-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M4I6VopUBOn/6xqFNKzy0z53hqaKmDljclNpIJOsnF6B7roYm3HmjfgSMgugnRCB OHWfyYnvHTkEO0xmDK781Q== 0000089966-95-000012.txt : 19951208 0000089966-95-000012.hdr.sgml : 19951208 ACCESSION NUMBER: 0000089966-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOWBOAT INC CENTRAL INDEX KEY: 0000089966 STANDARD INDUSTRIAL CLASSIFICATION: 7990 IRS NUMBER: 880090766 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07123 FILM NUMBER: 95591192 BUSINESS ADDRESS: STREET 1: 2800 FREMONT ST CITY: LAS VEGAS STATE: NV ZIP: 89104 BUSINESS PHONE: 7023859123 FORMER COMPANY: FORMER CONFORMED NAME: NEW HOTEL SHOWBOAT INC DATE OF NAME CHANGE: 19690122 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1995 ------------------------------------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ----EXCHANGE ACT OF 1934 For the transition period from to ----------------- ----------------------- Commission file number 1-7123 -------------------------------------------------- SHOWBOAT, INC. ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) NEVADA 88-0090766 -------------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2800 FREMONT STREET, LAS VEGAS, NEVADA 89104-4035 ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (702) 385-9123 ------------------------------------------------------------------------ (Registrant's telephone number, including area code) NOT APPLICABLE ------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution under a plan confirmed by a court. Yes No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of the issuer's classes of common stock, as of the latest practicable date. Common Stock - $1 Par Value 15,528,415 shares outstanding -------------------------------------- ------------------------------- SHOWBOAT, INC. AND SUBSIDIARIES INDEX PART I FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 1-2 Consolidated Statements of Income - For the nine months ended September 30, 1995 and 1994 3-4 Consolidated Statements of Income - For the three months ended September 30, 1995 and 1994 5-6 Consolidated Statements of Shareholders' Equity - For the nine months ended September 30, 1995 and year ended December 31, 1994 7 Consolidated Statements of Cash Flows - For the nine months ended September 30, 1995 and 1994 8-9 Notes to Consolidated Financial Statements 10-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13-24 PART II OTHER INFORMATION ITEMS 1 - 6 25-31 SIGNATURES 32 Item 1. Financial Statements SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 SEPTEMBER 30, DECEMBER 31, ASSETS 1995 1994 -------- ----------- ----------- (In thousands) Current assets: Cash and cash equivalents $125,594 $90,429 Receivables, net 8,645 8,890 Inventories 2,605 2,591 Prepaid expenses 5,737 4,736 Investment in unconsolidated affiliate held for sale - 30,346 Current deferred income taxes 9,197 6,529 ----------- ----------- Total current assets 151,778 143,521 ----------- ----------- Property and equipment 530,024 506,199 Less accumulated depreciation and amortization 187,365 168,531 ----------- ----------- 342,659 337,668 ----------- ----------- Other assets, at cost: Investments in unconsolidated affiliates 120,154 108,853 Deposits and other assets 25,716 22,537 Debt issuance costs, net of accumulated amortization of $1,590,000 at September 30 1995 and $955,000 at December 31, 1994 11,010 11,112 ----------- ----------- 156,880 142,502 ----------- ----------- $651,317 $623,691 =========== =========== See accompanying notes to consolidated financial statements. -1- (continued) SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 (continued) SEPTEMBER 30, DECEMBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 -------------------------------------- ----------- ----------- (In thousands) Current liabilities: Current maturities of long-term debt $21 $19 Accounts payable 10,230 11,059 Income taxes payable 5,582 4,562 Dividends payable 388 384 Accrued liabilities 40,136 34,286 ----------- ----------- Total current liabilities 56,357 50,310 ----------- ----------- Long-term debt, excluding current maturities 392,281 392,016 ----------- ----------- Other liabilities 4,892 5,144 ----------- ----------- Deferred income taxes 23,287 18,760 ----------- ----------- Minority interest 1,824 - ----------- ----------- Shareholders' equity: Common stock, $1 par value, 50,000,000 shares authorized, 15,794,578 shares issued at September 30, 1995 and December 31, 1994 15,795 15,795 Additional paid-in capital 77,975 76,845 Retained earnings 82,219 68,809 ----------- ----------- 175,989 161,449 Foreign currency translation adjustment 1,336 3,490 Cost of common stock in treasury, 266,163 shares at September 30, 1995 and 425,823 shares at December 31, 1994 (2,103) (3,364) Unearned compensation for restricted stock (2,546) (4,114) ----------- ----------- Total shareholders' equity 172,676 157,461 ----------- ----------- $651,317 $623,691 =========== =========== See accompanying notes to consolidated financial statements. -2- SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (In thousands except share and per share data) 1995 1994 ----------- ----------- Revenues: Casino $292,838 $265,946 Food and beverage 41,425 38,192 Rooms 19,282 15,248 Sports and special events 2,957 3,166 Management fees 190 1,529 Other 3,938 4,686 ----------- ----------- 360,630 328,767 Less promotional allowances 30,518 24,709 ----------- ----------- Net revenues 330,112 304,058 ----------- ----------- Costs and expenses: Casino 135,108 126,733 Food and beverage 24,955 26,810 Rooms 6,394 5,970 Sports and special events 2,506 2,537 General and administrative 88,833 82,456 Selling, advertising and promotion 7,693 7,951 Depreciation and amortization 23,909 20,680 ----------- ----------- 289,398 273,137 ----------- ----------- Income from operations from consolidated subsidiaries 40,714 30,921 Equity in income (loss) of unconsolidated affiliate (22) 11,470 ----------- ----------- Income from operations 40,692 42,391 ----------- ----------- -3- (continued) SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (In thousands except share and per share data) (continued) 1995 1994 ----------- ----------- Income from operations $40,692 $42,391 ----------- ----------- Other (income) expense: Interest income (4,547) (2,833) Interest expense 32,019 22,582 Interest capitalized (9,916) (2,202) Foreign currency gain (267) - Gain on sale of unconsolidated affiliate (2,558) - ----------- ----------- 14,731 17,547 ----------- ----------- Income before income taxes 25,961 24,844 Income tax expense 11,393 10,135 ----------- ----------- Net income $14,568 $14,709 =========== =========== Weighted average shares outstanding 15,548,448 15,461,490 Income per common and equivalent share $0.94 $0.95 =========== =========== See accompanying notes to consolidated financial statements. -4- SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (In thousands except share and per share data) 1995 1994 ----------- ----------- Revenues: Casino $106,741 $99,588 Food and beverage 15,057 14,155 Rooms 7,149 5,907 Sports and special events 1,012 1,080 Management fees - 447 Other 1,385 1,580 ----------- ----------- 131,344 122,757 Less promotional allowances 11,775 9,526 ----------- ----------- Net revenues 119,569 113,231 ----------- ----------- Costs and expenses: Casino 46,871 45,699 Food and beverage 8,905 9,468 Rooms 2,047 1,939 Sports and special events 880 931 General and administrative 31,706 31,226 Selling, advertising and promotion 2,520 2,800 Depreciation and amortization 7,646 7,484 ----------- ----------- 100,575 99,547 ----------- ----------- Income from operations from consolidated subsidiaries 18,994 13,684 Equity in income of unconsolidated affiliate - 3,578 ----------- ----------- Income from operations 18,994 17,262 ----------- ----------- -5- (continued) SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (In thousands except share and per share data) (continued) 1995 1994 ----------- ----------- Income from operations $18,994 $17,262 ----------- ----------- Other (income) expense: Interest income (1,657) (1,308) Interest expense 10,768 9,310 Interest capitalized (3,349) (850) Foreign currency gain (267) - ----------- ----------- 5,495 7,152 ----------- ----------- Income before income taxes 13,499 10,110 Income tax expense 5,673 4,195 ----------- ----------- Net income 7,826 5,915 =========== =========== Weighted average shares outstanding 15,730,786 15,488,979 Income per common and equivalent share $0.50 $0.38 =========== =========== See accompanying notes to consolidated financial statements. -6- SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' E (unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30 AND YEAR ENDED DECEMBER 31, 1994
Cumulative foreign Additional currency Common paid-in Retained translation stock capital earnings adjustment --------- --------- ---------- ----------- (In thousands Balance, January 1, 1994 $15,795 $71,162 $54,628 $ - Net income - - 15,699 - Cash dividends ($.10 per share) - - (1,518) - Issuance of warrants - 1,953 - - Share transactions under stock plans - 3,730 - - Amortization of unearned compensation - - - - Foreign currency translation adjustment - - - 3,490 --------- --------- ---------- ----------- Balance, December 31, 1994 15,795 76,845 68,809 3,490 Net income - - 14,568 - Cash dividends ($.075 per share) - - (1,158) - Share transactions under stock plans - 1,130 - - Amortization of unearned compensation - - - - Foreign currency translation adjustment - - - (2,154) --------- --------- ---------- ----------- Balance, September 30, 1995 $15,795 $77,975 $82,219 $1,336 ========= ========= ========== =========== See accompanying notes to consolidated financ -7-
SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 1995 1994 ----------- ----------- (In thousands) Cash flows from operating activities: Net income $14,568 $14,709 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for doubtful accounts 1,241 592 Depreciation and amortization 23,909 20,680 Amortization of discount on debt and debt issuance costs 917 521 Provision for deferred income taxes 3,019 1,804 Provision for loss on Casino Reinvestment Development Authority obligation 924 920 Amortization of unearned compensation 1,935 1,151 Gain on sale of unconsolidated affiliate (2,558) - (Undistributed) distributed earnings of unconsolidated affiliate 8,362 (4,544) Increase in receivables, net (1,326) (6,864) Increase in inventories and prepaid expenses (1,015) (1,804) (Increase) decrease in deposits and other assets 563 (1,224) Decrease in accounts payable (537) (314) Increase in income taxes payable 1,507 1,333 Increase in accrued liabilities 3,541 11,455 Other 458 136 ----------- ----------- Net cash provided by operating activities 55,508 38,551 ----------- ----------- Cash flows from investing activities: Acquisition of property and equipment (28,812) (61,567) Proceeds from sale of equipment 288 204 Deposit for Casino Reinvestment Development Authority obligation (2,721) (2,489) Casino Reinvestment Development Authority investment credit - 2,672 Restricted cash - (100,000) Investment in unconsolidated affiliates (39,163) (9,000) Proceeds from sale of unconsolidated affiliate 51,366 - Advances to unconsolidated affiliates (3,340) - Repayments of advances to unconsolidated affiliates 3,928 - Increase in deposits and other assets (3,615) - Other (42) - ----------- ----------- Net cash used in investing activities (22,111) (170,180) ----------- ----------- -8- (continued) SHOWBOAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (continued) 1995 1994 ----------- ----------- (In thousands) Cash flows from financing activities: Principal payments of long-term debt and capital lease obligations ($15) ($3,491) Proceeds from issuance of long-term debt - 120,000 Debt issuance costs (533) (4,388) Payment of dividends (1,154) (1,125) Distribution to bond holders - (5,176) Proceeds from employee stock option exercises 1,767 528 Minority interest contributions 1,824 - ----------- ----------- Net cash provided by (used in) financing activities 1,889 106,348 ----------- ----------- Effect of exchange rate changes on cash (121) - ----------- ----------- Net increase (decrease) in cash and cash equivalents 35,165 (25,281) Cash and cash equivalents at beginning of period 90,429 122,787 ----------- ----------- Cash and cash equivalents at end of period $125,594 $97,506 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net of amounts capitalized $18,337 $13,199 Income taxes 6,867 6,998 Supplemental schedule of noncash investing and financing activities: Decrease in construction contracts and retentions payable (604) (1,185) Share transactions under long-term incentive plan 617 6,122 Transfer deposits to property and equipment 777 (458) Warrants granted for loan commitment - 1,953 Accumulated benefit obligations of the Supplemental Executive Retirement Plan - 3,799 Foreign currency translation adjustment (2,154) - Net liabilities of unconsolidated affiliate assumed 1,824 - See accompanying notes to consolidated financial statements. -9- SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Showboat, Inc. and subsidiaries, collectively the Company or SBO, conduct casino gaming operations in Las Vegas, Nevada, Atlantic City, New Jersey and until March 9, 1995, in New Orleans, Louisiana. In addition, the Company operates support services including hotel, restaurant, bar, and convention facilities. On September 13, 1995, the Sydney Harbour Casino commenced gaming operations in Sydney, Australia. The Company, through its wholly owned subsidiary, Showboat Australia Pty. Ltd. (SA), owns approximately 26% of Sydney Harbour Casino Holdings Limited, the parent corporation of the casino licensee, the Sydney Harbour Casino Pty. Limited (SHC). SA also owns 85% of the manager of the Sydney Harbour Casino. The Company also owns a 55.0% interest in a general partnership formed to operate a riverboat casino in East Chicago, Indiana and an 80% interest in a limited partnership formed to operate a riverboat and dockside gaming facility in Lemay, Missouri. Gaming applications for the Indiana and Missouri projects are pending and gaming operations cannot commence until such applications are affirmatively acted upon by the respective regulatory agency. The consolidated financial statements include all domestic and foreign subsidiaries which are more than 50% owned and controlled by Showboat, Inc. Investments in unconsolidated affiliates which are at least 20% owned by Showboat, Inc. are carried at cost plus equity in undistributed earnings or loss since acquisition. All material intercompany balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to Shareholders and Form 10-K. The accompanying unaudited consolidated financial statements contain all adjustments which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. The results of operations for the interim periods are not indicative of results of operations for an entire year. -10- (continued) SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenues & Promotional Allowances Casino revenues represent the net win from gaming wins and losses. Revenues include the retail value of room, food, beverage and other goods and services provided to customers without charge. Such amounts are then deducted as promotional allowances. The estimated cost of providing these promotional allowances was charged to the casino department in the following amounts: Nine Months Ended September 30, ----------------------- 1995 1994 ----------- ----------- Food and beverage 20,063 17,101 Room 5,314 4,149 Other 1,091 1,712 ----------- ----------- Total 26,468 22,962 =========== =========== Reclassifications Certain prior period balances have been reclassified to conform to the current period's presentation. 2. LONG-TERM DEBT Long-term debt consists of the following: September 30, December 31, 1995 1994 ----------- ----------- (In thousands) 9 1/4% First Mortgage Bonds due 2008 $270,274 $269,992 13% Senior Subordinated Notes due 2009 120,000 120,000 Capitalized lease obligations 2,028 2,043 ----------- ----------- 392,302 392,035 Less current maturities 21 19 ----------- ----------- $392,281 $392,016 =========== =========== -11- (continued) SHOWBOAT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. LONG-TERM DEBT (continued) On August 4, 1995, the Company obtained a two year secured line of credit for general working capital purposes totaling $25.0 million. At the end of the two year term, the line of credit may convert to a three year term loan. The bank received security pari passu with the holders of the Company's $275.0 million 9 1/4% First Mortgage Bonds due 2008. Interest is payable monthly at the bank's prime rate plus .5% or LIBOR plus 2.5% at the election of the Company. The interest rate charged at the date the line of credit is converted to a term loan will be the bank's prime rate plus 1.0% or the fixed rate designated by the bank at the election of the Company. In the event the line of credit is utilized for equity investments in or loans to entities constituting new projects, the Company will be required to pay the bank a fee equal to .75% of the advance. As of September 30, 1995, all the funds under this line of credit were available for use by the Company. This line of credit replaced the Atlantic City Showboat's unsecured line of credit which expired in August of 1995. 3. GAIN ON SALE OF UNCONSOLIDATED AFFILIATE In March 1995, the Company purchased an additional 50% of the equity of Showboat Star Partnership (SSP), which operated the Showboat Star Casino on Lake Pontchartrain in New Orleans, Louisiana, bringing the Company's total equity interest in SSP to 100%. The purchase price of the additional equity interest was $25.0 million coupled with a distribution of certain of the current assets of SSP to partners other than the Company. On March 9, 1995, the Company ceased all operations at the Showboat Star Casino as a result of certain legal issues related to conducting dockside gaming in Orleans Parish. In a series of unrelated transactions, the Company sold certain of the assets of SSP and its equity interest in SSP resulting in a net pretax gain of $2.6 million which is included in the 1995 Consolidated Statement of Income as gain on sale of unconsolidated affiliate. -12- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL Showboat, Inc. and subsidiaries, collectively the Company or SBO, conduct casino gaming operations in Las Vegas, Nevada, Atlantic City, New Jersey and until March 9, 1995, in New Orleans, Louisiana. In addition, the Company operates support services including hotel, restaurant, bar, and convention facilities. On September 13, 1995, the Sydney Harbour Casino commenced gaming operations in Sydney, Australia. The Company, through its wholly owned subsidiary, Showboat Australia Pty. Ltd. (SA), owns approximately 26% of Sydney Harbour Casino Holdings Limited, the parent corporation of the casino licensee, the Sydney Harbour Casino Pty Limited (SHC). SA also owns 85% of the manager of the Sydney Harbour Casino. The Company also owns a 55.0% interest in a general partnership formed to operate a riverboat casino in East Chicago, Indiana and an 80% interest in a limited partnership formed to operate a riverboat and dockside gaming facility in Lemay, Missouri. Gaming applications for the Indiana and Missouri projects are pending and gaming operations cannot commence until such applications are affirmatively acted upon by the respective regulatory agency. The consolidated financial statements include all domestic and foreign subsidiaries which are more than 50% owned and controlled by Showboat, Inc. Investments in unconsolidated affiliates which are at least 20% owned by Showboat, Inc. are carried at cost plus equity in undistributed earnings or loss since acquisition. All material intercompany balances have been eliminated in consolidation. In March 1995, the Company purchased an additional 50% of the equity of Showboat Star Partnership (SSP), which operated the Showboat Star Casino on Lake Pontchartrain in New Orleans, Louisiana, bringing the Company's total equity interest in SSP to 100%. The purchase price of the additional equity interest was $25.0 million coupled with a distribution of certain of the current assets of SSP to partners other than the Company. On March 9, 1995, the Company ceased all operations at the Showboat Star Casino as a result of certain legal issues related to conducting dockside gaming in Orleans Parish. In a series of unrelated transactions, the Company sold certain of the assets of SSP and its equity interest in SSP resulting in a net pretax gain of $2.6 million which is included in the 1995 Consolidated Statement of Income as gain on sale of unconsolidated affiliate. -13- (continued) GENERAL (continued) SA was formed in 1994 and, along with Leighton Properties Ltd. formed SHC, to apply for the exclusive full service casino license in Sydney, Australia. The casino license was awarded to SHC in December 1994. SA invested approximately $100.0 million for a 26.3% equity interest in Sydney Harbour Casino Holdings Limited (SHCH) which owns 100% of SHC. SA also owns 85% of the company engaged to manage the casino for a fee. The Company has agreed to forego approximately $14.1 million in fees due under the management agreement. SHC commenced gaming operations on September 13, 1995 in a 60,000 square foot interim casino. SHC opened with very little or no marketing. In spite of this, table games revenues are meeting expectations although slot and food revenues are behind forecast. In response, SHC has commenced certain marketing programs. SHC is scheduled to open its permanent facility in early 1998. The company's equity in earnings of SHC's operations has been reduced to zero due to the write-off of certain preopening and development costs. The Company does not anticipate any contribution to earnings from SA or SHC in 1995 due to the write-off of preopening and development costs and the foregone management fees. MATERIAL CHANGES IN RESULTS OF OPERATIONS Quarter Ended September 30, 1995 Compared to Quarter Ended September 30, 1994 Revenues Net revenues for the Company increased to $119.5 million in the quarter ended September 30, 1995 compared to $113.2 million in the same period in 1994, an increase of $6.3 million or 5.6%. Casino revenues increased $7.1 million or 7.2% to $106.7 million in the quarter ended September 30, 1995 from $99.6 million in the same period in 1994. Nongaming revenues, which consist principally of food, beverage, room and bowling revenues and management fees, were $24.6 million in the third quarter of 1995 compared to $23.2 million in 1994. -14- (continued) The Atlantic City Showboat generated $107.3 million of net revenues in the quarter ended September 30, 1995 compared to $93.3 million in the same period in the prior year, an increase of $14.0 million or 15.1%. Casino revenues were $98.4 million in the three months ended September 30, 1995 compared to $85.1 million in the same period in the prior year, an increase of $13.3 million or 15.6%. The increase in casino revenues was due primarily to an increase in slot machine revenues of $9.7 million or 15.2% to $73.5 million in the quarter ended September 30, 1995 compared to $63.8 million in the same period in the prior year. This increase compares to a 9.5% growth in slot machine revenues in the Atlantic City market for the quarter ended September 30, 1995. The favorable comparison to the prior year is also the result of the addition of 200 slot machines in May of 1995, which were targeted toward high end slot players, and the increased hotel room capacity. The Atlantic City Showboat also increased its table game revenues by $3.8 million or 18.7% to $24.1 million for the quarter ended September 30, 1995 compared to $20.3 million for the same period in the prior year. The Las Vegas Showboat realized net revenues of $12.3 million in the quarter ended September 30, 1995, as compared to $19.5 million in the same period in 1994, a decrease of $7.2 million or 37.2%. Casino revenues decreased to $8.4 million in the third quarter of 1995 from $14.5 million in the third quarter of 1994, a decrease of $6.1 million or 42.3%. The renovation project at the Las Vegas Showboat which commenced in late June of 1995 and the increased competition on the Boulder Strip continued to negatively impact revenues in the third quarter of 1995. The casino capacity at the Las Vegas Showboat has been reduced approximately 40% due to the construction. The renovation is expected to be completed by the end of the year. It is anticipated that the construction will continue to adversely affect revenue through the remainder of 1995. Income From Operations The Company's income from operations increased to $19.0 million in the quarter ended September 30, 1995 from $17.3 million in the same period in 1994, an increase of $1.7 million or 10.0%. Improvements at the Atlantic City Showboat were offset by the cessation of operations of SSP and lower results at the Las Vegas Showboat. In addition, the Company incurred approximately $5.3 million in corporate expenses and expenses relating to the pursuit of expansion opportunities in jurisdictions outside of Nevada and New Jersey in the third quarter of 1995 compared to $5.9 million in the third quarter of 1994. -15- (continued) Atlantic City Showboat's income from operations, before management fees, increased to $26.7 million in the third quarter of 1995 compared to $19.3 million in the same period in 1994, an increase of $7.4 million or 38.7%. Operating expenses at the Atlantic City Showboat increased $6.6 million or 8.9% to $80.6 million in the three months ended September 30, 1995 compared to $74.0 million in the same period in the prior year. Increases in operating expenses at the Atlantic City Showboat primarily relate to increased casino capacity and volume of business as a result of the expansion of the Atlantic City facility. General and administrative expenses increased primarily as a result of increased incentive compensation, higher maintenance and utility costs as a result of the expanded facility, and increased property rent and real estate taxes. The Atlantic City Showboat's operating margin increased to 24.9% in the quarter ended September 30, 1995 compared to 20.7% in the same period in 1994. For the quarter ended September 30, 1995, the Las Vegas Showboat had a loss from operations, before management fees and intercompany rent, of $2.4 million compared to income of $0.1 million in the same period in 1994. Operating expenses at the Las Vegas Showboat declined to $14.6 million in the third quarter of 1995 compared to $19.4 million in the same period in 1994, a decrease of $4.8 million or 24.4%. Results at the Las Vegas Showboat were adversely impacted on a broad scale by the closure of approximately 40% of total casino floor space, the disruption to the guest experience caused by a major casino renovation project which commenced in July 1995, and the increased competition on the Boulder Strip. The renovation project is scheduled to be completed by the end of the year. Other (Income) Expense Net interest expense decreased to $5.8 million in the third quarter of 1995 down from $7.2 million in the same period in 1994, a decrease of $1.4 million or 19.4%. Although interest expense net of interest income increased by $1.1 million during the quarter, capitalized interest increased by $2.5 million resulting in an overall decrease in net interest expense. The increase in interest expense is primarily the result of the issuance, on August 10, 1994, of $120.0 million of 13% Senior Subordinated Notes due 2009. The increase in the capitalized interest is due primarily to the construction by SHC of its interim and permanent casino facilities in Sydney, Australia. Net Income The Company realized net income of $7.8 million or $.50 per share in the quarter ended September 30, 1995 compared to net income of $5.9 million or $.38 per share in the quarter ended September 30, 1994. -16- (continued) Nine Months Ended September 30, 1995 Compared to Nine Months Ended September 30, 1994 Net revenues for the Company increased to $330.1 million in the nine months ended September 30, 1995 compared to $304.1 million in the same period in 1994, an increase of $26.0 million or 8.6%. Casino revenues increased $26.9 million or 10.1% to $292.8 million in the nine months ended September 30, 1995 from $265.9 million in the same period in 1994. Nongaming revenues, which consist principally of food, beverage, room and bowling revenues and management fees, were $67.8 million in the nine months ended September 30, 1995 compared to $62.8 million in the same period in 1994. The Atlantic City Showboat generated $283.2 million of net revenues in the nine months ended September 30, 1995 compared to $240.6 million in the same period in the prior year, an increase of $42.6 million or 17.7%. Casino revenues were $259.0 million in the nine months ended September 30, 1995 compared to $219.5 million in the same period in the prior year, an increase of $39.5 million or 18.0%. The increase in casino revenues was due primarily to an increase in slot machine revenue of $29.4 million and an increase in table game revenue of $10.0 million compared to the same period in the prior year. The favorable comparison to the prior year is the result of the addition of 15,000 square feet of casino space with approximately 560 new slot machines that opened in May 1994, the increased hotel room capacity in November 1994, and the addition of 200 slot machines in May 1995. Also contributing to the increase in revenues was the mild winter weather during the first quarter of 1995 compared to the harsh winter weather during the same period in the prior year. At the Atlantic City Showboat, slot machine revenues were 74.2% of total casino revenues in the nine months ended September 30, 1995 and 1994. At the Las Vegas Showboat, net revenues decreased to $46.7 million in the nine months ended September 30, 1995 from $61.9 million in the same period in 1994, a decrease of $15.2 million or 24.6%. Casino revenues decreased to $33.9 million in the nine months ended September 30, 1995 from $46.4 million in the same period of 1994, a decrease of $12.5 million or 27.1%. The renovation project which commenced in late June 1995 and the increased competition on the Boulder Strip continued to negatively impact revenues in the first nine months of 1995. The Casino capacity at the Las Vegas Showboat has been reduced by approximately 40% during the construction period which is expected to be completed by the end of the year. It is anticipated that the construction will continue to adversely affect revenue through the remainder of 1995. -17- (continued) Income From Operations The Company's income from operations decreased to $40.7 million in the nine months ended September 30, 1995 from $42.4 million in the same period in 1994, a decrease of $1.7 million or 4.0%. This decrease is primarily due to the cessation of operations in Louisiana due to the Company's sale of its equity interest in SSP, lower results in Las Vegas, and an increase in corporate and development expenses. These decreases were partially offset by the improved performance at the Atlantic City Showboat. Atlantic City Showboat's income from operations, before management fees, increased to $58.3 million in the nine months ended September 30, 1995 compared to $38.9 million in the same period in 1994, an increase of $19.4 million or 50.0%. Operating expenses at the Atlantic City Showboat increased $23.2 million or 11.5% to $224.9 million in the nine months ended September 30, 1995 compared to $201.7 million in the same period in the prior year. Increases in operating expenses at the Atlantic City Showboat primarily relate to increased casino capacity and volume of business as a result of the expansion of the Atlantic City facility. General and administrative expenses increased primarily as a result of increased incentive compensation, higher maintenance and utilities costs as a result of the expanded facility, and increased property and real estate taxes. The Atlantic City Showboat's operating margin increased to 20.6% in the nine months ended September 30, 1995 compared to 16.2% in the same period in 1994. For the nine months ended September 30, 1995, the Las Vegas Showboat had a loss from operations, before management fees and intercompany rent, of $2.1 million compared to income of $4.9 million in the same period in 1994. Operating expenses declined to $48.8 million in the nine months ended September 30, 1995 compared to $57.0 million in the nine months ended September 30, 1994, a decrease of $8.2 million or 14.4%. Reductions in expenses were realized as a result of the decrease in volume of business, however, the increased competition on the Boulder Strip resulted in the continuation of certain promotional and marketing programs which negatively affected the overall operating results. Other (Income) Expense Other expense decreased to $14.7 million in the nine months ended September 30, 1995 compared to $17.5 million in the same period in 1994, a decrease of $2.8 million or 16.0%. Contributing to this decrease was the gain on sale of unconsolidated affiliate of $2.6 million and a foreign currency gain of $0.3 million. Net interest expense for the nine months ended September 30, 1995 and September 30, 1994 was $17.5 million. Interest expense net of interest income increased by $7.7 million during the nine months ended September 30, 1995 as compared to the prior period, but capitalized interest also increased by $7.7 million. The increase in interest expense is primarily the result of the issuance, on August 10, 1994, of $120.0 million of 13% Senior Subordinated Notes due 2009. The increase in capitalized interest is due primarily to the construction by SHC of its interim and permanent casino facilities in Sydney, Australia. -18- (continued) Income Taxes The Company's effective income tax rate increased to 43.9% in the nine months ended September 30, 1995 compared to 40.8% in the nine months ended September 30, 1994, an increase of 3.1%. This increase is primarily due to an increase in state income taxes. The Company has utilized all of its previous state net operating loss carryforward's and is in a state taxable position. Net Income The Company realized net income of $14.6 million or $.94 per share in the nine months ended September 30, 1995 compared to net income of $14.7 million or $.96 per share in the nine months ended September 30, 1994. MATERIAL CHANGES IN FINANCIAL CONDITION As of September 30, 1995, the Company held cash and cash equivalents of $125.6 million compared to $90.4 million at December 31, 1994. On March 31, 1995, the Company sold all of its interest in SSP which resulted in net proceeds available to the Company of approximately $34.7 million. During the nine months ended September 30, 1995 the Company expended approximately $28.8 million on capital improvements at its Las Vegas and Atlantic City facilities which were funded from operations. The Company has commenced an $18.5 million renovation of its Las Vegas facility. The construction project required closure of approximately 40% of the casino space for a period of up to six months commencing at the end of June 1995. The Las Vegas renovation is being funded from available cash. The Company expects the results of operations at the Las Vegas facility will continue to be adversely impacted by business disruption during the construction period. On August 4, 1995, the Company obtained a two year secured line of credit for general working capital purposes totaling $25.0 million. At the end of the two year term, the line of credit may convert to a three year term loan. The bank received security pari passu with the holders of the Company's $275.0 million 9 1/4% First Mortgage Bonds due 2008. Interest is payable monthly at the bank's prime rate plus .5% or LIBOR plus 2.5% at the election of the Company. The interest rate charged at the date the line of credit is converted to a term loan will be the bank's prime rate plus 1% or the fixed rate designated by the bank at the election of the Company. In the event the line of credit is utilized for equity investments in or loans to entities constituting new projects, the Company will be required to pay the bank a fee equal to .75% of the advance. As of September 30, 1995, all the funds under this line of credit are available for use by the Company. This line of credit replaced the Atlantic City Showboat's unsecured line of credit which expired in August of 1995. -19- (continued) On May 18, 1993, the Company issued $275.0 million of 9 1/4% First Mortgage Bonds due 2008 (Bonds). The Bonds are unconditionally guaranteed by Showboat Operating Company, a wholly-owned subsidiary of the Company, (SOC), Ocean Showboat, Inc., a wholly-owned subsidiary of the Company, (OSI), and Atlantic City Showboat, Inc. (ACSI), a wholly-owned subsidiary of OSI. The Bond Indenture was amended in July, 1994. Interest on the Bonds is payable semi-annually on May 1 and November 1 of each year. The Bonds are not redeemable prior to May 1, 2000. Thereafter, the Bonds will be redeemable, in whole or in part, at redemption prices specified in the Indenture for the Bonds (Bond Indenture), as amended. The Bonds are senior secured obligations of the Company and rank senior in right of payment to all existing and future subordinated indebtedness of the Company and pari passu with the Company's senior indebtedness. The Bonds are secured by a deed of trust representing a first lien on the Las Vegas hotel casino (other than certain assets), by a pledge of all outstanding shares of capital stock of OSI, an intercompany note by ACSI in favor of the Company and a pledge of certain intellectual property rights of the Company. OSI's obligation under its guarantee is secured by a pledge of all outstanding shares of capital stock of ACSI. ACSI's obligation under its guarantee is secured by a leasehold mortgage representing a first lien on the Atlantic City hotel casino (other than certain assets). SOC's guarantee is secured by a pledge of certain assets related to the Las Vegas hotel casino. The Bond Indenture, as amended, places significant restrictions on SBO and its subsidiaries, including restrictions on making loans and advances by SBO to subsidiaries which are Non-Recourse Subsidiaries or subsidiaries in which SBO owns less than 50% of the equity. All capitalized terms not otherwise defined in this paragraph have the meanings assigned to them in the Bond Indenture, as amended. The Bond Indenture, as amended, also places significant restrictions on the incurrence of additional Indebtedness by SBO and its subsidiaries, the creation of additional Liens on the Collateral securing the Bonds, transactions with Affiliates and the investment by SBO and its subsidiaries in certain Investments. In addition, the terms of the Bond Indenture, as amended, prohibit SBO and its subsidiaries from making a Restricted Payment unless, at the time of such Restricted Payment: (i) no Default or Event of Default has occurred or would occur as a consequence of such Restricted Payment; (ii) SBO, at the time of such Restricted Payment other than an investment in a Subsidiary in a Gaming Related Business or a Quarterly Dividend, and after giving proforma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, would have been permitted to incur at least $1.00 of additional Indebtedness; and, (iii) such Restricted Payment, together with the aggregate of all other Restricted Payments by SBO and its subsidiaries is less than the sum of (x) 50% of the Consolidated Net Income of SBO for the period (taken as one accounting period) from April 1, 1993 to the end of SBO's most recently ended fiscal quarter for which internal financial statements are available, -20- (continued) plus (y) 100% of the aggregate net cash proceeds received by SBO from the issuance or sale of Equity Interests of SBO since the Issue Date, plus (z) Excess Non-Recourse Subsidiary Cash Proceeds received after the Issue Date. The term Restricted Payment does not include, among other things, the payment of any dividend if, at the time of declaration of such dividend, the dividend would have complied with the provisions of the Bond Indenture, as amended; the redemption, repurchase, retirement, or other acquisition of any Equity Interest of SBO out of proceeds of the substantially concurrent sale of other Equity Interests of SBO; Investments by SBO in an amount not to exceed $75.0 million in the aggregate in any Non-Recourse Subsidiary engaged in a Gaming Related Business; Investments by SBO in any Non-Recourse Subsidiary engaged in a Gaming Related Business in an amount not to exceed in the aggregate 100% of all cash received by SBO from any Non-Recourse Subsidiary up to $75.0 million in the aggregate and thereafter, 50% of all cash received by SBO from any Non-Recourse Subsidiary other than cash required to be repaid or returned to such Non-Recourse Subsidiary provided that the aggregate amount of Investments pursuant thereto does not exceed $125.0 million in the aggregate; Investments in Controlled Entities; and the purchase, redemption, defeasance of any pari passu Indebtedness with a substantially concurrent purchase, redemption, defeasance, or retirement of the Bonds (on a pro rata basis). Notwithstanding the foregoing, the Company is permitted to make investments in Controlled Entities only if from July 18, 1994 until December 31, 1996, the Company's Fixed Charge Coverage Ratio for the Company's most recently ended twelve months is greater than 1.5 to 1 and for the period commencing after December 31, 1996 the Company's Fixed Charge Coverage Ratio is greater than 1.75 to 1. For all other Restricted Payments, other than a Regular Quarterly Dividend or a Restricted Investment in a Subsidiary engaged in a Gaming Related Business, the Company's Fixed Charge Coverage Ratio for the most recently ended four full fiscal quarters, after giving effect to such Restricted Payment must be greater than 2.25 to 1. As of September 30, 1995, the Company's Fixed Charge Coverage Ratio was 3.40 to 1. Additionally, the Bond Indenture, as amended, permits the Company to issue up to $150.0 million of additional Indebtedness (of which $120.0 million has been issued) without compliance with the debt incurrence tests stated therein. On August 10, 1994 the Company issued $120.0 million of 13% Senior Subordinated Notes due 2009 (Notes). The Notes are unconditionally guaranteed by OSI, ACSI and SOC. Interest on the Notes is payable semi-annually on February 1 and August 1 of each year commencing on February 1, 1995. The Notes are not redeemable prior to August 1, 2001. Thereafter, the Notes will be redeemable, in whole or in part, at redemption prices specified in the Indenture for the Notes (Note Indenture). The Notes are unsecured general obligations of the Company subordinated in right of payment to all Senior Debt (as defined in the Note Indenture) of the Company. The Note Indenture permits the issuance of an additional $30.0 million of Notes at the discretion of the Company. -21- (continued) The Note Indenture places significant restrictions on the Company, many of which are similar to the restrictions placed on the Company by the Bond Indenture, as amended, including covenants restricting or limiting the ability of the Company and its Restricted Subsidiaries (as defined in the Note Indenture) to, among other things, (i) pay dividends or make other restricted payments, (ii) incur additional indebtedness and issue preferred stock, (iii) create liens, (iv) create dividend and other payment restrictions affecting Restricted Subsidiaries, (v) enter into mergers, consolidations or make sales of all or substantially all assets, (vi) enter into transactions with affiliates and (vii) engage in other lines of business. The Company is actively pursuing potential gaming opportunities in certain jurisdictions where gaming is legalized, as well as jurisdictions where gaming is not yet, but is expected soon to be legalized. There can be no assurance that gaming legislation will be enacted in any additional jurisdictions, that any properties in which the Company may have invested will be compatible with any gaming legislation so enacted, that legalized gaming will continue to be authorized in any jurisdiction or that the Company will be able to obtain the required licenses in any jurisdiction. Further, no assurance can be given that any of the announced projects, or any project under development or any unannounced projects under development will be completed, licensed or result in any significant contribution to the Company's cash flow or earnings. Casino gaming operations are highly regulated and new casino development is subject to a number of risks. In February 1995, the Company, with an unrelated corporation, formed Showboat Mardi Gras, L.L.C. (SMGLLC) to own and operate, subject to licensing, a riverboat casino near Kansas City, Missouri. SMGLLC is 35%-owned by the Company. In May 1995, the Missouri Gaming Commission selected the applicants for the then current available gaming licenses in Kansas City. SMGLLC was not selected and is currently seeking a buyer for its riverboat. The Company has contributed approximately $4.5 million to SMGLLC for the completion of the riverboat, costs incurred in the licensing process and other general and administrative expenses. SMGLLC is currently completing the construction of the riverboat and intends to sell the riverboat. Although additional contributions may be required from the Company in order for SMGLLC to complete the riverboat, the Company will receive a portion of the proceeds upon sale of the assets of SMGLLC. The Company is evaluating whether to purchase the riverboat from SMGLLC for the Company's opportunity in Lemay, Missouri. If the Company does not acquire the riverboat from SMGLLC, the Company will write-off approximately $1.5 million, or $.06 per share, in order to write- down its investment in SMGLLC to its net realizable value. -22- (continued) The Company is a member of a partnership, Showboat Marina Partnership (Indiana Partnership), consisting of Showboat Indiana Investment Limited Partnership, a limited partnership owned by the Company (SII), and Waterfront Entertainment and Development, Inc., an unrelated Indiana corporation (Waterfront). The Indiana Partnership is the only applicant for the sole riverboat gaming license allocated by statute to East Chicago, Indiana. The Company anticipates that it will contribute approximately $35.0 million to the Indiana Partnership in a combination of debt and equity of which $6.4 million has been funded as of September 30, 1995. The Company will help the partnership obtain debt financing for the construction of a gaming vessel and related land site improvements. Licensing hearings for the Indiana Partnership's gaming application were scheduled for October 1995. However, on October 17, 1995, a complaint was filed against the Indiana Gaming Commission seeking a preliminary injunction and a temporary restraining order to enjoin the Indiana Gaming Commission from conducting a hearing on the Partnership's application. The complaint alleges that the City of East Chicago failed to hold an open public bidding process in selecting its applicant, and that such failure is in conflict with the Indiana gaming laws. On October 19, 1995, the Indiana Gaming Commission commenced the hearing on the application, but was served with a temporary restraining order and halted the proceedings. A final decision has not been reached in this matter. Neither the Indiana Partnership nor the Company are parties to the litigation and it is not known when this matter will be completed. Further, the Indiana Partnership's site location and improvements have not received approval from the Army Corp of Engineers. The City of East Chicago has resubmitted its application for the site location and improve- ments and is awaiting approval from the Army Corp of Engineers. No assurance can be given that the Indiana Partnership will be successful in obtaining the necessary funds to finance its gaming project, that the Indiana Partnership will successfully obtain a casino license or that the approvals will be received from the Army Corp of Engineers. In July 1995, the Company and Rockingham Venture, Inc., which owns the Rockingham Park, a thoroughbred racetrack in New Hampshire, entered into agreements to develop and manage any additional gaming that may be authorized at Rockingham Park. In December 1994, the Company loaned Rockingham Venture, Inc. $8.85 million, which loan is secured by a second mortgage on Rockingham Park. At this time, casino gaming is not permitted in the State of New Hampshire. No assurance can be given that casino gaming legislation will be enacted in the State of New Hampshire or, if enacted, such legislation will authorize casino gaming at Rockingham Park. The Company through its subsidiary, Showboat Lemay, Inc., has an 80% general partner interest in Southboat Limited Partnership (Southboat) which, subject to licensing, plans to build and operate a riverboat and dockside gaming facility on the Mississippi River in Lemay, Missouri. On June 1, 1995, the St. Louis County Council named Southboat as the preferred developer/operator for the gaming facility and on October 13, 1995, Southboat executed a 99 year lease with the -23- (continued) St. Louis County Port Authority for development and operation of a dockside gaming facility in Lemay, Missouri. On October 17, 1995, Southboat filed its application for a gaming license with the Missouri Gaming Commission. Southboat Limited Partnership has entered into a commitment letter to receive up to $75.0 million of financing for the construction of a riverboat and related site improvements subject to certain conditions. The Company expects to contribute approximately $20.0 million to Southboat. No assurance can be given that Southboat will be successful in obtaining the necessary funds to finance its gaming project or that the Partnership will successfully obtain a casino license. The Company believes that it has sufficient capital resources to cover the cash requirements of its existing operations. The ability of the Company to satisfy its cash requirements, however, will be dependent upon the future performance of its casino hotels which will continue to be influenced by prevailing economic conditions and financial, business and other factors, certain of which are beyond the control of the Company. As the Company realizes expansion opportunities, the Company shall make significant capital investments in such opportunities and additional financing will be required. The Company anticipates that additional funds shall be obtained through loans or public offerings of equity or debt securities. -24- SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION ITEM 1. Legal Proceedings. "Darling Harbour Casino Limited ("DHCL") vs. New South Wales Casino Control Authority, New South Wales Minister for Planning", Case No. 40227/94 and 40230/94, instituted in December 1994, in the Land and Environment Court of the State of New South Wales, Australia. On August 18, 1995, DHCL lodged an appeal with the Court of Appeals of the Supreme Court of New South Wales against the April 21, 1995 decision of the Land and Environmental Court which dismissed this proceeding. This legal proceeding is more fully discussed in the Company's Form 10-Q, Part II, Item 1 "Legal Proceedings" for the three months ended March 31, 1995. "DHCL vs. New South Wales Casino Control Authority, Sydney Harbour Casino Pty Limited and Cheif Secretary and Minister for Administrative Services", Case No. 30091 of 1994, instituted in the Supreme Court of New South Wales, Sydney Registry, Administrative Law Division, in December 1994. On November 8, 1995, the Court of Appeals of the Supreme Court of New South Wales dismissed the action filed by DHCL to revoke the issuance of the casino license to Sydney Habour Casino Pty Limited on December 14, 1994. DHCL has a period of 21 days to file a notice of appeal to the High Court of Australia. This legal proceeding is more fully discussed in the Company's Form 10-K, Part I, Item 3 "Legal Proceedings" for the year ended December 31, 1994. "Edward H. Egipiaco (Egipiaco) v. Indiana Gaming Commission", Case No. 45C01-95-10-MI01845, instituted on October 17, 1995 in the Circuit Court for Lake County, Indiana. Egipiaco filed a complaint (the Egipiaco Complaint) on behalf of himself and the residents of the City of East Chicago requesting a preliminary injunction to enjoin the Indiana Gaming Commission from conducting a hearing on the Indiana Partnership's application for the sole riverboat casino license in East Chicago, Indiana, and from issuing a Certificate of Suitability to the Indiana Partnership. The Egipiaco Complaint alleges that the City of East Chicago failed to hold an open public bidding process in selecting its applicant, and such failure is in conflict with Indiana gaming laws. On October 19, 1995, the Indiana Gaming Commission commenced the hearing on the East Chicago application, but was served with a temporary restraining order and halted the proceedings. A final decision has not been reached in this matter, but because neither the Company nor the Indiana Partnership is a party to the litigation it is not known when this matter will be completed. While neither the Company nor the Indiana Partnership is a party to the -25- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Egipiaco Complaint, an unfavorable outcome of such litigation would have a material adverse effect on the Indiana Partnership and its proposed riverboat casino project in East Chicago, Indiana. "Larry Schreier v. Caesars World, Inc. et al.", Case No. 95-923-DWH (RJJ), instituted on September 26, 1995 in the United States District Court for the District of Nevada. An individual, purportedly representing a class, filed a complaint against four manufacturers, three distributors and 38 casino operators, including the Company, who manufacture, distribute or offer for play video poker and electronic slot machines. The individual allegedly intends to seek class certification of the interests he claims to represent. The complaint alleges that the defendants have engaged in a course of conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win on a given play. The complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seeks damages in excess of $1.0 billion. The complaint is similar to the Poulos Complaint and the Ahern Complaint referenced in the Company's Form 10-K, Part I, Item 3 "Legal Proceedings" for the year ended December 31, 1994. The Company has not yet responded to the complaint, but intends to defend the action vigorously. Management believes that the complaint is without merit and that the litigation will not have a material adverse impact on the Company's financial condition or operations. "Hyland, et al. v. Griffin Investigation, et al. (the Hyland Case)", Case No. 95-CV-2236 (JEI), instituted on May 5, 1995 in the United States District Court for the District of New Jersey (Camden Division). The Company was served with a First Amended Complaint on August 29, 1995. On October 25, 1995, the plantiffs in the Hyland Case filed a "Notice of Dismissal Without Prejudice Only As To Defendant Showboat, Inc.," with the District Court Clerk. Seventy-six casino operators, including the Company, and others were originally named as defendants in the action. The action, brought on behalf of "card counters," alleges that the casino operators exclude "card counters" from play and share information about "card counters." The action is based on alleged violations of federal antitrust law, the Fair Credit Reporting Act, and various state consumer protection laws. -26- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Item 2. Changes in Securities. On October 5, 1995, the Board of Directors of Showboat, Inc. (the Company) declared a dividend distribution of one Preferred Stock Purchase Right for each outstanding share of Common Stock, par value $1.00 per share (the "Common Stock"), of the Company. The distribution was payable as of October 16, 1995 to stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundredth (1/100) of a share of preferred stock of the Company, designated as Series A Junior Preferred Stock (the Stock") at a price of $120.00 per one one-hunderdth (1/100) of a share ("Exercise Price"). The description and terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement") between the Company and American Stock Transfer and Trust Company, as Rights Agent (the "Rights Agent"). The Rights, unless earlier redeemed by the Board of Directors, become exercisable upon the close of business on the day (the "Distribution Date") which is the earlier of (i) the tenth day following a public announcement that a person or group of affiliated or associated persons, with certain exceptions set forth below, has acquired beneficial ownership of 15% or more of the outstanding voting stock of the Company (an "Acquiring Person") or (ii) the tenth business day (or such later date as may be determined by the Board of Directors prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) after the date of the commencement of announcement of a person's or group's intention to commence a tender or exchange offer the consummation of which would result in the ownership of 30% or more of the Company's outstanding voting stock (even if no shares are actually purchased pursuant to such offer); prior thereto, the Rights would not be exercisable, would not be represented by a separate certificate, and would not be transferable apart from the Company's Common Stock, but will instead be evidenced, with respect to any of the Common Stock certificates outstanding as of October 16, 1995, by such Common Stock certificate with a copy of a Summary of Rights attached thereto. An Acquiring Person does not include (A) the Company, (B) any subsidiary of the Company, (C) any employee benefit plan or employee stock plan of the Company or of any subsidiary of the Company, or any trust or other entity organized, appointed, established or holding Common Stock for or pursuant to the terms of any such plan or (D) any person or group whose ownership of 15% or more of the shares of voting stock of the Company then outstanding results solely from (i) any action or transaction or transactions approved by the Board of Directors before such person or group became an Acquiring -27- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Person or (ii) a reduction in the number of issued and outstanding shares of voting stock of the Company pursuant to a transaction or transactions approved by the Board of Directors (provided that any person or group that does not become an Acquiring Person by reason of clause (i) or (ii) above shall become an Acquiring Person upon acquisition of an additional 1% of the Company's voting stock unless such acquisition of additional voting stock will not result in such person or group becoming an Acquiring Person by reason of such clause (i) or (ii)). Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Stock certificates issued after October 16, 1995 will contain a legend incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any of the Common Stock certificates outstanding as of October 16, 1995, with or without a copy of this Summary of Rights attached thereto, will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and such separate certificates alone will evidence the Rights from and after the Distribution Date. The Rights are not exercisable until the Distribution Date. The Rights will expire at the close of business on October 5, 2005, unless earlier redeemed by the Company as described below. The Preferred Stock is nonredeemable and, unless otherwise provided in connection with the creation of a subsequent series of preferred stock, subordinate to any other series of the Company's preferred stock. The Preferred Stock may not be issued except upon exercise of Rights. Each share of Preferred Stock will be entitled to receive when, as and if declared, a quarterly dividend in an amount equal to the greater of $120.00 per share or 100 times the cash dividends declared on the Company's Common Stock. In addition, Preferred Stock is entitled to 100 times any non-cash dividends (other than dividends payable in equity securities) declared on the Common Stock, in like kind. In the event of the liquidation of the Company, the holders of Preferred Stock will be entitled to receive, for each share of Preferred Stock, a payment in an amount equal to the greater of $12,000.00 or 100 times the payment made per share of Common Stock. Each share of Preferred Stock will have 100 votes, voting together with the Common Stock. In the event of any merger, consolidation or other -28- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) transaction in which Common Stock is exchanged, each share of Preferred Stock will be entitled to receive 100 times the amount received per share of Common Stock. The rights of Preferred Stock as to dividends, liquidation and voting are protected by anti- dilution provisions. The number of shares of Preferred Stock issuable upon exercise of the Rights is subject to certain adjustments from time to time in the event of a stock dividend on, or a subdivision or combination of, the Common Stock. The Exercise Price for the Rights is subject to adjustment in the event of extraordinary distributions of cash or other property to the holders of Common Stock. Unless the Rights are earlier redeemed or the transaction is approved by the Board of Directors and the Continuing Directors, if the Company at any time after the Distribution Date were to be acquired in a merger or other business combination (in which any shares of Common Stock are changed into or exchanged for other securities or assets) or more than 50% of the assets or earning power of the Company and its subsidiaries (taken as a whole) were to be sold or transferred in one or a series of related transactions, the Rights Agreement provides that proper provision will be made so that each holder of record of a Right will from and after such date have the right to receive, upon payment of the Exercise Price, that number of shares of common stock of the acquiring company having a market value at the time of such transaction equal to two times the Exercise Price. In addition, unless the Rights are earlier redeemed, in the event that a person or group becomes the beneficial owner of 15% or more of the Company's voting stock (other than pursuant to a tender or exchange offer (a "Qualifying Tender Offer") for all outstanding shares of Common Stock that is approved by the Board of Directors, after taking into account the long-term value of the Company and all other factors they consider relevant in the circumstances), the Rights Agreement provides that proper provisions will be made so that each holder of record of a Right, other than the Acquiring Person (whose Rights will thereupon become null and void), will thereafter have the right to receive, upon payment of the Exercise Price, that number of shares of the Preferred Stock having a market value at the time of the transaction equal to two times the Exercise Price (such market value to be determined with reference to the market value of the Company's Common Stock as provided in the Rights Agreement). Fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-hundredth of a share) may, at the election of the Company, be evidenced by depositary -29- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) receipts. The Company may also issue cash in lieu of fractional shares which are not integral multiples of one one-hundredth of a share. At any time on or prior to the close of business on the earlier of (i) the tenth day after the time that a person has become an Acquiring Person (or such date as a majority of the Board of Directors and a majority of the Continuing Directors (as defined in the Rights Agreement) may determine) or (ii) October 5, 2005, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"). The Rights may be redeemed after the time that any Person has become an Acquiring Person only if approved by a majority of the Continuing Directors. Immediately upon the effective time of the action of the Board of Directors of the Company authorizing redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of the Rights will be to receive the Redemption Price. For as long as the Rights are then redeemable, the Company may, except with respect to the redemption price or date of expiration of the Rights, amend the Rights in any manner, including an amendment to extend the time period in which the Rights may be redeemed. At any time when the Rights are not then redeemable, the Company may amend the Rights in any manner that does not materially affect the interests of holders of the Rights as such. Amendments to the Rights Agreement from and after the time that any Person becomes an Acquiring person requires the approval of a majority of the Continuing Directors (as provided in the Rights Agreement). Until a Right is exercised, the holder, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or receive dividends. Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information None -30- (continued) SHOWBOAT, INC. AND SUBSIDIARIES PART II, OTHER INFORMATION (continued) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.01 Restated Bylaws of Showboat, Inc., Dated October 24, 1995. 27.01 Financial Data Schedule (b) Reports on Form 8-K Form 8-K, Items 5 and 7, dated October 13, 1995, reporting the execution of a lease and development agreement by and between Southboat Limited Partnership and the St. Louis County Port Authority. Form 8-K, Items 5 and 7, dated October 5, 1995, reporting a dividend of Preferred Stock Purchase Rights. Form 8-K, Items 5, dated September 13, 1995, reporting the opening of the Sydney Harbour Casino temporary facility. -31- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SHOWBOAT, INC. Registrant Date: November 13, 1995 s/H. Gregory Nasky ------------------- ---------------------------------- H. GREGORY NASKY, Executive Vice President and Secretary Date: November 13, 1995 s/ Leann Schneider ------------------- ---------------------------------- LEANN SCHNEIDER, Vice President - Finance and Chief Financial Officer -32- EXHIBIT INDEX Exhibit No. Description 3.01 Restate Bylaws of Showboat, Inc., dated October 24, 1995 27.01 Financial Data Schedule EX-3.01 2 SHOWBOAT INC. RESTATED BYLAWS DATED OCTOBER 24, 1995 RESTATED BYLAWS OF SHOWBOAT, INC. ARTICLE I OFFICES 1. The principal office shall be in the City of Las Vegas, County of Clark, State of Nevada, and the name of the resident agent in charge thereof is H. Gregory Nasky, Esq. [Amended May 15, 1973] 2. The corporation may also have offices at such other places as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS 1. Annual Meetings. All meetings of the stockholders for the election of Directors shall be held at the office of the corporation in Las Vegas, Nevada, or as may be specified in the notice or waiver of notice of meeting. Meetings of stockholders for any other purpose may be held at such place and time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. 2. Time of Annual Meeting. An annual meeting of stockholders shall be held on the fourth Tuesday in April each year if not a legal holiday, and if a legal holiday then on the next secular day following, at ten o'clock a.m., or the annual meeting of shareholders may be held on such other date and time as may be set by the Board of Directors from time to time. The stockholders shall elect by a majority vote a Board of Directors and they may transact such other business as may properly be brought before the annual meeting. [Amended February 27, 1990] 3. Notice of Annual Meeting. Written or printed notice of the annual meeting shall be served upon or mailed to each stockholder entitled to vote thereat at such address as appears on the books of the corporation, at least ten days prior to the meeting. 4. List of Stockholders. At least ten days before every election of Directors, a complete list of the stockholders entitled to vote at said election with the address of each and the number of voting shares held by each, shall be prepared. Such list shall be open at the place where the election is to be held for said ten days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof and subject to the inspection of any stockholder who may be present. [Amended August 17, 1982] 5. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called by the President, or by the President or Secretary upon a requisition in writing therefor, stating the purpose or purposes thereof, delivered to the President or Secretary, signed by a majority of the Directors or by resolution of the Directors. [Amended October 5, 1995] 6. Notice of Special Meetings. Written or printed notice of a special meeting of stockholders, stating the time and place and object thereof, shall be served upon or mailed to each stockholder entitled to vote thereat at such address as appears on the books of the corporation, at least ten days before such meeting. In addition to the notice of any specific matters to be considered by the stockholders at any special meeting, there may also be included in said notice a reference to the fact that other matters may be considered at said meeting. 7. Business at Special Meeting. Business transacted at all special meetings shall be confined to the objects stated in the call. In addition to the business to be transacted at said special meetings as specified in the notice thereof, there may be considered and acted upon at said meeting any other business which may come before the meeting if the notice thereof so specifies. 8. Quorum. The holders of fifty per cent of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the Certificate of Incorporation or by these Bylaws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. 9. Action of Stockholders. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation or of these Bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question. 2 10. Voting. At any meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless said instrument provides for a longer period. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation, and except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election of Directors which shall have been transferred on the books of the corporation within twenty days next preceding such election of Directors. 11. No Action By Written Consent in Lieu of Meeting. No action may be taken by Stockholders by written consent in lieu of a meeting. [Amended October 5, 1995] 12. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to the stockholders entitled to examine the stock ledger, the list required by section 4 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of Stockholders. [Amended October 5, 1995] 13. Conduct of Meetings of Stockholders. The meetings of stockholders shall generally follow reasonable and fair procedure. Subject to the foregoing, the conduct of any meeting and the determination of procedure and rules shall be within the absolute discretion of the chairman of the meeting, and there shall be no appeal from any ruling of the Chairman of the meeting with respect to procedure or rules. Accordingly, in any meeting of stockholders or part thereof, the Chairman of the meeting shall have the absolute power to determine appropriate rules or dispense with theretofore prevailing rules. The Chairman of the Board or his designee shall serve as Chairman of the meeting and preside at the meeting. Without limiting the foregoing, the following rules shall apply: (a) Within his sole discretion, the Chairman of the meeting may adjourn such meeting by declaring such meeting adjourned. Upon his doing so, the meeting shall be immediately adjourned. (b) The Chairman of the meeting may ask or require that anyone not a bona fide stockholder or proxy leave the meeting. (c) A resolution or motion shall be considered for vote only if proposed by a stockholder or duly authorized proxy, and seconded by an individual, who is a stockholder or a duly authorized proxy, other than the individual who proposed the resolution or motion. The Chairman may propose any motion for vote. 3 (d) The Chairman of the meeting may impose any reasonable limits with respect to participation in the meeting by stockholders, including, but not limited to, limits on the amount of time at the meeting taken up by the remarks or questions or any stockholder, limits on the numbers of questions per stockholder, and limits as to the subject matter and limits as to the subject matter and timing of questions and remarks by stockholders. [Amended December 22, 1987] 14. Advance Notice of Stockholder/Proposed Business at any Meeting of Stockholders. To be properly brought before any meeting of the stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, including (without limitation) requirements imposed by Federal Securities Laws pertaining to proxies, for business to be properly brought before any meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, at least seventy five (75) days prior to the meeting, provided, however, that in the event that less than ninety (90) days' notice or prior public disclosure of the date of. any annual meeting of stockholders is given or made to stockholders by the Corporation, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before any meeting of the stockholders (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any meeting of the stockholders except in accordance with the procedures set forth in this Article II, Section 14, provided, however, that nothing in this Article II, Section 14 shall be deemed to preclude discussion by any stockholder as to any business properly brought before any meeting. The Chairman of the meeting shall, if the facts warrant, determine and declare at any meeting of the stockholders that business was not properly brought before the meeting in accordance with the provisions of this Article II, Section 14, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. [Amended December 22, 1987] 4 ARTICLE III DIRECTORS 1. Number, Term, Quorum. Effective February 25, 1993, the number of directors which shall constitute the whole Board shall be nine (9). All directors of the corporation shall be of full age and at least one of whom shall be a citizen of the United States. The number of Directors which shall not be less than three (3), may be decreased from time to time by amendment to the Bylaws and in such event thereafter may be increased to not more than twelve (12) from time to time by amendment to the Bylaws. Directors need not be stockholders or residents of Nevada. [Amended February 25, 1993] (a) Beginning with the 1993 annual meeting of stockholders, there shall be three (3) categories of Directors and the categories of Directors shall be entitled "A," "B," and "C," respectively. Each category of Directors shall be elected for the following term of office and each category shall consist of the following number of Directors.
NUMBER OF CATEGORY TERM DIRECTORS A Three (3) years Two (2) B Three (3) years Four (4) C Three (3) years Three (3)
Each category of Directors the term of which expires at said annual meeting shall thereafter be elected for three (3) year terms. [Amended February 25, 1993] (b) Each category of Directors shall be elected at the annual meeting of stockholders for the year in which the term of each respective category expires. Each Director shall be elected to serve until the successor shall have been elected or qualified, provided that in the event of failure to hold the annual meeting or to hold such election at such annual meeting, it may be held at any special meeting of the stockholders called for that purpose. (c) The majority of the Directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof may be given other than by announcement at the meeting which shall be so adjourned. (d) The Directors of the corporation shall at each annual meeting or any subsequent special or regular meeting, elect from among their number a Chairman and a Vice-Chairman of the Board of Directors to serve until the next annual meeting of the Board of Directors or until their successors are named at a regular or special meeting. The duties of the Chairman and of the Vice-Chairman of the Board are set out in Article V. [Amended August 18, 1983] 5 (e) Directors of the Company who have served as directors for ten (10) or more years are eligible to be appointed upon their retirement or resignation as a director emeritus. Directors emeritus shall stand for reappointment each year at the Annual Organizational Meeting of the Board for up to five (5) years. They shall serve in an advisory capacity to the Board, be invited to each regular meeting of the Board, and enjoy such other privileges, other than the right to vote, as the Board shall from time to time determine. [Amended January 21, 1986] 2. First Meeting. The newly elected Directors may hold their first meeting for the purpose of organization and the transaction of business. If a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the Directors. 3. Regular Meetings. Regular meetings of the Board may be held without notice at such time and place, either within or without the State of Nevada, as shall from time to time be determined by the Board. 4. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, Vice Chairman of the Board, the President or any four (4) Directors. Notice thereof stating the place, date and hour of the meeting shall be given to each Director not less than 48 hours before the date of the meeting, by telephone or telegram on at least three (3) hours notice. [Amended December 22, 1987] 5. Place of Meeting. The Board of Directors may hold its meetings, regular or special, within or without the State of Nevada, at such place as is indicated in the notice or waiver of notice thereof. 6. Election of Officers. The officers of the corporation shall be elected by the Board of Directors at its first meeting after the election of Directors each year. If any office becomes vacant during the year, the Board of Directors shall fill the same for the unexpired term. The Board of Directors shall fix the compensation of the officers of the corporation. 7. Authority. The Board of Directors shall have entire charge of the property, interests, business and transactions of the corporation, with full power and authority to manage and conduct the same; and, subject to the restrictions imposed by law, by the Certificate of Incorporation, or by these Bylaws, may exercise all the powers of the corporation. 8. Compensation. Directors shall not receive any stated salary for their services as Directors, but by resolution of the Board a fixed fee and expenses of attendance may be allowed for attendance at each 6 meeting. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent or otherwise and receiving compensation therefor. 9. Removal of Directors. Any Director may be removed at any time, upon the affirmative vote of the holders of not less than two-thirds (2/3) of the outstanding voting shares of the corporation, at a special meeting of stockholders called for such purpose, and the term for which any Director shall be elected shall be subject to this provision. [Amended by shareholders April 26, 1988] 10. Resignations and Filling of Vacancies. Any Director may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective. 11. Eligibility of Directors. No director is eligible to continue to serve as a director of the corporation who is required under Nevada gaming laws to be found suitable to serve as a director and who is not found suitable or whose finding of suitability is suspended or revoked by Nevada gaming authorities or who is required under New Jersey gaming laws to be qualified to serve as a director and who is not found qualified or whose qualification is suspended or revoked by New Jersey gaming authorities. Such eligibility shall cease immediately following whatever act or event terminates the director's eligibility under the laws and gaming regulations of the States of Nevada or New Jersey. [Amended August 25, 1987] If the office of any Director or Directors becomes vacant by reason of death, resignation or retirement, disqualification, removal from office or otherwise, a majority of the remaining Directors, though less than a quorum, shall choose a successor or successors, who shall hold office until the next Annual Meeting of Stockholders, at which time election shall be had to elect a Director to serve until the expiration of the term or terms of such Director or Directors for which the vacancy occurred. [Amended September 20, 1983, retroactive to August 18, 1983] 12. Nomination of Directors. Only persons who are nominated in accordance with the procedures set forth in this Section 12 of Article III shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation at the Annual Meeting may be made at a meeting of stockholders by or at the direction of the Board of Directors by any nominating committee or person appointed by the Board or by any stockholder of the Corporation entitled to vote for the election of Directors at the meeting who complies with the Notice procedures set forth in this Section 12 of Article III. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the secretary of the Corporation. To be timely, unless waived by the Board of Directors, no person not already a Director shall be eligible to be elected or to serve as a Director unless such person's notice of 7 nomination shall be delivered to or mailed and received at the principal executive offices of the Corporation at least seventy five (75) days before initiation of solicitation to the stockholders for election in the event of an election other than at an Annual Meeting and seventy five (75) days before the corresponding date that had been the record date for the previous year's Annual Meeting or seventy five (75) days before the date of the next Annual Meeting of shareholders announced in the previous year's proxy materials in the event of an election at an Annual Meeting. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than seventy five (75) days nor more than ninety (90) days prior to the meeting; provided, however, that in the event that less than ninety (90) days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 15th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a Director, (i) the name, age, business address, residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder, and (b) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Rule 14a under the securities Exchange Act of 1934, as amended (vi) the consent of such nominee to serve as Director of the Corporation, if he is so elected; and (b) as to the stockholder giving the notice, (i) the name and record address of stockholder, and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as Director of the Corporation. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth herein. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. [Amended December 22, 1987] ARTICLE IV COMMITTEES 1. Executive Committee. The Board of Directors may appoint from among its members an Executive Committee of not less than two members, one of whom shall be the President and shall designate one of such members as Chairman. The Board may also designate one or more of its members as alternates to serve as a member or members of the Executive Committee in the absence of a regular member or 8 members. The Board of Directors reserves to itself alone the power to declare dividends, issue stock, recommend to stockholders any action requiring their approval, change the membership of any committee at any time, fill vacancies therein, and discharge any committee either with or without cause at any time. Subject to the foregoing limitations, the Executive Committee shall possess and exercise all other powers of the Board of Directors during the intervals between meetings. 2. Other Committees. The Board of Directors may also appoint from among its own members such other committees as the Board may determine, which shall in each case consist of not less than two directors, and which shall have such powers and duties as shall from time to time be prescribed by the Board. The President shall be a member ex officio of such committee appointed by the Board of Directors. 3. Rules of Procedure. A majority of the members of any committee may fix its rules of procedure. All action by any committee shall be reported to the Board of Directors at a meeting succeeding such action and shall be subject to revision, alteration and approval by the Board of Directors; provided that no rights or acts of third parties shall be affected by any such revision or alteration. [Article IV amended in its entirety October 20, 1970] ARTICLE V OFFICERS AND DEFINITION OF DUTIES 1. Officers. (a) The general officers of the corporation shall consist of a Chairman and a Vice-Chairman of the Board of Directors, a President, one or more Vice-Presidents, a Secretary and one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, and such other officers as may from time to time be elected or appointed by the Board. Any two or more of said offices may be held by the same person, except the offices of Chairman and Vice-Chairman of the Board of Directors and the offices of President and Secretary. All officers shall be subject to removal or suspension at any time by the affirmative vote of at least a majority of the entire Board of Directors. [Amended October 20, 1970] (b) The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chairman and a Vice-Chairman of the Board of Directors from among its number, and shall also choose a President, one or more Vice-Presidents, a Secretary and a Treasurer, none of whom need be a member of the Board of Directors. [Amended October 20, 1970] (c) The Board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. 9 (d) The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. (e) Any officer may resign at any time by giving written notice to the Board of Directors or to the Chairman of the Board or to the President. Any such resignation shall take effect at the date of receipt of such notice, or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. A vacancy in any office because of death, resignation, removal, disqualification or any other cause, shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. 2. Chairman and Vice-Chairman of the Board. (a) The Chairman of the Board shall preside at all meetings of the stockholders of the corporation and of the Board of Directors, and shall be responsible to the Board for presentation at each Board meeting of proper informative reports by the President, the Treasurer, the Secretary, the Chairman of the Executive Committee, and the Chairman of any special committee of the Board. He shall be responsible for presentation of any proposed changes in the major policies of the corporation to the Board of Directors for action. He shall appoint, subject to the approval of the Board of Directors, or recommend to the Board for appointment, all members of committees of the Board of Directors. He shall have authority to sign contracts and other documents within the ordinary scope of the business or as specifically authorized by the Board of Directors or the Executive Committee. He may, by mutual agreement with the President, assume additional specific executive duties, and such agreement when made shall continue during the term of their respective offices unless such agreement is dissolved by mutual consent. (b) The Vice-Chairman of the Board shall, in the absence or disability of the Chairman, perform the duties and exercise the powers of the Chairman, and shall perform such other duties as the Board of Directors shall prescribe. 3. Chairman of the Executive Committee. The Chairman of the Executive Committee shall preside at all meetings of the Executive Committee and shall perform such duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. [Amended October 20, 1970] 4. The President. The President shall have the general powers and duties of supervision and management usually vested in the office of a president of a corporation. He shall carry into effect all orders and resolutions of the Board of Directors or of the Executive Committee. He shall have authority to execute all contracts and other documents within the ordinary scope of the business or as specifically authorized by the Board of Directors or by the Executive Committee. He shall also submit a complete and detailed report of the operations of the corporation for its fiscal or calendar 10 year, and this report shall also be submitted to the stockholders at their annual meeting. The President shall also from time to time report to the Board of Directors all matters within his knowledge which the interests of the corporation may require to be brought to its notice. [Amended September 20, 1983, retroactive to August 18, 1983] 5. The Chief Executive Officer. The Chief Executive Officer shall be the chief policy-making officer of the corporation and shall be the supreme officer of the corporation in the general supervision, direction and active management of the business of the corporation. [Amended Septem ber 20, 1983, retroactive to August 18, 1983] 6. The Chief Operating Officer. The Chief Operating Officer shall be the officer of the corporation charged with supervision and management of the daily operations of the corporation in support of the Chief Executive Officer. [Amended September 20, 1983, retroactive to August 18, 1983] 7. The Vice-Presidents. Each Vice-President shall perform such duties and have such powers and designations as may from time to time be prescribed by the Board of Directors or be delegated to him by the President. One or more Vice-Presidents may be designated "Senior Vice- President." One or more Vice-Presidents may be designated "Executive Vice-President." One Vice-President may be designated "Vice-President/ Finance." The Vice-President/Finance shall be in charge of finances, securities, accounting and claims, with administrative supervision and control over the Secretary and the Treasurer and their departments. [Amended May 17, 1990] 8. The Secretary and Assistant Secretaries. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the Board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Secretary. The Assistant Secretaries shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary, and shall perform such other duties as the Board of Directors shall prescribe. 11 9. The Treasurer and Assistant Treasurers. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such dis bursements, and shall render to the President and Directors, at the regular meetings of the Board or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond (which shall be renewed each year) in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. The Assistant Treasurers shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe. ARTICLE VI STOCK 1. Certificates of Stock. The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the President or a Vice- President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. The designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue to represent such class or series of stock. The signature of any officer authorized to sign certificates of stock of the corporation may be by a facsimile thereof in such method and under such circumstances as may be approved by the Board of Directors from time to time. If any stock certificate is signed by a transfer agent or an assistant transfer agent or a transfer clerk acting on behalf of the corporation, and a registrar, the signature of any such officer may be by a facsimile. 2. Transfer of Stock. Upon surrender to the corporation or to the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or 12 authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. 3. Record Date. The Board of Directors may fix in advance a date not exceeding 60 days nor less than 10 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, and in such case, such stockholders, and only such stockholders as shall be stockholders of record on the date so fixed, shall be entitled to notice of and to vote at such meeting, or any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. [Amended October 5, 1995] 4. Registered Stockholders. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada. 5. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost or destroyed. 6. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other 13 purpose as the Directors shall think conducive to the interest of the corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE VII MISCELLANEOUS 1. Corporate Seal. The corporate seal shall have inscribed thereon the name of the corporation, and the words "Corporate Seal, Nevada". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. 2. Fiscal Year. The fiscal year of the corporation shall commence January 1 and end December 31 next following. [Amended August 25, 1987] 3. Checks, Drafts, Notes. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, or agent or agents of the corporation, and in such manner, as shall from time to time be determined by resolution of the Board of Directors. 4. Control of Stock and Securities. All shares of stock, bonds, obligations, certificates of indebtedness and other securities of any corporation or association owned by the corporation shall, so far as practicable, or unless otherwise ordered by the Board of Directors or the Executive Committee thereof, be registered in the name of the corporation, and shall be kept with such depository as the Board of Directors or the Executive Committee thereof may from time to time designate. The Treasurer or an Assistant Treasurer of the corporation shall be authorized to collect and receive on behalf of the corporation all money dividends paid on shares of stock owned by it, and all moneys becoming due, whether for principal or interest, upon all bonds, obligations, certificates of indebtedness, or other securities owned by the corporation, and shall deposit all amounts so collected to the credit of the corporation in depositories designated by the Board of Directors or the Executive Committee thereof, and shall make such reports and statements from time to time as may be required by the Board of Directors, the Executive Committee or the President. The right to vote upon shares of stock at any time owned by the corporation or in any other way to exercise the rights of ownership of or in respect to any such shares, or of or in respect to any bonds, obligations, certificates of indebtedness or other securities owned by the corporation (except to collect and receive money dividends upon stock and moneys becoming due upon bonds, obligations, certificates of indebtedness or other securities) is vested exclusively in the Board of Directors or the Executive Committee thereof, their nominees or appointees, and 14 shall be exercised only pursuant to resolutions adopted by the Board or by the Executive Committee or by some person or persons designated by like resolutions. Provided always, that nothing herein shall be deemed or construed to impair the normal and regular course of business in respect of such stock, bonds, issues, securities, trust receipts or other evidence of indebtedness as authorized in the Certificate of Incorporation. 5. Notice and Waiver of Notice. Whenever any notice is required by these Bylaws to be given it shall not be deemed or construed to mean personal notice unless expressly stated; and any notice so required shall be deemed to be delivered when deposited in the United States mail in a sealed envelope addressed to the stockholder at his address as shown on the records of the corporation, with postage prepaid. Any notice required to be given under these Bylaws may be waived by the person entitled thereto. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute. No failure of or irregularity of notice of any annual meeting of stockholders shall invalidate such meeting or any proceeding thereat. 6. Disqualified Security Holders. Pursuant to the requirements of Section 82(d)(7) of the New Jersey Casino Control Act (N.J.S.A. 5:12-82(d)(7)) (the "Act"), if this corporation becomes, and so long as it remains, either a holding company or intermediary company as to the holder of a casino licensee, all securities of this corporation shall be held subject to the condition that if a holder thereof is found to be disqualified by the New Jersey Casino Control Commission pursuant to the Act, such holder shall dispose of his interest in this corporation. [Amended March 19, 1985] 7. Liability for Gaming License Fees and Investigation Costs. In the event that any person or entity is required by the New Jersey Casino Control Commission ("New Jersey Commission") to be found qualified pursuant to the New Jersey Casino Control Act (the "New Jersey Act") or by the Nevada Gaming Commission or Nevada Gaming Control Board (collectively the "Nevada Commission") pursuant to the Nevada Gaming Control Act ("Nevada Act") by virtue of his, her or its beneficial ownership of securities of the Company, such person or entity shall indemnify the Company against all license fees, investigation costs and all expenses and charges related thereto, which are billed to the Company or any of its affiliates or subsidiaries by the New Jersey Commission or New Jersey Division of Gaming Enforcement or Nevada Commission on account of the processing and/or inves tigation of the application of such person or entity (and individuals or affiliates associated therewith) for quali fication, suitability or licensing. The required sums shall be paid to the Company (or directly to the New Jersey Commission or Nevada Commission, or both at the Company's option) within fifteen days of demand by the Company. The requirement of indemnification shall not apply to natural persons who are officers, directors or key employees of the Company at the time the New Jersey Commission or the Nevada Commission or both determines that qualification, suitability or licensing of said person as a security holder is required, so long as such officers, directors or key employees of the Company continue to serve in such position and capacity. [Amended December 22, 1987] 15 ARTICLE VIII INDEMNIFICATION [Amended May 26, 1992] 1. Power to Indemnify in Actions, Suits or Proceedings Other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, adminis trative or investigative (except an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, legal spouse (whether such status is derived by reason of statutory law, common law or otherwise of any applicable jurisdiction) of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer (including the legal spouse of such director or officer), employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he 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. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. The indemnification of a legal spouse of a director or officer shall not extend to any claim for any actual or alleged wrongful act of the spouse, but shall apply only to actual or alleged wrongful acts of a director or officer as provided in this Article VIII. 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, legal spouse of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer (including the legal spouse of such officer or director), employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation; but no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought 16 shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. The indemnification of a legal spouse of a director or officer shall not extend to any claim for any actual or alleged wrongful act of the spouse, but shall apply only to actual or alleged wrongful acts of a director or officer as provided in this Article VIII. 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, legal spouse of a director or officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by the stockholders, (ii) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such act, suit or proceeding, (iii) if such a quorum of disinterested directors so orders, or (iv) if such a quorum of disinterested directors cannot be obtained, by independent legal counsel in a written opinion. To the extent, however, that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he (including the legal spouse of such director or officer) shall be indemnified by the Corporation against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with such defense, without the necessity of authorization in the specific case. 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director, officer, legal spouse of a director or officer, employee or agent may apply to any court of 17 competent jurisdiction in the State of Nevada for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director, officer, legal spouse of a director or officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. 6. Expenses Payable in Advance. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, legal spouse of a director or officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article VIII. 7. Non-exclusivity and Survival of Indemnification. The indemnification provided by this Article VIII shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Nevada, or otherwise. The indemnification provided by this Article VIII shall continue as to a person who has ceased to be a director, officer (including the legal spouse of such director or officer), employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, legal spouse of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer (including the legal spouse of such director or officer), employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII. 18 ARTICLE IX AMENDMENT OF BYLAWS 1. These Bylaws may be amended, repealed or altered, in whole or in part, at any regular meeting of the Board of Directors or at any special meeting, provided the substance of the proposed amendment or amendments shall have been stated in the notice thereof, by a majority of the Board of Directors at such duly constituted meeting. 2. The Bylaws may be amended, repealed or altered, in whole or in part, upon the affirmative vote of the holders of not less than two-thirds (2/3) of the outstanding voting shares of the corporation. [Amended by shareholders April 26, 1988] * * * * * The undersigned as Secretary does hereby certify that the foregoing is a true and correct copy of the Restated Bylaws of Showboat, Inc. as amended at a regular meeting of the Board of Directors held on the 5th day of October, 1995. DATED this 24th day of October, 1995. SHOWBOAT, INC. By /s/ H. Gregory Nasky H. Gregory Nasky Its Secretary 19 EX-27 3
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