-----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, GP+lU/RVahhBlmiX/DH18EfumagGTz/02KyQHLpVVh5xCAmTl6F5gqWUWtSEMTw3 UEcX+dXp0WwWwzr4FUHfEg== 0000911147-02-000002.txt : 20020415 0000911147-02-000002.hdr.sgml : 20020415 ACCESSION NUMBER: 0000911147-02-000002 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY CASINOS INC /CO/ CENTRAL INDEX KEY: 0000911147 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841271317 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22900 FILM NUMBER: 02594492 BUSINESS ADDRESS: STREET 1: 200-220 EAST BENNETT AVE STREET 2: SUITE 755 CITY: CRIPPLE CREEK STATE: CO ZIP: 80813 BUSINESS PHONE: 7196890333 MAIL ADDRESS: STREET 1: 200-220 EAST BENNETT AVENUE STREET 2: SUITE 755 CITY: CRIPPLE CREEK STATE: CO ZIP: 80813 FORMER COMPANY: FORMER CONFORMED NAME: ALPINE GAMING INC DATE OF NAME CHANGE: 19930824 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY CASINOS INC DATE OF NAME CHANGE: 19940802 10KSB 1 doc1.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2001 Commission File No. 0-22290 - -------------------------- ------------------ CENTURY CASINOS, INC. ----------------------- (Name of small business issuer in its charter) Delaware 84-1271317 ----------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 200 - 220 E. Bennett Ave., Cripple Creek, CO 80813 ----------------------------------------------------- (Address of principal executive offices) (Zip code) (719) 689-9100 --------------- (Issuer's telephone number, including area code) Securities Registered Pursuant to Section 12(b) of the Exchange Act: None. Securities Registered Pursuant to Section 12(g) of the Exchange Act: Common Stock, $.01 Par Value ---------------------------- (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ X ] State the issuer's revenues for its most recent fiscal year: $29,576,161 The aggregate market value of the voting common stock held by non-affiliates of the Registrant on March 27, 2002, was approximately $30,926,712 based upon the average of the reported range of sale price of such shares on NASDAQ for that date. As of March 27, 2002, there were 13,728,784 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: None. 1 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Item 1. Business. - ------- -------- General Century Casinos, Inc. and subsidiaries (the "Company") is an international gaming company which owns and operates the Womacks Casino and Hotel in Cripple Creek, Colorado, owns 65% of and operates the Caledon Casino, Hotel and Spa near Cape Town, South Africa, manages Casino Millennium located within a hotel in Prague, Czech Republic, and serves as concessionaire of small casinos on four luxury cruise vessels operated by Silversea Cruises. The Company regularly pursues additional gaming opportunities internationally and in the United States. Prior to July 1, 1996, the Company's operations in Cripple Creek consisted of Legends Casino ("Legends"), which the Company had acquired on March 31, 1994, through a merger with Alpine Gaming, Inc. On July 1, 1996, the Company acquired the net assets of Gold Creek Associates, L.P. ("Gold Creek"), the owner of Womack's Saloon & Gaming Parlor, which was adjacent to Legends. Following the acquisition of Womacks, both properties were renovated to facilitate the marketing of the combined properties as one casino under the name "Womacks Casino and Hotel" ("Womacks"). In April 2000, the Company's South African subsidiary acquired a 50% equity interest in Caledon Casino Bid Company (Pty) Limited ("CCBC"). In June, 2001 the company name for CCBC was changed to Century Casinos Caledon (Pty) Ltd. ("CCAL"). CCAL was awarded a casino license and owns a 92-room resort hotel, spa, casino and approximately 600 acres of land (representing approximately 230 hectares) in Caledon, South Africa. The Company has a long-term agreement to manage the operations of the casino, which began in October 2000. In November 2000, the Company, through its South African subsidiary, increased its equity interest in CCAL by 15%, raising its total ownership to 65%. The Company's operating revenue for 2000 and 2001 was derived principally from Womacks and CCAL as reported in Note 7, Segment Information, of the Consolidated Financial Statements. See the Consolidated Financial Statements and the notes thereto included herein. The Company was formed in 1992 to acquire ownership interests in, and to obtain management contracts with respect to, gaming establishments. The Company was founded by a team of career gaming executives who had worked primarily for an Austrian gaming company that owned and operated casinos throughout the world. The Company, formerly known as Alpine, is a result of a business combination completed on March 31, 1994, pursuant to which Century Casinos Management, Inc. ("Century Management") shareholders acquired approximately 76% of the then issued and outstanding voting stock of the Company, and all officer and board positions of the Company were assumed by the management team of Century Management. Effective June 7, 1994, the Company reincorporated in Delaware under the name "Century Casinos, Inc." Because the Company is the result of this transaction, the Company's business has been combined with that of Century Management, and references herein to the Company refer to the combined entities, unless the context otherwise requires. Information contained in this Form 10-KSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of words such as "may," "will," "expect," "anticipate," "estimate" or "continue," or variations thereon or comparable terminology. In addition, all statements, other than statements of historical facts, that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, and other such matters, are forward-looking statements. 2 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) The future results of the Company may vary materially from those anticipated by management, and may be affected by various trends and factors, which are beyond the control of the Company. These risks include the competitive environment in which the Company operates, the Company's dependence upon the Cripple Creek, Colorado gaming market, the effects of governmental regulation and other risks described herein. Property and Project Descriptions Womacks Casino and Hotel, Cripple Creek, Colorado. On July 1, 1996, the Company purchased substantially all of the assets, and assumed substantially all of the liabilities, of Gold Creek, the owner of Womacks Saloon and Gaming Parlor in Cripple Creek, Colorado. Following the Company's acquisition of Gold Creek, the property was consolidated with the Company's Legends Casino, and the combined properties have been marketed since then as one casino under the name "Womacks Casino and Hotel." Management implemented certain consolidation, expansion and capital improvement programs. The Company created openings in the common walls in order to open up and integrate the gaming areas of the two casinos, expanded the existing player tracking system of Womacks Saloon and Gaming Parlor to include all of the Legends gaming devices; made general interior enhancements; and installed additional gaming devices and replaced older generation equipment. In 2001, the Company added ten hotel rooms to the existing eight on the second floor of the casino. An additional three hotel rooms are currently being constructed, also on the second floor. Womacks Casino is located at 200 to 220 East Bennett Avenue in Cripple Creek, Colorado. The lots comprising 200 to 210 East Bennett Avenue are owned by wholly-owned subsidiaries of the Company and are collateralized by a first mortgage held by Wells Fargo Bank. See Note 5, "Long-Term Debt", to the Consolidated Financial Statements for further information. The Company holds a subleasehold interest in the real property and improvements located at 220 East Bennett Avenue. The sublease, as assigned to WMCK-Acquisition Corp., provides for monthly rental payments of $16, and expires on June 20, 2005 unless terminated by the Company with 12 months' advance notice. The Company has an option to acquire the property at the expiration of the sublease at an exercise price of $1,500. Womacks currently has approximately 600 slot and video devices and four gaming tables. It has 150 feet of frontage on Bennett Avenue, the main gaming thoroughfare in Cripple Creek, and 110 feet of frontage on Second Street, with approximately 40,000 square feet of floor space. Management believes that, in addition to providing an adequate number of hotel rooms, an integral component in attracting gaming patrons to Cripple Creek is the availability of adequate, nearby parking spaces. The Company presently owns or leases nearly four hundred parking spaces. In 1997, the Company exercised its purchase option to acquire three lots (formerly known as the "Wright Property"), consisting of 9,375 square feet of land across the street from Womacks for $785 in cash. This acquisition provides the Company with 30 additional parking spaces. The Company subsequently paved the property and currently uses it for customer parking. In June 1998, the Company acquired 22,000 square feet of land (the "Hicks Property") from an unaffiliated third party. The property, which is zoned for gaming, is adjacent to Womacks. A partially-completed building structure that occupied a portion of the land was subsequently razed, and the entire property has been improved to provide the first paved customer parking spaces in the Cripple Creek market. The purchase price of $3.6 million was financed through 3 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) the Company's revolving credit facility with Wells Fargo Bank. The Company leases 99 contiguous parking spaces from the City of Cripple Creek. Annual rent payments total $90 and the lease agreement, as amended on February 17, 2000, expires on May 31, 2010. The agreement contains a purchase option whereby the Company may purchase the property for $3.25 million, less cumulative lease payments, at any time during the remainder of the lease term. The Company has paved the property and currently uses it for customer parking. In March 1999, the Company entered into a purchase option agreement for a piece of property, located in Cripple Creek across Bennett Avenue from Womacks. The agreement, as amended in February 2000, provides for an option period through March 31, 2004 and an exercise price of $1.5 million, less 50% of cumulative option payments through the exercise date. In May 2000, the Company completed its acquisition of two parcels of land located near Womacks for $1.85 million. The two parcels provide more than 100 parking spaces for casino patrons and those attending events held at the Womacks Events Center, located adjacent thereto. The Company has paved the property and currently uses it for customer parking. In August 2000, the Company opened the Womacks Events Center located near its Womacks/Legends Casino. The Company believes the 500-seat Womacks Events Center can further increase the number of visitors to Cripple Creek and add to the consistent growth experienced in the Cripple Creek gaming market. Through an arrangement with the City of Cripple Creek, the Events Center is available for attractions bringing people to the City via meetings, conventions, shows and other special events on a year-round basis. As an additional benefit, the second floor of the building houses much of the Company's administration and accounting departments thereby freeing up valuable floor-space in Womacks and allowing for additional hotel and casino expansion. Century Casinos Caledon (Pty) Ltd. - Caledon, South Africa An application for a casino license in Caledon, province of the Western Cape, was filed in October 1999 with the Western Cape Gambling and Racing Board by Caledon Casino Bid Company (Pty) Limited ("CCBC") doing business as The Caledon Casino, Hotel and Spa. The Company's subsidiary, Century Casinos Africa (Pty) Ltd ("CCA"), originally had a 50% equity interest in CCBC, by virtue of an agreement entered into between CCA and CCBC, together with various affiliated entities. In December 1999, in anticipation of a successful application, the Company entered into a ten-year casino management agreement with CCBC, which agreement may be extended at the Company's option for multiple ten-year periods, whereby the Company will earn management fees based on percentages of annual gaming revenue and earnings before interest, income taxes, depreciation, amortization and certain other costs. On February 16, 2000, the Western Cape Gambling and Racing Board awarded Successful Applicant status to CCBC. On April 13, 2000 CCBC was awarded the final license and the Company, through CCA, invested approximately $3.8 million (based on the exchange rate at that time) consisting of approximately $1.5 million (R10 million) in equity and $2.3 million in debt (R15 million). In December, 2000 the Company through CCA, acquired an additional 15% of The Caledon Casino, Hotel and Spa - raising its ownership in CCBC to 65%. Terms of the agreement included the payment of approximately $1.8 million by Century to its partners in exchange for 15% of the total ordinary shares of the project (valued at approximately $1.2 million) and a shareholder loan to CCBC previously held by its partners (with a value of approximately $600). 4 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) In June, 2001 the company name for CCBC was changed to Century Casinos Caledon (Pty) Ltd. ("CCAL") CCAL is located approximately one hour's drive from Cape Town on approximately 600 acres (230 hectares) of land adjacent to the N-2 highway, the main thoroughfare between Cape Town and Durban. This highway is known as the Garden Route, passing through an established tourist area known for its popular coastal towns, whale watching and wineries. Caledon is home to a 100 year-old annual wild flower show and a well-known 200 year-old national landmark with mineral hot springs located on the CCAL resort site. CCAL employs approximately 300 staff from the neighboring communities and includes a casino with 250 slot/video machines and 8 tables, a 92-room hotel, mineral hot springs and spa facility, two restaurants, three bars, a gift shop, conference facilities and the Outdoor Experience - a corporate team building facility. In addition, zoning approval has been secured for the potential future development of the resort to include a championship golf course, up to 350 residential or time-share units, possible additional hotel accommodations and additional retail facilities. Casino Millennium, Prague, Czech Republic In January 1999, the Company entered into a 20-year definitive agreement with Casino Millennium a.s., a Czech company, and with B.H. Centrum a.s., a Czech subsidiary of Bau Holding AG, one of the largest construction and development companies in Europe, to operate a casino in the five-star Marriott Hotel in Prague, Czech Republic. During 2001, Bau Holding AG changed its name to Strabag AG. The Company provides casino management services in exchange for 10% of the casino's gross revenue, and has provided gaming equipment for 45% of the casino's net profit. The hotel and casino opened in July 1999. In January 2000, the Company entered into a memorandum of agreement to either acquire a 50% ownership interest in Casino Millennium a.s. or to form a new joint venture with B.H. Centrum a.s., which joint venture would acquire all of the assets of Casino Millennium. The Company and Strabag AG have each agreed to purchase a 50% ownership interest. The documentation for this transaction has been submitted, as required, to the Ministry of Finance of the Czech Republic for approval. The acquisition is expected to be completed in 2002 and is expected to cost approximately $200 in cash plus contributed assets. Silversea Cruises In May 2000, the Company signed a five-year casino concession agreement with Silversea Cruises, a world-renowned, six-star cruise line based in Fort Lauderdale, Florida. The agreement gives the Company the exclusive right to install and operate casinos aboard four Silversea vessels. The Company will operate each shipboard casino for its own account and pay concession fees based on gross gaming revenue. Starting in late September 2000 with the new, 388-passenger Silver Shadow, Century began its shipboard casino operations. Within 60 days thereafter, the Company installed casinos on the 296-passenger vessels Silver Wind and Silver Cloud. In June 2001, Century installed its fourth casino aboard the new, 388-passenger Silver Whisper. In October 2001, the Silver Wind was taken out of service. It is expected to resume operations in early 2003. The Company has a total of 160 gaming positions on the four combined shipboard casinos. 5 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) The World of ResidenSea On August 30, 2000, Century signed a five-year casino concession agreement with ResidenSea Ltd., the owner and operator of The World of ResidenSea which is the world's first luxury residential resort community at sea continuously circumnavigating the globe. ResidenSea is the first to offer private residences on board a ship for purchase by customers. The ResidenSea vessel has a total of 110 residences and 88 guest suites with purchase prices starting at $2.2 million. Century has equipped the casino with 40 gaming positions and will operate the shipboard casino which is expected to depart for its maiden voyage in the first half of 2002. The Company will operate the shipboard casino for its own account and pay concession fees based on gross gaming revenue. In addition, the Company has a right of first refusal to install casinos aboard any new ships built or acquired by ResidenSea during the term of the agreement. Additional Company Projects In addition to Womacks in Cripple Creek, Colorado; Caledon Casino, Hotel and Spa in Caledon, South Africa; Casino Millennium in Prague, Czech Republic; Silversea Cruises and the ResidenSea, the Company has a number of potential gaming projects in various stages of development. Along with the capital needs of these potential projects, there are various other risks which, if they materialize, could materially adversely affect a proposed project or eliminate its feasibility altogether. For example, in order to conduct gaming operations in most jurisdictions, the Company must first obtain gaming licenses or receive regulatory clearances. To date, the Company has obtained gaming licenses or approval to operate gaming facilities in Colorado, Louisiana, on an American Indian reservation in California, the Czech Republic, the Western Cape province of South Africa and the Gauteng province of South Africa. While management believes that the Company is licensable in any jurisdiction, each licensing process is unique and requires a significant amount of funds and management time. The licensing process in any particular jurisdiction can take significant time and expense through licensing fees, background investigation costs, fees of counsel and other associated preparation costs. Moreover, should the Company proceed with a licensing approval process with industry partners, such industry partners would be subject to regulatory review as well. The Company seeks to satisfy itself that industry partners are licensable, but cannot assure that such partners will, in fact, be licensable. Additional risks before commencing operations include the time and expense incurred and unforeseen difficulties in obtaining suitable sites, liquor licenses, building permits, materials, competent and able contractors, supplies, employees, gaming devices and related matters. In addition, certain licenses include competitive situations where, even if the Company is licensable, other factors such as the economic impact of gaming and financial and operational capabilities of competitors must be analyzed by regulatory authorities. All of these risks should be viewed in light of the Company's limited staff and limited capital. Also, the Company's ability to expand to additional locations will depend upon a number of factors, including, but not limited to: (i) the identification and availability of suitable locations, and the negotiation of acceptable purchase, lease, joint venture or other terms; (ii) the securing of required state and local licenses, permits and approvals, which in some jurisdictions are limited in number; (iii) political factors; (iv) the risks typically associated with any new construction project; (v) the availability of adequate financing on acceptable terms; and (vi) for locations outside the United States, all the risks of foreign operations, including currency controls, unforeseen local regulations, political instability and other related risks. Certain jurisdictions issue licenses or approval for gaming operations by inviting proposals from all interested parties, which may increase competition for such licenses or approvals. The development of dockside and riverboat casinos in the United States of America may require approval from the Army Corps of Engineers and will be subject to significant Coast Guard regulations 6 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) governing design and operation. Most of these factors are beyond the control of the Company. As a result, there can be no assurance that the Company will be able to expand to additional locations or, if such expansion occurs, that it will be successful. Further, the Company anticipates that it will continue to expense certain costs, which have been substantial in the past and may continue to be substantial in the future, in connection with the pursuit of expansion projects. The following describes other activities of the Company. South Africa - Legislation enacted in 1996 in South Africa provides for the award of up to 40 casino licenses throughout the country. In addition to its Caledon operations, the Company has entered into agreements with various local consortia to provide consulting services during the application phase, as well as casino management services should the Company's partners be awarded one or more licenses. Six casino licenses were allocated to the province of Gauteng - primarily for the Greater Johannesburg area - by which five casinos have been operating since 1998. With respect to the sixth and final license, Silverstar Development Ltd. ("Silverstar"), a consortium owned by trusts, corporations and individuals from the province, chose the Company as equity and management partner for its proposed casino, hotel and entertainment resort in the West Rand (western portion of greater Johannesburg). Since joining forces more than five years ago, the Company has helped Silverstar work through a series of legal issues regarding the award of this gaming license - culminating in March 2000 with the entering into of an agreement with the sole competing license applicant. This agreement settled all past claims and brought both parties and the Company together in an effort to jointly secure the sixth and final gaming license in the province. In September 2001, the Company, through CCA, entered into a further agreement (and as subsequently amended) to secure a 50% ownership interest in Rhino Resort Limited. ("RRL"- a consortium which includes Silverstar) in exchange for an equity and loan contribution of R50 million or $4.2 million at the exchange rate as of December 3, 2001 subject to RRL securing in full the remaining financing and the approvals necessary to allow the development to proceed. In November, 2001, The Gauteng Gambling Board ("GGB"), with the concurrence of the Executive Council of the provincial government, awarded RRL the sixth, and final, casino license for 700 slot machines and 30 gaming tables conditional upon the satisfaction of certain requirements within three months of award. In February 2002, RRL filed documentation with the GGB in order to satisfy those conditions, including evidence of the continuing commitment of Nedcor Investment Bank (one of South Africa's leading financial institutions) to provide the necessary debt financing and project guarantees required under the license. On February 11, 2002, RRL received notification of the filing in the High Court of South Africa by Tsogo Sun Holdings ("Tsogo") of an action seeking to overturn the decision of the GGB to award a casino license to RRL. Tsogo owns and operates one of the five existing casinos in Gauteng which is situated approximately 15 miles from RRL's development site. RRL is pursuing all its rights under law in defending this action by Tsogo. The GGB, the Executive Council of the provincial government, as well as RRL have given notice of their intention to defend. The Company anticipates that Tsogo's action, which could ultimately lead to an overturn of the decision of the GGB to award a casino license to RRL, will result in a delay to the construction of the first phase of the development but cannot, at this time, assess the likely extent of such delay. In addition to the equity ownership in RRL, the Company through a 55% owned subsidiary, Century Casinos West Rand (Pty) Ltd. ("CCWR"), will receive management fees as the manager of the Casino, Hotel & Resort. Management fees will be based on a percentage of gross revenues as well as a percentage of EBITDA (defined as earnings before interest, taxes, depreciation, amortization and other specifically defined costs). 7 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Punta Del Este, Uruguay - The Company is part of a consortium, which includes Vantex S.A. and Inter-Continental Hotels & Resorts, that has submitted an official expression of interest to the Uruguayan government for the development and operation of a Resort, Convention Center and Casino in the internationally recognized Uruguayan beach resort Punta del Este. The Company has been awarded a long-term agreement to manage the proposed international casino comprising over 1,000 gaming positions, if a casino license is awarded. The proposed facility will be located 1.5 miles (on the same seaside highway) from the existing Conrad Casino Resort, which is, to date the only private casino in Uruguay (partially owned by Park Place Entertainment Corp). Punta del Este has its own international airport and is a 45-minute flight from Buenos Aires, Argentina, a 2 hour and 25 minute flight from Sao Paulo, Brazil, and a 3-hour flight from Rio de Janeiro (there is no legalized casino gaming in Brazil). The consortium considers making a formal application to the Uruguayan Authorities in due process, but there can be no certainty that a final application will be made. If such final application is made, there is no certainty regarding an award of this casino license or that financing for the project will be secured by the Vantex S.A. / Inter-Continental Hotels & Resorts / Century Casinos consortium. Riverboat Development Agreement - Indiana. - In December 1995, the Company sold its 80% interest in Pinnacle Gaming Development Corp. ("Pinnacle") to an affiliate of Hilton Gaming Corporation and Boomtown, Inc. ("Hilton/Boomtown"). Pinnacle had been pursuing a riverboat gaming license application in Switzerland County, Indiana. Upon signing the agreement, the Company received a cash payment of $80 and recognized a gain on the sale of its investment of $26. The agreement provided for additional payments to the Company upon the occurrence of certain events. In September 1998, the Indiana Gaming Commission awarded a Certificate of Suitability to Pinnacle to conduct riverboat gaming in Switzerland County that resulted in the Company receiving a payment of $431 in the third quarter of 1998. The Company also received a payment of $1,040 in the third quarter of 1999 upon "groundbreaking" of the project. Additionally, the Company was entitled to receive installment payments of $32 per month for the first 60 months of the riverboat's operation; however, the Company elected to receive an aggregate discounted amount of $1,380, which was received and recorded as income in January 2000. Revolving Credit Facility In March 1997, the Company entered into a four-year revolving line of credit facility (the "RCF") with Wells Fargo Bank ("Wells Fargo"). Various provisions of the RCF were subsequently amended, including an increase in the facility to $20 million in 1998, an increase to $26 million in April 2000 whereby the line of credit decreases quarterly beginning in the fourth quarter of 2000 and an extension of the maturity date to April 2004. At December 31, 2001, the maximum available under the RCF was $22.4 million. An annual commitment fee of between three-eighths and one-half percent, payable quarterly, is charged on the unused portion of the RCF. The RCF also contains an interest rate matrix that ties the interest rate charged on outstanding borrowings to the Company's leverage ratio, as defined. The Company's weighted-average interest rate on the RCF was 8.58% in 2000 and 9.04% in 2001. At December 31, 2001, the Company's unused borrowing capacity under the RCF was approximately $10.6 million. A portion of the proceeds of borrowings under the RCF was used for the development of The Caledon Casino, Hotel & Spa. The RCF is secured by substantially all of the real and personal property of Womacks. Under the RCF, the Company is required to comply with certain customary financial covenants, and is subject to certain capital expenditure requirements and restrictions on investments. The Company has entered into two interest rate swap agreements that 8 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) effectively fix the interest rates at 5.55% on $7.5 million of the variable rate debt and 7.95% on $4.0 million of the variable rate debt. See Note 5, Long-Term Debt, to the Consolidated Financial Statements for further information. Marketing Strategy Womacks Casino and Hotel - The marketing strategy of Womacks highlights promotion of the Womacks Gold Club, a player's club with a database containing profiles on over 80,000 members. Gold Club members receive benefits from membership, such as cash, coupons, merchandise, food and lodging. Those who qualify for VIP status receive additional benefits in addition to regular club membership. Status is determined through player tracking. Members receive information about upcoming events and parties, and, depending on player ranking, also receive invitations to special events. Caledon Casino, Hotel & Spa - As with Womacks described above, the marketing strategy of The Caledon Casino, Hotel & Spa highlights promotion of its players club and building its player information database. Players' club members receive benefits such as cash, coupons, merchandise, food and lodging. Those who qualify for VIP status receive additional benefits in addition to regular club membership. Status is determined through player tracking. Members receive newsletters of upcoming events and parties, and, depending on player ranking, also receive invitations to special events. Market Data The Cripple Creek Market - Cripple Creek is a small mountain town located approximately 45 miles southwest of Colorado Springs, Colorado on the western boundary of Pikes Peak. Cripple Creek is an historic mining town, originally founded in the late 1800's following a large gold strike. Cripple Creek is a tourist town and its heaviest traffic is in the summer months. Traffic generally decreases to its low point in the winter months. Cripple Creek is one of only three Colorado cities, exclusive of Indian gaming operations, where casino gaming is legal, the others being Black Hawk and Central City. Cripple Creek operated approximately 29% of the gaming devices and generated 21% of gaming revenues for these three cities during the year ended December 31, 2001. As of December 31, 2001, there were 18 casinos operating in Cripple Creek. 9 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) The tables below set forth information obtained from the Colorado Division of Gaming regarding gaming revenue by market and slot machine data for Cripple Creek from calendar 1998 through 2001. This data is not intended by the Company to imply, nor should the reader infer, that it is any indication of future Colorado or Company gaming revenue. GAMING REVENUE BY MARKET
% change % change % change % change Over Over Over Over 1998 Prior Year 1999 Prior Year 2000 Prior Year 2001 Prior Year ------------------------------------------------------------------------------------------------- CRIPPLE CREEK $ 113,230 4.0% $ 122,611 8.3% $ 134,630 9.8% $ 138,618 3.0% Black Hawk $ 272,008 15.9% $ 354,914 30.5 % $ 433,769 22.2% $ 478,326 10.3% Central City $ 93,980 7.5% $ 73,794 -21.5% $ 63,453 -14.0% $ 59,730 -5.9% ------------------------------------------------------------------------------------------------- COLORADO TOTAL $ 479,218 11.2% $ 551,319 15.0% $ 631,852 14.6% $ 676,674 7.1% CRIPPLE CREEK SLOT DATA % change % change % change % change Over Over Over Over 1998 Prior Year 1999 Prior Year 2000 Prior Year 2001 Prior Year ------------------------------------------------------------------------------------------------- Total Slot Revenue $ 107,690 4.8% $ 117,387 9.0% $ 129,500 10.3% $ 134,330 3.7% Average Number Of Slots 4,369 -3.1% 4,058 -7.1% 4,148 2.2% 4,170 .5% Average Win Per Slot Per Day 68 dollars 8.1% 81 dollars 19.9% 85 dollars 4.7% 88 dollars 3.5%
Gaming in Colorado is "limited stakes," which restricts any single wager to a maximum of $5.00. While this limits the revenue potential of table games, management believes that slot machine play, which accounts for over 96% of total gaming revenues, is currently impacted only marginally by the $5.00 limitation. The Company faces intense competition from other casinos in Cripple Creek, including a handful of casinos of similar size and many other smaller casinos. There can be no assurance that other casinos in Cripple Creek will not undertake expansion efforts similar to those recently taken by the Company, thereby further increasing competition, or that large, established gaming operators will not enter the Cripple Creek market. The Company seeks to compete against these casinos through promotion of Womacks Gold Club and superior service to players. Management believes that the casinos likely to be more successful and best able to take advantage of the market potential of Cripple Creek will be the larger casinos that have reached a certain critical mass. 10 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) CENTURY CASINOS' PROPERTY IN CRIPPLE CREEK ("Womacks Casino and Hotel")
% change % change % change % change Over Over Over Over 1998 Prior Year 1999 Prior Year 2000 Prior Year 2001 Prior Year ------------------------------------------------------------------------------------------------- Total Slot Revenue $ 18,597 2.7% $ 22,235 19.6% $ 23,670 6.5% $ 23,142 -2.2% Average Number Of Slots 565 3.3% 592 4.8% 627 5.9% 593 -5.4% Average Win Per Slot Per Day 90 dollars -.05% 103 dollars 13.7% 103 dollars .57% 107 dollars 3.6% Market Share in % 17.42% -1.0% 18.87% 8.3% 18.28% -3.1% 17.23% -5.7%
The Company competes, to a far lesser extent, with 22 casinos in Black Hawk and 5 casinos in Central City. Black Hawk and Central City are also small mountain tourist towns, which adjoin each other and are approximately 30 miles from Denver and a two and one-half hour drive from Cripple Creek. The main market for Cripple Creek is the Colorado Springs metropolitan area, and the main market for Black Hawk and Central City is the Denver metropolitan area. In addition, there is intense competition among companies in the gaming industry generally, and many gaming operators have greater name recognition and financial and marketing resources than the Company. The Company competes with many established operators in gaming venues other than Cripple Creek. Many of these operators have greater financial, operational and personnel resources than the Company. There can be no assurance that the number of casino and hotel operations will not exceed market demand or that additional hotel rooms or casino capacity will not adversely affect the operations of the Company. The Caledon, South Africa Market - Caledon is a small agricultural community located approximately 60 miles east of Cape Town. Caledon lies on the N-2 highway - the main thoroughfare between Cape Town and Durban - and is known for its wild flower shows, wineries and the natural historic hot springs located on the Caledon Casino, Hotel and Spa site. Caledon experiences its heaviest traffic during the December holiday season (summer in South Africa). Traffic will be somewhat slower in the winter months (June through September), but Management is optimistic that the enhanced hot springs facilities will increasingly attract additional patrons during this time. The Caledon Casino, Hotel and Spa operates its casino under one of only three licenses awarded in the Western Cape Province which has a population of approximately 4 million. Although the competition is limited by the number of casino licenses and the casinos are geographically distributed, Management continues to believe that the Caledon Casino, Hotel and Spa will face intense competition from the other two casinos - particularly a large casino located in Cape Town approximately one hour from Caledon. The Company will strive to compete against these casinos by emphasizing Caledon's destination resort appeal in its marketing campaign, by promotion of its players club and by superior service to its players. In addition, there is intense competition among companies in the South Africa gaming industry, and the gaming industry in general, and many gaming operators have greater name recognition, financial 11 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) and marketing resources than the Company. The Company competes with many established operators in gaming venues other than the Western Cape Province. Many of these operators have greater financial, operational and personnel resources than the Company. There can be no assurance that the number of casino and hotel operations will not exceed market demand or that additional hotel rooms or casino capacity will not adversely affect the operations of the Company. Gaming in South Africa is "unlimited wagering" where each casino can set its own limits. As a result, the relationship between table games revenues and slot revenues will resemble more traditional gaming markets (unlike Cripple Creek where nearly 96% of gaming revenues are derived from the slot machines). The casino has 250 slot machines and 8 (14 as of December 31, 2001) table games including blackjack, roulette and Caribbean Stud. 2001 GAMING REVENUE AND POSITION DATA BY MARKET
Gaming Average Average Revenue Market Number % Of Number % Of (in $000's) Share% Of Mach. Total Of Tables Total --------------------------------------------------------------- CALEDON CASINO $ 5,892 6.7% 250 11.1% 14 14.9% Other (2 casinos) $ 86,504 93.3% 2,000 88.9% 78 85.1% --------------------------------------------------------------- WESTERN CAPE TOTAL $ 92,396 100.0% 2,250 100.0% 94 100.0% CENTURY CASINOS' PROPERTY IN CALEDON ("The Caledon Casino, Hotel & Spa") 2000 2001 ------------------------ Total Slot Revenue $ 2,838 $ 5,104 Average Number Of Slots 250 250 Average Win Per Slot Per Day 138 dollars 66 dollars
The Caledon Casino opened for business on October 11, 2000. It was in operation for 82 days in the year 2000. The decline in the average slot per day is largely due to the December 2001 opening of a major competitor in Cape Town, approximately one hour from Caledon, with approximately 1,400 slot machines and the devaluation of the Rand versus the U.S. dollar throughout 2001. The Company is focusing its marketing efforts on increasing the gaming revenue by increasing its market share. 12 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Employees Womacks Casino and Hotel - The Company employs approximately 200 persons in Cripple Creek, CO on an equivalent full-time basis, including cashiers, dealers, food and beverage service personnel, facilities maintenance staff, and accounting and marketing personnel. No labor unions represent any employee group. A standard package of employee benefits is provided to full-time employees along with training and job advancement opportunities. In March 1998, the Company adopted a 401(k) Savings and Retirement Plan for its employees. Caledon Casino Hotel & Spa - The Caledon Casino Hotel & Spa employs approximately 300 persons on an equivalent full-time basis, including cashiers, dealers, food and beverage service personnel, facilities maintenance staff, and accounting and marketing personnel. A standard package of employee benefits is provided to full-time employees along with training and job advancement opportunities. Hotel & casino employees are represented by the T.E.U.S.A. (Technical Employee Union of South Africa). Membership in the union is not mandatory and less than 50% of eligible employees are currently members. On November 24, 2001, the T.E.U.S.A. initiated a strike action against the hotel and casino. An application for a temporary interdict was granted by the Labour Court with cost to the union and union officials. Employees returned to work on December 15, 2001 and on January 29, 2002 the temporary interdict was made final. Seasonality Womacks Casino and Hotel - The Company's business in Cripple Creek, CO is at its highest levels during the tourist season (i.e., from May through September). Its base level (i.e., October through April) is expected to remain fairly constant although weather conditions during this period could have a significant impact on business levels in Colorado. Caledon Casino Hotel & Spa - The Company's business in Caledon is seasonal; the highest levels of business activity will occur in the holiday season in December. Caledon has a very mild climate and management is optimistic that it can maintain steady traffic to the Caledon Casino Hotel & Spa in the winter months (June through September) due to its enhanced historic hot springs facilities. Governmental Regulation Womacks Casino and Hotel - The Company's gaming operations are subject to strict governmental regulations at state and local levels. Statutes and regulations can require the Company to meet various standards relating to, among other matters, business licenses, registration of employees, floor plans, background investigations of licensees and employees, historic preservation, building, fire and accessibility requirements, payment of gaming taxes, and regulations concerning equipment, machines, tokens, gaming participants, and ownership interests. Civil and criminal penalties can be assessed against the Company and/or its officers or stockholders to the extent of their individual participation in, or association with, a violation of any of the state and local gaming statutes or regulations. Such laws and regulations apply in all jurisdictions within the United States in which the Company may do business. Management believes that the Company is in compliance with applicable gaming regulations. For purposes of the discussion below, the term "the Company" includes its applicable subsidiaries. The Colorado Limited Gaming Control Commission ("Commission") has adopted regulations regarding the ownership of gaming establishments by publicly held companies (the "Regulations"). 13 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) The Regulations require the prior clearance of, or notification to, the Commission before any public offering of any securities of any gaming licensee or any affiliated company. The Regulations require all publicly traded or publicly owned gaming licensees to comply with numerous regulatory gaming requirements including, but not limited to, notifying / filing with the Colorado Division of Gaming any proxy statements, lists of shareholders, new officers and directors of the Company, any shareholders obtaining 5% or more of the Company's common stock and any issuance of new voting securities. Management believes that the Company is in compliance with applicable gaming regulations. Other state regulatory agencies also impact the Company's operations, particularly its license to serve alcoholic beverages. Rules and regulations in this regard are strict, and loss or suspension of a liquor license could significantly impair, if not ruin, a licensee's operation. Local building, parking and fire codes and similar regulations could also impact the Company's operations and proposed development of its properties. Caledon Casino Hotel & Spa - Caledon's gaming operations are subject to strict regulations by the Western Cape Gambling and Racing Board under national and provincial legislation. Statutes and regulations require the Company to meet various standards relating to, among other matters, business licenses, licensing of employees, historic preservation, building, fire and accessibility requirements, payment of gaming taxes, and regulations concerning equipment, machines, tokens, gaming participants, and ownership interests. Civil and criminal penalties can be assessed against the Company and/or its officers to the extent of their individual participation in, or association with, a violation of any of these gaming statutes or regulations. Management believes that the Company is in compliance with applicable gaming regulations. Casino Millennium - Casino Millennium's gaming operations are subject to strict regulations by the Czech Republic under national legislation. Statutes and regulations require the Company to meet various standards relating to, among other matters, business licenses, building, fire and accessibility requirements, payment of gaming taxes, and regulations concerning equipment, machines, tokens, gaming participants, and ownership interests. Civil and criminal penalties can be assessed against the Company and/or its officers to the extent of their individual participation in, or association with, a violation of any of these gaming statutes or regulations. Management believes that the Company is in compliance with applicable gaming regulations. Silversea Cruise Ships - The casinos onboard the cruise ships only operate when they are in international waters. Therefore, the gaming operations are not regulated by any national or local regulatory body. However, the Company follows standardized rules and practices in the daily operation of the casinos. Item 2. Properties. - ------- ---------- The Company's administrative offices are located at its Womacks at 200 East Bennett Avenue, Cripple Creek, Colorado. See Item 1. "Business -- Property and Project Descriptions" herein for a description of the Company's other properties. See also Note 5, Long-Term Debt to the Consolidated Financial Statements for complete disclosure of the debt instruments which are secured by Company property. Item 3. Legal Proceedings. - ------- ------------------ The Company is not a party to, nor is it aware of, any pending or threatened litigation which, in management's opinion, could have a material adverse effect on the Company's financial position or results of operations. 14 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Item 4. Submission of Matters to a Vote of Security Holders. - ------- ------------------------------------------------------------ The 2001 annual meeting of the stockholders of the Company was held on June 1, 2001. At the annual meeting the two Class I directors to the Board, Robert Eichberg and Dinah Corbaci, were re-elected to the Board for a three year term. On this proposal to elect the Class I directors, the votes were: Robert Eichberg, 9,278,202 for, 0 (zero) against, and 5,785 abstained; Dinah Corbaci, 9,277,402 for, 0 (zero) against, and 6,585 abstained. No other proposals were brought for a vote of the stockholders. Item 5. Market for Common Equity and Related Stockholder Matters. - ------- ----------------------------------------------------------------- The common stock of the Company began trading in the NASDAQ SmallCap Market on November 10, 1993. The following table sets forth the low and high sale price per share quotations as reported on the NASDAQ Stock Market of the common stock for the periods indicated. These quotations reflect inter-dealer prices, without retail mark-up, mark down or commission and may not necessarily represent actual transactions. Actual prices may vary. Quarter Ended Low High - ------------------------------------------------- March 31, 2000 $0.97 $2.47 June 30, 2000 $1.50 $1.97 September 30, 2000 $1.44 $1.97 December 31, 2000 $1.50 $1.94 March 31, 2001 $1.63 $2.53 June 30, 2001 $1.69 $2.24 September 30, 2001 $1.65 $2.22 December 31, 2001 $1.86 $2.39 At December 31, 2001, the Company had approximately 100 shareholders of record of its common stock; management estimates that the number of beneficial owners is approximately 1,300. At the present time, management of the Company intends to use any earnings that may be generated to finance the growth of the Company's business. Accordingly, while payment of dividends rests within the discretion of the Board of Directors, no dividends have been declared or paid by the Company, and it does not presently intend to pay dividends. Item 6. Management's Discussion and Analysis of Financial Condition and Results - ------- ----------------------------------------------------------------------- of Operations - -------------- Business Environment and Risk Factors 15 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) The following discussion should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere herein. The Company's future operating results may be affected by various trends and factors beyond the Company's control. These include, among other factors, the competitive environment in which the Company operates, present dependence upon the Cripple Creek, Colorado and the South African gaming markets, changes in the rates of gaming-specific taxes, shifting public attitudes toward the socioeconomic costs and benefits of gaming, actions of regulatory bodies, dependence upon key personnel, the speculative nature of gaming projects the Company may pursue, risks associated with expansion, and other uncertain business conditions that may affect the Company's business. With the exception of historical information, the matters discussed below under the headings "Results of Operations" and "Liquidity and Capital Resources," may include forward-looking statements that involve risks and uncertainties. The Company cautions the reader that a number of important factors discussed herein, and in other reports filed with the Securities and Exchange Commission, could affect the Company's actual results and cause actual results to differ materially from those discussed in forward-looking statements. Results of Operations Cripple Creek, Colorado Womacks is located in Cripple Creek, Colorado. Net operating revenue, derived principally from its gaming operations, decreased marginally from $21,612 in 2000 to $21,022 in 2001. Womacks casino revenue decreased from $21,211 in 2000 to $20,645 in 2001, or 2.7%. During the first quarter of 2001, the Company undertook an extensive remodeling of the second floor of its property, transforming previously used gaming space into much needed hotel space. The number of gaming devices was reduced from an average of 627 during 2000 to an average of 593 in 2001. The construction was a necessary step towards the future expansion of gaming space to the rear of the property. The Company's share of the overall Cripple Creek market decreased from 17.9% in 2000 to 17.0% in 2001. Womacks Casino operated approximately 14.2% of the gaming devices in the Cripple Creek market in 2001, with an average win per day per machine of 107 dollars compared with a market average of 88 dollars. Gross margin for the Cripple Creek casino activities (casino revenues, net of applicable casino gaming incentives, less casino expenses) remained relatively flat at 69.4% compared to 70.0% a year earlier. Management continues to focus on the marketing of the casino through the expansion of the highly successful Gold Club. Management continues to place emphasis on further refining the product mix, upgrading both the interior of the facilities, as well as the slot machine mix. Management has recently introduced valet parking to its list of customer benefits, expanding on the convenient and expansive parking facilities currently provided by the casino. Food and Beverage revenue continues to increase. Revenues in 2001 increased to $1,132 from $1,002 in 2000, or 12.9% as the Company continues to focus on improving service. The cost of food and beverage promotional allowances, which are included in casino costs, increased from $829 in 2000 to $950 in 2001. Hotel revenue also increased to $144 from $81, or 77.7% as the result of introducing 10 new luxury rooms in July of 2001. General and administrative expenses decreased from $5,127 in 2000 to $4,056 in 2001, or 26.4%. Expenses associated with the cost of check processing totaling $229 have been reclassified to casino cost. In addition, the cost of casino management allocated from corporate operations has been reduced by $430 in 2001. Additional reductions in payroll cost further reduced the administrative expenses by $217. Depreciation decreased from $1,899 in 2000 to $1,655 in 2001. Amortization remained unchanged at $1,342 in both 2000 and 2001. 16 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Interest expense, including debt issuance cost, decreased from $1,510 in 2000 to $1,433 in 2001. In April 2000, the Company borrowed $3.8 million under the RCF to fund its investment in Caledon, South Africa. An additional $1,800 was borrowed in November 2000 to fund the acquisition of an additional 15% interest in the South African operation. The investment has resulted in the incursion of approximately $926 in cumulative interest charged to the Company's Cripple Creek operations. The weighted-average interest rate on the borrowings under the RCF, including effects of the swap agreements, has increased from 8.58% in 2000 to 9.04% in 2001. The Cripple Creek segment recognized income tax expense of $2,697 in 2001 versus $2,262 in 2000 due to an increase in pre-tax earnings. South Africa The acquisition of Caledon Casino Hotel and Spa has contributed significant revenues to the consolidated results of the Company. The Caledon Casino Hotel and Spa began operations in October 2000. Net operating revenue provided increased from $4,155 in 2000 to $7,408 in 2001. Deterioration in the Rand versus the Dollar over the span of the year has had a negative impact on the reported revenues. The Caledon Casino Hotel and Spa also faces intense competition from a significantly larger casino operation in Cape Town, S.A. approximately one hour away. Gross margin for the Caledon casino activities (casino revenues, less casino expenses) decreased to 56.3% from 71.0% a year earlier. Management has reduced expenses from an average of $426 per month in 2000 to an average of $224 per month in 2001 to offset the reduced level of revenue. By concentrating on increasing the gaming revenues, management feels it can return the casino margin to a more acceptable level. Food and beverage revenue provided by a full year of operation increased to $766 in 2001 from $375 in 2000, or 104%. Hotel revenue provided by a full year of operation increased to $611 in 2001 from $176 in 2000. General and administrative expenses increased from $1,232 in 2000 to $1,807 in 2001, or 46.7%. The 2000 results include approximately $624 in one time costs associated with the start up of the casino in October 2000. Depreciation expense incurred in South Africa increased from $290 in 2000 to $1,219 in 2001 as a result of a full year of operation and early 2001 construction of the new spa. The amortization of goodwill resulting from the Company's late 2000 purchase of an additional 15% interest resulted in a charge of $75 in 2001. Interest expense, including debt issuance cost, increased from $367 in 2000 to $883 in 2001. As of December 31, 2001, CCAL has incurred approximately $3.9 million in debt at the exchange rate as of December 31, 2001 to fund the capital improvements to the Hotel, Casino & Spa. The weighted-average interest rate on the borrowings under the PSG loan agreement is 16.9% in both 2000 and 2001 The South African segment recognized an income tax benefit of $157 in 2001 versus an income tax expense of $193 in 2000. Cruise Ships Beginning in the fourth quarter of 2000, the Company installed casino operations on four six-star vessels belonging to Silversea Cruises. Net operating revenue increased from $189 in 2000 to $891 in 2001. Gross margin for the casino activities (casino revenues, less casino expenses) decreased to 23.9% from 81.6% a year earlier. Following the tragedy of September 11, 2001 attacks 17 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) on the World Trade Center, the cruise ships have seen a substantial decrease in the amount of passenger traffic. In October 2001, Silversea Cruises removed one of the four ships from service. This, combined with the cost of transporting personnel to and from the ships, along with the cost of transporting new equipment and supplies for installation of gaming equipment on the Residensea, has severely impacted the profitability in the fourth quarter. The Company expects these operations to rebound in 2002 as the travel industry begins to recover. Depreciation expense has increased from $6 in 2000 to $47 in 2001 as a result of a full year of operation. $82 has been allocated to the cruise ships for income taxes in the year 2001. No allocation was made in 2000 as the profits in the segment were not material. Corporate & Other Net operating revenues consist principally of management fees earned from operating Casino Millennium in Prague, Czech Republic which increased from $177 in 2000 to $205 in 2001. Overall net operating revenues reported by the segment decreased from $276 in 2000 to $255 in 2001. Depreciation increased slightly from $216 in 2000 to $226 in 2001. General and administrative expense increased from $1,509 in 2000 to $1,675 in 2001, or 11.0%, Other Income for 2001 includes a charge of $57 for the write-down in value of non-operating property and land held by the Company in Nevada. Included in 2000 is $1,380 in income from the sale of the Company's casino rights in an Indiana riverboat gaming license. Liquidity and Capital Resources Cash and cash equivalents totaled $3.3 million (including $334 of restricted cash) at December 31, 2001, and the Company had a net deficit working capital of $677. Additional liquidity may be provided by the Company's revolving credit facility ("RCF") with Wells Fargo Bank, under which the Company had a total commitment of $22.4 million and unused borrowing capacity of approximately $10.6 million at December 31, 2001. For the year ended December 31, 2001, cash provided by operating activities was $6.4 million compared with $7.1 million in the prior-year period. Cash used by investing activities was $3.2 million for the year 2001 and included $920 in cost related to the construction and furnishing of new hotel space at Womacks, including the associated cost of reconstructing the casino floor, $400 towards the expansion of the casino at the rear of the property that is expected to be completed in 2002 which will provide additional gaming space as well as hotel rooms, $1.6 million towards improvements at the Caledon Casino Hotel and Spa in South Africa and the balance of $277 due to expenditure for other long lived assets. Cash used in financing activities in 2001 consisted of net repayments of $6.8 million under the RCF with Wells Fargo, net repayments of $417 under the loan agreement with PSG, repurchase of Company's stock, on the open market, with a cost of $606, and other net payments of $613. Effective April 26, 2000, the Company and Wells Fargo Bank entered into an amended and restated credit agreement, which increased the borrowing commitment as of that date from $17.2 million to $26.0 million and extended the maturity date of the RCF until April 2004. In August of 2001, the agreement was further amended to give the Company more flexibility in using RCF funds for projects. 18 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) In April 2000, Century Casinos Caledon (Pty) Ltd. ("CCAL") was awarded a gaming license for a casino at a 92-room resort hotel and spa in Caledon, province of the Western Cape, South Africa, and the Company's subsidiary, Century Casinos Africa (Pty) Ltd ("CCA"), acquired a 50% equity interest in CCAL. The Company made an initial equity investment of approximately $1,534 in, and loans totaling approximately $2,302 to, CCAL with borrowings obtained under the Company's RCF. CCA has a ten-year casino management agreement with CCAL, which agreement may be extended at the Company's option for multiple ten-year periods. In November 2000, the Company, through CCA, acquired an additional 15% of CCAL, raising its ownership in CCAL to 65%. The acquisition of the additional interest was completed with the payment of approximately $1,800 by Century through CCA to COIL in exchange for 15% of the total shares of common stock of CCAL (valued at approximately $1,200) and a shareholder loan to CCAL previously held by COIL (with a value of approximately $600). In April 2000, CCAL entered into a loan agreement with PSG Investment Bank Limited ("PSGIB"), which provides for a principal loan of approximately $3,919 at the exchange rate as of December 31, 2001 to fund development of the Caledon project. In April 2001, CCAL entered into an addendum to the loan agreement in which PSGIB provided CCAL with a standby facility in the amount of approximately $375 at the exchange rate as of December 31, 2001. Under the original terms of the agreement CCAL made its first principal payment in December 2001, based on a repayment schedule that required semi-annual installments continuing over a five-year period. On March 26, 2002, CCAL and PSGIB entered into an amended agreement that changed the repayment schedule to require quarterly installments beginning on March 26, 2002 and continuing over the remaining term of the original 5 year agreement. Outstanding borrowings under the standby facility bear interest at 15.1%. As of December 31, 2001, the entire amount has been advanced against the loan and the standby facility. The Company has a 20-year agreement with Casino Millennium a.s., a Czech company, to operate a casino in the five-star Marriott Hotel, in Prague, Czech Republic. The hotel and casino opened in July 1999. The Company provides casino management services in exchange for ten percent of the casino's gross revenue and leases gaming equipment, with an original cost of approximately $1.3 million, to the casino for 45% of the casino's net profit. In January 2000, the Company entered into a memorandum of agreement with B. H. Centrum, a Czech company which owns the hotel and casino facility, to acquire the operations of the casino by either a joint acquisition of Casino Millennium a.s. or the formation of a new joint venture. The transaction, if completed, would result in the Company having a 50% equity interest in Casino Millennium. Any funding required by the Company to consummate this transaction would be met through a combination of RCF borrowings, existing liquidity and anticipated cash flow. The acquisition is expected to be completed in 2002, subject to certain contingencies and contract conditions, and is expected to cost approximately $200 in cash plus contributed assets. The Company's Board of Directors has approved a discretionary program to repurchase up to $5 million of the Company's outstanding common stock. The Board believes that the Company's stock is undervalued in the trading market in relation to both its present operations and its future prospects. During 2001, the Company purchased 340,000 additional shares at an average cost per share of $2.03. Beginning in 1998 and through 2001, the Company has repurchased a total of 2,189,800 shares at a total cost of approximately $2.9 million. Management expects to continue to review the market price of the Company's stock and repurchase shares as appropriate, with funds coming from existing liquidity or borrowings under the RCF. The Company is the contracted casino management partner of, and, as of September 2001, through its South African subsidiary, CCA, entered into an agreement to secure a 50% ownership interest in Rhino Resort Ltd. ("RRL"), a consortium which includes Silverstar Development Ltd. ("Silverstar"). 19 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) RRL has submitted an application for a proposed hotel/casino resort development in the greater Johannesburg area of South Africa at a cost of approximately 400 million Rand ($33.4 million at the exchange rate as of December 31, 2001). The dollar value of the proposed development fluctuates with the USD/Rand exchange rate. Upon favorable resolution of the pending court action initiated by a competing casino, Tsogo Sun Holdings, the Company, as part of the September 2001 agreement, as amended, would be required to make an equity investment of approximately 50 million Rand or $4.2 million at the exchange rate as of December 31, 2001. This funding requirement would be met through borrowings under the RCF. In the fourth quarter 2001, Womacks began a 6,022 square foot expansion. Approximately half of the space will provide additional gaming for approximately 60 slot machines on the street level. The other half will increase the "back of house" area. Contracts for the project totaling $1.5 million have been secured in the fourth quarter 2001. The total construction cost, including additional slot machines, is expected to be $2.5 million, of which $0.4 million has been spent in the fourth quarter 2001. The project is expected to be completed by the end of 2002. Subsequent to December 31, 2001, the Company, through a subsidiary, has made a conditional offer to purchase certain real estate in Cripple Creek, Colorado from a non-affiliated entity. This offer has been accepted but certain conditions have not yet been fulfilled by the seller. In the event that all conditions are met and the transaction is completed, the cash required will be in excess of $1.0 million. Management believes that the Company's cash and working capital at December 31, 2001, together with expected cash flows from operations and borrowing capacity under the RCF, will be sufficient to fund its anticipated capital expenditures, pursue additional business growth opportunities for the foreseeable future, and satisfy its debt repayment obligations. Critical Accounting Policies In accordance with recent Securities and Exchange Commission guidance, those material accounting policies that we believe are the most critical to an investor's understanding of the Company's financial results and condition and/or require complex management judgment have been expanded and are discussed below. Information regarding the Company's other accounting policies is included in Note 2 to the Company's consolidated financial statements for the year ended December 31, 2001. Revenue Recognition - Casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses. Management and consulting fees are recognized as revenue as services are provided. The incremental amount of unpaid progressive jackpot is recorded as a liability and a reduction of casino revenue in the period during which the progressive jackpot increases. Goodwill - The Company's goodwill results from the acquisitions of casino and hotel operations and is being amortized on a straight-line basis over estimated useful lives of ten to fifteen years. If impairment indicators exist, such as continued operating losses, increased competition in a market, etc., we evaluate goodwill for impairment by comparing the unamortized balance of goodwill to the undiscounted future cash flows of the related assets. Estimated undiscounted future cash flows are based on historical results to-date, modified for the elimination of intercompany management fees and for a conservative estimate for planned business growth. We adjust goodwill if impairment is indicated, to its fair value based on the present value of future cash flows at the Company's incremental borrowing rate. Under existing accounting standards, the Company's assessment of the goodwill recorded for all of its acquisitions indicates that no impairment exists as of December 31, 2001. In June 2001, the Financial Accounting Standards Board (the "FASB") adopted SFAS No. 142 "Goodwill and Intangible Assets". SFAS No. 142 addresses the methods used to capitalize, amortize 20 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) and to assess impairment of intangible assets, including goodwill resulting from business combinations accounted for under the purchase method. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, except that goodwill and intangible assets other than goodwill acquired after June 30, 2001 shall be amortized or not amortized in accordance with SFAS No. 142. Included in assets at December 31, 2001 is unamortized goodwill of approximately $7,709. Upon adoption of SFAS No. 142, the Company will no longer amortize goodwill, decreasing amortization expense by approximately $1,425 per year. The Company will be required to assess goodwill for impairment in the year of adoption and at least annually thereafter. The Company will not be able to determine the full effect of these pronouncements on its financial position or results of its operations until it is able to complete its analysis of the impairment provisions of the new standards. In the event the Company's analysis under the new guidance indicates goodwill is impaired, it will be required to record a charge to its earnings in the year of adoption. Foreign Exchange - Current period transactions affecting the profit and loss of operations conducted in foreign currencies are valued at the average exchange rate for the period in which they are incurred. Except for equity transactions and balances denominated in U.S. dollars, the balance sheet is revalued based on the exchange rate at the end of the period. Item 7. Financial Statements. - ------- --------------------- See "Index to Financial Statements" on page F-1 hereof. Item 8. Changes In and Disagreements With Accountants on Accounting and - ------- ------------------------------------------------------------------- Financial Disclosure. --------------------- There were no changes in accountants, nor any disagreements on accounting and financial disclosure with Grant Thornton LLP, the Company's independent auditors. 21 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Item 9. Directors, Executive Officers, Promoters and Control Persons; - ------- ------------------------------------------------------------------- Compliance with Section 16(a) of the Exchange Act. -------------------------------------------------------- Information Concerning Directors And Executive Officers Information regarding the Board of Directors and executive officers of the Company, as of December 31, 2001, is as follows: Officer or Name Age Positions Held Director Since ---- --- -------------- -------------- Erwin Haitzmann 48 Chairman of the Board & March 1994 Chief Executive Officer Peter Hoetzinger 39 Vice Chairman of the Board March 1994 & President James D. Forbes 44 Director March 1994 Robert S. Eichberg 55 Director January 1997 Gottfried Schellmann 48 Director January 1997 Dinah Corbaci 47 Director April 2000 Larry Hannappel 49 Chief Accounting Officer, October 1999 Secretary & Treasurer Erwin Haitzmann holds a Doctorate and a Masters degree in Social and Economic Sciences from the University of Linz, Austria (1980), and has 26 years of casino gaming experience ranging from dealer (commencing in 1975) through various casino management positions. Mr. Haitzmann has been employed full-time by the Company since May 1993. Peter Hoetzinger received a Masters degree from the University of Linz, Austria, in 1986. He thereafter was employed in several managerial positions in the gaming industry with Austrian casino companies. Mr. Hoetzinger has been employed full-time by the Company since May 1993. James D. Forbes, from 1979 to 1993, was employed in several positions in the gaming industry with British and Austrian casino companies. Mr. Forbes has been employed full-time by the Company since February 1993. Robert S. Eichberg graduated from Bradley University in 1968 with a B.S. Degree in Accounting and is a Certified Public Accountant. He was employed by the public accounting firm of Deloitte & Touche, LLP from 1974 to 1994, ending his tenure there as Tax Partner. From 1994 to 1996 he served as Tax Partner for the public accounting firm Price Bednar LLP, before joining the public accounting firm of Causey, Demgen & Moore, Inc. in September of 1996, where he has been employed since, as shareholder and President. Gottfried Schellmann graduated from University of Vienna with a law degree and is a certified 22 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) tax advisor in Austria. After having worked for several firms, including KPMG Germany as tax and accounting manager, he formed Schellmann & Partner in 1993, where he has been employed since, which specializes in tax and accounting work for provinces and municipalities in Austria. He is a member of the International Bar Association. He is also one of the main co-authors, together with certain officers of the Austrian Ministry of Finance, of the Austrian corporate tax code. Dinah Corbaci holds a Doctorate degree in Law from the University of Salzburg, Austria (1981). She joined IBM Austria in 1984, where she served As Account Manager for large government customers. Since 1995, she has Shifted her focus to e-business for large IBM mainframe customers and has been working in the area of e-commerce since. Larry Hannappel graduated from National College, Rapid City, South Dakota (1976) with a B.S. Degree in Accounting. From 1976 to 1979, he was employed by the public accounting firm of Hamma & Nelson. From 1979 to 1994, he served in various financial management capacities in manufacturing and gaming. Mr. Hannappel has been employed full-time by the Company since May, 1994. He became Chief Accounting Officer in October 1999, was appointed as Secretary of the Company in March, 2000 and appointed as Treasurer in June 2001. There are no family relationships between or among the Company's executive officers and directors. Certain Information Regarding the Board of Directors During 2001, on several occasions during the year, the members of the Board of Directors executed unanimous written consents in lieu of meetings, in accordance with Delaware law. The Audit Committee of the Board of Directors (consisting of Messrs. Eichberg and Schellmann, and Dr. Corbaci), which assesses the Company's system of internal controls and assists in considering the recommendation and performance of the Company's independent accountants, have held one meeting between January 1, 2001 and December 31, 2001. The Board of Directors does not have a separate Nominating Committee. Compliance With Section 16(A) Of The Securities Exchange Act Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who beneficially own more than 10% of its outstanding common stock, to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the Company's knowledge (based solely on review of the copies of such reports furnished to the Company and representations that no other reports were required, during the fiscal year ended December 31, 2001), all Section 16(a) filing requirements applicable to its officers and directors were complied with- in a timely manner. 23 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Item 10. Executive Compensation. - -------- ----------------------- The table below sets forth executive compensation during 1999, 2000 and 2001 to the Chairman of the Board and Chief Executive Officer of the Company, Erwin Haitzmann, and to all other executive officers who received greater than $100,000 in compensation in 1999, 2000 or 2001. Summary Compensation Table
Awards Payouts --------------- Name & Other (c) Restricted Securities All (D) Principal Salary (a) Bonus(b) Annual Stock Underlying LTIP Other Position Year ($) ($) Compensation Awards Options/SARs (#) Payouts Compensation($) - -------------------------------------------------------------------------------------------------------------------------- Erwin Haitzmann, Chairman of the Board and 2001 133,944 248,993 8,801 Chief Executive 2000 150,000 352,000 9,738 Officer 1999 157,519 295,000 59,228 Peter Hoetzinger, Vice Chairman of 2001 160,975 223,484 5,452 the Board and 2000 150,000 351,500 8,411 President 1999 157,519 295,000 57,812 James D. Forbes, 2001 150,000 2,685 39,000 2,250 Director 2000 150,000 182,240 39,445 2,250 1999 167,479 118,000 56,342 2,250 Larry Hannappel, Chief Accounting 2001 80,508 50,000 1,374 Officer & 2000 80,542 30,000 1,291 Secretary 1999 65,545 20,000 1,066
(a) Salary for 2001 includes $100,000 paid to Flyfish Casino Consulting AG for the benefit of Mr. Haitzmann's family foundation and $100,000 paid to Focus Casino Consulting AG for the benefit of Mr. Hoetzinger's family foundation pursuant to separate management agreements with the Company entered into on March 1, 2001 and amended October 11, 2001. See Item 12, Certain Relationships and Related Transactions. On October 12, 2001 the Company entered into separate Employment Agreements with Mr. Haitzmann and Mr. Hoetzinger. The terms of the agreements are to continue until December 31, 2006 and are automatically renewable for successive periods of five years each unless sooner terminated by either the Company or the employee. The agreements call for an annual salary of $24,000 with annual increases and bonuses plus other incentives as determined by the Compensation Committee of the Board of Directors. The Compensation Committee is required to review the salaries on an annual basis. The agreements provide for termination payments to be made for a period of six (6) months if the agreement is terminated by the Company without cause, or for payment of three times the employee's annual salary and average bonus and complete vesting (including employee's trusts and foundations) in unvested stock and stock options if the 24 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) termination occurs (a) after Change of Control of the Company, or (b) by the employee for cause. If the termination occurs after a Change of Control or by the employee for cause the employee shall have the option to either (a) receive an immediate payment of the market value of 100% of his stock and the higher of (i) the value according to the Black Scholes model or (ii) the in-the-money value of his stock options/warrants, or (b) receive an immediate cash bonus from the Company enabling him, after full payment of all of employee's taxes on such cash bonus, to exercise 100% of his stock options/warrants, and to continue to hold his stock, with the right to "put" or sell the stock back to the Company for cash at market value. . (b) Mr. Haitzmann's bonus for 2001 was paid to Flyfish Casino Consulting AG for the benefit of Mr. Haitzmann's family foundation and Mr. Hoetzinger's bonus for 2001 was paid to Focus Casino Consulting AG for the benefit of Mr. Hoetzinger's family foundation. See Item 12, Certain Relationships and Related Transactions. (c) Amounts for 2001 and 2000, respectively, include reimbursement for estimated income taxes, associated with perquisites, of $482 and $3,580 for Mr. Haitzmann; $0 and $2,456 for Mr. Hoetzinger; $7,800 and $7,317 for Mr. Forbes. (d) Consists solely of Company's matching contributions to the 401(k) Savings and Retirement Plan. Stock Option Grants In Last Fiscal Year There were no grants of stock options during 2001 to purchase shares of common stock of the Company to any of the Company's executive officers. Aggregated Options Exercised In Last Fiscal Year And Fiscal Year- End Option Values The following table sets forth the aggregate options held by certain executive officers of the Company. No options were exercised by the specified officers in 2001.
Number of Securities Value of Unexercised Underlying Options In-the-Money Options Shares Acquired Value at December 31, 2001 at December 31, 2001 Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable - -------------------------------------------------------------------------------------------------------- Erwin Haitzmann, Chairman of the Board and Chief Executive Officer 1,300,000 / -0- (a) $1,224,500 / -0- (c) Peter Hoetzinger, Vice Chairman of the Board and President 793,000 / -0- (b) $ 774,320 / -0- (c) James D. Forbes, Director 618,000 / -0- $ 577,320 / -0- (c) Larry Hannappel, Chief Accounting Officer & Secretary 37,500 / -0- $ 31,550 / -0- (c)
25 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) (a) Includes 950,000 options held by The Haitzmann Family Foundation. See Item 12, Certain Relationships and Related Transactions. (b) Includes 543,000 options held by The Hoetzinger Family Foundation. See Item 12, Certain Relationships and Related Transactions. (c) Based on the closing price of ($2.24) of the Company's Common Stock on the NASDAQ Stock Market on December 31, 2001. Directors who are full-time employees receive no compensation for their services as directors. With the exception of Messrs. Eichberg and Schellmann and Mrs. Corbaci, all of the Company's directors are full-time employees. Messrs. Eichberg and Schellmann and Mrs. Corbaci, the outside directors of the Company, are being compensated for their services as follows: (a) Stock options - In 1998, upon joining the Board of Directors, both Eichberg and Schellmann received options to purchase 10,000 shares of the Company's common stock. The options have a five-year term and are exercisable at $0.938 per share. In 1999, both Eichberg and Schellmann received options to purchase an additional 10,000 shares of the Company's stock, which have a four-year term and are exercisable at $.75 per share. In February, 2000, both Eichberg and Schellmann received options to purchase an additional 20,000 shares of the Company's stock; these options have a five-year term and are exercisable at $1.00 per share. In April, 2000, Mrs. Corbaci received options to purchase 20,000 shares of the Company's stock, which have a five-year term and are exercisable at $1.75 per share. (b) Compensation, Reimbursement - The outside directors receive $1,000 per Board or committee meeting attended and the Company will pay for reasonable expenses incurred in conjunction with those meetings. In addition, the outside directors receive $1,000 per gaming application filed with gaming regulators to compensate them for their time spent. 26 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Item 11. Security Ownership of Certain Beneficial Owners and Management - -------- -------------------------------------------------------------------- The following table sets forth information as of December 31, 2001, concerning record common stock ownership by beneficial owners of five percent or more of the Company's common stock and the officers and directors of the Company. All of the named persons below, other than Thomas Graf and Lloyd I. Miller, III, are officers or directors of the Company.
Title Name and Address of Amount and Nature of Percent of of Class Beneficial Owner Beneficial Ownership Class - ------------------------------------------------------------------------------------------ Common Stock, Erwin Haitzmann $.01 par value 200-220 E. Bennett Ave. Cripple Creek, CO 80813 1,946,669 (a) 11.7% Common Stock, Peter Hoetzinger $.01 par value 200-220 E. Bennett Ave. Cripple Creek, CO 80813 1,164,728 (b) 7.0% Common Stock, James D. Forbes $.01 par value 1 Nerina Street Caledon 7230, South Africa 989,264 (c) 6.0% Common Stock, Robert S. Eichberg $.01 par value 1801 California St. Ste 4650 Denver, CO 80202 50,000 (d) (h) Common Stock, Gottfried Schellmann $.01 par value Lerchengasse 2 2340 Moedling, Austria, Europe 89,000 (e) (h) Common Stock, Dinah Corbaci $.01 par value Schlossgasse 1 A-1050 Wien, Austria, Europe 20,000 (f) (h) Common Stock, Larry Hannappel $.01 par value 200-220 E. Bennett Ave. Cripple Creek, CO 80813 42,500 (g) (h) Common Stock, All Officers and Directors $.01 par value as a Group (seven persons) 4,302,161 25.9% Common Stock, Thomas Graf $.01 par value Liechtensteinstrasse 54 A-2344 Maria Enzersdorf, Austria, Europe 2,494,300 15.0% Common Stock, Lloyd I. Miller, III $.01 par value 4550 Gordon Drive Naples, FL 34102 2,495,123 15.0%
(a) Includes: (i) a non-statutory stock option for 350,000 shares exercisable at $0.75 per share; (ii) a non-statutory stock option for 950,000 shares exercisable at $1.50 per share, indirectly owned 27 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) and held by The Haitzmann Family Foundation, which is managed by three independent trustees; and (iii) 550,000 shares indirectly owned and held by The Haitzmann Family Foundation. During 2001 an incentive stock option for 130,000 shares exercisable at $1.50 per share and an incentive stock option for 183,333 shares exercisable at $0.75 per share were converted to non-statutory stock options with the same terms and conditions as the original incentive stock options; further the non-statutory stock options in (ii) above were transferred from Mr. Haitzmann's ownership during 2001 with the same terms and conditions as the original options. Neither the conversions nor the transfer were additional option grants during 2001. (b) Includes: (i) a non-statutory stock option for 250,000 shares exercisable at $0.75 per share; (ii) a non-statutory stock option for 543,000 shares exercisable at $1.50 per share, indirectly owned and held by The Hoetzinger Family Foundation, which is managed by three independent trustees; and (iii) 100,000 shares held by Mr. Hoetzinger's spouse; and (iv) 143,728 shares indirectly owned and held by The Hoetzinger Family Foundation. During 2001 an incentive stock option for 130,000 shares exercisable at $1.50 per share and an incentive stock option for 183,333 shares exercisable at $0.75 per share were converted to non-statutory stock options with the same terms and conditions as the original incentive stock options; further the non-statutory stock options in (ii) above were transferred from Mr. Hoetzinger's ownership during 2001 with the same terms and conditions as the original options. Neither the conversions nor the transfer were additional option grants during 2001. (c) Includes: (i) an incentive stock option for 130,000 shares exercisable at $1.50 per share; (ii) an incentive stock option for 160,000 shares exercisable at $0.75 per share; and (iii) a non-statutory stock option for 328,000 shares exercisable at $1.50 per share. (d) Includes: (i) an option for 10,000 shares exercisable at $0.938 per share; (ii) an option for 10,000 shares exercisable at $0.75 per share; and (iii) an option for 20,000 shares exercisable at $1.00 per share. (e) Includes:(i) an option for 10,000 shares exercisable at $0.938 per share; (ii) an option for 10,000 shares exercisable at $0.75 per share; and (iii) an option for 20,000 shares exercisable at $1.00 per share. (f) Includes an option for 20,000 shares exercisable at $1.75 per share. (g) Includes:(i) an incentive stock option for 10,000 shares exercisable at $0.75 per share; (ii) an incentive stock option for 22,500 shares exercisable at $1.50 per share; and (iii) an incentive stock option for 5,000 shares exercisable at $2.25 per share. (h) Less than 1%. Item 12. Certain Relationships and Related Transactions. - -------- -------------------------------------------------- At December 31, 2001, the Company had an unsecured note payable that matures on April 1, 2004, in the principal amount of $380,000 to Thomas Graf, a founding stockholder of the Company. On March 1, 2001, as amended on October 11, 2001, the Company entered into separate management agreements with Focus Casino Consulting AG, a Swiss corporation, to secure the 28 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) services of Mr. Hoetzinger, and with Flyfish Casino Consulting AG, a Swiss corporation, to secure the services of Mr. Haitzmann, to provide executive casino management services to the Company through December 31, 2005, and for five (5) year renewable periods thereafter, unless sooner terminated by them or by the Company. Each of these management agreements provides for an annual base management fee of $100,000, plus such annual increases and bonuses, and such other incentives, benefits and compensation as may be awarded to them, respectively, by the Compensation Committee of the Board of Directors of the Company. Payments to each of these management companies are included in the Executive Compensation Table, Item 10. Each of the management fees will be reviewed annually by the Compensation Committee. The management agreements further provide for termination payments to be made for a period of six (6) months if the management agreement is terminated by the Company without cause, or for a payment of three times the management company's annual fee and average bonus if the termination occurs (a) after a Change of Control of the Company, or (b) by the management company, for cause. Both Mr. Haitzmann and Mr. Hoetzinger are Austrian citizens, and have established Austrian trusts (The Haitzmann Family Foundation and The Hoetzinger Family Foundation, respectively) to hold, on behalf of their respective families, a certain portion of their interests in the Company. (See Item 11. Security Ownership of Certain Beneficial Owners and Management) There have been no transactions with management, except as otherwise disclosed herein, since the date of the Company's last annual meeting on June 12, 2001, and the transactions disclosed in the Proxy Statement for that meeting. Item 13. Exhibits and Reports on Form 8-K. - -------- ------------------------------------- a. Exhibits Filed Herewith or Incorporated by Reference to Previous -------------------------------------------------------------------- Filings with the Securities and Exchange Commission: ----------------------------------------------------------- 1. The following exhibits were included with the filing of the Alpine's Form 10-KSB for the fiscal year ended December 31, 1993 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.14 Plan of Reorganization and Agreement Among Alpine Gaming, Inc., Alpine Acquisition, Inc., and Century Casinos Management, Inc. - Filed with Form 8-K dated December 24, 1993 and incorporated by reference therein. 10.15 Amendments One, Two, and Three to Plan of Reorganization and Agreement Among Alpine Gaming, Inc., Alpine Acquisition, Inc., and Century Casinos Management, Inc. 2. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1995 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 3.1 Certificate of Incorporation (filed with Proxy Statement in respect of 1994 Annual Meeting of Stockholders and incorporated herein by reference). 3.2 Bylaws (filed with Proxy Statement in respect of 1994 Annual Meeting of Stockholders and incorporated herein by reference). 29 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) 10.51 Asset Purchase Agreement dated as of September 27, 1995 by and among Gold Creek Associates, L.P., WMCK Acquisition Corp., and Century Casinos, Inc., Including Exhibits and Schedules, along with First Amendment thereto. 10.57 Stock Purchase Agreement dated December 21, 1995 between Switzerland County Development Corp. ("Buyer") and Century Casinos Management, Inc., and Cimarron Investment Properties Corp. ("Sellers"). 10.58 Consultancy Agreement - Chalkwell Limited. 3. The following exhibits were filed with the Form 8-K Current Report dated July 1, 1996 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.60 Promissory Note dated March 19, 1992, made by Chrysore, Inc. in the original amount of $1,850,000 payable to R & L Historic Enterprises, together with Assignment dated September 14, 1992 of said Promissory Note to TJL Enterprises, Inc. and Assignment dated May 16, 1996 of said Promissory Note to Century Casinos, Inc. 10.61 Promissory Note dated July 1, 1996, made by WMCK Acquisition Corp. in the original principal amount of $5,174,540 payable to Gold Creek Associates, L.P., together with Guaranty dated July 1, 1996, of said Promissory Note by Century Casinos, Inc. 10.62 Building Lease dated as of July 1, 1996, among TJL Enterprises, Inc., WMCK Acquisition Corp. and Century Casinos, Inc., together with Memorandum of Building Lease with Option to Purchase dated as of July 1, 1996, among the same parties. 10.63 Four Party Agreement, Assignment and Assumption of Lease, Consent to Assignment of Lease, Confirmation of Option Agreement and Estoppel Statements dated as of July 1, 1996, among Harold William Large, Teller Realty, Inc., Gold Creek Associates, L.P., and WMCK Acquisition Corp. 10.64 Consulting Agreement dated as of July 1, 1996, between WMCK Acquisition Corp. and James A. Gulbrandsen. 10.65 Consulting Agreement dated as of July 1, 1996, between WMCK Acquisition Corp. and Gary Y. Findlay. 4. The following exhibit was filed with the Form 10-QSB for the quarterly period ended March 31, 1997 and is incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.68 Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"). 30 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) 5. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1997 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.69 First Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 11, 1997. 10.70 Second Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated January 28, 1998. 6. The following exhibits were filed with the Form 10-QSB for the quarterly period ended June 30, 1998 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.71 Termination of Stock Transfer and Registration Rights Agreement dated May 1, 1998, between Century Casinos, Inc. and Gary Y. Findlay 10.72 Promissory Note dated April 30, 1998, between Century Casinos, Inc. and Gary Y. Findlay 10.73 Termination of Stock Transfer and Registration Rights Agreement dated June 2, 1998, between Century Casinos, Inc. and James A. Gulbrandsen 10.74 Promissory Note dated June 2, 1998, between Century Casinos, Inc. and James A. Gulbrandsen 10.76 Casino Consulting Agreement dated March 25, 1998, by and between Rhodes Casino S.A., Century Casinos, Inc. and Playboy Gaming International Ltd. 7. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1998 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.77 Third Amendment to the Credit Agreement dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 4, 1998. 10.78 Parking Lease - Option to Purchase dated June 1, 1998, between the City of Cripple Creek ("Lessor") and WMCK Venture Corporation ("Lessee") 8. The following exhibits were filed with the Form 10-QSB for the quarterly period ended March 31, 1999 and are incorporated herein by reference: 31 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) Exhibit No. Description ------------ ----------- 10.79 Casino Services Agreement dated January 4, 1999 by and between Casino Millennium a.s., Century Casinos Management, Inc. and B.H. Centrum a.s. 10.80 Option to Purchase Real Property dated March 25, 1999, by and between Robert J. Elliott ("Optionor") and WMCK Venture Corp. ("Optionee"). 10.81 Letter Amendment to Note Agreement dated April 1, 1999, by and between Century Casinos, Inc. and Thomas Graf 9. The following exhibit was filed with the Form 10-QSB for the quarterly period ended June 30, 1999 and is incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.82 Master Lease Agreement dated January 4, 1999 by and between Casino Millennium a.s. and Century Management und Beteiligungs GmbH 10. The following exhibit was filed with the Form 10-QSB for the quarterly period ended September 30, 1999 and is incorporated by reference: Exhibit No. Description ------------ ----------- 10.83 Waiver and Release and Consulting Agreement dated October 15, 1999 by and between Norbert Teufelberger and Century Casinos, Inc. 11. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 1999 and are incorporated herein by reference: Exhibit No. Description ------------ ----------- 10.84 Marketing and Investor Relations Agreement, dated November 5, 1999, by and between Century Casinos, Inc. and advice! Investment Services GmbH, and related Warrant Agreement 10.85 Fourth Amendment to the Credit Agreement, dated as of March 31, 1997, between Wells Fargo Bank, N.A. ("Lender"); WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. ("Borrowers"); and Century Casinos, Inc. ("Guarantor"), dated November 15, 1999 10.86 Casino Management Agreement, dated December 3, 1999, by and between Caledon Casino Bid Company (Pty) Limited and Century Casinos Africa (Pty) Ltd. 32 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) 10.87 Shareholders Agreement, dated December 3, 1999, and Addendum to the Agreement, dated December 9, 1999, by and between Caledon Casino Bid Company (Pty) Limited, Caledon Overberg Investments (Pty) Limited, Century Casinos Africa (Pty) Ltd., Century Casinos, Inc. (not as a shareholder or party, but for clauses 4.2.3 and 6.7 of this agreement only), Caledon Hotel Spa and Casino Resort (Pty) Limited, Fortes King Hospitality (Pty) Limited, The Overberger Country Hotel and Spa (Pty) Limited, and Senator Trust 10.88 Memorandum of Agreement, dated January 7, 2000, by and between B. H. Centrum a.s. (a subsidiary of Ilbau and Bau Holding) and Century Casinos, Inc. 10.89 Assumption and Modification Agreement, dated February 7, 2000, by and between Marcie I. Elliott ("Optionor") and WMCK Venture Corporation ("Optionee") 10.90 Commercial Contract to Buy and Sell Real Estate, dated November 17, 1999, by and between WMCK Venture Corporation ("Buyer") and Saskatchewan Investments, Inc. ("Seller") 10.91 Prepayment and Release, dated January 19, 2000, by and between Switzerland County Development Corp. and Century Casinos Management, Inc. 10.92 Amendment No. 1 to Parking Lease - Option to Purchase, dated February 17, 2000, by and between City of Cripple Creek ("Lessor") and WMCK Venture Corporation ("Lessee") 12. The following exhibits were filed with the Form 10-QSB for the quarterly period ended March 31, 2000 and are incorporated by reference: Exhibit No. Description ------------ ----------- 10.93 Amended and Restated Credit Agreement, by and among, WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. (collectively, the "Borrowers"), Century Casinos, Inc. (the "Guarantor") and Wells Fargo Bank, National Association, dated April 21, 2000. 10.94 Loan Agreement between Century Casinos Africa (Proprietary) Limited, Caledon Casino Bid Company (Proprietary) Limited, Caledon Overberg Investments (Proprietary) Limited, and Century Casinos, Inc. (for purposes of clause 14.6 only), dated March 31, 2000. 10.95 Subscription Agreement between Century Casinos Africa (Proprietary) Limited, Caledon Casino Bid Company (Proprietary) Limited, Caledon Overberg Investments (Proprietary) Limited, and Century Casinos, Inc. (for purposes of clause 10.6 only), dated March 31, 2000. 13. The following exhibits were filed with the Form 10-QSB for the quarterly period ended June 30, 2000 and are incorporated by reference: Exhibit No. Description ------------ ----------- 33 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) 10.96 Loan Agreement, dated April 13, 2000, between PSG Investment Bank Limited and Caledon Casino Bid Company (Proprietary) Limited 10.97 Subordination, Cession and Pledge Agreement, dated April 13, 2000, between PSG Investment Bank Limited, Century Casinos Africa (Proprietary) Limited, Caledon Overberg Investments (Proprietary) Limited, and Caledon Casino Bid Company (Proprietary) Limited 14. The following exhibits were filed with the Form 10-KSB for the fiscal year ended December 31, 2000 and are incorporated by reference: Exhibit No. Description ------------ ----------- 10.98 Shareholders Agreement, dated November 4, 2000, by and between Caledon Casino Bid Company (Pty) Limited, Caledon Overberg Investments (Pty) Limited, Century Casinos Africa (Pty) Ltd., Century Casinos, Inc. (not as a shareholder or party, but for clauses 8.5, 15.1 and 15.2 of this agreement only), Overberg Empowerment Company Limited, and The Overberg Community Trust 10.99 Sale of Shares Agreement, dated November 4, 2000, by and between Caledon Casino Bid Company (Pty) Limited, Caledon Overberg Investments (Pty) Limited and Century Casinos, Inc. 15. The following exhibit was filed with the Form 10-QSB for the quarterly period ended March 31, 2001 and is incorporated by reference: Exhibit No. Description ------------ ----------- 11.0 April 21, 2001 Addendum to Loan Agreement, dated April 13, 2000, between PSG Investment Bank Limited and Caledon Casino Bid Company (Proprietary) Limited 16. The following exhibit was filed with the Form 10-QSB for the quarterly period ended September 30, 2001, and is incorporated by reference: Exhibit No. Description ------------ ----------- 11.01 First Amendment to the Amended and Restated Credit Agreement, by and among, WMCK Venture Corp., Century Casinos Cripple Creek, Inc., and WMCK Acquisition Corp. (collectively, the "Borrowers"), Century Casinos, Inc. (the "Guarantor") and Wells Fargo Bank, National Association, dated August 22, 2001. 17. The following exhibit is filed herewith: Exhibit No. Description ------------ ----------- 11.02 Management Agreement by and between Century Casinos, Inc. and Focus Casino Consulting A.G. dated March 1, 2001. 34 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) 11.03 Management Agreement by and between Century Casinos, Inc. and Flyfish Casino Consulting, A.G. dated March 1, 2001. 11.04 Equity Subscription Agreement by and between Rhino Resort Limited, Silverstar Development Limited and Century Casinos Africa (Pty) Ltd., dated September 7, 2001. 11.05 Memorandum of Agreement by and between Century Casinos Caledon (Pty) Ltd. (previously known as Caledon Casino Bid Company (Pty) Ltd.) and Century Casinos Africa (Pty) Ltd., and Fortes King Hospitality (Pty) Ltd. and/or its successor to the Hotel Management Agreement - FKH) dated September 20, 2001. 11.06 Amendment to Loan Agreement between Century Casinos Africa (Pty) Limited and Century Casinos Caledon (Pty) Ltd. (previously known as Caledon Casino Bid Company (Pty) Ltd.), Caledon Overberg Investments (Pty) Limited, and Century Casinos, Inc. dated September 20, 2001. 11.07 Adjustment/Amendment No. 1 to Management Agreement by and between Century Casinos Inc. and Focus Casino Consulting, A.G. dated October 11, 2001. 11.08 Adjustment/Amendment No. 1 to Management Agreement by and between Century Casinos Inc. and Flyfish Casino Consulting, A.G. dated October 11, 2001 11.09 Employment Agreement by and between Century Casinos Inc. and Erwin Haitzmann, dated October 12, 2001. 11.10 Employment Agreement by and between Century Casinos Inc. and Peter Hoetzinger, dated October 12, 2001. 11.11 Amendment Number 1 to the Equity Subscription Agreement entered into on September 7, 2001, by and between Rhino Resort Limited, Silverstar Development Limited and Century Casinos Africa (Pty) Ltd, dated March 2, 2002. 11.12 Second Addendum to Loan Agreement dated April 13, 2000, between PSG Investment Bank Limited and Caledon Casino Bid Company (Proprietary) Limited completed on March 26, 2002. 21. Subsidiaries of the Registrant 23.1 Consent of Independent Accountants b. Reports on Form 8-K Filed During the Registrant's ------------------------------------------------------- Fourth Fiscal Quarter: ------------------------ No reports on Form 8-K were filed by the Company during the fourth quarter of its fiscal year ended December 31, 2001. 35 CENTURY CASINOS, INC. AND SUBSIDIARIES (Dollar amounts in thousands, except for share information) SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 on March 28, 2002. CENTURY CASINOS, INC. By:/s/ Erwin Haitzmann --------------------- Erwin Haitzmann, Chairman of the Board and Chief Executive Officer /s/ Larry Hannappel --------------------- Larry Hannappel, Chief Accounting Officer (Principal Accounting Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Erwin Haitzmann, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-KSB, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on March 28, 2002.
Signature Title Signature Title /s/ Erwin Haitzmann Chairman of the Board and /s/ Gottfried Schellmann Director - -------------------- ------------------------ Erwin Haitzmann Chief Executive Officer Gottfried Schellmann /s/ Peter Hoetzinger Vice Chairman of the Board /s/ Robert S. Eichberg Director - -------------------- ------------------------ Peter Hoetzinger and President Robert S. Eichberg /s/ James D. Forbes Director /s/ Dinah Corbaci Director - -------------------- ------------------ James D. Forbes Dinah Corbaci
36 CENTURY CASINOS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Number ------------ Independent Auditors' Report F2 Consolidated Balance Sheet as of December 31, 2001 F3 Consolidated Statements of Earnings for the Years Ended December 31, 2001 and 2000 F4 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2001 and 2000 F5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001 and 2000 F6 Notes to Consolidated Financial Statements F8 F1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Century Casinos, Inc. We have audited the accompanying consolidated balance sheet of Century Casinos, Inc. and subsidiaries as of December 31, 2001, and the related consolidated statements of earnings, shareholders' equity and cash flows for the years ended December 31, 2001 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Casinos, Inc. and subsidiaries as of December 31, 2001, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2001 and 2000 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2, the Company adopted new accounting standards for derivative financial instruments. GRANT THORNTON LLP Colorado Springs, Colorado February 8, 2002 (except for Note 5, as to which the date is March 26, 2002) F2 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollar amounts in thousands, except for share information)
DECEMBER 31, 2001 ------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents (including restricted cash of $334) $ 3,365 Receivables 433 Prepaid expenses and other 591 ------------------- Total current assets 4,389 Property and Equipment, net 29,338 Goodwill, net 7,709 Other Assets 3,383 ------------------- Total $ 44,819 =================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,554 Accounts payable and accrued liabilities 3,512 ------------------- Total current liabilities 5,066 Long-Term Debt, less current portion 15,991 Other Non-current Liabilities 979 Minority Interest 605 Commitments and Contingencies - Shareholders' Equity: Preferred stock; $.01 par value; 20,000,000 shares authorized; no shares issued and outstanding - Common stock; $.01 par value; 50,000,000 shares authorized; 14,485,776 shares issued; 13,728,784 shares outstanding 145 Additional paid-in capital 21,901 Accumulated other comprehensive loss (3,291) Retained earnings 4,847 ------------------- 23,602 Treasury stock - 756,992 shares, at cost (1,424) ------------------- Total shareholders' equity 22,178 ------------------- Total $ 44,819 ===================
See notes to consolidated financial statements F3 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollar amounts in thousands, except for share information)
FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 2001 2000 ---- ---- Operating Revenue: Casino $ 30,096 $ 27,703 Food and beverage 1,897 1,377 Hotel 755 257 Other 771 427 ---------- ----------- 33,519 29,764 Less promotional allowances (3,943) (3,532) ---------- ----------- Net operating revenue 29,576 26,232 ---------- ----------- Operating Costs and Expenses: Casino 9,521 7,425 Food and beverage 1,075 761 Hotel 673 416 General and administrative 7,530 8,004 Depreciation and amortization 4,564 3,753 ---------- ----------- Total operating costs and expenses 23,363 20,359 ---------- ----------- Earnings from Operations 6,213 5,873 Other (expense), net (1,996) (20) ---------- ----------- Earnings before Income Taxes and Minority Interest 4,217 5,853 Provision for income taxes 1,794 2,542 ---------- ----------- Earnings before Minority Interest 2,423 3,311 Minority interest in subsidiary (earnings) losses 32 (58) ---------- ----------- Net Earnings $ 2,455 $ 3,253 ========== =========== ---------- ----------- Earnings per Share, Basic $ 0.18 $ 0.23 ========== =========== Earnings Per Share, Diluted $ 0.16 $ 0.22 ========== ===========
See notes to consolidated financial statements. F4
CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (Dollar amounts in thousands) Accumulated Retained Additional Other Earnings Common Stock Paid -in Comprehensive Accumulated Treasury Stock Total Comprehensive Shares Amount Capital Income (Loss) Deficit Shares Amount Income (Loss) ------ ------ ---------- ------------- ----------- ------ ------ ------ ------------- BALANCE AT JANUARY 1, 2000 15,861,885 $ 159 $ 23,329 $ (32) $ (861) 1,385,000 $(1,464) $ 21,131 Purchases of treasury stock - - - - - 464,800 (818) (818) Options exercised 8,891 - 2 - - - - 2 Re-issued treasury Stock - - - - - (308) - - Retired treasury Shares (1,385,000) (14) (1,449) - - (1,385,000) 1,464 1 Foreign currency translation adjustments - - - (627) - - - (627) $ (627) Other equity Changes - - 28 - - - - 28 Net earnings - - - - 3,253 - - 3,253 3,253 ---------- ---- ------- ----- ----- ------- ----- ------- ------ BALANCE AT DECEMBER 31, 2000 14,485,776 145 21,910 (659) 2,392 464,492 (818) 22,970 $2,626 ====== Purchases of treasury stock - - - - - 340,000 (690) (690) Options Exercised - - (16) - - (47,500) 84 68 Foreign currency translation adjustments - - - (2,078) - - - (2,078) $(2,078) Cumulative effect Of change in accounting principle related to interest rate swap, net of income tax benefit - - - (175) - - - (175) (175) Change in fair value of interest rate swap, net of income tax benefit - - - (379) - - - (379) (379) Other equity Changes - - 7 - - - - 7 Net earnings - - - - 2,455 - - 2,455 2,455 ---------- ---- ------- ------ ------ ------- -------- ------- ------ BALANCE AT DECEMBER 31, 2001 14,485,776 $145 $21,901 $(3,291) $4,847 756,992 $(1,424) $22,178 $(177) ========== ==== ======= ======= ====== ======= ======== ======= ======
See notes to consolidated financial statements. F5 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands except for share information)
FOR THE YEAR ENDED DECEMBER 31, -------------------------------- 2001 2000 ---- ---- Cash Flows from Operating Activities: Net earnings $ 2,455 $ 3,253 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation 3,147 2,411 Amortization of goodwill 1,417 1,342 Amortization of deferred financing costs 81 88 Income from sale of casino project rights - (1,380) (Gain) loss on disposition of assets (13) (80) Deferred tax benefit (207) (446) Minority interest in subsidiaries earnings (losses) (32) 58 Other 6 34 Changes in operating assets and liabilities: Receivables 38 (164) Prepaid expenses and other assets 138 (358) Accounts payable and accrued liabilities (592) 2,304 ---------- ----------- Net cash provided by operating activities 6,438 7,062 ---------- ----------- Cash Flows from Investing Activities: Purchases of property and equipment (2,994) (12,863) Sales (purchases) of short-term investment securities, net - 8 Proceeds from sale of casino project rights - 1,380 Expenditures for deposits and other assets (277) (1,179) Proceeds received from disposition of assets 9 571 Acquisition of subsidiary, net of cash acquired - (1,858) ---------- ----------- Net cash used in investing activities (3,262) (13,941) ---------- ----------- Cash Flows from Financing Activities: Proceeds from borrowings $ 21,321 $ 31,401 Principal repayments (29,151) (16,754) Deferred financing costs - (273) Purchases of treasury stock (606) (818) ---------- ----------- Net cash provided by (used in) financing activities (8,436) 13,556 ---------- ----------- Effect of exchange rate changes on cash (452) (108) ---------- ----------- Increase (Decrease) in Cash and Cash Equivalents (5,712) 6,569 Cash and Cash Equivalents at Beginning of Year 9,077 2,508 ---------- ----------- Cash and Cash Equivalents at End of Year $ 3,365 $ 9,077 ========== ===========
F6 CENTURY CASINOS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands except for share information) Supplemental Disclosure of Noncash Investing and Financing Activities:
In connection with the subsidiary acquired, liabilities were assumed as follows: Fair value of assets acquired, including cash of $881 $ - $ 6,707 Cash Paid - (2,739) ---------- ----------- Liabilities assumed $ - $ 3,968 ========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of capitalized interest of $219 in 2001 and $0 in 2000 $ 2,037 $ 1,416 ========== =========== Income taxes paid $ 2,376 $ 2,461 ========== ===========
See notes to consolidated financial statements. F7 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Century Casinos, Inc. ("CCI") is an international gaming company. Wholly owned subsidiaries of CCI include Century Casinos Management, Inc. ("CCM"), Century Casinos Nevada, Inc. ("CCN", a dormant subsidiary), Century Management u. Beteiligungs GmbH ("CMB"), and WMCK-Venture Corp. ("WMCK"). Wholly owned subsidiaries of WMCK include WMCK-Acquisition Corp ("ACQ") and Century Casinos Cripple Creek, Inc. ("CCC"). Century Casinos Africa Inc. ("CCA"), a 96.7% owned subsidiary of CCI, owns 65% of Century Casinos Caledon (Pty) Ltd. ("CCAL"), 55% of Century Casinos West Rand (Pty) Ltd. ("CCWR") and 50% of Rhino Resort Ltd. ("RRL"). CCI and subsidiaries (the "Company") own and/or manage casino operations in United States of America, South Africa, the Czech Republic, and international waters as follows. WMCK owns and operates Womacks Casino and Hotel, a limited-stakes gaming casino in Cripple Creek, Colorado. CCA owns 65% of and operates the Caledon Casino, Hotel and Spa near Cape Town, South Africa. CCM manages Casino Millennium located within a hotel in Prague, Czech Republic. Subject to the approval by regulators, the Company and another entity have each agreed to purchase a 50% ownership interest in Casino Millennium. The acquisition is expected to be completed in 2002 and is expected to cost approximately $200 in cash plus the contribution of operating assets of the casino currently owned by the Company. CCI serves as concessionaire of small casinos on four luxury cruise vessels operated by Silversea Cruises. In October 2001, one vessel was taken out of service. This vessel, which is expected to resume operations in early 2003, has approximately 33 gaming positions. The net book value of the Company's equipment as of December 31, 2001 is $53. The Company has alternative uses for the gaming equipment aboard the vessel. The Company has a total of approximately 127 gaming positions on the three combined shipboard casinos currently in operation. The Company regularly pursues additional gaming opportunities internationally and in the United States. In 2000, CCI entered into a five-year agreement to serve as concessionaire of a small casino aboard The World of ResidenSea, a vessel designed as an exclusive residential community at sea. The Company will operate the casino for its own account and pay concession fees based on gross gaming revenue, as defined, in excess of an established amount per month. The maiden voyage of the residential cruise liner is expected during 2002. During 2001, CCA entered into an agreement to secure a 50% ownership interest in Rhino Resort Ltd. ("Rhino"), a consortium which includes Silverstar Development Ltd. ("Silverstar"). Rhino submitted an application for a proposed hotel/casino resort development in the greater Johannesburg area of South Africa at a cost of approximately 400 million Rand ($33.4 million at the exchange rate as of December 31, 2001). In November 2001 Rhino was awarded the sixth and final casino license serving the Johannesburg region of the Gauteng province in South Africa. In February 2002 a competing casino filed a court action seeking to overturn the license award. Upon favorable resolution of the pending court action, CCA, as part of the September 2001 agreement, would be required to make an equity and loan contribution of approximately 50 million Rand or $4.2 million at the exchange rate as of December 31, 2001. In addition to the equity ownership in RRL, CCWR will receive management fees as the manager of the Casino, Hotel & Resort. Management fees will be based on a percentage of gross revenues as well as a percentage of EBITDA (defined as earnings before interest, taxes, depreciation, amortization and other specifically defined costs). F8 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 2. SIGNIFICANT ACCOUNTING POLICIES Consolidation - The accompanying consolidated financial statements include the accounts of CCI and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents - All highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Fair Value of Financial Instruments - In accordance with the reporting and disclosure requirements of Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments," the Company calculates the fair value of financial instruments and includes this additional information in the notes to its financial statements when the fair value does not approximate the carrying value of those financial instruments. The Company's financial instruments include cash and cash equivalents, long-term debt and interest rate swap agreements. Fair value is determined using quoted market prices whenever available. When quoted market prices are not available, the Company uses alternative valuation techniques such as calculating the present value of estimated future cash flows utilizing risk-adjusted discount rates. The Company's carrying value of financial instruments approximates fair value at December 31, 2001. Property and Equipment - Property and equipment are stated at cost. Depreciation of assets in service is provided using the straight-line method over the estimated useful lives of the assets. Leased property and equipment under capital leases is amortized over the lives of the respective leases or over the service lives of the assets for those leases that substantially transfer ownership. F9 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) Goodwill - Goodwill represents the excess of the purchase price over net identifiable assets acquired in a business combination. In June 2001, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Intangible Assets". SFAS No. 141 addresses the methods used to account for business combinations and requires the use of the purchase method of accounting for all combinations after June 30, 2001. SFAS No. 142 addresses the methods used to capitalize, amortize and to assess impairment of intangible assets, including goodwill resulting from business combinations accounted for under the purchase method. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. Included in assets at December 31, 2001 is unamortized goodwill from the acquisition of various casino operations of $7,709. Upon adoption of SFAS No. 142, the Company will no longer amortize goodwill, decreasing amortization expense by approximately $1,425 per year. The Company will be required to assess goodwill for impairment in 2002, and at least annually thereafter. The Company will not be able to determine the full effect of these pronouncements on its financial position or results of its operations until it is able to complete its analysis of the impairment provisions of the new standards, which is expected to be completed by June 30, 2002. In the event the Company's analysis under the new guidance indicates goodwill is impaired, it will be required to record a charge to its earnings in the year of adoption. Based on its current operations, the Company does not believe adoption of the new standards will have a material impact of its financial statements. Impairment of Long-Lived Assets - The Company reviews long-lived assets for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If there is an indication of impairment, which is estimated as the difference between anticipated undiscounted future cash flows and carrying value, the carrying amount of the asset is written down to its estimated fair value by a charge to operations. Fair value is estimated based on the present value of estimated future cash flows using a discount rate commensurate with the risk involved. Estimates of future cash flows are inherently subjective and are based on management's best assessment of expected future conditions. During 2001 FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" which is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". While SFAS No. 144 retains many of the provisions of SFAS No. 121 it provides guidance on estimating future cash flows to test recoverability, among other things. The Company does not believe adoption of SFAS No. 144 will have a material impact on its financial statements. Revenue Recognition - Casino revenue is the net win from gaming activities, which is the difference between gaming wins and losses. Management and consulting fees are recognized as revenue as services are provided. The incremental amount of unpaid progressive jackpot is recorded as a liability and a reduction of casino revenue in the period during which the progressive jackpot increases. Promotional Allowances - Food and beverage furnished without charge to customers is included in gross revenue at a value which approximates retail and then deducted as complimentary services to arrive at net revenue. The estimated cost of such complimentary services is charged to casino operations, and was $949 in 2001 and $829 in 2000. F10 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) As part of its promotional activities, the Company offers "free plays" or coupons to its customers for gaming activity and the Company's players' club allows customers to earn certain complimentary services and/or cash rebates based on the volume of a customer's gaming activity. During 2001, the Company adopted Emerging Issues Task Force (EITF) No. 00-14, "Accounting for Certain Sales Incentives", which requires that discounts which result in a reduction in or refund of the selling price of a product or service in a single exchange transaction be recorded as a reduction in revenue, and EITF No. 00-22, "Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to be Delivered in the Future", which requires that vendors recognize the cash rebate or refund obligation associated with time- or volume-based cash rebates as a reduction of revenue based on a "systematic and rational allocation of the cost of honoring rebates or refunds earned". Prior to adopting these standards, the Company accounted for these promotional activities in casino expense. As a result of adopting these accounting standards, $2,740 was reported as a reduction of revenue for 2001 and $2,777 was reclassified from expenses to a reduction of revenue for 2000. The adoption of these standards did not have any impact on net earnings or earnings per share amounts. Foreign Currency Translation - Adjustments resulting from the translation of the accounts of the Company's foreign subsidiaries from the local functional currency to U.S. dollars are recorded as other comprehensive income or loss in the consolidated statements of shareholders' equity. Adjustments resulting from the translation of other casino operations and other transactions which are denominated in a currency other than U.S. dollars are recognized in the statements of earnings. Income Taxes - The Company accounts for income taxes using the liability method, which provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, at a rate expected to be in effect when the differences become deductible or payable. Stock-Based Compensation - Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation for employees using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock issued to Employees", and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire that stock. The Company values stock-based compensation granted to non-employees at fair value. Earnings Per Share - The Company follows the provisions of SFAS No. 128, "Earnings per Share," in calculating basic and diluted earnings per share. Basic earnings per share considers only weighted-average outstanding common shares in the computation. Diluted earnings per share gives effect to all potentially dilutive securities. Diluted earnings per share is based upon the weighted average number of common shares outstanding during the period, plus, if dilutive, the assumed exercise of stock options using the treasury stock method, and the assumed conversion of other convertible securities (using the "if converted" method) at the beginning of the year, or for the period outstanding during the year for current year issuances. Comprehensive Income - The Company follows SFAS No. 130, "Reporting Comprehensive Income," which provides for a more inclusive financial reporting measure than net income, and includes all changes in equity during the period, except those resulting from investments by, and distributions to, shareholders of the Company. F11 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) Operating Segments - The Company follows SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" which establishes standards for public business enterprises to report information about operating segments in annual financial statements and in condensed interim financial reports issued to shareholders. Hedging Activities - The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", in the first quarter of fiscal 2001. SFAS No. 133 and No. 138 establish accounting and reporting standards for derivative instruments and hedging activities. The pronouncements require that a company designate the intent of a derivative to which it is a party, and prescribes measurement and recognition criteria based on the intent and effectiveness of the designation. SFAS No. 133 requires companies to recognize all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. For derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposures to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change. The Company currently does not have fair value hedges or hedges of a net investment in a foreign operation. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change. The cumulative effect of adopting SFAS No. 133 and No. 138 related to the Company's interest rate swap agreements (see Note 5 to the consolidated financial statements) was to decrease shareholders' equity as of January 1, 2001 by $175, net of related federal and state income tax benefits of $104. As of December 31, 2001, the interest rate swap agreements decreased shareholder's equity by $554, net of federal and state income tax benefits of $329. Advertising Costs - Costs incurred for producing and communicating advertising are expensed when incurred. Advertising expense was $319 and $232 for the years ended December 31, 2001 and 2000, respectively. Reclassifications - Certain reclassifications have been made to the 2000 financial information in order to conform to the 2001 presentation. Other - The Company has reviewed all recently issued accounting pronouncements and does not believe that any such pronouncements will have a material impact on its financial statements. F12 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 3. RECEIVABLES FROM OFFICERS/DIRECTORS At December 31, 2001, the Company had unsecured, noninterest bearing receivables from Erwin Haitzmann, chief executive officer, and Peter Hoetzinger, president, of $30 each, both of which have been paid in the first quarter of 2002 and are classified as current assets. 4. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2001, consist of the following:
Estimated Service Life in Years Land $ 11,011 Buildings and improvements 15,447 7 - 31 Gaming equipment 8,276 3 - 7 Furniture and office equipment 2,614 5 - 7 Other equipment 1,368 3 - 7 Capital projects in process 425 -------------- 39,141 Less accumulated depreciation (10,667) -------------- 28,474 Nonoperating casino and land held for sale 864 -------------- Property and equipment, net $ 29,338 ==============
The non-operating casino and land is located in Nevada and is carried at estimated net realizable value. During the years 2000 and 2001, CCAL entered into a series of lease agreements for the purchase of capital equipment. The average effective interest rate is 13.5% on the lease obligations which are repayable over a term of 60 months. Assets under lease included in property and equipment as of December 31, 2001 are as follows:
Original Accumulated Book Value Depreciation Gaming equipment $ 325 $ 90 Furniture and office equipment 157 11 Other equipment 48 32 -------- -------- Total $ 530 $ 133 ======== ========
Depreciation expense for the years ended December 31, 2001 and 2000 was $3,147 and $2,411, respectively. F13 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 5. LONG-TERM DEBT Long-term debt at December 31, 2001, consists of the following:
Borrowings under revolving line of credit facility with Wells Fargo Bank $ 11,801 Borrowings under loan agreement with PSG Bank Limited 3,924 Note payable to minority shareholder 914 Capital leases for various equipment 331 Note payable to founding shareholder, unsecured 380 Note payable to director, unsecured 163 Other unsecured note payables 32 ---------- Total long-term debt 17,545 Less current portion (1,554) ---------- Long-term portion $15,991 ==========
On April 26, 2000, the Company and Wells Fargo Bank (the "Bank") entered into an Amended and Restated Credit Agreement (the "Agreement") which increased the Company's aggregate borrowing commitment from the Bank under a Revolving Line of Credit Facility ("RCF") to $26 million and extended the maturity date to April 2004. The Agreement was further amended on August 22, 2001 to give greater flexibility to the ability to use the borrowed funds for projects for the Company. The aggregate commitment available to the Company will be reduced quarterly by $722 beginning October 2000 through the maturity date. Interest on the Agreement is variable based on the interest rate option selected by the Company, plus an applicable margin based on the Company's leverage ratio. The Agreement also requires a nonusage fee based on the Company's leverage ratio on the unused portion of the commitment. The principal balance outstanding under the loan agreement as of December 31, 2001 was $11,801. The amount available under the RCF as of December 31, 2001 was $10,588, net of amounts outstanding as of that date. The loan agreement includes certain restrictive covenants on financial ratios of WMCK. The most significant covenants include i) a maximum leverage ratio no greater than 2.5 to 1.00, ii) a minimum interest coverage ratio no less than 1.50 to 1.00, and iii) a TFCC ratio ( a derivative of EBITDA, as defined in the agreement) of no less than 1.10 to 1.00. The loan is collateralized by a deed of trust and a security agreement with assignments of lease, rents and furniture, fixtures and equipment of all Colorado property. Interest rates at December 31, 2001 were 4.75% for $501 outstanding under prime based provisions of the loan agreement and 6.87% for $11,300 outstanding under LIBOR based provisions of the loan agreement. F14 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) In 1998, the Company entered into a five-year interest rate swap agreement on $7.5 million notional amount of debt under the RCF, whereby the Company pays a LIBOR-based fixed rate of 5.55% and receives a LIBOR-based floating rate reset quarterly based on a three-month rate. In May 2000, the Company entered into a second five-year interest rate swap agreement on $4.0 million notional amount of debt under the RCF, whereby the Company pays a LIBOR-based fixed rate of 7.95% and receives a LIBOR-based floating rate reset quarterly based on a three-month rate. Generally, the swap arrangement is advantageous to the Company to the extent that interest rates increase in the future and disadvantageous to the extent that they decrease. The net amount paid or received by the Company on a quarterly basis results in an increase or decrease to interest expense. The fair value of the derivatives as of December 31, 2001 of $883 is reported as a liability in the consolidated balance sheet. The Company's objective for entering into the interest rate swap agreements, derivative instruments designated as cash flow hedging instruments, was to eliminate the variability of cash flows in the interest payments for $11,500 of the RCF. The Company has determined that the cash flow hedges were highly effective. Accordingly no net gain or loss has been recognized in earnings during 2001 and none of the derivative instruments' loss has been excluded from the assessment of the hedge effectiveness. The net loss on the interest rate swaps' of $379, net of income tax benefit of $225 has been reported in comprehensive loss on the statement of shareholders' equity for 2001. If the interest rate swaps' critical terms (notional amount, interest rate reset dates, maturity/expiration date or underlying index) change significantly, such event would result in reclassifying the losses that are reported in accumulated other comprehensive income (loss). The Company estimates that no such reclassification will occur in 2002. There were no discontinuances of cash flow hedges because of the probability that the forecasted transactions will not occur. Accordingly, no gain or loss has been reclassed to earnings for such discontinuance of a cash flow hedge. Net additional (reduction in) interest expense to the Company under the swap agreement was $231 in 2001 and ($64) in 2000. In April 2000, CCAL entered into a loan agreement with PSG Investment Bank Limited ("PSGIB"), which provides for a principal loan of approximately $3,919 at the exchange rate as of December 31, 2001 to fund development of the Caledon project. The outstanding balance and interest rate as of December 31, 2001 was $3,565 and 17.05%, respectively. The shareholders of CCAL have pledged all of the common shares held by them in CCAL to PSGIB as collateral. The loan is also collateralized by a first mortgage bond over land and buildings and a general notorial bond over all equipment. In April 2001, CCAL entered into an addendum to the loan agreement in which PSGIB provided CCAL with a standby facility in the amount of approximately $375 at the exchange rate as of December 31, 2001. The outstanding balance and interest rate as of December 31, 2001 was $359 and 15.1%, respectively. Under the original terms of the agreement CCAL made its first principal payment in December 2001, based on a repayment schedule that required semi-annual installments continuing over a five-year period. On March 26, 2002 CCAL and PSGIB entered into an amended agreement that changed the repayment schedule to require quarterly installments beginning on March 31, 2002 and continuing over the remaining term of the original five-year agreement. The amendment also changed the requirements for the sinking fund. The original agreement required CCAL to have on deposit a "sinking fund" in the amount equal to the next semi-annual principal and interest payment. The amended agreement changes the periodic payments from semi-annual to quarterly and requires a minimum deposit in the sinking fund equal to four million Rand (approximately $334 at the exchange rate as of December 31, 2001). In addition, one third of the next quarterly principal and interest payment must be deposited on the last day of each month into the fund and used for the next quarterly installment. As of December 31, 2001, the Company was not in compliance with the original sinking fund requirement, of approximately $650, however the amended agreement provides a waiver of the non-compliance. F15 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) The loan agreement includes certain restrictive covenants for CCAL, including the maintenance of the following ratios; i) debt/equity ratio of 45:55 after the first twelve months of operations and a 40:60 debt/equity ratio after two years of operations, ii) interest coverage ratio of at least 2.0 after the first twelve months of operations, iii) debt service coverage ratio of at least 1.34 for the principal loan and 1.7 for the standby facility after the first twelve months of operations, and iv) loan life coverage ratio of 1.5 for the principal loan and a loan life coverage ratio of 2.5 for the standby facility. In April 2000, CCA, CCAL, CCI and Caledon Overberg Investments (Proprietary) Limited ("COIL"), the minority shareholder in CCAL, entered into a note agreement as part of the purchase of CCAL. Under the terms of the agreement, CCAL, in exchange for the contribution of certain fixed assets, entered into a loan agreement with COIL in the amount of approximately $2,300, as valued at the the time of the agreement. Under the terms of the original agreement, the loan bears interest at the rate of 2% over the prime/base rate established by PSGIB, and is due on demand subsequent to the repayment in full of the loan between CCAL and PSGIB. In November 2000, as part of the CCA's additional equity investment in CCAL, CCA acquired a portion of COIL's note receivable from CCAL valued at approximately $600, as valued at the time of the original agreement. The current dollar value of the outstanding note agreement based on the exchange rate on December 31, 2001 is approximately $914. In September 2001, CCA, CCAL, CCI and COIL amended the loan agreement to reduce the rate of interest charged on the loan to 0% (zero), effective with the original date of the agreement. $107, net of $46 of income tax benefit, of accrued interest dating from the original date of the agreement was written off by CCAL as a reduction in interest expense. The loan from CCA and COIL are proportionate to each shareholder's percentage of ownership. The additional net income reported by CCAL, as a result of reducing the interest charged, is shared proportionately by each shareholder, therefore, there is no change in the consolidated net income of the South African segment nor the consolidated net income of the Company. Each shareholder has the option to re-instate the interest rate to be charged from January 1, 2002 forward. The unsecured note payable to a founding shareholder bears interest at 6%, payable quarterly. The noteholder, at his option, may elect to receive any or all of the unpaid principal by notifying CCI on or before April 1 of any year. Payment of the principal amount so specified would be required by the Company on or before January 1 of the following year. The entire outstanding principal is otherwise due and payable on April 1, 2004. Accordingly, the note is classified as noncurrent in the accompanying consolidated balance sheet as of December 31, 2001. The consolidated weighted average interest rate on all borrowings was 9.0% for the year ended December 31, 2001. F16 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) As of December 31, 2001, scheduled maturities of all long-term debt are as follows:
Future minimum Total lease payment long-term of capital leases Other debt . debt ------------------ ----------- ----------- 2002 - $ 108 $ 1,486 $ 1,594 2003 - 108 872 980 2004 - 108 12,673 12,781 2005 - 93 872 965 2006 - 10 436 446 Thereafter - 875 875 ---------- ----------- ----------- 427 17,214 17,641 Less amounts representing interest 96 - 96 ---------- ----------- ----------- Total $ 331 $ 17,214 $ 17,545 ========== =========== ===========
6. SHAREHOLDERS' EQUITY The Company's Board of Directors has approved a discretionary program to repurchase up to $5 million of the Company's outstanding common stock. Through December 31, 2001, the Company had repurchased 2,189,800 shares of its common stock at an average cost per share of $1.36, of which 1,385,000 shares, with an average cost of $1.06 per share, were retired in 2000. 308 shares were awarded in a drawing amongst investors and 47,500 shares were re-issued to satisfy options exercised under the Employees' Equity Incentive Plan, leaving 756,992 shares remaining in treasury as of December 31, 2001, at an average cost per share of $1.88. The Board of Directors of the Company has adopted the Employees' Equity Incentive Plan (the "Plan"). The Plan as subsequently amended provides for the grant of awards to eligible employees in the form of stock, restricted stock, stock options, stock appreciation rights, performance shares or performance units, all as defined in the Plan. The Plan provides for the issuance of up to 4,500,000 shares of common stock to eligible employees through the various forms of awards permitted. Through December 31, 2001, only incentive stock option awards, for which the option price may not be less than fair market value at the date of grant, or non-statutory options, which may be granted at any option price, have been granted under the Plan. All options must have an exercise period not to exceed ten years. Options granted to date have one-year, two-year or four-year vesting periods. The Company's Incentive Plan Committee has the power and discretion to prescribe the terms and conditions for the exercise of, or modification of, any outstanding awards in the event of merger, acquisition or any other form of acquisition other than a reorganization of the Company under United States Bankruptcy Code or liquidation of the Company. The Plan also allows limited transferability of any non-statutory stock options to legal entities that are 100% - owned or controlled by the optionee. As of December 31, 2001 there were an additional 100,000 options outstanding to directors of the Company. These options have a weighted average exercise price of $1.09 F17 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) Transactions regarding the Plan are as follows:
2001 2000 ------------------- -------------------- Weighted- Weighted- Average Average Exercise Exercise Shares Price Shares Price ------------------- -------------------- Employee Stock Options: Outstanding at January 1 2,812,300 $ 1.29 2,906,500 $ 1.29 Granted 20,000 1.93 - - Exercised (47,500) 1.42 (8,891) .82 Cancelled or forfeited - - (85,309) 1.44 --------- ---------- Outstanding at December 31 2,784,800 1.30 2,812,300 1.29 ========= ========== Options exercisable 2,764,800 $ 1.29 2,812,300 $ 1.29 at December 31 ========= ==========
Summarized information regarding all employee options outstanding at December 31, 2001, is as follows:
Weighted- Number Average Number Exercise Outstanding Remaining Exercisable Price At Year End Term in Years At Year End - ---------- ----------- ------------- ----------- $0.75 774,000 6.8 774,000 $1.50 1,985,800 3.7 1,985,800 $1.75 10,000 9.3 - $2.10 10,000 9.6 - $2.25 5,000 3.5 5,000 --------- --------- 2,784,800 4.6 2,764,800 ========= =========
F18 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for options granted under the Plan. Accordingly, no compensation cost has been recognized in the accompanying financial statements. Had compensation cost for the Plan been determined based on the fair value at the grant dates for awards under the Plan, consistent with the method recommended, but not required, by SFAS No.123, the Company's net earnings and earnings per share would have been adjusted to the pro forma amounts indicated below:
2001 2000 ---- ---- Net earnings As reported $ 2,455 $ 3,253 Pro forma $ 2,447 $ 3,233 Earnings per share, Basic As reported $ 0.18 $ 0.23 Pro forma $ 0.18 $ 0.23 Diluted As reported $ 0.16 $ 0.22 Pro forma $ 0.16 $ 0.22
The fair value of options granted under the Plan was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 2001 ---- Weighted-average risk-free interest rate 5.08% Weighted-average expected life 10 yrs. Weighted-average expected volatility 43.6% Weighted-average expected dividends $0 The weighted-average fair value of options granted during 2001 was $1.93. No options were granted to employees under the Plan in the year 2000. Subsidiary Preference Shares: During the year ended December 31, 2000, the Company's South African subsidiary acquired a 65% equity interest in CCAL (note 1). In connection with the granting of a gaming license to CCAL by the Western Cape Gambling and Racing Board in April 2000, CCAL issued a total of 200 preference shares, 100 shares each to two minority shareholders. The preference shares are not cumulative, nor are they redeemable. The preference shareholders are entitled to receive annual dividends of 20% of the after-tax profits directly attributable to the CCAL casino business subject to working capital and capital expenditure requirements and CCAL loan obligations and liabilities as determined by the directors of CCAL. Should the CCAL casino business be sold or otherwise dissolved, the preference shareholders are entitled to 20% of any surplus directly attributable to the CCAL casino business, net of all liabilities attributable to the CCAL casino business. No preference dividends were paid or are payable in the year 2000 or 2001. F19 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 7. SEGMENT INFORMATION The Company has adopted FASB Statement No. 131 " Disclosures about Segments of an Enterprise and Related Information". The Company is managed in four segments: Cripple Creek Colorado, South Africa, Cruise Ships, and Corporate operations. Corporate operations include the revenue and expense of certain corporate gaming projects for which the Company has secured long-term management contracts. Earnings before interest, taxes, depreciation and amortization (EBITDA) is not considered a measure of performance recognized as an accounting principle generally accepted in the United States of America. Management believes that EBITDA is a valuable measure of the relative performance amongst its operating segments. Segment information as of and for the years ended December 31, 2001 and 2000 is presented below.
Dollar amounts in thousands Cripple Creek CO South Africa Cruise Ships 2001 2000 2001 2000 2001 2000 Property and equipment, net of accumulated depreciation $19,444 $19,275 $ 7,911 $11,759 $236 $213 Total assets $30,393 $36,386 $12,278 $20,310 $435 $438 Net operating revenue $21,022 $21,612 $ 7,408 $ 4,155 $891 $189 Depreciation & amortization $ 2,997 $ 3,241 $ 1,294 $ 290 $ 47 $ 6 Interest income $ 20 $ 2 $ 61 $ 112 - - Interest expense, including debt issuance cost $ 1,433 $ 1,510 $ 883 $ 367 $ - $ - Earnings (loss) before income taxes and minority interest $ 5,865 $ 4,916 ($ 470) $ 666 $219 $ 12 Income tax expense(benefit) $ 2,697 $ 2,262 ($ 157) $ 193 $ 82 - Net earnings (loss) $ 3,167 $ 2,654 ($ 280) $ 416 $137 $ 12 EBITDA $10,274 $ 9,665 $ 1,679 $ 1,154 $266 $ 18
Dollar amounts in thousands Corporate & Other Intersegment Elimination Consolidated 2001 2000 2001 2000 2001 2000 Property and equipment, net of accumulated depreciation $ 1,747 $ 2,021 $ - $ - $29,338 $33,268 Total assets $ 5,184 $ 2,176 ($ 3,471) ($3,188) $44,819 $56,122 Net operating revenue $ 255 $ 276 $ - $ - $29,576 $26,232 Depreciation & amortization $ 226 $ 216 $ - $ - $ 4,564 $ 3,753 Interest income $ 350 $ 372 ($ 341) ($ 341) $ 90 $ 145 Interest expense, including debt issuance cost $ 43 $ 81 ($ 341) ($ 341) $ 2,018 $ 1,617 Earnings (loss) before income taxes and minority interest ($ 1,397) $ 259 $ - $ - $ 4,217 $ 5,853 Income tax expense(benefit) ($ 828) $ 87 $ - $ - $ 1,794 $ 2,542 Net earnings (loss) ($ 569) $ 171 $ - $ - $ 2,455 $ 3,253 EBITDA ($ 1,478) $ 183 $ - $ - $10,741 $11,020
F20 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 8. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS Cripple Creek, Colorado - In the fourth quarter 2001, Womacks began a 6,022 square foot expansion. Approximately half of the space will provide additional gaming for approximately 60 slot machines on the street level. The other half will increase the "back of house" area. Contracts for the project totaling $1.5 million have been secured in the fourth quarter 2001. The total construction cost, including additional slot machines, is expected to be $2.5 million, of which $0.4 million has been spent in the fourth quarter 2001. The project is expected to be completed by the end of 2002. Prague, Czech Republic - As discussed in Note 1, the Company entered into a memorandum of agreement to either acquire a 50% ownership interest in Casino Millennium a.s., a Czech company, or to form a new joint venture with B.H. Centrum a.s., a subsidiary of Strabag AG, for each entity to acquire 50% of the net assets of Casino Millennium. Subject to approval by the Ministry of Finance of the Czech Republic, the Company anticipates closing the transaction in 2002 at an expected cost of approximately $200 in cash plus the contribution of the casino equipment currently owned by the Company. As of December 31, 2001, the Company's net fixed assets leased under operating leases to Casino Millennium approximated $822. South Africa - Caledon - In December 1999, the Company entered into a ten-year casino management agreement for the operation of the casino property in Cape Town, South Africa, which provides for a percentage of gross revenues and other earnings as defined in the agreement. The Company's joint venturer in the property has a ten-year agreement for management of the hotel and spa operations of the resort. The agreement may be extended at the Company's option for multiple ten-year periods. The Company will receive a management fee consisting of the following: (i) an amount equal to 3% (increasing to 4% and 5% in the second fiscal year of operations, variable based on levels of annual gross revenues) of annual gross revenues, as defined, and (ii) an amount equal to 7.5% of the casino's annual earnings before interest, income taxes, depreciation, amortization and certain other costs. In December 1999, CCAL entered into a ten-year management agreement with Fortes King Hospitality (Pty) Limited ("FKH"), an affiliate of the Company's partner, which agreement may be extended at FKH's option. FKH will receive a management fee consisting of the following: (i) an amount equal to 6.5% of the annual hotel gross income, as defined, and (ii) an amount equal to 10% (increasing to 15% after twelve months of operations) of net operating profit, as defined. The casino opened on October 11, 2000 and currently operates 250 slot machines and 8 gaming tables. In addition to the casino license, hotel and spa, CCAL owns approximately 600 acres of land, which is expected to be used for future expansion of the project. In September 2001, CCA, CCAL and FKH entered into a Memorandum of Agreement such that any and all management fees shall be deemed to equal zero from the inception of those agreements and shall remain so until no earlier than January 1, 2002. $552, net of $236 of income tax benefit, of accrued management fee expense was written off by CCAL as a reduction in casino costs. By agreement, the management fees that would have been payable to CCA and FKH are given preferential treatment in the event of the sale or liquidation of CCA. Consequently, the minority interest liability in the consolidated balance sheet at December 31, 2001 and the minority interest in subsidiary (earnings) losses in the consolidated statement of earnings for the year ended December 31, 2001 include $120, net of $51 of income tax benefit, representing the management fees that would have been payable to FKH. As a result, the consolidated net income for the South African segment or the consolidated net income for the Company was not affected by this agreement. Beginning January 1, 2002, either CCA or FKH have the option to declare the fees calculable and payable. Initial start up costs of the casino, resort hotel and spa have resulted in a pre-tax charge of $652 against the income for the year ended December 31, 2000. F21 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) South Africa-Gauteng - Legislation enacted in 1996 in South Africa provides for the award of up to 40 casino licenses throughout the country. In addition to its Caledon operations, the Company has entered into agreements with various local consortia to provide consulting services during the application phase, as well as casino management services should the Company's partners be awarded one or more licenses. Six casino licenses were allocated to the province of (Gauteng primarily for the Greater Johannesburg area) by which five casinos have been operating since 1998. With respect to the sixth and final license, Silverstar Development Ltd. ("Silverstar"), a consortium owned by trusts, corporations and individuals from the province, chose the Company as equity and management partner for its proposed casino, hotel and entertainment resort in the West Rand Province(western portion of greater Johannesburg). Since joining forces more than five years ago, the Company has helped Silverstar work through a series of legal issues regarding the award of this gaming license - culminating in March 2000 with the entering into of an agreement with the sole competing license applicant. This agreement settled all past claims and brought both parties and the Company together in an effort to jointly secure the sixth and final gaming license in the province. In September 2001, the Company, through CCA, entered into a further agreement (and as subsequently amended) to secure a 50% ownership interest in Rhino Resort Limited ("RRL"- a consortium which includes Silverstar) in exchange for an equity and loan contribution of 50 million Rand or $4.2 million at the exchange rate as of December 31, 2001 subject to RRL securing in full the remaining financing and the approvals necessary to allow the development to proceed. In November, 2001, The Gauteng Gambling Board ("GGB"), with the concurrence of the Executive Council of the provincial government, awarded RRL the sixth, and final, casino license for 700 slot machines and 30 gaming tables conditional upon the satisfaction of certain requirements within three months of award. In February 2002, RRL filed documentation with the GGB in order to satisfy those conditions, including evidence of the continuing commitment of Nedcor Investment Bank (one of South Africa's leading financial institutions) to provide the necessary debt financing and project guarantees required under the license. On February 11, 2002, RRL received notification of the filing in the High Court of South Africa by Tsogo Sun Holdings ("Tsogo") of an action seeking to overturn the decision of the GGB to award a casino license to RRL. Tsogo owns and operates one of the five existing casinos in Gauteng which is situated approximately 15 miles from RRL's development site. RRL is pursuing all its rights under law in defending this action by Tsogo. The GGB, the Executive Council of the provincial government, as well as RRL have given notice of their intention to defend. The Company anticipates that Tsogo's action, which could lead to an overturn of the decision of the GGB to award a casino license to RRL, will result in a delay to the construction of the first phase of the development but cannot, at this time, assess the likely extent of such delay. In addition to the equity ownership in RRL, the Company through a 55% owned subsidiary, Century Casinos West Rand (Pty) Ltd. ("CCWR"), will receive management fees as the manager of the Casino, Hotel & Resort. Management fees will be based on a percentage of gross revenues as well as a percentage of EBITDA (defined as earnings before interest, taxes, depreciation, amortization and other specifically defined costs). F22 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) Riverboat Development Agreement - Indiana - In September 1998, the Indiana Gaming Commission awarded a Certificate of Suitability to Pinnacle Gaming Development Corporation ("Pinnacle") to conduct riverboat gaming in Switzerland County. In accordance with the terms of the sale of the Company's interest in Pinnacle in 1995, the Company received payments of $1,380 in 2000 and $1,040 in 1999. The Company was entitled to receive installment payments of $32 per month for the first 60 months of the riverboat's operation; however, subsequent to 1999, the Company elected to receive an aggregate discounted payment amount of $1,380, which is included in other (expense), net in the 2000 statement of earnings. Employee Benefit Plan - In March 1998, the Company adopted the 401(k) Savings and Retirement Plan (the "Plan"). The Plan allows eligible employees to make tax-deferred contributions that are matched by the Company up to a specified level. The Company contributed $22 and $26 to the Plan in 2001 and 2000, respectively. Operating Lease Commitments and Purchase Options - The Company has entered into certain noncancelable operating leases for real property and equipment. As of December 31, 2001, future minimum lease payments under existing lease agreements are $330 in 2002, $287 in 2003, $282 in 2004, $170 in 2005, $90 in 2006 and a total of $308 remaining thereafter. Rental expense was $357 in 2001 and $505 in 2000. In June 1998, the Company began leasing parking spaces from the City of Cripple Creek under a five-year agreement which requires annual lease payments of $90. The Company may purchase the property for $3,250, less cumulative lease payments ($325 through December 31, 2001), at any time during the lease term. In February 2000, the agreement was amended to extend the term to 2010. In March 1999, the Company entered into a purchase option agreement for a property in Cripple Creek, Colorado, situated across the street from its Womacks/Legends Casino on Bennett Avenue. The agreement, as amended on February 7, 2000, expires March 31, 2004 and provides for option payments as follows: 2000 - $37; 2001 - $49; 2002 - $24; 2003 - $24; and 2004 - $6. The Company may exercise its option to purchase the property at any time during that period for a price of $1,500, less 50% of cumulative monthly option payments. The Company holds a subleasehold interest in the real property and improvements located at 220 East Bennett Avenue. The sublease, as assigned to WMCK-Acquisition Corp., provides for monthly rental payments of $16, and expires on June 20, 2005 unless terminated by the Company with 12 months advance notice. The Company has an option to acquire the property at the expiration of the sublease at an exercise price of $1,500. Stock Redemption Requirement - Colorado gaming regulations require the disqualification of any shareholder who may be determined by the Colorado Division of Gaming to be unsuitable as an owner of a Colorado casino. Unless a sale of such common stock to an acceptable party could be arranged, the Company would repurchase the common stock of any shareholder found to be unsuitable under the regulations. The Company could effect the repurchase with cash, Redemption Securities, as such term is defined in the Company's Certificate of Incorporation and having terms and conditions as shall be approved by the Board of Directors, or a combination thereof. Subsequent Event - Subsequent to December 31, 2001, the Company has made a conditional offer to purchase certain real estate in Cripple Creek, Colorado from a non-affiliated entity. This offer has been accepted but certain conditions have not yet been fulfilled by the seller. In the event that all conditions are met and the transaction is completed, the cash required will be in excess of $1.0 million. F23 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 9. INCOME TAXES The provision for income tax expense (benefit) consists of the following:
2001 2000 ---- ---- Current: Federal $ 1,856 $ 2,261 State 234 341 Foreign (89) 386 --------- --------- 2,001 2,988 Deferred: Federal (131) (219) State (8) (34) Foreign (68) (193) --------- --------- (207) (446) --------- --------- $ 1,794 $ 2,542 ========= =========
The provision for income taxes differs from the expected amount of income tax calculated by applying the statutory rate to pretax income as follows:
2001 2000 ---- ---- Expected income tax provision at statutory rate of 34% $ 1,434 $ 1,990 Increase (decrease) due to: Non-deductible goodwill amortization 252 252 Effect of foreign operations taxed at different rates (19) (18) State income taxes, net of federal benefit 163 201 Other, net (36) 117 --------- --------- Provision for income taxes $ 1,794 $ 2,542 ========= =========
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities at December 31, 2001, consist of the following: Deferred tax assets: Property and equipment - noncurrent $ 1,176 Accrued liabilities and other - current 1,082 --------- 2,258 Deferred tax liabilities: Prepaid expenses - current (704) --------- Net deferred tax assets $ 1,554 ========= F24 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) Net deferred tax assets of $378 and $1,176 are classified as current and noncurrent, respectively, and included in prepaid expenses and other assets in the accompanying consolidated balance sheet as of December 31, 2001. CCAL, a 65% owned subsidiary of the Company's South African subsidiary, has approximately $1,360 in net operating loss carryforwards as of December 31, 2001, which carry no expiration date. 10. OTHER EXPENSE, NET Other (expense), net, consists of the following: 2001 2000 ---- ---- Interest income $ 90 $ 145 Interest expense (1,936) (1,529) Income from sale of casino project rights - 1,380 Foreign currency exchange gains (losses) (29) (1) Amortization of deferred financing costs (82) (88) Gain on disposal of equipment 13 80 Write-down value of non-operating property (57) - Other 5 (7) -------- -------- $(1,996) $ (20) ======== ======== F25 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) 11. EARNINGS PER SHARE Basic and diluted earnings per share for the years ended December 31, 2001 and 2000 were computed as follows:
2001 2000 ---- ---- Basic Earnings Per Share: Net earnings $ 2,455 $ 3,253 ========== ========== Weighted average common shares 13,823,468 14,240,990 ========== ========== Basic earnings per share $ 0.18 $ 0.23 ========== ========== Diluted Earnings Per Share: Net earnings, as reported $ 2,455 $ 3,253 Interest expense, net of income taxes, on convertible debenture 8 28 ---------- ---------- Net earnings available to common shareholders $ 2,463 $ 3,281 ========== ========== Weighted average common shares 13,823,468 14,240,990 Effect of dilutive securities: Convertible debenture 67,451 227,489 Stock options and warrants 1,094,028 567,362 ---------- ---------- Dilutive potential common shares 14,984,947 15,035,841 ========== ========== Diluted earnings per share $ 0.16 $ 0.22 ========== ========== Excluded from computation of diluted earnings per share due to anti-dilutive effect: Options and warrants to purchase common shares 15,000 205,000 Weighted average exercise price $ 2.15 $ 2.19
F26 CENTURY CASINOS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands, except for share information) UNAUDITED SUMMARIZED QUARTERLY DATA Summarized quarterly financial data for 2001 and 2000 is as follows:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- Year ended December 31, 2001 Net operating revenue $ 7,309 $ 7,393 $ 7,901 $ 6,973 Earnings from operations $ 1,189 $ 1,284 $ 2,016 $ 1,724 Net earnings $ 453 $ 589 $ 687 $ 726 Basic earnings per share $ 0.03 $ 0.05 $ 0.05 $ 0.05 Diluted earnings per share $ 0.03 $ 0.04 $ 0.05 $ 0.04 1st Quarter(1) 2nd Quarter 3rd Quarter 4th Quarter(2) -------------- ----------- ----------- -------------- Year ended December 31, 2000 Net operating revenue (3) $ 5,164 $ 5,514 $ 6,454 $ 9,100 Earnings from operations $ 603 $ 1,052 $ 1,554 $ 2,664 Net earnings $ 979 $ 396 $ 830 $ 1,048 Basic earnings per share $ 0.07 $ 0.03 $ 0.06 $ 0.07 Diluted earnings per share $ 0.07 $ 0.03 $ 0.06 $ 0.06
(1) During the 1st quarter of 2000, the Company received $1,380, from the sale of its riverboat gambling license in Indiana. This was offset by charges of $302 related to the write-off of a noncompete agreement with a former officer/director and bonuses paid to certain officers/directors related to the final payment received on the sale of the Company's riverboat gambling license in Indiana. (2) The Caledon Casino opened for business on October 11, 2000. During the 4th quarter of 2000, net operating revenue for the casino was $3,536. Consolidated net earnings, after eliminating all intercompany transactions, for CCA, the Company's South African subsidiary, of which the Caledon Casino is a part, was $748 for the 4th quarter of 2000. (3) In 2001, the Company changed its classification of promotional charges which totaled $2,740 and $2,777 for the years ended December 31, 2001 and 2000, respectively. The following promotional expenses, which are now accounted for as a reduction of revenue were previously classified as casino expenses. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2000 $670 $698 $736 $673 F27 EX-11.02 3 doc2.txt MANAGEMENT AGREEMENT CCI AND FOCUS MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT is made effective for all purposes and in all respects as of the 1 day of March, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation (hereinafter referred to as the "Company"), and FOCUS CASINO CONSULTING AG, a Swiss corporation (hereinafter referred to as the "Consultant"). WITNESSETH THAT: WHEREAS, Consultant has a contractual relationship with Mr. Peter Hoetzinger (Austrian citizen, born 05-05-1962), who is presently employed, and has since 1993 been employed by the Company; and WHEREAS, Consultant has the right, and the human resources available, to provide executive casino management services (a substantial part of the services Mr. Peter Hoetzinger provided) to the Company; and WHEREAS, both the Company and the Consultant desire to set forth the terms and conditions of their agreements and understandings, and for their mutual benefit to extend the term of Consultant's engagement hereunder; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: 1. Term of Agreement. ------------------- The term of this Agreement shall commence on March 1, 2001, and shall continue until December 31 , 2005, and shall be automatically renewed for additional, successive periods of five (5) years each thereafter, unless sooner terminated in accordance with the relevant provisions of this Agreement. 2. Duties of Consultant. ---------------------- 2.1 By entering into this Agreement, Consultant shall undertake and assume the responsibility of performing for and on behalf of the Company such duties as are usual and customary to the position of a Vice Chairman and President. The duties of Consultant shall be performed through Consultant by a management team, of which Mr. Peter Hoetzinger has to be part of. 3. Compensation. ------------ 3.1 Management Fee. As annual compensation for the services rendered --------------- by Consultant for the Company pursuant to this Agreement, Consultant shall be paid not less than the following base annual management fee, on a monthly basis, during the term hereof: $100,000, plus annual increases and bonuses, and such other incentives, benefits, and compensation as may be awarded to him from time to time by the Compensation Committee of the Board of Directors of the Company. 1 3.2 Management Fee Review. Consultant's management fee shall be ----------------------- reviewed annually by the Compensation Committee. 4. Additional Benefits. -------------------- In addition to, and not in limitation of, the compensation referred to in Section 3, Consultant shall receive reimbursement of all reasonable expenses incurred in connection with the performance of the duties for the Company, upon submission of receipts to the Company. Reasonable expenses shall include, but not be limited to all out-of-pocket expenses for entertainment, travel, meals, lodging, automobile expenses, communications and office costs and the like incurred by the Consultant in the interest of the Company. 5. Termination. ----------- 5.1 Termination By Either Party Without Cause. At any time during the ------------------------------------------ term hereof, or at the end of the term or any renewal term under Section 1 above, this Agreement may be terminated "without cause" by either the Company or the Consultant upon written notice to the other party. (a) Termination By Consultant. In the event of such termination --------------------------- "without cause" by Consultant, the Company shall have the option either (i) to accept Consultant's resignation, effective immediately on receipt of such written notice; or (ii) to require Consultant to continue to perform his duties hereunder, for a period not to exceed six (6) months from the date of receipt of such written notice. In either event, the Consultant's compensation and benefits hereunder shall continue only until the date on which the Consultant ceases to perform any further duties for the Company. (b) Termination By Company. In the event of such termination ------------------------ "without cause" by the Company, Consultant shall be continued at the same base fee for a period of six (6) months from the date on which the Consultant receives written notice of termination. Such compensation shall be paid to the Consultant in six (6) equal, successive monthly payments, beginning on the 1st day of the month immediately following the date on which the Consultant receives written notice of termination. Consultant shall continue to make himself available to, and shall cooperate with the Company, as may be reasonably required to assist the Company during the six-month transition period. (c) In the event Consultant's engagement hereunder is terminated by the Company "without cause" pursuant to this Section 5.1(b), after a "Change of Control," as defined in Section 5.3(a)(ii) below, has occurred, then the provisions of Section 5.3(b) shall apply. 2 5.2 Termination By Company For Cause. ------------------------------------ Notwithstanding any other provision hereof, the Company may terminate Consultant's engagement under this Agreement at any time for cause. The termination shall be effected by written notice thereof to the Consultant, which shall specify the exact cause for termination. For purposes hereof, the term "cause" shall mean the failure of Consultant for any reason, within thirty (30) days after receipt by Consultant of written notice thereof from the Company, to correct, cease, or otherwise alter any specific action or omission to act that constitutes a material and willful breach of this Agreement likely to result in material damage to the Company, or willful gross misconduct likely to result in material damage to the Company. Upon such valid termination for cause by the Company, Consultant shall not receive any termination pay or benefits beyond the date on which he receives final written notice of termination. 5.3 Termination By Consultant For Cause. --------------------------------------- (a) Notwithstanding any other provision hereof, Consultant may terminate his engagement with Company under this Agreement at any time for cause, upon written notice thereof to the Company specifying the cause for Consultant's termination. For purposes hereof, the term "for cause" shall mean: (i) the failure of the Company for any reason, within thirty (30) days after receipt by the Company of written notice from Consultant, to correct, cease, or otherwise alter any material adverse change in the conditions of Consultant's engagement, including, but not limited to any change in Consultant's duties (such as, but not limited to another person or consulting company assuming the same or similar title, position or duties, or the Consultant's primary duties being assigned to be performed by the Consultant in a country other than the country of primary residence of the Consultant's management team, including Mr. Peter Hoetzinger), unless Consultant consents in writing to such change, or unless directed by the Compensation Committee (as long as the Compensation Committee consists of persons appointed by the Company's Board of Directors before any Change of Control); or (ii) a "Change of Control" of the Company occurs, or has previously occurred at any time during Consultant's engagement hereunder. "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Consultant or Mr. Peter Hoetzinger) becoming the beneficial owner of a majority of the Company's then outstanding securities; (b) the triggering 3 of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of a majority of the existing Board of Directors of the Company; (d) holders of the Company's securities approve a merger, consolidation or liquidation of the Company. (b) In the event of termination by the Consultant "for cause" hereunder: (1) A lump sum cash benefit payment of three (3) times the Consultant's then current annual fee plus three (3) times the Consultant's average bonus for the last three years shall be made to Consultant within 30 days of such written notice. (2) Consultant may also, in addition to, and not in limitation of payments under Section 5.3(b)(1) hereunder, at his sole option, elect to serve as a consultant to Company (working out of his then current residence) for an additional period of three (3) years at his then current fee, his previous year's bonus and current benefits. 5.4 Effective Date of Termination. Unless otherwise specified, the ------------------------------- effective date of termination, as used in this Section 5, shall be the date on which Consultant receives written notice of termination from the Company or gives written notice of termination to the Company. 6. Other Business Activities. --------------------------- During the period of his engagement under this Agreement, the Consultant shall not be employed by or otherwise engage or be interested in any business other than the Company, with the following exceptions: (a) Consultant's investment or involvement in any business shall not be considered a violation of this Section, provided that such business is not in direct competition with the Company and the Consultant does not render substantial management or other personal services to such business; (b) Consultant may consult with or for other businesses not in direct competition with the Company. 7. Indemnification. --------------- So long as Consultant is not found by a court of law to be guilty of a willful and material breach of this Agreement, or to be guilty of willful gross misconduct, Consultant shall be indemnified from and against any and all losses, liability, claims and expenses, damages, or causes of action, proceedings or investigations, or threats thereof (including reasonable attorney fees and expenses of counsel satisfactory to and approved by Consultant) incurred by Consultant, arising out of, in connection with, or based upon Consultant's services and the performance of his duties pursuant to this Agreement, or any other matter contemplated by this Agreement, whether or not resulting in any such 4 liability; and Consultant shall be reimbursed by the Company as and when incurred for any reasonable legal or other expenses incurred by Consultant in connection with investigating or defending against any such loss, claim, damage, liability, action, proceeding, investigation or threat thereof, or producing evidence, producing documents or taking any other action in respect thereto (whether or not Consultant is a defendant in or target of such action, proceeding or investigation). 8. Burden and Benefit. -------------------- Unless the express provisions of a particular section of this Agreement state otherwise, or performance thereunder would be impossible, this Agreement shall be binding upon, and shall inure to the benefit of, Company and Consultant, and their respective heirs, personal and legal representatives, successors, and assigns. It shall also be expressly binding upon and inure to the benefit of any person or entity assuming the Corporation/Company, by merger, consolidation, purchase of assets or stock, or otherwise. 9. Governing Law. -------------- It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Delaware. The Company agrees to cover all costs, including legal, arising in connection with drafting and implementing this Agreement, both for the Company and for Consultant. 10. Severability. ------------ The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity and enforceability of the other provisions. 11. Notice. ------ Any notice required to be given hereunder shall be sufficient if it is in writing and sent by certified or registered mail, return receipt requested, first-class postage prepaid, to the following respective addresses, which may hereafter be changed by written notice to the other party. Company at 200 - 220 ------- East Bennett Ave., Cripple Creek, CO 80813, USA, Consultant at Focus Casino ---------- Consulting AG, c/o Lex Account - Mr. Werner Stocker, Neugasse 7, CH-6301 Zug, Switzerland. 12. Entire Agreement; Interpretation. ---------------------------------- 12.1 This Agreement contains the entire agreement and understanding by and between the Company and Consultant with respect to the engagement of Consultant. No change or modification of this Agreement shall be valid or binding unless it is in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or at any other time. The Compensation Committee shall interpret and administer this 5 Agreement, in good faith, and may make such administrative or ministerial adjustments hereto as may be reasonably required without requiring written Amendment, if both parties agree, and the rights of the Consultant are not adversely affected thereby. 13. Confidentiality. --------------- Other than in the performance of his duties hereunder, Consultant agrees not to disclose, either during the term of his engagement by the Company or at any time thereafter, to any person, firm or corporation any confidential information concerning the business affairs, financial affairs, know-how, private documents, reports, plans, proposals, marketing and sales plans, or similar information of the Company. Any such documents, techniques, methods, processes or technologies used by the Company shall be considered confidential and a "trade secret" for the purposes of this Agreement. 14. Counterparts. ------------ This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. IN WITNESS WHEREOF, the Company and Consultant have duly executed this Agreement as of the day and year first above written. COMPANY: CONSULTANT: CENTURY CASINOS, INC., FOCUS CASINO CONSULTING AG, a Delaware corporation a Swiss corporation By: /s/Erwin Haitzmann By: /s/Werner Stocker ------------------ ----------------- Chairman, Compensation Committee Chairman of the Board By:/s/ Dinah Corbaci ------------------- Member, Compensation Committee 6 EX-11.03 4 doc3.txt MANAGEMENT AGREEMENT CCI AND FLYFISH MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT is made effective for all purposes and in all respects as of the 1 day of March, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation (hereinafter referred to as the "Company"), and FLYFISH CASINO CONSULTING AG, a Swiss corporation (hereinafter referred to as the "Consultant"). WITNESSETH THAT: WHEREAS, Consultant has a contractual relationship with Mr. Erwin Haitzmann (Austrian citizen, born 08-18-1953), who is presently employed, and has since 1993 been employed by the Company; and WHEREAS, Consultant has the right, and the human resources available, to provide executive casino management services (a substantial part of the services Mr. Erwin Haitzmann provided) to the Company; and WHEREAS, both the Company and the Consultant desire to set forth the terms and conditions of their agreements and understandings, and for their mutual benefit to extend the term of Consultant's engagement hereunder; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: 1. Term of Agreement. ------------------- The term of this Agreement shall commence on March 1, 2001, and shall continue until December 31, 2005, and shall be automatically renewed for additional, successive periods of five (5) years each thereafter, unless sooner terminated in accordance with the relevant provisions of this Agreement. 2. Duties of Consultant. ---------------------- 2.1 By entering into this Agreement, Consultant shall undertake and assume the responsibility of performing for and on behalf of the Company such duties as are usual and customary to the position of a Chairman and Chief Executive Officer. The duties of Consultant shall be performed through Consultant by a management team, of which Mr. Erwin Haitzmann has to be part of. 3. Compensation. ------------ 3.1 Management Fee. As annual compensation for the services rendered --------------- by Consultant for the Company pursuant to this Agreement, Consultant shall be paid not less than the following base annual management fee, on a monthly basis, during the term 1 hereof: $100,000, plus annual increases and bonuses, and such other incentives, benefits, and compensation as may be awarded to him from time to time by the Compensation Committee of the Board of Directors of the Company. 3.2 Management Fee Review. Consultant's management fee shall be ----------------------- reviewed annually by the Compensation Committee. 4. Additional Benefits. -------------------- In addition to, and not in limitation of, the compensation referred to in Section 3, Consultant shall receive reimbursement of all reasonable expenses incurred in connection with the performance of the duties for the Company, upon submission of receipts to the Company. Reasonable expenses shall include, but not be limited to all out-of-pocket expenses for entertainment, travel, meals, lodging, automobile expenses, communications and office costs and the like incurred by the Consultant in the interest of the Company. 5. Termination. ----------- 5.1 Termination By Either Party Without Cause. At any time during the ------------------------------------------ term hereof, or at the end of the term or any renewal term under Section 1 above, this Agreement may be terminated "without cause" by either the Company or the Consultant upon written notice to the other party. (a) Termination By Consultant. In the event of such termination --------------------------- "without cause" by Consultant, the Company shall have the option either (i) to accept Consultant's resignation, effective immediately on receipt of such written notice; or (ii) to require Consultant to continue to perform his duties hereunder, for a period not to exceed six (6) months from the date of receipt of such written notice. In either event, the Consultant's compensation and benefits hereunder shall continue only until the date on which the Consultant ceases to perform any further duties for the Company. (b) Termination By Company. In the event of such termination ------------------------ "without cause" by the Company, Consultant shall be continued at the same base fee for a period of six (6) months from the date on which the Consultant receives written notice of termination. Such compensation shall be paid to the Consultant in six (6) equal, successive monthly payments, beginning on the 1st day of the month immediately following the date on which the Consultant receives written notice of termination. Consultant shall continue to make himself available to, and shall cooperate with the Company, as may be reasonably required to assist the Company during the six-month transition period. (c) In the event Consultant's engagement hereunder is terminated by the Company "without cause" pursuant to this Section 5.1(b), after a "Change of Control," as defined in Section 5.3(a)(ii) below, has occurred, then the provisions of Section 5.3(b) shall apply. 2 5.2 Termination By Company For Cause. ------------------------------------ Notwithstanding any other provision hereof, the Company may terminate Consultant's engagement under this Agreement at any time for cause. The termination shall be effected by written notice thereof to the Consultant, which shall specify the exact cause for termination. For purposes hereof, the term "cause" shall mean the failure of Consultant for any reason, within thirty (30) days after receipt by Consultant of written notice thereof from the Company, to correct, cease, or otherwise alter any specific action or omission to act that constitutes a material and willful breach of this Agreement likely to result in material damage to the Company, or willful gross misconduct likely to result in material damage to the Company. Upon such valid termination for cause by the Company, Consultant shall not receive any termination pay or benefits beyond the date on which he receives final written notice of termination. 5.3 Termination By Consultant For Cause. --------------------------------------- (a) Notwithstanding any other provision hereof, Consultant may terminate his engagement with Company under this Agreement at any time for cause, upon written notice thereof to the Company specifying the cause for Consultant's termination. For purposes hereof, the term "for cause" shall mean: (i) the failure of the Company for any reason, within thirty (30) days after receipt by the Company of written notice from Consultant, to correct, cease, or otherwise alter any material adverse change in the conditions of Consultant's engagement, including, but not limited to any change in Consultant's duties (such as, but not limited to another person or consulting company assuming the same or similar title, position or duties, or the Consultant's primary duties being assigned to be performed by the Consultant in a country other than the country of primary residence of the Consultant's management team, including Mr. Erwin Haitzmann), unless Consultant consents in writing to such change, or unless directed by the Compensation Committee (as long as the Compensation Committee consists of persons appointed by the Company's Board of Directors before any Change of Control); or (ii) a "Change of Control" of the Company occurs, or has previously occurred at any time during Consultant's engagement hereunder. "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Consultant or Mr. Erwin Haitzmann) becoming the beneficial owner of a majority of the Company's then outstanding securities; (b) the triggering 3 of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of a majority of the existing Board of Directors of the Company; (d) holders of the Company's securities approve a merger, consolidation or liquidation of the Company. (b) In the event of termination by the Consultant "for cause" hereunder: (1) A lump sum cash benefit payment of three (3) times the Consultant's then current annual fee plus three (3) times the Consultant's average bonus for the last three years shall be made to Consultant within 30 days of such written notice. (2) Consultant may also, in addition to, and not in limitation of payments under Section 5.3(b)(1) hereunder, at his sole option, elect to serve as a consultant to Company (working out of his then current residence) for an additional period of three (3) years at his then current fee, his previous year's bonus and current benefits. 5.4 Effective Date of Termination. Unless otherwise specified, the ------------------------------- effective date of termination, as used in this Section 5, shall be the date on which Consultant receives written notice of termination from the Company or gives written notice of termination to the Company. 6. Other Business Activities. --------------------------- During the period of his engagement under this Agreement, the Consultant shall not be employed by or otherwise engage or be interested in any business other than the Company, with the following exceptions: (a) Consultant's investment or involvement in any business shall not be considered a violation of this Section, provided that such business is not in direct competition with the Company and the Consultant does not render substantial management or other personal services to such business; (b) Consultant may consult with or for other businesses not in direct competition with the Company. 7. Indemnification. --------------- So long as Consultant is not found by a court of law to be guilty of a willful and material breach of this Agreement, or to be guilty of willful gross misconduct, Consultant shall be indemnified from and against any and all losses, liability, claims and expenses, damages, or causes of action, proceedings or investigations, or threats thereof (including reasonable attorney fees and expenses of counsel satisfactory to and approved by Consultant) incurred by Consultant, arising out of, in connection with, or based upon Consultant's services and the performance of his duties pursuant to this Agreement, or any other matter contemplated by this Agreement, whether or not resulting in any such 4 liability; and Consultant shall be reimbursed by the Company as and when incurred for any reasonable legal or other expenses incurred by Consultant in connection with investigating or defending against any such loss, claim, damage, liability, action, proceeding, investigation or threat thereof, or producing evidence, producing documents or taking any other action in respect thereto (whether or not Consultant is a defendant in or target of such action, proceeding or investigation). 8. Burden and Benefit. -------------------- Unless the express provisions of a particular section of this Agreement state otherwise, or performance thereunder would be impossible, this Agreement shall be binding upon, and shall inure to the benefit of, Company and Consultant, and their respective heirs, personal and legal representatives, successors, and assigns. It shall also be expressly binding upon and inure to the benefit of any person or entity assuming the Corporation/Company, by merger, consolidation, purchase of assets or stock, or otherwise. 9. Governing Law. -------------- It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of Delaware. The Company agrees to cover all costs, including legal, arising in connection with drafting and implementing this Agreement, both for the Company and for Consultant. 10. Severability. ------------ The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity and enforceability of the other provisions. 11. Notice. ------ Any notice required to be given hereunder shall be sufficient if it is in writing and sent by certified or registered mail, return receipt requested, first-class postage prepaid, to the following respective addresses, which may hereafter be changed by written notice to the other party. Company at 200 - 220 ------- East Bennett Ave., Cripple Creek, CO 80813, USA, Consultant at Focus Casino ---------- Consulting AG, c/o Lex Account - Mr. Werner Stocker, Neugasse 7, CH-6301 Zug, Switzerland. 12. Entire Agreement; Interpretation. ---------------------------------- 12.1 This Agreement contains the entire agreement and understanding by and between the Company and Consultant with respect to the engagement of Consultant. No change or modification of this Agreement shall be valid or binding unless it is in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or at any other time. The Compensation Committee shall interpret and administer this 5 Agreement, in good faith, and may make such administrative or ministerial adjustments hereto as may be reasonably required without requiring written Amendment, if both parties agree, and the rights of the Consultant are not adversely affected thereby. 13. Confidentiality. --------------- Other than in the performance of his duties hereunder, Consultant agrees not to disclose, either during the term of his engagement by the Company or at any time thereafter, to any person, firm or corporation any confidential information concerning the business affairs, financial affairs, know-how, private documents, reports, plans, proposals, marketing and sales plans, or similar information of the Company. Any such documents, techniques, methods, processes or technologies used by the Company shall be considered confidential and a "trade secret" for the purposes of this Agreement. 14. Counterparts. ------------ This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. IN WITNESS WHEREOF, the Company and Consultant have duly executed this Agreement as of the day and year first above written. COMPANY: CONSULTANT: CENTURY CASINOS, INC., FLYFISH CASINO CONSULTING AG, a Delaware corporation a Swiss corporation By: /s/ Dinah Corbaci By: /s/Werner Stocker ------------------- --------------------- Member, Compensation Committee Chairman of the Board By:/s/ Peter Hoetzinger ---------------------- Member, Compensation Committee EX-11.04 5 doc4.txt EQUITY SUBSCRIPTION AGREEMENT ------------------------------- This agreement is dated the 7th day of September, 2001 and is made by and between RHINO RESORT LIMITED ("Rhino Resort") and SILVERSTAR DEVELOPMENT LIMITED ("Silverstar") and CENTURY CASINOS AFRICA (PTY) LIMITED ("Century") (hereinafter collectively referred to as "the parties"). WHEREBY IT IS AGREED AS FOLLOWS: A. ISSUE OF SHARES - - ----------------- Rhino, at its own cost, shall immediately upon execution of this agreement give irrevocable instruction to its attorneys to cause that there be issued to Century, as soon as practicable, shares in Rhino so as to constitute Century the beneficial owner of fifty percent (50%) of the issued share capital of Rhino Resort and shall, from the date of execution of this agreement, conduct the business of Rhino (including election / appointment of directors and the voting of shareholders) as if the issue of said shares to Century had been completed as at the date of execution of this agreement. B UNDERTAKING TO PROVIDE EQUITY FUNDS - - --------------------------------------- Century Casinos Africa (Pty) Limited ("Century") hereby undertakes to Rhino Resort Limited ("Rhino Resort") which hereby accepts the benefit of this undertaking that: 1. Century shall inject an amount of R40 million by way of equity share capital into the share capital of Rhino Resort. 2. This undertaking is subject to the fulfillment by no later than Dec 31 2003 of the following suspensive conditions which are inserted into this undertaking and agreement for the benefit of Century: 2.1 The issue of a casino licence to Rhino Resort to develop and operate a casino in the West Rand (Gauteng province) upon 1 exactly the same terms as outlined in Rhino Resort's amended application lodged with the Gauteng Gambling Board (these terms specifically include the location of the temporary casino at Hillfox Power Centre for a period of not less than three (3) years, the allocation of not less than seven hundred (700) gaming machines for the temporary casino and nine hundred and fifty (950) gaming machines for the permanent casino, the approval of the management fees presently envisaged as payable by Rhino Resort to CCWR and that no third party shall have legally disputed the grant of such casino licence prior to the fulfillment date stated above; 2.2 That the Casino and Resort Management Agreement between Rhino and CCWR, as amended, remains in good standing and undisputed; 2.3 That a firm, irrevocable and unconditional commitment from a reputable bank acceptable to Century is in place for the entire funding (other than the R40 million capital contribution from Century) necessary to develop and operate the temporary and permanent casino resort as presently proposed by Rhino Resort in the amended application to the Gauteng Gambling Board. 2.4 That Kairo Management SA (Pty) Limited ("Kairo") has agreed, in writing, to irrevocably waive any and all of its rights under article 5.6 of the Memorandum of Agreement dated May 2000, entered into by and between Silverstar, CCWR, Rhino Hotel & Resort (Pty) Ltd, and Kairo. 2.5 That the issue of shares and appointment of directors and other such relevant matters described in paragraph A above ("Issue of Shares") have been completed, formalized, and 2 ratified. C MANNER OF PROVISION OF EQUITY FUNDS - - ---------------------------------------- Subject to the fulfillment or waiver of the suspensive conditions in accordance with B above, Century shall (unless otherwise agreed between the parties) cause to be deposited in a bank account designated by Rhino the sum of R40 million no later than five business prior to the completion of the first drawdown of funds envisaged to be provided in paragraph 2.3 above. D CHANGE OF APPLICANT ENTITY - - ----------------------------- In the event, for whatever reason, it is determined that an entity other than Rhino be introduced to be the beneficiary of that process generally known as "The Amendment Application", then the parties agree that they shall procure that any and all such action shall be taken that may be required to establish with that substitute entity the rights, obligations, and benefits of all parties as are established under this Agreement. E EVENT OF NON-FULFILLMENT OR NON-WAIVER OF SUSPENSIVE CONDITIONS - - ---------------------------------------------------------------------- In the event that, for whatever reason, the suspensive conditions specified in B above have not been fulfilled or waived prior to December 31, 2003 and that Century, as a result, has not provided funding as specified in B and C above, the provisions of this Equity Subscription Agreement shall be null and void and the status as prior to the date of execution shall be restored. 3 DATED AT JMB THIS 8TH DAY OF SEPTEMBER 2001. /S/ JAMES FORBES - ------------------ CENTURY CASINOS AFRICA (PTY) LIMITED DATED AT JMB THIS 7TH DAY OF SEPTEMBER 2001. /S/ JAMES FORBES - ------------------ RHINO RESORT LIMITED DATED AT JMB THIS 7TH DAY OF SEPTEMBER 2001. /S/ JOSE GARCIA DA SILVA - ---------------------------- SILVERSTAR DEVELOPMENT LIMITED 4 EX-11.05 6 doc5.txt MEMORANDUM AGREEMENT CALEDON MEMORANDUM OF AGREEMENT BY AND BETWEEN CENTURY CASINOS CALEDON (PTY) LTD. ("CCAL") (PREVIOUSLY KNOWN AS CALEDON CASINO BID COMPANY (PTY) LTD.) AND CENTURY CASINOS AFRICA (PTY) LTD. ("CCA") AND FORTES KING HOSPITALITY (PTY) LTD. (AND / OR ITS SUCCESSOR TO THE HOTEL MANAGEMENT AGREEMENT - "FKH") (COLLECTIVELY, "THE PARTIES") WHEREAS The Parties have entered into various agreements with respect to the development and operation of The Caledon Casino, Hotel & Spa and wish to make amendment to and/or restate those agreements (as applicable) to give effect to the matters in principle as described herein. NOW, THEREFORE, the parties hereto (as applicable) agree as follows: 1. CASINO MANAGEMENT AGREEMENT (BY AND BETWEEN CCAL & CCA) & HOTEL ------------------------------------------------------------------------- MANAGEMENT AGREEMENT (BY AND BETWEEN CCAL & FKH) --------------------------------------------------- ("THE MANAGEMENT AGREEMENTS") ----------------------------- a. Amendment shall be made to the management agreements such that any and all fees identified therein shall be deemed to have been not due or payable (and therefore shall be deemed to equal 1 'zero') from the inception date of those agreements and shall remain so until no earlier than Jan 1, 2002, whereafter each of CCA (in respect of the Casino Management Agreement) and FKH (in respect of the Hotel Management Agreement) shall, commencing with respect to the financial year beginning January 1, 2002, have the right to declare the fees calculable and payable for their respective management agreements by written notification to the other parties to this agreement which notice shall, i. state from which date (the "declaration date") the respective fees shall become calculable and payable; and ii. not be given earlier than the first day of the financial year within which the declaration date falls; and iii. not be given later than 30 days after the end of the financial year within which the declaration date falls. b. There shall be created a reserve to which shall be applied amounts calculated upon the same basis as contained in the management agreements for the period commencing October 10, 2000 until the respective election date. The previously intended recipients of any fees under the management agreements may, in the event that the Board of Directors of CCAL determines that distribution in part or in whole of those reserves be allowed, elect that distributions from this reserve be made by way of allocation of amounts from the respective reserves which will then attach to newly created further classes of shares and which may be declared and paid as dividend to such extent as there remains within the respective reserve sufficient amount to meet in full any STC payable upon dividends so declared. c. Any amounts contained within these reserves shall rank as an obligation of the company ahead of any and all other classes of share. d. Payments of dividends relating to the newly created classes of share may only be made in equal proportion as measured as a percentage of the amounts contained in each respective reserve. e. Distributions and / or dividends relating to the newly created classes of share may only be declared at such time or times when all current claims, if any, for fees due and payable under the management agreements and interest due and payable, if any, upon shareholders loans to CCAL have been satisfied in full. 2 2. SUMS PAYABLE TO FKH BY CCAL -------------------------------- a. It is agreed by the parties that CCAL shall, by no later than January 30, 2002, pay to FKH against invoice and in consideration for expenses incurred, the sum of forty thousand Rands (R40,000). b. Commencing January 1, 2002, and for such period of time that FKH choose not to make the election provided for under paragraph 1a and that Caledon Overberg Investments Limited have not elected to amend the interest payable upon their shareholder loans to a rate greater than 0% (zero per cent), CCAL shall pay to FKH against invoice the sum of six thousand Rands (R6,000) monthly in arrears plus not more than a further four thousand Rands (R4,000) in consideration for expenses incurred. c. The cumulative amounts paid by CCAL to FKH under this paragraph 4 may, at the election of CCAL, be deducted from any amounts that may accrue to the FKH reserve established in accordance with paragraph 1 above. 3. GENERAL PROVISIONS ------------------- a. The parties agree to take any and all such actions as may be reasonably required to give effect to this Memorandum of Agreement and to enter into and execute any such further documentation that shall give full effect to the principle and commercial objectives contained herein. b. It is the intention of the parties, notwithstanding the date of execution of this Memorandum of Agreement, that all matters contained herein shall be interpreted as having been in full force and effect from the date of execution of those agreements to which reference is made herein. THUS DONE AND SIGNED by CCAL at Capetown this 20th day of September 2001 /S/ JAMES FORBES - ------------------ who warrants his authority to sign hereto 3 THUS DONE AND SIGNED by FKH at Capetown this 20th day of September 2001 /s/ Leon Fortes - ----------------- who warrants his authority to sign hereto THUS DONE AND SIGNED by CCA at Capetown this 20th day of September 2001 /s/ James Forbes - ------------------ who warrants his authority to sign hereto 4 EX-11.06 7 doc6.txt AMENDMENT TO LOAN AGREEMENT BETWEEN CENTURY CASINOS AFRICA (PROPRIETARY) LIMITED ("CENTURY") AND CENTURY CASINOS CALEDON (PROPRIETARY) LIMITED - (FORMERLY KNOWN AS CALEDON CASINO BID COMPANY (PROPRIETARY) LIMITED) ("CCAL") OR ("BORROWER") AND CALEDON OVERBERG INVESTMENTS (PROPRIETARY) LIMITED ("COIL") AND CENTURY CASINOS INC. ("CCI") OR ("CENTURY INC.") Preamble The parties to this agreement entered into a Loan Agreement dated 31 March 2000 ("the Loan Agreement") in terms of which the Borrower, borrowed money from Century and COIL on terms as contained in that agreement. It is the intention of the parties to amend the Loan Agreement as provided hereunder. Definitions Unless the context of this agreement otherwise clearly provides, all expressions shall bear the meanings assigned to them in the Loan Agreement. Interest Clause 5 of the Loan Agreement shall be deleted in its entirety and is replaced with a similarly numbered new Clause 5, which shall read as follows; "5 Interest 5.1 The capital outstanding from time to time (together with all interest that may have accrued thereon from time to time) shall bear interest, as from the advance dates to the date of actual repayment in full, at such interest rate as 5.1.1 does not exceed the prime rate plus 3% (Three per cent) unless otherwise agreed between the parties to this agreement; and 5.1.2 does not under any circumstance exceed the prime rate plus 10% (Ten per cent); and 1 5.1.3 may be 0% (Zero per cent) should the Lenders elect to charge no interest upon the loan balances outstanding from time to time. 5.2 The interest referred to in 5.1 shall - 5.2.1 be calculated monthly in arrear on the capital amount and all previously accrued interest outstanding as at; and 5.2.2 to the extent not paid in terms of Clause 6.1.1, be capitalised and compounded monthly in arrear on, the last day of each and every calendar month commencing with the month in which the advance date falls. 5.3 With effect from the commencement of the advances and until no earlier than January 1, 2002, no interest shall be accrued or paid on the capital outstanding from time to time. 5.4 On or after January 1, 2002, each of COIL and CCA shall independently have the right to require that the rate of interest applicable to their respective loan be adjusted to that provided for in paragraph 5 of the Loan Agreement subject to any restrictions that may be applicable in accordance with the third party financing agreements (including those with PSG Investment Bank) entered into variously by the parties and CCAL. 5.5 Any Lender electing to have the rate of interest adjusted in terms of 5.4 above shall do so by written notification to the other parties to this agreement which notice shall, 5.5.1 state from which date (the "election date") the interest rate adjustment shall be applicable; and 5.5.2 not be given earlier than the first day of the financial year within which the election date falls; and 5.5.3 not be given later than 30 days after the end of the financial year within which the election date falls. Signed at Capetown on 20 September 2001 for CENTURY CASINOS AFRICA (PROPRIETARY) LIMITED /s/ James Forbes ------------------ Who warrants that he is duly authorised hereto Signed at Capetown on 20 September 2001 for CENTURY CASINOS CALEDON (PROPRIETARY) LIMITED 2 /s/ James Forbes ------------------ Who warrants that he is duly authorised hereto Signed at Capetown on 20 September 2001 for CALEDON OVERBERG INVESTMENTS (PROPRIETARY) LIMITED /s/ Leon Fortes ----------------- Who warrants that he is duly authorised hereto Signed at Captetown on 20 September 2001 for CENTURY CASINOS INC. /s/ James Forbes ------------------ Who warrants that he is duly authorised hereto 3 EX-11.07 8 doc9.txt Adjustment / Amendment No. 1 to Management Agreement ---------------------------------------------------- This Adjustment / Amendment No. 1 is made on this day of October 11, 2001 to the MANAGEMENT AGREEMENT ("Agreement") dated March 1, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation ("Company"), and FOCUS CASINO CONSULTING AG, a Swiss corporation ("Consultant"). Adjustment / Amendment to Article 5.3 (a) (ii): - ------------------------------------------------------ The Company and Consultant hereby agree to delete the definition of "Change of Control" as used in Article 5.3 (a) (ii) of the Agreement in its entirety and replace it with the following: "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Consultant or Mr. Peter Hoetzinger) becoming the beneficial owner of a majority of the voting rights of the Company's then outstanding securities; (b) the triggering of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of half or more of the existing Board of Directors of the Company; (d) the replacement, or rejection (i.e. through a proxy fight), of one or more person(s), nominated to be Director(s) by the Company's Board of Directors before any Change of Control; (e) Mr. Erwin Haitzmann is no longer Chairman and Chief Executive Officer of the Company, unless because of his death or permanent disability; (f) holders of the Company's securities approve a merger, consolidation or liquidation of the Company." Agreed to and accepted by: CENTURY CASINOS, INC., FOCUS CASINO CONSULTING AG, A Delaware corporation a Swiss corporation By: /s/Erwin Haitzmann By: /s/Werner Stocker Chairman, Compensation Committee Chairman of the Board By: /s/Dinah Corbaci Member, Compensation Committee 1 EX-11.08 9 doc8.txt AMENDMENT CCI/FOCUS Adjustment / Amendment No. 1 to Management Agreement ---------------------------------------------------- This Adjustment / Amendment No. 1 is made on this day of October 11, 2001 to the MANAGEMENT AGREEMENT ("Agreement") dated March 1, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation ("Company"), and FLYFISH CASINO CONSULTING AG, a Swiss corporation ("Consultant"). Adjustment / Amendment to Article 5.3 (a) (ii): - ------------------------------------------------------ The Company and Consultant hereby agree to delete the definition of "Change of Control" as used in Article 5.3 (a) (ii) of the Agreement in its entirety and replace it with the following: "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Consultant or Mr. Erwin Haitzmann) becoming the beneficial owner of a majority of the voting rights of the Company's then outstanding securities; (b) the triggering of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of half or more of the existing Board of Directors of the Company; (d) the replacement, or rejection (i.e. through a proxy fight), of one or more person(s), nominated to be Director(s) by the Company's Board of Directors before any Change of Control; (e) Mr. Peter Hoetzinger is no longer Vice Chairman and President of the Company, unless because of his death or permanent disability; (f) holders of the Company's securities approve a merger, consolidation or liquidation of the Company." Agreed to and accepted by: CENTURY CASINOS, INC., FLYFISH CASINO CONSULTING AG, A Delaware corporation a Swiss corporation By: /s/Dinah Corbaci By: /s/Werner Stocker Member, Compensation Committee Chairman of the Board By: /s/Peter Hoetzinger Member, Compensation Committee 1 EX-11.09 10 doc7.txt HAITZMANN EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made effective for all purposes and in all respects as of the 12th day of October, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation (hereinafter referred to as the "Employer" or the "Company"), and ERWIN HAITZMANN (hereinafter referred to as the "Employee"). WITNESSETH THAT: WHEREAS, Employee is presently employed, and has since 1993 been employed by the Company; and WHEREAS, the Employee's performance of his duties as Chairman and Chief Executive Officer ("CEO") of the Company has been and continues to be critical to the success of the Company; and WHEREAS, both the Company and the Employee desire to set forth the terms and conditions of their agreements and understandings (as agreed verbally and as consummated and acted on immediately before entering into this Agreement), and for their mutual benefit to extend the term of Employee's employment hereunder; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: 1. Term of Agreement. ------------------- The term of this Agreement shall commence on September 1, 2001, and shall continue until December 31, 2006, and shall be automatically renewed for additional, successive periods of five (5) years each thereafter, unless sooner terminated in accordance with the provisions of Paragraph 5. 2. Duties of Employee. -------------------- 2.1 It is understood and agreed that Employee's principal duties on behalf of the Company at the date of execution hereof are and shall be Chairman and CEO of the Company. In accepting this Employment Agreement, Employee shall undertake and assume the responsibility of performing for and on behalf of the Company such duties as are usual and customary to his position as Chairman and CEO in the way he has performed in the past on behalf of the Company in that position. 2.2 Employee covenants and agrees that at all times during the term of this Agreement, Employee shall devote his best efforts to his duties as Chairman and CEO of the Company. 3. Compensation. ------------ 3.1 Salary. As compensation for the services rendered by Employee for the Company pursuant to this Agreement, Employee shall be paid not less than the following base annual salary, on a monthly basis, during the term hereof: $24,000, plus annual increases and bonuses, and such other incentives, benefits, insurance policies and compensation as may have been and may be awarded to him from time to time by the Compensation Committee of the Board of Directors of the Company. 3.2 Employees' Equity Incentive Plan. Employee shall be a participant in the Company's Employees' Equity Incentive Plan, as it may be amended from time to time by the Board of Directors; provided, that if any change - after the date of this Agreement - in any tax rules and regulations, or in the application or applicability of any tax rules as a result of Employee's employment with the Company, or required accounting principles shall negatively impact the amount of Employee's total after tax compensation under this Section 3, the Company shall increase Employee's other compensation and incentives accordingly to completely offset such negative impact. 3.3 Salary Review. Employee's salary will be reviewed annually by the Compensation Committee. 1 4. Additional Benefits. -------------------- In addition to, and not in limitation of, the compensation referred to in Section 3, Employee shall be paid the following additional benefits during the term hereof: 4.1 Reimbursement. The Company shall continue to either provide Employee with, or shall reimburse Employee for, all Reasonable Expenses incurred by him in connection with the performance of his duties as an executive for the Company, in substantially at least the same form and fashion as it has been done during the past twelve (12) months preceding the date of this Agreement. 4.2 Death or Disability Payments. (a) In the event of the Employee's disability or death, during the term of his employment hereunder, Employee's salary in effect at the time of his death or disability shall continue to be paid to the Employee, or to his designee or heirs, for a period of twelve (12) calendar months from the date of death or from the date of Employee's termination of employment by reason of disability. (b) For the purposes of this Employment Agreement, the obligations of the Company to make the payments upon the disability of Employee shall not become effective unless and until all of the following conditions are met, as determined (referring to (i) and (ii) below) by the Employee's regular physician and an independent physician selected by the Employee (or his immediate family): (i) Employee shall become physically or mentally incapable (excluding infrequent and temporary absences due to ordinary illnesses) of properly performing the services required of him in accordance with his obligations under Section 2 hereof or similar provisions of any renewal agreement; (ii) Such incapacities shall exist or be reasonably expected to exist for more than one hundred eighty (180) days in the aggregate during the period of twelve (12) consecutive months; and (iii) Either the Employee or the Company shall have given the other sixty (60) days written notice of his or its intention to terminate the active employment of Employee because of such disability. 5. Termination. ----------- 5.1 Termination By Either Party Without Cause. At any time during the term hereof, or at the end of the term or any renewal term under Section 1 above, this Employment Agreement may be terminated "without cause" by either the Company or the Employee upon sixty (60) days written notice to the other party. (a) Termination By Employee. In the event of such termination "without cause" by Employee, the Company shall have the option either (i) to accept Employee's resignation, effective immediately on receipt of such written notice; or (ii) to require Employee to continue to perform his duties hereunder, for a period not to exceed six (6) months from the date of receipt of such written notice. In either event, the Employee's compensation and benefits hereunder shall continue only until the date on which the Employee ceases to perform any further duties for the Company. (b) Termination By Company. In the event of such termination "without cause" by the Company, Employee shall be continued at the same base salary for a period of six (6) months from the date on which the Employee receives written notice of termination. Such compensation shall be paid to the Employee in six (6) equal, successive monthly payments, beginning on the 1st day of the month immediately following the date on which the Employee receives written notice of termination. Employee shall continue to make himself available to, and shall cooperate with the Company, as may be reasonably required to assist the Company during the six-month transition period. (c) In the event Employee's employment hereunder is terminated by the Company "without cause" pursuant to this Section 5.1(b), during the first three (3) years after a "Change of Control," as defined in Annexure A, 2 has occurred, then the provisions of Section 5.3(b) shall apply. 5.2 Termination By Company For Cause. ------------------------------------ Notwithstanding any other provision hereof, the Company may terminate Employee's employment under this Agreement at any time for cause. The termination shall be effected by written notice thereof to the Employee, which shall specify the exact cause for termination. Upon such valid termination for cause by the Company, Employee shall not receive any termination pay or benefits beyond the date on which he receives final written notice of termination. 5.3 Termination By Employee For Cause. ------------------------------------- (a) Notwithstanding any other provision hereof, Employee may terminate his employment with Company under this Agreement at any time for cause and no later than three (3) years after such cause has occurred, upon written notice thereof to the Company specifying the exact cause for Employee's termination. (b) In the event of termination by the Employee for cause hereunder: (1) All of Employee's (including Employee's trusts and foundations) unvested stock and stock options shall immediately vest 100% and Employee (including Employee's trusts and foundations) shall have the option to either (a) receive an immediate payment of the Market Value of 100% of his Stock and the higher of (i) the value according to the Black and Scholes model, or (ii) the "in-the-money value" of his stock options/warrants as of the date of such written notice, or (b) receive an immediate cash bonus from the Company enabling Employee (including Employee's trusts and foundations), after full payment of all of Employee's (including Employee's trusts and foundations) taxes on such cash bonus, to exercise 100% of his stock options/warrants, and to continue to hold his Stock, with the right to "put" or sell the Stock back to the Company for cash at Market Value. This right to "put" or sell the Stock back to the Company shall be in full force and effect and valid and exercisable at any time and as how many times as Employee wishes, in whole or in part, within three (3) years after Employee's termination for cause, at Employee's (including Employee's trusts and foundations) sole election. (2) A lump sum cash retirement benefit payment of three (3) times the Employee's then current annual salary plus three (3) times the Employee's average bonus for the last three years shall be made to Employee within 30 days of such written notice. (3) Employee may also, in addition to, and not in limitation of payments under Section 5.3(b)(1) and Section 5.3(b)(2) hereunder, at his sole option, elect to serve as a consultant to Company (working from his then current residence) for an additional period of three (3) years at his then current salary, his previous year's bonus and current benefits, including but not limited to reimbursement of all Reasonable Expenses. During such consulting period, Employee would be required to keep himself reasonably available to the Company to render advice or to provide services for no more than thirty (30) days per year. (4) Employee (including Employee's trusts and foundations) shall be made whole on an after-tax basis (in a timely fashion and in a way not to create any liability for Employee, including Employee's trusts and foundations) with respect to any taxes that might become payable as a result of any action or provision in connection with a Change of Control. 5.4 Effective Date of Termination. --------------------------------- Unless otherwise specified, the effective date of termination, as used in this Section 5, shall be the date on which Employee receives written notice of termination from the Company or gives written notice of termination to the Company. 3 6. Indemnification. --------------- So long as Employee is not found by a court of law to be guilty of a willful and material breach of this Agreement, or to be guilty of willful gross misconduct, he shall be indemnified by the Company from and against any and all losses, liability, claims and expenses, damages, or causes of action, proceedings or investigations, or threats thereof (including reasonable attorney fees and expenses of counsel satisfactory to and selected by Employee) incurred by Employee, arising out of, in connection with, or based upon Employee's services and the performance of his duties pursuant to this Employment Agreement, or any other matter contemplated by this Employment Agreement, whether or not resulting in any such liability; and Employee shall be reimbursed by the Company as and when incurred for any reasonable legal or other expenses incurred by Employee in connection with investigating or defending against any such loss, claim, damage, liability, action, proceeding, investigation or threat thereof, or producing evidence, producing documents or taking any other action in respect thereto (whether or not Employee is a defendant in or target of such action, proceeding or investigation). 7. Burden and Benefit. -------------------- Unless the express provisions of a particular section of this Agreement state otherwise, or performance thereunder would be impossible, this Agreement shall be binding upon, and shall inure to the benefit of, Employer and Employee, and their respective heirs, personal and legal representatives, successors, and assigns. It shall also be expressly binding upon and inure to the benefit of any person or entity assuming the Corporation/Company, by merger, consolidation, purchase of assets or stock, or otherwise. The interests of the Employee hereunder are not subject to the claims of his creditors, and may not be voluntarily or involuntarily assigned, alienated or encumbered; provided, that Employee may assign all or any part of his rights, duties and obligations hereunder to any entity (e.g., a partnership or management company) so long as the services to be performed hereunder are personally performed by him. 8. Governing Law. -------------- It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the country of the Company's and/or the Employee's residence. The Company agrees to cover all costs, including legal, arising in connection with drafting, interpreting and implementing this Employment Agreement, both for the Company and for Employee. 9. Severability. ------------ The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity and enforceability of the other provisions. 10. Notice. ------ Any notice required to be given hereunder shall be sufficient if it is in writing and sent by certified or registered mail, return receipt requested, first-class postage prepaid, to the following respective addresses, which may hereafter be changed by written notice to the other party: Employer: Century Casinos, Inc. 200 - 220 East Bennett Avenue Cripple Creek, CO. 80813 USA Employee: Dr. Erwin Haitzmann Zacharias Werner - Gasse 24 A-2344 Maria Enzersdorf am Gebirge Austria / Europe 4 11. Interpretation, Minor Adjustments. ----------------------------------- 11.1 No representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect. No change or modification of this Agreement shall be valid or binding unless it is in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or at any other time. 11.2 The Compensation Committee shall have absolute authority to amend, interpret and administer this Agreement, in good faith, and in the best interests of both the Company and Employee, and may make such adjustments or amendments hereto as may be reasonably required, if the rights of the Employee are not adversely affected thereby. 12. Confidentiality. --------------- Other than in the performance of his duties hereunder, Employee agrees not to disclose, either during the term of his employment by the Company or at any time thereafter, to any person, firm or corporation any confidential information concerning the business affairs, financial affairs, know-how, private documents, reports, plans, proposals, marketing and sales plans, or similar information of the Company. Any such documents, techniques, methods, processes or technologies used by the Company shall be considered confidential and a "trade secret" for the purposes of this Agreement. 13. Counterparts and Annexure. --------------------------- The Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. Annexure A (Definitions) shall be an integral part of this Agreement and the Agreement shall not be complete without it. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement as of the day and year first above written. EMPLOYER: CENTURY CASINOS, INC. By: /s /Peter Hoetzinger ---------------------- Vice Chairman, Compensation Committee By: /s /Dinah Corbaci ------------------- Member, Compensation Committee EMPLOYEE: By: /s/ Erwin Haitzmann --------------------- Erwin Haitzmann Chairman & CEO 5 ANNEXURE A ----------- Definitions: - ------------ As used in this Agreement, the following terms shall have the respective meanings indicated. Reasonable Expenses. - -------------------- Reasonable expenses shall include, but not be limited to, all out-of-pocket expenses for entertainment, travel (economy flights within the USA, wherever reasonably available, business class on other continental flights, and one class above business class on inter-continental long distance flights), meals, lodging, automobile expenses, communications and office costs and the like incurred by the Employee. Cause (as used in 5.2). - ---------------------- For purposes hereof, the term "cause" shall mean the failure of Employee for any reason, within thirty (30) days after receipt by Employee of written notice thereof from the Company, to correct, cease, or otherwise alter (i) any specific action or omission to act that constitutes a material and willful breach of this Agreement likely to result in material damage to the Company; or (ii) any willful gross misconduct likely to result in material damage to the Company. Cause (as used in 5.3). - -------------------------- For purposes hereof, the term "for cause" shall mean: (i) the failure of the Company for any reason, within thirty (30) days after receipt by the Company of written notice from Employee, to correct, cease, or otherwise alter any material adverse change in the conditions of Employee's employment, including, but not limited to any change in Employee's title or position as Chairman and CEO, or the duties of such position (such as, but not limited to another person assuming the same or similar title, position or duties, or one or more of the Employee's primary duties being assigned to be performed by the Employee in a country other than his country of primary residence), unless Employee consents in writing to such change; or (ii) a "Change of Control" of the Company occurs, or has previously occurred at any time during Employee's employment hereunder. "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Employee) becoming the beneficial owner of a majority of the voting rights of the Company's then outstanding securities; (b) the triggering of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of half or more of the existing Board of Directors of the Company; (d) the replacement, or rejection (i.e. through a proxy fight), of one or more person(s), nominated to be Director(s) by the Company's Board of Directors before any Change of Control; (e) Mr. Peter Hoetzinger is no longer Vice Chairman and President of the Company, unless because of his death or permanent disability; (f) holders of the Company's securities approve a merger, consolidation or liquidation of the Company. Market Value. - ------------- The higher of (i) the highest closing ask price of the Company's common stock during the 52 (fifty two) weeks immediately preceding the termination of Employee, or (ii) the highest closing ask price of the Company's common stock during the 52 (fifty two) weeks immediately preceding the date Employee exercised his option under any given article or paragraph of this Agreement. Stock. - ----- The term "Stock" shall include any and all shares of common and/or preferred stock, of the Company and of any subsidiary of the Company owned by the Employee (including Employee's trusts and foundations), no matter how and when acquired (including through exercise of options and/or warrants). --------------------------------------------- 6 EX-11.10 11 doc10.txt EMPLOYMENT AGREEMENT CCI/HOETZINGER EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is made effective for all purposes and in all respects as of the 12th day of October, 2001, by and between CENTURY CASINOS, INC., a Delaware corporation (hereinafter referred to as the "Employer" or the "Company"), and PETER HOETZINGER (hereinafter referred to as the "Employee"). WITNESSETH THAT: WHEREAS, Employee is presently employed, and has since 1993 been employed by the Company; and WHEREAS, the Employee's performance of his duties as Vice Chairman and President of the Company has been and continues to be critical to the success of the Company; and WHEREAS, both the Company and the Employee desire to set forth the terms and conditions of their agreements and understandings (as agreed verbally and as consummated and acted on immediately before entering into this Agreement), and for their mutual benefit to extend the term of Employee's employment hereunder; NOW, THEREFORE, in consideration of the foregoing, of the mutual promises herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: 1. Term of Agreement. ------------------- The term of this Agreement shall commence on September 1, 2001, and shall continue until December 31, 2006, and shall be automatically renewed for additional, successive periods of five (5) years each thereafter, unless sooner terminated in accordance with the provisions of Paragraph 5. 2. Duties of Employee. --------------------- 2.1 It is understood and agreed that Employee's principal duties on behalf of the Company at the date of execution hereof are and shall be Vice Chairman and President of the Company. In accepting this Employment Agreement, Employee shall undertake and assume the responsibility of performing for and on behalf of the Company such duties as are usual and customary to his position as Vice Chairman and President in the way he has performed in the past on behalf of the Company in that position. 2.2 Employee covenants and agrees that at all times during the term of this Agreement, Employee shall devote his best efforts to his duties as Vice Chairman and President of the Company. 3. Compensation. ------------ 3.1 Salary. As compensation for the services rendered by Employee for the Company pursuant to this Agreement, Employee shall be paid not less than the following base annual salary, on a monthly basis, during the term hereof: $24,000, plus annual increases and bonuses, and such other incentives, benefits, insurance policies and compensation as may have been and may be awarded to him from time to time by the Compensation Committee of the Board of Directors of the Company. 3.2 Employees' Equity Incentive Plan. Employee shall be a participant in the Company's Employees' Equity Incentive Plan, as it may be amended from time to time by the Board of Directors; provided, that if any change - after the date of this Agreement - in any tax rules and regulations, or in the application or applicability of any tax rules as a result of Employee's employment with the Company, or required accounting principles shall negatively impact the amount of Employee's total after tax compensation under this Section 3, the Company shall increase Employee's other compensation and incentives accordingly to completely offset such negative impact. 3.3 Salary Review. Employee's salary will be reviewed annually by the Compensation Committee. 1 4. Additional Benefits. -------------------- In addition to, and not in limitation of, the compensation referred to in Section 3, Employee shall be paid the following additional benefits during the term hereof: 4.1 Reimbursement. The Company shall continue to either provide Employee with, or shall reimburse Employee for, all Reasonable Expenses incurred by him in connection with the performance of his duties as an executive for the Company, in substantially at least the same form and fashion as it has been done during the past twelve (12) months preceding the date of this Agreement. 4.2 Death or Disability Payments. -------------------------------- (a) In the event of the Employee's disability or death, during the term of his employment hereunder, Employee's salary in effect at the time of his death or disability shall continue to be paid to the Employee, or to his designee or heirs, for a period of twelve (12) calendar months from the date of death or from the date of Employee's termination of employment by reason of disability. (b) For the purposes of this Employment Agreement, the obligations of the Company to make the payments upon the disability of Employee shall not become effective unless and until all of the following conditions are met, as determined (referring to (i) and (ii) below) by the Employee's regular physician and an independent physician selected by the Employee (or his immediate family): (i) Employee shall become physically or mentally incapable (excluding infrequent and temporary absences due to ordinary illnesses) of properly performing the services required of him in accordance with his obligations under Section 2 hereof or similar provisions of any renewal agreement; (ii) Such incapacities shall exist or be reasonably expected to exist for more than one hundred eighty (180) days in the aggregate during the period of twelve (12) consecutive months; and (iii) Either the Employee or the Company shall have given the other sixty (60) days written notice of his or its intention to terminate the active employment of Employee because of such disability. 5. Termination. ----------- 5.1 Termination By Either Party Without Cause. At any time during the term hereof, or at the end of the term or any renewal term under Section 1 above, this Employment Agreement may be terminated "without cause" by either the Company or the Employee upon sixty (60) days written notice to the other party. (a) Termination By Employee. In the event of such termination "without cause" by Employee, the Company shall have the option either (i) to accept Employee's resignation, effective immediately on receipt of such written notice; or (ii) to require Employee to continue to perform his duties hereunder, for a period not to exceed six (6) months from the date of receipt of such written notice. In either event, the Employee's compensation and benefits hereunder shall continue only until the date on which the Employee ceases to perform any further duties for the Company. (b) Termination By Company. In the event of such termination "without cause" by the Company, Employee shall be continued at the same base salary for a period of six (6) months from the date on which the Employee receives written notice of termination. Such compensation shall be paid to the Employee in six (6) equal, successive monthly payments, beginning on the 1st day of the month immediately following the date on which the Employee receives written notice of termination. Employee shall continue to make himself available to, and shall cooperate with the Company, as may be reasonably required to assist the Company during the six-month transition period. (c) In the event Employee's employment hereunder is terminated by the Company "without cause" pursuant to this Section 5.1(b), during the first three (3) years after a "Change of Control," as defined in Annexure A, 2 has occurred, then the provisions of Section 5.3(b) shall apply. 5.2 Termination By Company For Cause. ------------------------------------ Notwithstanding any other provision hereof, the Company may Terminate Employee's employment under this Agreement at any time for cause. The termination shall be effected by written notice thereof to the Employee, which shall specify the exact cause for termination. Upon such valid termination for cause by the Company, Employee shall not receive any termination pay or benefits beyond the date on which he receives final written notice of termination. 5.3 Termination By Employee For Cause. ------------------------------------- (a) Notwithstanding any other provision hereof, Employee may terminate his employment with Company under this Agreement at any time for cause and no later than three (3) years after such cause has occurred, upon written notice thereof to the Company specifying the exact cause for Employee's termination. (b) In the event of termination by the Employee for cause hereunder: (1) All of Employee's (including Employee's trusts and foundations) unvested stock and stock options shall immediately vest 100% and Employee (including Employee's trusts and foundations) shall have the option to either (a) receive an immediate payment of the Market Value of 100% of his Stock and the higher of (i) the value according to the Black and Scholes model, or (ii) the "in-the-money value" of his stock options/warrants as of the date of such written notice, or (b) receive an immediate cash bonus from the Company enabling Employee (including Employee's trusts and foundations), after full payment of all of Employee's (including Employee's trusts and foundations) taxes on such cash bonus, to exercise 100% of his stock options/warrants, and to continue to hold his Stock, with the right to "put" or sell the Stock back to the Company for cash at Market Value. This right to "put" or sell the Stock back to the Company shall be in full force and effect and valid and exercisable at any time and as how many times as Employee wishes, in whole or in part, within three (3) years after Employee's termination for cause, at Employee's (including Employee's trusts and foundations) sole election. (2) A lump sum cash retirement benefit payment of three (3) times the Employee's then current annual salary plus three (3) times the Employee's average bonus for the last three years shall be made to Employee within 30 days of such written notice. (3) Employee may also, in addition to, and not in limitation of payments under Section 5.3(b)(1) and Section 5.3(b)(2) hereunder, at his sole option, elect to serve as a consultant to Company (working from his then current residence) for an additional period of three (3) years at his then current salary, his previous year's bonus and current benefits, including but not limited to reimbursement of all Reasonable Expenses. During such consulting period, Employee would be required to keep himself reasonably available to the Company to render advice or to provide services for no more than thirty (30) days per year. (4) Employee (including Employee's trusts and foundations) shall be made whole on an after-tax basis (in a timely fashion and in a way not to create any liability for Employee, including Employee's trusts and foundations) with respect to any taxes that might become payable as a result of any action or provision in connection with a Change of Control. 3 5.4 Effective Date of Termination. -------------------------------- Unless otherwise specified, the effective date of termination, as used in this Section 5, shall be the date on which Employee receives written notice of termination from the Company or gives written notice of termination to the Company. 6. Indemnification. --------------- So long as Employee is not found by a court of law to be guilty of a willful and material breach of this Agreement, or to be guilty of willful gross misconduct, he shall be indemnified by the Company from and against any and all losses, liability, claims and expenses, damages, or causes of action, proceedings or investigations, or threats thereof (including reasonable attorney fees and expenses of counsel satisfactory to and selected by Employee) incurred by Employee, arising out of, in connection with, or based upon Employee's services and the performance of his duties pursuant to this Employment Agreement, or any other matter contemplated by this Employment Agreement, whether or not resulting in any such liability; and Employee shall be reimbursed by the Company as and when incurred for any reasonable legal or other expenses incurred by Employee in connection with investigating or defending against any such loss, claim, damage, liability, action, proceeding, investigation or threat thereof, or producing evidence, producing documents or taking any other action in respect thereto (whether or not Employee is a defendant in or target of such action, proceeding or investigation). 7. Burden and Benefit. -------------------- Unless the express provisions of a particular section of this Agreement state otherwise, or performance thereunder would be impossible, this Agreement shall be binding upon, and shall inure to the benefit of, Employer and Employee, and their respective heirs, personal and legal representatives, successors, and assigns. It shall also be expressly binding upon and inure to the benefit of any person or entity assuming the Corporation/Company, by merger, consolidation, purchase of assets or stock, or otherwise. The interests of the Employee hereunder are not subject to the claims of his creditors, and may not be voluntarily or involuntarily assigned, alienated or encumbered; provided, that Employee may assign all or any part of his rights, duties and obligations hereunder to any entity (e.g., a partnership or management company) so long as the services to be performed hereunder are personally performed by him. 8. Governing Law. -------------- It is understood and agreed that the construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the country of the Company's and/or the Employee's residence. The Company agrees to cover all costs, including legal, arising in connection with drafting, interpreting and implementing this Employment Agreement, both for the Company and for Employee. 9. Severability. ------------ The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any one or more of the provisions of this Agreement shall not affect the validity and enforceability of the other provisions. 10. Notice. ------ Any notice required to be given hereunder shall be sufficient if it is in writing and sent by certified or registered mail, return receipt requested, first-class postage prepaid, to the following respective addresses, which may hereafter be changed by written notice to the other party: Employer: 200 - 220 East Bennett Avenue Cripple Creek, CO. 80813 USA Employee: Johann Hoerbigergasse 15 Vienna 1230 Austria 4 11. Interpretation, Minor Adjustments. ----------------------------------- 11.1 No representations, promises, agreements, or understandings, written or oral, not contained herein shall be of any force or effect. No change or modification of this Agreement shall be valid or binding unless it is in writing and signed by the party intended to be bound. No waiver of any provision of this Agreement shall be valid unless it is in writing and signed by the party against whom the waiver is sought to be enforced. No valid waiver of any provision of this Agreement at any time shall be deemed a waiver of any other provision of this Agreement at such time or at any other time. 11.2 The Compensation Committee shall have absolute authority to amend, interpret and administer this Agreement, in good faith, and in the best interests of both the Company and Employee, and may make such adjustments or amendments hereto as may be reasonably required, if the rights of the Employee are not adversely affected thereby. 12. Confidentiality. ---------------- Other than in the performance of his duties hereunder, Employee agrees not to disclose, either during the term of his employment by the Company or at any time thereafter, to any person, firm or corporation any confidential information concerning the business affairs, financial affairs, know-how, private documents, reports, plans, proposals, marketing and sales plans, or similar information of the Company. Any such documents, techniques, methods, processes or technologies used by the Company shall be considered confidential and a "trade secret" for the purposes of this Agreement. 13. Counterparts and Annexure. ---------------------------- The Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others. Annexure A (Definitions) shall be an integral part of this Agreement and the Agreement shall not be complete without it. IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement as of the day and year first above written. EMPLOYER: CENTURY CASINOS, INC. By: /s/ Erwin Haitzmann --------------------- Chairman, Compensation Committee By: /s/ Dinah Corbaci ------------------- Member, Compensation Committee EMPLOYEE: By: /s/ Peter Hoetzinger ---------------------- Peter Hoetzinger Vice Chairman & President 5 ANNEXURE A ----------- Definitions: - ------------ As used in this Agreement, the following terms shall have the respective meanings indicated. Reasonable Expenses. - -------------------- Reasonable expenses shall include, but not be limited to, all out-of-pocket expenses for entertainment, travel (economy flights within the USA, wherever reasonably available, business class on other continental flights, and one class above business class on inter-continental long distance flights), meals, lodging, automobile expenses, communications and office costs and the like incurred by the Employee. Cause (as used in 5.2). - ---------------------- For purposes hereof, the term "cause" shall mean the failure of Employee for any reason, within thirty (30) days after receipt by Employee of written notice thereof from the Company, to correct, cease, or otherwise alter (i) any specific action or omission to act that constitutes a material and willful breach of this Agreement likely to result in material damage to the Company; or (ii) any willful gross misconduct likely to result in material damage to the Company. Cause (as used in 5.3). - -------------------------- For purposes hereof, the term "for cause" shall mean: (i) the failure of the Company for any reason, within thirty (30) days after receipt by the Company of written notice from Employee, to correct, cease, or otherwise alter any material adverse change in the conditions of Employee's employment, including, but not limited to any change in Employee's title or position as Vice Chairman and President, or the duties of such position (such as, but not limited to another person assuming the same or similar title, position or duties, or one or more of the Employee's primary duties being assigned to be performed by the Employee in a country other than his country of primary residence), unless Employee consents in writing to such change; or (ii) a "Change of Control" of the Company occurs, or has previously occurred at any time during Employee's employment hereunder. "Change of Control" as used herein shall mean: (a) any person or entity (not affiliated with the Employee) becoming the beneficial owner of a majority of the voting rights of the Company's then outstanding securities; (b) the triggering of the issuance of stock rights to Shareholders pursuant to the Company's Stock Rights Agreement, as amended from time to time; (c) the replacement during any two calendar years of half or more of the existing Board of Directors of the Company; (d) the replacement, or rejection (i.e. through a proxy fight), of one or more person(s), nominated to be Director(s) by the Company's Board of Directors before any Change of Control; (e) Mr. Erwin Haitzmann is no longer Chairman and Chief Executive Officer of the Company, unless because of his death or permanent disability; (f) holders of the Company's securities approve a merger, consolidation or liquidation of the Company. Market Value. - ------------- The higher of (i) the highest closing ask price of the Company's common stock during the 52 (fifty two) weeks immediately preceding the termination of Employee, or (ii) the highest closing ask price of the Company's common stock during the 52 (fifty two) weeks immediately preceding the date Employee exercised his option under any given article or paragraph of this Agreement. Stock. - ----- The term "Stock" shall include any and all shares of common and/or preferred stock, of the Company and of any subsidiary of the Company owned by the Employee (including Employee's trusts and foundations), no matter how and when acquired (including through exercise of options and/or warrants). --------------------------------------------- 6 EX-11.11 12 doc11.txt AMENDMENT TO EQUITY SUBSCRIPTION AMENDMENT NUMBER 1 ------------------ to Equity Subscription Agreement (entered into on September 7, 2001 by and between) Rhino Resort Limited ("Rhino Resort") and Century Casinos Africa (Pty) Limited ("Century") and Silverstar Development Limited ("Silverstar") (collectively "The Parties") This Amendment Number 1 to the Equity Subscription Agreement shall be effective from March 2, 2002. WHEREAS, certain amendments to the conditions governing Rhino Resort's casino license are required by the Gauteng Gambling Board pursuant to the Temporary Casino License issued by the Gauteng Gambling Board on November 21, 2001; and WHEREAS, these amendments necessitate an increase in the quantum of initial funds required by the Rhino Resort development as contemplated; and WHEREAS, Rhino Resort's debt financiers have required that the initial funds to be provided by Rhino Resort's shareholders shall be increased from R40 million to R50 million; and WHEREAS, Rhino Resort and Silverstar wish to secure a commitment to provide the initial funds required without diluting or amending the existing shareholder structures; and 1 NOW THEREFORE, IT IS AGREED AS FOLLOWS: 1. The name of the Equity Subscription Agreement shall be changed to "Funding Agreement" 2. Paragraph B of the Funding Agreement ("Undertaking to Provide Equity Funds") is amended as follows: 2.1. Sub-paragraph 1 is deleted and replaced with the following: "Century shall inject an amount of R50 million by way of equity share capital, or shareholder loans, into Rhino Resort". 2.2 The date "December 31 2003" in paragraph B2 shall be replaced by "December 31, 2004. 3. Paragraph C of the Funding Agreement ("Manner of Provision of Equity Funds") is deleted in its entirety and replaced with the following: "C. Manner of Provision of Funds a. Subject to the fulfillment or waiver of the suspensive conditions in accordance with B above, Century shall (unless otherwise agreed between the parties) provide the sum of R50 m in accordance with paragraph B.1. by whatever means, and at such time as Century shall have agreed with Rhino Resort's debt financiers (as envisaged in paragraph B.2.3). Evidence of satisfaction of Rhino Resort's debt financiers as to the manner and timing of the provision of funds, shall similarly be deemed by Rhino Resort and Silverstar to be satisfaction of Century's obligation to provide funds as described herein. b. Century may elect that a portion of its R50 million contribution be made by way of a shareholder loan which shall i) not exceed 40% of the total amount of Century's committed contribution of funds in terms of the Funding Agreement; and ii) be subject to a rate of interest compounded monthly in arrears, which shall initially be zero percent (0%), and which may be such other rate as Century may from time to time elect, and which shall be calculated from time of contribution until time of repayment in full, save that such interest rate shall at no time exceed the Bankers Acceptance Rate plus 3.625%; and 2 iii) be otherwise governed by a Shareholder Loan agreement to be entered into between Rhino Resort and Century". 4. The date "December 31, 2003" is replaced by "December 31, 2004" in paragraph E. 5. A new paragraph F is inserted as follows: "F. INTERIM FUNDS PROVIDED ----------------------------- a. Century, at the request of Rhino Resort, shall be entitled, but not obligated, to make funds available to Rhino Resort to finance such costs that Rhino Resort and Century may jointly determine are necessary to be incurred either directly by Rhino Resort or on behalf of Rhino Resort in order to maintain the good standing of the casino license, or which may otherwise assist Rhino Resort in proceeding with the casino development as currently contemplated. Such costs may include, inter alia, fees and charges levied by the Gauteng Gambling Board, legal fees, professional fees, salaries, equipment and supplies. Unless specifically subject to separate agreements that may be in force, any funds directly or indirectly advanced by Century in this regard shall, at Century's election, which election may be made either before or after provision of such interim funding, i) represent an advance contribution of the fund's committed by Century to Rhino Resort in terms of this Funding Agreement; or ii) represent an obligation of Rhino Resort to Century which is repayable upon demand at any time after the date of Financial Close as defined in Rhino Resort's third party debt funding agreements; iii) attract interest compounded monthly in arrears from time of advance until time of settlement in accordance with sub-paragraphs a. and b. above, at a rate which shall initially be zero and subsequently such other rate as Century may from time to time determine, and which rate shall not exceed the Prime Rate applicable to Rand denominated loans in South Africa plus 2% (two percent) measured from time of advance to time of settlement in full. b. Until such time as Century has made an election under the main part of subsection a of this paragraph F, and for so long as any obligations of Rhino Resort to Century, under any of the elections, 3 including interest, remains outstanding, Century shall be entitled to rank as a secured creditor of Rhino (either by procuring a pledge of or other appropriate security interest in, any and all assets and / or services acquired by Rhino Resort (or by Century on behalf of Rhino Resort) utilising funds provided by Century under this agreement. c. Rhino Resort and Silverstar agree that they shall, as soon as reasonably practicable execute all further documentation and do all things that Century may require in order to perfect the rights granted under this paragraph F. d. Subsequent to the satisfaction of all obligations of Rhino Resort relating to any election by Century under this paragraph F, Century shall cause any related security interest or related title granted in its favour to be released or transferred to the benefit of Rhino Resort." Dated at Johannesburg this 2nd day of March, 2002 /s/ James Forbes - ------------------ CENTURY CASINOS AFRICA (Pty) LIMITED Dated at Johannesburg this 2nd day of March, 2002 /s/ James Forbes Jose Garcia Da Silva - --------------------------------------------- RHINO RESORT LIMITED Dated at Johannesburg this 2nd day of March, 2002 /s/ Jose Garcia Da Silva ----------------------- SILVERSTAR DEVELOPMENT LIMITED 4 EX-11.12 13 doc12.txt SECOND ADDENDUM LOAN AGREEMENT SECOND ADDENDUM TO LOAN AGREEMENT 1. PARTIES 1.1 The parties to this agreement are 1.1.1 PSG Investment Bank Limited; and 1.1.2 Century Casinos Caledon (Proprietary) Limited. 1.2 The parties agree as set out below. 2 INTERPRETATION 2.1 In this agreement, unless inconsistent with or otherwise indicated by the context ~ 2.1.1 the/this "agreement" means the agreement as set out in this document; 2.1.2 "Bidco" means Century Casinos Caledon (Proprietary) Limited (previously known as Caledon Casino Bid Company (Proprietary) Limited), registration number 1996/010708/07, a private company duly incorporated in accordance with the company laws of the Republic of South Africa; 2.1.3 "business day" means a day which is not a Saturday, Sunday or South African public holiday; 2.1.4 "EBITDA" means, for each financial year of Bidco, Bidco's earnings for such financial year ~ 2.1.4.1 before interest, tax, depreciation and amortisation; and 1 2.1.4.2 after deducting any management fees incurred by Bidco during such financial year if Bidco has not, by the end of such financial year, paid those management fees to the persons entitled to receive them and if, pursuant to the subordination agreement, the persons entitled to payment of such management fees have subordinated their claims for payment to the claims of PSGIB in respect of the principal loan and the standby loan; 2.1.5 the "first addendum" means an addendum to the principal loan agreement concluded between PSGIB and Bidco on 21 April 2001 pursuant to which, inter alia, PSGIB made the standby facility available to Bidco; 2.1.6 "interest period" means any period which commences on one payment date and terminates on the day immediately preceding the next payment date; 2.1.7 the "loan agreement" means a loan agreement concluded between PSGIB and Bidco on 12 April 2000 (as amended by the first addendum) pursuant to which, inter alia, PSGIB made the principal loan available to Bidco; 2.1.8 "management fees" means any management fees payable by Bidco pursuant to either the casino management agreement or the hotel management agreement; 2.1.9 "payment dates" means 31 March, 30 June, 30 September and 31 December of each year or, if any such day is not a business day, the immediately preceding business day; 2.1.10 "quarterly payment" means, in respect of each payment date, the aggregate of all amounts (both in respect of principal and interest) 2 payable by Bidco to PSGIB on such payment date pursuant to the provisions of 6 below; 2.1.11 "reserve account" means the bank account which, pursuant to paragraph 7.3 of the first addendum, Bidco has opened with PSGIB, which reserve account bear the number CCBC1; 2.1.12 "signature date" means the date on which this agreement is signed by the last party signing it; 2.1.13 the "standby facility" means a standby facility for a maximum principal amount of R4 500 000 (four million five hundred thousand Rand) made available by PSGIB to Bidco pursuant to the first addendum (which said facility is regulated both by the first addendum and by the principal loan agreement); 2.1.14 save where otherwise indicated, all expressions defined in the loan agreement and the first addendum have the meanings assigned to them therein; 2.1.15 any reference to the singular includes the plural and vice versa; 2.1.16 any reference to natural persons includes legal persons and vice versa; 2.1.17 any reference to gender includes the other genders. 2.2 The clause headings in this agreement have been inserted for convenience only and shall not be taken into account in its interpretation. 2.3 Words and expressions defined in any sub-clause shall, for the purpose of the clause of which that sub-clause forms part, bear the meaning assigned to such words and expressions in that sub-clause. 3 2.4 If any provision in a definition is a substantive provision conferring rights or imposing obligations on any party, effect shall be given to it as if it were a substantive clause in the body of the agreement, notwithstanding that it is only contained in the interpretation clause. 2.5 If any period is referred to in this agreement by way of reference to a number of days, the days shall be reckoned, subject to 2.6 below, exclusively of the first and inclusively of the last day unless the last day falls on a day which is not a business day, in which case the day shall be the next succeeding business day. 2.6 If any period for which interest is to be calculated is referred to in this agreement by way of a reference to a number of days, the days shall be reckoned inclusively of the first and exclusively of the last day. 2.7 This agreement shall be governed by, construed and interpreted in accordance with the law of the Republic of South Africa. 3 RECORDAL 3.1 The parties have concluded the loan agreement and the first addendum. Subsequent to the conclusion of the loan agreement and the first addendum, Bidco's name was changed from Caledon Casino Bid Company (Proprietary) Limited to Century Casinos Caledon (Proprietary) Limited. 3.2 Pursuant to the first addendum, PSGIB made the standby facility to Bidco. 3.3 The parties have agreed to amend the loan agreement and the first addendum in the manner set out herein. 4 4 RATIOS 4.1 The definition of "debt service cover ratio" contained in paragraph 2.1.18 of the loan agreement is hereby deleted and is hereby replaced with the following definition ~ "2.1.18 "debt service cover ratio" means, for any financial year, the ratio between ~ 2.1.18.1 EBITDA as reflected in Bidco's management accounts or in Bidco's unqualified audited financial statements for such financial year, both prepared in accordance with generally accepted accounting principles, on the basis that if there is any conflict between such management accounts and such audited financial statements, the audited financial statements shall prevail; and 2.1.18.2 all the quarterly payments which become payable during such financial year". 4.2 The definition of "interest cover ratio" contained in paragraph 2.1.25 of the loan agreement is hereby deleted and is hereby replaced with the following definition ~ "2.1.25 "interest cover ratio" means, in respect of any one of Bidco's financial years, the ratio between ~ 2.1.25.1 EBITDA determined on the basis set out in 2.1.18.1 above; and 2.1.25.2 the difference between all interest incurred by Bidco during the applicable financial year in respect of all its interest-bearing debt of any nature whatsoever including, without limitation, 5 any dividends which Bidco has contracted to pay during that financial year in respect of any cumulative, redeemable preference shares issued by it, and the interest actually received by Bidco during that financial year, all as reflected in Bidco's management accounts or in Bidco's unqualified audited financial statements for such financial year, both prepared in accordance with generally accepted accounting principles, on the basis that if there is any conflict between such management accounts and such audited financial statements, the audited financial statements shall prevail, provided that interest which accrues on any shareholders' loans shall be disregarded if, by the last day of the applicable financial year, such interest has not been paid and if, pursuant to the subordination agreement, the applicable shareholders have subordinated their claims in respect of such interest to PSGIB's claims arising out of the principal loan and the standby facility". 4.3 The definition of "loan life cover ratio" contained in paragraph 2.1.27 of the loan agreement is hereby deleted and is hereby replaced with the following definition ~ "2.1.27 "loan life cover ratio" means, at any particular point in time, the ratio between ~ 2.1.27.1 the net present value of EBITDA which Bidco is forecasted, pursuant to the most recently updated project forecast, to derive out of the project for the period which commences on the 1st (first) day of 6 Bidco's then current financial year and which terminates on the final date; and 2.1.27.2 the net present value of all the quarterly payments which will become payable during the same period, both such net present values to be determined at a discount rate of 16,87% (sixteen comma eight seven per centum) nominal annual compounded monthly in arrears (which rate the parties record is equal to the weighted average cost to Bidco of the principal loan and the standby facility). 4.4 The debt service cover ratio and the interest cover ratio for each of Bidco's financial years shall be measured within 60 (sixty) days of the last day of such financial year. The loan life cover ratio shall be measured annually within 60 (sixty) days of the last day of each of Bidco's financial years. 4.5 The debt equity ratio shall be measured as at the 31st (thirty-first) day of December of each year, such measurement to be undertaken within 60 (sixty) days of the 31st (thirty-first) day of December of each applicable year. 4.6 Paragraph 10.1.1 of the principal loan agreement is hereby deleted and is hereby replaced with the following paragraph ~ "maintain a debt equity ratio no worse than 45:55 (forty five to fifty five) with effect from the last day of the 12th (twelfth) month after the commencement of operations and maintain a debt equity ratio of 40:60 (forty to sixty) with effect from the last day of the 24th (twenty-fourth) month after the commencement of operations;". 4.7 Paragraph 10.1.3 of the principal loan agreement is hereby deleted and is hereby replaced with the following paragraph ~ 7 "10.1.3 maintain, in respect of each of its financial years, commencing with the 1st (first) financial year following upon the expiry of 12 (twelve) months after the commencement of operations, a debt service cover ratio of at least 1,34 (one comma three four);". 4.8 Paragraph 10.1.4 of the principal loan agreement is hereby deleted and is hereby replaced with the following paragraph ~ "10.1.4 maintain, in respect of each of its financial years, commencing with the 1st (first) financial year following upon the commencement of operations, a loan life cover ratio of at least 1,5 (one comma five);". 5 THE RESERVE ACCOUNT 5.1 PSGIB and Bidco confirm that Bidco has failed to comply with the obligations imposed on it pursuant to paragraph 7.2 of the first addendum more particularly in that, as at 31 December 2001, Bidco had not maintained the debt service reserve required pursuant to the aforesaid paragraph. PSGIB hereby ~ 5.1.1 condones the aforesaid failure; and 5.1.2 waives any rights which it may have against Bidco arising out of the aforesaid failure. 5.2 Paragraph 7.2 of the principal loan agreement is hereby deleted and is hereby replaced with the following paragraph ~ "7.2 Bidco shall, out of the revenue from time derived by it, cause amounts to be deposited into the reserve account so that, on each payment date, and before the quarterly payment which becomes payable on such date is made 8 by Bidco, the amount held by Bidco in the reserve account is equal to such quarterly payment. Bidco shall ~ 7.2.1 be entitled, on each payment date, to withdraw, from the deposit account, an amount not exceeding the quarterly payment which becomes payable by it on such payment date , and not reducing the balance on the deposit account to less than R4 million (four million rand) , and ; 7.2.2 be obliged, if it exercises its aforesaid right of withdrawal, to deposit, into the deposit account, on the last day of each of the succeeding 3 (three) months thereafter, an amount equal to 1/3 (one-third) of the quarterly payment which will become payable by it on the next payment date (so that, on such next payment date, the amount held in the reserve account is equal to the applicable quarterly payment)". 5.3 Paragraph 7 of the principal loan agreement is hereby amended as follows ~ 5.3.1 by deleting the words "subject to 7.4 below" in the first line of paragraph 7.3; 5.3.2 by deleting the words "six months' call deposit" in the sixth and seventh lines of paragraph 7.3.1 and by replacing those words with the words "3 (three) months' call deposit", such amendment to take effect on the date on which this addendum is signed; 5.3.3 by deleting paragraph 7.4 in its entirety. 9 6 PAYMENTS 6.1 Paragraph 8 of the first addendum is hereby deleted. 6.2 Bidco and PSGIB confirm that, on 1 January 2002 ~ 6.2.1 the principal amount owing by Bidco to PSGIB on account of the principal loan amounted to R 42 765 644 (forty two million seven hundred and sixty five thousand six hundred and forty four rand); and 6.2.2 the principal amount owing by Bidco to PSGIB on account of the standby facility amounted to R 4 309 532 (four million three hundred and nine thousand five hundred and thirty two rand). 6.3 Bidco shall repay the aforesaid principal amounts to PSGIB in 18 (eighteen) equal quarterly instalments, the first such instalment to be paid on 28 March 2002 and each subsequent instalment to be paid on each subsequent payment date thereafter. 6.4 The parties have calculated the instalments envisaged in 6.3 above and those instalments are reflected in ANNEXURE A hereto on the basis that ~ 6.4.1 the item "cash flow 1" reflects the total instalment payable, on each payment date, by Bidco to PSGIB on account of the principal and interest amount of the principal loan; 6.4.2 the item "cash flow 2", reflects the total instalment payable, on each payment date, by Bidco to PSGIB on account of the principal and interest amount of the standby facility; and 6.4.3 the item "cash flow 3" reflects, in respect of each payment date, the aggregate of the aforesaid 2 (two) instalments. 10 7 REMAINDER Subject to the amendments contained herein, the loan agreement and the first addendum shall continue to be of full force and effect. 8 BREACH In the event of any of the parties (the "DEFAULTING PARTY") committing a breach of any of the terms of this agreement and failing to remedy such breach within a period of 10 (ten) days after receipt of a written notice from another party (the "AGGRIEVED PARTY") calling upon the defaulting party so to remedy, then the aggrieved party shall be entitled, at its sole discretion and without prejudice to any of its other rights in law, either to claim specific performance of the terms of this agreement or to cancel this agreement forthwith and without further notice, and to claim and recover damages from the defaulting party. SIGNED at Rosebank on 26th March 2002 AS WITNESS: /s/Barry Lengton For: PSG INVESTMENT BANK - ---------------- LIMITED Barry Lengton /s/Mario Becker /s/Jaco Burger - ---------------- ------------------------------- (Name of witness in print) Duly authorised 11 SIGNED at Onrys Rivier on 28th March 2002 AS WITNESS: - ------------ /s/Bianca Shaw For: CENTURY CASINOS - -------------- CALEDON (PTY) LIMITED Bianca Shaw /s/Joseph Bender - -------------- ---------------- (Name of witness in print) Duly authorised - ------------------------------ ---------------- 12 EX-21 14 doc13.txt EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT State or Country Name of Incorporation Century Casinos Management, Inc. Delaware Century Casinos - Nevada, Inc. Nevada Century Management und Beteiligungs GmbH Austria Century Casinos Cripple Creek, Inc. Colorado WMCK Acquisition Corp. Delaware WMCK Venture Corp. Delaware Century Casinos Africa (Pty) Limited South Africa Century Casinos Caledon (Pty) Limited South Africa Century Casinos West Rand (Pty) Limited South Africa Rhino Resort Limited South Africa 1 EX-23.1 15 doc14.txt EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We have issued our report dated February 8, 2002, accompanying the consolidated financial statements included in the Annual Report of Century Casinos, Inc. on Form 10-KSB for the year ended December 31, 2001. We hereby consent to the incorporation by reference of said report in Registration Statement No. 333-13801 on Form S-8 of Century Casinos, Inc. /s/ Grant Thornton LLP - ------------------------- Grant Thornton LLP Denver, Colorado March 29, 2002 1 -----END PRIVACY-ENHANCED MESSAGE-----