AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1999.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LOUISIANA CASINO CRUISES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
LOUISIANA 7999 72-1196619
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1717 NORTH RIVER ROAD
BATON ROUGE, LOUISIANA 70802
(225) 709-7777
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
W. PETER TEMLING
3250 MARY STREET, 5TH FLOOR
MIAMI, FLORIDA 33133
(305) 445-4200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
RICHARD E. SCHATZ, ESQ.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
150 WEST FLAGLER STREET, SUITE 2200
MIAMI, FLORIDA 33130
(305) 789-3517
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11% Series B Senior Secured Notes $55,000,000 100% $55,000,000 $15,290
Due 2005
=========================================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(1).
</FN>
</TABLE>
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 SECURITIES ACT OF 1933, AS AMENDED, 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>
SUBJECT TO COMPLETION, DATED MARCH 19, 1999
OFFER TO EXCHANGE
11% SERIES B SENIOR SECURED NOTES DUE 2005
FOR ANY AND ALL
OUTSTANDING 11% SENIOR SECURED NOTES DUE 2005
OF LOUISIANA CASINO CRUISES, INC.
THE 11% SENIOR SECURED NOTES DUE 2005 --
/bullet/ were originally offered and sold on January 27, 1999 pursuant
to Rule 144A of the Securities and Exchange Commission
/bullet/ will mature on December 1, 2005
/bullet/ bear interest at the annual rate of 11%, payable semi-annually
beginning on June 1, 1999
/bullet/ are secured by substantially all of our current and future
assets other than certain excluded assets, and rank senior in
right of payment to any of our subordinated indebtedness and
rank equally with any of our senior indebtedness
/bullet/ are subject to redemption or repurchase by us under certain
circumstances
THE 11% SERIES B SENIOR SECURED NOTES DUE 2005 --
/bullet/ are offered in exchange for an equal principal amount of our
outstanding 11% Senior Secured Notes
/bullet/ will evidence the same indebtedness as our outstanding 11%
Senior Secured Notes and will be entitled to the benefits of
the indenture under which those notes were issued
/bullet/ are substantially identical in all material respects to our
outstanding 11% Senior Secured Notes, except for certain
transfer restrictions and registration rights relating to the
outstanding 11% Senior Secured Notes
THE EXCHANGE OFFER --
/bullet/ expires at 5:00 P.M., New York City time, on
______________________ , 1999, unless extended
/bullet/ is our offer to exchange $1,000 principal amount of our 11%
Series B Senior Secured Notes for each $1,000 principal amount
of our outstanding 11% Senior Secured Notes
/bullet/ is made to satisfy our obligations under a Registration Rights
Agreement which we entered into with the initial purchaser of
our 11% Senior Secured Notes
/bullet/ will terminate the rights of most holders of any outstanding
11% Senior Secured Notes to exercise registration rights under
the Registration Rights Agreement
/bullet/ is not a taxable exchange for U.S. Federal income tax purposes
/bullet/ is not subject to any condition other than that the Exchange
Offer not violate applicable law or any applicable
interpretation of the Staff of the Securities and Exchange
Commission
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 7 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ____________, 1999
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS
PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
THIS PROSPECTUS INCLUDES SPECIFIC TERMS OF THE NOTES WE ARE OFFERING, AS WELL AS
INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE YOU
TO READ THIS PROSPECTUS IN ITS ENTIRETY.
THE COMPANY
We own and operate the Casino Rouge, the leading riverboat gaming
facility in Baton Rouge, Louisiana. The Casino Rouge is one of only two licensed
riverboat gaming facilities in Baton Rouge. For the fiscal year ended November
30, 1998, we generated $70.8 million of revenues and achieved a 59.3% market
share of the approximately $120 million of casino gaming "win" in Baton Rouge in
1998. The Louisiana state constitution currently limits the Baton Rouge market
to its two existing gaming licenses, absent a referendum election in the parish.
In addition, the approximately 1,600 video poker machines in four Baton Rouge
area parishes in non-casino locations such as restaurants, taverns,
hotels/motels and truckstops generated approximately $80 million of annual video
poker win during the twelve months ended June 30, 1998. A recent referendum,
which will become effective in July 1999, will prohibit video poker outside of
casinos in these parishes. The Company anticipates that it will capture a share
of this $80 million market, based upon a recent survey of video poker players in
these parishes.
The Casino Rouge features a four-story, 47,000 square foot riverboat
casino, replicating a 19th century Mississippi River paddlewheel steamboat, and
a two-story, 58,000 square foot dockside embarkation building. Our riverboat has
a capacity of 1,800 customers and emphasizes spaciousness and excitement with
its ample aisle space, 15-foot ceilings, large central atrium and specially
designed lighting. The overall effect avoids the cramped atmosphere found in
many riverboat casinos. We offer patrons a selection of 946 gaming machines and
43 table games in 28,000 square feet of gaming space spread over three decks. In
fiscal 1998, our dockside embarkation facility underwent a $2.3 million
renovation and offers a panoramic view of the Mississippi River. This facility
features a variety of amenities, including:
/bullet/ the new 268-seat "International Marketplace
Buffet;"
/bullet/ an array of food, bar and lounge areas;
/bullet/ a new meeting and planning center; and
/bullet/ a gift shop.
All of our facilities are open seven days a week, 24 hours a day with
eight cruises scheduled daily.
The Casino Rouge is located on a 23-acre site on the east bank of the
Mississippi River in the East Baton Rouge Downtown Development District, less
than one-quarter mile from the Louisiana state capital complex. The site is
within approximately one mile of both Interstate 10 and Interstate 110. In
addition, the site has convenient parking for approximately 1,100 cars adjacent
to the embarkation facility with potential capacity for a total of 1,550 spaces.
COMPETITION
Our principal competitor is the only other riverboat casino licensed in
the Baton Rouge market, the "Belle of Baton Rouge." Situated approximately a
mile and a half south of the Casino Rouge, the Belle of Baton Rouge opened
September 30, 1994 and is owned and operated by Argosy Gaming Company. In
connection with Argosy's gaming license, Argosy agreed to build a hotel and to
be subject to an additional $2.50 admission tax per person until construction of
the hotel commences. To date, Argosy has not started development of a hotel, and
it is unclear if and when such development will commence. The additional
admission tax costs Argosy approximately $3.0 million annually, putting it at an
operating disadvantage as compared to us.
We also face secondary competition from:
/bullet/ three existing New Orleans riverboat
casinos
/bullet/ two land-based Native American casinos
within 65 miles of Baton Rouge; and
/bullet/ Mississippi casinos along the Gulf Coast.
Additionally, a land-based casino in New Orleans, which halted
construction and closed its temporary casino in November 1995, recently resumed
construction under changed ownership and operations are expected to begin in
late 1999. Fourteen of the fifteen authorized riverboat licenses in Louisiana
are currently issued, and there are no proposals currently in the legislature to
create additional authorized riverboat licenses.
- 1 -
<PAGE>
OPERATING STRATEGY
Key elements of our operating strategy include the following:
/bullet/ FOCUS ON THE LOCAL BATON ROUGE MARKET. Our operating strategy
is focused primarily on catering to persons residing within
the nine parishes of the greater Baton Rouge market. We draw
approximately 85% of our customers from within a 25 mile
radius and nearly all of our customers from within a 50 mile
radius. Baton Rouge, the capital of Louisiana, is one of the
fastest growing cities in Louisiana, with approximately
620,000 people residing in the greater Baton Rouge
metropolitan area and 1.1 million people within a 50-mile
radius. The population within a 50-mile radius of Baton Rouge
is expected to increase by nearly 5% by 2002. The downtown
Baton Rouge business district has been experiencing a
revitalization, due in part to the consolidation of state
buildings within close proximity of each other. We expect this
consolidation to have a positive impact on us, particularly
since the largest administrative complex, a new 465,000 square
foot facility, will be built directly across the street from
the Casino Rouge.
/bullet/ ACCESS NEW VIDEO POKER MARKET OPPORTUNITY. We will seek to
capitalize on any increased demand for video poker resulting
from the recent video poker referendum that will prohibit
video poker outside of casinos in four local parishes around
Baton Rouge beginning in July 1999. During the twelve months
ended June 30, 1998, the four parishes generated approximately
$80 million of non-casino based video poker win from
approximately 1,600 video poker machines. Our recent survey of
video poker players within these parishes indicates that the
Casino Rouge has the opportunity to gain inroads into this
market with minimal capital expenditures or changes to our
existing casino floor plan. The Casino Rouge currently has 139
video poker machines and plans to add more machines to address
this new opportunity.
/bullet/ FURTHER BUILD OUR ESTABLISHED CUSTOMER BASE THROUGH TARGETED
MARKETING. We use frequent promotional programs to attract
target customers and establish a high level of customer
recognition. In addition to aggressive marketing through radio
and newspaper advertising, we sponsor promotions designed for
groups such as senior citizens, petrochemical industry shift
workers and attendees at local college sporting events. We
also utilize an electronic player tracking system to monitor
frequency and level of play for our slot club customers,
allowing us to focus our marketing efforts, customize our
product offering and build customer loyalty. Members of our
"Players" club receive special privileges, such as entrance to
slot tournaments, bonus play prizes based upon level of play
and complimentary meals. This database and established
customer base is a key asset with approximately 200,000 club
members as of November 30, 1998.
/bullet/ OPTIMIZE MIX OF GAMES. We continually attune our overall game
mix to appeal to the local Baton Rouge target market.
Approximately 75% of the Casino Rouge's gaming positions are
gaming machines. Our 946 gaming machines include denominations
from $0.05 to $100.00, with over 95% of the machines $1.00 or
lower in denomination. We have also recently added gaming
machines that are popular at Native American casinos, but
which were previously unlicensed for use outside of such
casinos. We intend ultimately to increase the number of our
gaming machines to more than 1,000. The 43 table games offered
by the Casino Rouge include craps, roulette, blackjack,
mini-baccarat, Caribbean Stud, Let-It-Ride, American Poker and
a Big Six Wheel, primarily with low minimum betting limits. We
have also recently reconfigured our floor to provide
continuous poker games.
/bullet/ ENHANCE APPEAL OF PRODUCT OFFERINGS. To capitalize on the
popularity of the Casino Rouge and to further penetrate the
local market, in fiscal 1998 we completed a $2.3 million
capital improvement project, which significantly enhanced our
dockside facilities. These improvements include the new
"International Marketplace Buffet" and new meeting and
planning facilities, as well as significant renovations to the
riverboat,
- 2 -
<PAGE>
guest walkway and the pavilion area. We also recently upgraded
our food offering with the hire of a regionally-recognized
chef. In addition, we periodically host in temporary tent
facilities a variety of special events, such as holiday
parties, concerts and boxing matches which serve to increase
traffic flow for the Casino Rouge. These events have been
extremely popular and typically sell out. As a result, we are
evaluating the construction of permanent entertainment
facilities, which would be more cost effective and increase
our capacity.
/bullet/ PROVIDE SUPERIOR CUSTOMER SERVICE. One of the primary areas of
our business strategy is to provide our customers with a high
level of personal service. We train our employees to interact
with our guests and we continually strive to instill in each
employee a dedication to superior service designed to exceed
our guests' expectations. To this end, we have implemented
extensive training programs and instituted programs to
incentivize our employees to provide a high level of customer
service.
COMPANY MANAGEMENT AND OWNERSHIP
The Casino Rouge is managed by CRC Holdings, Inc., doing business as
Carnival Resorts and Casinos, an experienced operator of gaming facilities and
our majority shareholder. In addition to the Casino Rouge, CRC operates Casino
Rama, located north of Toronto, Canada, for the Chippewas of Rama First Nations
and the Ontario Casino Corporation. CRC also develops other casinos and hotels
including a hotel/casino, retail and condominium project near Las Vegas, Nevada,
and a casino development project near Spokane, Washington for the Kalispel Tribe
of Indians.
On February 17, 1999, CRC announced that it had signed a definitive
agreement to merge with Jackpot Enterprises, Inc., which presently operates one
of the largest gaming machine route operations in Nevada aggregating
approximately 4,300 gaming machines at approximately 400 locations. Gaming
machine route operations include the operation of machines at retail stores
(supermarkets, drug stores, merchandise stores and convenience stores), bars and
restaurants. If the merger is consummated, Jackpot, as a successor to CRC, would
succeed to CRC's ownership of us, and responsibility for handling all aspects of
the Casino Rouge's management. See "Certain Relationships and Related
Transactions." We can not assure you, however, when that merger will be
consummated, if ever.
------------------------------------
Our executive offices are located at 1717 North River Road, Baton
Rouge, Louisiana, 70802 and our telephone number is (225) 709-7777.
- 3 -
<PAGE>
THE INITIAL OFFERING
Pursuant to a Purchase Agreement dated as of January 27, 1999 (the
"Purchase Agreement"), we sold our 11% Senior Secured Notes due 2005 (the "Old
Notes") in an aggregate principal amount of $55.0 million to the initial
purchaser of those Old Notes on January 27, 1999. The initial purchaser of the
Old Notes subsequently resold the Old Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") and to certain institutional accredited investors (as defined
in Rule 501(A)(1), (2), (3) or (7) under the Securities Act). The net proceeds
from the offering of the Old Notes were used to repay our
Senior Secured Increasing Rate Notes due 2001 (the "1998 Notes") and for general
corporate purposes.
THE EXCHANGE OFFER
/bullet/ SECURITIES OFFERED. We are offering up to $55.0 million aggregate
principal amount of our 11% Series B Senior Secured Notes due 2005 (the
"New Notes," and collectively with the Old Notes, the "Notes"). The
terms of the New Notes and the Old Notes are substantially identical in
all material respects, except that certain transfer restrictions,
registration rights and liquidated damages for defaults under the
Registration Rights Agreement, which we entered into with the initial
purchaser of the Old Notes, will not apply to the New Notes. See
"Description of Notes."
/bullet/ THE EXCHANGE OFFER. We will exchange $1,000 principal amount of New
Notes for each $1,000 principal amount of Old Notes. See "The Exchange
Offer" for a description of the procedures for tendering Old Notes.
This exchange offer satisfies our registration obligations under the
registration rights agreement. Upon consummation of the exchange offer,
if you were not prohibited from participating in the exchange offer and
did not tender your Old Notes, you will not have any registration
rights under the registration rights agreement with respect to your
nontendered Old Notes, and your Old Notes will continue to be subject
to the restrictions on transfer contained in the legend thereon.
/bullet/ TENDERS, EXPIRATION DATE; WITHDRAWAL; EXCHANGE DATE. The Exchange Offer
will expire at 5:00 p.m., New York City time, on ______________, 1999,
or such later date and time to which we may extend it. We will not
extend the exchange offer more than 30 business days from the date of
this Prospectus. You may withdraw your tender of Old Notes and retender
your Old Notes at any time prior to the expiration date. We will return
any Old Notes which we do not accept for exchange without expense to
you as promptly as practicable after the expiration or termination of
the exchange offer. If you properly tender and do not withdraw your Old
Notes, we will deem them to be accepted for exchange on the first
business day following the expiration date or as soon as practicable
thereafter.
/bullet/ ACCRUED INTEREST ON THE NEW NOTES. Your New Notes will bear interest
from the most recent date to which we have paid interest on your
corresponding Old Note or, if no interest has yet been paid, from
January 27, 1999.
/bullet/ FEDERAL INCOME TAX CONSIDERATIONS. The exchange offer will not result
in any income, gain or loss to you or us for federal income tax
purposes. See "Certain Federal Income Tax Considerations."
/bullet/ USE OF PROCEEDS. We will not receive any proceeds from the exchange of
New Notes for the Old Notes pursuant to the exchange offer.
/bullet/ EXCHANGE AGENT. First Trust National Association, the trustee under the
indenture relating to the Notes, is serving as exchange agent for the
exchange offer.
CONSEQUENCES OF EXCHANGING OR FAILURE TO
EXCHANGE OLD NOTES PURSUANT TO
THE EXCHANGE OFFER
Generally, unless you are an "affiliate" of us within the meaning of Rule
405 under the Securities Act, if you exchange your Old Notes for New Notes
pursuant to the exchange offer you may offer your New Notes for resale, resell
your New Notes, and otherwise transfer your New Notes without compliance with
the registration and prospectus delivery provisions of the Securities Act, so
long as:
/bullet/ you acquired your New Notes in the ordinary
course of your business;
/bullet/ you have no arrangement with any person to
participate in a distribution of your New
Notes; and
/bullet/ neither you nor any other person is engaging
in or intends to engage in a distribution of
your New Notes.
A broker-dealer who acquired Old Notes directly
- 4 -
<PAGE>
from us can not exchange its Old Notes in the exchange offer. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
its New Notes. See "Plan of Distribution." To comply with the securities laws of
certain jurisdictions, it may be necessary to qualify for sale or register the
New Notes prior to offering or selling such New Notes. We are required, under
the registration rights agreement, to register the New Notes in any jurisdiction
requested by the holders, subject to certain limitations. Upon completion of the
exchange offer, if you were not prohibited from participating in the exchange
offer and did not tender your Old Notes, you will not have any registration
rights under the registration rights agreement with respect to your nontendered
Old Notes. These Old Notes will continue to be subject to transfer restrictions.
See "The Exchange Offer-Consequences of Failure to Exchange."
SUMMARY DESCRIPTION OF THE NEW NOTES
/bullet/ ISSUER. Louisiana Casino Cruises, Inc.
/bullet/ SECURITIES OFFERED. $55,000,000 principal amount of 11% Series B Senior
Secured Notes due 2005
/bullet/ MATURITY DATE. December 1, 2005.
/bullet/ INTEREST RATE. We will pay an annual rate of interest equal to 11%.
/bullet/ INTEREST PAYMENT DATES. Semi-annually, beginning on June 1, 1999.
/bullet/ RANKING. The New Notes will rank senior in right of payment to any of
our subordinated indebtedness; and will rank equally with any of our
senior indebtedness including a working capital credit facility of up
to $5 million and certain other permitted purchase money indebtedness.
/bullet/ SECURITY INTEREST. We will provide, for the benefit of the holders of
the Notes, a mortgage representing a first lien on substantially all of
our current and future tangible and intangible assets, other than
certain excluded assets, subject to customary exceptions for
transactions of this type.
/bullet/ OPTIONAL REDEMPTION. After December 1, 2002, we may redeem all or some
of the Notes at our option at the following premiums (together with
accrued interest through the redemption date):
FOR THE PERIOD BELOW PERCENTAGE
-------------------- ----------
On or after December 1, 2002 105.50%
On or after December 1, 2003 102.75%
December 1, 2004 and thereafter 100.00%
Before December 1, 2001, we may redeem up to one-third of the principal
amount of the Notes at our option with the net proceeds of certain of our public
equity offerings at 111% of the face amount, plus interest.
/bullet/ GUARANTEES. Subject to certain exceptions, if we create or acquire new
subsidiaries, they will guarantee the Notes.
/bullet/ CHANGE OF CONTROL OFFER. If we go through a change in control, we must
give holders of the Notes the opportunity to sell us their Notes at
101% of their face amount, plus interest.
/bullet/ ASSET SALE PROCEEDS. We may have to use the cash proceeds from selling
assets to repurchase some of the Notes at their face amount, plus
accrued interest.
/bullet/ CERTAIN INDENTURE PROVISIONS. The indenture limits what we may do. The
indenture limits our ability to:
/bullet/ incur more debt;
/bullet/ pay dividends, redeem stock, or make other distributions;
/bullet/ issue stock of subsidiaries;
/bullet/ make certain investments;
/bullet/ create liens;
/bullet/ enter into transactions with affiliates;
/bullet/ merge or consolidate; and
/bullet/ transfer or sell assets.
These covenants are subject to a number of exceptions.
/bullet/ USE OF PROCEEDS. We used the money raised from the offering of the Old
Notes to repay the 1998 Notes and for general corporate purposes.
For more complete information about the Notes, see the "Description of
Notes" section of this Prospectus.
RISK FACTORS
Before making a decision to participate in the exchange offer, you
should consider carefully the information included in the "Risk Factors"
section, as well as all other information set forth in this Prospectus.
- 5 -
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(Dollars in thousands, except operating data)
The following summary financial information for each of the fiscal
years in the three year period ended November 30, 1998 has been derived from our
financial statements, which have been audited by PricewaterhouseCoopers LLP,
independent accountants, whose report thereon is included elsewhere in this
Prospectus. The information presented below should be read in conjunction with,
and is qualified in its entirety by reference to, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30,
-----------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Revenues $76,760 $69,744 $70,845
Operating expenses................................. 57,194 54,183 55,788
Depreciation and amortization ..................... 4,162 4,334 4,762
Operating income .................................. 15,404 11,227 10,295
Net income ........................................ 7,303 3,507 2,681
OTHER FINANCIAL DATA:
Capital expenditures .............................. 1,655 1,214 5,321(a)
OPERATING DATA:
Number of gaming machines(b) 850 904 925
Number of table games(b) .......................... 47 43 43
Win per passenger.................................. $45.09 $45.69 $49.46
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1998
-----------------
ACTUAL AS ADJUSTED(C)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $13,525 $13,549
Total assets ..................................... 62,023 61,352
Total debt (including current portion) ........... 50,000 55,000
Redeemable common stock warrants ................. 4,131 --
Shareholders' equity (deficit) ................... 8 (1,430)
<FN>
- --------------------
(a) Includes $2,318 spent on renovations to the Casino Rouge and the
Company's dockside facilities, including renovations to the International
Marketplace Buffet, new meeting and planning facilities, remodeling of the
guest walkway and pavilion area and $1,109 for the purchase of five acres
of adjacent land.
(b) As of the end of each period.
(c) The As Adjusted Balance Sheet Data has been adjusted to give effect to (i)
the offering of the Old Notes and the use of the proceeds therefrom
including the redemption of the 1998 Notes, (ii) payment of accrued
interest on the 1998 Notes of $103,000, (iii) the extraordinary loss, net
of income tax benefit, of the write off of debt issuance costs associated
with the offering of the 1998 Notes of $1,820,000, (iv) the purchase of
138,900 Redeemable Common Stock Warrants (the "Warrants") from available
cash, at a net price of $3,749, and (v) the exercise of Warrants to
purchase 14,100 shares of our Common Stock for a price of one cent per
share, which Warrants had an accreted value of $381 immediately prior to
exercise.
</FN>
</TABLE>
- 6 -
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE
OFFER.
WE MAKE "FORWARD-LOOKING STATEMENTS" THROUGHOUT THIS PROSPECTUS.
WHENEVER YOU READ A STATEMENT THAT IS NOT SIMPLY A STATEMENT OF HISTORICAL FACT
(SUCH AS WHEN WE DESCRIBE WHAT WE "BELIEVE," "EXPECT" OR "ANTICIPATE" WILL
OCCUR, AND OTHER SIMILAR STATEMENTS), YOU MUST REMEMBER THAT OUR EXPECTATIONS
MAY NOT BE CORRECT, EVEN THOUGH WE BELIEVE THEY ARE REASONABLE. WE DO NOT
GUARANTEE THAT THE TRANSACTIONS AND EVENTS DESCRIBED IN THIS PROSPECTUS WILL
HAPPEN AS DESCRIBED (OR THAT THEY WILL HAPPEN AT ALL). THE FORWARD-LOOKING
INFORMATION CONTAINED IN THIS PROSPECTUS IS GENERALLY LOCATED IN THE MATERIAL
SET FORTH UNDER THE HEADINGS "SUMMARY," "RISK FACTORS," "CAPITALIZATION,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS" BUT MAY BE FOUND IN OTHER LOCATIONS AS WELL. THESE
FORWARD-LOOKING STATEMENTS GENERALLY RELATE TO OUR PLANS AND OBJECTIVES FOR
FUTURE OPERATIONS AND ARE BASED UPON OUR MANAGEMENT'S REASONABLE ESTIMATES OF
FUTURE RESULTS OR TRENDS. THE FACTORS THAT MAY AFFECT OUR EXPECTATIONS OF OUR
OPERATIONS, MARKETS AND SERVICES INCLUDE, AMONG OTHERS, THE FOLLOWING:
/bullet/ LOCAL AND REGIONAL ECONOMIC AND BUSINESS CONDITIONS;
/bullet/ CHANGES OR DEVELOPMENT IN LAWS, REGULATIONS OR TAXES;
/bullet/ ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THIRD PARTIES,
INCLUDING OUR CUSTOMERS, SUPPLIERS, COMPETITORS AND
STOCKHOLDERS AS WELL AS LEGISLATIVE, REGULATORY, JUDICIAL AND
OTHER GOVERNMENTAL AUTHORITIES;
/bullet/ COMPETITION;
/bullet/ THE LOSS OF ANY LICENSES OR PERMITS OR OUR FAILURE TO OBTAIN
AN UNCONDITIONAL RENEWAL OF OUR GAMING LICENSE ON A TIMELY
BASIS;
/bullet/ THE LOSS OF OUR RIVERBOAT CASINO AND PAVILION FACILITIES DUE
TO CASUALTY, WEATHER, MECHANICAL FAILURE OR EXTENDED OR
EXTRAORDINARY MAINTENANCE OR INSPECTION;
/bullet/ CHANGES IN BUSINESS STRATEGY, CAPITAL IMPROVEMENTS OR
DEVELOPMENT PLANS;
/bullet/ AVAILABILITY OF ADDITIONAL CAPITAL TO SUPPORT CAPITAL
IMPROVEMENTS AND DEVELOPMENT; AND
/bullet/ OTHER FACTORS DISCUSSED UNDER "RISK FACTORS" OR ELSEWHERE IN
THIS PROSPECTUS.
YOU SHOULD READ THIS PROSPECTUS COMPLETELY AND WITH THE UNDERSTANDING
THAT ACTUAL FUTURE RESULTS MAY BE MATERIALLY DIFFERENT FROM WHAT WE EXPECT. WE
WILL NOT UPDATE THESE FORWARD-LOOKING STATEMENTS, EVEN THOUGH OUR SITUATION WILL
CHANGE IN THE FUTURE.
CONSEQUENCES OF FAILURE TO EXCHANGE
In general, you may not offer or sell your Old Notes, unless the
offering and sale is registered under the Securities Act and applicable state
securities laws, or the offering and sale is not subject to or is exempt from,
the Securities Act and applicable state securities laws. We do not intend to
register the Old Notes under the Securities Act. Upon the completion of the
exchange offer, if you were not prohibited from participating in the exchange
offer and you did not tender your Old Notes, you will not have any registration
rights under the registration rights agreement with respect to your nontendered
Old Notes. Therefore, your nontendered Old Notes will continue to be subject to
transfer restrictions.
Based on interpretations by the staff of the Securities and Exchange
Commission with respect to similar transactions, we believe that, unless you are
an "affiliate" of us within the meaning of Rule 405 under the Securities Act,
you may offer for resale, resell and otherwise transfer the New Notes issued
pursuant to the exchange offer without compliance with the registration and
prospectus delivery provisions of the Securities Act, if:
/bullet/ you acquired your New Notes in the ordinary course of your
business;
/bullet/ you have no arrangement or understanding with any person to
participate in the distribution of your New Notes; and
/bullet/ neither you nor any other person is engaging in or intends to
engage in a distribution of your New Notes.
A broker-dealer who acquired Old Notes directly from us can not
exchange those Old Notes in the exchange offer. Each broker-dealer that receives
New Notes for its own account in exchange for Old
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Notes must acknowledge that it will deliver a prospectus in connection with any
resale of its New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Notes received in exchange
for the Old Notes acquired by the broker-dealer as a result of market-making
activities or other trading activities. We have agreed that we will make this
Prospectus available to any broker-dealer for use in connection with any such
resale for a period of 180 days after the expiration date or, if earlier, until
all participating broker-dealers have so resold. See "Plan of Distribution." You
may not offer or sell your New Notes unless they have been registered or
qualified for sale under applicable state securities laws or an exemption from
registration or qualification is available and is complied with. We are
required, under the registration rights agreement, to register the New Notes in
any jurisdiction requested by the holders, subject to certain limitations.
SUBSTANTIAL LEVERAGE
At November 30, 1998, after giving pro forma effect to the Offering and
the application of the net proceeds which we realized from the offering of the
Old Notes, we would have had approximately $55 million in total indebtedness. In
addition, subject to certain restrictions set forth in the indenture, we may
incur additional indebtedness in the future. Our level of indebtedness will have
several important effects on our future operations, such as:
/bullet/ a portion of our cash flow from operations must be dedicated
to the payment of interest on our indebtedness;
/bullet/ our leveraged position will increase our vulnerability to
adverse changes in general economic and industry conditions,
as well as to competitive pressure; and
/bullet/ our ability to obtain additional financing for working
capital, capital expenditures, general corporate and other
purposes may be limited.
Our ability to make payments of principal and interest on our
indebtedness depends upon our future performance, which will be subject to
general economic conditions, industry cycles and financial, business and other
factors affecting our operations, many of which are beyond our control. Our
business might not continue to generate cash flow at or above current levels. If
we are unable to generate sufficient cash flow from operations in the future to
service our debt, we may be required to:
/bullet/ seek additional debt or equity financing;
/bullet/ refinance or restructure all or a portion of our indebtedness,
including the Notes;
/bullet/ sell selected assets; or
/bullet/ to reduce or delay planned capital expenditures.
Such measures might not be sufficient to enable us to service our debt.
In addition, any such financing, refinancing or sale of assets might not be
available on economically favorable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
COMPETITION
Competition in the gaming industry is intense in the market where we
operate our gaming facility. As new gaming opportunities arise in existing
gaming jurisdictions, in new gaming jurisdictions and on Native American-owned
lands, new or expanded operations by others can be expected to increase
competition for our operations and could also limit new opportunities for us.
Casino gaming does not have a long operating history in the jurisdiction where
we operate and other nearby jurisdictions and we cannot predict the effects of
competition in these jurisdictions with any degree of certainty. Many of our
competitors outside of the greater Baton Rouge area have more gaming industry
experience, are larger and have greater financial resources than us. A
land-based casino is also being developed in New Orleans. In addition, Native
American casinos have advantages because they do not pay Louisiana gaming taxes
or admission fees. As a result, increased competition both inside and outside of
our market could have a material adverse effect on us.
Proposals have been introduced from time to time in the Louisiana
legislature to increase the number of gaming facilities permitted in Louisiana.
Such proposals, if passed, could have a material adverse effect on our
operations. Alternative forms of gaming
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are also available to potential customers. Louisiana state law allows the
operations of a state lottery, betting on horse racing and charitable bingo. In
July 1991, the state of Louisiana also authorized operation of video poker
terminals at various types of facilities in the state, including taverns,
restaurants, hotels/motels, truckstops and racing facilities. As of June 30,
1998, approximately 15,000 video poker terminals at approximately 3,600
non-casino locations were in operation throughout the state.
An emerging trend in Mississippi gaming, particularly on the Gulf Coast
(approximately 125 miles from Baton Rouge), is the development of large-scale
destination resort projects. A substantial increase in the number of casinos
operating in the Mississippi Gulf Coast could increase the competition for
Louisiana gaming customers, including those in our market area, which would
adversely affect us. Lower tax rates in Mississippi also provide casinos there
with a substantial advantage in providing incentives to patrons. As of December
31, 1998, the Mississippi Gaming Commission had granted 45 gaming licenses. The
Mississippi Gaming Commission allows dockside gaming and does not limit the
number of casinos or the square footage of gaming space in such facilities. See
"Business--Competition."
DEPENDENCE UPON A SINGLE GAMING SITE; LOSS OF SERVICE OF RIVERBOAT CASINO
Our profitability is entirely dependent upon the Casino Rouge. We will
have little or no operating revenues for any period that the Casino Rouge is not
in service. The riverboat could be out of service due to casualty, mechanical
failure or extended or extraordinary maintenance or inspection. In addition, the
riverboat is subject to United States Coast Guard regulations requiring periodic
hull inspections every five years, which could result in a temporary loss of
service of the riverboat. Our next hull inspection is expected to take place by
December 1999. Although we are currently exploring alternatives to the
traditional out of water dry dock hull inspection, such an alternative may not
be available. A traditional dry dock hull inspection would result in the
temporary loss of service of the riverboat for up to approximately two weeks. In
addition, the Casino Rouge is subject to the risk of severe weather, including
high winds, water action and hurricanes. We maintain insurance policies that
contain casualty loss and certain limited business interruption insurance
coverage for casualties resulting from severe weather conditions, including
hurricanes. However, a hurricane or other severe weather conditions could cause
significant physical damage to the Casino Rouge and Baton Rouge and, for a
period of time, reduce the number of people visiting the Casino Rouge or Baton
Rouge, either of which could have a material adverse effect on us.
REGULATION
We are subject to regulation by the State of Louisiana and, to a lesser
extent, by federal law. We are subject to regulations that apply specifically to
the gaming industry and casinos and regulations that apply to the owners and
operators of riverboats in addition to regulations applicable to businesses
generally. Legislative or administrative changes in applicable legal
requirements, including legislation to prohibit casino gaming, have been
proposed from time to time. It is possible that applicable requirements to
operate a Louisiana gaming facility will become more stringent and burdensome,
and that taxes, fees and expenses may increase, as the state gains further
experience in regulating gaming. It is also possible that the number of
authorized gaming licenses may increase, which would intensify competition.
Failure to comply with detailed regulatory requirements may be grounds for the
suspension or revocation of a license which would have a materially adverse
effect upon us. See "Regulatory Matters."
Riverboat licenses in Louisiana are issued for an initial five-year
term with annual renewals thereafter. Our original five-year gaming license for
the Casino Rouge is up for renewal in July 1999. Our company and our officers,
directors, managers, principal shareholders and their officers and directors and
key gaming employees will be subject to strict scrutiny and full suitability and
approval by the Louisiana Gaming Control Board (the "Louisiana Board") in
connection with our renewal application. The factors that the Louisiana Board
has stated it will consider, among others, in order to renew our license,
include:
/bullet/ our compliance with all the requirements of the Louisiana
Riverboat Economic Development and Gaming Control Act (the
"Louisiana Act");
/bullet/ the approval of various systems and procedures, the
demonstration of good character (including an examination of
criminal and civil records); and
/bullet/ methods of business practice.
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<PAGE>
The Louisiana Board may also seek to impose, as a condition of the license
renewal, certain Louisiana, minority and female employment and procurement
goals. As a result of the Justice Department's recent indictments of former
Louisiana Governor Edwin Edwards and certain other persons on charges relating
to, among other things, gaming licenses in Louisiana, the Louisiana regulators
are applying greater scrutiny to the suitability and business practices of the
licensees. We believe we will be successful in receiving a renewal of our
license from the Louisiana Board, but we can give you no assurance as to whether
or when our license will be extended, or the extent of any restrictions that may
be imposed on us as a condition to the issuance of a renewed license. The loss,
suspension or failure to obtain a renewal of such license would have a material
adverse effect on us. See "Regulatory Matters."
Proposals to amend or supplement the Louisiana Act are frequently
introduced in the Louisiana state legislature. In addition, the state
legislature from time to time considers proposals to repeal the Louisiana Act,
which would effectively prohibit riverboat gaming in the State of Louisiana.
Although we do not believe that a prohibition of riverboat gaming in Louisiana
is likely, we can give you no assurance that changes in the Louisiana gaming law
will not occur or that such changes will not have a material adverse effect on
our business. On November 5, 1996 in the six parishes in which riverboats are
currently located, including East Baton Rouge Parish, voters approved the
continuation of riverboat gaming. In East Baton Rouge Parish and the six
parishes as a whole, the vote in favor of riverboat gaming was 59% and 66%,
respectively.
At the present time, gaming is authorized between cruising excursions
if the vessel is docked for less than forty-five minutes between such excursions
and at such other times as the master of the vessel certifies in writing that
existing weather or water conditions present a danger to the riverboat,
passengers or crew. Legislation may be proposed that could involve the expansion
of cruising requirements; the creation of "phantom" cruises; the establishment
of a minimum number of annual cruises a vessel must take; or the authorization
of unrestricted dockside gaming. An expansion of cruising requirements could
have a negative impact on future gaming revenue and state tax revenue. See
"Regulatory Matters."
We are currently undergoing a scheduled state audit review of our
accounting procedures and reporting of revenue from our Caribbean Stud poker
table games. The review has resulted in us being required to remit additional
taxes of $248,000 plus interest of $65,000 for the audit period of
December 1994 through December 1998.
In August 1996, President Clinton signed a bill creating the National
Gambling Impact Study Commission (the "NGISC"), composed of individuals
associated with the gaming industry as well as individuals who are openly
opposed to legalized gaming, to examine the economic and social impact of
gaming. The NGISC began a series of hearings on June 20, 1997 and is scheduled
to release a report on its findings, together with recommended legislation and
administrative action, on or before June 20, 1999. Any additional regulation of
the gaming industry resulting from the NGISC's recommendations could have a
material adverse impact on the gaming industry, including us.
Louisiana gaming authorities have discretionary authority to require
you to file an application, to be investigated or to be found suitable as an
owner or operator of a gaming establishment for any reason, including in the
event of a foreclosure on and the taking of possession of the collateral which
secures the Notes. If the relevant gaming authorities determine that you or
beneficial owner of the Notes must be found suitable (whether as the result of
the foreclosure sale or for any other reason), and if you or the beneficial
owner is not found suitable, we may, at our option, redeem your Notes at the
principal amount thereof together with accrued interest to the redemption date.
If you are required to apply for a finding of suitability you must pay all
investigative fees and costs of the gaming authorities in connection with such
an investigation. See "Regulatory Matters."
TAXATION
We believe that one of the primary reasons that jurisdictions have
legalized gaming is the prospect of significant additional revenue for the
jurisdiction. As a result, gaming companies are typically subject to significant
taxes and fees in addition to normal federal and state corporate income taxes,
and such taxes and fees are subject to increase at any time. Any material
increase in these taxes or fees would adversely affect us. See "Regulatory
Matters."
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<PAGE>
POSSIBLE CONFLICTS OF INTEREST WITH MANAGEMENT COMPANY
CRC, our majority shareholder, is primarily responsible for marketing,
managing and operating the Casino Rouge. CRC is not restricted (nor will Jackpot
be restricted if the merger is consummated) from managing other gaming
operations, including new gaming ventures or facilities that compete with us.
Such activities could require significant amounts of time of CRC's officers and
directors and could detract from CRC's ability to manage and operate the Casino
Rouge.
EFFECT OF LOCAL ECONOMIC CONDITIONS
Our results of operations may be adversely affected by local economic
factors. If the local Baton Rouge economy suffers a downturn, the Casino Rouge
may be adversely affected as the disposable income of consumers in the area
declines, resulting in a decrease in the number of patrons at the Casino Rouge
or a decrease in the amount that patrons are willing to wager.
DIFFICULTY IN ATTRACTING AND RETAINING QUALIFIED EMPLOYEES
The operation of our business requires qualified executives, managers
and skilled employees with gaming industry experience. We believe that a
shortage of skilled labor exists in the gaming industry which will make it
increasingly difficult and expensive to attract and retain qualified employees.
Increasing competition in our market is expected to lead to higher costs in
order to retain and attract qualified employees.
FINANCING CHANGE OF CONTROL OFFER
If we go through a "Change of Control" as defined in the indenture,
we will have to offer to repurchase all outstanding Notes. It is possible that
we will not have, or have access to, sufficient funds at the time of any such
change of control to make the required repurchases of the Notes. See
"Description of Notes--Repurchase Upon Change of Control."
COLLATERAL VALUE; ABILITY TO REALIZE ON COLLATERAL
If an event of default occurs with respect to the Notes, it is unlikely
that the liquidation of the collateral would produce proceeds in an amount
sufficient to pay our obligations under the Notes. The ability of the trustee to
foreclose on any of the collateral will be subject to the provisions of the
documents granting such collateral. See "Description of Notes--Security."
The trustee's ability to foreclose upon the collateral or take over
gaming operations will be limited by the relevant gaming laws, which require
that persons who own or operate a riverboat casino be properly licensed to
conduct gaming operations. No person can hold a license in Louisiana unless that
person is found qualified or suitable by the relevant gaming authorities. In
order for the trustee to be found qualified or suitable, such gaming authorities
would have discretionary authority to require the trustee and any or all of the
holders to file applications, be investigated and be found qualified and
suitable as an owner or operator of gaming establishments. The applicant for
qualification, a finding of suitability or licensing must pay all costs of such
investigation. If the trustee is unable or chooses not to qualify, be found
suitable, or be licensed to own or operate such assets, it would either have to
sell such assets or retain an entity licensed to operate such assets. In
addition, in any foreclosure sale or subsequent resale by the trustee, licensing
requirements under relevant gaming laws may limit the number of potential
bidders and may delay any sale, either of which events could have an adverse
effect on the sale price of such collateral. See "Regulatory Matters."
In addition, the ability of the holders to foreclose on the collateral
will also be subject to certain limitations arising under applicable bankruptcy
and insolvency laws. See "Description of Notes--Security--Certain Bankruptcy
Limitations."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On January 27, 1999, Louisiana Casino Cruises, Inc. ("LCC" or the
"Company") issued $55.0 million aggregate principal amount of Old Notes to
Jefferies & Company, Inc. (the "Initial Purchaser"). The issuance was not
registered under the Securities Act in reliance upon the exemption under Rule
144A and Section 4(2) of the Securities Act. In connection with the issuance and
sale of the Old Notes, the Company entered into a Registration Rights Agreement
with the Initial Purchaser, dated January 27, 1999 (the "Registration Rights
Agreement"), which requires the Company to file with the Securities and Exchange
Commission (the "Commission") a registration statement under the Securities Act
with respect to an issue of new notes of the Company identical in all material
respects to the Old Notes. Upon the effectiveness of that registration
statement, the Company is required to offer to the holders of the Old Notes the
opportunity to exchange their Old Notes for a like principal amount of New
Notes, which will be issued without a restrictive legend and may be reoffered
and resold by the holder without restrictions or limitations under the
Securities Act (the "Exchange Offer"). In the event that applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer and under certain other circumstances, the Company
will, at its cost, file with the Commission a shelf registration (the "Shelf
Registration Statement") to cover resales of Notes by the holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Exchange Offer is being made pursuant to
the Registration Rights Agreement to satisfy the Company's obligations
thereunder.
Based on no-action letters issued by the staff of the Commission to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder of such New Notes (other than any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement or understanding with any person to participate in the
distribution of such New Notes and neither the holder nor any other person is
engaging in or intends to engage in a distribution of the New Notes. A
broker-dealer who acquired Old Notes directly from the Company can not exchange
such Old Notes in the Exchange Offer. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes cannot
rely on such interpretations by the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
____________, 1999 (or such later date and time to which it is extended (as it
may be so extended, the "Expiration Date"). The Company will issue a principal
amount of New Notes in exchange for an equal principal amount of outstanding Old
Notes tendered and accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. The date of acceptance
for exchange of the Old Notes for the New Notes (the "Exchange Date") will be
the first business day following the Expiration Date or as soon as practicable
thereafter.
The terms of the New Notes and the Old Notes are substantially
identical in all material respects, except for certain transfer restrictions,
registration rights and liquidated damages for defaults under the Registration
Rights Agreement ("Registration Defaults") relating to the Old Notes which will
not apply to the New Notes. See "Description of Notes." The New Notes will
evidence the same debt as the Old Notes. The New Notes will be issued under and
entitled to the benefits of the Indenture governing the Notes (the "Indenture").
As of the date of this Prospectus, $55.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Old Notes.
Holders of Old
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<PAGE>
Notes do not have any appraisal or dissenters' rights under state law or the
Indenture in connection with the Exchange Offer. The Company intends to conduct
the Exchange Offer in accordance with the provisions of the Registration Rights
Agreement and the applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered and were not prohibited
from being tendered for exchange in the Exchange Offer will remain outstanding
and continue to accrue interest and to be subject to transfer restrictions, but
will not be entitled to any rights or benefits under the Registration Rights
Agreement.
Upon satisfaction or waiver of all the conditions to the Exchange
Offer, on the Exchange Date the Company will accept all Old Notes properly
tendered and not withdrawn and will issue New Notes in exchange therefor. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company had given
oral or written notice thereof to U.S. Bank Trust National Association, the
trustee under the Indenture and the exchange agent for the Exchange Offer (the
"Exchange Agent"). The Exchange Agent will act as agent for the tendering
holders for the purposes of receiving the New Notes from the Company.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or nonexchanged Old Notes or
substitute Old Notes evidencing the unaccepted portion, as appropriate, will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "Fees and Expenses."
EXTENSION OF EXPIRATION DATE; AMENDMENTS
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, prior to 9:00 a.m., New York City
time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions" shall
not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holder of Old Notes of
such amendment.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at the rate of 11% per annum, payable
semi-annually, in cash, on June 1 and December 1 of each year, from the most
recent date to which interest has been paid on the Old Notes or, if no such
payment has been made, from January 27, 1999.
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<PAGE>
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to exchange any new Notes for any Old Notes, and may terminate
or amend the Exchange Offer before the acceptance of any Old Notes for exchange,
if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer which
seeks to restrain or prohibit the Exchange Offer or, in the Company's judgment,
would materially impair the ability of the Company to proceed with the Exchange
Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule, order or regulation is interpreted,
by any government or governmental authority which, in the Company's judgment,
would materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) the Exchange Offer or the consummation thereof would otherwise
violate or be prohibited by applicable law.
If the Company determines in its sole discretion that any of these
conditions is not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders who tendered such Old
Notes to withdraw their tendered Old Notes, or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn. If such waiver constitutes a material
change to the Exchange Offer, the Company will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
holders, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any determination by the Company
concerning the events described above shall be final and binding on all parties.
In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer and under
certain other circumstances, the Company will, at its cost, file with the
Commission a Shelf Registration Statement to cover resales of Notes by the
holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement.
PROCEDURES FOR TENDERING
The tender of Old Notes by a holder as set forth below (including the
tender of Old Notes by book-entry delivery pursuant to the procedures of the
Depository Trust Company ("DTC")) and the acceptance thereof by the Company will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth in this Prospectus and in the
Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. To tender in the Exchange Offer, a holder must (i) complete, sign and
date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date, or (ii) comply with the guaranteed delivery procedures described below.
Delivery of all documents must be made to the Exchange Agent at its address set
forth herein.
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THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owners' own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering of
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any Eligible Institution (as defined) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes,
with the signature thereon guaranteed by an Eligible Institution. If the Letter
of Transmittal or any Old Notes or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
Any financial institution that is a participant in the book-entry
transfer facility for the Old Notes, DTC, may make book-entry delivery of Old
Notes by causing DTC to transfer such Old Notes into the Exchange Agent's
account with respect to the Old Notes in accordance with DTC's procedures for
such transfer, including if applicable the procedures under the Automated Tender
Offer Program ("ATOP"). Although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, an appropriate
Letter of Transmittal with any required signature guarantee and all other
required documents must in each case be, or be deemed to be, transmitted to and
received and confirmed by the Exchange Agent at its address set forth below on
or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel of the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent
- 15 -
<PAGE>
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holders, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date or, as set forth below under "Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder will also represent to the Company (i) that
the New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the holder, (ii) that neither the holder nor any such person
has an arrangement or understanding with any person to participate in the
distribution of such New Notes and (iii) that neither the holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities Act,
of the Company, or that if it is an "affiliate," it will comply with the
registration and prospective delivery requirements of the Securities Act to the
extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available, (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, or (iii) who cannot complete the procedures for book-entry
transfer of Old Notes to the Exchange Agent's account with DTC prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) On or prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of such Old
Notes (if possible) and the principal amount of Old Notes tendered, stating that
the tender is being made thereby and guaranteeing that, within five business
trading days after the Expiration Date, (i) the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the Old Notes
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent, or (ii) that book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC will be
effected and confirmation of such book-entry transfer will be delivered to the
Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered Old
Notes in proper form for transfer and all other documents required by the Letter
of Transmittal, or confirmation of book-entry transfer of the Old Notes into the
Exchange Agent's account at DTC, are received by the Exchange Agent within five
business trading days after the Expiration Date. Upon request to the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their Old Notes according to the guaranteed delivery procedures set forth
above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer:
The holder tendering Old Notes exchanges, assigns and transfers the Old
Notes to the Company and irrevocably constitutes and appoints the Exchange Agent
as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants to the
Company and the Exchange Agent that (i) it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire the New Notes
in exchange for the Old Notes, (ii) when the Old Notes are accepted for
exchange, the Company will acquire good and unencumbered title to the Old Notes,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, (iii) it will, upon request, execute and deliver
any additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes and (iv)
acceptance of any
- 16 -
<PAGE>
tendered Old Notes by the Company and the issuance of New Notes in exchange
therefor will constitute performance in full by the Company of its obligations
under the Registration Rights Agreement and the Company will have no further
obligations or liabilities thereunder to such holders (except with respect to
accrued and unpaid Liquidated Damages, if any). All authority conferred by the
holder will survive the death or incapacity of the holder and every obligation
of the holder will be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of the holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or that, if it
is an "affiliate," it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (ii) is acquiring
the New Notes in the ordinary course of its business and (iii) has no
arrangement with any person or intent to participate in, and is not
participating in, the distribution of the New Notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram
telex, facsimile transmission or letter indicating notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Old Notes register
the transfer of such Old Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawn Old Notes or otherwise comply with DTC's procedures. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for payment will be returned to the holder thereof without cost to such
holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "Procedures
for Tendering" at any time prior to the Expiration Date.
UNTENDERED OLD NOTES
Holders of Old Notes whose Old Notes are not tendered or are tendered
but not accepted in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligations to such holders, other than the Initial Purchaser, to provide for
the registration under the Securities Act of the Old Notes held by them. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected.
EXCHANGE AGENT
U.S. Bank Trust National Association, the Trustee under the Indenture,
has been appointed as Exchange Agent of the Exchange Offer. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
- 17 -
<PAGE>
<TABLE>
<S> <C>
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier:
U.S. Bank Trust National Association
U.S. Bank Trust National Association Attention: Corporate Trust Administration
180 East Fifth Street (651) 244-1145
St. Paul, Minnesota 55101 Confirm by Telephone:
Attention: Corporate Trust Administration (651) 244-0444
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers, regular employees
or agents of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith and will
pay the reasonable fees and expenses of holders in delivering their Old Notes to
the Exchange Agent.
The cash expenses of the Company to be incurred in connection with the
Company's performance and completion of the Exchange Offer will be paid by the
Company. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such Old
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act and applicable state securities laws, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not intend
to register the Old Notes under the Securities Act. Based on interpretations by
the staff of the Commission with respect to similar transactions, the Company
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by any
holder of such New Notes (other than any such holder which is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business, such holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, the holder (i) could not rely on the applicable
interpretations
- 18 -
<PAGE>
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes must acknowledge that it will deliver a
prospectus in connection with any resale of its New Notes. See "Plan of
Distribution." The New Notes may not be offered or sold unless they have been
registered or qualified for sale under applicable state securities laws or an
exemption from registration or qualification is available and is complied with.
The Company is required, under the Registration Rights Agreement, to register
the New Notes in any jurisdiction requested by the holders, subject to certain
limitations.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
Upon consummation of the Exchange Offer, holders of the Old Notes that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. However, in the event the Company fails to
consummate the Exchange Offer or a holder of Old Notes notifies the Company in
accordance with the Registration Rights Agreement that it will be unable to
participate in the Exchange Offer due to circumstances delineated in the
Registration Rights Agreement, then the holder of the Old Notes will have
certain rights to have such Old Notes registered under the Securities Act
pursuant to the Registration Rights Agreement and subject to conditions
contained therein.
The Company has not entered into any arrangement or understanding with
any person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to participate
in the distribution of the New Notes to be received in the Exchange Offer. In
this regard, the Company will make each person participating in the Exchange
Offer aware (through this Prospectus or otherwise) that if the Exchange Offer is
being registered for the purpose of secondary resale, any holder using the
Exchange Offer to participate in a distribution of New Notes to be acquired in
the registered Exchange Offer (i) may not rely on the staff position enunciated
in Morgan Stanley and Co. Incorporated (available June 5, 1991) and Exxon
Capital Holdings Corporation (available May 13, 1988) or similar letters and
(ii) must comply with registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old
Notes as reflected in the Company's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The expenses of the Exchange Offer will be expensed over the term of
the New Notes.
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<PAGE>
USE OF PROCEEDS
The net proceeds received by the Company from the sale of the Old Notes
were approximately $54.0 million (after deducting discounts to the Initial
Purchaser and offering expenses). The Company will not receive any proceeds from
the Exchange Offer. Approximately $50.0 million of the net proceeds from the
offering of the Old Notes was used to defease and redeem the 1998 Notes. The
remaining proceeds are available for general corporate purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1998 and as adjusted to give effect to the offering of the Old
Notes and the application of the net proceeds therefrom as set forth under "Use
of Proceeds," including the redemption of the 1998 Notes. The following table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto included elsewhere in this Prospectus.
NOVEMBER 30, 1998
-----------------
ACTUAL AS ADJUSTED
------- -----------
(Dollars in thousands)
Cash and cash equivalents ................. $13,525 $13,549
======= =======
Total debt:
1998 Notes(a) $50,000 $--
Notes ................................ -- $55,000
Total debt $50,000 $55,000
------- -------
Redeemable common stock warrants(b) ....... 4,131 --
Total shareholder's equity (deficit)(c) ... 8 (1,430)
------- -------
Total capitalization $54,139 $53,570
======= =======
(a) The 1998 Notes were issued by the Company in November 1998. The proceeds
from the sale of the 1998 Notes were used to repay outstanding indebtedness
and to redeem the Company's outstanding preferred stock. The Company used
the proceeds from the sale of the Old Notes to defease and redeem the 1998
Notes. See "Use of Proceeds."
(b) On November 30, 1998, the Company had 153,000 Warrants outstanding. The
Warrants were issued in connection with the Company's initial debt offering
in December 1993. Pursuant to the terms of the Warrants, certain
Warrantholders recently exercised their rights under 14,100 Warrants to
purchase an equal number of shares of the Company's Common Stock at a price
per share of one cent. The remaining Warrantholders exercised put rights
obligating the Company to purchase 138,900 Warrants at a price based on the
value of the Company's Common Stock on December 1, 1998, as determined by
two independent investment banking firms, one selected by the Company and
the other selected by the Warrantholders. The Company retained Jefferies &
Company, Inc. to determine such value and the Warrantholders selected Lehman
Brothers. The purchase price of the Warrants was based upon the average of
the values determined by Lehman Brothers and Jefferies & Company, Inc. On
November 30, 1998, the Company valued the 138,900 Warrants at $3,750. The
net purchase price, as described above was $3,749 and was funded on
March 8, 1999 from available cash.
(c) The change in total shareholders' equity (deficit) is the result of (i) the
extraordinary loss, net of income tax benefit, of the write off of debt
issuance costs associated with the offering of the 1998 Notes of $1,820,000
and (ii) the exercise of Warrants to purchase 14,100 shares of the Company's
Common Stock for a price of one cent per share, which Warrants had an
accreted value of $381 immediately prior to exercise. See note (b) above.
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<PAGE>
SELECTED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
The following selected financial information for each of the
fiscal years presented below has been derived from the Company's financial
statements, which have been audited by PricewaterhouseCoopers LLP, independent
accountants. From inception in August 1991 through December 27, 1994, the
Company devoted substantially all of its efforts to evaluating gaming
opportunities in Louisiana, including seeking a Louisiana gaming license, the
development and construction of the Casino Rouge and the financing thereof.
Accordingly, through the fiscal year ended November 30, 1994, the Company
reported net operating losses and had no earnings from continuing operations.
The information presented below should be read in conjunction with, and is
qualified in its entirety by reference to, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's financial
statements and the notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
NOVEMBER 30,
-----------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Casino .................................. $ -- $65,187 $74,615 $67,694 $68,845
Food and beverage ....................... -- 1,382 1,351 1,345 1,407
Other ................................... -- 514 794 705 593
------- ------- ------- ------- -------
Net revenues -- 67,083 76,760 69,744 70,845
------- ------- ------- ------- -------
Costs and expenses:
Casino .................................. -- 29,849 33,947 31,826 33,302
Food and beverage ....................... -- 1,619 1,293 1,318 1,538
Selling, general and administrative ..... -- 18,085 21,954 21,039 20,948
Pre-opening expenses .................... 4,389 1,625 -- -- --
------- ------- ------- ------- -------
Total operating expenses 4,389 51,178 57,194 54,183 55,788
------- ------- ------- ------- -------
Income (loss) before depreciation,
amortization and interest (4,389) 15,905 19,566 15,561 15,057
Depreciation and amortization ........... 34 3,584 4,162 4,334 4,762
------- ------- ------- ------- -------
Operating income (loss) (4,423) 12,321 15,404 11,227 10,295
Other income (expense):
Interest income ......................... 1,357 344 241 280 428
Interest expense ........................ (5,180) (6,675) (7,002) (5,955) (6,376)
------- ------- ------- ------- -------
Income (loss) before the provision for
income taxes (8,246) 5,990 8,643 5,552 4,347
Provision for income taxes .............. -- -- 1,340 2,045 1,666
------- ------- ------- ------- -------
Net income (loss) $(8,246) $ 5,990 $ 7,303 $ 3,507 $ 2,681
======= ======= ======= ======= =======
Ratio of earnings to fixed charges(a) ... -- 1.60x 2.25x 1.95x 1.83x
SHARE AND PER SHARE DATA(B):
Basic earnings (loss) per share $ (8.84) $ 2.71 $ 6.70 $ 3.37 $ 2.57
Diluted earnings (loss) per share ....... $ (8.84) $ 2.70 $ 6.31 $ 2.97 $ 2.46
Cash dividends declared on common stock
and common equivalent shares ......... $ -- $ 2.67 $ 3.82 $ 0.42 $ 1.76
Weighted average common shares
outstanding ......................... 980,333 982,783 982,783 982,783 982,783
Weighted average common equivalent
shares outstanding .................. 1,133,333 1,135,783 1,135,783 1,135,783 1,135,783
</TABLE>
- 21 -
<PAGE>
<TABLE>
<CAPTION>
AT NOVEMBER 30,
---------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current Assets ....................... $ 8,647 $12,059 $11,630 $16,807 $16,531
Total Assets ......................... 59,030 62,692 58,438 59,757 62,023
Current liabilities(c) ............... 7,995 13,863 12,612 11,625 4,890
Long-term obligations(d) ............. 54,802 49,609 42,656 40,732 50,000
Redeemable preferred stock and
common stock warrants(e) .......... 2,818 5,740 5,872 6,004 4,131
Shareholders' equity (deficit) ....... (6,585) (6,520) (3,683) (790) 8
<FN>
- ----------
(a) As indicated above, through November 30, 1994 the Company had no
earnings while in the development stage; accordingly, earnings were not
adequate to cover fixed charges. For fiscal year ended November 30,
1994, the deficiency was approximately $9,877. For the fiscal years
ended November 30, 1995, 1996, 1997 and 1998, fixed charges were
$9,756, $7,002, $5,955 and $5,208, respectively. Fixed charges include
interest charges, amortization of debt expense and discounts, and the
change to the accreted value of the warrants.
(b) Earnings per share amounts have been restated to conform to the
Financial Accounting Standards Board Statement No. 128 "Earnings per
Share." Basic earnings per share is calculated by dividing net income
(loss) assigned to common shareholders by weighted average common
shares outstanding. Diluted earnings per share is calculated by
dividing net income (loss) assigned to common shareholders before
distributions to warrantholders by weighted average common equivalent
shares outstanding.
(c) Amounts as of November 30, 1996 and 1997 include $1,700 for estimated
dispute resolution cost.
(d) Amounts as of November 30, 1994 and 1995 also include $1,700 for
estimated dispute resolution cost.
(e) Such amounts include preferred stock of $1,232, $1,364, $1,496 and
$1,628 as of November 30, 1994, 1995, 1996 and 1997, respectively, and
the assigned value of the warrants of $1,586 as of November 30, 1994,
$4,376 as of November 30, 1995, 1996 and 1997 and $4,131 as of November
30, 1998.
</FN>
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On December 28, 1994, the Company commenced operations of its riverboat
gaming facility in Baton Rouge, Louisiana. The Company's activities from
inception have been financed from (i) cash flow from operations, (ii) equity and
other capital contributions of the shareholders, (iii) secured equipment
financing, (iv) a December 1993 debt offering of 51,000 units, each unit
consisting of $1,000 principal amount of a Senior Secured Note (the "1993
Notes") and three warrants to purchase one share each of the Company's common
stock, (v) a November 1998 offering consisting of $50,000,000 of Senior Secured
Increasing Rate Notes (the "1998 Notes"), which proceeds were used to repay the
1993 Notes, and (vi) the 1999 Notes, which proceeds were used to defease and
redeem the 1998 Notes.
RESULTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997.
Casino revenues in the two-riverboat Baton Rouge gaming market for the
years ended November 30, 1998 and 1997 were $118,806,000 and $117,058,000,
respectively. Riverboat casino patron counts in Baton Rouge for the same
respective periods were 2,571,000 and 2,768,000. Management believes the
principal factors contributing to the minimal increase in revenues were due to
(i) a reduced number of patron visits and (ii) the maturation of the customer
base which resulted in an increased win per patron from $42.29 to $46.21 per
patron for the years ended November 30, 1997 and 1998, respectively. The
Company's casino revenue increased 1.7% while customer counts declined 6.1% in
1998 compared to 1997. The Company's competitor's riverboat casino revenues
remained flat as its customer counts decreased 8.4%, 1998 compared to 1997. The
Company's share of the Baton Rouge gaming market was 59.3% and 58.6% of casino
revenues and 54.2% and 53.5% of admissions for the years ended November 30, 1998
and 1997, respectively.
Casino revenues for the Company were $68,845,000 and $67,694,000 for
the years ended November 30, 1998 and 1997, respectively. Table revenues,
excluding poker, decreased 11.2% in 1998 compared to 1997 due to a 16.7%
decrease in table game drop offset by an improvement of the hold percentage from
20.1% to 21.7% on an annual basis. Gaming machine revenues increased 5.5% in
1998 compared to 1997 primarily due to a 5.6% increase in coin in. Poker win for
1998 and 1997 was $494,000 and $300,000, respectively. Management believes that
the decline in table game drop is a direct result of patrons converting to
gaming machines due to new, exciting and innovative gaming equipment being
introduced by the casino industry.
For the year ended November 30, 1998 the Company's win per passenger
increased 8.3% to $49.46 compared to $45.69 in the same period of 1997. Revenues
from casino operations were 78.0% from gaming machines and 22.0% from table
games in 1998 compared to 75.2% and 24.8%, respectively, for 1997. Such mix for
gaming machines and gaming table win is attributable to the continuing
popularity of gaming machines among the Company's base casino patrons and
generally conforms to that experienced by riverboats throughout Louisiana.
Casino expenses for the year ended November 30, 1998 and 1997 were
$33,302,000 and $31,826,000, respectively, which represents 48.4% and 47.0% of
casino revenues in each period. Overall casino expenses increased primarily due
to the introduction of the Company's Rouge Arena, a temporary facility used for
concerts, sporting activities, customer parties and other promotional
activities. The facility was in use through July 1998.
Selling, general and administrative expenses were $20,948,000 and
$21,039,000 for the years ended November 30, 1998 and 1997, respectively.
Overall selling, general and administrative expenses for 1998 are lower than
1997 due primarily to a decrease in risk management costs partially offset by an
increase in legal expenses.
Income before depreciation, amortization and interest was $15,057,000
and $15,561,000 for the years ended November 30, 1998 and 1997, respectively.
Such amounts, as a percentage of net revenues (or operating margins), were 21.3%
and 22.3% for 1998 and 1997, respectively. Management believes the decrease in
operating margins was primarily due to the Rouge Arena noted above.
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<PAGE>
Net interest expense was $5,948,000 and $5,675,000 for the years ended
November 30, 1998 and 1997, respectively. The increase in interest expense is
primarily due to interest and related financing costs being charged on both the
1993 Notes and the 1998 Notes for a six day period during which proceeds from
the 1998 Notes were escrowed to repay the 1993 Notes.
The Company recorded a provision for income taxes of $1,666,000 and
$2,045,000 for the years ended November 30, 1998 and 1997, respectively. For the
year ended November 30, 1998, the Company recorded a current tax provision of
$273,000 and a deferred tax provision of $1,393,000. For the year ended November
30, 1997, the Company recorded a current tax provision of $650,000 and deferred
tax provision of $1,395,000.
The Company recorded a market value warrant adjustment of $245,000 for
the year ended November 30, 1998 to reduce the accreted value of redeemable
common stock warrants to $4,131,000. Pursuant to the terms of the warrants the
Company is obligated to purchase the warrants during fiscal 1999 to the extent
the holders exercised their put rights. Holders of 138,900 warrants exercised
their put rights obligating the Company to purchase such warrants. The purchase
price for the 138,900 warrants, as determined by two independent investment
banking firms in accordance with the original agreements issued in 1993, has
been established at $3,750,000.
YEAR ENDED NOVEMBER 30, 1997 COMPARED TO YEAR ENDED NOVEMBER 30, 1996.
Casino revenues in the two-riverboat Baton Rouge gaming market for the
years ended November 30, 1997 and 1996 were $117,058,000 and $127,491,000,
respectively. Riverboat casino patron counts in Baton Rouge for the same periods
were 2,768,000 and 2,910,000. Management believes the principal factors
contributing to the 8.2% decline in casino revenues for the Baton Rouge market
are (i) milder weather in the first quarter of 1997 compared to the same period
in 1996, allowing persons to become more involved in alternative forms of
outdoor leisure activities, (ii) the negative impact of an accident involving an
overturned barge containing benzene on the Mississippi River in Baton Rouge
during March 1997, (iii) a decline in winning from premium player activity, and
(iv) the additional reasons discussed below. The Company's casino revenues and
customer counts declined 9.6% and 10.5% respectively, in 1997 compared to 1996.
The Company's competitor's riverboat casino revenues decreased 6.1% as its
customer counts increased 2.5% in 1997 compared to 1996. The Company's share of
the Baton Rouge gaming market was 58.6% and 59.5% of casino revenues and 53.5%
and 56.9% of admissions for the years ended November 30, 1997 and 1996,
respectively. Management believes the decrease in the Company's market share of
gaming revenues and admissions is attributable to (i) the Company's competition
having made product improvements, consisting of a new parking garage and an
enclosed entertainment/retail shopping area, which opened during the second
quarter of 1996, and extensive food and cash promotions by such competitor, (ii)
a decrease in the Company's table and slot hold percentages and winnings from
premium player activity, all as discussed below, and (iii) the general decline
in customer visits impacting the Company.
Casino revenues for the Company were $67,694,000 and $74,615,000 for
the years ended November 30, 1997 and 1996, respectively. Table revenues,
excluding poker, decreased 17.8% in 1997 compared to 1996 due to winnings from
premium player activity in he 1996 period that did not occur in 1997, a decrease
in table game hold percentage and a decrease in table drop. Slot revenues
decreased 4.8% in 1997 compared to 1996 primarily due to a 3.7% decline in slot
coin in. Poker win for 1997 and 1996 was $300,000 and $1,103,000, respectively,
as the Company initially eliminated its poker operations in March 1997 and the
reintroduced them for competitive reasons in December 1997. Management believes
the decrease in table drop and slot coin in is reflective of lower customer
visits affecting the entire Baton Rouge marketplace. The decrease in table game
hold percentage, excluding premium player activity in 1996, is due to its
changes in odds on craps tables and increased skill level of blackjack players
in the market combined with the randomness associated with games of chance.
For the year ended November 30, 1997 win per passenger increased 1.3%
to $45.69 compared to $45.09 in the same period of 1996. Revenues from casino
operations were 75.2% from slot machines and 24.8% for table games in 1997
compared to 71.6% and 28.4%, respectively, for 1996. Such mix of slot machine
gaming table win is attributable to the continuing popularity of slot machines
among the Company's base of casino patrons and generally conforms to that
experienced by riverboats throughout Louisiana.
Casino expenses for the years ended November 30, 1997 and 1996 were
$31,826,000 and $33,947,000, respectively, which represented 47.0% and 45.5% of
casino revenues in each period. Overall casino expenses are down reflecting (i)
decreased taxes associated with gaming revenues, (ii) lower expenses for payroll
and related costs in the gaming and casino
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marketing departments, and (iii) lower costs for selling and administering the
bus program. These decreases in expenses were partially offset by increased
costs for promotional expenses and casino support departments.
Selling, general and administrative expenses were $21,039,000 and
$21,954,00 for the years ended November 30, 1997 and 1996, respectively. Overall
selling, general and administrative expenses for 1997 were lower than 1996 due
to (i) one time expenses incurred in 1996 related to a campaign in support of
riverboat gaming in Baton Rouge, (ii) decreased insurance premiums and
deductible expenses, and (iii) decreased management fees and land lease expenses
that resulted from lower revenues. These lower expenses were partially offset by
increased marketing, security, human resources and facility department expenses
for 1997 and compared to 1996.
Income before depreciation, amortization and interest was $15,561,000
and $19,566,000 for the years ended November 30, 1997 and 1996, respectively.
Such amounts as a percentage of net revenues (or operating margins) were 22.3%
and 25.5% for the 1997 and 1996 periods, respectively. Management believes the
decrease in operating margins was due to (i) winnings from premium player
activity in the 1996 period that did not occur in 1997, and (ii) the decline of
gaming revenues in the Baton Rouge market without a proportionate decline in
expenses.
Net interest expense was $5,675,000 and $6,761,000 for the years ended
November 30, 1997 and 1996, respectively. The reduction in interest expense is
due to a decline in outstanding debt due to the 1997 and 1996 mandatory 1993
Note repurchases.
The Company recorded a provision for income taxes of $2,045,000 and
$1,340,000 for the years ended November 30, 1997 and 1996, respectively. For the
year ended November 30, 1997, the Company recorded a current tax provision of
$650,000 and a deferred tax provision of $1,395,000. For the year ended November
30, 1996, the Company released the remaining balance of a deferred tax valuation
allowance of $2,399,000 in accordance with SFAS 109. The release of the
valuation allowance partially offset the current tax provision of $1,663,000 and
the deferred tax provision of $2,076,000 for the year ended November 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended November 30, 1998, the Company generated
$6,693,000 in cash flows from operations as compared to $9,621,000 for the year
ended November 30, 1997. The decrease in cash flows from operations was
primarily due to the settlement of the dispute regarding consulting services
described in Note 7 to the November 30, 1998 financial statements included
elsewhere herein, early payment of interest related to the 1993 Notes and a
decrease in net income.
Cash flows used for investing activities were $472,000 and $253,000,
respectively, for the years ended November 30, 1998 and 1997, net of $4,807,000
and $939,000, respectively, of restricted cash, as permitted by the indenture
under which the 1993 Notes were issued (the "1993 Indenture"). The uses of funds
for each of the periods were primarily for capital expenditures for continuing
operations. In addition, in 1998 the Company acquired approximately five acres
of land adjacent to its docking facility for approximately $1,100,000.
Financing activities for the year ended November 30, 1998 used cash
flows of $620,000 for dividend payments to common shareholders and distributions
to warrantholders of $1,996,000, repayment of the 1993 Notes of $43,946,000, and
redemption of preferred stock and payment of related accrued dividends of
$1,760,000, offset by the net proceeds of $47,100,000 from the issuance of the
1998 Notes. The net cash used by financing activities in the year ended November
30, 1997 of $6,121,000 related primarily to the $2,223,000 repayment of
regularly scheduled principal amounts due under the Company's credit agreement,
as amended (which credit agreement subsequently expired on December 1, 1998), an
increase in restricted cash of $2,694,000 as calculated pursuant to the 1993
Indenture, the repurchase of $722,000 of 1993 Notes as required by the 1993
Indenture, and dividend payments to common shareholders and distributions to
warrantholders of $482,000.
Certain warrantholders recently exercised their rights under 14,100
warrants to purchase an equal number of shares of the Company's common stock at
a price per share of $.01. The remaining warrantholders exercised put rights
obligating the Company to purchase 138,900 warrants at a price based on the
value of the Company's common stock on December 1, 1998, as determined by two
investment banking firms, one selected by the Company and the other selected by
the warrantholders. The Company retained Jefferies & Company, Inc. while the
warrantholders retained Lehman Brothers, Inc. to determine such value.
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<PAGE>
The purchase price of the warrants is based upon the average of the values
determined by the two investment banking firms. The actual net purchase price of
$3,749,000 for the 138,900 warrants was funded on March 8, 1999 from available
cash.
Management believes that cash on hand and cash generated from
operations will be sufficient to satisfy working capital requirements and
maintenance capital expenditures for the foreseeable future. Historically, the
Company has incurred annual maintenance capital expenditures of approximately
$2,000,000. The Company anticipates maintenance capital expenditures in 1999 of
$3,000,000, inclusive of approximately $300,000 of expenditures associated with
an underwater hull inspection and $400,000 of expenditures associated with year
2000 readiness.
In addition to capital expenditures noted above, the Company is
presently contemplating various capital improvements to the Casino Rouge
facilities. Financing for any such improvements is anticipated to be provided by
cash flow from operations and future borrowings.
In November 1998, the Company sold $50,000,000 principal amount of 1998
Notes. The net proceeds from such offering, approximately $47.5 million, were
used to repay the outstanding 1993 Notes and redeem the Company's redeemable
preferred stock.
In January 1999, the Company issued the 1999 Notes. The Company used
the proceeds to defease and redeem the 1998 Notes and for general corporate
purposes. The Indenture pursuant to which the 1999 Notes were issued includes
certain covenants which limit the ability of the Company and its restricted
subsidiaries, subject to certain exceptions, to: (i) incur additional
indebtedness; (ii) pay dividends or other distributions, repurchase capital
stock or other equity interests or subordinated indebtedness; (iii) enter into
certain transactions with affiliates; (iv) create certain liens or sell certain
assets; and (v) enter into certain mergers and consolidations. As a result of
the restrictions, the ability of the Company to incur additional indebtedness to
fund operations or to make capital expenditures is limited. To the extent that
cash flow from operations is insufficient to cover cash requirements, the
Company would be required to curtail or defer certain capital expenditures under
these circumstances, which could have an adverse effect on the Company's
operations.
YEAR 2000
As the year 2000 approaches, all companies that use computers must
address "Year 2000" issues. Year 2000 issues result from the past practice in
the computer industry of using two digits rather than four to identify the
applicable year. This practice can create breakdowns or erroneous results when
computers perform operations involving years later than 1999.
The Company has devised and commenced an extensive compliance plan with
the objective of bringing all of the Company's information technology ("IT")
systems and its non-IT systems into Year 2000 compliance by the end of fiscal
1999. The IT systems include the Company's computer equipment and software and
non-IT systems include the Company's communication systems, alarm and security
systems, gaming equipment and shipboard equipment (e.g. shipboard navigation,
control and power generation and distribution systems). Each system will be
evaluated and brought into compliance in three phases:
Phase I -- Evaluate and assess compliance of the system
Phase II -- Commit and assign resources needed to implement
compliance
Phase III -- Modify or replace non-compliant system.
The Company's systems used to maintain financial records and other
critical systems have completed Phases I and II, with completion of Phase III
scheduled by the end of fiscal 1999. Approximately 98% of the Company's
non-critical systems have completed Phase II. The Company anticipates the
non-critical systems will be evaluated and brought into compliance by the end of
the third quarter of 1999.
The Company has also commenced efforts to determine the extent to which
it may be impacted by year 2000 issues of third parties, including its material
vendors and suppliers and certain agencies and regulatory organizations. Year
2000
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<PAGE>
correspondence was sent to third parties, with continued follow-up for those
that failed to respond and where risks have been identified. The Company
estimates that the process of identifying and evaluating third party risks is
98% complete.
Through November 30, 1998 the Company has not incurred or expensed any
material amounts directly related to year 2000 readiness. The Company is
currently evaluating the expected remaining costs to be incurred in connection
with the year 2000 project, with approximately $400,000 estimated and included
in the 1999 capital expenditure budget. The project is being funded by cash on
hand and internally generated funds, which the Company expects to be adequate to
complete the project.
The failure to correct a material year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the year
2000 readiness of third parties, the Company is unable to determine at this time
whether the consequences of year 2000 failures will have a material impact on
the Company's results of operations, liquidity or financial condition. The year
2000 project is expected to significantly reduce the Company's level of
uncertainty about year 2000 problems, including the year 2000 compliance and
readiness of its material third parties. The Company believes that completion of
the project as scheduled will reduce the possibility of significant
interruptions of normal operations. A contingency plan has not been developed
for dealing with the most reasonably likely worst case scenario, and such
scenario has not yet been clearly identified. The Company currently plans to
complete such analysis and develop and implement any necessary contingency plans
by December 31, 1999.
The costs of the Company's year 2000 project and the dates on which the
Company believes it will complete the various phases of this project are based
upon management's best estimates, which were derived using numerous assumptions
regarding future events, including the continued availability of certain
resources, third-party remediation plans and other factors. There can be no
assurance that these estimates will prove to be accurate and actual results
could differ materially from those currently anticipated. Specific factors that
could cause such material differences include, but are not limited to, the
availability and cost of personnel trained in year 2000 issues, the ability to
identify, assess, remediate and test all relevant computer code and embedded
technology, the performance of new systems and equipment, the reduction of
productivity pending completion of employee training and similar uncertainties.
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BUSINESS
GENERAL
LCC owns and operates the leading riverboat gaming facility in Baton
Rouge, Louisiana. The Casino Rouge, one of only two licensed riverboat gaming
facilities in Baton Rouge, achieved a 59.3% market-share of the approximately
$120 million casino gaming win in Baton Rouge in 1998. The state constitution
currently limits the Baton Rouge market to the two existing gaming licenses,
absent a referendum election in the parish. In addition, approximately $80
million of annual video poker win was generated from approximately 1,600 video
poker machines during the twelve months ended June 30, 1998 in four Baton Rouge
area parishes in non-casino locations such as restaurants, taverns, hotel/motels
and truckstops. A recent referendum, effective July 1999, prohibits video poker
outside casinos in these parishes. The Company anticipates that it will capture
a share of this $80 million market, based upon a recent survey of video poker
players in these parishes. For the fiscal year ended November 30, 1998, LCC
generated revenues of $70.8 million.
The Casino Rouge features a four-story, 47,000 square foot riverboat
casino, replicating a 19th century Mississippi River paddlewheel steamboat, and
a two-story, 58,000 square foot dockside embarkation building. The riverboat has
a capacity of 1,800 customers and emphasizes spaciousness and excitement with
its ample aisle space, 15-foot ceilings, a large central atrium and specially
designed lighting. The overall effect avoids the cramped atmosphere found in
many riverboat casinos. Patrons are offered a selection of 946 gaming machines
and 43 table games in 28,000 square feet of gaming space spread over three
decks. The dockside embarkation facility, which in fiscal year 1998 underwent a
$2.3 million renovation, offers a panoramic view of the Mississippi River and
features a variety of amenities, including (i) the new 268-seat "International
Marketplace Buffet," (ii) an array of food, bar and lounge areas, (iii) a new
meeting and planning center and (iv) a gift shop. All of the facilities are open
seven days a week, 24 hours a day with eight cruises scheduled daily.
LCC selected the site of the Casino Rouge for its convenient location
and easy accessibility. The 23-acre site is located on the east bank of the
Mississippi River in the East Baton Rouge Downtown Development District less
than one-quarter mile from the state capital complex. The site is within
approximately one mile of both Interstate 10 and Interstate 110. In addition,
the site has convenient parking for approximately 1,100 cars adjacent to the
embarkation facility with potential capacity for a total of 1,550 spaces.
The Company believes that it has enhanced patron satisfaction and
competed successfully due to the Casino Rouge's (i) spacious, appealing
atmosphere, (ii) superior location and ease of access with ample on-site
parking, (iii) effective marketing and operating strategy which has built an
established local customer base and (iv) strong management team. LCC believes
that these strengths should allow it to capitalize on strong local market
fundamentals, permitting it to realize its goal of sustained revenue growth,
particularly in light of the opportunity represented by the recent referendum
providing access to new video poker win.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy statements and
other information with the Commission under the Exchange Act. These reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the following regional offices of
the Commission: Seven World Trade Center, Suite 1300, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material can be obtained at prescribed rates by writing to
the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission maintains an internet web site that contains reports,
proxy and information statements and other information regarding issuers
(including the Company) that file electronically with the Commission. The
address of that site is www.sec.gov.
OPERATING STRATEGY
Key elements of the Company's operating strategy include the following:
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FOCUS ON THE LOCAL BATON ROUGE MARKET. LCC's operating strategy is
focused primarily on catering to persons residing within the nine parishes of
the greater Baton Rouge market, drawing approximately 85% of its customers from
within a 25 mile radius and nearly all of its customers from within a 50 mile
radius. Baton Rouge, the capital of Louisiana, is one of the fastest growing
cities in Louisiana, with approximately 620,000 people residing in the greater
Baton Rouge metropolitan area and 1.1 million people within a 50-mile radius.
The population within a 50-mile radius of Baton Rouge is expected to increase by
nearly 5% by 2002. The downtown Baton Rouge business district has been
experiencing a revitalization, due in part to the consolidation all state
buildings within close proximity of each other. Management expects this
consolidation to have a positive impact on the Company, particularly since the
largest administrative complex, a new 465,000 square foot facility, will be
built directly across the street from the Casino Rouge.
ACCESS NEW VIDEO POKER MARKET OPPORTUNITY. The Company will seek to
capitalize on any increased demand for video poker resulting from the recent
referendum that, effective July 1999, prohibits video poker outside of casinos
in four local parishes around Baton Rouge. During the twelve months ended June
30, 1998, the four parishes generated approximately $80 million of non-casino
based video poker win from approximately 1,600 video poker machines. LCC's
recent survey of video poker players within these parishes indicates that the
Casino Rouge has the opportunity to gain inroads into this market with minimal
capital expenditures or changes to the existing casino floor plan. The Casino
Rouge currently has 139 video poker machines and plans to add more machines to
address this new opportunity.
FURTHER BUILD THE ESTABLISHED CUSTOMER BASE THROUGH TARGETED MARKETING.
LCC uses frequent promotional programs in order to attract target customers and
establish a high level of customer recognition. In addition to aggressive
marketing through radio and newspaper advertising, LCC sponsors promotions
designed for groups such as senior citizens, petrochemical industry shift
workers and attendees at local college sporting events. The Company also
utilizes an electronic player tracking system to monitor frequency and level of
play for its slot club customers, allowing LCC to focus its marketing efforts,
customize its product offering and build customer loyalty. Members of the
Company's "Players" club receive special privileges, such as entrance to slot
tournaments, bonus play prizes based upon level of play and complimentary meals.
This database and established customer base is a key asset of the Company with
approximately 200,000 club members as of November 30, 1998.
OPTIMIZE MIX OF GAMES. The Company continually attunes its overall game
mix to appeal to the local Baton Rouge target market. Approximately 75% of the
Casino Rouge's gaming positions are gaming machines. The 946 gaming machines
include denominations of $0.05 to $100.00, with over 95% of the machines $1.00
or lower in denomination. The Company has also recently added gaming machines
that are popular at Native American casinos, but which were previously
unlicensed for use outside of such casinos. The Company intends ultimately to
increase the number of its gaming machines to in excess of 1,000. The 43 table
games offered by the Casino Rouge include craps, roulette, blackjack,
mini-baccarat, Caribbean Stud, Let-It-Ride, American Poker and a Big Six Wheel,
primarily with low minimum betting limits. The Company has also recently
reconfigured its floor to provide continuous poker games.
ENHANCE APPEAL OF PRODUCT OFFERINGS. To capitalize on the popularity of
the Casino Rouge and to further penetrate the local market, the Company has
recently completed a $2.3 million capital improvement project, which
significantly enhanced the Company's dockside facilities. These improvements
include the new "International Marketplace Buffet" and new meeting and planning
facilities, as well as significant renovations to the riverboat, guest walkway
and the pavilion area. The Company also recently upgraded its food offering with
the hire of a regionally-recognized head chef. In addition, the Company
periodically hosts in temporary tent facilities a variety of special events,
such as holiday parties, concerts and boxing matches, which serve to increase
traffic flow for the Casino Rouge. Such events have been extremely popular and
typically sold-out. As a result, the Company is evaluating the construction of
permanent entertainment facilities, which would be more cost effective and
increase capacity.
PROVIDE SUPERIOR CUSTOMER SERVICE. One of the primary areas of the
Company's business strategy is to provide its customers with a high level of
personal service. Management trains its employees to interact with guests and
continually strives to instill in each employee a dedication to superior service
designed to exceed guests' expectations. To this end, the Company has
implemented extensive training programs and instituted programs to incentivize
its employees to provide a high level of customer service.
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THE BATON ROUGE MARKET
Baton Rouge, the capital of Louisiana, is located along the Mississippi
River, approximately 75 miles northwest of New Orleans. It is one of the fastest
growing cities in Louisiana with approximately 620,000 people residing in the
greater Baton Rouge metropolitan area and 1.1 million people within a 50-mile
radius. The population within a 50-mile radius of Baton Rouge is expected to
increase by nearly 5% by 2002. Major employers include the State of Louisiana,
the petrochemical industry and local governments. Additionally, the city is home
to thirty-one corporate and university research facilities, Louisiana State
University ("LSU"), Southern University ("Southern") and a major port on the
Mississippi River.
The downtown Baton Rouge business district has been experiencing a
revitalization, due in part to the state government's desire to consolidate all
state buildings within close proximity of each other. Management expects this
decision to have a positive impact on the Company, particularly since the
largest administrative complex, a new 465,000 square foot facility, will be
built directly across the street from the Casino Rouge. A 1,000-employee state
administration building was also recently completed within one-quarter mile from
the Casino Rouge, and other nearby facilities are in various stages of
construction.
Baton Rouge offers a number of tourist attractions in or near the city,
including antebellum homes, the state capital and other historic sites, as well
as LSU and Southern sporting events. Due to its political, business and
educational importance, as well as its tourist attractions, Baton Rouge drew
over 2.0 million visitors in both 1996 and 1997. The Company hopes to supplement
its core local customer base with this visitor market.
COMPETITION
GENERAL. The Louisiana Act limits the number of gaming casinos to
fifteen riverboat casinos statewide and one land-based casino in New Orleans.
Absent further state legislation and local option referendum, additional
licenses cannot be granted. Fourteen of the fifteen available riverboat licenses
are currently issued and outstanding: two for Baton Rouge; three for the greater
New Orleans area; four for the Shreveport/Bossier City area in the northwest
part of the state, approximately 235 miles from Baton Rouge; four for Lake
Charles in the southwest part of the state, approximately 120 miles from Baton
Rouge; and one granted to a riverboat casino which discontinued operations in
New Orleans in October 1997 and whose owners received the approval of the
Louisiana Board to relocate the riverboat casino for what will be the fifth
license in the Shreveport/Bossier City area.
BATON ROUGE CASINOS. The Company's principal competitor is the other
Baton Rouge riverboat casino, the Belle of Baton Rouge, which opened on
September 30, 1994 and is owned and operated by Argosy. Since commencing
operations on December 28, 1994, the Casino Rouge has achieved an average of 57%
of the market-share of gaming win on Baton Rouge riverboats as reported by the
Louisiana State Police. Argosy constructed a retail, restaurant and
entertainment center called "Catfish Town" as an integral part of its land-based
facility which commenced operations in April 1996. As of December 31, 1998, all
merchants and retailers had ceased operations at Catfish Town and there were no
remaining tenants. Situated approximately a mile and a half north of the Belle
of Baton Rouge, the Company believes that it enjoys a superior location at its
berth on the Mississippi River in Baton Rouge. Additionally, in connection with
Argosy's gaming license, Argosy agreed to build a hotel, and to be subject to an
additional $2.50 admission tax per person until construction of the hotel
project commences. To date, Argosy has not begun development of the hotel
project, and it is unclear if and when Argosy will commence development of the
proposed hotel. The additional admission tax costs Argosy approximately $3.0
million annually.
The following table provides a quarterly summary of gaming revenue
share captured by the Casino Rouge in comparison to that of the Belle of Baton
Rouge:
BATON ROUGE RIVERBOAT GAMING MARKET TAXABLE GAMING REVENUE MARKET SHARE
[INSERT BAR CHART]
Source: Numbers are derived from Louisiana State Police reported taxable gaming
win and are based upon November 30 fiscal years.
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<PAGE>
Additionally, as depicted in the following table, the Casino Rouge has
experienced an improving trend in gaming market win per patron as compared to
that of the Belle of Baton Rouge:
BATON ROUGE RIVERBOAT GAMING MARKET TAXABLE GAMING WIN PER PATRON
[INSERT BAR CHART]
Source: Numbers are derived from Louisiana State Police reported taxable gaming
win and are based upon November 30 fiscal years.
The two Baton Rouge riverboats also currently face competition from the
following sources:
NEW ORLEANS CASINOS. New Orleans has three riverboats and one
land-based casino. During November 1995, the controlling partnership which owned
the right to operate the only land-based casino in New Orleans, closed its
temporary casino, temporarily halted construction on its permanent casino and
filed for bankruptcy protection under Chapter 11. Construction of the land-based
casino under changed ownership has recently resumed and operations are expected
to begin in late 1999.
NATIVE AMERICAN CASINOS. Gaming is also permitted on Native American
lands in Louisiana and other states, and there are currently three such
operating Native American casinos in Louisiana. Although the closest such casino
is a land-based facility located on the Chitimacha reservation in Charenton,
Louisiana, approximately 45 miles southwest of Baton Rouge, it is not accessible
by a major highway. The closest Native American casino to Baton Rouge with major
highway accessibility is a land-based facility located on the Tunica-Biloxi
reservation in Mansura, Louisiana, approximately 65 miles northwest of Baton
Rouge.
MISSISSIPPI CASINOS. An emerging trend in Mississippi gaming,
particularly on the Gulf Coast (approximately 125 miles from Baton Rouge), is
the development of large-scale destination resort projects. As of December 31,
1998, the Mississippi Gaming Commission had granted 45 gaming licenses. Of
these, 29 of the licensees have opened and are operating casinos, one licensee
anticipates opening in the immediate future and the remaining licensees
represent entities that have either consolidated or closed casinos.
OTHER COMPETITION. Proposals have been introduced into the Louisiana
legislature to increase the number of gaming facilities permitted in Louisiana.
However, to date no such legislation has been approved and currently there are
no proposals in the legislature to issue new licenses. Alternative forms of
gaming are available to potential customers. Louisiana state law allows the
operation of a state lottery, betting on horse racing and charitable bingo. In
July 1991, Louisiana also authorized operation of video poker terminals at
various types of facilities in the state, including taverns, restaurants,
hotels/motels, truckstops and racing facilities. As of June 30, 1998,
approximately 15,000 video poker terminals at approximately 3,600 non-casino
locations were in operation throughout the state. These facilities are widely
distributed throughout the state and have had no greater impact on the Baton
Rouge riverboat casinos than on other Louisiana riverboats.
EMPLOYEES
The Company maintains a staff of approximately 800 full-time equivalent
employees. None of the employees are covered by a collective bargaining
agreement. In 1995, two separate union elections, involving a total of less than
5% of all employees, were held and both initiatives were defeated. The Company
believes that its employee relations are good.
LEGAL PROCEEDINGS
The Company is a party to pending legal proceedings arising in the
normal course of business, none of which LCC believes is material to its
financial position or results of operations.
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<PAGE>
PROPERTIES
The Casino Rouge is located on the east bank of the Mississippi River
in Baton Rouge, Louisiana on an 18-acre leased site. The Company leases the
18-acre site for the Casino Rouge pursuant to a 10-year lease entered into
beginning January 1994, the term of which may be extended at the Company's
option for four successive five-year periods. The annual rent is equal to the
greater of (a) 1.25% of all revenue generated on or by the leased premises or
any riverboat docked there or (b) $33,333 per month. In addition, LCC prepaid
rent of approximately $1,756,000 in connection with the lessor's acquisition of
nine acres of the 18-acre site subject to the lease. Pursuant to the lease, the
Company must also pay all property taxes. For the year ended November 30, 1998,
the rental expense for the casino site was $909,000 (excluding amortization of
prepaid rent of $180,000). The Company has the option to purchase the entire
18-acre site on or after the fifteenth anniversary of the date of the lease for
a purchase price equal to the then appraised value of the original nine acres
subject to the lease (excluding improvements). In addition, in September 1998
the Company purchased approximately five acres of land adjacent to its docking
facilities for $1.1 million.
The Company also leases a total of approximately 81,600 square feet for
general warehousing, office use and employee parking pursuant to two separate
two-year leases. The rents are $7,476 per month for one lease and $8,190 per
month for the other. Each lease is a triple net lease, has two two-year renewal
options and grants the Company a right of first refusal to purchase the
properties. The Company has agreed, subject to due diligence, to purchase such
property for $1.4 million, evidenced by a note and mortgage held by the seller
of the property. For the year ended November 30, 1998, the rental expense for
the general warehousing, office use and employee parking sites, was $177,000.
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<PAGE>
REGULATORY MATTERS
GENERAL
LCC is subject to regulation by the State of Louisiana and, to a lesser
extent, by federal law. The Company is subject to regulations that apply
specifically to the gaming industry and casinos and regulations that apply to
the owners and operators of riverboats in addition to regulations applicable to
businesses generally. Below is a description of certain regulations to which the
Company is subject. Legislative or administrative changes in applicable legal
requirements have been proposed from time to time. It is possible that the
applicable requirements to operate a Louisiana gaming facility will become more
stringent and burdensome, and that taxes, fees and expenses may increase, as the
state gains further experience in regulating gaming. Failure to comply with
detailed regulatory requirements may be grounds for the suspension or revocation
of a license which would have a materially adverse effect upon the Company. See
"Risk Factors--Regulation."
LOUISIANA RIVERBOAT GAMING REGULATION
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
Since May 1, 1996, gaming activities have been regulated by the Louisiana Board.
Under the Louisiana Act, local authorities may impose an admission fee of up to
$2.50 per passenger. Currently, Baton Rouge authorities are imposing the full
$2.50 per passenger fee at the two Baton Rouge riverboats.
The Louisiana Act authorized the issuance of up to 15 licenses to
conduct gaming activities on a riverboat of new construction in accordance with
applicable law. However, no more than six licenses may be granted to riverboats
operating from any one parish. Of the 15 available licenses, currently 13 are in
operation, one is being relocated and one has been returned to the state.
In issuing or renewing a license, the Louisiana Board must find that
the applicant is a person of good character, honesty and integrity and that the
applicant is a person whose prior activities, criminal record, if any,
reputation, habits and associations do not pose a threat to the public interest
of the State of Louisiana or to the effective regulation and control of gaming,
or create or enhance the dangers of unsuitable, unfair or illegal practices,
methods and activities in the conduct of gaming or the carrying on of business
and financial arrangements in connection therewith. The Louisiana Board will
grant or renew a license if it finds that: (a) the applicant can demonstrate the
capability, either through training, education, business experience, or a
combination of the above, to operate a gaming casino; (b) the proposed financing
of the riverboat and the gaming operations is adequate for the nature of the
proposed operation and from a source suitable and acceptable to the Louisiana
Board; (c) the applicant demonstrates a proven ability to operate a vessel of
comparable size, capacity and complexity to a riverboat so as to ensure the
safety of its passengers, with each employee being appropriately Coast Guard
certified; (d) the applicant submits a detailed plan of design of the riverboat
in its application for a license; (e) the applicant designates the docking
facilities to be used by the riverboat; (f) the applicant shows adequate
financial ability to construct and maintain a riverboat; and (g) the applicant
has a good faith plan to recruit, train and upgrade minorities in all employment
classifications.
Riverboat gaming licenses in Louisiana are issued for an initial
five-year term with annual renewals thereafter. The Company's original five-year
gaming license for the Casino Rouge is up for renewal in July 1999. Each of the
Company and its officers, directors, managers, principal shareholders and their
officers and directors and key gaming employees will be subject to strict
scrutiny and full suitability and approval by the Louisiana Board in connection
with the Company's renewal application. The factors that the Louisiana Board has
stated it will consider, among others, in order to renew the Company's license,
include the Company's compliance with all the requirements of the Louisiana Act,
the approval of various systems and procedures, the demonstration of good
character (including an examination of criminal and civil records) and methods
of business practice. The Louisiana Board may also seek to impose, as a
condition of the license renewal, certain Louisiana, minority and female
procurement goals. As a result of the Justice Department's recent indictments of
former Louisiana Governor Edwin Edwards and certain other persons on charges
relating to, among other things, gaming licenses in Louisiana, the Louisiana
regulators are applying greater scrutiny to the suitability and business
practices of the licensees. The Company believes it will be successful in
receiving a renewal of its license from the Louisiana Board, but no assurance
can be given as to whether or when the license will be extended, or the extent
of any restrictions that may be imposed as a condition to the issuance thereof.
The loss, suspension or failure to obtain a renewal of such license would have a
material adverse effect on the Company. See "Risk Factors--Regulation."
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<PAGE>
Other regulations imposed by the Louisiana Act or rules adopted
pursuant thereto include, but are not limited to, the following: (a) the Company
must periodically submit financial and operating reports to the Louisiana Board;
(b) owners holding greater than a 5% interest must be found suitable by the
Louisiana Board; (c) any individual who is found to have a material relationship
to, or involvement with, the Company may be required to be investigated for
suitability; (d) if a director, officer, or key employee were found to be
unsuitable, the Company would have to sever all relationships with that person;
(e) the transfer of a license or permit or an interest in a license or permit is
prohibited without prior approval; (f) the Company must notify the Louisiana
Board of any withdrawals of capital, loans, advances, or distributions in excess
of 5% of retained earnings upon completion of such transaction; and (g) the
Company must give prior notification to the Louisiana Board if it applies or
receives, accepts or modifies the terms of any loan or other financing
transaction. In some cases, the Louisiana Board will be required to investigate
the reported transaction and to either approve or disapprove the transaction.
The Louisiana Act or rules adopted pursuant thereto specify certain
restrictions and conditions relating to the operation of riverboat gaming,
including the following: (a) gaming is not permitted while a riverboat is
docked, other than the 45 minutes between excursions, and during times when
dangerous weather or water conditions exist as certified by the riverboat's
master; (b) each round-trip riverboat cruise may not be less than three nor more
than eight hours in duration, subject to specified exceptions; (c) agents of the
Louisiana Board are permitted on board at any time during gaming operations; (d)
gaming devices, equipment and supplies may only be purchased or leased from
permitted suppliers; (e) gaming may only take place in the designated gaming
area while the riverboat is upon a designated river or waterway; (f) gaming
equipment may not be possessed, maintained or exhibited by any person on a
riverboat except in the specifically designated gaming area, or a secure area
used for inspection, repair or storage of such equipment; (g) wagers may be
received only from a person present on a licensed riverboat; (h) persons under
21 are not permitted on gaming vessels; (i) except for slot machine play, wagers
may be made only with tokens, chips or electronic cards purchased from the
licensee aboard a riverboat; (j) licensees may only use docking facilities and
routes for which they are licensed and may only board and discharge passengers
at the riverboat's licensed berth; (k) licensees must have adequate protection
and indemnity insurance; (l) licensees must have all necessary federal and state
licenses, certificates and other regulatory approvals prior to operating a
riverboat; and (m) gaming may only be conducted in accordance with the terms of
the license, the Louisiana Act and the rules and regulations adopted by the
Louisiana Board.
Fees for conducting gaming activities on a riverboat pursuant to the
Louisiana Act include (i) $50,000 per riverboat for the first year of operation
and $100,000 per year per riverboat thereafter plus (ii) 18.5% of net gaming
proceeds. The Louisiana Act also authorizes the local governing body to assess a
boarding fee up to $2.50 in East Baton Rouge Parish. The City of Baton Rouge has
imposed an admission fee of $2.50 for each patron boarding the vessel. For
fiscal year ended November 30, 1998, LCC's boarding fee expense was $3,480,000.
For competitive reasons, the Company and its Baton Rouge competitor have elected
not to collect boarding fees from patrons.
Proposals to amend or supplement the Louisiana Act are frequently
introduced in the Louisiana state legislature. In addition, the state
legislature from time to time considers proposals to repeal the Louisiana Act,
which would effectively prohibit riverboat gaming in the State of Louisiana.
Although the Company does not believe that a prohibition of riverboat gaming in
Louisiana is likely, no assurance can be given that changes in the Louisiana
gaming law will not occur or that such changes will not have a material adverse
affect on the Company's business. On November 5, 1996, in the six parishes in
which riverboats are currently located, including East Baton Rouge Parish,
voters approved the continuation of riverboat gaming. In East Baton Rouge Parish
and the six parishes as a whole, the vote in favor of riverboat gaming was 59%
and 66%, respectively.
At the present time, gaming is authorized between cruising excursions
if the vessel is docked for less than forty-five minutes between such excursions
and at such other times as the master of the vessel certifies in writing that
existing weather or water conditions present a danger to the riverboat,
passengers or crew. Legislation may be proposed that could involve the expansion
of cruising requirements; the creation of "phantom" cruises; the establishment
of a minimum number of annual cruises a vessel must take; or the authorization
of unrestricted dockside gaming. The Company does not believe that any
legislation which would expand cruising requirements would be successful due to
the fiscal and safety concerns articulated to the Louisiana Board in its
extensive review of all riverboat licensees that are required to cruise. An
expansion of cruising requirements could have a negative impact on future gaming
revenue and state tax revenue. See "Risk Factors--Regulation."
The Company is currently undergoing a scheduled state audit review of
its accounting procedures and reporting of revenue from its Caribbean Stud poker
table games. The review has resulted in the Company being required to remit
additional taxes of $248,000 and interest of $65,000 for the audit period of
December 1994 through December 1998.
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<PAGE>
In August 1996, President Clinton signed a bill creating the National
Gambling Impact Study Commission (the "NGISC"), composed of individuals
associated with the gaming industry as well as individuals who are openly
opposed to legalized gaming, to examine the economic and social impact of
gaming. The NGISC began a series of hearings on June 20, 1997 and is scheduled
to release a report on its findings, together with recommended legislation and
administrative action, on or before June 20, 1999. Any additional regulation of
the gaming industry resulting from the NGISC's recommendations could have a
material adverse impact on the gaming industry, including the Company.
UNITED STATES COAST GUARD
Each cruising riverboat also is regulated by the United States Coast
Guard, whose regulations affect boat design and stipulate on-board facilities,
equipment and personnel (including requirements that each vessel be operated by
a minimum complement of licensed personnel) in addition to restricting the
number of persons who can be aboard the boat at any one time. The Company's
riverboat must hold, and currently possesses, a Certificate of Inspection. Loss
of the Certificate of Inspection of a vessel would preclude its use as an
operating riverboat. For vessels of the Company's type, the inspection cycle is
every five years. The Company's riverboat is scheduled to be inspected no later
than December 1999. Although the vessel may be drydocked periodically for
inspection of the hull, which would result in a temporary loss of service of up
to two weeks, LCC believes that it will be able to avoid a drydock inspection
and the potential closure associated with such inspection by utilizing an
alternative underwater inspection.
All shipboard employees of the Company employed on United States Coast
Guard regulated vessels, even those who have nothing to do with the actual
operation of the vessel, such as dealers, cocktail hostesses and security
personnel, may be subject to the Merchant Marine Act of 1920, which, among other
things, exempts those employees from state limits on workers' compensation
awards. LCC believes that it has adequate insurance to cover employee claims.
THE SHIPPING ACT OF 1916; THE MERCHANT MARINE ACT OF 1936
The Shipping Act of 1916, as amended, and the Merchant Marine Act of
1936, as amended, and applicable regulations thereunder contain provisions which
would prevent persons who are not citizens of the United States from holding in
the aggregate more than 25% of the outstanding shares of common stock. The
Company's Articles of Incorporation provide that, in the event a shareholder's
ownership prevents the Company from complying with the foreign shareholder
limits imposed by these Acts, such shareholder will be required, within 30 days,
to cure such problem, including through the sale of a requisite percentage of
its ownership interest in the Company, or the Company will be entitled to
purchase such requisite percentage from such shareholder at the price the
shareholder paid to acquire it. Such payment from the Company may be made in
cash, notes or preferred stock which, in the opinion of a nationally recognized
investment banking firm, have a value equal to the amount required to be paid.
GENERAL NON-GAMING REGULATION
The Company is subject to federal, state and local environmental and
safety and health laws, regulations and ordinances that apply to non-gaming
business generally, such as the Clean Air Act, Federal Water Pollution Control
Act, Occupational Safety and Health Act, Resource Conservation Recovery Act, Oil
Pollution Act and Comprehensive Environmental Response, Compensation and
Liability Act, each as amended. The Company has not incurred, and does not
expect to incur material expenditures with respect to such laws. There can be no
assurances, however, that the Company will not incur material liability pursuant
to such laws in the future.
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<PAGE>
PAID ADVERTISING AND MARKETING
The Federal Communications Commission ("FCC") prohibits broadcasters
from accepting advertising that actively promotes gaming, although the FCC does
not ban all advertising for casinos. Federal regulation also restricts the
circulation of certain materials related to gaming through the United States
mail.
DISCOURAGEMENT OF SHARE ACCUMULATIONS
Louisiana state law requiring approval of shareholders over certain
thresholds may discourage accumulations over such limits and therefore may
discourage changes in control of the Company. The federal laws referred to above
may also discourage ownership by shareholders that are not United States
citizens.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information with respect to the directors
and executive officers of the Company.
NAME AGE POSITION
- ---- --- --------
Sherwood M. Weiser..... 68 Chairman of the Board of Directors
Dan S. Meadows......... 52 President and Vice Chairman of the Board
of Directors
Thomas L. Meehan....... 54 Director
Leon R. Tarver II...... 56 Director
W. Peter Temling....... 51 Chief Financial Officer, Secretary, Treasurer
and Director
Dale A. Darrough....... 51 General Manager
The following information summarizes the business experience during at
least the past five years of each director and executive officer of the Company.
SHERWOOD M. WEISER has been the Chairman of the Board of Directors of
the Company since September 1998. Mr. Weiser also is Chairman of the Board of
Directors, President and Chief Executive Officer of CRC and held the same
positions with CHC International, Inc. ("CHC"), a predecessor of CRC, from March
1994 until June 1998. From 1990 to March 1994, Mr. Weiser served as Chairman and
Chief Executive Officer of TCC, a predecessor of CHC. Mr. Weiser is a member of
the Board of Directors of Carnival Corp. and serves as a member of the
Nominating Committee and Chairman of the Compensation Committee and Plan
Administration Committee of the Board of Directors of Carnival Corp. Mr. Weiser
is also a member of the Board of Directors of Mellon United National Bank, a
subsidiary of Mellon Bank, Winsloew Furniture, Inc. and Wyndham International,
Inc. and a trustee of the University of Miami.
DAN S. MEADOWS has been President and a director of the Company since
October 1993 and Vice Chairman of the Board of Directors since September 1998.
From the incorporation of the Company until October 1993, he served as
Secretary/Treasurer. He was elected a director in July 1993. From April 1993 to
April 1995, Mr. Meadows was based in Baton Rouge and was directly responsible
for the development and licensing of the Casino Rouge. Mr. Meadows and Mr.
Thomas L. Meehan are the co-owners of Synura, Inc. ("Synura"), which provided
funding for two corporations in which they own a significant interest:
Sportlite, Inc., an Arizona corporation involved in the development and
marketing of energy saving lighting, and the Company. Prior to co-founding
Synura, Mr. Meadows was involved in real estate development and marketing for 19
years.
THOMAS L. MEEHAN has been a director of the Company since September
1998. Mr. Meehan also served as the Chairman of the Board of Directors of the
Company from its inception until October 1993. Mr. Meehan is President and
Chairman of the Board of Sportlite, Inc. and Chairman of the Board of Synura. In
1979, Mr. Meehan co-founded National Electric, Inc. ("NEI") and served as
President and Director from 1979 until 1989. In 1987, NEI merged its business
with Westinghouse Electric Corporation to become Aptus. Mr. Meehan presently is
a member of the Board of Directors of Manchester Commercial Finance and
Intergenerational Living and Health Care.
LEON R. TARVER II has been a director of the Company since December
1994. Since January 1997, he has been President, and since January 1992,
Professor of Public Administration, of Southern University in Baton Rouge. From
February 1994 through December 1996, Mr. Tarver was Chancellor for
Administration of Southern University. From August 1989 to January 1992, Mr.
Tarver served as the Secretary of the Louisiana Department of Revenue and
Taxation.
W. PETER TEMLING has been Chief Financial Officer, Secretary and
Treasurer of the Company since May 1998 and became a director of the Company in
September 1998. From October 1993 to May 1998 he was acting Chief Financial
Officer of the Company. He was a director of the Company from November 1993
through November 1994. He also is Executive Vice President/Finance and Chief
Financial Officer and a director of CRC and held the same positions with CHC
from 1994 until June 1998. Prior to the formation of CHC in March 1994, Mr.
Temling held similar positions with TCC. Mr. Temling joined TCC in 1981 after
serving 12 years with the Sheraton Corporation, where his responsibilities
included business planning for
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<PAGE>
more than 100 hotels, the opening of hotels worldwide and directing the
financial functions for the franchise division consisting of 400 hotels and
inns. Mr. Temling also is a certified public accountant.
DALE A. DARROUGH has been General Manager of the Company since February
1996. From October 1995 to February 1996, he served as Executive Vice President,
Operations, with Shuffle Master Gaming, Inc. Prior thereto, from August 1995,
Mr. Darrough was a Consultant to Hyatt Development Corp. He held positions with
Bally's Casino Resort from April 1991 to July 1995, most recently as Senior Vice
President, Casino Operations.
EXECUTIVE COMPENSATION
The following table provides a summary of the compensation for the
fiscal years ended November 30, 1998, 1997 and 1996 of the Chairman of the Board
and President of the Company and the other executive officers who received cash
compensation in excess of $100,000 during fiscal 1998 from the Company.
SUMMARY COMPENSATION TABLE
OTHER ANNUAL
NAME AND POSITION YEAR SALARY BONUS COMPENSATION(1)
- ----------------- ---- ------ ----- ---------------
Sherwood M. Weiser(2) 1998 $-- $-- $--
Chairman of the Board
Robert B. Sturges(3) 1998 $-- $-- $--
Chairman of the Board 1997 $-- $-- $--
1996 $-- $-- $--
Dan S. Meadows(4) 1998 $-- $-- $--
President and Vice 1997 $-- $-- $--
Chairman of the Board 1996 $-- $-- $--
Dale A. Darrough 1998 $181,557 $40,000 $--
General Manager 1997 $161,000 $50,000 $--
1996 $120,785 $-- $--
(1) Aggregate amount of other annual compensation does not exceed the
lesser of $50,000 or 10% of executive officers's salary and bonuses.
(2) Mr. Weiser became Chairman of the Board in September 1998.
(3) Mr. Sturges resigned from the position of Chairman of the Board in
September 1998.
(4) Mr. Meadows together with Mr. John R. Rauen, Senior Vice
President/Operations of CRC, serve as the only members of the Executive
Committee of the Board of Directors. They do not receive any
compensation from the Company. They are reimbursed their reasonable
expenses for Board of Directors meetings attended as explained below in
"--Compensation of Directors." See "Principal Shareholders" and
"Certain Relationships and Related Transactions."
COMPENSATION OF DIRECTORS
Directors of the Company who are either employees of the Company or
elected pursuant to the Shareholder Agreement, dated October 8, 1993 by and
among the Company, CRC, Jerry L. Bayles, Dan S. Meadows, Leon R. Tarver and
Thomas L. Meehan (the "Shareholder Agreement") are reimbursed their reasonable
expenses for meetings attended but do not receive any separate compensation. As
a director, Mr. Tarver receives an annual retainer of $10,000 and reimbursement
of reasonable expenses for meetings attended. On December 1, 1994, the Company
issued 2,450 shares of Common Stock to Mr. Tarver, which are now fully vested.
In addition, Mr. Tarver receives $24,000 annually to serve as Chairman of the
Company's Minority Business and Economic Advisory Committee. The Company's Audit
Committee consists of Messrs. Meadows, Rauen, Temling, Meehan and Tarver.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no standing Compensation Committee of the Board of
Directors; therefore, all members of the Board of Directors participate in
deliberations concerning executive officer compensation.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 1999 (a) by each person
who beneficially owns more than five percent of the Company's Common Stock, (b)
by each of the Company's directors, (c) by each executive officer listed in the
Summary Compensation Table who is not a director and (d) by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
COMMON STOCK PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
- ------------------------------------ --------------------- --------
<S> <C> <C>
CRC Holdings, Inc.,(3)........................... 588,200 59.0%
d/b/a Carnival Resorts and Casinos
3250 Mary Street
Miami, FL 33133
Dan S. Meadows
2422 E. Solano
Phoenix, AZ 85016 ............................... 130,711 13.1%
Jerry L. Bayles
2236 Estate Road
Baton Rouge, LA 70808............................ 130,711 13.1%
Thomas L. Meehan
7331 Tilden Lane
Naples, FL 34108................................. 130,711 13.1%
Sherwood M. Weiser(3)
CRC Holdings, Inc.
3250 Mary Street
Miami, FL 33133.................................. -- --
W. Peter Temling(3)
CRC Holdings, Inc.
3250 Mary Street
Miami, FL 33133.................................. -- --
Leon R. Tarver, II
16215 Chadsford Avenue
Baton Rouge. LA 70817............................ 2,450 (2)
All directors and executive officers
as a group (six persons)(3)................. 263,872 26.5%
<FN>
(1) The voting and investment power with regard to the shares of Common
Stock beneficially owned by all shareholders are restricted by the
Shareholder Agreement.
(2) Less than 1%.
(3) Mr. Weiser and Mr. Temling are principal shareholders and officers of
CRC. Mr. Weiser has the right to vote in excess of 50% of the
outstanding common stock of CRC.
</FN>
</TABLE>
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CRC and the Company are parties to a Casino Consulting and Management
Agreement, dated December 11, 1992, as amended (the "Management Agreement"),
pursuant to which, prior to the opening of the Casino Rouge, CRC provided
consulting and technical services to the Company in connection with the
planning, development and equipping of the Casino Rouge. CRC assisted the
Company in preparing the Casino Rouge for operations, including hiring a full
staff of employees, designing the Casino Rouge, establishing accounting systems,
and developing marketing and casino operations concepts. Upon opening of the
Casino Rouge, CRC commenced handling all aspects of Casino Rouge's management
pursuant to the terms of the Management Agreement. The Management Agreement
expires in December 2004, subject to extension at the option of CRC for an
additional 10-year period. CRC is entitled to an annual management fee equal to
2% of gross revenues plus 5% of total operating income (as such terms are
defined in the Management Agreement). By separate agreement, CRC has agreed to
pay one-half of its 5% fee of total operating income to Dan S. Meadows, Jerry L.
Bayles and Thomas L. Meehan, aggregate holders of approximately 40% of the
Company's Common Stock. Mr. Meadows also serves as the Company's President and
Vice Chairman of the Board and Mr. Meehan serves as a director of the Company.
For the fiscal years ended November 30, 1998, 1997 and 1996, the amount earned
by CRC pursuant to the Management Agreement was $2,195,000, $2,214,000 and
$2,567,000, respectively. For the fiscal years ended November 30, 1998, 1997 and
1996, the amount paid by CRC to Messrs. Meadow, Bayles and Meehan was $369,000,
$407,000 and $516,000, respectively.
On September 22, 1993, CRC extended a $2 million credit facility to the
Company. At the closing of the issuance of the Company's 11 1/2% Notes due 1998,
CRC converted all of the $2 million of indebtedness then outstanding under such
facility into 20% of the Common Stock. In October 1993, the Company issued and
sold to CRC 40% of the then issued and outstanding Common Stock for $3 million
pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") among
the Company, CRC and Messrs. Meadows, Bayles and Meehan. The Company and Messrs.
Meadows, Bayles and Meehan, on the one hand, and CRC on the other, agreed to
indemnify each other in the event of certain breaches of the Stock Purchase
Agreement. The Company and Messrs. Meadows, Bayles and Meehan further agreed to
indemnify CRC in the event of certain liabilities arising out of activities
prior to the date of the Stock Purchase Agreement.
Other than warrantholders who exercised warrants to purchase common stock,
all shareholders are parties to the Shareholder Agreement with regard to the
ongoing operation, management and financing of the Company. Pursuant to the
Shareholder Agreement, all actions by the Board of Directors require the
majority approval of the directors. The Shareholder Agreement also provides for
an Executive Committee of the Board, consisting of one nominee of CRC and one
nominee of the individual shareholders, who currently are Mr. Rauen and Mr.
Meadows, respectively. All actions of the Executive Committee require the
unanimous approval of both members. Unless rescinded by a vote of the holders of
51% of the outstanding Common Stock, the Shareholder Agreement provides that the
Executive Committee is delegated all of the duties and responsibilities of the
Board of Directors. The Shareholder Agreement also provides that certain actions
cannot be taken without the approval of the holders of either 51% or 67% of the
outstanding Common Stock, as the case may be, including: (a) the authorization
or issuance of any additional Common Stock (or any securities convertible into
or rights to acquire Common Stock); (b) the sale, lease, transfer, mortgage,
pledge or other disposition of or the acquisition of any assets of the Company,
other than in the ordinary course of developing or operating the Casino Rouge;
(c) the authorization or execution of contracts for major landsite improvements,
any amendment to the landsite lease and contracts for acquiring additional land
as part of the Casino Rouge; (d) all submissions to the Louisiana Board and any
modification or amendment of any approvals or licenses; (e) the redemption,
retirement, purchase or other acquisition by the Company of any Common Stock and
the declaration of any dividend or distribution on account of any capital stock
or any merger, consolidation, split, reverse split or other change of the
capitalization of the Company; (f) the election of any additional members of the
Board of Directors; (g) the approval of the operational budget for the Casino
Rouge presented by CRC pursuant to the Management Agreement; (h) the resolution
of any deadlock between the members of the Executive Committee; (i) any
amendment to the Articles of Incorporation or By-laws of the Company; and (j)
the initiation or settlement of any material litigation or other dispute by or
against the Company.
The Shareholder Agreement also limits the transfer of the Common Stock
owned by the shareholders party thereto. The shares of Common Stock to be issued
in connection with the recent exercise of the Warrants will not become subject
to the transfer restrictions contained in the Shareholder Agreement. Such
restrictions will also lapse upon the consummation of a public offering of
Common Stock. Additionally, any transfer must be subject to any required
regulatory approvals. The transferee must agree to hold its shares subject to
the terms of the Shareholder Agreement and must be of such character and
reputation so as not to jeopardize any regulatory approval held by the Company
or the shareholders and affiliates thereof. Any transfer, other
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than to Permitted Transferees (as defined in the Shareholder Agreement), is
subject to a right of first refusal by the other parties. If the Management
Agreement terminates for any reason, CRC shall have the right to make an offer
to sell to the other shareholders all its Common Stock or to purchase from the
other shareholders all their Common Stock on the terms set forth in the offer.
The Shareholder Agreement also requires CRC, to the extent required by any
individual vendor or supplier, to negotiate and enter into a guaranty of the
Company's payment obligations under agreements to lease or purchase gaming
equipment. The terms of such guaranties shall be subject to the approval of CRC.
On September 15, 1998, the Company resolved a regulatory inquiry from the
Louisiana Board relating to a 1994 stock ownership issue whereby the Company
agreed to reimburse the Louisiana Riverboat Gaming Enforcement Division of the
State Police (the "Division") $50,000, constituting the Division's costs and
expenses of conducting the investigation, pay a fine of $200,000 and comply with
a decree to establish a regulatory compliance committee. CRC has reimbursed the
Company for such fine and costs.
On November 30, 1998, the Company redeemed from Thomas L. Meehan the
11,000 outstanding shares of the Company's Redeemable Preferred Stock for an
aggregate payment of $1,760,000. Such redemption was in accordance with the
terms of such preferred stock.
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DESCRIPTION OF NOTES
GENERAL
The New Notes, like the Old Notes, will be issued pursuant to the
Indenture. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The terms of the New Notes are
substantially identical in all material respects to the terms of the Old Notes,
except that (i) the New Notes will not be subject to the restrictions on
transfer (other than with respect to holders that are broker-dealers, persons
who participated in the distribution of the Old Notes or affiliates) and (ii)
the Registration Rights Agreement covenants regarding registration and the
related Liquidated Damages (other than those that have accrued and were not
paid, if any) with respect to Registration Defaults will have been deemed
satisfied. The Notes are subject to all such terms, and Holders of the Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of certain provisions of the Indenture and the Security
Documents (as defined) and the Registration Rights Agreement does not purport to
be complete and is qualified in its entirety by reference to the Indenture and
the Security Documents, including the definitions therein of certain terms used
below. Copies of the forms of Indenture, the Security Documents and the
Registration Rights Agreement are available from the Company upon request. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions."
The Notes will be senior secured obligations of the Company and will rank
senior in right of payment to all existing and future subordinated Indebtedness
of the Company and PARI PASSU in right of payment with all existing and future
senior Indebtedness of the Company.
The Indenture will allow the Company to designate certain Subsidiaries as
Unrestricted Subsidiaries.
The New Notes will be issued in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
PRINCIPAL, MATURITY AND INTEREST
The Indenture does not limit the aggregate principal amount of Notes that
may be issued thereunder and provides that subject to the covenant in the
Indenture described under "--Certain Covenants--Limitation on Incurrence of
Indebtedness," additional Notes may be issued thereunder from time to time,
without the consent of the Holders of previously issued Notes, in an aggregate
principal amount to be determined from time to time by the Company. The Notes
will mature on December 1, 2005. Interest on the Notes will be payable
semi-annually on June 1 and December 1 of each year, commencing on June 1, 1999,
to Holders of record on the immediately preceding May 15 and November 15,
respectively. The Notes will bear interest at 11% per annum from the date of
original issue. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Notes will be payable both as to
principal and interest at the office or agency of the Company maintained for
such purpose within the City of New York or, at the option of the Company,
payment of interest may be made by check mailed to the Holders at their
respective addresses set forth in the register of Holders. Until otherwise
designated by the Company, the Company's office or agency will be the office of
the U.S. Bank Trust National Association as Trustee under the Indenture (the
"Trustee") maintained for such purpose. If a payment date is a Legal Holiday,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
REDEMPTION
AT THE OPTION OF THE COMPANY. Except as set forth below, the Notes are not
redeemable at the Company's option prior to December 1, 2002. Thereafter, the
Notes will be subject to redemption at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the applicable date of
redemption, if redeemed during the 12-month period beginning on December 1 of
the years indicated below:
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YEAR PERCENTAGE
---- ----------
2002.......................... 105.50%
2003.......................... 102.75%
2004 and thereafter........... 100.00%
Notwithstanding the foregoing, at any time or from time to time prior
to December 1, 2001, the Company may redeem up to one-third of the aggregate
principal amount of the Notes at a redemption price of 111% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, through the
applicable date of redemption, with the net cash proceeds of one or more Public
Equity Offerings; provided, that (i) such redemption shall occur within 60 days
of the date of closing of such Public Equity Offering and (ii) at least
two-thirds of the aggregate principal amount of Notes issued on or after the
Issue Date remains outstanding immediately after giving effect to each such
redemption.
The Notes will also be redeemable, in whole or in part, at any time
upon not less than 20 Business Days nor more than 60 days notice (or such
earlier date as may be ordered by any Governmental Authority) at 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the
redemption date, pursuant to a Required Regulatory Redemption.
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a PRO RATA basis, by
lot or by such method as the Trustee deems to be fair and appropriate; provided,
that Notes of $1,000 or less may not be redeemed in part. Except in the case of
a Required Regulatory Redemption requiring less notice, notice of redemption
will be mailed by first-class mail at least 30 but not more than 60 days before
the redemption date to each Holder to be redeemed at such Holder's registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note will state the portion of the principal amount thereof
to be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the date of redemption, interest will cease to
accrue on Notes or portions thereof called for redemption.
MANDATORY. The Notes will not be entitled to any mandatory redemption
or sinking fund.
SUBSIDIARY GUARANTORS
The repayment of the Notes will be unconditionally and irrevocably
guaranteed, jointly and severally, by all future Restricted Subsidiaries. On the
date of the Indenture, the Company will have no Subsidiaries. The Indenture will
provide that so long as any Notes remain outstanding, any future Restricted
Subsidiary of the Company shall enter into a Subsidiary Guaranty.
If all of the Capital Stock of any Subsidiary Guarantor is sold by the
Company or any of its Subsidiaries to a Person (other than the Company or any of
its Subsidiaries) and the Net Proceeds from such Asset Sale are used in
accordance with the terms of the covenant described under "--Limitation on Asset
Sales," then such Subsidiary Guarantor shall be released and discharged from all
of its Obligations under its Subsidiary Guaranty and the Indenture.
The Obligations of each Subsidiary Guarantor under its Subsidiary
Guaranty will be limited to the maximum amount as will, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Subsidiary Guarantor in respect of the Obligations of such other
Subsidiary Guarantor under its Subsidiary Guaranty, result in the Obligations of
such Subsidiary Guarantor under its Subsidiary Guaranty not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law or
render a Subsidiary Guarantor insolvent.
SECURITY
The Company will assign and pledge as collateral to the Trustee, for
the benefit of the Trustee and the Holders, as security for the Company's
obligations with respect to the Notes (i) the riverboat and the land-based
facility comprising the
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Casino Rouge, (ii) all additions or improvements thereon, and (iii) all real
property, furniture, fixtures and equipment, inventory, accounts, contract
rights and other general intangibles, cash, trademarks and trade names
(collectively the "Collateral"). Notwithstanding the foregoing, the term
Collateral shall not include the Excluded Assets.
The security interest in the Collateral will be a first priority
security interest, subject to certain exceptions permitted by the Indenture and
the Security Documents. The security interest in favor of the Trustee and the
Holders will be created in the riverboat pursuant to a first preferred ship
mortgage (the "Ship Mortgage"), in real property Collateral pursuant to
mortgages or deeds of trust (the "Shore Mortgages" and, together with the Ship
Mortgage, the "Mortgages"), and in all other Collateral pursuant to a security
agreement from the Company in favor of the Trustee (the "Security Agreement"
and, together with the Mortgages, the "Security Documents").
The proceeds of any sale of the Collateral pursuant to the Indenture
and the Security Documents following an Event of Default may not be sufficient
to satisfy payments due on the Notes. In addition, the ability of the Holders to
realize upon the Collateral may be limited pursuant to applicable laws,
including gaming, bankruptcy or securities laws.
If an Event of Default occurs and is continuing, the Trustee, on behalf
of the Holders, in addition to any rights or remedies available to it under the
Indenture and the Security Documents, may take such action as it deems advisable
to protect and enforce its rights in the Collateral, including the institution
of sale or foreclosure proceedings. The proceeds received by the Trustee from
any such sale or foreclosure will be applied by the Trustee first to pay the
expenses of such sale or foreclosure and fees and other amounts then payable to
the Trustee under the Indenture, and thereafter to pay amounts due and payable
with respect to the Notes.
CERTAIN GAMING LAW LIMITATIONS. The Trustee's ability to foreclose upon
the Collateral will be limited by relevant gaming laws, which generally require
that Persons who own or operate a casino or purchase or sell gaming equipment
hold a valid gaming license or permit. No Person can hold a license in the State
of Louisiana unless the Person is found qualified or suitable by the relevant
Gaming Authorities. In order for the Trustee to be found qualified or suitable
such Gaming Authorities would have discretionary authority to require the
Trustee and any or all of the Holders to file applications, be investigated and
be found qualified or suitable as an owner or operator of gaming establishments.
The applicant for qualification, a finding of suitability or licensing must pay
all costs of such investigation. If the Trustee is unable or chooses not to
qualify, be found suitable, or licensed to own, operate or sell such assets, it
would have to retain an entity licensed to operate or sell such assets. In
addition, in any foreclosure sale or subsequent resale by the Trustee, licensing
requirements under the relevant gaming laws may limit the number of potential
bidders and may delay any sale, either of which events could have an adverse
effect on the sale price of such Collateral. Therefore, the practical value of
realizing on the Collateral may, without the appropriate approvals, be limited.
CERTAIN BANKRUPTCY LIMITATIONS. The right of the Trustee to repossess
and dispose of the Collateral upon the occurrence of an Event of Default is
likely to be significantly impaired by applicable bankruptcy law if a bankruptcy
proceeding were to be commenced by or against the Company prior to the Trustee
having repossessed and disposed of the Collateral. Under the Bankruptcy Code, a
secured creditor is prohibited from repossessing its security from a debtor in a
bankruptcy case, or from disposing of security repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor to continue to retain and to use collateral owned as of the date of the
bankruptcy filing (and the proceeds, products, offspring, rents or profits of
such collateral to the extent provided by the Security Agreement and by
applicable nonbankruptcy law) even though the debtor is in default under the
applicable debt instruments, provided, that the secured creditor is given
"adequate protection." The meaning of the term "adequate protection" may vary
according to circumstances. In view of the lack of a precise definition of the
term "adequate protection" and the broad discretionary powers of a bankruptcy
court, it is impossible to predict how long payments under the Notes could be
delayed following commencement of a bankruptcy case, whether or when the Trustee
could repossess or dispose of the Collateral or whether or to what extent
Holders would be compensated for any delay in payment or loss of value of the
Collateral through the requirement of "adequate protection." Furthermore, in the
event a bankruptcy court determines the value of the Collateral is not
sufficient to repay all amounts due on the Notes, the Holders would hold secured
claims to the extent of the value of the Collateral to which the Holders are
entitled, and would hold unsecured claims with respect to such shortfall.
Applicable federal bankruptcy laws do not permit the payment and/or accrual of
post-petition interest, costs and attorneys' fees during a debtor's bankruptcy
case unless the claims are oversecured or the debtor is solvent at the time of
reorganization. In addition, in the event that the Company becomes the subject
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of a bankruptcy case, the bankruptcy court, among other things, may avoid
certain transfers made by the entity that is the subject of the bankruptcy
filing, including, without limitation, transfers held to be fraudulent
conveyances and preferences.
Further, certain limitations exist under the Merchant Marine Act of
1936 on the ability of non-U.S. citizens to realize upon collateral consisting
of vessels documented under the laws of the United States. To the extent that
the Holders are non-U.S. citizens, such limitation could adversely affect the
ability of the Trustee to complete foreclosure on the Collateral. Also, the
Trustee may be required to foreclose through a federal court admiralty
proceeding. Such a proceeding would entail compliance with notice and other
procedural requirements, and could require posting of a substantial bond with
the U.S. Marshall.
REPURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be
required to offer to repurchase all of the Notes then outstanding (the "Change
of Control Offer") at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company must mail or cause to be mailed a notice to each
Holder stating, among other things: (i) the purchase price and the purchase
date, which will be no earlier than 30 days nor later than 45 days from the date
such notice is mailed (the "Change of Control Payment Date"); (ii) that any
Holder electing to have Notes purchased pursuant to a Change of Control Offer
will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the paying
agent with respect to the Notes (the "Paying Agent") at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; and (iii) that the Holder will be entitled
to withdraw such election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Notes
purchased.
The Company will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes in
connection with a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the "Change of Control" provisions
of the Indenture, the Company will comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
the "Change of Control" provisions of the Indenture by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment the Notes or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Notes or portions
thereof so tendered and not withdrawn, and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted, together with an Officers'
Certificate stating that the Notes or portions thereof tendered to the Company
are accepted for payment. The Paying Agent will promptly mail to each Holder of
Notes so accepted payment in an amount equal to the purchase price for such
Notes, and the Trustee will authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided, that each such
new Note will be in the principal amount of $1,000 or an integral multiple
thereof. The Company will announce the result of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
There can be no assurance that sufficient funds will be available at
the time of any Change of Control Offer to make required repurchases.
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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The term "all or substantially all" as used in the definition of Change
in Control has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the Holders elect to exercise their rights under the
Indenture and the Company elects to contest such election, there could be no
assurance as to how a court would interpret the phrase under New York law, which
may have the effect of preventing the Trustee or the Holders from successfully
asserting that a Change in Control has occurred.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on
account of any Equity Interests of the Company or any of its
Subsidiaries or, make any other payment to any Excluded Person or
Affiliate thereof (other than (A) dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or (B)
amounts payable to the Company or any Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interest of the Company, any Subsidiary or any other
Affiliate of the Company (other than any such Equity Interest owned by
the Company or any Restricted Subsidiary);
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of
the Company or any Subsidiary Guarantor that is subordinated in right
of payment to the Notes or such Subsidiary Guarantor's Subsidiary
Guaranty thereof, as the case may be, prior to any scheduled principal
payment, sinking fund payment or other payment at the stated maturity
thereof; or
(iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment:
(a) no Default or Event of Default has occurred and is
continuing or would occur as a consequence thereof,
(b) immediately after giving effect to such Restricted Payment
on a pro forma basis, the Interest Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such Restricted Payment is made would have been not less than 2.0
to 1.0, and
(c) such Restricted Payment (the value of any such payment, if
other than cash, being determined in good faith by the Board of
Directors of the Company and evidenced by a resolution set forth in an
Officers' Certificate delivered to the Trustee), together with the
aggregate of all other Restricted Payments made after the Issue Date
(including Restricted Payments permitted by clauses (i) and (ii) of the
next following paragraph and excluding Restricted Payments permitted by
the other clauses therein), is less than the sum of (1) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from December 1, 1997 to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, 100% of such
deficit), plus (2) 100% of the aggregate net cash proceeds (or of the
net cash proceeds received upon the conversion of non-cash proceeds
into cash) received by the Company from the issuance or sale, other
than to a Subsidiary, of Equity Interests of the Company (other than
Disqualified Stock) after the Issue Date and on or prior to the time of
such Restricted Payment, plus (3) 100% of the aggregate net cash
proceeds (or of the net cash proceeds received upon the conversion of
non-cash proceeds into cash) received by the Company from the issuance
or sale, other than to a Subsidiary, of any convertible or exchangeable
debt security of the Company that has been converted or exchanged into
Equity Interests of the Company (other than Disqualified Stock)
pursuant to the terms thereof after the Issue Date and on or prior to
the time of such Restricted Payment (including any additional net
proceeds received by the Company upon such conversion or exchange) plus
(4)
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the aggregate Return from Unrestricted Subsidiaries after the Issue
Date and on or prior to the time of such Restricted Payment.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment
would not have been prohibited by the provisions of the Indenture;
(ii) the redemption, purchase, retirement or other acquisition
of any Equity Interests of the Company or Indebtedness of the Company
or any Restricted Subsidiary in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary) of,
other Equity Interests of the Company (other than Disqualified Stock);
(iii) the satisfaction of the Company's obligations with
respect to the Warrants, in accordance with the terms thereof as in
effect on the Issue Date;
(iv) the redemption, repurchase or payoff of any Indebtedness
of the Company or a Restricted Subsidiary with proceeds of any
Refinancing Indebtedness permitted to be incurred pursuant to the
provision described under "--Limitation on Incurrence of Indebtedness";
(v) transactions contemplated by the Management Agreement as
in effect on the Issue Date; and
(vi) (a) employment agreements, arrangements and plans
(including stock plans) entered into by the Company or any Restricted
Subsidiary (and the granting of awards thereunder) in each case in the
ordinary course of business with the approval of the disinterested
members of the Board of Directors of the Company or, if none,
unanimously by such Board of Directors;
(b) reasonable and customary fees and compensation paid
to and indemnity provided on behalf of, directors of the Company; and
(c) customary reimbursement of travel and similar
expenses in the ordinary course of business.
Not later than the date of making any Restricted Payment, the Company
will deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed, which calculations may be
based upon the Company's latest available financial statements.
LIMITATION ON INCURRENCE OF INDEBTEDNESS. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
(i) create, incur, issue, assume, guaranty or otherwise become directly or
indirectly liable with respect to, contingently or otherwise (collectively,
"incur"), any Indebtedness (including, without limitation, Acquired Debt) or
(ii) issue any Disqualified Stock; provided, that the Company may incur
Indebtedness (including, without limitation, Acquired Debt) and issue shares of
Disqualified Stock (and a Restricted Subsidiary may incur Acquired Debt) if (x)
no Default or Event of Default shall have occurred and be continuing at the time
of, or would occur after giving effect on a pro forma basis to such incurrence
or issuance, and (y) the Interest Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been not less than
2.5 to 1.0, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period; provided, that in the case of
Indebtedness (other than Indebtedness outstanding under the Revolving Credit
Facility, Purchase Money Obligations, Capital Lease Obligations or Acquired
Debt), the Weighted Average Life to Maturity and final stated maturity of such
Indebtedness is greater than the Weighted Average Life to Maturity and final
stated maturity of the Notes. Accrual of interest, accretion of accreted value,
and the payment of interest in the form of additional Indebtedness will not be
deemed to be the incurrence of Indebtedness for purpose of this covenant.
Notwithstanding the foregoing, the foregoing limitations will not
prohibit the incurrence of:
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(a) Indebtedness under the Revolving Credit Facility;
provided, that the aggregate principal amount of Indebtedness so
incurred on any date, together with all other Indebtedness incurred
pursuant to this clause (a) and outstanding on such date, shall not
exceed $5 million less the aggregate amount of commitment reductions
contemplated by clause (iii) under the caption "Limitation on Asset
Sales;"
(b) Purchase Money Obligations; provided, that the aggregate
principal amount of Indebtedness so incurred on any date, together with
all other Indebtedness incurred pursuant to this clause (b) and
outstanding on such date, shall not exceed $2.5 million;
(c) Performance bonds, appeal bonds, surety bonds, insurance
obligations or bonds and other similar bonds or obligations (including
Obligations under letters of credit) incurred in the ordinary course of
business;
(d) Hedging Obligations incurred to fix the interest rate on
any variable rate Indebtedness otherwise permitted by the Indenture;
provided, that the notional principal amount of each such Hedging
Obligation does not exceed the principal amount of the Indebtedness to
which such Hedging Obligation relates;
(e) Indebtedness outstanding on the Issue Date, including the
Notes outstanding on the Issue Date and the Subsidiary Guaranties
thereof; and
(f) Indebtedness issued in exchange for, or the proceeds of
which are contemporaneously used to extend, refinance, renew, replace,
or refund (collectively, "Refinance"), Indebtedness incurred pursuant
to the Interest Coverage Ratio test set forth in the immediately
preceding paragraph, clause (e) above or this clause (f) (the
"Refinancing Indebtedness"); provided, that (i) the principal amount of
such Refinancing Indebtedness does not exceed the principal amount of
Indebtedness so Refinanced (including any required premiums and
out-of-pocket expenses reasonably incurred in connection therewith),
(ii) the Refinancing Indebtedness has a final scheduled maturity that
equals or exceeds the final stated maturity, and a Weighted Average
Life to Maturity that is equal to or greater than the Weighted Average
Life to Maturity, of the Indebtedness being Refinanced and (iii) the
Refinancing Indebtedness ranks, in right of payment, no more favorable
to the Notes than the Indebtedness being Refinanced.
LIMITATION ON ASSET SALES. The Company will not, and will not permit
any Restricted Subsidiary to, make any Asset Sale unless:
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale not less than the fair
market value of the assets subject to such Asset Sale;
(ii) at least 80% of the consideration for such Asset Sale is
in the form of cash or Cash Equivalents or liabilities of the Company
or any Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the Notes or any Subsidiary Guaranty) that are
assumed by the transferee of such assets (provided, that following such
Asset Sale there is no further recourse to the Company or its
Restricted Subsidiaries with respect to such liabilities); and
(iii) within 270 days of such Asset Sale, the Net Proceeds
thereof are (A) invested in assets related to the business of the
Company or its Restricted Subsidiaries (which, in the case of an Event
of Loss of the Casino Rouge or any replacement Gaming Vessel (a
"Replacement Vessel"), must be a Gaming Vessel having a fair market
value, as determined by an independent appraisal, at least equal to the
fair market value of the Casino Rouge or such Replacement Vessel
immediately preceding such Event of Loss), (B) applied to repay
Indebtedness under Purchase Money Obligations incurred in connection
with the asset so sold, (C) applied to repay Indebtedness under the
Revolving Credit Facility and permanently reduce the commitment
thereunder in the amount of the Indebtedness so repaid or (D) to the
extent not used as provided in clauses (A), (B), or (C) applied to make
an offer to purchase Notes as described below (an "Excess Proceeds
Offer"); provided, that the Company will not be required to make an
Excess Proceeds Offer until the amount of Excess Proceeds is greater
than $5,000,000.
Notwithstanding the foregoing, the Company shall not be permitted to
directly or indirectly sell, assign, lease, convey or otherwise dispose of the
Casino Rouge or any Replacement Vessel (other than in connection with an Event
of Loss) unless,
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within 60 days of such disposition, the Company replaces the Casino Rouge or
such Replacement Vessel with a Gaming Vessel having a fair market value, as
determined by an independent appraisal, at least equal to the fair market value
of the Casino Rouge or such Replacement Vessel immediately preceding such
disposition.
Pending the final application of any Net Proceeds, the Company may
temporarily reduce Indebtedness under the Revolving Credit Facility or
temporarily invest such Net Proceeds in Cash Equivalents.
Net Proceeds not invested or applied as set forth in the preceding
clauses (A), (B) or (C) constitute "Excess Proceeds." If the Company elects, or
becomes obligated to make an Excess Proceeds Offer, the Company will offer to
purchase Notes having an aggregate principal amount equal to the Excess Proceeds
(the "Purchase Amount"), at a purchase price equal to 100% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date. The Company must commence such Excess Proceeds Offer not later
than 30 days after the expiration of the 270 day period following the Asset Sale
that produced such Excess Proceeds. If the aggregate purchase price for the
Notes tendered pursuant to the Excess Proceeds Offer is less than the Excess
Proceeds, the Company and its Restricted Subsidiaries may use the portion of the
Excess Proceeds remaining after payment of such purchase price for general
corporate purposes.
The Indenture will provide that each Excess Proceeds Offer will remain
open for a period of 20 Business Days and no longer, unless a longer period is
required by law (the "Excess Proceeds Offer Period"). Promptly after the
termination of the Excess Proceeds Offer Period, the Company will purchase and
mail or deliver payment for the Purchase Amount for the Notes or portions
thereof tendered, pro rata or by such other method as may be required by law,
or, if less than the Purchase Amount has been tendered, all Notes tendered
pursuant to the Excess Proceeds Offer. The principal amount of Notes to be
purchased pursuant to an Excess Proceeds Offer may be reduced by the principal
amount of Notes acquired by the Company through purchase or redemption (other
than pursuant to a Change of Control Offer) subsequent to the date of the Asset
Sale and surrendered to the Trustee for cancellation.
Any Excess Proceeds Offer will be conducted in compliance with
applicable regulations under the federal securities laws, including Exchange Act
Rule 14e-1. To the extent that the provisions of any securities laws or
regulations conflict with the "Asset Sale" provisions of the Indenture, the
Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the "Asset Sale"
provisions of the Indenture by virtue thereof.
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, create or suffer to exist or
become effective any restriction that would impair the ability of the Company to
make an Excess Proceeds Offer upon an Asset Sale or, if such Excess Proceeds
Offer is made, to pay for the Notes tendered for purchase.
LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset (including, without limitation, all real,
tangible or intangible property) of the Company or any Restricted Subsidiary,
whether now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom, except Permitted
Liens.
LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS. The Company will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions to the
Company or any of its Restricted Subsidiaries (a) on such Restricted
Subsidiary's Capital Stock or (b) with respect to any other interest or
participation in, or measured by, such Restricted Subsidiary's profits,
or
(ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries,
(iii) make loans or advances to the Company or any of its
Restricted Subsidiaries, or
(iv) transfer any of its assets to the Company or any of its
Restricted Subsidiaries,
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except, with respect to clauses (i) through (iv) above, for such encumbrances or
restrictions existing under or by reason of:
(1) a Revolving Credit Facility entered into during the six
month period commencing on the Issue Date (the "Initial Facility") or
any other Revolving Credit Facility containing dividend or other
payment restrictions that are not more restrictive than those contained
in the documents governing the Initial Facility;
(2) the Indenture, the Security Documents and the Notes;
(3) applicable law;
(4) Acquired Debt; provided, that such encumbrances and
restrictions are not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets
of the Person, so acquired;
(5) customary non-assignment and net worth provisions of any
contract, lease or license entered into in the ordinary course of
business;
(6) customary restrictions on the transfer of assets subject
to a Permitted Lien imposed by the holder of such Lien; and
(7) the agreements governing permitted Refinancing
Indebtedness, provided, that such restrictions contained in any
agreement governing such Refinancing Indebtedness are no more
restrictive than those contained in any agreements governing the
Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS. The Company may not
consolidate or merge with or into (regardless of whether the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) in one or
more related transactions to, any other Person, unless:
(i) the Company is the surviving Person or the Person formed
by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition has been made is a corporation organized and
existing under the laws of the United States of America, any state
thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation
or merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition has been
made assumes all the Obligations of the Company, pursuant to a
supplemental indenture and in a form reasonably satisfactory to the
Trustee, under the Notes, the Indenture, the Security Documents and the
Registration Rights Agreement;
(iii) immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default exists; and
(iv) the Company, or any Person formed by or surviving any
such consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition has been made, (A) has
Consolidated Net Worth (immediately after the transaction but prior to
any purchase accounting adjustments resulting from the transaction)
equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will be permitted, at the
time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable
four-quarter period, to incur at least $1.00 of additional Indebtedness
pursuant to the Interest Coverage Ratio test set forth in the covenant
described under "--Limitation on Incurrence of Indebtedness."
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company is not the surviving Person, such surviving Person or
transferee shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under, and the Company shall be discharged from
its Obligations under, the Indenture, the Notes and the Registration Rights
Agreement.
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LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guaranty with, or for the benefit of,
any Affiliate (each of the foregoing, an "Affiliate Transaction"), except for:
(i) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$1,000,000; provided, that such transactions are conducted in good
faith and on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction at such time by the Company or such
Restricted Subsidiary on an arm's-length basis from a Person that is
not an Affiliate of the Company or such Restricted Subsidiary;
(ii) Affiliate Transactions that, together with all related
Affiliate Transactions, have an aggregate value of not more than
$5,000,000; provided, that a majority of the disinterested members of
the Board of Directors of the Company determine that such transactions
are conducted in good faith and on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction at such time by the
Company or such Restricted Subsidiary on an arm's-length basis from a
Person that is not an Affiliate of the Company or such Restricted
Subsidiary; or
(iii) Affiliate Transactions for which the Company delivers to
the Trustee an opinion as to the fairness to the Company or such
Restricted Subsidiary from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following will be deemed not to be
Affiliate Transactions: (a) transactions between or among the Company and/or any
or all of the Subsidiary Guarantors, and (b) Restricted Payments permitted by
the provisions of the Indenture described above under "--Limitations on
Restricted Payments" (including, without limitation, transactions contemplated
by the Management Agreement as in effect on the Issue Date).
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK. The Company will
not, and will not permit any Restricted Subsidiary to issue or sell, any Equity
Interests (other than directors' qualifying shares) of any Restricted Subsidiary
to any Person other than the Company or a Wholly Owned Subsidiary of the
Company; provided, that the Company and its Restricted Subsidiaries may sell all
(but not less than all) of the Capital Stock of a Restricted Subsidiary owned by
the Company and its Restricted Subsidiaries if the Net Proceeds from such Asset
Sale are used in accordance with the terms of the covenant described under
"--Limitation on Asset Sales."
SUBSIDIARY GUARANTORS. The Company will cause each Restricted
Subsidiary to (i) execute and deliver to the Trustee a supplemental indenture in
form reasonably satisfactory to the Trustee, pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's Obligations
under the Notes and the Indenture on the terms set forth in the Indenture and
(ii) deliver to the Trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Restricted
Subsidiary and constitutes a legal, valid, binding and enforceable obligation,
of such Restricted Subsidiary, in each case subject to customary qualifications.
Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all
purposes of the Indenture.
ADDITIONAL COLLATERAL. The Company will, and will cause each of the
Subsidiary Guarantors to, grant to the Trustee a first priority security
interest in all Collateral, whether owned on the Issue Date or thereafter
acquired, and to execute and deliver all documents and to take all action
necessary or desirable to perfect and protect such a security interest in favor
of the Trustee.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly engage to
any substantial extent in any line or lines of business activity other than that
which, in the reasonable good faith judgment of the Board of Directors of the
Company, is a Related Business.
REPORTS. Regardless of whether required by the rules and regulations of
the Securities and Exchange Commission (the "Commission"), so long as any Notes
are outstanding, the Company will furnish to the Trustee and Holders, within 15
days after the Company is or would have been required to file such with the
Commission, (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required
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to file such Forms, including for each a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Company's independent certified
public accountants and (ii) all information that would be required to be
contained in a filing with the Commission on Form 8-K if the Company were
required to file such reports. From and after the time the Company files a
registration statement with the Commission with respect to the Notes, the
Company will file such information with the Commission so long as the Commission
will accept such filings.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will constitute an Event of Default under the
Indenture:
(i) default for 30 days in the payment when due of interest on
the Notes;
(ii) default in payment of principal (or premium, if any) on
the Notes when due at maturity, redemption, by acceleration or
otherwise;
(iii) default in the performance or breach of the covenants in
the Indenture described under "--Repurchase Upon Change of Control,"
"--Limitation on Asset Sales," or "--Merger, Consolidation or Sale of
Assets;"
(iv) failure by the Company or any Subsidiary Guarantor for 60
days after notice to comply with any other agreements in the Indenture
or the Notes;
(v) default under (after giving effect to any applicable grace
periods or any extension of any maturity date) any mortgage, indenture
or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any Restricted Subsidiary (or the payment of which is guaranteed by
the Company or any Restricted Subsidiary), whether such Indebtedness or
guaranty now exists or is created after the Issue Date, if (A) either
(1) such default results from the failure to pay principal of or
interest on such Indebtedness or (2) as a result of such default the
maturity of such Indebtedness has been accelerated, and (B) the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which such a
payment default (after the expiration of any applicable grace period or
any extension of the maturity date) has occurred, or the maturity of
which has been so accelerated, exceeds $5,000,000 in the aggregate;
(vi) failure by the Company or any Subsidiary to pay final
judgments (other than any judgment as to which a reputable insurance
company has accepted full liability) aggregating in excess of
$5,000,000, which judgments are not discharged, bonded or stayed within
60 days after their entry;
(vii) the cessation of substantially all gaming operations of
the Company for more than 60 days, except as a result of an Event of
Loss;
(viii) any revocation, suspension, expiration (without
previous or concurrent renewal) or loss of any Gaming License for more
than 60 days;
(ix) any event of default under a Security Document; and
(x) certain events of bankruptcy or insolvency with respect to
the Company or any of the Subsidiary Guarantors.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare by written notice to the Company and the Trustee all the Notes to be due
and payable immediately. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power.
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The Holders of a majority in aggregate principal amount of the Notes
then outstanding, by written notice to the Trustee, may on behalf of the Holders
of all of the Notes (i) waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes or a Default or an
Event of Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected, and/or (ii) rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree if all existing Events
of Default (except nonpayment of principal or interest that has become due
solely because of the acceleration) have been cured or waived.
The Company is required, upon becoming aware of any Default or Event of
Default, to deliver to the Trustee a statement specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, will have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Notes, the
Indenture or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
will be part of the consideration for issuance of the Notes. Such waiver may not
be effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company released with respect to certain material
covenants that are described herein ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may
be, and the Company must specify whether the Notes are being defeased
to maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States of
America reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the Issue Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
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(iii) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an opinion of counsel in the United
States of America reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit);
(v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(vi) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(vii) the Company must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating, subject to certain
factual assumptions and bankruptcy and insolvency exceptions, that all
conditions precedent provided for in the Indenture relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents, and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. The Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the two succeeding paragraphs, the Indenture and
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for Notes)
and any existing Default or Event of Default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of, or the premium (including,
without limitation, redemption premium) on, or change the fixed
maturity of any Note or alter the provisions with respect to the
payment with respect to redemption of the Notes or alter the price at
which repurchases of the Notes may be made pursuant to an Excess
Proceeds Offer or Change of Control Offer;
(iii) reduce the rate of or change the time for payment of
interest on any Note;
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(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(v) make any Note payable in money other than that stated in
the Notes;
(vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults with respect to, or the rights of
Holders to receive, payments of principal of or interest on the Notes;
(vii) waive a redemption payment with respect to any Note;
(viii) adversely affect the contractual ranking of the Notes
or Subsidiary Guaranties; or
(ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of the Holders, the
Company and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Company's or the Subsidiary Guarantors' obligations to Holders in the
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders or that does not adversely affect
the legal rights of any such Holder under the Indenture or the Notes, to release
any Subsidiary Guaranty permitted to be released under the terms of the
Indenture, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; provided, that, if the Trustee acquires any conflicting
interest, it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue, or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (and is not cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full definition of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"ACQUIRED DEBT" means Indebtedness of a Person existing at the time
such Person is merged with or into the Company or a Restricted Subsidiary or
becomes a Restricted Subsidiary, other than Indebtedness incurred in connection
with, or in contemplation of, such Person merging with or into the Company or a
Restricted Subsidiary or becoming a Restricted Subsidiary.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, will mean
(a) the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise or (b) beneficial
ownership of 10% or more of the voting securities of such Person.
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"ASSET SALE" means any (i) direct or indirect sale, assignment,
transfer, lease, conveyance, or other disposition (including, without
limitation, by way of merger or consolidation) (collectively, a "transfer"),
other than in the ordinary course of business, of any assets of the Company or
any Restricted Subsidiary; (ii) direct or indirect issuance or sale of any
Capital Stock of any Restricted Subsidiary (other than directors' qualifying
shares), in each case to any Person (other than the Company or a Restricted
Subsidiary); or (iii) Event of Loss. For purposes of this definition, (a) any
series of transactions that are part of a common plan shall be deemed a single
Asset Sale and (b) the term "Asset Sale" shall not include (1) any series of
transactions that have a fair market value (or result in gross proceeds) of less
than $1 million, until the aggregate fair market value and gross proceeds of the
transactions excluded from the definition of Asset Sale pursuant to this clause
(b)(1) exceed $5 million, or (2) any disposition of all or substantially all of
the assets of the Company that is governed under and complies with the terms of
the covenant described under "-- Certain Covenants--Merger, Consolidation or
Sale of Assets."
"BENEFICIAL OWNER" has the meaning attributed to it in Rules 13d-3 and
13d-5 under the Exchange Act (as in effect on the Issue Date), whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP, and the amount of such obligations at
any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"CAPITAL STOCK" means, (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, and (ii) with respect to
any other Person, any and all partnership or other equity interests of such
Person.
"CASH EQUIVALENT" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank of recognized standing having capital and surplus
in excess of $250,000,000 and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition; (iii) investments in
money market funds substantially all of whose assets comprise securities of the
type described in clauses (i) and (ii) above; and (iv) repurchase obligations
for underlying securities of the types and with the maturities described above.
"CHANGE OF CONTROL" means
(i) any merger or consolidation of the Company with or into
any Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company, on
a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the
transferee(s) or surviving entity or entities,
(ii) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) (other than an Excluded Person) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate of the Voting Stock of the Company,
(iii) during any period of 12 consecutive months after the
Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the
merger, consolidation or sale, transfer or other conveyance, of all or
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substantially all of the assets of the Company, if such agreement was
approved by a vote of such majority of directors) cease for any reason
to constitute a majority of the Board of Directors of the Company then
in office, or
(iv) the Company adopts a plan of liquidation.
Notwithstanding anything to the contrary contained herein, "Change of
Control" shall not be deemed to include any transaction between CRC and Jackpot
Enterprises, Inc. or any of its Affiliates or among the Company, CRC and Jackpot
Enterprises, Inc. or any of its Affiliates.
"CONSOLIDATED EBITDA" means, with respect to any Person (the referent
Person) for any period, consolidated income (loss) from operations of such
Person and its subsidiaries for such period, determined in accordance with GAAP,
plus (to the extent such amounts are deducted in calculating such income (loss)
from operations of such Person for such period, and without duplication)
amortization, depreciation and other non-cash charges (including, without
limitation, amortization of goodwill, deferred financing fees, fees and charges
relating to the issuance and redemption of the 1998 Notes, and other intangibles
but excluding (a) non-cash charges incurred after the Issue Date that require an
accrual of or a reserve for cash charges for any future period, (b) normally
recurring accruals such as reserves against accounts receivables and (c)
Pre-Opening Expenses); provided, that (i) the income from operations of any
Person that is not a Wholly Owned Subsidiary of the referent Person or that is
accounted for by the equity method of accounting will be included only to the
extent of the amount of dividends or distributions paid during such period to
the referent Person or a Wholly Owned Subsidiary of the referent Person, (ii)
the income from operations of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded, and (iii) the income from operations of any Restricted Subsidiary will
not be included to the extent that declarations of dividends or similar
distributions by that Restricted Subsidiary are not at the time permitted,
directly or indirectly, by operation of the terms of its organization documents
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its owners.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, (a) the consolidated interest expense of such Person and its
subsidiaries for such period, whether paid or accrued (including amortization of
original issue discount, noncash interest payment, and the interest component of
Capital Lease Obligations), to the extent such expense was deducted in computing
Consolidated Net Income of such Person for such period less (b) amortization
expense, write-off of deferred financing costs and any charge related to any
premium or penalty paid, in each case accrued during such period in connection
with redeeming or retiring any Indebtedness before its stated maturity, as
determined in accordance with GAAP, to the extent such expense, cost or charge
was included in the calculation made pursuant to clause (a) above.
"CONSOLIDATED NET INCOME" means, with respect to any Person (the
referent Person) for any period, the aggregate of the Net Income of such Person
and its subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP; provided, that (i) the Net Income of any Person relating
to any portion of such period that such Person (a) is not a Wholly Owned
Subsidiary of the referent Person or (b) is accounted for by the equity method
of accounting will be included only to the extent of the amount of dividends or
distributions paid to the referent Person or a Wholly Owned Subsidiary of the
referent Person during such portion of such period, (ii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition will be excluded, and (iii) the Net Income of any
Restricted Subsidiary will not be included to the extent that declarations of
dividends or similar distributions by that Restricted Subsidiary are not at the
time permitted, directly or indirectly, by operation of the terms of its
organization documents or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its owners.
"CONSOLIDATED NET WORTH" means, with respect to any Person, the total
stockholders' equity of such Person determined on a consolidated basis in
accordance with GAAP, adjusted to exclude (to the extent included in calculating
such equity), (i) the amount of any such stockholders' equity attributable to
Disqualified Stock or treasury stock of such Person and its consolidated
subsidiaries, and (ii) all upward revaluations and other write-ups in the book
value of any asset of such Person or a consolidated subsidiary of such Person
subsequent to the Issue Date, and (iii) all Investments in subsidiaries of such
Person that are not consolidated subsidiaries and in Persons that are not
subsidiaries of such Person.
"DEFAULT" means any event that is, or after notice or the passage of
time or both would be, an Event of Default.
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"DISQUALIFIED STOCK" means any Equity Interest that (i) either by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable) is or upon the happening of an event would be required to be
redeemed or repurchased prior to the final stated maturity of the Notes or is
redeemable at the option of the holder thereof at any time prior to such final
stated maturity, or (ii) is convertible into or exchangeable at the option of
the issuer thereof or any other Person for debt securities.
"ENTERTAINMENT FACILITY" means a multi-purpose meeting and
entertainment facility, owned by the Company or a Restricted Subsidiary, to be
constructed on a portion of the Undeveloped Parcel.
"EQUITY INTERESTS" means Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EVENT OF LOSS" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"EXCLUDED ASSET" means any asset encumbered by Liens permitted under
clauses (viii), (ix), or (xi) of the definition of Permitted Liens. If a portion
of the Collateral becomes an Excluded Asset after the Issue Date the Trustee
shall, simultaneous with the granting of the applicable Permitted Lien, release
the Lien in favor of the Trustee in such Excluded Asset; provided, that in
addition to all other requirements under the Indenture, prior to such release
the Company has delivered to the Trustee an Officer's Certificate certifying
that the assets constituting the Collateral following such release include all
of the assets (including, without limitation, sufficient parking space)
necessary to permit the Company to conduct the Related Business in the same
manner as such business is conducted on the Issue Date.
"EXCLUDED PERSON" means any of CRC, Jackpot Enterprises, Inc., Dan S.
Meadows, Jerry L. Bayles and Thomas L. Meehan, and all Related Persons of each
such Person.
"GAAP" or "GAAP" means generally accepted accounting principles, as in
effect from time to time, set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession, and in the rules and
regulations of the Commission.
"GAMING LICENSES" means every material license, material franchise or
other material approval or authorization required to own, lease, operate or
otherwise conduct or manage riverboat, dockside or land-based gaming in any
state or jurisdiction in which the Company or any of its Restricted Subsidiaries
conduct business, and all applicable liquor licenses.
"GAMING VESSEL" means a riverboat casino (i) which is substantially
similar in size and space to the Casino Rouge, (ii) with at least the same
overall qualities and amenities as the Casino Rouge, and (iii) that is
developed, constructed and equipped to be in compliance with all federal, state
and local laws, including, without limitation, the cruising requirements of the
Louisiana Act. In the event the laws of the State of Louisiana change to permit
the development and operation of additional land-based casinos, the term "Gaming
Vessel" shall be deemed to include a land-based casino meeting the requirements
of clauses (i), (ii) and (iii) above.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"GUARANTY" or "GUARANTEE," used as a noun, means any guaranty (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness or other Obligation. "guarantee," used as
a verb, has a correlative meaning.
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"HEDGING OBLIGATIONS" means, with respect to any Person, the
Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"HOLDER" means the Person in whose name a Note is registered in the
register of the Notes.
"HOTEL FACILITY" means a hotel facility, owned by the Company or a
Restricted Subsidiary, to be constructed on a portion of the Undeveloped Parcel.
"INDEBTEDNESS" of any Person means (without duplication) (i) all
liabilities and obligations, contingent or otherwise, of such Person (A) in
respect of borrowed money (regardless of whether the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by bonds, debentures, notes or other similar instruments, (C)
representing the deferred purchase price of property or services (other than
trade payables on customary terms incurred in the ordinary course of business),
(D) created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (E) representing
Capital Lease Obligations, (F) under bankers' acceptance and letter of credit
facilities, (G) to purchase, redeem, retire, defease or otherwise acquire for
value any Disqualified Stock, or (H) in respect of Hedging Obligations; (ii) all
Indebtedness of others that is guaranteed by such Person; and (iii) all
Indebtedness of others that is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, provided, that the amount of such
Indebtedness shall (to the extent such Person has not assumed or become liable
for the payment of such Indebtedness) be the lesser of (x) the fair market value
of such property at the time of determination and (y) the amount of such
Indebtedness. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
Notwithstanding the foregoing, the term Indebtedness shall not include
obligations arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument drawn against insufficient funds in the
ordinary course of business, provided, that such obligation is extinguished
within two business days of its incurrence.
"INTEREST COVERAGE RATIO" means, for any period, the ratio of (i)
Consolidated EBITDA of the Company for such period, to (ii) Consolidated
Interest Expense of the Company for such period. In calculating Interest
Coverage Ratio for any period, pro forma effect shall be given to the
incurrence, assumption, guarantee, repayment, repurchase, redemption or
retirement by the Company or any of its Subsidiaries of any Indebtedness
subsequent to the commencement of the period for which the Interest Coverage
Ratio is being calculated, as if the same had occurred at the beginning of the
applicable period. For purposes of making the computation referred to above,
acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the first
day of such period and Consolidated EBITDA for such period shall be calculated
without giving effect to clause (ii) of the proviso set forth in the definition
of Consolidated EBITDA. Without limiting the foregoing, the financial
information of the Company with respect to any portion of such period that falls
before the Issue Date shall be adjusted to give pro forma effect to the issuance
of the Notes and the application of the proceeds therefrom as if they had
occurred at the beginning of such period.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans,
guaranties, advances or capital contributions (excluding (i) payroll commission,
travel and similar advances to officers and employees of such Person made in the
ordinary course of business and (ii) bona fide accounts receivable arising from
the sale of goods or services in the ordinary course of business consistent with
past practice), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, and any other items that are
or would be classified as investments on a balance sheet prepared in accordance
with GAAP.
"ISSUE DATE" means the date upon which the Notes are first issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed.
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"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LOUISIANA ACT" means the Louisiana Riverboat Economic Development and
Gaming Control Act, as amended from time to time.
"NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with
GAAP, excluding (i) any gain or loss, together with any related provision for
taxes on such gain or loss, realized in connection with any Asset Sales and
dispositions pursuant to sale-leaseback transactions, (ii) any extraordinary
gain or loss (including any losses, fees and charges related to the issuance and
redemption of the 1998 Notes), together with any related provision for taxes on
such gain or loss and (iii) any Pre-Opening Expenses.
"NET PROCEEDS" means the aggregate proceeds received in the form of
cash or Cash Equivalents in respect of any Asset Sale (including insurance or
other payments in an Event of Loss and payments in respect of deferred payment
obligations and any cash or Cash Equivalents received upon the sale or
disposition of any non-cash consideration received in any Asset Sale, in each
case when received), net of (i) the reasonable and customary direct
out-of-pocket costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees and sales commissions), other than
any such costs payable to an Affiliate of the Company, (ii) taxes actually
payable directly as a result of such Asset Sale (after taking into account any
available tax credits or deductions (to the extent reasonably allocable thereto)
and any tax sharing arrangements), (iii) amounts required to be applied to the
permanent repayment of Indebtedness in connection with such Asset Sale, and (iv)
appropriate amounts provided as a reserve by the Company or any Restricted
Subsidiary, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or such Restricted Subsidiary, as
the case may be, after such Asset Sale (including, without limitation, as
applicable, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations arising from such Asset Sale).
"1998 NOTES" means the $50 million aggregate principal amount of Senior
Secured Increasing Rate Notes due 2001 issued by the Company in November 1998.
"OBLIGATION" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"OLD NOTES" means the $55 million aggregate principal amount of Senior
Secured Notes due 2005 issued by the Company in January 1999.
"PERMITTED INVESTMENTS" means (i) Investments in the Company or in any
Restricted Subsidiary; (ii) Investments in Cash Equivalents; (iii) Investments
in a Person, if, as a result of such Investment, such Person (A) becomes a
Restricted Subsidiary, or (B) is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary; (iv) Hedging
Obligations; (v) Investments as a result of consideration received in connection
with an Asset Sale made in compliance with the covenant described under the
caption "Certain Covenants-- Limitation on Asset Sales;" (vi) Investments
existing on the Issue Date; (vii) Investments paid for solely with Capital Stock
(other than Disqualified Stock) of the Company; (viii) credit extensions to
gaming customers in the ordinary course of business, consistent with industry
practice; (ix) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company in
satisfaction of judgments; and (x) loans or advances to employees of the Company
and its Subsidiaries made in the ordinary course of business in an aggregate
amount not to exceed $250,000 at any one time outstanding.
"PERMITTED LIENS" means:
(i) Liens arising by reason of any judgment, decree or order
of any court for an amount and for a period not resulting in an Event
of Default with respect thereto, so long as such Lien is being
contested in good faith and is adequately bonded, and any appropriate
legal proceedings that may have been duly initiated for the review of
such
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judgment, decree or order shall not have been finally adversely
terminated or the period within which such proceedings may be initiated
shall not have expired;
(ii) security for the performance of bids, tenders, trade,
contracts (other than contracts for the payment of money) or leases,
surety bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business, consistent with industry
practice;
(iii) Liens (other than Liens arising under ERISA (as
defined)) for taxes, assessments or other governmental charges not yet
due or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on
the books of the Company in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics, landlords,
material men, repairmen or other like Liens arising by operation of law
in the ordinary course of business consistent with industry practices
(other than Liens arising under ERISA) and Liens on deposits made to
obtain the release of such Liens if (a) the underlying obligations are
not overdue for a period of more than 30 days or (b) such Liens are
being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of
the Company in accordance with GAAP;
(v) easements, rights of way, zoning and similar restrictions
and other similar encumbrances or title defects incurred in the
ordinary course of business, consistent with industry practices that,
in the aggregate, are not substantial in amount, and that do not in any
case materially detract from the value of the property subject thereto
(as such property is used by the Company or a Subsidiary) or interfere
with the ordinary conduct of the business of the Company or any of its
Subsidiaries; provided, that such Liens are not incurred in connection
with any borrowing of money or any commitment to loan any money or to
extend any credit;
(vi) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security legislation;
(vii) Liens securing Refinancing Indebtedness incurred in
compliance with the Indenture to refinance Indebtedness secured by
Liens, provided, that (a) such Liens do not extend to any additional
property or assets; (b) if the Liens securing the Indebtedness being
refinanced were subordinated to or PARI PASSU with the Liens securing
the Notes, the Subsidiary Guaranties or any intercompany loan, as
applicable, such new Liens are subordinated to or PARI PASSU with such
Liens to the same extent, and any related subordination or
intercreditor agreement is confirmed; and (c) such Liens are no more
adverse to the interests of Holders than the Liens replaced or extended
thereby;
(viii) Liens that secure Acquired Debt, provided, that such
Liens do not extend to or cover any property or assets other than those
of the Person being acquired and were not put in place in anticipation
of such acquisition;
(ix) (A) Liens that secure Purchase Money Obligations
permitted to be incurred under the Indenture or (B) Capital Lease
Obligations permitted to be incurred under the Indenture, provided,
that such Liens do not extend to or cover any property or assets other
than those being leased;
(x) Liens securing Obligations under the Indenture, the Notes
or the Security Documents;
(xi) Liens on furniture, fixtures and equipment of the Company
and the Subsidiaries, and the proceeds of any or all the foregoing,
securing Indebtedness incurred pursuant to clause (a) under the caption
"Limitation on Incurrence of Indebtedness;"
(xii) with respect to any vessel included in the Collateral,
certain maritime Liens, including Liens for crew's wages and salvage;
(xiii) Liens existing on the Issue Date securing Indebtedness
outstanding under the 1998 Notes; provided, that such Liens are
released on or prior to March 1, 1999;
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(xiv) leases or subleases granted in the ordinary course of
business not materially interfering with the conduct of the business of
the Company or any of the Restricted Subsidiaries; and
(xv) Liens arising from precautionary Uniform Commercial Code
financing statement filings regarding operating leases entered into by
the Company or any of its subsidiaries in the ordinary course of
business.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof, or any other entity.
"PRE-OPENING EXPENSES" means all pre-opening costs incurred in the
construction and development of any of the Undeveloped Parcel, which are
expensed in accordance with GAAP.
"PUBLIC EQUITY OFFERING" means a bona fide underwritten public offering
of Qualified Capital Stock of the Company, pursuant to a registration statement
filed with and declared effective by the Commission in accordance with the
Securities Act.
"PURCHASE MONEY OBLIGATIONS" means Indebtedness representing, or
incurred to finance (or to refinance Indebtedness incurred to Finance), the cost
(i) of acquiring any assets and (ii) of construction or build-out of facilities
(including Purchase Money Obligations of any other Person at the time such other
Person is merged with or into or is otherwise acquired by the Company);
provided, that (x) the principal amount of such Indebtedness does not exceed 80%
of such cost, including construction charges, (y) any Lien securing such
Indebtedness does not extend to or cover any other asset or property other than
(1) the asset or property being so acquired, constructed or built and (2) in the
case of the Hotel Facility or the Entertainment Facility, that portion of the
Undeveloped Parcel on which such facility is constructed or built, and (z) such
Indebtedness is (or the Indebtedness being refinanced was) incurred, and any
Liens with respect thereto are granted, within 180 days of the acquisition or
commencement of construction or build-out of such property or asset.
"QUALIFIED CAPITAL STOCK" means, with respect to any Person, Capital
Stock of such Person other than Disqualified Stock.
"RELATED BUSINESS" means the gaming, entertainment and hotel businesses
conducted (or proposed to be conducted) by the Company and its Subsidiaries as
of the Issue Date and any and all businesses that in the good faith judgment of
the Board of Directors of the Company are materially related businesses.
"RELATED PERSON" means any Person who controls, is controlled by or is
under common control with an Excluded Person; provided, that for purposes of
this definition "control" means the beneficial ownership of more than 50% of the
total voting power of the Voting Stock of a Person.
"REQUIRED REGULATORY REDEMPTION" means a redemption by the Company of
any Holder's Notes pursuant to, and in accordance with, any order of any
Governmental Authority with appropriate jurisdiction and authority relating to a
Gaming License, or to the extent necessary in the reasonable, good faith
judgment of the Board of Directors of the Company to prevent the loss, failure
to obtain or material impairment or to secure the reinstatement of, any Gaming
License, where such redemption or acquisition is required because the Holder or
beneficial owner of Notes is required to be found suitable or to otherwise
qualify under any gaming laws and is not found suitable or so qualified within a
reasonable period of time.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means a Subsidiary other than an Unrestricted
Subsidiary.
"RETURN FROM UNRESTRICTED SUBSIDIARIES" means (a) 50% of any dividends
or distributions received by the Company or a Restricted Subsidiary from an
Unrestricted Subsidiary, to the extent that such dividends or distributions were
not otherwise included in Consolidated Net Income of the Company, plus (b) to
the extent not otherwise included in Consolidated Net Income of the Company, an
amount equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from (i) repayments of the principal of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary from
Unrestricted Subsidiaries or (ii) the sale or liquidation of any Unrestricted
Subsidiaries, plus (c) to the extent that any Unrestricted Subsidiary
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of the Company is designated to be a Restricted Subsidiary, the fair market
value of the Company's Investment in such Subsidiary on the date of such
designation.
"REVOLVING CREDIT FACILITY" means any revolving credit agreement or
similar instrument, including, without limitation, working capital or equipment
purchase lines of credit, entered into by the Company governing the terms of a
BONA FIDE borrowing by the Company from (i) a third party financial institution
that is primarily engaged in the business of commercial banking or (ii) a vendor
or other provider of financial accommodations in connection with the purchase of
equipment, in either case for valid business purposes, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity (including a limited liability company) of
which more than 50% of the total voting power of shares of Voting Stock thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other subsidiaries of that Person or a combination thereof
and (ii) any partnership in which such Person or any of its subsidiaries is a
general partner.
"SUBSIDIARY" means any subsidiary of the Company.
"SUBSIDIARY GUARANTY" means an unconditional and irrevocable guaranty
by a Subsidiary Guarantor of the Obligations of the Company under the Notes and
the Indenture, on a senior unsecured basis, as set forth in the Indenture, as
amended from time to time in accordance with the terms thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary that has executed and
delivered in accordance with the Indenture a Subsidiary Guaranty, and such
Person's successors and assigns.
"UNDEVELOPED PARCEL" means that portion of the land owned or leased by
the Company at which the Casino Rouge is based (including, without limitation,
five undeveloped acres of land located adjacent to the Casino Rouge's docking
facilities) used for the development and construction of the Hotel Facility
and/or the Entertainment Facility.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that, at or prior to the
time of determination, shall have been designated by the Board of Directors of
the Company as an Unrestricted Subsidiary; provided, that such Subsidiary (i) is
not a Subsidiary in existence on the Issue Date and (ii) does not hold any
Indebtedness or Capital Stock of, or any Lien on any assets of, the Company or
any Restricted Subsidiary. If, at any time, any Unrestricted Subsidiary would
fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary as of such date. The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the Interest Coverage Ratio test set forth in
the covenant described under the caption "--Certain Covenants--Limitation on
Incurrence of Indebtedness" calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation. The Company shall be deemed to make an Investment in each
Subsidiary designated as an Unrestricted Subsidiary immediately following such
designation in an amount equal to the Investment in such Subsidiary and its
subsidiaries immediately prior to such designation. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board of Directors resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complies with the foregoing conditions and is permitted by the
covenant described above under the caption "--Certain Covenants--Limitation on
Incurrence of Indebtedness."
"VOTING STOCK" means, with respect to any Person, (i) one or more
classes of the Capital Stock of such Person having general voting power to elect
at least a majority of the Board of Directors, managers or trustees of such
Person (regardless of whether at the time Capital Stock of any other class or
classes have or might have voting power by reason of the happening of any
contingency) and (ii) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (i) above.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years (rounded to the nearest
one-twelfth) obtained by dividing (i) the then outstanding principal amount of
such Indebtedness into (ii) the total of the product obtained by multiplying (A)
the amount of each then remaining installment, sinking fund, serial
- 63 -
<PAGE>
maturity or other required payments of principal, including payment at final
maturity, in respect thereof, by (B) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment.
"WHOLLY OWNED SUBSIDIARY" of any Person means a subsidiary of such
Person all the Capital Stock of which (other than directors' qualifying shares)
is owned directly or indirectly by such Person; provided, that with respect to
the Company, the term Wholly Owned Subsidiary shall exclude Unrestricted
Subsidiaries.
BOOK ENTRY, DELIVERY AND FORM
The Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Notes"). The Global Notes will be deposited upon issuance with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant as described below.
Except as set forth below, the Global Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Notes may not be exchanged
for Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes."
The Notes (including beneficial interests in the Global Notes) will be
subject to certain restrictions on transfer and will bear a restrictive legend
as described under "Notice to Investors." In addition, transfer of beneficial
interests in the Global Notes will be subject to the applicable rules and
procedures of DTC and its direct or indirect participants, which may change from
time to time.
The Notes may be presented for registration of transfer and exchange at
the offices of the Registrar.
DEPOSITORY PROCEDURES
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
DTC has also advised the Company that pursuant to procedures
established by it, (i) upon deposit of the Global Notes, DTC will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of Global Notes and (ii) ownership of such interests in the
Global Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to Participants)
or by Participants and the Indirect Participants (with respect to other owners
of beneficial interests in the Global Notes).
Investors in the Global Notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations that are Participants in such system. All interests in a Global
Note, may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interest in a Global Note to such persons may be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having a beneficial interest in a Global Note to pledge such
interest to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing
- 64 -
<PAGE>
such interest. For certain other restrictions on the transferability of the
Notes, see "--Exchange of Book-Entry Notes for Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal, premium, liquidated damages, if
any, and interest on a Global Note registered in the name of DTC or its nominee
will be payable by the Trustee to DTC or its nominee in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Trustee nor any agent of the Company or
the Trustee has or will have any responsibility or liability for (i) any aspect
of DTC's records or any Participant's or Indirect Participant's records relating
to or payments made on account of beneficial ownership interests in the Global
Notes, or for maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Notes or (ii) any other matter relating to the
actions and practices of DTC or any of its Participants or Indirect
Participants.
DTC has advised the Company that its current practices, upon receipt of
any payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial owners of the Notes, and the Company and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the Notes for all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will, therefore,
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its Participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to
be taken by a Holder of Notes only at the direction of one or more Participants
to whose account DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given direction. However, if
there is an Event of Default under the Notes, DTC reserves the right to exchange
Global Notes for legended Notes in certificated form, and to distribute such
Notes to its Participants.
The information in this section concerning DTC and its book-entry
system has been obtained from sources believed to be reliable, but the Company
takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in DTC it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Initial Purchaser nor
the Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
to occur a Default or an Event of Default with respect to the Notes. In
addition, beneficial interests in a Global Note may be exchanged for
certificated Notes upon request but only upon at least 20 days' prior written
notice given to the
- 65 -
<PAGE>
Trustee by or on behalf of DTC in accordance with customary procedures. In all
cases, certificated Notes delivered in exchange for any Global Note or
beneficial interest therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures) and will bear the restrictive legend
referred to in "Notice to Investors" unless the Company determines otherwise in
compliance with applicable law.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest
in a Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in certificated form (a "Certificated Note"). Upon any such
issuance, the Trustee is required to register such Certificated Notes in the
name of, and cause the same to be delivered to, such person or persons (or the
nominee of any thereof). All such Certificated Notes would be subject to the
legend requirements described herein under "Notice to Investors." In addition,
if (i) the Company notifies the Trustee in writing that the DTC is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Notes under the Indenture, then, upon surrender by the Global
Note Holder of its Global Note, Notes in such form will be issued to each person
that the Global Note Holder and the DTC identify as being the beneficial owner
of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the DTC in identifying the beneficial owners of Notes and
the Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Global Note Holder or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented by
a Global Note (including principal, premium, if any, interest and liquidated
damages, if any, thereon) be made by wire transfer of immediately available next
day funds to the accounts specified by the Global Note Holder. With respect to
Certificated Notes, the Company will make all payments of principal, premium, if
any, interest and liquidated damages, if any, thereon by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Company expects that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
- 66 -
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes acquired
as a result of market-making activities or other trading activities. The Company
has agreed that it will make this prospectus available to any broker-dealer for
use in connection with any such resale for a period of 180 days after the
Expiration Date or until all participating broker-dealers have so resold.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concession from any such
broker-dealer and/or the purchasers of any New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker-dealer that participates in a distribution of New
Notes may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with
any person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to participate
in the distribution of the New Notes to be received in the Exchange Offer.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., Miami,
Florida.
INDEPENDENT ACCOUNTANTS
The Company's financial statements as of November 30, 1998 and 1997 and
for each of the three fiscal years in the period ended November 30, 1998,
included in this Prospectus, have been audited by PricewaterhouseCoopers LLP,
independent accountants, as indicated in their report included herein.
- 67 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants................................... F-2
Balance Sheets- November 30, 1998 and 1997.......................... F-3
Statements of Operations-
Years ended November 30, 1998, 1997 and 1996........................ F-4
Statements of Changes in Shareholders' Equity (Deficit)-
Years ended November 30, 1996, 1997 and 1998........................ F-5
Statements of Cash Flows-
Years ended November 30, 1998, 1997 and 1996........................ F-6
Notes to Financial Statements....................................... F-8
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Louisiana Casino Cruises, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 14(a) 1 present fairly, in all material respects, the financial
position of Louisiana Casino Cruises, Inc. at November 30, 1998 and 1997, and
the results of its operations and its cash flows for each of the three years in
the period ended November 30, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
December 11, 1998, except for
Note 12 which is as of March 1, 1999.
F-2
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA CASINO CRUISES, INC.
BALANCE SHEETS
(in thousands, except share data)
NOVEMBER 30,
--------------------------------------------------
1998 1997
------------------------- ----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,525 $ 7,924
Restricted cash (Notes 1 and 3) - 4,807
Receivables, less allowance for doubtful accounts
of $123 and $298 at 1998 and 1997, respectively 332 479
Prepaid and other current assets 756 1,103
Inventories 452 443
Deferred tax asset (Note 8) 1,466 2,051
------------------------- ----------------------
Total current assets 16,531 16,807
Property and equipment, net 41,504 40,872
Prepaid and other assets 3,988 2,078
------------------------- ----------------------
Total assets $ 62,023 $ 59,757
========================= ======================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,428 $ 2,566
Accrued liabilities 2,028 1,642
Accrued interest 102 2,527
First mortgage notes, net of original issue
discount, current portion (Note 3) - 2,932
Notes payable, current portion (Note 3) - 18
Other current liabilities 332 240
Estimated dispute resolution costs (Note 7) - 1,700
------------------------ ----------------------
Total current liabilities 4,890 11,625
First mortgage notes, net of original issue
discount (Note 3) 50,000 40,732
Deferred tax liability (Note 8) 2,994 2,186
------------------------- ----------------------
Total liabilities 57,884 54,543
------------------------- ----------------------
Redeemable preferred stock (Note 4) - 1,628
------------------------- ----------------------
Redeemable common stock warrants (Note 3) 4,131 4,376
------------------------- ----------------------
Commitments and contingencies (Note 7)
Shareholders' equity (deficit):
Common stock, no par value:
10,000,000 shares authorized: 982,783 shares issued
and outstanding at 1998 and 1997, respectively 1 1
Accumulated equity (deficit) 7 (791)
------------------------- ---------------------
Total shareholders' equity (deficit) 8 (790)
------------------------- ---------------------
Total liabilities and shareholders' equity (deficit) $ 62,023 $ 59,757
========================= =====================
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF OPERATIONS
(in thousands, except share data)
YEAR ENDED NOVEMBER 30,
-------------------------------------------------
1998 1997 1996
---------------- -------------- ---------------
<S> <C> <C> <C>
Revenues:
Casino $ 68,845 $ 67,694 $ 74,615
Food and beverage 1,407 1,345 1,351
Other 593 705 794
---------------- -------------- ---------------
Net revenues 70,845 69,744 76,760
---------------- -------------- ---------------
Costs and expenses:
Casino 33,302 31,826 33,947
Food and beverage 1,538 1,318 1,293
Selling, general and administrative 20,948 21,039 21,954
---------------- -------------- ---------------
Total operating expenses 55,788 54,183 57,194
---------------- -------------- ---------------
Income before depreciation,
amortization and interest 15,057 15,561 19,566
Depreciation and amortization 4,762 4,334 4,162
---------------- -------------- ---------------
Operating income 10,295 11,227 15,404
Other income (expense):
Interest income 428 280 241
Interest expense (6,376) (5,955) (7,002)
---------------- -------------- ---------------
Income before provision for income taxes 4,347 5,552 8,643
Provision for income taxes (Note 8) 1,666 2,045 1,340
---------------- -------------- ---------------
Net income 2,681 3,507 7,303
Dividend requirement on redeemable
preferred stock (Note 4) 132 132 132
Market value warrant adjustment (245) - -
Distributions paid to common stock
warrantholders 269 65 584
---------------- -------------- ---------------
Net income assigned to common
shareholders $ 2,525 $ 3,310 $ 6,587
================ ============== ===============
Earnings Per Share (Note 5):
Basic earnings per share $ 2.57 $ 3.37 $ 6.70
================ ============== ===============
Diluted earnings per share $ 2.46 $ 2.97 $ 6.31
================ ============== ===============
Weighted average common shares outstanding 982,783 982,783 982,783
================ ============== ===============
Weighted average common equivalent shares
outstanding 1,135,783 1,135,783 1,135,783
================ ============== ===============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
COMMON STOCK ACCUMULATED
SHARES AMOUNT EQUITY (DEFICIT) TOTAL
-------------- --------------- ------------------ -----------
<S> <C> <C> <C> <C>
Balance at November 30, 1995 982,783 $ 1 $ (6,521) $ (6,520)
Dividend requirements on
redeemable preferred stock - - (132) (132)
Dividends paid to holders of common
stock and distributions to common
stock warrantholders - - (4,334) (4,334)
Net income - - 7,303 7,303
-------------- --------------- ------------------ -----------
Balance at November 30, 1996 982,783 1 (3,684) (3,683)
-------------- --------------- ------------------ -----------
Dividend requirements on
redeemable preferred stock - - (132) (132
Dividends paid to holders of common
stock and distributions to common
stock warrantholders - - (482) (482)
Net income - - 3,507 3,507
-------------- --------------- ------------------ -----------
Balance at November 30, 1997 982,783 1 (791) (790)
-------------- --------------- ------------------ -----------
Dividend requirements on
redeemable preferred stock - - (132) (132)
Market value warrant adjustment 245 245
Dividends paid to holders of common
stock and distributions to common
stock warrantholders - - (1,996) (1,996)
Net income - - 2,681 2,681
-------------- --------------- ------------------ -----------
Balance at November 30, 1998 982,783 $ 1 $ 7 $ 8
============== =============== ================== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
Page 1 of 2
(in thousands)
YEAR ENDED NOVEMBER 30,
-------------------------------------------------
1998 1997 1996
-------------- -------------- ---------------
<S> <C> <C> <C>
Net income $ 2,681 $ 3,507 $ 7,303
Net cash flows from operating activities:
Depreciation and amortization 4,762 4,334 4,162
Amortization of deferred costs 958 917 1,404
Loss on note repurchase and warrant valuation reserve 282 - -
Provision for doubtful accounts 52 94 258
Decrease (increase) in receivables 95 (149) (260)
(9) (4) (54)
Decrease (increase) in prepaid and other assets 264 (285) 843
Decrease (increase) in deferred tax assets 585 190 (1,649)
Decrease in accrued interest (2,425) (51) (372)
(Increase) decrease in accounts payable and other liabilities (552) 1,068 1,073
-------------- -------------- ---------------
Net cash provided by operating activities 6,693 9,621 12,708
-------------- -------------- ---------------
Cash flows from investing activities:
Capital expenditures (5,321) (1,214) (1,655)
Proceeds from sale of fixed assets 42 22 8
Decrease in restricted cash 4,807 939 62
-------------- -------------- ---------------
Net cash used by investing activities (472) (253) (1,585)
-------------- -------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of note payable - 440
Repayment of first mortgage notes (43,946) (722) (6,332)
Proceeds from issuance of first mortgage notes 50,000 - -
Payment of deferred financing costs (2,900) - -
(Increase) decrease in restricted cash - (2,694) 1,170
Redemption of preferred stock and payment of accrued dividends (1,760) - -
Repayments of notes payable (18) (2,223) (2,400)
Dividends paid to holders of common stock and
distributions to common stock warrantholders (1,996) (482) (4,334)
-------------- -------------- ---------------
Net cash used by financing activities (620) (6,121) (11,456)
-------------- -------------- ---------------
Net increase (decrease) in cash and cash equivalents 5,601 3,247 (333
Cash and cash equivalents at beginning of year 7,924 4,677 5,010
-------------- -------------- ---------------
Cash and cash equivalents at end of year $13,525 $ 7,924 $ 4,677
============== ============== ===============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-6
<PAGE>
LOUISIANA CASINO CRUISES, INC.
STATEMENTS OF CASH FLOWS
Page 2 of 2
(in thousands)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
YEAR ENDED NOVEMBER 30,
---------------------------------------------
1998 1997 1996
-------------- ------------- ------------
Cash paid for interest $7,567 $5,264 $6,146
============== ============= ============
Cash paid for income taxes $30 $1,077 $2,053
============== ============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING, INVESTING AND FINANCING
ACTIVITIES:
Redeemable preferred stock dividends of $132,000 were accrued in each of the
years ended November 30, 1998, 1997 and 1996 (see Note 4).
The accompanying notes are an integral part of
these financial statements.
F-7
<PAGE>
LOUISIANA CASINO CRUISES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Louisiana Casino Cruises, Inc. (the Company), a Louisiana corporation,
was formed in August 1991 for the purpose of developing and operating gaming
activities in Louisiana. For the period March 26, 1993, when the Company
obtained preliminary regulatory approval to construct a riverboat casino based
in Baton Rouge, Louisiana, through December 28, 1994, the commencement date of
operations, the Company's activities consisted of applying for the license
necessary to operate the riverboat; designing, planning and constructing the
Baton Rouge riverboat and land-based facility; negotiating and securing
financing for construction; negotiating contracts; and training for gaming
operations. On July 19, 1994, the Louisiana Riverboat Gaming Enforcement
Division granted the Company a license to conduct riverboat gaming activities
for a period of five years.
Financing for the project included an issuance of common stock for
$3,000,000 to Carnival Management Services, Inc. (renamed CRC Holdings, Inc.,
"CRC" ), a credit facility from CRC for $2,000,000 (subsequently converted to
equity), pre-opening expenditures by Synura, Inc. of $2,200,000 (converted to
redeemable preferred stock and equity), secured bank financing of approximately
$6,000,000 and a private placement offering of $51,000,000 in first mortgage
notes (the "1993 Notes"). The 1993 Notes were issued with detachable warrants to
purchase up to an aggregate amount of 153,000 shares of the Company's common
stock at a price of $0.01 per share. On November 25, 1998 the Company issued
$50,000,000 of Senior Secured Increasing Rate Notes (the "1998 Notes"), the
proceeds from which were used to repay the 1993 Notes (see Note 3). The 1998
Notes were redeemed on January 27, 1999 from the proceeds of a $55,000,000
offering of 11% Senior Secured Notes due December 1, 2005 (the "1999" Notes")
(see Note 12).
CASINO REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenue represents the net win from gaming wins and losses. Food
and beverage and other revenues are recorded at amounts collected from guests
and exclude the retail value of food, beverage and other items provided on a
complimentary and promotional basis to customers. The estimated retail value of
complimentary and promotional items were $4,174,000, $5,216,000 and $5,180,000
for years ended November 30, 1998, 1997 and 1996, respectively. The estimated
costs of such complimentary and promotional items have been classified as casino
costs and totaled $2,793,000, $3,090,000 and $2,979,000 for the years ended
November 30, 1998, 1997 and 1996, respectively.
RESTRICTED CASH
In accordance with the terms of the indenture dated as of November 15,
1993 (the "1993 Indenture") (see Note 3), Cumulative Excess Cash Flow, as
defined, not previously used to repurchase Notes, and Cash Available For
Reinvestment, as defined, , are classified as restricted cash.
INVENTORIES
Inventories consist of food, beverage and supplies and are stated at
the lower of cost or market. Cost is determined on a first-in, first-out basis.
LICENSING AND FINANCING COSTS
All costs incurred which relate to obtaining the regulatory approval of
the Baton Rouge riverboat facility are recorded as deferred licensing charges
and are amortized over the license period, which is five years. Costs incurred
in connection with debt offerings are recorded as deferred offering costs and
are being amortized on the effective interest method over the term of the
related debt. Deferred licensing charges and offering costs are classified under
prepaid and other assets in the accompanying balance sheets.
F-8
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense of
$4,522,000, $4,162,000 and $4,010,000 for the years ended November 30, 1998,
1997 and 1996, respectively, is calculated on the straight-line basis over the
estimated useful lives of the assets or the expected term of the land lease
(including renewals), whichever is shorter. Useful lives range from four to
thirty years. Expenditures for repairs and maintenance are charged to expenses
as incurred. Expenditures for major renewals and betterments, which
significantly extend the useful lives of existing equipment, are capitalized and
depreciated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash and cash equivalents,
restricted cash, notes payable and warrants. The fair value of the 1998 Notes,
was approximately $50,000,000 at November 30, 1998. The fair value of the 1993
Notes was approximately $44,166,000 at November 30, 1997. The fair value of cash
and cash equivalents, restricted cash, other notes payable and warrants
approximates carrying value.
INCOME TAXES
The Company accounts for income taxes using the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which recognizes the amount of taxes payable or refundable for the current year
and recognizes deferred tax liabilities and assets for future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns based on currently enacted rates.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the financial statements for the years ended
November 30, 1997 and 1996 have been reclassed to conform to the presentation of
the financial statements for the year ended November 30, 1998. These
reclassifications have no impact on net income, accumulated equity (deficit) or
cash flows for the years ended November 30, 1997 and 1996.
NOTE 2- PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
ESTIMATED AS OF NOVEMBER 30,
USEFUL LIFE 1998 1997
----------------- ---------------- -------------
Vessel 18 years $16,839 $16,673
Building 30 years 20,140 19,062
Furniture and fixtures 5-10 years 6,060 6,025
Gaming equipment 5-15 years 9,468 8,790
Other equipment 4-7 years 4,977 1,918
---------------- -------------
57,484 52,468
Less: accumulated depreciation (15,980) (11,596)
---------------- -------------
$41,504 $40,872
================ =============
Capitalized interest included in the cost of property and equipment at
November 30, 1998 and 1997 was $1,628,000. Unamortized capitalized interest at
November 30, 1998 and 1997 is $1,206,000 and $1,313,000, respectively.
F-9
<PAGE>
NOTE 3- FIRST MORTGAGE NOTES, NOTES PAYABLE AND REDEEMABLE COMMON STOCK WARRANTS
1998 NOTES
Pursuant to the indenture, dated as of November 15, 1998 between the
Company and U.S. Bank Trust National Association, as Trustee (the "1998
Indenture"), the Company issued in a private placement $50,000,000 of 1998 Notes
due December 1, 2001. On November 25, 1998 the proceeds from the offering were
placed in escrow with The Bank of New York, as successor Trustee, to repay upon
maturity the aggregate principal amount of $43,827,000 and accrued interest
outstanding on the 1993 Notes (see below).
The 1998 Notes were collateralized by substantially all assets of the
Company, bore interest at an initial increasing rate of 12.25% and were defeased
on January 27, 1999 and redeemed on February 24, 1999 from the proceeds of a
$55,000,000 private placement offering of Senior Secured Notes (see Note 12).
1993 NOTES AND REDEEMABLE COMMON STOCK WARRANTS
Pursuant to the 1993 Indenture), between the Company and The Bank of
New York, as successor trustee, the Company issued $51,000,000 of 11 1/2% First
Mortgage Notes due December 1, 1998 in a private placement offering on December
1, 1993. These notes were exchanged in April 1994 for $51,000,000 in aggregate
principal of the Company's 1993 Notes which were registered under the Securities
Act of 1933. The proceeds from the offering were used to finance the development
and construction of the Baton Rouge riverboat facility. Interest was payable
each June 1 and December 1, commencing June 1, 1994. The 1993 Notes were freely
transferable by the holders thereof. The1993 Notes were redeemable at the option
of the Company, in whole or in part after December 1, 1997 at par as provided in
the 1993 Indenture. The aggregate principal amount of the 1993 Notes outstanding
as of November 30, 1997 was $43,946,000.
The private placement offering was made in units, consisting of first
mortgage notes in the principal amount of $1,000 and three warrants to purchase
one share each of the Company's no par value common stock at the price of $.01
per share. The original issue discount on the private placement offering was
$1,301,000, the amount assigned to the value of the warrants at December 1,
1993. The amortization of the original issue discount was $281,000, $253,000,and
$234,000 for the years ended November 30, 1998, 1997, and 1996, respectively. In
addition to original issue discount amortization, for the years ended November
30, 1997 and 1996 the Company recorded a credit of $30,000 and an additional
$134,000, respectively, of the original issue discount as interest expense
relating to the 1993 Notes repurchased by the Company. The unamortized original
issue discount balance at November 30, 1998 and 1997 was $0 and $281,000,
respectively.
As required by the 1993 Indenture the Company made tender offers to
repurchase 1993 Notes at par from Cumulative Excess Cash Flow (as defined). The
repurchased amounts for the years ended November 30, 1998, 1997 and 1996 were
$119,000, $722,000 and $6,332,000, respectively.
The warrantholders had 153,000 put rights whereby the Company has an
obligation to purchase the 153,000 warrants, at the value of the Company's
common stock as of December 1, 1998, as determined by two independent investment
banking firms. The warrants are classified as redeemable equity due to the put
right feature and, at each balance sheet date, are accreted to the amount at
which the Company expects to repurchase these warrants. The estimated accreted
value attributed to the redeemable common stock warrants as of November 30, 1998
and 1997 is $4,131,000 and $4,376,000, respectively. Of the 153,000 warrants,
holders of 14,100 warrants elected to convert to an equivalent number of common
shares while holders of 138,900 warrants elected to have the Company purchase
the warrants.
NOTES PAYABLE
On January 2, 1996, the Company obtained a loan in the amount of
$440,000 from City National Bank of Baton Rouge. The loan amount was payable in
24 equal principal payments plus interest commencing January 1996. The loan bore
interest at 10.5% per annum, payable monthly in arrears, on the outstanding
balance of the loan. The loan agreement required the Company to maintain a
certain cash flow ratio. The loan was collateralized by gaming and other
equipment and limited the sale or encumbrance of such equipment. The outstanding
principal balance as of November 30, 1998 and 1997 was $0 and $18,000,
respectively.
NOTE 4- REDEEMABLE PREFERRED STOCK
The Company has authorized 50,000 shares of preferred stock, of which
11,000 shares of 12% cumulative redeemable preferred stock was issued and
outstanding at November 30, 1997 at a carrying value of $1,628,000, including
accrued non-cash dividends. The preferred stock was redeemed on November 30,
1998 for $1,760,000, including all accrued dividends.
F-10
<PAGE>
NOTE 5- EARNINGS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share" which requires the Company to present basic earnings per
share (EPS) and diluted EPS, as defined in the standard. The new standard has
been adopted by the Company for fiscal 1998, therefore, for the years ended
November 30, 1998, 1997 and 1996, EPS calculations have been made using the new
standard.
For the years ended November 30, 1998, 1997 and 1996, basic EPS is
calculated by dividing net income assigned to common shareholders by the
weighted average common shares outstanding (982,783 shares); diluted EPS is
calculated by dividing net income assigned to common shareholders before
distributions to common stock warrantholders by the weighted average common and
common equivalent shares outstanding (1,135,783 shares). Common equivalent
shares consist of redeemable common stock warrants with the rights to purchase
153,000 shares of the Company's common stock (see Note 3).
NOTE 6- RELATED PARTY TRANSACTIONS
The Company and CRC are party to a separate consulting and management
agreement dated December 11, 1992, as amended, whereby CRC provides consulting
and technical services to the Company in connection with the planning and
development of the riverboat facility and management of the casino operations.
CRC receives an annual management fee of 2% of gross revenues, plus 5% of total
operating income, as such terms are defined in the agreement. The term of the
agreement is ten years from the commencement of casino operations, renewable for
an additional ten years at the option of CRC. CRC entered into a separate
agreement with three individual shareholders whereby the three individual
shareholders receive half of the fee of 5% of total operating income. The amount
earned by CRC under the management agreement and expensed for management fees by
the Company was $2,195,000, $2,214,000 and $2,567,000 for the years ended
November 30, 1998, 1997 and 1996, respectively. Of the amount earned and
expensed, $165,000 and $157,000 was payable and included in current liabilities
at November 30, 1998 and 1997, respectively.
NOTE 7-COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
At November 30, 1993, the Company was involved in a dispute regarding
consulting services. Although a formal demand had not been made to the Company,
management believed the dispute could lead to litigation and accrued $1,700,000
for the estimated cost of resolution. The Company settled litigation related to
this dispute on May 12, 1998. As a result of the settlement, the Company has
recognized a net reduction of $400,000 within selling, general and
administrative expenses in the year ended November 30, 1998.
On September 15, 1998, the Louisiana Gaming Control Board (the
"Louisiana Board") approved a mutually satisfactory resolution to a regulatory
inquiry relating to a 1994 stock ownership issue whereby the Company agreed to
reimburse the Riverboat Gaming Enforcement Division of the State Police $50,000,
constituting their costs and expenses of conducting the investigation, and to
pay a fine of $200,000. The Company was reimbursed by CRC, the Company's
majority shareholder, in the amount of $250,000.
The Company is also involved in other legal proceedings. In the opinion
of management, the resolution of these matters will not have a material effect
on the financial statements or the results of operations of the Company.
LEASE AGREEMENTS
The Company has an operating lease agreement for property on which the
Company constructed the riverboat facility and parking facility. The initial
lease term is ten years beginning January 1994. The terms of the lease include
payment of minimum monthly rent of $7,500 through October 1, 1994, increasing to
the greater of $33,333 or 1.25% of the gross revenue for the remainder of the
lease term. The Company subsequently entered into an amendment to the lease
agreement to lease an additional parcel of land from the lessor. The Company
prepaid rent of $1,755,707 for this additional property. The prepaid rent is
being amortized over the initial lease term.
The Company has the option to purchase the entire site on or after
fifteen years for the then appraised value of the original site, excluding
improvements. The Company also leases a total of approximately 81,600 square
feet for general warehousing, office use and employee parking pursuant to two
separate two-year leases. The rents are $7,476 per month for one lease and
$8,190 per month for the other. Each lease is a triple net lease, has two
two-year renewal options and grants
F-11
<PAGE>
the Company a right of first refusal to purchase the properties. The Company has
agreed, subject to due diligence, to purchase such properties for $1.4 million,
for a purchase money note and mortgage to be held by the seller of the
properties.
Rental expense for the years ended November 30, 1998, 1997 and 1996
was $1,266,000, $1,216,000 and $1,316,000, respectively. Rental expense for the
years ended November 30, 1998, 1997 and 1996 includes $509,000, $464,000 and
$574,000, respectively, of contingent rental payments above the monthly minimum
rent with respect to the land lease for the riverboat and parking facilities.
Future minimum lease payments for all leases with non-cancelable terms in excess
of one year are as follows:
YEAR ENDING
NOVEMBER 30,
------------
1999 $ 588,000
2000 557,000
2001 400,000
2002 400,000
2003 400,000
Thereafter 33,000
-------------
Total $ 2,378,000
=============
RELICENSING
Riverboat gaming licenses in Louisiana are issued for an initial
five-year term with annual renewals thereafter. The Company's original five-year
gaming license for the Casino Rouge is up for renewal in July 1999. Each of the
Company and its officers, directors, managers, principal shareholders and their
officers and directors and key gaming employees will be subject to strict
scrutiny and full suitability and approval by the Louisiana Board in connection
with the Company's renewal application. The factors that the Louisiana Board has
stated it will consider, among others, in order to renew the Company's license,
include the Company's compliance with all the requirements of the Louisiana
Riverboat Economic Development and Gaming Control Act (the "Louisiana Act"), the
approval of various systems and procedures, the demonstration of good character
(including an examination of criminal and civil records) and methods of business
practice. The Louisiana Board may also seek to impose, as a condition of the
license renewal, certain Louisiana, minority and female employment and
procurement goals. The Company believes it will be successful in receiving a
renewal of its license from the Louisiana Board, but no assurance can be given
as to whether or when the license will be extended, or the extent of any
restrictions that may be imposed as a condition to the issuance thereof. The
loss, suspension or failure to obtain a renewal of such license would have a
material adverse effect on the Company.
NOTE 8- INCOME TAXES
The provision for income taxes attributable to continuing operations is
comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
Current tax expense:
Federal $ 271,000 $ 720,000 $ 1,478,000
State 2,000 (70,000) 185,000
---------------- ---------------- --------------
Total current tax expense 273,000 650,000 1,663,000
Deferred tax provision (benefit) 1,393,000 1,395,000 (323,000)
---------------- ---------------- --------------
Total provision for income taxes $ 1,666,000 $ 2,045,000 $ 1,340,000
================ ================ ==============
</TABLE>
F-12
<PAGE>
The following is a summary of the components of the provision (benefit)
for deferred income taxes:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
Depreciation $ 434,000 $ 1,191,000 $ 1,801,000
Amortization of deferred pre-opening costs 602,000 602,000 602,000
Alternative minimum tax credit carry forward (371,000) (358,000) (408,000)
Accrued litigation costs 663,000 - 213,000
Other, net 65,000 (40,000) (132,000)
---------------- ---------------- --------------
Provision for deferred income taxes 1,393,000 1,395,000 2,076,000
Release valuation allowance - - (2,399,000)
---------------- ---------------- --------------
Total provision (benefit) for deferred income taxes $ 1,393,000 $ 1,395,000 $ (323,000)
================ ================ ==============
</TABLE>
The difference between the taxes provided for continuing operations at
the United States federal statutory rate and the Company's actual tax provision
is reconciled below for the year ended November 30:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
Taxes provided at statutory rate $ 1,478,000 $1,888,000 $ 2,939,000
State tax expense, net of federal benefit 217,000 278,000 432,000
Release of valuation allowance - - (2,399,000)
Nondeductible lobbying costs - - 366,000
Other, net (29,000) (121,000) 2,000
---------------- ---------------- --------------
Total provision for income taxes $ 1,666,000 $2,045,000 $ 1,340,000
================ ================ ==============
</TABLE>
The approximate effect of temporary differences and carryforwards that
give rise to deferred tax balances at November 30 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------
1998 1997 1996
---------------- ---------------- --------------
<S> <C> <C> <C>
Deferred pre-openingcosts $ 602,000 $ 602,000 $ 602,000
Accrued litigation costs - 663,000 663,000
Alternative minimum tax credit carry forward 414,000 306,000 526,000
Other, net 450,000 480,000 450,000
---------------- ---------------- --------------
Current deferred tax asset $ 1,466,000 $ 2,051,000 $ 2,241,000
================ ================ ==============
Depreciation $(4,084,000) $(3,650,000) $(2,459,000)
Deferred pre-opening costs 50,000 653,000 1,255,000
Alternative minimum tax credit carry forward 1,064,000 801,000 223,000
Other, net (24,000) 10,000 -
---------------- ---------------- --------------
Noncurrent deferred tax liability $(2,994,000) $(2,186,000) $ (981,000)
================ ================ ==============
</TABLE>
In accordance with SFAS 109, the Company recorded a valuation allowance
for a portion of the deferred tax asset at November 30, 1995 because of
uncertainty regarding the realization of the related tax benefits. The net
decrease in the valuation allowance of $2,399,000 from November 30, 1995 to
November 30, 1996 was due to realization of future tax benefits.
The Company has approximately $182,000 of general business credits
generated by the work opportunity credit and the employee tips credit that are
scheduled to expire in the year ending November 30, 2012. The Company has not
recorded a benefit for the credits because of uncertainty regarding the use of
the credits.
NOTE 9-DIVIDENDS
On March 18 and July 1, 1998 the Board of Directors declared a dividend
of $1.057515 and $0.70, respectively, per share of common stock and an
equivalent distribution per common stock warrant, payable to the holders of
record on March 27 and July 1, 1998, respectively. Aggregate payments of
$1,201,000 and $795,000 were disbursed on March 30 and July 2, 1998,
respectively.
F-13
<PAGE>
On March 26, 1997 the Board of Directors declared a dividend of
$0.424377 per share of common stock and an equal distribution per common stock
warrant. An aggregate payment of $482,000 was paid on March 28, 1997 to holders
of record on March 26, 1997.
On March 27, July 29 and October 15, 1996 the Board of Directors
declared a dividend of $1.587450, $1.610345 and $0.618080, respectively, per
share of common stock and an equal distribution per common stock warrant,
payable to the holders of record on March 27, July 29 and October 15, 1996,
respectively. Aggregate payments of $1,803,000, $1,829,000 and $702,000 were
disbursed on March 28, July 31 and October 18, 1996, respectively.
NOTE 10- EMPLOYEE BENEFIT PLAN
In January 1996, the Company established a defined contribution plan
(the "Plan") for all employees, qualified under Section 401(k) of the Internal
Revenue Code. The Plan was terminated June 30, 1997, and plan assets and
participant amounts were transferred to the Carnival Resorts and Casinos 401K
Plan-Casino Rouge (the "CRC Plan") effective July 1, 1997 at their then current
value. The provisions of the CRC Plan are substantially the same as those of the
Plan. Contributions to the plans by the Company are based on the participants'
contributions. For the years ended November 30, 1998, 1997 and 1996, the Company
contributed $114,000, $129,000 and $134,000, respectively. The Company paid
certain expenses associated with plan administration.
Effective December 1, 1998, the Company adopted a non-qualified
deferred compensation arrangement for employees earning in excess of $80,000.
NOTE 11-SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
---------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
---------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Fiscal 1998:
Income assigned to common shareholders $ 484 $1,080 $ 148 $ 813 $2,525
Basic earnings per share (Note 5) $ 0.49 $ 1.10 $ 0.15 $ 0.83 $ 2.57
Diluted earnings per share (Note 5) $ 0.43 $ 1.09 $ 0.15 $ 0.72 $ 2.46
Fiscal 1997:
Income (loss) assigned to common shareholders $1,073 $1,260 $ 996 $ (19) $3,310
Basic earnings (loss) per share (Note 5) $ 1.09 $ 1.28 $ 1.01 $(0.01) $ 3.37
Diluted earnings (loss) per share (Note 5) $ 0.94 $ 1.17 $ 0.88 $(0.02) $ 2.97
Fiscal 1996:
Income (loss) assigned to common shareholders $2,601 $3,131 $1,124 $ (269) $6,587
Basic earnings (loss) per share (Note 5) $ 2.65 $ 3.19 $ 1.14 $(0.28) $ 6.70
Diluted earnings (loss) per share (Note 5) $ 2.29 $ 2.97 $ 1.14 $(0.28) $ 6.31
</TABLE>
F-14
<PAGE>
NOTE 12- SUBSEQUENT EVENTS
1999 NOTES
On January 27,1999, the Company issued in a private placement the 1999
Notes with interest due semi-annually beginning June 1, 1999. The Company used
the proceeds to defease and redeem the 1998 Notes and for general corporate
purposes.
The 1999 Notes are secured by substantially all of the Company's
assets, other than certain excluded assets. The indenture dated as of January
27, 1999 (the "1999 Indenture") includes certain covenants which limit the
ability of the Company and its restricted subsidiaries, subject to certain
exceptions, to: (i) incur additional indebtedness; (ii) pay dividends or other
distributions, repurchase capital stock or other equity interest or subordinated
indebtedness; (iii) enter into certain transactions with affiliates; (iv) create
certain liens or sell certain assets; and (v) enter into certain mergers and
consolidations
Under the terms of the 1999 Indenture, after December 1, 2002, the
Company may, at its option, redeem all or some of the notes at a premium that
will decrease over time from 105.5% to 100% of their face amount, plus interest.
Prior to December 1, 2001, if the Company publicly offers certain equity
securities the Company may, at its option, apply certain of the net proceeds
from those transactions to the redemption of up to one-third of the principal
amount of the notes at 111% of their face amount, plus interest. If the Company
goes through a change in control, it must give holders of the notes the
opportunity to sell their notes to the Company at 101% of their face amount,
plus interest.
CRC MERGER
On February 17, 1999, CRC announced that it had signed a definitive
agreement to merge with Jackpot Enterprises, Inc. (NYSE:J), which presently
operates one of the largest gaming machine route operations in Nevada
aggregating approximately 4,300 gaming machines at approximately 400 locations.
Gaming machine route operations include the operation of machines at retail
stores (supermarkets, drug stores, merchandise stores, merchandise stores and
convenience stores), bars and restaurants. If the merger were consummated,
Jackpot Enterprises, Inc., as a successor to CRC, would succeed to CRC's
ownership interest of the company, and responsibility for handling all aspects
of the Casino Rouge's management. There are no assurances, however, when such
merger will be consummated, if ever.
REDEEMABLE COMMON STOCK WARRANTS
On March 1, 1999, the Company received valuations from the two
investment banking firms (see Note 3). Based upon the average of the values
determined by the investment banking firms the Company will pay $3,750,000 to
the holders of 138,900 warrants who exercised their put rights. The holders of
the remaining 14,100 warrants elected to exercise their rights to purchase an
equal number of shares of the Company's common stock at a price per share of
$.01.
F-15
<PAGE>
$55,000,000
LOUISIANA CASINO
CRUISES, INC.
11% SERIES B SENIOR SECURED NOTES DUE 2005
TABLE OF CONTENTS
PAGE
----
Summary..............................................................1
Risk Factors.........................................................7
The Exchange Offer..................................................12
Use of Proceeds.....................................................20
Capitalization......................................................20
Selected Financial Information......................................21
Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................23
Business............................................................28
Regulatory Matters..................................................33
Management..........................................................37
Principal Shareholders..............................................39
Certain Relationships and Related Transactions......................40
Description of Notes................................................42
Plan of Distribution................................................67
Legal Matters.......................................................67
Independent Accountants.............................................67
Index to Financial Statements......................................F-1
We have not authorized any dealer, salesperson or other person to give any
information or represent anything to you other than the information contained in
this Prospectus. You must not rely on unauthorized information or
representations.
-------------------------
PROSPECTUS
-------------------------
__________________, 1999
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 12.83 of the Louisiana Business Corporation Law authorizes a
corporation to indemnify any director, officer, employee or agent of a
corporation, if such person acted in good faith and in a manner reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. To the extent that such person has been
successful on the merits or otherwise in defense of any claim, issue or matter
therein, he shall be indemnified by the corporation. A corporation may also
procure or maintain insurance or other similar arrangement on behalf of any such
person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are filed as exhibits to this Registration Statement.
<TABLE>
<S> <C>
3.1 Articles of Incorporation of Louisiana Casino Cruises, Inc. (Incorporated by reference to the Annual Report of
Louisiana Casino Cruises, Inc. for the fiscal year ended November 30, 1998.)
3.2 Bylaws of Louisiana Casino Cruises, Inc. (Incorporated by reference to the Annual Report of Louisiana Casino
Cruises, Inc. for the fiscal year ended November 30, 1998.)
4.1 Indenture, dated as of January 27, 1999, between Louisiana Casino
Cruises, Inc. and U.S. Bank Trust National Association, as trustee.
(Incorporated by reference to the Annual Report of Louisiana Casino
Cruises, Inc. for the fiscal year ended November 30, 1998.)
4.2 Registration Rights Agreement, dated as of January 27, 1999, by and among Louisiana Casino Cruises, Inc. and
Jefferies & Company, Inc. (Incorporated by reference to the Annual Report of Louisiana Casino Cruises, Inc. for the
fiscal year ended November 30, 1998.)
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
10.1 Shareholder Agreement, dated October 8, 1993, among Louisiana Casino Cruises, Inc., Jerry L. Bayles, Dan S.
Meadows, Thomas L. Meehan, Leon R. Tarver II and CSMC- Management Services, Inc., as amended. (Incorporated
by reference to the Registration Statement on Form S-4 of Louisiana Casino Cruises, Inc. (File No. 33-73536).)
10.2 Ground Lease Agreement between Louisiana Casino Cruises, Inc. and Capital Lake Properties, Inc., dated June 16,
1993, as amended. (Incorporated by reference to the Registration Statement on Form S-4 of Louisiana Casino Cruises,
Inc. (File No. 33-73536).)
10.3 Lease Agreement, dated July 29, 1994 between Anvil Realty, Inc. and Louisiana Casino Cruises, Inc. (Incorporated
by reference to the Annual Report of Louisiana Casino Cruises, Inc. for the fiscal year ended November 30, 1994.)
10.4 Lease Agreement, dated July 29, 1994, between Anvil Realty, Inc. and Louisiana Casino Cruises, Inc. (Incorporated
by reference to the Annual Report of Louisiana Casino Cruises, Inc. for the fiscal year ended November 30, 1994.)
10.5 Mortgage, Leasehold Mortgage, Assignment of Rents, Fixture Filing, Security Agreement and Financing Statement,
dated January 27, 1999, by and between Louisiana Casino Cruises, Inc. and U.S. Bank Trust National Association,
as Trustee. (Incorporated by reference to the Annual Report of Louisiana Casino Cruises, Inc. for the fiscal year
ended November 30, 1998.)
10.6 First Preferred Ship Mortgage, dated January 27, 1999, by and between Louisiana Casino Cruises, Inc. and U.S. Bank
Trust National Association, as Trustee. (Incorporated by reference to the Annual Report of Louisiana Casino Cruises,
Inc. for the fiscal year ended November 30, 1998.)
10.7 Security Agreement dated January 27, 1999, by and between Louisiana Casino Cruises, Inc. and U.S. Bank Trust
National Association, as Trustee. (Incorporated by reference to the Annual Report of Louisiana Casino Cruises, Inc.
for the fiscal year ended November 30, 1998.)
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (included in Exhibit 5.1 above).
24.1 Power of Attorney (included on Signature Page of this Registration Statement)
25.1 Form T-1 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal and Notice of Guaranteed Delivery of Notes.
</TABLE>
II-1
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933 (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
II-2
<PAGE>
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Miami, State
of Florida, on March 24, 1999.
LOUISIANA CASINO CRUISES, INC.
/s/ W. PETER TEMLING
-------------------------------------------------
W. Peter Temling
Chief Financial Officer, Secretary and Treasurer
POWER OF ATTORNEY
The undersigned directors and officers of Louisiana Casinos Cruises,
Inc. hereby constitute and appoint Dan S. Meadows and W. Peter Temling and each
of them with full power to act without the other and with full power of
substitution and resubstitution, our true and lawful attorneys-in-fact with full
power to execute in our name and behalf in the capacities indicated below this
Registration Statement on Form S-4 and any and all amendments thereto and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and hereby ratify and
confirm all that such attorneys-in-fact, or any of them, or their substitutes
shall lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ SHERWOOD M. WEISER Chairman of the Board of Directors March 24, 1999
- ------------------------------------------
Sherwood M. Weiser
/s/ DAN S. MEADOWS President and Vice Chairman of the March 24, 1999
- ------------------------------------------ Board of Directors
Dan S. Meadows (Principal Executive Officer)
/s/ W. PETER TEMLING Chief Financial Officer, Secretary, March 24, 1999
- ------------------------------------------ Treasurer and Director (Principal
W. Peter Temling Financial Officer and Principal
Accounting Officer)
/s/ THOMAS L. MEEHAN Director March 24, 1999
- ------------------------------------------
Thomas L. Meehan
/s/ LEON R. TARVER II Director March 24, 1999
- ------------------------------------------
Leon R. Tarver II
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
25.1 Form T-1 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal and Notice of Guaranteed Delivery
of Notes.
EXHIBIT 5.1
[STEARNS WEAVER LETTERHEAD]
March 24, 1998
Louisiana Casino Cruises, Inc.
1717 N. River Road
Baton Rouge, LA 70802
Dear Sirs:
We have acted as counsel to Louisiana Casino Cruises, Inc., a Louisiana
corporation (the "Company"), in connection with the proposed exchange (the
"Exchange") by the Company of 11% Series B Senior Subordinated Notes Due 2005
("New Notes") for an equal principal amount of its outstanding 11% Senior
Subordinated Notes Due 2005 ("Old Notes").
In connection with the proposed Exchange, we have examined the
Company's Articles of Incorporation and By-laws, as presently in effect, the
Company's relevant corporate proceedings, the draft Registration Statement on
Form S-4 covering the proposed Exchange (the "Registration Statement"),
including the Prospectus filed as a part of the Registration Statement, the
Indenture dated January 27, 1999, in respect of the Old Notes and the New Notes
(the "Indenture"), and such other documents, records, certificates of public
officials, statutes and decisions as we considered necessary to express the
opinions contained herein. In the examination of such documents, we have assumed
the genuineness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to the original documents of all
documents submitted to us as certified or photostatic copies.
<PAGE>
Louisiana Casino Cruises, Inc.
March 24, 1999
Page 2
We understand that the New Notes are to be issued to the holders of the
Old Notes in the Exchange and are to be available for resale by such holders,
all in the manner described in the Prospectus, which is a part of the
Registration Statement, and in the Indenture.
Based on the foregoing, we are of the opinion that:
1. The issuance of the New Notes to the holders of the Old Notes
pursuant to the terms of the Exchange and the Indenture have been duly
authorized by proper corporate action of the Company.
2. When the Registration Statement shall have been declared effective
by order of the Securities and Exchange Commission and the New Notes have been
duly issued to and exchanged for the Old Notes, all in accordance with the terms
of the Exchange, the Indenture and the Registration Statement, such New Notes
will be validly issued and will constitute binding obligations of the Company,
subject, as to enforcement (i) to any applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws relating to
or affecting creditors' rights and remedies generally and (ii) to general
principles of judicial discretion and equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity or in a bankruptcy proceeding and
except that (i) rights to contribution or indemnification may be limited by the
laws, rules or regulations of any governmental authority or agency thereof or by
public policy and (ii) waivers as to usury, stay or extension laws may be
unenforceable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to any reference to us in the Prospectus which is a
part hereof.
Sincerely,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
/s/ STEARNS WEAVER MILLER
WEISSLER ALHADEFF & SITTERSON,
P.A.
EXHIBIT 12.1
LOUISIANA CASINO CRUISES, INC.
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
1998 1997 1996 1995
------ ------ ------ ------
INTEREST: $5,160 $5,214 $5,773 $5,923
AMORTIZATION AND OTHER: 48 741 1,229 3,833
FIXED CHARGES $5,208 $5,955 %7,002 $9,756
====== ====== ===== ======
PRETAX INCOME $4,347 $5,552 $8,643 $5,990
====== ====== ===== ======
Ratio of Earnings to
fixed charges 1.83 1.95 2.25 1.60
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
reports dated December 11, 1998, except for Note 12 which is as of March 1, 1999
on our audits of the financial statements and financial statement schedule of
Louisiana Casino Cruises, Inc. We also consent to the reference to our firm
under the captions "Selected Financial and Operating Data" and "Selected
Financial Information."
PricewaterhouseCoopers LLP
New Orleans, Louisiana
March 19, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
LOUISIANA CASINO CRUISES, INC.
(Exact name of Registrant as specified in its charter)
Louisiana 72-1196619
(State of Incorporation) (I.R.S. Employer
Identification No.)
1717 North River Road
Baton Rouge, Louisiana 70802
(Address of Principal Executive Offices) (Zip Code)
$55,000,000 11% SERIES B SENIOR SECURED NOTES DUE 2005
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION Furnish the following information as to the
Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority is incorporated by reference to Registration
Number 333-70709.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 15th day of March, 1999.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ RICHARD H. PROKOSCH
--------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ JUDITH M. ZUZEK
- -------------------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCITION hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Dated: March 15, 1999
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ RICHARD H. PROKOSCH
------------------------------------
Richard H. Prokosch
Assistant Vice President
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
11% SENIOR SECURED NOTES DUE 2005
OF
LOUISIANA CASINO CRUISES, INC.
PURSUANT TO THE EXCHANGE OFFER IN RESPECT OF ALL OF
THEIR OUTSTANDING 11% SENIOR SECURED NOTES DUE 2005
FOR
11% SERIES B SENIOR SECURED NOTES DUE 2005
PURSUANT TO THE PROSPECTUS DATED _____________, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 1999, OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY
BE EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN PRIOR
TO THE EXPIRATION DATE.
TO: U.S. BANK TRUST NATIONAL ASSOCIATION (THE "EXCHANGE AGENT")
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED
MAIL OR OVERNIGHT COURIER: BY FACSIMILE: BY HAND DELIVERY:
(651) 244-1537
4th Floor Bond Drop Window
U.S. Bank Trust National Association FOR INFORMATION CALL: U.S. Bank Trust National Association
180 East Fifth Street (651) 244-8161 180 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Attention: Specialized Finance Department
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS TO A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the
Prospectus (the "Prospectus"), dated __________, 1999, of Louisiana Casino
Cruises, Inc. (the "Company"), which, together with this Letter of Transmittal
and the Instructions hereto (the "Letter of Transmittal"), constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 11% Series B Senior Secured Notes due 2005 (the "New Notes") that have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
for each $1,000 principal amount of its outstanding 11% Senior Secured Notes due
2005 (the "Old Notes"), upon the terms and subject to the conditions set forth
in the Prospectus.
This Letter of Transmittal is to be used by Holders if: (i)
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC") pursuant to the procedures set forth in the Prospectus under
"The Exchange Offer--Procedures for Tendering" by any financial institution that
is a participant in DTC and whose name appears on a security position listing as
the owner of Old Notes (such participants, acting on behalf of Holders (as
defined below), are referred to herein, together with such Holders, as "Acting
Holders"); or (iii) tender of Old Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." Delivery of documents to DTC does not
constitute delivery to the Exchange Agent. Holders who tender using the DTC ATOP
procedures need not submit a Letter of Transmittal.
<PAGE>
The term "Holder" with respect to the Exchange Offer means any persons:
(i) in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder or (ii) whose Old Notes are held of record by DTC and who
desires to deliver such Old Notes by book-entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be
followed. Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 10 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
<TABLE>
<CAPTION>
===========================================================================================================================
DESCRIPTION OF OLD NOTES
(See Instructions 3 and 4)
===========================================================================================================================
Name(s) and Address(es) of Registered Holders: Certificate(s) Tendered
(Please fill in, if blank) (Attach additional signed schedule if necessary)
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate
Principal Principal
Certificate Amount of Amount
Number(s)* Certificates* Tendered**
-------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Total Principal
Amount
Tendered
-------------------------------------------------------
<FN>
* Need not be completed by Holders tendering by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all
Old Notes evidenced by any certificates delivered to the
Exchange Agent are being tendered. See Instruction 4 of
this Letter of Transmittal.
===========================================================================================================================
</FN>
</TABLE>
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE
AGENT AND COMPLETE THE FOLLOWING:
-2-
<PAGE>
Name(s) of Registered Holder(s):_______________________________________
Window Ticket No. (if any):____________________________________________
Date of Execution of Notice of Guaranteed Delivery:____________________
Name of Eligible Institution which Guaranteed Delivery:________________
If Delivered by Book-Entry Transfer,
the Account Number:____________________________________________________
Transaction Code Number:_______________________________________________
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:_________________________________________
Account Number:________________________________________________________
Transaction Code Number:_______________________________________________
Principal Amount of Tendered Notes:____________________________________
If Holders desire to tender Old Notes pursuant to the Exchange Offer and (i)
time will not permit this Letter of Transmittal, certificates representing Old
Notes or other required documents to reach the Exchange Agent prior to the
Expiration Date, or (ii) the procedures for book-entry transfer cannot be
completed prior to the Expiration Date, such Holders may effect a tender of such
Old Notes in accordance with the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2 below.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENT
OR SUPPLEMENTS THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS
AFTER THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS
AVAILABLE TO ANY PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH
RESALES OF THE NEW NOTES.
Name:__________________________________________________________________
Address:_______________________________________________________________
Attention:_____________________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
-3-
<PAGE>
Ladies and Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby
tenders to the Company the principal amount of Old Notes indicated above.
Subject to and effective upon acceptance for exchange of the principal amount of
Old Notes tendered in accordance with this Letter of Transmittal, the
undersigned sell, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Old Notes that are being tendered
hereby and irrevocably constitutes and appoints the Exchange Agent the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge that
the Exchange Agent also acts as the agent of the Company and as Trustee under
the Indenture for the Old Notes and the New Notes) with respect to such Old
Notes, with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest), to (a) deliver certificates
for such Old Notes to the Company, or transfer ownership of such Old Notes on
the account books maintained by DTC, together, in either such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Company, (b) present such Old Notes for transfer on the Company's books and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Old Notes, all in accordance with the terms of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to validly tender, sell, assign and transfer the Old
Notes tendered hereby and, the Company will acquire good, valid and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims, when the same are acquired
by the Company. The undersigned also acknowledges that this Exchange Offer is
being made in reliance upon an interpretation by the staff of the Securities and
Exchange Commission that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement with any
person to participate in the distribution of such New Notes. The undersigned
acknowledges that if he or she is participating in the Exchange Offer for the
purpose of distributing the New Notes, the undersigned must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of the New Notes. If the undersigned is
a broker-dealer that will receive New Notes for its own account in exchange for
Old Notes and the undersigned represents that such Old Notes were acquired as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Notes, the undersigned will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The undersigned represents that (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of such Holder's
business, (ii) such Holder has no arrangements with any person to participate in
the distribution of such New Notes and (iii) such Holder is not an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company or, if such
Holder is an affiliate, that such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
The undersigned will, upon request, execute any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Old Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent. If any tendered Old Notes are
not accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for
-4-
<PAGE>
any such unaccepted Old Notes will be returned (except as noted below with
respect to tenders through DTC), without expense, to the undersigned at the
address shown below or at a different address shown below or at a different
address as may be indicated under "Special Issuance Instructions" as soon as
practicable following the Expiration Date.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by and shall survive the death or incapacity of the undersigned.
The undersigned understands that the valid tender of Old Notes pursuant
to the procedures described under the caption "The Exchange Offer--Procedures
for Tendering" in the Prospectus and in the Instructions hereto will constitute
a binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated herein under "Special Issuance
Instructions," please issue the certificates representing the New Notes issued
in exchange for the Old Notes accepted for exchange and return any Old Notes not
tendered or not exchanged in the name(s) of the undersigned (or in such event in
the case of Old Notes tendered by DTC, by credit to the account at DTC).
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please send the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) to the
undersigned at the address(es) shown below the undersigned's signatures, unless,
in either event, tender is being made through DTC. In the event that both the
Special Issuance Instructions and the Special Delivery Instructions are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange and return any certificates for
Old Notes not tendered or not exchanged in the name(s) of, and send said
certificates to, the person or persons so indicated. The undersigned recognizes
that the Company has no obligation pursuant to the Special Issuance Instructions
and Special Delivery Instructions to transfer any Old Notes from the name of the
registered holder(s) thereof if the Company does not accept for exchange any of
the Old Notes so tendered.
-5-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact or other person acting in a
fiduciary or representative capacity, such person must set forth his or her full
title below under "Capacity" and submit evidence satisfactory to the Issuer of
such person's authority to so act. See Instruction 5 herein.
If the signature appearing below is not of the registered Holder(s) of
the Old Notes, then the registered Holder(s) must sign a valid proxy.
X__________________________________ Date:__________________________________
X__________________________________ Date:__________________________________
Signature(s) of Holder(s) or Address:_______________________________
Authorized Signatory
_______________________________________
(including zip code)
Name(s):___________________________ Area Code and Telephone No.:___________
___________________________________
(Please Print)
Capacity:__________________________
Social Security No.:_______________
SIGNATURE GUARANTEE (SEE INSTRUCTIONS 1 AND 5 HEREIN)
CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION
______________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
______________________________________________________
(Address (including zip code) and Telephone Number
(including area code) of Firm)
______________________________________________________
(Authorized Signatures)
______________________________________________________
(Printed Name)
______________________________________________________
(Title)
Date:__________________________________
-6-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 5, 6 And 7)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered are to be issued in the name of, or the New Notes issued pursuant to
the Exchange Offer are to be issued to the order of, someone other than the
person or persons whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Old Notes" within this Letter of Transmittal, or if Old Notes
tendered by book-entry transfer that are not accepted for exchange are to be
credited to an account maintained at DTC.
Name:___________________________________________________________________________
(Please print or type)
Address_________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 And 7)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange or the New Notes issued pursuant to the
Exchange Offer are to be sent to someone other than the person or persons whose
signature(s) appear(s) within this Letter of Transmittal or to an address
different from that shown in the box entitled "Description of Old Notes" within
this Letter of Transmittal.
Name:___________________________________________________________________________
(Please print or type)
Address_________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security No.)
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURE. No signature guarantee is required on this
Letter of Transmittal (i) if this Letter of Transmittal is signed by the
registered Holder(s) (including any participant in DTC whose name appears on a
security position listing as the owner of the Old Notes) of Old Notes tendered
herewith, unless such Holder(s) has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Issuance Instructions" on
page 7 hereof or (ii) if such Old Notes are tendered for the account of a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having and office, branch or agency in the United States (each, an
"Eligible Institution," and, collectively, "Eligible Institutions"). In all
other cases all signatures on this Letter of Transmittal must be guaranteed by
an Eligible Institution (See Instruction 5).
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. For Old Notes
to be validly tendered pursuant to the Exchange Offer, (i) certificates for all
tendered Old Notes (or a confirmation of a book-entry into the Exchange Agent's
account at DTC of all Old Notes delivered electronically), together with a
properly completed and duly executed copy of this Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at the address set forth herein, prior to 5:00 p.m., New York
City time, on the Expiration Date. Holders who tender their old notes using the
DTC ATOP procedures need not submit Letter or Transmittal.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes and all
other required documents to the Exchange Agent prior to the Expiration Date must
tender their Old Notes by properly completing and duly executing the Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in
the Prospectus. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent must have received a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder of the Old Notes, the certificate
number or numbers of the Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five business days after the
Expiration Date, this Letter of Transmittal (or facsimile thereof) together with
the certificate(s) representing the Old Notes (or a confirmation of electronic
book-entry delivery into the Exchange Agent's account at DTC) and any of the
required documents will be deposited by the Eligible Institution with the
Exchange Agent and (iii) the certificates for all tendered Old Notes in proper
form for transfer (or a confirmation of electronic mail delivery of book-entry
delivery into the Exchange Agent's account at DTC), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees, and any other required documents, must be
received by the Exchange Agent within five business days after the Expiration
Date, all as provided in the Prospectus under the caption "Guaranteed Delivery
Procedures." Any Holder of Old Notes who wishes to tender his Old Notes pursuant
to the guaranteed delivery procedures described above must ensure that the
Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m. New
York City time, on the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR OLD
NOTES, IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER AND DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. AS AN ALTERNATIVE TO DELIVERY BY MAIL, THE HOLDER MAY WISH TO USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NEITHER THE COMPANY NOR THE EXCHANGE AGENT IS
UNDER ANY OBLIGATION TO NOTIFY ANY TENDERING HOLDER OF THE COMPANY'S ACCEPTANCE
OF TENDERED OLD NOTES PRIOR TO THE COMPLETION OF THE EXCHANGE OFFER. NO LETTER
OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
3. INADEQUATE SPACE. If the space provided is inadequate, the
information required under "Description of Old Notes" should be listed on a
separate signed schedule and attached hereto.
-8-
<PAGE>
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If tenders are
to be made with respect to less than the entire principal amount of Old Notes
evidenced by any certificate, fill in the principal amount of Old Notes which
are tendered in column four of the "Description of Old Notes" box. In the case
of partial tenders, Old Notes for the principal amount of the Old Notes not
tendered and a certificate or certificates representing New Notes issued in
exchange for any Old Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box in this Letter of Transmittal or unless tender is made through DTC, as
promptly as practicable after the Old Notes are accepted for exchange. All Old
Notes represented by the certificates delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS.
If this Letter of Transmittal (or facsimile hereof) is signed by the registered
Holder of the Old Notes tendered hereby, the signature must correspond with the
name as written on the face of the Old Notes without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and proper
evidence satisfactory to the Company of his authority so to act must be
submitted with this Letter of Transmittal.
When this Letter of Transmittal is signed by the registered Holder(s)
of the Old Notes listed and transmitted hereby and the certificate(s) for New
Notes issued in exchange thereof is to be issued (or any untendered principal
amount of Old Notes is to be reissued) to the registered Holders(s), no
endorsements of certificates or separate bond powers are required. In any other
case, such Holder(s) must either properly endorse the Old Notes tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal, with the signatures on such certificates or bond powers guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered Holder(s) appear on the
certificates. Signatures on such certificates or bond powers must be guaranteed
by an Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, the
Company will pay any transfer taxes payable with respect to the exchange of Old
Notes pursuant to the Exchange Offer. If, however, certificates representing New
Notes or Old Notes for principal amounts not tendered or accepted for exchange
are to be registered or issued in the name of any persons other than the
registered Holder(s) of the Old Notes tendered hereby, or if tendered Old Notes
are registered in the name of any person other than the person(s) signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of the
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing
-9-
<PAGE>
this Letter of Transmittal (or in the case of tender of the Old Notes through
DTC, if different from DTC). In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
8. SUBSTITUTE FORM W-9. The tendering holder is required to provide the
Exchange Agent with a correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9, which is provided under "Important Tax Information" below,
and to certify that the holder is not subject to backup withholding by checking
the box in Part 2 of the form. Failure to provide the information on the
Substitute Form W-9 may subject the tendering holder to 31% federal income tax
withholding on payments made by the Company on account of New Notes issued
pursuant to the Exchange Offer. The box in Part 3 of the Substitute Form W-9 may
be checked if the tendering holder has not been issued a TIN and has applied for
a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked and the Company (or the Transfer Agent with respect to the New Notes) is
not provided with a TIN within 60 days, the Transfer Agent will withhold 31% on
all payments thereafter until a TIN is provided to the Transfer Agent. Foreign
Note holders are required to submit Form W-8 in order to avoid backup
withholding.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Old Notes to be deemed invalidly tendered, but may require the Company or the
Transfer Agent with respect to the New Notes, broker or custodian to withhold
31% of the amount of any payments made on account of the New Notes. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
9. MUTILATED, LOST OR DESTROYED CERTIFICATES. If any certificate(s)
representing Old Notes has been lost or destroyed, the Holder should promptly
notify the Exchange Agent. The Holder will then be instructed as to the
procedure to be followed in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until procedures for
replacing lost or destroyed certificates have been followed.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Prospectus, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the Substitute Form W-9 may
be directed to the Exchange Agent at its address set forth above.
11. VALIDITY OF TENDERS. All questions as to the validity, form
eligibility (including time of receipt), and acceptance of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of the Company or its counsel, be
unlawful. The Company also reserves the right in its sole discretion to waive
any conditions of the Exchange Offer or defects or irregularities in tenders of
Old Notes as to any ineligibility of any Holder who seeks to tender Old Notes in
the Exchange Offer. The interpretation of the terms and conditions of the
Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. The Company will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Notes, but shall not incur any liability for failure
to give such notification. Tenders of Old Notes will not be deemed to have been
made until such effects or irregularities have been cured or waived.
12. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Exchange Offer in the case
of any tendered Old Notes.
13. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
-10-
<PAGE>
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN
OF OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue Old Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Old Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered Old
Note are not exchange pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown above (or credited to the undersigned's account at the
Book-Entry Transfer Facility designated above) or at a different address as my
be indicated under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
IMPORTANT TAX INFORMATION
Under federal income tax law, a person exchanging Old Notes for New
Notes must provide the Exchange Agent with his correct TIN on Substitute Form
W-9 on this Letter of Transmittal. If the Holder is an individual, his TIN is
his social security number. If the correct TIN is not provided, the Holder may
be subject to a penalty imposed by the Internal Revenue Service and payments
made pursuant to the Exchange Offer may be subject to backup withholding of 31%
Certain persons (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that person must submit a
statement, signed under penalties of perjury, attesting to his exempt status.
Such statements can be obtained from the Exchange Agent.
-11-
<PAGE>
PAYOR'S NAME: LOUISIANA CASINO CRUISES, INC.
<TABLE>
<S> <C>
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number
RIGHT AND CERTIFY BY SIGNING AND DATING or Employer
BELOW Identification Number
--------------------------------------------------------------------------------------------------
PART 2 - Check the box if you are NOT subject to backup withholding under the provisions of
SUBSTITUTE Section 3408(a)(1)(C) of the Internal Revenue Code of 1986 because (1) you have not been notified
Form W-9 that you are subject to backup withholding as a result of failure to report all interest or
Department of the Treasury dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to
Internal Revenue Service backup withholding. [_]
--------------------------------------------------------------------------------------------------
PART 3 - CERTIFICATION - UNDER THE PENALTIES OF
Payer's Request for PERJURY.
Taxpayer Identification
Number ("TIN") and I CERTIFY THAT THE INFORMATION PROVIDED ON
Certification THIS FORM IS TRUE, CORRECT, AND COMPLETE.
Awaiting
Print Your Name: _________________________________ TIN [_]
Address: _________________________________________
__________________________________________________
Signature: _______________________________________
Date: ____________________________________________
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
______________________________________________ _____________________________
Signature Date
-12-
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
11% SENIOR SECURED NOTES DUE 2005 (THE "OLD NOTES")
OF
LOUISIANA CASINO CRUISES, INC.
This form, or one substantially equivalent hereto, must be used to
tender Old Notes pursuant to the Exchange Offer described in the Prospectus
dated ___________, 1999 (the "Prospectus") of Louisiana Casino Cruises, Inc.
(the "Company"), if a holder of Old Notes cannot deliver a Letter of Transmittal
to the Exchange Agent listed below (the "Exchange Agent") or cannot either
deliver the Old Note to be tendered or complete the procedure for book-entry
transfer prior to 5:00 p.m., New York City time, on __________, 1999 or such
later date and time to which the Exchange Offer may be extended (the "Expiration
Date"). This form, or one substantially equivalent hereto, must be delivered by
hand or sent by facsimile transmission or mail to the Exchange Agent, and must
be received by the Exchange Agent on or prior to the Expiration Date. See "The
Exchange Offer--Procedures for Tendering" and "--Guaranteed Delivery Procedures"
in the Prospectus. Capitalized terms used herein and not defined herein shall
have the meanings ascribed thereto in the Prospectus.
TO: FIRST TRUST NATIONAL ASSOCIATION
By Mail, by Hand or Overnight Delivery:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Special Finance Department
By Facsimile:
(651) 244-1537
Confirm by Telephone:
(651) 244-8161
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
-13-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of the
Old Notes indicated below and that the Letter of Transmittal cannot be delivered
to the Exchange Agent and/or either the certificates representing such Old Notes
cannot be delivered to the Exchange Agent or the procedure for book-entry
transfer cannot be completed prior to the Expiration Date. The undersigned
hereby tenders the Old Notes indicated below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and the Letter of Transmittal, receipt of
which is hereby acknowledged.
Name(s) of Tender Holder(s):____________________________________________________
(Please Print or Type)
____________________________________________________
(Signature)
Address(es):____________________________________________________________________
Telephone Number(s):____________________________________________________________
Name(s) in which Old Notes are registered:______________________________________
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
CERTIFICATE NO(S). (IF APPLICABLE)* AMOUNT REPRESENTED AMOUNT TENDERED
- ----------------------------------- ------------------- --------------------
OR ACCOUNT NUMBER AT THE
BOOK-ENTRY FACILITY
* Need not be completed by book-entry holders.
-14-
<PAGE>
GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealer, Inc., a commercial
bank or trust company having an office or a correspondent in the United States
or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, hereby guarantees that the
undersigned will deliver to the Exchange Agent the certificates representing the
Old Notes being tendered hereby in proper form for transfer (or a confirmation
of book-entry transfer of such Old Notes, into the Exchange Agent's account at
the book-entry transfer facility) with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, all within five business
days after the Expiration Date.
Name of Firm: Authorized Signature:
_____________________________________ Name:_________________________________
(Please Print or Type
Address:_____________________________
Title:________________________________
_____________________________________
(include zip code)
Dated:________________________________
Telephone No.:_______________________
The institution that completes this form must communicate the guarantee
to the Exchange Agent and must deliver the certificates representing any Old
Notes (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility) and the Letter of
Transmittal to the Exchange Agent within the time period shown herein. Failure
to do so could result in a financial loss to such institution.
-15-
