> <C> <C> <C> <C> <C>
J.K. Houssels(3)........ 1,209,708(4) 7.9 100,000 1,109,708(4) 6.0
J. Kell Houssels, III... 124,017(5) * -- 124,017(5) *
William C. Richardson... 14,000(6) * -- 14,000(6) *
John D. Gaughan......... 183,824(7) 1.2 -- 183,824(7) 1.0
Jeanne S. Stewart....... 414,686(6) 2.7 -- 414,686(6) 2.3
Frank A. Modica......... 113,169(8) * -- 113,169(8) *
H. Gregory Nasky........ 21,466(9) * -- 21,466(9) *
George A. Zettler....... 10,955(6) * -- 10,955(6) *
Carolyn M. Sparks....... 357,058(10) 2.3 -- 357,058(10) 1.9
FMR Corp................ 1,237,350(11) 8.0 -- 1,237,350(11) 6.7
State of Wisconsin
Investment Board....... 757,000(12) 4.9 -- 757,000(12) 4.1
All Directors and
Executive Officers as a
Group (13 persons)..... 2,557,583(13) 16.4 100,000 2,457,583(13) 13.2
</TABLE>
- ---------------------
* Beneficial ownership does not exceed 1% of outstanding Common Stock.
(1) Assumes that the Underwriters' over-allotment option is not exercised.

(2) Unless otherwise specifically stated herein, each person has sole voting
power and sole investment power as to the identified Common Stock
ownership. The total includes shares subject to currently exercisable
options and options that will become exercisable on or prior to August
29, 1994.
(3) Mr. Houssels may be deemed to be a control person. Mr. Houssels has held
the following positions and offices with the Company within the past
three years: Chairman of the Board of Directors, President and Chief
Executive Officer of the Company; Chairman of the Board of Showboat
Operating Company, Ocean Showboat Inc. and Ocean Showboat Finance
Corporation.
(4) Mr. Houssels' shareholdings include 11,450 shares held in his individual
retirement account, 35,700 shares as a trustee of the J.K. Houssels, Jr.,
1976 Trust Agreement and currently exercisable options to purchase up to
20,000 shares. He disclaims beneficial ownership of 7,800 shares owned by
his wife and such shares are excluded from this table.
(5) Mr. Houssels, III's shares include currently exercisable options to
purchase up to 32,000 shares.
(6) Includes currently exercisable options to purchase up to 9,000 shares.
(7) Mr. Gaughan's shareholdings include 86,000 shares held by Exber, Inc., a
Nevada corporation controlled by Mr. Gaughan and 69,674 shares over which
he shares voting power and investment power with his wife and currently
exercisable options to purchase up to 9,000 shares.
(8) Mr. Modica's shares include currently exercisable options to purchase up
to 32,000 shares.
(9) Mr. Nasky's shareholdings include 1,250 shares owned by Mr. Nasky's wife
over which he does not have voting power or investment power and
currently exercisable options to purchase up to 9,000 shares.
(10) Mrs. Sparks' shareholdings include 227,000 shares beneficially owned by
her as a co-trustee of the Fred L. Morledge Family Trust and 123,058
shares beneficially owned by her as a co-trustee of the Sparks Family
Trust and currently exercisable options to purchase up to 7,000 shares.
(11) FMR Corp. ("FMR"), the parent holding company of Fidelity Management &
Research Company, reported on a Schedule 13G, dated February 11, 1994,
that it has sole investment discretion with respect to all of such shares
and sole voting discretion with respect to 51,706 of such shares. With
respect to such shares, FMR beneficially owns 880,650 shares or 5.9% of
the total outstanding Common Stock at December 31, 1993, on behalf of
Fidelity Magellan Fund, an investment company registered under the
Investment Company Act of 1940. FMR's address is 82 Devonshire Street,
Boston, MA 02109.
(12) State of Wisconsin Investment Board, a Wisconsin state agency, reported
on a Schedule 13G, dated February 8, 1994, that it has sole voting and
investment discretion to all such shares. The Investment Board's address
is P.O. Box 7842, Madison, Wisconsin 53707.
(13) Includes currently exercisable options to purchase up to 134,000 shares.

33
<PAGE>

MANAGEMENT

The following table sets forth information concerning the Company's executive
officers, directors and other key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
J.K. Houssels........................ 71 Chairman of the Board
J. Kell Houssels, III................ 44 Director, President and Chief
Executive Officer
William C. Richardson(2)............. 67 Director
John D. Gaughan(1)................... 73 Director
Jeanne S. Stewart.................... 71 Director
Frank A. Modica...................... 66 Director and Executive Vice President
and Chief Operating Officer
H. Gregory Nasky..................... 52 Director and Secretary
George A. Zettler(1)(2).............. 67 Director
Carolyn Sparks(1).................... 52 Director
G. Clifford Taylor, Jr............... 49 Treasurer and Assistant Secretary
R. Craig Bird........................ 47 Executive Vice President-Finance and
Development
Leann K. Schneider................... 41 Vice President-Finance and Chief
Financial Officer
Mark J. Miller....................... 37 Executive Vice President-Operations
</TABLE>
- ---------------------
(1) Member of Audit Committee of the Board of Directors.
(2) Member of Compensation Committee of the Board of Directors.

J.K. Houssels is the Chairman of the Board of the Company, SBOC, SDC, OSI,
OSFC, SBL, LPSI, SBI, SBM and Showboat Australia. Mr. Houssels was the
President and Chief Executive Officer of the Company until May 25, 1994. Mr.
Houssels is Vice-Chairman of the Board of Directors of Union Plaza Hotel and
Casino, Inc., Las Vegas, Nevada. Until July 25, 1991, he was Director of First
Western Financial Corporation (savings and loan association), Las Vegas,
Nevada.

J. Kell Houssels, III is a Director and the President and Chief Executive
Officer of the Company and SDC, a Director of ACSI, SBOC, OSI, OSFC, SBL, LPSI,
SBI, SBM and Showboat Australia, and the Executive Vice President of OSI. From
January 1, 1990 until May 25, 1994, Mr. Houssels was the Vice President of the
Company. From May 1993 to June 1994, Mr. Houssels was the President and Chief
Executive Officer of ACSI. From January 1990 to May 1993, Mr. Houssels was the
President and Chief Operating Officer of ACSI. From June 1989 until January
1990, Mr. Houssels was the Senior Vice President and Chief Operating Officer of
ACSI. From January 1989 until June 1989, he was the Senior Vice President and
General Manager of ACSI.

William C. Richardson is a Director of the Company and OSI. Mr. Richardson is
an independent financial consultant, Los Angeles, California. Since April 1,
1991, he has been an arbitrator and mediator for the American Arbitration
Association and other self regulatory organizations. Until March 30, 1991, Mr.
Richardson was President, Chief Executive Officer and the Vice Chairman of
Western Capital Financial Group, Los Angeles, California.

John D. Gaughan is a Director of the Company, ACSI, SBOC, SDC, OSI, OSFC,
SBL, LPSI, SBI, SBM and Showboat Australia. Mr. Gaughan is Chairman of the
Board and President of Exber, Inc., doing business as the El Cortez Hotel and
the Western Hotel and Casino, Las Vegas, Nevada. Mr. Gaughan is also the
Chairman of the Board of Union Plaza Hotel and Casino, Inc., Las Vegas, Nevada.

Jeanne S. Stewart is a Director of the Company and OSI. Mrs. Stewart is a
retired attorney, Las Vegas, Nevada.

Frank A. Modica is the Chief Operating Officer, Executive Vice President and
Director of the Company. He is also a Director, President and Chief Executive
Officer of SBOC and OSI. He also serves as a Director and the President of
OSFC, a Director and Vice Chairman of SBL, LPSI, SBI and SBM, a Director of SDC

34
<PAGE>

and Showboat Australia, and the Chairman of the Board of ACSI. Until December
31, 1989, Mr. Modica was the President and Chief Executive Officer of ACSI. Mr.
Modica is a Director of First Security Bank (formerly Continental National
Bank), Las Vegas, Nevada.

H. Gregory Nasky is the Secretary and a Director of the Company and all
subsidiaries. He also serves as Chief Executive Officer and Managing Director
of Showboat Australia and SHCL. Since March 1, 1994, Mr. Nasky has been of
counsel to the law firm of Kummer Kaempfer Bonner & Renshaw, Las Vegas, Nevada,
general counsel to the Company. Until February 28, 1994, Mr. Nasky was a member
of the law firm of Vargas & Bartlett, Las Vegas and Reno, Nevada, former
general counsel to the Company.

George A. Zettler is a Director of the Company and OSI. Since February 1,
1994, Mr. Zettler has been the President of Zimex, Redondo Beach, California.
Until February 1, 1994, he was the President of World Trade Services Group,
Long Beach, California. Prior to January 1, 1991, he was the President of
United Export Trading Company, Los Angeles, California.

Carolyn M. Sparks is a Director of the Company and OSI. Mrs. Sparks is a co-
owner of International Insurance Services, Las Vegas, Nevada. Until January
1991, Mrs. Sparks was the Vice-President, Secretary and Treasurer of
International Insurance Services, Ltd. Until December 31, 1990, she was a
claims administrator for International Insurance Services, Ltd. She is also a
Director of Southwest Gas Corporation, a Director of PriMerit Bank--Federal
Savings Bank and a Regent of the University and Community College System of
Nevada.

G. Clifford Taylor, Jr. has been the Executive Vice President and Chief
Operating Officer of SBOC since December 1, 1988. He has served as the
Assistant Secretary of the Company since May 1990. He has also served as the
Treasurer of the Company and SBOC since February 1981. He served as the
Treasurer of SDC from June 1983 to May 1993. He has been the Treasurer of OSI
since December 1983, ACSI since June 1984 and OSFC since December 1986. He
serves at the pleasure of the respective board of directors.

R. Craig Bird has been the Executive Vice President--Finance and Development
of the Company since June 1994 and the Executive Vice President and Chief
Operating Officer of SDC since October 1993. Mr. Bird was the Vice President--
Financial Administration of the Company from February 1988 to June 1994. Mr.
Bird was the Vice President--Financial Administration of ACSI from March 1990
to October 1993. He serves at the pleasure of the respective boards of
directors.

Leann K. Schneider has been the Vice President--Finance and Chief Financial
Officer of the Company and the Vice President--Finance and Chief Financial
Officer of SBOC since May 1990. Ms. Schneider has also served as the Chief
Financial Officer and Treasurer of SDC since May 1993, the Treasurer of SBL and
SBM since July 1993 and the Treasurer of SBI since September 1993. From
December 1989 until May 1990, she served as the Vice President--Financial
Relations and Chief Financial Officer of the Company. From December 1988 until
December 1989, she served as the Vice President--Financial Relations and Acting
Chief Financial Officer of the Company. She serves at the pleasure of the
respective boards of directors.

Mark J. Miller has served as the Executive Vice President--Operations of the
Company since June 1994, the Vice President--Finance of OSI since April 1988,
the Vice President--Finance and Chief Financial Officer of OSFC since April
1991 and, subject to regulatory approval, will serve as the President and Chief
Executive Officer and cease to serve as the Executive Vice President and Chief
Operating Officer of ACSI. Mr. Miller served as the Vice President--Finance and
Chief Financial Officer of ACSI from December 1988 to October 1993. He serves
at the pleasure of the respective boards of directors.

Subject to the approval of the New Jersey Casino Control Commission, the
following have been appointed as additional officers of the Company:

Donald L. Tatzin, age 42, will become the Executive Vice President of the
Company and has been the Executive Vice President of SDC since April 1993. Mr.
Tatzin has been a consultant with Arthur D. Little, Inc., San Francisco,
California since June 1976.

Paul S. Harris, age 58, will become the Senior Vice President--Human
Resources for the Company and has been Vice President--Organization and
Development of ACSI since July 1988.

35
<PAGE>

REGULATION

The operations of the Company are subject to extensive regulation by the
States of Nevada, New Jersey, Louisiana and local governmental authorities in
Nevada, New Jersey and Louisiana. Such regulations impose restrictions on the
Company's operations in such states, including, among other things,
restrictions on the manner of operation of the casinos, licensing of officers,
directors and certain key employees, and the submission of extensive financial
and operating reports. Although the Company believes that it is in substantial
compliance in all material respects with applicable local, state and federal
laws, rules and regulations, there can be no assurance that more restrictive
laws, rules and regulations will not be adopted in the future which could make
compliance much more difficult or expensive, restrict the Company's ability to
attract investors or lenders, or otherwise adversely affect the business or
prospects of the Company.

The Company may be required to disclose to the Gaming Authorities, upon
request, the identities of the Company's stockholders. The Gaming Authorities
may, in their discretion, (i) require stockholders of the Company to file
applications in states in which the Company does business; (ii) investigate
such stockholders; and (iii) require such stockholders to be found suitable or
qualified to own such securities. Pursuant to the regulations of the Gaming
Authorities, the Company may be sanctioned, including the loss of its
approvals, if, without prior approval of the Gaming Authorities, it (i) pays to
the unsuitable or unqualified person any dividend, interest or other
distribution; (ii) recognizes any voting right by such unsuitable or
unqualified person in connection with the securities; (iii) pays the unsuitable
or unqualified person remuneration in any form; or (iv) makes any payments to
the unsuitable or unqualified person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction.

Pursuant to the regulations of the Nevada Gaming Commission (the "Nevada
Commission") and the Nevada State Gaming Control Board (the "Nevada Board"),
the Company may not make a public offering of its securities, such as the
Common Stock offered hereby, without the prior approval of the Nevada
Commission if the securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to retire or
extend obligations incurred for such purposes. On November 18, 1993, the Nevada
Commission granted the Company prior approval to make public offerings for a
period of one year, subject to certain conditions (the "Shelf Approval"). The
Shelf Approval is for a period of one year and expires on the date of the
November 1994 Nevada Commission meeting. The Shelf Approval may be rescinded
without prior notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board. This Offering is made pursuant to the Shelf
Approval.

If the Company becomes involved in gaming operations in any other
jurisdictions, such gaming operations will subject the Company and certain of
its officers, directors, key employees, stockholders and other affiliates
("Regulated Persons") to strict legal and regulatory requirements, including
mandatory licensing and approval requirements, suitability requirements, and
ongoing regulatory oversight with respect to such gaming operations. Such legal
and regulatory requirements and oversight will be administered and exercised by
the relevant regulatory agency or agencies in each jurisdiction. The Company
and the Regulated Persons will need to satisfy the licensing, approval and
suitability requirements of each jurisdiction in which the Company seeks to
become involved in gaming operations. To date, other than Nevada, New Jersey
and Louisiana, no such gaming licenses, approvals or findings of suitability
have been obtained or, other than in Sydney, Australia, Indiana or the St.
Regis Mohawk Reservation, applied for by the Company.

A more extensive discussion of the Nevada, New Jersey and Louisiana gaming
statutes and regulations, and other statutes and regulations in jurisdictions
to which the Company and its subsidiaries are subject, or may become subject,
is contained in the Company's Annual Report on Form 10-K for the Year Ended
December 31, 1993, which is incorporated herein by reference.

36
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Company, the Selling Shareholder
and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and
Oppenheimer & Co., Inc., as representatives (the "Representatives") of the
underwriters (the "Underwriters"), the Company and the Selling Shareholder
have agreed to sell to the Underwriters, and each of the several Underwriters
have agreed to purchase from the Company and the Selling Shareholder, the
following number of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...................
Oppenheimer & Co., Inc. ..............................................
---------
Total............................................................... 3,100,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of
the Common Stock is purchased by the Underwriters pursuant to the Underwriting
Agreement, all such Common Stock must be so purchased.

The Representatives have advised the Company and the Selling Shareholder
that the Underwriters propose to offer the Common Stock to the public
initially at the price to the public set forth on the cover page of this
Prospectus and to certain dealers (who may include the Underwriters) at such
offering price less a concession not to exceed $ per share. The Underwriters
may allow and such dealers may reallow discounts not in excess of $ per
share to any other Underwriter and certain other dealers. After the initial
public offering, the public offering price and such concessions may be
changed.

The Company and the Selling Shareholder have granted an option to the
Underwriters, exercisable for 30 days from the date of this Prospectus, to
purchase up to 450,000 and 15,000 additional shares of Common Stock,
respectively, on the same terms and conditions as set forth on the cover page
of this Prospectus. The Representatives may exercise such option solely for
the purpose of covering over-allotments, if any, incurred in the sale of the
Common Stock. To the extent that the Representatives exercise such options,
each of the Underwriters will become obligated, subject to certain conditions,
to purchase the same proportion of such additional shares as the number set
forth opposite each such Underwriter's name above bears to 3,100,000.

The Company and certain officers and directors, who beneficially own an
aggregate of 2,393,833 shares of Common Stock, have agreed not to sell, offer
to sell or otherwise dispose of any shares of Common Stock, or any security
convertible into or exercisable or exchangeable for any shares of Common
Stock, for a period of 120 days after the date of this Prospectus without the
prior written consent of DLJ.

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

DLJ will also be the underwriter in connection with the Note Offering. In
addition, DLJ acted as financial advisor to the Company in connection with a
consent solicitation relating to the First Mortgage Bonds, for which it
received customary fees. An affiliate of DLJ has provided a standby bridge
loan commitment to the Company relating to the Company's investment in SHCL,
for which it received customary fees.

37
<PAGE>

LEGAL MATTERS

Certain legal matters with regard to the validity of the Common Stock offered
hereby will be passed upon for the Company by Kummer Kaempfer Bonner & Renshaw,
Las Vegas, Nevada. H. Gregory Nasky, of counsel to the law firm of Kummer
Kaempfer Bonner & Renshaw, is a Director and the Secretary of the Company.
Latham & Watkins, New York, New York, is acting as counsel for the Underwriters
in connection with certain legal matters relating to the Common Stock offered
hereby. From time to time Latham & Watkins has represented certain subsidiaries
of the Company on matters not related to the Common Stock Offering or the Note
Offering.

EXPERTS

The consolidated financial statements and schedules of Showboat, Inc. and its
subsidiaries as of December 31, 1993 and 1992, and for each of the years in the
three-year period ended December 31, 1993, included and incorporated by
reference herein and elsewhere in the Registration Statement, have been
included and incorporated by reference herein and elsewhere in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick, independent
certified public accountants, included and incorporated by reference herein and
elsewhere in the Registration Statement, and upon the authority of said firm as
experts in accounting and auditing.

38
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets at December 31, 1993 and 1992 and March 31,
1994 (unaudited)........................................................ F-3
Consolidated Statements of Income for the Years Ended December 31, 1993,
1992 and 1991 and Three Months Ended March 31, 1994 and 1993 (unau-
dited).................................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended De-
cember 31, 1993, 1992 and 1991 and the Three Months Ended March 31, 1994
(unaudited)............................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1992 and 1991 and the Three Months Ended March 31, 1994 (unau-
dited).................................................................. F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Board of Directors Showboat, Inc.

We have audited the accompanying consolidated balance sheets of Showboat, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Showboat, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles.

As discussed in Notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."

KPMG Peat Marwick

Las Vegas, Nevada February 18, 1994, except for Note 1 paragraph 3 and Note 12
paragraph 2 which are as of March 1, 1994

F-2
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1993 1992 1994
-------- -------- -----------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $122,787 $ 99,601 $107,458
Receivables, net.............................. 5,913 5,092 6,086
Income taxes receivable....................... -- -- 435
Inventories................................... 2,359 2,411 2,213
Prepaid expenses.............................. 4,044 3,969 4,114
Current deferred income taxes................. 4,865 3,483 5,847
-------- -------- --------
Total current assets........................ 139,968 114,556 126,153
-------- -------- --------
Property and equipment:
Land.......................................... 9,425 3,609 9,425
Land improvements............................. 541 841 541
Buildings..................................... 261,009 246,090 261,398
Furniture and equipment....................... 145,178 122,573 146,079
Construction in progress...................... 27,194 7,253 45,274
-------- -------- --------
443,347 380,366 462,717
Less accumulated depreciation and
amortization................................. 145,527 129,183 150,795
-------- -------- --------
297,820 251,183 311,922
-------- -------- --------
Other assets, at cost:
Deposits and other assets..................... 7,892 16,074 8,167
Investment in unconsolidated affiliate........ 17,750 -- 29,090
Debt issuance costs, net of accumulated
amortization of $323,000 at December 31,
1993, $3,131,000 at December 31, 1992 and
$450,000 at March 31, 1994................... 7,270 3,087 7,143
-------- -------- --------
32,912 19,161 44,400
-------- -------- --------
$470,700 $384,900 $482,475
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Current maturities of long-term debt.......... $ 3,574 $ 54,055 $ 2,549
Accounts payable.............................. 14,173 10,096 16,497
Income taxes payable.......................... 1,752 1,453 --
Dividends payable............................. 375 284 375
Accrued liabilities........................... 23,664 25,167 30,787
-------- -------- --------
Total current liabilities................... 43,538 91,055 50,208
-------- -------- --------
Long-term debt................................. 277,043 155,061 277,021
-------- -------- --------
Deferred income taxes.......................... 14,961 12,766 16,685
-------- -------- --------
Commitments and contingencies (Note 12)
Shareholders' equity (Note 14):
Common stock, $1 par value; 20,000,000 shares
authorized; issued 15,794,578 shares at
December 31, 1993, 1992 and March 31, 1994... 15,795 15,795 15,795
Additional paid-in capital.................... 71,162 69,374 71,437
Retained earnings............................. 54,628 48,778 57,693
-------- -------- --------
141,585 133,947 144,925
Less: Cost of common stock in treasury, 814,483
shares and 991,043 shares at December 31, 1993
and 1992, respectively; and 809,383 shares at
March 31, 1994................................ (6,370) (7,761) (6,328)
Unearned compensation for restricted stock.. (57) (168) (36)
-------- -------- --------
Total shareholders' equity.................. 135,158 126,018 138,561
-------- -------- --------
$470,700 $384,900 $482,475
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- ------------------------------
1993 1992 1991 1994 1993
-------- -------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Casino................. $329,522 $313,247 $288,442 $ 76,897 $ 75,272
Food and beverage...... 48,669 44,511 46,802 11,202 10,972
Rooms.................. 19,355 17,280 15,612 4,225 3,834
Sports and special
events................ 4,251 4,443 4,506 1,106 1,159
Management Fees........ -- -- -- 948 --
Other.................. 5,982 4,932 4,791 1,398 1,345
-------- -------- -------- ------------- -------------
407,779 384,413 360,153 95,776 92,582
Less complimentaries... 32,052 29,177 28,593 6,997 7,086
-------- -------- -------- ------------- -------------
Net revenues........... 375,727 355,236 331,560 88,779 85,496
-------- -------- -------- ------------- -------------
Costs and expenses:
Casino................. 129,898 125,773 115,468 31,005 31,906
Food and beverage...... 55,608 51,173 51,388 13,567 12,689
Rooms.................. 13,083 12,169 11,282 3,253 3,049
Sports and special
events................ 3,198 3,141 3,140 878 869
General and
administrative........ 92,739 84,058 78,022 23,333 21,898
Selling, advertising
and promotion......... 11,629 10,402 11,067 2,534 2,260
Depreciation and
amortization.......... 23,303 22,012 25,692 6,361 5,140
-------- -------- -------- ------------- -------------
329,458 308,728 296,059 80,931 77,811
-------- -------- -------- ------------- -------------
Income from operations
of consolidated
subsidiaries........... 46,269 46,508 35,501 7,848 7,685
Equity in income (loss)
of unconsolidated
affiliate.............. (850) -- -- 3,240 --
-------- -------- -------- ------------- -------------
Income from operations.. 45,419 46,508 35,501 11,088 7,685
-------- -------- -------- ------------- -------------
Other (income) expense:
Interest income........ (3,215) (1,441) (2,098) (803) (401)
Interest expense, net
of amounts
capitalized........... 24,696 25,335 27,497 6,202 4,900
-------- -------- -------- ------------- -------------
21,481 23,894 25,399 5,399 4,499
-------- -------- -------- ------------- -------------
Income before income tax
expense, extraordinary
items and cumulative
effect adjustment...... 23,938 22,614 10,102 5,689 3,186
Income tax expense...... 10,474 6,757 4,088 2,249 1,265
-------- -------- -------- ------------- -------------
Income before
extraordinary items and
cumulative effect
adjustment............. 13,464 15,857 6,014 3,440 1,921
Extraordinary items, net
of income tax.......... (6,679) (3,408) 180 -- --
Cumulative effect of
change in method of
accounting for income
taxes.................. 556 -- -- -- 556
-------- -------- -------- ------------- -------------
Net income.............. $ 7,341 $ 12,449 $ 6,194 $ 3,440 $ 2,477
======== ======== ======== ============= =============
Income per common and
equivalent share:
Income before
extraordinary items
and cumulative effect
adjustment............ $ .89 $ 1.37 $ .53 $ .23 $ .13
Extraordinary items,
net of income tax..... (.44) (.29) .02 -- --
Cumulative effect of
change in method of
accounting for income
taxes................. .04 -- -- -- .03
-------- -------- -------- ------------- -------------
Net income............. $ .49 $ 1.08 $ .55 $ .23 $ .16
======== ======== ======== ============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL LESS LESS
COMMON PAID-IN RETAINED TREASURY UNEARNED
STOCK CAPITAL EARNINGS STOCK COMPENSATION TOTAL
------- ---------- -------- -------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1990................... $12,345 $22,416 $32,405 $(7,765) $(553) $ 58,848
Net income.............. -- -- 6,194 -- -- 6,194
Cash dividends ($.10 per
share)................. -- -- (1,135) -- -- (1,135)
Share transactions under
stock plans............ -- 27 -- (19) 15 23
Amortization of unearned
compensation........... -- -- -- -- 203 203
------- ------- ------- ------- ----- --------
Balance, December 31,
1991................... 12,345 22,443 37,464 (7,784) (335) 64,133
Net income.............. -- -- 12,449 -- -- 12,449
Cash dividends ($.10 per
share)................. -- -- (1,135) -- -- (1,135)
Issuance of 3,450,000
shares of common stock. 3,450 46,916 -- -- -- 50,366
Share transactions under
stock plans............ -- 15 -- 23 11 49
Amortization of unearned
compensation........... -- -- -- -- 156 156
------- ------- ------- ------- ----- --------
Balance, December 31,
1992................... 15,795 69,374 48,778 (7,761) (168) 126,018
Net income.............. -- -- 7,341 -- -- 7,341
Cash dividends ($.10 per
share)................. -- -- (1,491) -- -- (1,491)
Share transactions under
stock plans............ -- 1,788 -- 1,391 -- 3,179
Amortization of unearned
compensation........... -- -- -- -- 111 111
------- ------- ------- ------- ----- --------
Balance, December 31,
1993................... $15,795 $71,162 $54,628 $(6,370) $ (57) $135,158
======= ======= ======= ======= ===== ========
(Balances from January
1, 1994 to
March 31, 1994 are
unaudited).............
Net income.............. -- -- 3,440 -- -- 3,440
Cash dividends ($.025
per share)............. -- -- (375) -- -- (375)
Share transactions under
stock plans............ -- 275 -- 42 9 326
Amortization of unearned
compensation........... -- -- -- -- 12 12
------- ------- ------- ------- ----- --------
Balance, March 31, 1994. $15,795 $71,437 $57,693 $(6,328) $ (36) $138,561
======= ======= ======= ======= ===== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------- -----------------------
1993 1992 1991 1994 1993
-------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income................ $ 7,341 $12,449 $ 6,194 $ 3,440 $ 2,477
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Allowance for doubtful
accounts................. 1,849 1,644 2,924 58 513
Depreciation and
amortization............. 23,303 22,012 25,692 6,361 5,140
Amortization of original
issue discount and debt
issuance costs........... 744 1,011 811 127 134
Provision for deferred
income taxes............. 813 238 1,230 742 141
Amortization of unearned
compensation............. 111 156 203 12 30
Provision for loss on
Casino Reinvestment
Development Authority
obligation............... 1,122 1,068 1,057 255 249
Equity in (income) loss of
unconsolidated affiliate. 850 -- -- (3,240) --
Extraordinary (gain) loss
on extinguishment of
debt..................... 11,166 5,164 (273) -- --
Loss on disposition of
property and equipment... 517 264 350 -- --
(Increase) decrease in
receivables, net......... (2,670) (1,537) (899) (231) 43
(Increase) decrease in
inventories and prepaid
expenses................. (23) (265) 599 76 (339)
(Increase) decrease in
deposits and other
assets................... (554) 284 (448) 235 52
Increase (decrease) in
accounts payable......... 85 395 (826) 1,556 1,236
Increase (decrease) in
income taxes payable..... 968 429 2 (1,996) (1,531)
Increase (decrease) in
accrued liabilities...... (1,503) 400 1,007 7,123 (5,038)
Other..................... (66) 346
-------- ------- ------- -------- -------
Net cash provided by
operating activities.... 44,119 43,712 37,623 14,452 3,453
-------- ------- ------- -------- -------
Cash flows from investing
activities:
Acquisition of property
and equipment............ (59,686) (21,050) (13,381) (19,693) (17,286)
Proceeds from sale of
property and equipment... 78 105 311 47 29
Investment in
unconsolidated affiliate. (18,600) -- -- (9,000) --
(Increase) decrease in
deposits and other
assets................... 4,046 910 (1,097) -- (67)
Deposit for Casino
Reinvestment Development
Authority obligation..... (3,289) (3,161) (2,892) (792) (717)
Distribution of earnings
of unconsolidated
affiliate................ -- -- -- 900 --
-------- ------- ------- -------- -------
Net cash used in
investing activities.... (77,451) (23,196) (17,059) (28,538) (18,041)
-------- ------- ------- -------- -------
Cash flows from financing
activities:
Principal payments of
long-term debt and
capital lease
obligations.............. (3,914) (8,879) (7,635) (1,047) (51,080)
Proceeds from issuance of
long-term debt........... 275,000 -- 1,098 -- --
Proceeds from note
payable.................. -- -- -- -- 1,100
Early extinguishment of
debt..................... (208,085) -- (11,696) -- --
Debt issuance costs....... (7,593) -- (74) -- --
Payment of dividends...... (1,400) (1,141) (1,140) (375) (284)
Issuance of common stock.. 2,510 50,366 -- 179 18
Other..................... -- 49 23 -- --
-------- ------- ------- -------- -------
Net cash provided by
(used in) financing
activities.............. 56,518 40,395 (19,424) (1,243) (50,246)
-------- ------- ------- -------- -------
Net increase (decrease) in
cash and cash equivalents. 23,186 60,911 1,140 (15,329) (64,834)
Cash and cash equivalents
at beginning of period.... 99,601 38,690 37,550 122,787 99,601
-------- ------- ------- -------- -------
Cash and cash equivalents
at end of period.......... $122,787 $99,601 $38,690 $107,458 $34,767
======== ======= ======= ======== =======
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest, net of amount
capitalized.............. $ 25,741 $24,562 $26,937 $ 164 $10,275
Income taxes.............. 3,650 4,400 2,948 3,503 2,100
Supplemental schedule of
non-cash investing and
financing activities:
Capital lease obligations
incurred in connection
with acquisition of
equipment................ -- 152 131 -- --
Increase (decrease) in
property and equipment
acquisitions included in
construction contracts
and retentions payable
and long-term debt....... 3,914 1,890 (309) 795 483
Share transactions under
long-term incentive plan. -- 27 35 -- --
Transfer deposits for
Casino Reinvestment
Development Authority
obligation to
construction in progress. 6,667 -- -- -- --
</TABLE>
See accompanying notes to consolidated financial statements.

F-6
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION

Showboat, Inc. and subsidiaries, collectively the Company, conduct casino
gaming operations in Las Vegas, Nevada, Atlantic City, New Jersey and New
Orleans, Louisiana. In addition, the Company operates support services
including hotel, restaurant, bar, bowling and convention facilities.

The Consolidated Financial Statements for the three months ended March 31,
1993 and 1994 and related amounts in the Notes to the consolidated financial
statements are unaudited, but in the opinion of management reflect all normal
and recurring adjustments necessary for a fair representation of the results of
those periods.

The consolidated financial statements include the accounts of Showboat, Inc.
(SBO) and its wholly-owned subsidiaries which are Showboat Development Company
(SDC), Showboat Operating Company (SBOC) and Ocean Showboat, Inc. (OSI). They
also include SDC's wholly-owned subsidiaries, Lake Pontchartrain Showboat, Inc.
(LPSI) and Showboat Louisiana, Inc. (SBL), and OSI's wholly-owned subsidiaries
Atlantic City Showboat, Inc. (ACSI) and Ocean Showboat Finance Corporation
(OSFC). Showboat, Inc. and its subsidiaries own and operate hotel casinos in
Las Vegas, Nevada (Las Vegas Showboat) and Atlantic City, New Jersey (Atlantic
City Showboat) and own an equity interest in and manage a riverboat casino on
Lake Pontchartrain in New Orleans, Louisiana (Showboat Star Casino). All
material intercompany balances and transactions have been eliminated in
consolidation.

On March 1, 1994, the Company purchased an additional 20% equity interest
from its partner for $9 million, increasing its interest in Showboat Star
Partnership to 50%. The Company's equity in the income or loss of Showboat Star
Partnership is included in the Consolidated Statements of Income. LPSI receives
a management fee from Showboat Star Partnership of 5.0% of casino revenues net
of gaming taxes of 18.5% and boarding fees of $5.00 per person. Management fees
are included in other revenues in the Consolidated Statements of Income.

CASINO REVENUE AND COMPLIMENTARIES

In accordance with common industry practice, casino revenues are the net of
gaming wins less losses.

Complimentaries primarily consist of rooms, food and beverage furnished
gratuitously to customers. The sales values of such services are included in
the respective revenue classifications and are then deducted as
complimentaries. Complimentary rates are periodically reviewed and adjusted by
management.

CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

FAIR VALUE OF CERTAIN FINANCIAL INSTRUMENTS

The carrying amount of cash equivalents, accounts receivable and all current
liabilities approximates fair value because of the short maturity of these
instruments. See Notes 4 and 11 for additional fair value disclosures.

F-7
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation, including
amortization of capitalized leases, is computed using the straight-line method.
The cost of maintenance and repairs is charged to expense as incurred;
significant renewals and betterments are capitalized.

Estimated useful lives for property and equipment are 5 to 15 years for land
improvements, 10 to 40 years for buildings and 2 to 10 years for furniture and
equipment.

INTEREST COSTS

Interest is capitalized in connection with the construction of major
facilities. The capitalized interest is recorded as part of the asset to which
it relates and is amortized over the asset's estimated useful life. For the
year ended December 31, 1993, $1,085,000 of interest cost was capitalized. No
interest was capitalized in the years ended December 31, 1992 and 1991. For the
three-month periods ended March 31, 1994 and 1993, interest costs of $449,000
and $189,000, respectively, were capitalized (unaudited).

INCOME TAXES

In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (FAS 109). Under the asset and liability method of FAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. 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. Under FAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period
that includes the enactment date.

Effective January 1, 1993, the Company adopted FAS 109 and has reported the
cumulative effect of that change in accounting method in the 1993 Consolidated
Statement of Income.

The Company previously used the asset and liability method under Statement of
Financial Accounting Standards No. 96 (FAS 96). Under the asset and liability
method of FAS 96, deferred tax assets and liabilities were recognized for all
the events that had been recognized in the financial statements. Under FAS 96,
the future tax consequences of recovering assets or settling liabilities at
their financial statement carrying amounts were considered in calculating
deferred income taxes. Generally, FAS 96 prohibited consideration of any other
future events in calculating deferred income taxes.

The Company and its subsidiaries file a consolidated federal income tax
return. For tax reporting purposes, the Company has elected to continue its
fiscal year ending June 30.

POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS

The Company does not currently provide any significant postemployment or
postretirement benefits.

AMORTIZATION OF ORIGINAL ISSUE DISCOUNT AND DEBT ISSUANCE COSTS

Original issue discount is amortized over the life of the related
indebtedness using the effective interest method.

Costs associated with the issuance of debt have been deferred and are being
amortized over the life of the related indebtedness using a weighted average
method based on retirement schedules specified in the debt indentures.

F-8
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

INCOME PER COMMON AND EQUIVALENT SHARE

Income per common and equivalent share is based on the weighted average
number of shares outstanding. Such averages were 15,099,147, 11,584,275 and
11,410,208 for the years ended December 31, 1993, 1992 and 1991, respectively
and 15,180,008 and 15,141,493 for the three-months ended March 31, 1994 and
1993, respectively (unaudited). Fully-diluted and primary income per common and
equivalent share are the same.

PREOPENING AND DEVELOPMENT COSTS

The Company is currently investigating expansion opportunities in new gaming
jurisdictions. Costs associated with these investigations are expensed as
incurred until such time as a particular opportunity is determined to be
viable, generally when the Company is selected as the operator of a new gaming
facility or a gaming license has been granted.

Costs incurred during the construction and preopening phase are capitalized.
Types of costs capitalized include professional fees, salaries and wages,
temporary office expenses, marketing expenses and training costs. When the new
operation opens for business, preopening costs will be amortized over a period
not to exceed 12 months using the straight-line method.

Costs associated with the preopening of the Showboat Star Casino on Lake
Pontchartrain in New Orleans, Louisiana were written-off upon commencement of
operations on November 8, 1993 and totaled $4,246,000. The Company's share of
those costs of $1,274,000 are included in equity in loss of unconsolidated
affiliate in the December 31, 1993 Consolidated Statement of Income.

RECLASSIFICATIONS

Certain prior period balances have been reclassified to conform to the
current year's presentation.

2. RECEIVABLES

Receivables consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- 1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Casino.............................................. $ 6,816 $ 6,964 $6,621
Hotel............................................... 1,020 715 772
Employees........................................... 88 86 80
Other............................................... 935 406 1,248
------- ------- ------
8,859 8,171 8,721
Less allowance for doubtful accounts................ 2,946 3,079 2,635
------- ------- ------
Receivables, net.................................... $ 5,913 $ 5,092 $6,086
======= ======= ======
</TABLE>

F-9
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------- 1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest............................................ $ 4,240 $ 6,029 $10,599
Salaries and wages.................................. 8,289 7,540 7,918
Taxes, other than taxes on income................... 1,988 1,641 3,264
Medical and liability claims........................ 2,983 3,036 3,045
Advertising and promotion........................... 2,397 3,068 2,375
Outstanding chips and tokens........................ 1,204 1,308 1,066
Other............................................... 2,563 2,545 2,520
------- ------- -------
Total accrued liabilities........................... $23,664 $25,167 $30,787
======= ======= =======
</TABLE>

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- 1994
1993 1992 (UNAUDITED)
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
9 1/4% First Mortgage Bonds due 2008 (a)......... $275,000 $ -- $275,000
11 3/8% Mortgage-Backed Bonds Due 2002 (b)....... -- 149,444 --
13% Subordinated Sinking Fund Debentures Due Oc-
tober 1, 2004 (c)............................... -- 32,949 --
Construction and term loan, repaid in 1993....... -- 17,192 --
Capitalized lease obligations (Note 5)........... 5,617 9,531 4,570
-------- -------- --------
280,617 209,116 279,570
Less current maturities.......................... 3,574 54,055 2,549
-------- -------- --------
$277,043 $155,061 $277,021
======== ======== ========
</TABLE>

(a) On May 18, 1993, the Company issued $275,000,000 of 9 1/4% First Mortgage
Bonds due 2008 (First Mortgage Bonds). The proceeds from the sale of the First
Mortgage Bonds were $268,469,000, net of underwriting discounts and
commissions. Proceeds from the sale of the First Mortgage Bonds were used to
redeem all of the outstanding 11 3/8% Mortgage-Backed Bonds Due 2002 at 105.7%
of the principal amount plus accrued interest. The remaining proceeds were
reserved by the Company to benefit existing facilities and to expand into new
facilities or gaming jurisdictions.

The First Mortgage Bonds are unconditionally guaranteed by OSI, ACSI and
SBOC. Interest on the First Mortgage Bonds is payable semi-annually on May 1
and November 1 of each year commencing November 1, 1993. The First Mortgage
Bonds are not redeemable prior to May 1, 2000. Thereafter, the First Mortgage
Bonds will be redeemable, in whole or in part, at redemption prices specified
in the Indenture for the First Mortgage Bonds (Indenture). The First Mortgage
Bonds are senior secured obligations of the Company and rank senior in right of
payment to all existing and future subordinated indebtedness of the Company and
pari passu with the Company's senior indebtedness. The First Mortgage Bonds are
secured by a deed of trust representing a first lien on the Las Vegas Showboat
(other than certain assets), by a pledge of all outstanding shares of capital
stock of OSI, an intercompany note by ACSI in favor of SBO and a pledge of
certain intellectual property rights of the Company. OSI's obligation under its
guaranty is secured by a pledge of all outstanding shares of capital stock of
ACSI. ACSI's obligation under its guaranty is secured by

F-10
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

a leasehold mortgage representing a first lien on the Atlantic City Showboat
(other than certain assets). SBOC's guaranty is secured by a pledge of certain
assets related to the Las Vegas Showboat.

The Indenture places significant restrictions on SBO and its subsidiaries,
including restrictions on making loans and advances by SBO to subsidiaries
which are Non-Recourse Subsidiaries or subsidiaries in which SBO owns less than
50% of the equity. All capitalized terms not otherwise defined in this
paragraph have the meanings assigned to the Indenture. The Indenture also
places significant restrictions on the incurrence of additional Indebtedness by
SBO and its subsidiaries, the creation of additional Liens on the Collateral
securing the First Mortgage Bonds, transactions with Affiliates and the
investment of SBO and its subsidiaries in certain Investments. In addition, the
terms of the Indenture prohibit SBO and its subsidiaries from making a
Restricted Payment unless, at the time of such Restricted Payment: (i) no
Default or Event of Default has occurred or would occur as a consequence of
such restricted payment; (ii) SBO, at the time of Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, would have been permitted
to incur at least $1.00 of additional Indebtedness; and (iii) such Restricted
Payment, together with the aggregate of all other Restricted Payments by SBO
and its subsidiaries is less than the sum of (x) 50% of the Consolidated Net
Income of SBO for the period (taken as one accounting period) from April 1,
1993 to the end of SBO's most recently ended fiscal quarter for which internal
financial statements are available, plus (y) 100% of the aggregate net cash
proceeds received by SBO from the issuance or sale of Equity Interests of SBO
since the Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds
received after the Issue Date. The Term Restricted Payment does not include,
among other things, the payment of any dividend if, at the time of declaration
of such dividend, the dividend would have complied with the provisions of the
Indenture; the redemption, repurchase, retirement, or other acquisition of any
Equity Interest of SBO out of proceeds of, the substantially concurrent sale of
other Equity Interests of SBO; Investments by SBO in an amount not to exceed
$75,000,000 in the aggregate in any Non-Recourse Subsidiary engaged in a Gaming
Related Business; Investments by SBO in any Non-Recourse Subsidiary engaged in
a Gaming Related Business in an amount not to exceed in the aggregate 100% of
all cash received by SBO from any Non-Recourse Subsidiary up to $75,000,000 in
the aggregate and thereafter, 50% of all cash received by SBO from any Non-
Recourse Subsidiary other than cash required to be repaid or returned to such
Non-Recourse Subsidiary provided that the aggregate amount of Investments
pursuant thereto does not exceed $125,000,000 in the aggregate; and the
purchase, redemption, defeasance of any pari passu Indebtedness with a
substantially concurrent purchase, redemption, defeasance, or retirement of the
First Mortgage Bonds (on a pro rata basis).

(b) In March 1987, the Company issued $180,000,000 of 11 3/8% Mortgage-Backed
Bonds Due 2002 (11 3/8% Bonds). Interest was payable semi-annually on March 15
and September 15 of each year. During the years ended December 31, 1991 and
1990, the Company repurchased $12,096,000 and $18,460,000 face value,
respectively, of the 11 3/8% Bonds (Note 10). In accordance with the provisions
of the Indenture for the First Mortgage Bonds, the 11 3/8% Bonds were redeemed
on June 18, 1993 at 105.7% of par plus accrued interest.

(c) During fiscal year 1985, the Company issued $57,500,000 of 13% (effective
rate of 15.75%) Subordinated Sinking Fund Debentures Due October 1, 2004
(Debentures), with interest payable semi-annually. The Debentures were
redeemable at any time at the option of the Company, in whole or in part, at
par plus accrued interest or the Debentures may have been reacquired through
purchases in the open market. The Debentures had a mandatory sinking fund
requirement beginning October 1, 1991, designed to retire 80% of the issue
prior to maturity. On October 1, 1992 and 1991, the Company applied $2,875,000
of previously repurchased Debentures toward the sinking fund requirement. On
October 29, 1992, the Company made a redemption of $2,875,000 of Debentures. On
January 29, 1993, the Company redeemed in full the Debentures at par plus
accrued interest (Note 10).

F-11
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1993 and March 31, 1994, the Company's Atlantic City
subsidiary, ACSI, had available an unsecured line of credit for general working
capital purposes totaling $15,000,000. Interest is payable monthly at the
bank's prime rate plus .5%. The Bank's prime rate was 6.0% and 6.75% at
December 31, 1993 and March 31, 1994, respectively. The line of credit is
guaranteed by OSI and expires in August 1994. Borrowings on this line of credit
may not be used for the payment of management fees or to fund ventures in other
jurisdictions. At December 31, 1993 and March 31, 1994, ACSI had all the funds
under this line of credit available for use.

Maturities of the Company's long-term debt are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year Ending
December 31,
1994........................................................... $ 3,574
1995........................................................... 20
1996........................................................... 1,950
1997........................................................... 25
1998........................................................... 29
Thereafter....................................................... 275,019
--------
$280,617
========
</TABLE>

The fair value of the Company's First Mortgage Bonds was $283,250,000 at
December 31, 1993 based on the quoted market price of the First Mortgage Bonds.
The carrying amount of capital leases approximates fair value at December 31,
1993.

5. LEASES

The Company leases certain furniture and equipment and a warehouse under
long-term lease agreements. The leases covering furniture and equipment expire
in 1994 and the warehouse lease expires in 2001. The Company has the option to
purchase the warehouse from January 1, 1996 through March 31, 2001 at an option
price of approximately $1,928,000.

Property leased under capital leases by major classes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
MARCH 31,
1994
1993 1992 (UNAUDITED)
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Building--warehouse................................. $ 2,050 $ 2,050 $ 2,050
Furniture and equipment............................. 22,621 23,417 22,262
------- ------- -------
24,671 25,467 24,312
Less accumulated amortization....................... 19,456 21,308 21,667
------- ------- -------
$ 5,215 $ 4,159 $ 2,645
======= ======= =======
</TABLE>

F-12
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

ACSI is leasing 10 1/2 acres of Boardwalk property in Atlantic City, New
Jersey for a term of 99 years commencing October 1983. Annual rent payments,
which are payable monthly, commenced upon opening of the Atlantic City
Showboat. The rent is adjusted annually based upon increases or decreases in
the Consumer Price Index. In April 1993, the annual rent increased $243,000 to
$8,118,000. ACSI is responsible for taxes, assessments, insurance and
utilities.

The following is a schedule of future minimum lease payments for capital
leases and operating leases (with initial or remaining terms in excess of one
year) as of December 31, 1993:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31,
1994........................................................ $4,014 $ 9,537
1995........................................................ 286 9,773
1996........................................................ 1,961 9,629
1997........................................................ 33 9,783
1998........................................................ 33 9,916
Thereafter.................................................... 20 797,971
------ --------
Total minimum lease payments.................................. 6,347 $846,609
========
Less amount representing interest (10.4% to 12.9%)............ 730
------
Present value of net minimum capital lease payments........... $5,617
======
</TABLE>

Rent expense for all operating leases was $9,287,000, $8,659,000 and
$8,046,000 for the years ended December 31, 1993, 1992 and 1991, respectively
and $2,406,000 and $2,157,000 for the three-months ended March 31, 1994 and
1993.

6. STOCK PLANS

On May 17, 1990, the shareholders of SBO approved a long-term incentive plan
in which officers and key employees of the Company participate. Up to 600,000
shares of SBO common stock may be awarded to plan participants as either
restricted shares or stock options. Restricted shares and options shall vest
over a five-year period. The options are exercisable, subject to vesting, over
ten years at option prices determined by SBO's Compensation Committee provided
that the option price is not less than 100% of the fair market value of the
Company's common stock determined on the date of grant of the options. As of
December 31, 1993, 127,900 restricted shares have been issued from treasury.

On May 17, 1990, the shareholders of SBO approved the Directors' Stock Option
Plan whereby options to purchase up to 120,000 shares of SBO common stock may
be granted at an option price no less than 100% of the fair market value of the
shares on the date of grant. Under the terms of the Directors' Plan, each
option shall be exercisable in full one year after the date of grant. Unless
special circumstances exist, each option shall expire on the tenth anniversary
of the date of grant or two years after the director's retirement.

In April 1992, the Board of Directors of the Company adopted the 1992
Employee Stock Option Plan (Plan) for all full-time and part-time employees.
The Company reserved an aggregate of 1,000,000 shares of SBO common stock for
issuance under the Plan. The exercise price of an option awarded under the Plan
cannot be less than the fair market value of the Company's common stock on the
date of grant. The number of options granted to an employee is based on the
employee's years of service with the Company. Options, all of which expire ten
years from the date of grant, are subject to vesting and continued affiliation
with the Company.

F-13
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

A summary of certain stock option information is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Options outstanding at
January 1........................................ 901,080 393,570 386,850
Granted........................................... 96,550 521,550 21,000
Exercised......................................... (176,560) (6,840) (2,280)
Forfeited......................................... (8,750) (7,200) (12,000)
-------- -------- --------
Options outstanding at
December 31...................................... 812,320 901,080 393,570
======== ======== ========
Option price range at $6.50 to $6.50 to $6.50 to
December 31...................................... $18.00 $14.50 $8.00
Options exercisable at
December 31...................................... 529,495 120,430 82,245
</TABLE>

Unearned compensation in connection with restricted stock issued for future
services was recorded on the date of grant at the fair market value of SBO's
common stock and is being amortized ratably from the date of grant over the
five-year vesting period as it is earned. Compensation expense of $111,000,
$156,000 and $203,000 was recognized during the years ended December 31, 1993,
1992 and 1991, respectively. Unearned compensation has been shown as a
reduction of shareholders' equity in the accompanying Consolidated Balance
Sheets.

7. SHAREHOLDERS' EQUITY

On December 24, 1992, the Company issued 3,450,000 shares of its $1.00 par
value common stock in a public offering. The price to the public was $15.50 per
share. Net proceeds of the offering, after deducting all associated costs, was
$50,366,000 or $14.60 per newly issued share. Proceeds of the offering were
used in January 1993 to redeem all of SBO's 13% Subordinated Sinking Fund
Debentures Due 2004 and to fully prepay the balance outstanding on the
construction and term loan.

8. INCOME TAXES

As discussed in Note 1, the Company adopted FAS 109 effective January 1,
1993. The cumulative effect of the change in method of accounting for income
taxes of $556,000 is determined as of January 1, 1993 and is reported
separately in the Consolidated Statement of Income for the year ended December
31, 1993. Prior year financial statements have not been restated to apply the
provisions of FAS 109.

Total income tax expense for the year ended December 31, 1993 was allocated
as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Continuing operations...................................... $10,474
Extraordinary item......................................... (4,487)
Shareholders' equity, related to compensation expense de-
ferred and reported as a reduction of shareholders' equity
for financial reporting purposes.......................... (661)
-------
$ 5,326
=======
</TABLE>

F-14
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Income tax expense (benefit) attributable to income from continuing
operations consists of:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ 1994
1993 1992 1991 (UNAUDITED)
-------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. federal
Current................................. $ 7,910 $ 6,519 $ 2,858 $1,260
Deferred................................ 965 238 1,230 853
-------- ------- ------- ------
8,875 6,757 4,088 2,113
-------- ------- ------- ------
State and local
Current................................. 1,195 -- -- 248
Deferred................................ 404 -- -- (112)
-------- ------- ------- ------
1,599 -- -- 136
-------- ------- ------- ------
Total
Current................................. 9,105 6,519 2,858 1,508
Deferred................................ 1,369 238 1,230 741
-------- ------- ------- ------
$ 10,474 $ 6,757 $ 4,088 $2,249
======== ======= ======= ======
</TABLE>

In 1992 and 1991, income tax expense of $6,757,000 and $4,088,000,
respectively, represents income tax expense from continuing operations before
extraordinary items. In 1992, as a result of an extraordinary loss of
$5,164,000 (Note 10), the Company recognized an income tax benefit of
$1,756,000 resulting in total income tax expense of $5,001,000. In 1991, as a
result of an extraordinary gain of $273,000 (Note 10), the Company recognized
additional income tax expense of $93,000 resulting in total income tax expense
of $4,181,000.

Income tax expense attributable to income from continuing operations differed
from the amounts computed by applying the U.S. federal income tax rate of 35%
for the year ended December 31, 1993 and 34% for the years ended December 31,
1992 and 1991 to pretax income from continuing operations as a result of the
following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1992 1991
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed "expected" tax expense..................... $ 8,378 $ 7,689 $ 3,435
Increase (reduction) in income taxes resulting from:
Change in the beginning of the year balance of the
valuation allowance for deferred tax assets allo-
cated to income tax expense...................... 224 -- --
Adjustment to deferred tax assets and liabilities
for enacted changes in tax rates................. 383 -- --
State and local income taxes, net of federal tax
benefit.......................................... 930 -- --
Impact of settlement of Internal Revenue Service
examination...................................... -- (102) --
Restricted interest assessment, net of tax........ 619 -- --
Impact of graduated tax rates..................... (90) -- --
Other, net........................................ 30 (830) 653
-------- ------- -------
Income tax expense................................ $ 10,474 $ 6,757 $ 4,088
======== ======= =======
</TABLE>

F-15
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The significant components of deferred income tax expense attributable to
income from continuing operations for the year ended December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax expense (exclusive of other components listed
below).................................................... $ 762
Adjustment to deferred tax assets and liabilities for en-
acted changes in tax rates................................ 383
Change in beginning of the year balance of the valuation
allowance for deferred tax assets......................... 224
------
$1,369
======
</TABLE>

For the years ended December 31, 1992 and 1991, deferred income tax expense
of $238,000 and $1,230,000, respectively, results from temporary differences in
the recognition of income and expenses for income tax and financial reporting
purposes. The sources and tax effects of these temporary differences are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1992 1991
------- -------
(IN THOUSANDS)
<S> <C> <C>
Depreciation and amortization................................ $ 1,250 $ 556
Utilization of credit carryforwards, net..................... 1,145 (676)
Provisions for loss on Casino Reinvestment Development Au-
thority obligation.......................................... (1,496) 31
Allowance for doubtful accounts.............................. 309 342
Preopening costs............................................. 369 1,511
Accrued vacations............................................ (359) (149)
Impact of settlement of Internal Revenue Service examination. (625) --
Other, net................................................... (355) (385)
------- -------
$ 238 $ 1,230
======= =======
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Casino Reinvestment Development Authority obligation........ $(1,566)
Accrued vacations........................................... (1,621)
Allowance for doubtful accounts............................. (1,210)
Alternative minimum tax credit carryforwards................ (2,423)
Other....................................................... (3,606)
-------
Total gross deferred tax assets............................. (10,426)
Less valuation allowance.................................... 601
-------
Net deferred tax assets.................................... (9,825)
-------
Deferred tax liabilities:
Depreciation and amortization.............................. 17,350
Capitalized interest....................................... 2,571
-------
Total gross deferred tax liabilities....................... 19,921
-------
Net deferred tax liability................................... $10,096
=======
</TABLE>

F-16
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the net deferred tax liability at December 31, 1992 relate to the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Depreciation and amortization.............................. $13,931
Utilization of credit carryforwards........................ (2,032)
Capitalized interest....................................... 2,572
Allowance for doubtful accounts............................ (1,047)
Accrued vacations.......................................... (1,328)
Provisions for loss on Casino Reinvestment Development Au-
thority
obligation................................................ (1,496)
Other...................................................... (1,317)
-------
Net deferred tax liability................................. $ 9,283
=======
</TABLE>

The valuation allowance for deferred tax assets as of January 1, 1993 was
$377,000. The net change in the total valuation allowance for the year ended
December 31, 1993 was an increase of $224,000.

At December 31, 1993, the Company had available $2,423,000 of alternative
minimum tax credit carryforwards which are available to reduce future federal
regular income taxes, if any, over an indefinite period.

For State of New Jersey income tax purposes, the Company has available
$1,144,000 of net operating loss carryforwards which expire through 1997.

9. EMPLOYEE BENEFIT PLANS

The Company maintains a profit sharing and retirement plan for eligible
employees who are not covered by a collective bargaining agreement or by
another retirement plan to which the Company is required to contribute.
Contributions to the plan are made at the discretion of the Board of Directors
of SBO. The benefits are limited to the allocated interest in the fund assets
and each participant's account vests over a seven-year period. Contributions
accrued by the Company were $195,000, $175,000 and $150,000 for the years ended
December 31, 1993, 1992 and 1991, respectively.

The Company maintains a retirement and savings plan for eligible employees of
ACSI and OSI. Under the terms of the plan, eligible employees may defer up to
3% of their compensation, as defined, of which 100% of the deferral is matched
by ACSI. Eligible employees may contribute an additional 12% of their
compensation which will not be matched by the Company. Contributions by the
Company vest over a five-year period. The Company contributed $1,330,000,
$1,110,000 and $776,000 to this plan for the years ended December 31, 1993,
1992 and 1991, respectively.

Effective January 1, 1994, SBOC and LPSI adopted the provisions of the
retirement and savings plan previously available to the eligible employees of
ACSI and OSI. The Company has requested a determination letter from the
Internal Revenue Service to allow the Company to merge the present profit
sharing plan and the retirement and savings plan.

The Company's union employees are covered by union-sponsored, collectively-
bargained, multi-employer pension plans. The Company contributed and charged to
expense $1,197,000, $1,182,000 and $1,184,000 during the years ended December
31, 1993, 1992 and 1991, respectively. These contributions are

F-17
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

determined in accordance with the provisions of negotiated labor contracts and
generally are based on the number of hours worked.

10. EXTRAORDINARY ITEMS

On June 18, 1993, the Company redeemed all of its remaining 11 3/8% Bonds at
105.7% plus accrued and unpaid interest up to and including the redemption
date. The Company recognized an extraordinary loss before any income tax
benefit of $11,166,000 as a result of the write-off of the unamortized debt
issuance costs of $2,666,000 and the payment of a 5.7% redemption premium of
$8,500,000. The after tax loss was $6,679,000 or $.44 per share.

On December 30, 1992, the Company notified debentureholders of its intent to
redeem all of the outstanding Debentures at par plus accrued interest on
January 29, 1993. Accordingly, at December 31, 1992, the Company reclassified
the outstanding principal balance of $32,949,000 to current maturities of long-
term debt and recognized an extraordinary loss of $5,164,000 before an income
tax benefit of $1,756,000 as a result of the write-off of the unamortized
discount and debt issuance costs. The after tax loss was $3,408,000 or $.29 per
share.

In 1991, OSI purchased $12,096,000 face value of the Company's 11 3/8% Bonds
for $11,696,000. Accordingly, after a charge of $127,000 for unamortized bond
issuance costs, the Company realized an extraordinary gain of $273,000 before
income taxes of $93,000 resulting in an after tax gain of $180,000 or $.02 per
share.

11. NEW JERSEY INVESTMENT OBLIGATION

The New Jersey Casino Control Act (Act) provides, among other things, for an
assessment on a gaming licensee based upon its gross casino revenues after
completion of its first full year of operation. This assessment may be
satisfied by investing in qualified direct investments, purchasing bonds issued
by the Casino Reinvestment Development Authority (CRDA), or paying an
"alternative tax." In order for direct investments to be eligible, they must be
approved by the CRDA.

Deposits with the CRDA bear interest at two-thirds of market rates resulting
in a current value lower than cost. At December 31, 1993 and 1992, deposits and
other assets include $5,010,000 and $9,431,000, respectively, representing the
Company's deposit with the CRDA of $7,488,000 as of December 31, 1993 and
$14,121,000 as of December 31, 1992, net of a valuation allowance of $2,478,000
and $4,690,000, respectively. The carrying value of these deposits, net of the
valuation allowance, approximates fair value.

The CRDA, as an agency of the City of Atlantic City, is responsible for the
redevelopment of the area surrounding the Boardwalk. The Company has requested
and the CRDA has approved that $8,000,000 of the Company's deposits with the
CRDA will be used in connection with the expansion of a City street leading to
the Atlantic City Showboat. In connection with its approval, the CRDA required
the Company to donate $2,000,000 of its deposits with the CRDA to certain
public programs. Construction of the City street commenced in the fourth
quarter of 1993 and is expected to be completed in 1994. The Company has
reclassified these CRDA deposits, net of the valuation allowance, totaling
$6,667,000 to construction in progress. When construction is complete, these
costs will be amortized over seven years. The CRDA has set aside these deposits
in a restricted account and the Company no longer receives the benefit of
investment income on these funds.

The Company has applied for and received approval for approximately
$8,800,000 in funding credits from the CRDA in connection with the construction
of Atlantic City Showboat's additional hotel rooms.

F-18
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Pending the execution of a Credit Agreement with the CRDA, which states the
terms and conditions by which the Company may receive funding credit, the
Company may begin applying for and receiving funds from the CRDA as
expenditures are made for the construction of the hotel rooms to the extent
ACSI has available funds on deposit with the CRDA. The Company has
approximately $2,500,000 in available deposits with the CRDA which they may
apply for upon execution of the Credit Agreement, with the balance being
applied to portions of future CRDA deposits.

12. COMMITMENTS AND CONTINGENCIES

During 1993, the Company entered into construction contracts which commit the
Company to approximately $39,000,000 in expenditures in 1994 and approximately
$7,000,000 in 1995.

In December 1993, the Company agreed to purchase an additional 20% equity
interest in Showboat Star Partnership from a partner for $9,000,000, increasing
the Company's interest in the partnership to 50% subject to the approval of the
Louisiana Riverboat Gaming Commission. The Louisiana Riverboat Gaming
Commission approved the transaction in February 1994 and effective March 1,
1994, the Company acquired the additional 20% equity interest in Showboat Star
Partnership.

In February 1994, Showboat and Waterfront Entertainment and Development, Inc.
formed the Showboat Marina Partnership (Indiana Partnership). The Indiana
Partnership has filed a gaming application with the Indiana Gaming Commission
to operate a riverboat on Lake Michigan in East Chicago, Indiana. Under the
terms of the partnership agreement, Showboat will own 55% of the Indiana
Partnership and is required to make an initial capital contribution of
$1,000,000 and an additional contribution of $16,500,000 at such later dates as
specified in an initial development budget.

The Company is involved in various claims and legal actions arising in the
ordinary course of business. Additionally, the Company is presently undergoing
an audit by the Internal Revenue Service for the tax years ending June 30, 1989
and 1990. The State of New Jersey is currently auditing the Company's state
income tax returns for the tax years ended June 30, 1986 through 1992. In the
opinion of management, the ultimate disposition of these matters will not have
a material adverse effect on the Company's financial position or results of
operations.

F-19
<PAGE>

SHOWBOAT, INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)

13. SELECTED QUARTERLY DATA (UNAUDITED)

Summarized unaudited financial data for interim periods for the years ended
December 31, 1993 and 1992 are as follows:

<TABLE>
<CAPTION>
QUARTER ENDED (A) YEAR
-------------------------------------- ENDED
3/31/93 6/30/93 9/30/93 12/31/93 12/31/93
-------- -------- --------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues.................. $ 85,496 $ 92,706 $ 108,005 $ 89,520 $375,727
Income from operations (b).... 7,685 11,983 18,250 7,501 45,419
Income before extraordinary
loss and cumulative effect
adjustment (c)(d)............ 1,921 3,751 7,356 436 13,464
Net income (loss)............. 2,477 (2,928) 7,356 436 7,341
Income before extraordinary
loss and cumulative effect
adjustment per share (c)(d).. .13 .24 .48 .03 .89
Net income (loss) per share... .16 (.20) .48 .03 .49
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED (A) YEAR
--------------------------------------- ENDED
3/31/92 6/30/92 9/30/92 12/31/92 12/31/92
--------- --------- --------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues................. $ 85,523 $ 89,250 $ 99,105 $ 81,358 $355,236
Income from operations....... 10,074 12,224 18,981 5,229 46,508
Income before extraordinary
loss (e).................... 2,628 3,973 8,426 830 15,857
Net income (loss)............ 2,628 3,973 8,426 (2,578) 12,449
Income before extraordinary
loss per share(e)........... .23 .34 .73 .07 1.37
Net income (loss) per share.. .23 .34 .73 (.22) 1.08
</TABLE>
- ---------------------
(a) Quarterly results may not be comparable due to the seasonal nature of the
Atlantic City operation.
(b) In 1993, the Company acquired a 30% equity interest in Showboat Star
Partnership which was engaged in the development of a riverboat casino on
Lake Pontchartrain in New Orleans, Louisiana. Operation of the riverboat
casino commenced on November 8, 1993. The Company's share of the
partnership's loss from the commencement of operations through December 31,
1993, including the write-off of preopening costs of $1,274,000, is
included in income from operations for the quarter ended December 31, 1993.
(c) The Company adopted FAS 109 in 1993 and reported the cumulative effect of
the change in method of accounting for income taxes as of January 1, 1993
in the 1993 Consolidated Statement of Income.
(d) In the quarter ended June 30, 1993, the Company recognized an extraordinary
loss of $6,679,000, net of tax, as a result of the redemption of all of its
outstanding 11 3/8% Bonds (Note 10).
(e) In the quarter ended December 31, 1992, the Company recognized an
extraordinary loss of $3,408,000, net of tax, as a result of the planned
redemption of all of its outstanding Debentures (Note 10).

14. SUBSEQUENT EVENTS (UNAUDITED)

On May 6, 1994, the New South Wales Casino Control Authority announced that
Sydney Harbour Casino Pty Limited, a wholly owned subsidiary of a company in
which Showboat, Inc. is a principal founding shareholder, was the preferred
applicant to develop a casino in Sydney, Australia. The preferred applicant
will work during the next six months to obtain all the necessary regulatory
approvals. Subsequently, the Authority will enter into a 99-year lease for the
site of the casino in New South Wales and issue an exclusive casino license for
12 years to cover the State of New South Wales. The Company will have an
approximate 27% equity interest in the casino at a cost of approximately $98.7
million. The Company anticipates making its investment in November 1994.

F-20
<PAGE>

On March 24, 1994, SBO secured a line of credit for A$8.4 million (U.S.
dollar equivalent approximately $6.1 million) in compliance with the New South
Wales Casino Control Authority's licensing requirements. This line of credit is
secured by a $6.3 million certificate of deposit. Interest on this line of
credit is payable at the bank's prime rate plus 2.0%. This line of credit
expires in December 1994. At March 31, 1994, ACSI had all the funds under this
line of credit available for use.

On May 25, 1994, the Shareholders approved an increase in the number of
Shares of Common Stock authorized from 20,000,000 to 50,000,000 Shares.

On May 25, 1994, the Shareholders approved a long-term incentive plan in
which officers and most management level employees of the Company participate.
Up to 2,000,000 Shares of SBO Common Stock may be awarded to plan participants
as either restricted shares or stock options. Restricted shares and options
generally vest over a five-year period. The options are exercisable, subject to
vesting, over ten years at option prices determined by SBO's Compensation
Committee provided that the option price is not less than 100% of the fair
market value of the Company's Common Stock determined on the date of grant of
the options.

F-21
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED
HEREBY IN ANY JURISDICTION IN WHICH 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 CIRCUMSTANCE, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
The Company............................................................... 9
Certain Considerations.................................................... 17
Use of Proceeds........................................................... 21
Capitalization............................................................ 22
Price Range of Common Stock and Dividends................................. 23
Selected Consolidated Financial Data...................................... 24
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 25
Principal and Selling Shareholders........................................ 33
Management................................................................ 34
Regulation................................................................ 36
Underwriting.............................................................. 37
Legal Matters............................................................. 38
Experts................................................................... 38
Index to Consolidated Financial Statements................................ F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

3,100,000 SHARES

LOGO

SHOWBOAT, INC.

COMMON STOCK

----------------
PROSPECTUS
----------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

OPPENHEIMER & CO., INC.

, 1994

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the issuance and distribution of the Common Stock
offered in the Common Stock Offering, as set forth below, will be borne
entirely by the Company:

<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 22,666
Blue Sky Fees*..................................................... 20,000
NASD Fees.......................................................... 7,073
New York Stock Exchange Listing Fee*............................... 12,500
Transfer Agents' Fees*............................................. 5,000
Printing and Engraving Fees and Expenses*.......................... 75,000
Legal Fees and Expenses*........................................... 75,000
Accounting Fees and Expenses*...................................... 37,500
Miscellaneous Expenses*............................................ 95,261
--------
Total.......................................................... $350,000
========
</TABLE>
- ---------------------

*Estimated

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION/1/
------- --------------
<C> <S>
1.01 Form of Underwriting Agreement./2/
3.01 Restated Articles of Incorporation of the Company dated June 23, 1994.
4.01 Specimen Common Stock Certificate for the Common Stock of the Company.
4.03 Restated Bylaws of the Company dated February 25, 1993 are
incorporated herein by reference from the Company's Form 10-K for the
Year Ended December 31, 1992, Part IV, Item 14(a)(3), Exhibit 3.02.
4.04 Indenture relating to the 9 1/4% First Mortgage Bonds due 2008 is
incorporated by reference from the Company's Form 8-K dated May 18,
1993, Item 5, Exhibit 28.01
4.05 Bond Certificate relating to the 9 1/4% First Mortgage Bonds due 2008
is incorporated herein by reference from the Company's Form 8-K dated
May 18, 1993, Item 5, Exhibit 28.01.
4.06 Form of Indenture relating to the % Senior Subordinated Notes due
2009, including form of Note./2/
5.01 Opinion and consent of Kummer Kaempfer Bonner & Renshaw as to the
legality of securities being registered.

23.01 Consent of Kummer Kaempfer Bonner & Renshaw, contained in Exhibit
5.01.
23.02 Consent of KPMG Peat Marwick.
24.01 Power of Attorney./2/
</TABLE>
- ---------------------
/1/All exhibits which are incorporated by reference are incorporated from
the Company's respective periodic reports, Securities and Exchange Commission
File No. 1-7123.

/2/Previously filed.

II-1
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN THE CITY OF LAS VEGAS, STATE OF NEVADA ON JULY 8,
1994.

Showboat, Inc.

By: /s/ LEANN K. SCHNEIDER
_________________________________

LEANN K. SCHNEIDER
VICE PRESIDENT--
FINANCE AND CHIEF FINANCIAL
OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS OF
SHOWBOAT, INC. IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURES TITLE DATE

Chairman of the
* Board
- -------------------------------------
J.K. HOUSSELS

Director, President
* and Chief Executive
- ------------------------------------- Officer (Principal
J. KELL HOUSSELS, III Executive Officer)

Vice President--
/s/ LEANN K. SCHNEIDER Finance and Chief July 8, 1994
_____________________________________ Financial Officer
LEANN K. SCHNEIDER (Principal
Financial Officer
and Principal
Accounting Officer)

II-2
<PAGE>

SIGNATURES TITLE DATE
---------- ----- ----

Director
*
- -------------------------------------
WILLIAM C. RICHARDSON

Director
*
- -------------------------------------
JOHN D. GAUGHAN

Director
*
- -------------------------------------
JEANNE S. STEWART

Director, Executive
* Vice President and
- ------------------------------------- Chief Operating
FRANK A. MODICA Officer

Director and
* Secretary
- -------------------------------------
H. GREGORY NASKY

Director
*
- -------------------------------------
GEORGE A. ZETTLER

Director
*
- -------------------------------------
CAROLYN M. SPARKS

*By: /s/ R. CRAIG BIRD (Attorney-in-fact) July 8, 1994
___________________________
R. CRAIG BIRD

II-3
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
3.01 Restated Articles of Incorporation of the Company dated June
23, 1994.
4.01 Specimen Common Stock Certificate for the Common Stock of the
Company.
5.01 Opinion and consent of Kummer Kaempfer Bonner & Renshaw as to
the legality of securities being registered.
23.01 Consent of Kummer Kaempfer Bonner & Renshaw, contained in
Exhibit 5.01.
23.02 Consent of KPMG Peat Marwick.
</TABLE>

<PAGE>

GRAPHICS APPENDIX LIST

PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- --------------------------------------------------------------------------------
Inside Front Cover 1 Graphic No. 1 - An artist's rendering of the
contains graphics No. 1, Atlantic City Showboat expansion.
2 and 3
Graphic No. 2 - A picture of the renovated Pacific
Avenue entrance to the Atlantic City Showboat.

Graphic No. 3 - A picture of the Showboat Star
Casino riverboat.
- --------------------------------------------------------------------------------
Inside Front Cover 2 Graphic No. 4 - An artist's rendering of the
contains graphics No. 4 proposed Sydney Harbour Casino.
and 5
Graphic No. 5 - An artist's rendering of the lobby
at the proposed Sydney Harbour Casino.
- --------------------------------------------------------------------------------
Inside Front Cover 3 Graphic No. 6 - A world map with a yellow dot
contains graphics No. 6, marking Showboat's existing properties at Atlantic
7 and 8 City, New Jersey, Las Vegas, Nevada and Lake
Pontchartrain, Louisiana and a red dot marking
Showboat's announced expansion opportunities as of
June 1994: Sydney, Australia, East Chicago, Indiana
and St. Regis Mohawk, New York.
- --------------------------------------------------------------------------------

<PAGE>

GRAPHICS APPENDIX LIST

PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- ---------------------------------------------------------------------------
Graphic No. 7 - A map of portions of Wisconsin,
Michigan, Illinois and Indiana with a black star
marking the location of the proposed East Chicago
riverboat and a black circle marking the city of
Chicago, each within the center of a bullseye with
three lines indicating a 30, 60 and 120 mile radius.

Graphic No. 8 - A map of portions of Quebec,
Ontario, New York and Vermont with a black star in
the center of a bullseye marking the location of the
proposed St. Regis Casino in Hoganrburg, New York
and a black circle marking the city of Montreal with
distances marked for 30, 60 and 120 miles.
- --------------------------------------------------------------------------------
Inside Back Cover Graphic No. 9 - A picture of the Las Vegas Showboat.
contains graphics
No. 9 and 10 Graphic No. 10 - An artist's rendering of the Las
Vegas Showboat's proposed renovation and expansion.
- --------------------------------------------------------------------------------

<PAGE>

EXHIBIT 3.01

FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA

JUN 23 1994

209-60

CHERYL A.LAU SECRETARY OF STATE
/s/ Cheryl A.Lau

AMENDED AND RESTATED

ARTICLES OF INCORPORATION OF

SHOWBOAT, INC.

Nevada State File No. 209-60

The undersigned hereby certify:

1. That they are the President and Assistant Secretary,
respectively, of Showboat, Inc., a Nevada corporation.

2. That at a meeting of the Board of Directors of the Company duly
held in Las Vegas, Nevada on February 23, 1994, the Board of Directors
unanimously adopted, approved and recommended to its shareholders to amend the
Company's Articles of Incorporation to increase the amount of authorized common
stock the Company may issue to 50,000,000.

3. That at a duly held annual meeting of the shareholders of the
Company, held at 801 Boardwalk, Atlantic City, New Jersey on May 25, 1994 the
shareholders of the Company approved and adopted the following amendment to the
first paragraph of Article IV of the Articles of Incorporation previously deemed
advisable and proposed to the shareholders by the Board of Directors as follows:

The amount of the total authorized capital stock of the
Company is Fifty-One Million Dollars ($51,000,000) consisting of
fifty million (50,000,000) shares of common stock of the par
value of One Dollar ($1) per share ("Common Stock") and One
Million (1,000,000) shares of preferred stock of the par value of
One Dollar ($1) per share ("Preferred Stock").

4. That the required number of shares of common stock entitled to
vote on the proposed amendments was 14,992,195 shares, and that a vote of sixty-
six and two-thirds percent (66 2/3%) or more than 9,994,797 shares was required
to approve the foregoing amendment. No shares of preferred stock are issued.
<PAGE>

5. That the vote on the proposed amendment was as follows:

For 11,415,350
Against 1,248,556
Abstain 47,557

The vote on the foregoing proposed amendment exceeded that required to
approve said amendment.

6. The Articles of Incorporation as amended are restated as follows:

RESTATED ARTICLES OF INCORPORATION
----------------------------------

OF
--

SHOWBOAT, INC.
--------------

The name of the corporation is SHOWBOAT, INC.

The principal office of the corporation in Nevada is to be located at
Showboat, Inc., 2800 Fremont Street, Las Vegas, Nevada.

III

The nature of the business, or objects or purposes proposed to be
transacted, promoted, or carried on by the corporation are: To engage in any
lawful activity.

(a) In addition thereto, said corporation shall conduct a gaming
business in the State of Nevada, in accordance with the laws of the State of
Nevada and the United States of America.

The amount of the total authorized capital stock of the corporation is
Twenty One Million Dollars ($21,000,000.00) consisting of Twenty Million
(20,000,000) shares of common stock of the par value of One Dollar ($1.00) per
share ("Common Stock") and One Million (1,000,000) shares of preferred stock of
the par value of One Dollar ($1.00) per share ("Preferred Stock").

The Preferred Stock may be divided into and issued in series. If the
shares of any such class are to be issued in series, then
<PAGE>

each series shall be so designated as to distinguish the shares thereof from the
shares of all other series and classes. Any or all of the series of any such
class and variations and the relative rights and preferences as between
different series can be fixed and be determined by the Board of Directors. The
authority of the Board of Directors with respect to each series shall include,
without limitation thereto, the determination of any or all of the following and
the shares of each series may vary from the shares of any other series in the
following respects:

The Board of Directors of this corporation is hereby authorized to issue
the Preferred Stock at any time and from time to time, in one or more series and
for such consideration as may be fixed from time to time by the then Board of
Directors, but not less than the par value thereof. The number of shares to
comprise each such series, which number may be increased (except where otherwise
provided by the Board of Directors in creating such series) or decreased (but
not below the number of shares thereof then outstanding) shall be determined
from time to time by the Board of Directors. The Board of Directors is hereby
expressly authorized, before issuance of any shares of a particular series, to
determine any and all designations, preferences and relative, participating,
optional or other special rights, or qualifications, restrictions or limitations
thereof, pertaining to such series including but not limited to:

(1) Voting rights, if any, including, without limitation, the authority to
confer voting rights as to specified matters or issues such as
mergers, consolidations or sales of assets, or voting rights to be
exercised either together with holders of common stock as a single
class, or independently as a separate class;

(2) Rights, if any, permitting the conversion or exchange of any such
shares, at the option of the holder, into any other class or series of
shares of this corporation and the price or prices or the rates of
exchange and any adjustment thereto at which such shares will be
convertible or exchangeable;

(3) The rate of dividends, if any, payable on shares of such series, the
conditions and the dates upon which such dividends shall be payable
and whether such dividends shall be cumulative or non-cumulative;

(4) The amount payable on shares of such series in the event of any
liquidation, dissolution or distribution of the assets of or winding
up of the affairs of this corporation;
<PAGE>

(5) Redemption, repurchase, retirement and sinking fund rights,
preferences and limitations, if any, the amount payable on shares of
such series in the event of such redemption, repurchase or retirement,
the terms and conditions of any sinking fund, the manner of creating
such fund or funds and whether any of the foregoing shall be payable
in preference to, or in relation to, the dividends payable on any
other class or classes of stock, or cumulative or non-cumulative; and

(6) Any other preference and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of
shares of such series not fixed and determined herein, to the extent
permitted to do so by law.

All shares of Preferred Stock shall be of equal rank and shall be identical
except with respect to the particulars that may be fixed by the Board of
Directors as above provided and as to the date from which dividends thereon, if
any, shall be cumulative if made cumulative by the Board of Directors.

(a) No holders of shares of the corporation of whatever class shall have
any preference or right of subscription to any share of any class of shares of
the corporation authorized, issued or sold, or to be authorized, issued or sold,
or to any obligations or shares authorized or issued or to be authorized or
issued, and convertible into shares of any class or classes of the corporation,
nor to any right of subscription thereto, other than the extent, if any, as the
Board of Directors in its discretion may determine, in respect thereof, whether
in respect of any portion unissued or unsold of any original authorized issue or
otherwise.

(b) Deleted.

(c) Said corporation shall not make a public offering of any stock or
security of this corporation, unless such public offering or sale of security
has been first approved by the Nevada Gaming Commission.

(d) If at any time the Nevada Gaming Commission finds that any individual
owner of any stock or security of this corporation, pursuant to the laws of the
State of Nevada or regulations of the Gaming Commission, is unsuitable to
continue as a gaming licensee in this State, such owner shall immediately offer
such security or stock for purchase. If this corporation does not purchase any
such stock or security, the owner may offer it to other purchasers subject to
prior approval of the Nevada Gaming Commission, as provided by the laws of the
State of Nevada and regulations pursuant thereto.
<PAGE>

The members of the governing board shall be styled directors, and the
number, names and Post Office addresses of the Board of Directors are as
follows, there being eight directors:

J.K. HOUSSELS, SR. 1012 South Sixth Street
Las Vegas, Nevada

J.K. HOUSSELS, JR. 1425 Aztec Way
Las Vegas, Nevada

FRED MORLEDGE 2040 Edgewood Avenue
Las Vegas, Nevada

NELSON CONWAY 1317 South Sixth Street
Las Vegas, Nevada

JUDD PARKER 605 Lacy Lane
Las Vegas, Nevada

JOSEPH KELLEY 830 Kenny Way
Las Vegas, Nevada

JULIAN MOORE 701 Vegas Drive
Las Vegas, Nevada

HAROLD VALENTINE 3627 Medlock Drive
Phoenix, Arizona

The capital stock of the corporation, after the amount of the subscription
price has been paid in, shall not be subject to assessment.

VII

The name and Post Office addresses of each of the incorporators signing the
Articles of Incorporation are:

C.R. TICE 320 W. Cleveland, Apt. 8
Las Vegas, Nevada

FRIEDA FIFIELD 1703 Carson Avenue
Las Vegas, Nevada

LEE B. DIAL 1337 Darmak Drive
Las Vegas, Nevada
<PAGE>

VIII

The corporation shall have perpetual existence.

The affirmative vote of voting shares necessary to approve a sale,
lease or exchange of property or assets of this corporation, or a merger or
consolidation involving this corporation, shall be 66-2/3# of the outstanding
voting shares.

The affirmative vote of voting shares necessary to approve an
amendment to the Articles of Incorporation of this corporation shall be 66-2/3%
of the outstanding voting shares.
XI

A director or officer of the corporation shall not be personally
liable to this corporation or its stockholders for damages for breach of
fiduciary duty as a director or officer, but this article shall not eliminate or
limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law or (ii) the
unlawful payment of dividends. Any repeal or modification of this article by
the stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the corporation for acts or omissions prior to such repeal or
modification.

XII

Pursuant to the requirements of the Nevada Gaming Control Act ("Nevada
Act") and the New Jersey Casino Control Act ("New Jersey Act") and so long as it
remains, either a holding company or intermediary company as to the holder of a
gaming or casino license in either Nevada or New Jersey, all securities of this
corporation shall be held subject to the condition that if a holder thereof is
found to be unsuitable pursuant to the Nevada Act by the Nevada Gaming
Commission ("Nevada Commission") or is found to be disqualified pursuant to the
New Jersey Act by the New Jersey Casino Control Commission ("New Jersey
Commission"), such holder shall dispose of his interest in this corporation
promptly after such holder's receipt of written notice of his unsuitability or
disqualification. Promptly following its own receipt of notice from the Nevada
Commission or the New Jersey Commission, the corporation shall either deliver
such written notice personally to the unsuitable or disqualified holder or shall
mail it to such holder by certified mail, return receipt requested, to the
address shown on the corporation's books and records. Once such holder has been
found unsuitable by the Nevada Commission or disqualified by
<PAGE>

the New Jersey Commission, this corporation shall take all steps required under
the Nevada Act or the New Jersey Act with respect to such unsuitable or
disqualified holder. If any unsuitable or disqualified holder fails to dispose
promptly of his securities, such unsuitable or disqualified holder shall
indemnify the cor-poration for any and all direct or indirect costs, including
attorneys' fees, incurred by the corporation as a result of such holder's
continuing ownership or failure to divest promptly.

XIII

The corporation is authorized to redeem control shares (as that term
is defined in NRS 78.3781, et seq.), as provided in NRS 78.3792, as amended from
time to time.

XIV

A. In addition to any affirmative vote required by law or these
Articles of Incorporation or the Bylaws of the corporation, and except as
otherwise expressly provided in Section B of this Article XIV, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, an
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of such Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than sixty-six and two-thirds
percent (66-2/3%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock (as hereinafter defined), voting
together as a single class, excluding Voting Stock beneficially owned by such
Interested Stockholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage or separate
class vote may be specified, by law or in any agreement with any national
securities exchange or otherwise.

B. The provisions of Section A of this Article XIV shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by
any other provision of these Articles of Incorporation or the Bylaws of the
corporation, or any agreement with any national securities exchange, if all the
conditions specified in either of the following Paragraphs 1 or 2 are met or, in
the case of a Business Combination not involving the payment of consideration to
the holders of the Corporation's outstanding Capital Stock (as hereinafter
defined), if the condition specified in the following Paragraph 1 is met:

1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such
<PAGE>

approval is made prior to or subsequent to the acquisition of, or
announcement of public disclosure of the intention to acquire, beneficial
ownership of the Voting Stock that caused the Interested Stockholder to
become an Interested Stockholder) of the Continuing Directors (as
hereinafter defined).

2. All of the following conditions shall have been met:

(a) The aggregate per share amount of cash and the Fair Market
Value (as hereinafter defined), as of the date of the consummation of
the Business Combination, of consideration other than cash to be
received by holders of common stock in such Business Combination shall
be at least equal to the highest amount determined under clauses (i),
(ii), (iii), and (iv) below:

(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any
share of common stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of
common stock (x) within the two-year period immediately prior to
the first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the transaction
in which it became an Interested Stockholder, whichever is
higher, in either case as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification affecting
or relating to the common stock;

(ii) the Fair Market Value per share of common stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the "Determination
Date"), whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification affecting
or relating to the common stock;

(iii) (if applicable) the price per share equal to the Fair
Market Value per share of common stock determined pursuant to the
immediately preceding clause (ii), multiplied by the ratio of (x)
the highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf
of the Interested Stockholder for any share of common
<PAGE>

stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of common stock
within the two-year period immediately prior to the Announcement
Date, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification affecting or relating to the
common stock to (y) the Fair Market Value per share of common
stock on the day immediately preceding the first day in such two-
year period on which the Interested Stockholder acquired
beneficial ownership of any share of common stock, as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification affecting or relating to the common stock; and

(iv) the corporations' net income per share of common stock
for the four full consecutive fiscal quarters immediately
preceding the Announcement Date, multiplied by the higher of the
then price/earnings multiple (if any) of such Interested
Stockholder or the highest price/earnings multiple of the
corporation within the two-year period immediately preceding the
Announcement Date (such price/earnings multiples being determined
as customarily computed and reported in the financial community).

(b) The aggregate amount per share of cash and the Fair Market
Value, as of the date of the consummation of the Business Combination,
of consideration other than cash to be received by holders of shares
of any class or series of outstanding Capital Stock, other that common
stock, shall be at least equal to the highest amount determined under
clauses (i), (ii), (iii), and (iv) below:

(i) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any
share of such class or series of Capital Stock in connection with
the acquisition by the Interested Stockholder or beneficial
ownership of shares of such class or series of Capital Stock (x)
within the two-year period immediately prior to the Announcement
Date or (y) in the transaction in which it became an interested
Stockholder, whichever is higher, in either case as adjusted for
any subsequent stock split, stock dividend, subdivision or
reclassification affecting or relating to such class or series of
Capital Stock;
<PAGE>

(ii) the Fair Market Value per share of such class or series
of Capital Stock on the Announcement Date or on the Determination
Date, whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification affecting
or relating to such class or series of Capital Stock;

(iii) (if applicable) the price per share equal to the Fair
Market Value per share of such class or series of Capital Stock
determined pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of such class or series of Capital
Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of such class or
series of Capital Stock within the two-year period immediately
prior to the Announcement Date, as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification
affecting or relating to such class or series of Capital Stock to
(y) the Fair Market Value per share of such class or series of
Capital Stock on the day immediately preceding the first day in
such two year period on which the Interested Stockholder acquired
beneficial ownership of any share of such class or series of
Capital Stock, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification affecting or relating
to such class or series of Capital Stock; and

(iv) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or series of
Capital Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the corporation regardless of whether the Business Combination
to be consummated constitutes such an event.

The provisions of this Paragraph 2 shall be required to be met with respect
to every class or series of outstanding Capital Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Capital Stock.
<PAGE>

(c) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the
Interested Stockholder in connection with its direct or indirect
acquisition of beneficial ownership of shares of such class or series
of Capital Stock. If the consideration so paid for shares of any
class or series of Capital Stock varied as to form, the form of
consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.

(d) After the Determination Date and prior to the consummation of
such Business Combination: (i) except as approved by a majority of
the Continuing Directors, there shall have been no failure to declare
and pay at the regular dates therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms of
any outstanding Capital Stock; (ii) there shall have been no reduction
in the annual rate of dividends paid on the common stock (except as
necessary to reflect any stock split, stock dividend or subdivision of
the common stock), except as approved by a majority of the Continuing
Directors; (iii) there shall have been an increase in the annual rate
of dividends paid on the common stock as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has
the effect of reducing the number of outstanding shares of common
stock, unless the failure so to increase such annual rate is approved
by a majority of the Continuing Directors; and (iv) such Interested
Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction
that results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction that, after giving effect
thereto, would not result in any increase in the Interested
Stockholder's percentage beneficial ownership of any class or series
of Capital Stock.

(e) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") or, any subsequent
provisions replacing the Exchange Act, shall be mailed to all
shareholders of the corporation at least 30 days prior to the
consummation of such Business Combination (whether or not
<PAGE>

such proxy or information statement is required to be mailed pursuant
to the Exchange Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a
prominent place, any statement as to the advisability (or
inadvisability) of the Business Combination that the Continuing Direc-
tors, or any of them, may choose to make and, if deemed advisable by a
majority of the Continuing Directors, the opinion of an investment
banking firm selected by a majority of the Continuing Directors as to
the fairness (or absence thereof) of the terms of the Business
Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested
Stockholder and its Affiliates or Associates, such investment banking
firm to be paid a reasonable fee for its services by the corporation.

(f) Such Interested Stockholder shall not have made any major
changes in the corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.

C. The following definitions shall apply with respect to this Article XIV:

1. The term "Business Combination" shall mean:

(a) Any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other company (whether or not itself an
Interested Stockholder) which is or after such merger or consolidation
would be an Affiliate or Associate of an Interested Stockholder; or

(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit of
any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder involving any assets, securities, obligations
or commitments of the corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder which has aggregate Fair Market Value and/or involves
aggregate commitments of $10,000,000 or more or constitutes more than
5 percent of the book value of the total assets (in the case of
transactions involving assets or commitments other than capital stock)
or 5 percent of the shareholders' equity (in the case of
<PAGE>

transactions in capital stock) of the entity in question (the
"Substantial Part"), as reflected in the most recent fiscal year end
consolidated balance sheet of such entity existing at the time the
shareholders of the corporation would be required to approve or
authorize the Business Combination involving the assets, securities,
obligations and/or commitments constituting any Substantial Part;
provided that any arrangement, whether as employee, consultant or
otherwise, other than as a director, pursuant to which any Interested
Stockholder or any Affiliate or Associate thereof shall, directly or
indirectly, have any control over or management of any aspect of the
business or affairs of the corporation, shall be deemed to be a
"Business Combination" irrespective of the value test set forth above;
or

(c) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation or for any amendment to the
corporation's Bylaws; or

(d) any reclassification of securities (including any reverse
stock split), or recapitalization of the corporation, or any merger or
consolidation of the corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly,
of increasing the proportionate shares of any class or series of
Capital Stock, or any securities convertible into Capital Stock or
into equity securities of any Subsidiary, that is beneficially owned
by any Interested Stockholder or any affiliate or Associate of any
Interested Stockholder; or

(e) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses (a)
to (d).

2. The term "Capital Stock" shall mean all capital stock of the
corporation authorized to be issued from time to time under Article IV of
these Articles of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
shareholders of the corporation generally.

3. The term "person" shall mean any individual, firm, company or
other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
<PAGE>

4. The term "Interested Stockholder" shall mean any person (other than the
corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan
when acting in such capacity) who (a) is, or has announced or publicly
disclosed a plan or intention to become, the beneficial owner of Voting
Stock representing fifteen percent (15#) or more of the votes entitled to
be cast by the holders of all then outstanding shares of Voting Stock; or
(b) is an Affiliate or Associate of the corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner of Voting Stock representing fifteen percent (15#) or more
of the votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock.

5. A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement
or undertaking; or (c) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its
Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section C, the
number of shares of Capital Stock deemed to be outstanding shall include
shares deemed beneficially owned by such person through application of this
Paragraph 5 of Section C, but shall not include any other shares of Capital
Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise.

6. The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act (the
term "registrant" in said Rule 12b-2 meaning in this case the corporation).

7. The term "Subsidiary" means any company of which a majority of any
class of equity security is beneficially owned by the corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 4 of this Section C, the term
"Subsidiary" shall
<PAGE>

mean only a company of which a majority of each class of equity security is
beneficially owned by the corporation.

8. The term "Continuing Director" means (i) any member of the Board
of Directors of the corporation (the "Board of Directors"), while such
person is a member of the Board of Directors, who is not an Interested
Stockholder or an Affiliate or Associate or representative of the
Interested Stockholder and was a member of the Board of Directors prior to
the time that the Interested Stockholder became an Interested Stockholder,
and (ii) any person who subsequently becomes a member of the Board of
Directors, while such person is a member of the Board of Directors, who is
not an Interested Stockholder or an Affiliate or Associate or
representative of the Interested Stockholder, if such person's nomination
for election or election to the Board of Directors is recommended or
approved by a majority of the Continuing Directors then in office.

9. The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock Exchange-
Listed Stocks, or, if such stock is not quoted on the Composite Tape, on
the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered
under the Exchange Act on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the
date in question on the National Association of Securities Dealers, Inc.
Automated Quotation System or any similar system then in use, or if no such
quotations are available, the fair market value on the date in question of
a share of such stock as determined by a majority of the Continuing
Directors in good faith; and (c) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.

10. In the event of any Business Combination in which the corporation
survives the phrase "consideration other than cash to be received" as used
in Paragraphs 2.a and 2.b of Section B of this Article XIV shall include
the shares of common stock and/or the shares of any other class or series
of Capital Stock retained by the holders of such shares.

D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article XIV, on the basis of information
known to them after reasonable inquiry,
<PAGE>

all questions arising under this Article XIV, including, without limitation, (a)
whether a person is an Interested Stockholder, (b) the number of shares of
Capital Stock or other securities beneficially owned by any person, (c) whether
a person is an Affiliate or Associate of another (d) whether a Proposed Action
(as hereinafter defined) is with, or proposed by, or on behalf of an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder, (e)
whether the assets that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
corporation or Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $10,000,000 or more, (f) whether the assets or securities that
are the subject of any Business Combination constitute a Substantial Part and
(g) to what extent an adjustment is appropriate (including an adjustment to
paragraph 2 of Section B of this Article XIV) in respect of any provision
contained within this Article XIV as a result of a merger, consolidation, stock
split, stock dividend, extraordinary cash dividend, subdivision,
reclassification, recapitalization or similar transaction. Any such
determination made in good faith shall be binding and conclusive on all parties.
For purposes of this Article XIV (including without limitation paragraph 2 of
Section B and subparagraph (g) of this Section D of this Article XIV), the term
"corporation" including, without limitation, any reference to any shares of
capital stock of the corporation or the holders or prices or value of such
shares shall be deemed to include any predecessor corporation and the
corresponding shares of capital stock of such predecessor corporation and the
holders and prices and value of such shares.

E. Nothing contained in this Article XIV shall be construed to relieve any
Interested Stockholder from any fiduciary obligation imposed by law.

F. The fact that any Business Combination complies with the provisions of
Section B of this Article XIV shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the corporation, nor shall such compliance
limit, prohibit or other wise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.

G. For the purposes of this Article XIV, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article XIV (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who
<PAGE>

thereafter would become such if (1) after the Interested Stockholder became
such, the Proposed Action is proposed following the election of any director of
the Corporation who with respect to such Interested Stockholder, would not
qualify to serve as a Continuing Director, or (2) such Interested Stockholder,
Affiliate, Associate or person votes for or consents to the adoption of any such
Proposed Action, unless as to such Interested Stockholder, Affiliate, Associate
or person a majority of the Continuing Directors makes a good faith
determination that such Proposed Action is not proposed by or on behalf of such
Interested Stockholder, Affiliate, Associate or person, based on information
known to them after reasonable inquiry.

H. Notwithstanding any other provision of these Articles of Incorporation
or the Bylaws of the corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, these Articles of
Incorporation or the Bylaws of the corporation), any proposal to amend, repeat
or adopt any provision of these Articles of Incorporation inconsistent with this
Article XIV which is proposed by or on behalf of an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder shall require the
affirmative vote of the holders of not less than 66-2/3# of the votes entitled
to be cast by the holders of all the then outstanding shares of Voting Stock,
voting together as a single class and excluding Voting Stock beneficially owned
by such Interested Stockholder.

IN WITNESS WHEREOF, the undersigned have executed the Amended and
Restated Articles of Incorporation of Showboat, Inc. on June 10, 1994.
--

/s/ J.K. Houssels, III /s/ John N. Brewer
- ----------------------------- -----------------------------------
J.K. Houssels, III, President John N. Brewer, Assistant Secretary

STATE OF NEW JERSEY )
) ss:
COUNTY OF ATLANTIC )

On this 10th day of June, 1994, before me, the undersigned, a Notary
----
Public in and for the County of Atlantic, State of New Jersey, duly commissioned
and sworn, personally appeared J.K. HOUSSELS, III, known/proved to me to be the
PRESIDENT of SHOWBOAT, INC., that executed the within instrument and known to be
the person who affixed his name thereto as such J.K. HOUSSELS, III, PRESIDENT,
and who acknowledged to me that he executed the
<PAGE>

same freely and voluntarily and for the uses and purposes therein mentioned.

BRENDA SUE WALLACE /s/ Brenda Sue Wallace
NOTARY PUBLIC OF NEW JERSEY ------------------------------
My Commission Expires Jan 30, 1996 NOTARY PUBLIC

STATE OF NEVADA)
) ss:
COUNTY OF CLARK)

On this 10th day of June, 1994, before me, the undersigned, a Notary
----
Public in and for the County of Clark, State of Nevada, duly commissioned and
sworn, personally appeared JOHN N. BREWER, known/proved to me to be the
ASSISTANT SECRETARY of SHOWBOAT, INC., that executed the within instrument and
known to be the person who affixed his name thereto as such JOHN N. BREWER,
ASSISTANT SECRETARY, and who acknowledged to me that he executed the same freely
and voluntarily and for the uses and purposes therein mentioned.

SEAL

ANGELA M. PETERSON /s/ Angela M. Peterson
------------------------------
Notary Public - Nevada NOTARY PUBLIC

Clark County

My appt. exp. Nov. 15, 1997

<PAGE>

EXHIBIT 4.01

[GRAPHIC OF CERTIFICATE OF STOCK APPEARS HERE]

<PAGE>

SHOWBOAT, INC.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM -- as tenants in common UNIF GIFT MIN ACT --______Custodian_______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act:_________________
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED _____ HEREBY SELL, ASSIGN AND TRANSFER UNTO

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

- ---------------------------------------

- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------
OF THE COMMON STOCK REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
ATTORNEY
- ----------------------------------------------------------------------
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.

DATED
----------------------

- --------------------------------------------------------------------------------
NOTICE: THE SIGNATURE IN THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATIONS OF ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature Guarantee

- --------------------------------------------------------------------------------
Signature must be guaranteed by an officer of a commercial bank or by a
stockbroker who is a member of a national stock exchange.

<PAGE>

EXHIBIT 4.01

GRAPHICS APPENDIX LIST

PAGE WHERE
GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS REFERENCE
- --------------------------------------------------------------------------------
Front Page contains Graphic No. 1 - A picture of J.K. Houssels, Sr.
Graphics No. 1 and
No. 2 Graphic No. 2 - A picture of Joseph H. Kelley
- --------------------------------------------------------------------------------

<PAGE>

EXHIBIT 5.01

July 8, 1994

Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549

Re: Showboat, Inc.
Registration Statement on Form S-3
Registration No. 33-54327

Ladies and Gentlemen:

As counsel to Showboat, Inc., a Nevada corporation (the "Company"), we are
rendering this opinion in connection with the registration by the Company of
3,565,000 shares of Common Stock, $1.00 par value (including 100,000 shares to
be sold by a selling shareholder and 465,000 shares subject to over-allotment
options) (collectively, the "Shares"), of the Company and the proposed sale
thereof.

We have examined all instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.

Based on such examination and subject to the limitations hereinabove
provided, we are of the opinion that the Company has the full power and
authority under the laws of the State of Nevada, and under its Articles of
Incorporation and Bylaws, as amended, to issue the Shares which will be sold by
it and that such Shares are validly authorized shares of Common Stock of the
Company, and when sold, will be legally issued, fully paid and nonassessable and
not subject to any preemptive or similar rights.
<PAGE>

Securities and Exchange Commission
July 8, 1994
Page 2

We hereby consent to the filing of the foregoing Opinion as an Exhibit to
the above-referenced Registration Statement filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and to the use
of our name in such Registration Statement and in the related prospectus under
the heading "Legal Matters."

Very truly yours,

/S/ KUMMER KAEMPFER BONNER & RENSHAW
------------------------------------
KUMMER KAEMPFER BONNER & RENSHAW

<PAGE>

Exhibit 23.02

ACCOUNTANT'S CONSENT

The Board of Directors
Showboat, Inc.

We consent to the use of our reports included and incorporated herein by
reference and to the references to our Firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.

KPMG PEAT MARWICK

Las Vegas, Nevada

July 7, 1994