Apr 24, 2016 10-K

ISLE OF CAPRI CASINOS INC
FORM
10-K
(Annual Report)
Filed 06/21/16 for the Period Ending 04/24/16
Address
Telephone
CIK
Symbol
SIC Code
Industry
Sector
Fiscal Year
600 EMERSON ROAD
SUITE 300
SAINT LOUIS, MO 63141
3148139200
0000863015
ISLE
7011 - Hotels and Motels
Casinos & Gaming
Consumer Cyclicals
04/25
http://www.edgar-online.com
© Copyright 2016, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
Use these links to rapidly review the document TABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Table
of
Contents
UNITED
STATES
SECURITIES
AND
EXCHANGE
COMMISSION
Washington,
D.C.
20549
FORM
10-K
(Mark
One) ý
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
fiscal
year
ended
April
24,
2016
OR
o
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
transition
period
from
to
Commission
File
Number
0-20538
ISLE
OF
CAPRI
CASINOS,
INC.
(Exact
name
of
registrant
as
specified
in
its
charter)
Delaware
(State
or
other
jurisdiction
of
incorporation
or
organization)
41-1659606
(I.R.S.
Employer
Identification
Number)
600
Emerson
Road,
Suite
300,
St.
Louis,
Missouri
(Address
of
principal
executive
offices)
63141
(Zip
Code)
Registrant's
telephone
number,
including
area
code:
(314)
813-9200
Securities
Registered
Pursuant
to
Section
12(b)
of
the
Act:
Common
Stock,
$.01
Par
Value
Per
Share
(Title
of
Class)
NASDAQ
(Name
of
each
exchange
on
which
registered)
Securities
Registered
Pursuant
to
Section
12(g)
of
the
Act:
Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
o
No
ý
Indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
Section
15(d)
of
the
Act.
Yes
o
No
ý
Indicate
by
check
mark
whether
the
registrant
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for
the
past
90
days.
Yes
ý
No
o
Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§
229.405
of
this
chapter)
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
submit
and
post
such
files).
Yes
ý
No
o
Indicate
by
check
mark
if
disclosure
of
delinquent
filers
pursuant
to
Item
405
of
Regulation
S-K
is
not
contained
herein,
and
will
not
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-K
or
any
amendment
to
this
Form
10-K.
o
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
accelerated
filer,
a
non-accelerated
filer,
or
a
smaller
reporting
company.
See
the
definitions
of
"large
accelerated
filer,"
"accelerated
filer"
and
"smaller
reporting
company"
in
Rule
12b-2
of
the
Exchange
Act.
Large
accelerated
filer
o
Accelerated
filer
ý
Non-accelerated
filer
o
(Do
not
check
if
a
smaller
reporting
company)
Smaller
reporting
company
o
Indicate
by
check
mark
whether
the
registrant
is
a
shell
company
(as
defined
in
Rule
12b-2
of
the
Exchange
Act).
Yes
o
No
ý
The
aggregate
market
value
of
the
voting
and
non-voting
stock
held
by
non-affiliates
1
of
the
Company
is
$475,736,976,
based
on
the
last
reported
sale
price
of
19.22
per
share
on
October
23,
2015
on
the
NASDAQ
Stock
Market;
multiplied
by
24,752,184
shares
of
Common
Stock
outstanding
and
held
by
non-affiliates
of
the
Company
on
such
date.
As
of
June
17,
2016,
the
Company
had
a
total
of
41,275,288
shares
of
Common
Stock
outstanding
(which
excludes
790,860
shares
held
by
us
in
treasury).
Part
III
incorporates
information
by
reference
to
the
Registrant's
definitive
proxy
statement
to
be
filed
with
the
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year.
Affiliates
for
the
purpose
of
this
item
refer
to
the
directors,
named
executive
officers
and/or
persons
owning
10%
or
more
of
the
Company's
common
stock,
both
of
record
and
beneficially;
however,
this
determination
does
not
constitute
an
admission
of
affiliate
status
for
any
of
the
individual
stockholders.
(1)
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
FORM
10-K
INDEX
PART I
ITEM
1.
ITEM
1A.
ITEM
1B.
ITEM
2.
ITEM
3.
ITEM
4.
PART II
ITEM
5.
BUSINESS
RISK
FACTORS
UNRESOLVED
STAFF
COMMENTS
PROPERTIES
LEGAL
PROCEEDINGS
MINE
SAFETY
DISCLOSURES
MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITY
SECURITIES
ITEM
6. SELECTED
FINANCIAL
DATA
ITEM
7. MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
ITEM
7A. QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK
ITEM
8. FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA
ITEM
9. CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE
ITEM
9A. CONTROLS
AND
PROCEDURES
ITEM
9B. OTHER
INFORMATION
PART III
ITEM
10. DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE
ITEM
11. EXECUTIVE
COMPENSATION
ITEM
12. SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS
ITEM
13. CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
DIRECTOR
INDEPENDENCE
ITEM
14. PRINCIPAL
ACCOUNTANT
FEES
AND
SERVICES
PART IV
ITEM
15. EXHIBITS,
FINANCIAL
STATEMENT
SCHEDULES
SIGNATURES
PAGE
2
2
11
23
23
26
26
27
27
28
31
46
47
92
92
92
92
92
93
93
93
93
94
94
95
-
96
Table
of
Contents
DISCLOSURE
REGARDING
FORWARD-LOOKING
STATEMENTS
This Annual Report contains statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other
than statements of historical fact included in this Annual Report regarding the prospects of our industry or our prospects, plans, financial position or business
strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such
as "may," "will," "expect," "intend," "estimate," "foresee," "project," "anticipate," "believe," "plans," "forecasts," "continue" or "could" or the negatives of these
terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press
releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, these expectations may not prove to be correct and are not guarantees of future performance. These forward-looking
statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those
reflected in these forward-looking statements. Factors that might cause actual results to differ include, but are not limited to, those discussed in the section entitled
"Risk Factors" beginning on page 10 of this report. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which
reflect management's opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any
revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent
written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements
contained in this Annual Report.
1
Table
of
Contents
PART
I
ITEM
1.
BUSINESS
Overview
We
are
a
developer,
owner
and
operator
of
branded
gaming
facilities
and
related
dining,
lodging
and
entertainment
facilities
in
regional
markets
in
the
United
States.
We
currently
own
or
operate
14
gaming
and
entertainment
facilities
in
Colorado,
Florida,
Iowa,
Louisiana,
Mississippi,
Missouri
and
Pennsylvania.
Collectively,
these
properties
feature
over
12,000
slot
machines
and
over
300
table
games
(including
approximately
80
poker
tables),
approximately
2,200
hotel
rooms
and
more
than
40
restaurants.
We
also
operate
a
harness
racing
track
at
our
casino
in
Florida.
Our
portfolio
of
properties
provides
us
with
a
diverse
geographic
footprint
that
minimizes
geographically
concentrated
risks
caused
by
weather,
regional
economic
difficulties,
gaming
tax
rates
and
regulations
imposed
by
local
gaming
authorities.
We
operate
under
two
brands,
Isle
and
Lady
Luck.
Isle-branded
facilities
are
generally
in
larger
markets
with
a
regional
draw
and
offer
expanded
amenities,
whereas
Lady
Luck-branded
facilities
are
typically
in
smaller
markets
drawing
from
a
more
local
customer
base.
Our
senior
management
team
has
significant
gaming
experience
spanning
numerous
jurisdictions.
We
focus
on
three
core
principles,
(1)
exceptional
guest
experience,
(2)
targeted
allocation
of
capital,
and
(3)
prudent
fiscal
management.
1.
Exceptional guest experience— We
focus
on
customer
satisfaction
and
delivering
superior
guest
experiences
by
providing
popular
gaming,
dining
and
entertainment
experiences
designed
to
exceed
customer
expectations
in
a
clean,
safe,
friendly
and
fun
environment.
We
focus
on
initiatives
to
increase
length
of
stay
including
refreshing
several
of
our
casino
floors,
improving
the
rewards
and
benefits
of
our
loyalty
program,
focusing
on
guest
service
and
providing
highquality
targeted
non-gaming
amenities
at
a
reasonable
value
and
price
point.
These
non-gaming
amenities
have
included
the
development
of
several
proprietary
food,
beverage
and
entertainment
offerings,
including
the
introduction
of
Lone
Wolf
bars
and
Otis
and
Henry's
restaurants,
a
buffet
concept
called
Farmer's
Pick
focused
on
locally-sourced
where
possible,
fresh
food,
and
live
entertainment.
Lone
Wolf
bars
and
Otis
&
Henry's
restaurants
are
open
in
seven
of
our
properties
and
Farmer's
Pick
Buffets
are
open
in
Pompano,
Waterloo,
Vicksburg,
Boonville
and
Cape
Girardeau.
Both
our
Isle-branded
and
Lady
Luck-branded
properties
share
a
unified
marketing
message,
which
changes
from
time-to-time;
it
is
currently
Play
More,
Be
Happy.
Our
marketing
messages
are
designed
to
make
our
customers
feel
welcome
and
comfortable
at
our
properties.
In
fiscal
2015,
we
completed
the
introduction
of
our
enhanced
customer
loyalty
program,
Fan
Club,
which
is
aimed
at
attracting
new
customers
and
increasing
visitation
from
our
current
customers.
We
believe
we
benefited
from
this
program
in
fiscal
2016
and
we
are
planning
to
roll
out
further
enhancements
during
fiscal
2017.
Our
marketing
teams
continuously
evaluate
and
modify
our
marketing
and
promotional
calendars
in
order
to
stimulate
guest
engagement
and
generate
repeat
visitation.
We
also
focus
on
hiring
friendly,
capable
employees
who
will
provide
great
customer
service.
We
enable
our
employees
to
own
the
customer
experience
and
provide
continuous
training
to
achieve
results.
In
order
to
measure
our
progress,
we
bonus
our
property
management
teams
and
employees
based
on
their
achievement
of
customer
service
scores
that
are
based
on
customer
feedback
generated
through
regular
surveys.
2.
Targeted Allocation of Capital —We
believe
that
continuous
targeted
reinvestment
of
capital
into
our
properties
and
technology
enhances
our
guest
experience
and
fosters
customer
loyalty.
We
plan
to
continue
to
focus
on
refreshing
all
areas
of
our
business
that
impact
our
guest
experience.
This
includes
refreshing
our
casino
floors
to
provide
the
latest
games
for
our
customers
to
play,
renovating
2
Table
of
Contents
and
refreshing
our
hotel
room
product,
public
areas
and
food
and
beverage
outlets
and
strengthening
our
technology
infrastructure.
In
fiscal
2016,
we
continued
to
refresh
our
casino
floors,
spending
approximately
$19
million
on
games
and
casino
floor
equipment.
In
fiscal
2016,
we
also
completed
the
remodel
of
the
hotel
rooms
in
the
south
tower
in
Bettendorf
and
the
hotel
and
most
of
the
remaining
non-gaming
areas
in
Boonville.
We
also
added
new
parking
in
Caruthersville,
renovated
the
casino
floor
in
Kansas
City
and
renovated
a
restaurant
at
Pompano
among
other
projects.
In
May
2015,
we
began
construction
of
a
land-based
gaming
and
entertainment
facility
in
Bettendorf,
with
a
current
estimated
cost
of
approximately
$60
million
to
replace
our
current
riverboat
casino.
The
new
facility
includes
all
new
restaurants,
a
single
consolidated
hotel
check-in,
new
entrance
and
new
casino.
We
expect
to
open
the
facility
in
late
June
2016.
In
fiscal
2017,
we
plan
to
remodel
and
rebrand
our
buffets
in
Black
Hawk
and
Kansas
City
among
other
projects.
We
also
continuously
update
and
enhance
our
information
technology
(including
our
legacy
systems)
to
facilitate
efficiencies
in
our
operations.
help
our
employees
do
their
jobs
better,
enhance
our
security
and
improve
guest
experience.
In
fiscal
2016,
we
upgraded
the
casino
management
systems
at
Bettendorf
and
Lula
and
upgraded
our
hotel
management
systems
across
our
enterprise,
which
included
enhanced
online
booking
engines
among
other
projects.
We
are
currently
developing
our
social
gaming
platform
under
the
Lady
Luck
brand
that
will
include
a
full
suite
of
play
for
fun
games.
We
expect
to
launch
the
site
in
late
summer
2016.
We
also
believe
our
long-term
success
will
depend
upon
increasing
the
quality,
reach
and
scope
of
our
operating
portfolio,
including
targeted
development
projects,
rebranding
projects,
and
identifying
profitable
growth
and/or
expansion
and
acquisition
opportunities.
3.
Prudent fiscal management— We
believe
that
our
business
benefits
from
a
cost-effective
approach
to
creating
valuable
customer
experiences
and
a
stronger
balance
sheet.
We
continually
strive
to
find
ways
to
make
our
business
processes
more
efficient
and
focus
on
reducing
our
operating
costs
while
maintaining
or
improving
customer
service
levels.
In
fiscal
2014,
we
undertook
a
company-wide
effort
to
identify
a
variety
of
cost
savings
measures
to
improve
our
operating
performance
and
implemented
measures
that
we
believe
reduced
our
costs
by
over
$12
million
annually.
We
have
also
monetized
non-core
assets,
including
the
sale
and
closure
of
certain
assets
in
Natchez
in
October
2015,
the
sale
of
our
casino
in
Davenport
in
February
2014,
the
sale
of
our
casino
and
hotel
in
Biloxi
in
November
2012
and
the
sale
of
one
of
our
two
riverboat
casinos
in
Lake
Charles
in
February
2012.
Generally,
we
used
proceeds
from
these
sales
to
reduce
our
debt
and/or
reinvest
into
our
existing
business.
Over
the
past
five
years,
we
reduced
debt
by
approximately
$270
million,
or
23%,
which
includes
$70
million
paid
off
in
fiscal
2016,
through
the
disciplined
application
of
our
free
cash
flow,
asset
sales
and
a
series
of
financing
transactions.
We
plan
to
maintain
this
discipline
through
continued
efforts
to
further
reduce
our
cost
structure,
applying
discipline
in
the
evaluation
and
execution
of
future
capital
projects
and
actively
managing
our
capital
structure
to
lower
our
cost
of
capital.
3
Table
of
Contents
Casino
Properties
The
following
is
an
overview
of
our
casino
properties
as
of
April
24,
2016:
Property
Colorado
Isle
Casino
Hotel—Black
Hawk
Lady
Luck
Casino—Black
Hawk
Florida
Pompano
Park
Iowa
Bettendorf
Marquette
Waterloo
Louisiana
Lake
Charles
Mississippi
Lula
Vicksburg
Missouri
Boonville
Cape
Girardeau
Caruthersville
Kansas
City
Pennsylvania
Nemacolin
Date
Acquired
or
Opened
December
1998 April
2003
July
1995/April
2007 March
2000
March
2000
June
2007
July
1995
March
2000
June
2010
December
2001 October
2012
June
2007
June
2000
July
2013
​
Slot
Machines
1,074
454
1,446
963
534
941
1,157
871
616
914
923
557
979
597
12,026
Table
Games
34
15
42
17
8
26
49
20
7
20
26
9
18
29
320
Hotel
Rooms
238
164
—
509
—
195
493
451
—
140
—
—
—
—
2,190
Parking
Spaces 1,100
1,200
3,800
2,057
475
1,500
2,539
1,611
977
1,100
1,049
1,151
1,426
766
20,751
​​
​
Colorado
Isle Casino Hotel-Black Hawk
Isle
Casino
Hotel-Black
Hawk
commenced
operations
in
December
1998,
is
located
on
an
approximately
10-acre
site
and
is
one
of
the
first
gaming
facilities
reached
by
customers
arriving
from
Denver
via
Highway
119,
the
main
thoroughfare
connecting
Denver
to
Black
Hawk.
The
property
includes
a
land-based
casino
with
1,074
slot
machines,
25
standard
table
games,
a
nine
table
poker
room,
a
238-room
hotel
and
1,100
parking
spaces
in
an
attached
parking
garage.
Isle
Casino
Hotel-Black
Hawk
also
offers
customers
three
restaurants,
including
a
128-seat
Farraddays
restaurant,
a
270-seat
Calypso's
buffet
and
a
42-seat
Tradewinds
Marketplace.
The
property
also
has
approximately
5,000
square
feet
of
flex
space
that
can
be
used
for
meetings
and
special
events.
Lady Luck Casino-Black Hawk
Lady
Luck
Casino-Black
Hawk,
which
we
acquired
in
April
2003
and
rebranded
in
June
2009,
is
located
across
the
intersection
of
Main
Street
and
Mill
Street
from
the
Isle
Casino
Hotel-Black
Hawk.
The
property
consists
of
a
land-based
casino
with
454
slot
machines,
10
standard
table
games,
five
poker
tables,
a
164room
hotel
that
opened
in
December
2005
and
1,200
parking
spaces
in
our
parking
structure
connecting
Isle
Casino
Hotel-Black
Hawk
and
Lady
Luck
CasinoBlack
Hawk.
The
property
also
offers
guests
dining
in
a
93-seat
Otis
&
Henry's
restaurant
as
well
as
a
grab-and-go
fast
serve
food
cart
that
is
located
in
the
main
level
of
the
facility.
The
property
also
has
approximately
2,250
square
4
Table
of
Contents
feet
of
flex
space
that
can
be
used
for
meetings
and
special
events.
Our
Black
Hawk
sites
are
connected
via
sky
bridges.
When
casinos
having
multiple
gaming
licenses
in
the
same
building
are
combined,
the
Black
Hawk/Central
City
market
consists
of
23
gaming
facilities
(seven
of
which
have
more
than
500
slot
machines),
which
in
aggregate,
generated
gaming
revenues
of
approximately
$674
million
in
the
twelve
months
ended
April
2016.
Our
Black
Hawk
properties
generated
casino
revenues
for
fiscal
2016
of
approximately
$136
million.
Black
Hawk
is
the
closest
gaming
market
to
the
Denver,
Colorado
metropolitan
area,
which
has
a
population
of
approximately
3.1
million
and
is
located
approximately
40
miles
east
of
Black
Hawk
and
serves
as
the
primary
feeder
market
for
Black
Hawk.
Florida
Pompano
In
1995,
we
acquired
Pompano
Park,
a
harness
racing
track
located
in
Pompano
Beach,
Florida
and
opened
the
casino
in
April
2007.
Pompano
Park
is
located
off
of
Interstate
95
and
the
Florida
Turnpike
on
a
223-acre
owned
site,
near
Fort
Lauderdale,
midway
between
Miami
and
West
Palm
Beach.
Pompano
Park
is
the
only
racetrack
licensed
to
conduct
harness
racing
in
Florida.
Our
Pompano
facility
includes
1,446
slot
machines,
a
42-table
poker
room,
a
120-seat
Farraddays
restaurant,
a
110-seat
Bragozzos
Italian
restaurant,
a
280seat
Farmer's
Pick
buffet,
a
newly
renovated
120-seat
Myron's
Deli,
a
12-seat
express
grab-and-go
food
outlet,
a
feature
bar,
a
sports
bar,
an
outdoor
trackside
food
truck
and
bar
and
3,800
parking
spaces.
Approximately
2.8
million
people
reside
within
a
25-mile
radius
of
our
Pompano
facility,
which
competes
with
seven
other
pari-mutuels
and
three
Native
American
gaming
facilities
in
the
market.
The
Pompano
facility
generated
approximately
$179
million
in
casino
revenues
for
fiscal
2016.
While
casino
revenues
are
not
available
for
all
market
competitors,
we
estimate
that
we
operate
approximately
10%
of
the
slot
machines
in
the
market.
Iowa
Bettendorf
Our
Bettendorf
property
was
acquired
in
March
2000
and
is
located
off
of
Interstate
74,
an
interstate
highway
serving
the
Quad
Cities
metropolitan
area,
which
consists
of
Bettendorf
and
Davenport,
Iowa
and
Moline
and
Rock
Island,
Illinois.
The
property
currently
consists
of
a
dockside
casino
offering
963
slot
machines
and
17
table
games.
The
property
includes
two
hotel
towers
(the
North
Tower
and
South
Tower)
with
509
hotel
rooms,
of
which
the
259
rooms
in
the
South
Tower
were
renovated
in
fiscal
2016.
In
addition,
the
property
contains
40,000
square
feet
of
flexible
convention/banquet
space,
a
142-seat
Farraddays'
restaurant,
a
262-seat
Calypso's
buffet,
a
26-seat
Tradewinds
Marketplace
and
2,057
parking
spaces.
We
have
agreements
with
the
City
of
Bettendorf,
Iowa
under
which
we
manage
and
provide
financial
and
operating
support
for
the
QC
Waterfront
Convention
Center
that
is
adjacent
to
our
hotel.
The
QC
Waterfront
Convention
Center
opened
in
January
2009.
We
expect
to
open
our
new
land-based
casino
on
June
24,
2016,
on
the
current
Bettendorf
property
between
our
two
hotel
towers.
Our
estimated
investment
in
this
project
is
approximately
$60
million.
The
new
35,000
square
foot
facility
will
include
approximately
1,000
slot
machines
and
20
table
games,
a
consolidated
single
hotel
check-in,
a
grand
new
entrance
and
valet
drop
off.
The
property
will
replace
its
current
food
offerings
with
a
Farmer's
Pick
Buffet,
a
Keller's
American
Grill
Restaurant
and
a
Keller's
Express.
Other
new
amenities
include
the
Lone
Wolf
Bar
located
directly
on
the
gaming
floor,
as
well
as
a
new
fitness
center
and
VIP
lounge.
5
Table
of
Contents
The
Quad
Cities
metropolitan
area
currently
has
three
gaming
operations,
including
our
gaming
facility
in
Bettendorf
and
the
Rhythm
City
facility
in
Davenport,
which
we
sold
during
February
2014.
The
three
casinos
in
the
Quad
Cities
generated
total
gaming
revenues
of
approximately
$189
million
for
the
twelve
months
ended
April
2016.
Our
Bettendorf
property
generated
casino
revenues
for
fiscal
2016
of
approximately
$69
million.
Bettendorf
also
competes
with
other
gaming
operations
in
Illinois
and
Iowa
and
a
competitor
will
be
moving
the
Rhythm
City
casino
to
a
new
land-based
location
in
June
2016.
Approximately
905,000
people
reside
within
60
miles
of
our
Bettendorf
property.
Marquette
Our
Marquette,
Iowa
property,
which
we
acquired
in
March
2000,
is
approximately
60
miles
north
of
Dubuque,
Iowa.
The
property
consists
of
a
dockside
casino
offering
534
slot
machines
and
8
table
games,
a
marina
and
475
parking
spaces.
The
facility
operates
as
a
Lady
Luck
casino
and
includes
a
132-seat
buffet
restaurant,
a
22-seat
Otis
and
Henry's
Express
food
outlet
and
a
155-seat
Lone
Wolf
restaurant
and
bar.
Our
Marquette
property
is
the
only
gaming
facility
in
the
Marquette,
Iowa
market
and
generated
casino
revenues
of
approximately
$27
million
in
fiscal
2016.
We
believe
most
of
our
Marquette
customers
are
from
northeast
Iowa
and
Wisconsin,
which
includes
approximately
490,000
people
within
60
miles
of
our
property.
We
compete
for
those
customers
with
other
gaming
facilities
in
Dubuque,
Iowa
and
Native
American
casinos
in
southwestern
Wisconsin.
Waterloo
Our
Waterloo,
Iowa
property
opened
in
June
2007
and
is
located
adjacent
to
Highway
218
and
US
20.
The
property
consists
of
a
single-level
casino
offering
941
slot
machines,
22
table
games
and
four
poker
tables.
The
property
also
offers
a
wide
variety
of
non-gaming
amenities,
including
a
96-seat
Otis
&
Henry's
restaurant,
a
218-seat
Farmer's
Pick
buffet,
65-seat
Lone
Wolf
restaurant
and
bar,
5,000
square
feet
of
meeting
space,
1,500
parking
spaces
and
a
195-room
hotel,
which
includes
27
suites.
Our
Waterloo
property
is
the
only
gaming
facility
in
the
Waterloo,
Iowa
market
and
approximately
685,000
people
live
within
60
miles
of
the
property.
We
compete
with
other
casinos
in
eastern
Iowa.
We
generated
casino
revenues
of
approximately
$89
million
in
fiscal
2016.
Louisiana
Lake Charles
Our
Lake
Charles
property
commenced
operations
in
July
1995
and
is
located
on
a
19-acre
site
along
Interstate
10,
the
main
thoroughfare
connecting
Houston,
Texas
to
Lake
Charles,
Louisiana.
In
February
2012,
we
consolidated
our
gaming
operations
onto
one
gaming
vessel
offering
1,157
slot
machines,
36
table
games,
including
13
poker
tables,
two
hotels
offering
493
rooms,
a
96,000
square
foot
land-based
pavilion
and
entertainment
center,
and
2,539
parking
spaces,
including
approximately
1,160
spaces
in
an
attached
parking
garage.
The
pavilion
and
entertainment
center
offer
customers
a
wide
variety
of
non-gaming
amenities,
including
a
100-seat
Otis
&
Henry's
restaurant
and
a
240-seat
Farmers'
Pick
buffet.
During
fiscal
2016,
we
remodeled
and
rebranded
the
fast
casual
restaurant
to
a
Lone
Wolf
Express,
which
features
American
favorites
and
a
selection
of
Asian
items.
In
addition,
we
updated
and
rebranded
the
bar
to
a
Lone
Wolf,
which
features
free
live
entertainment
and
can
accommodate
171
guests.
The
pavilion
also
has
a
14,750
square
foot
entertainment
center
comprised
of
a
1,142-seat
special
events
center
designed
for
concerts,
banquets
and
other
events,
meeting
facilities
and
administrative
offices.
The
Lake
Charles
market
consists
of
three
dockside
gaming
facilities,
the
newest
of
which
opened
in
December
2014,
a
Native
American
casino
and
a
parimutuel
facility/racino.
In
addition,
a
Native
6
Table
of
Contents
American
electronic
bingo
hall
recently
opened
approximately
100
miles
north
of
Houston.
The
market
includes
approximately
8,800
slot
machines
and
approximately
280
table
games.
For
the
twelve
months
ended
April
2016,
the
three
gaming
facilities
and
one
racino,
in
the
aggregate,
generated
gaming
revenues
of
approximately
$895
million.
Revenues
for
the
Native
American
property
are
not
published.
Casino
revenues
for
our
Lake
Charles
property
for
fiscal
2016
were
approximately
$131
million.
Lake
Charles
is
the
closest
gaming
market
to
the
Houston
metropolitan
area,
which
has
a
population
of
approximately
6.2
million
and
is
located
approximately
140
miles
west
of
Lake
Charles.
We
believe
that
our
Lake
Charles
property
attracts
customers
primarily
from
southeast
Texas,
including
Houston,
Beaumont,
Galveston,
Orange
and
Port
Arthur
and
from
local
area
residents.
Approximately
500,000
and
1.7
million
people
reside
within
50
and
100
miles,
respectively,
of
the
Lake
Charles
property.
Mississippi
Lula
Our
Lula
property,
which
we
acquired
in
March
2000,
is
located
off
of
Highway
49,
the
only
road
crossing
the
Mississippi
River
between
Mississippi
and
Arkansas
for
more
than
50
miles
in
either
direction.
The
property
consists
of
two
dockside
casinos
containing
871
slot
machines
and
20
table
games,
two
on-site
hotels
with
a
total
of
451
rooms,
a
land-based
pavilion
and
entertainment
center,
1,611
parking
spaces
and
a
28-space
RV
Park.
The
pavilion
and
entertainment
center
offer
a
wide
variety
of
non-gaming
amenities,
including
a
130-seat
Otis
&
Henry's
restaurant,
a
240-seat
Calypso's
buffet
and
a
57-seat
Otis
&
Henry's
Express.
Our
Lula
property
is
the
only
gaming
facility
in
Coahoma
County,
Mississippi
and
generated
casino
revenues
of
approximately
$57
million
in
fiscal
2016.
Lula
draws
a
significant
amount
of
business
from
the
Little
Rock,
Arkansas
metropolitan
area,
which
has
a
population
of
approximately
725,000
and
is
located
approximately
120
miles
west
of
the
property.
Coahoma
County
is
also
located
approximately
60
miles
southwest
of
Memphis,
Tennessee,
which
is
primarily
served
by
eight
casinos
in
Tunica
County,
Mississippi.
Lula
also
competes
with
Native
American
casinos
in
Oklahoma
and
racinos
in
West
Memphis,
Arkansas
and
Hot
Springs,
Arkansas.
Approximately
65,000
and
1.0
million
people
reside
within
25
and
60
miles,
respectively,
of
our
Lula
property.
Vicksburg
Our
Vicksburg
property,
which
we
acquired
in
June
2010,
is
located
off
Interstate
20
and
Highway
61
in
western
Mississippi,
approximately
50
miles
west
of
Jackson,
Mississippi.
The
property
consists
of
a
dockside
casino
offering
616
slot
machines
and
seven
table
games.
During
fiscal
2013,
the
property
was
rebranded
to
a
Lady
Luck,
which
involved
significant
changes
in
appearance
and
renovation
of
all
restaurants.
The
property
offers
a
200-seat
Farmer's
Pick
buffet,
a
48-seat
Otis
&
Henry's,
a
64-seat
Lone
Wolf
bar
and
an
18-seat
Otis
&
Henry's
Express.
The
property
has
977
parking
spaces.
The
Vicksburg
market
consists
of
five
dockside
casinos
which
generated
total
gaming
revenues
of
approximately
$233
million
for
the
twelve
months
ended
April
2016.
Our
Vicksburg
property
generated
casino
revenues
of
approximately
$39
million
in
fiscal
2016.
Approximately
700,000
people
reside
within
60
miles
of
the
property.
Missouri
Boonville
Our
Boonville
property,
which
opened
in
December
2001,
is
located
three
miles
off
Interstate
70,
approximately
halfway
between
Kansas
City
and
St.
Louis.
The
property
consists
of
a
single
level
dockside
casino
offering
914
slot
machines,
20
table
games,
a
140-room
hotel,
a
32,400
square
foot
7
Table
of
Contents
pavilion
and
entertainment
center
and
1,100
parking
spaces.
The
pavilion
and
entertainment
center
offer
customers
a
wide
variety
of
non-gaming
amenities,
including
a
202-seat
Farmer's
Pick
Buffet,
a
94-seat
Farraddays'
restaurant,
a
26-seat
Tradewinds
Marketplace,
an
850-seat
ballroom
and
a
200
seat
event
center.
Our
Boonville
property
is
the
only
gaming
facility
in
central
Missouri
and
generated
casino
revenues
of
approximately
$82
million
in
fiscal
2016.
We
believe
that
our
Boonville
casino
attracts
customers
primarily
from
the
approximately
615,000
people
who
reside
within
60
miles
of
the
property
which
includes
the
Columbia
and
Jefferson
City
areas.
Cape Girardeau
Our
Cape
Girardeau
property,
which
opened
in
October
2012,
is
located
three
and
a
half
miles
from
Interstate
55
in
Southeast
Missouri,
approximately
120
miles
south
of
St.
Louis,
Missouri.
The
dockside
casino
offers
923
slot
machines,
22
table
games
and
4
poker
tables.
The
pavilion
and
entertainment
center
offer
a
wide
variety
of
non-gaming
amenities,
which
includes
a
110-seat
Lone
Wolf
bar
and
lounge,
a
230-seat
Farmer's
Pick
buffet,
a
122-seat
Farraddays'
restaurant,
a
12-seat
Lone
Wolf
Express
and
a
59-seat
Keller's
restaurant
and
bar
that
overlooks
the
Mississippi
river.
The
property
also
operates
a
7,725
square
foot
event
center
with
seating
for
up
to
600
patrons
and
has
1,049
parking
spaces.
Our
Cape
Girardeau
property
is
the
only
gaming
facility
in
the
Cape
Girardeau,
Missouri
market
and
generated
casino
revenues
of
approximately
$64
million
in
fiscal
2016.
Our
operations
primarily
compete
with
other
gaming
operations
in
Southwest
Illinois
and
Southeast
Missouri.
Approximately
640,000
people
reside
within
60
miles
of
our
property,
which
includes
Carbondale
and
Marion,
Illinois,
Paducah,
Kentucky
and
Sikeston,
Missouri.
Caruthersville
Our
Caruthersville
property
was
acquired
in
June
2007
and
is
a
riverboat
casino
located
along
the
Mississippi
River
in
Southeast
Missouri.
The
dockside
casino
offers
557
slot
machines
and
nine
table
games.
The
property
offers
a
40,000
square
foot
pavilion,
which
includes
a
147-seat
Lone
Wolf
bar
and
lounge
and
a
232-seat
Otis
&
Henry's
restaurant.
The
property
has
1,151
parking
spaces.
Our
Caruthersville
facility
generated
casino
revenues
of
approximately
$37
million
in
fiscal
year
2016.
Approximately
610,000
people
reside
within
60
miles
of
the
property.
Our
casino
in
Cape
Girardeau
is
located
approximately
85
miles
north
of
our
Caruthersville
casino.
Kansas City
Our
Kansas
City
property,
which
we
acquired
in
June
2000,
is
the
closest
gaming
facility
to
downtown
Kansas
City
and
consists
of
a
dockside
casino
offering
979
slot
machines
and
18
table
games,
a
172-seat
Calypso's
buffet,
a
162-seat
Lone
Wolf
restaurant
and
bar,
a
44-seat
Tradewinds
Marketplace
and
1,426
parking
spaces.
The
Kansas
City
market
consists
of
four
dockside
gaming
facilities,
a
land-based
facility
which
opened
in
February
2012
and
a
Native
American
casino.
Operating
statistics
for
the
Native
American
casino
are
not
published.
The
four
dockside
gaming
facilities
and
the
land-based
facility
generated
gaming
revenues
of
approximately
$748
million
for
the
twelve
months
ended
April
2016.
Our
Kansas
City
property
generated
casino
revenues
of
approximately
$77
million
during
fiscal
2016.
We
believe
that
our
Kansas
City
casino
attracts
customers
primarily
from
the
Kansas
City
metropolitan
area,
which
has
approximately
2.0
million
residents.
8
Table
of
Contents
Pennsylvania
Nemacolin
Lady
Luck
Nemacolin
opened
July
1,
2013.
The
property
is
located
on
the
2,000
acre
Nemacolin
Woodlands
Resort
in
Western
Pennsylvania.
The
casino
property
includes
597
slot
machines,
29
table
games,
a
133-seat
Otis
&
Henry's
restaurant,
a
83-seat
Lone
Wolf
restaurant,
bar
and
lounge
and
766
parking
spots.
The
Nemacolin
Woodlands
Resort
includes
over
300
rooms,
suites,
townhouses
and
luxury
homes
for
the
property
guests,
as
well
as
numerous
activities
for
the
outdoor
enthusiast.
Our
Nemacolin
property
is
the
only
casino
in
Fayette
County,
Pennsylvania
and
generated
$41
million
of
gaming
revenues
during
fiscal
year
2016.
We
believe
that
our
casino
attracts
customers
staying
at
the
Nemacolin
Woodlands
Resort
as
well
as
from
the
2.5
million
people
who
reside
within
60
miles
of
the
property.
The
closest
competing
casino
to
Nemacolin
is
approximately
60
miles
away.
The
Nemacolin
facility
competes
primarily
with
a
casino
and
a
racino
in
the
Pittsburgh,
Pennsylvania
area
and
a
casino
in
Rocky
Gap,
Maryland.
Marketing
We
continue
to
focus
on
profitable
revenue
growth
through
our
strategic
initiatives:
optimizing
customer
reinvestment,
innovating
revenue
channels
and
improving
our
customers'
experience.
Our
targeted
promotions,
direct
mail
and
fun
entertainment
options
reflect
our
strong
dedication
to
lifecycle
management.
We
strive
to
deliver
the
right
message
to
each
of
our
customers
at
the
right
time
and
through
the
right
channel.
Our
marketing
programs
and
initiatives
are
focused
on
the
following
areas:
Channel Optimization: In
the
highly-competitive
markets
in
which
we
operate,
it
is
critical
for
us
to
stay
in-tune
with
our
customers
and
offer
relevant
and
competitive
services
and
programs
in
the
right
channel.
Our
marketing
strategies
will
continue
to
be
refined
as
technology,
media
preferences
and
communication
channels
evolve.
Database Marketing and Analytics: We
have
compiled
an
extensive
database
of
customer
information
over
time.
This
information
is
being
used
in
new
ways,
including
predictive
modeling,
which
allows
us
to
maximize
customer
profitability
and
improve
targeting
within
our
programming.
Regional Marketing Management Model: The
conversion
to
a
regional
management
model
in
marketing
operations
in
fiscal
2015
has
improved
our
sharing
of
best
practices
and
time-to-market.
This
approach
allows
us
to
maximize
the
effect
of
our
most
talented
employees,
yielding
best
practices
on
profitability,
marketing
and
operations.
Fan Club®: Fan
Club,
our
customer
loyalty
program,
provides
customers
the
opportunity
to
earn
same-day
benefits
based
on
their
level
of
play.
The
five-tier
program
provides
customers
with
unique
rewards
based
on
individual
tier.
In
fiscal
2015,
we
moved
the
last
four
properties
using
legacy
loyalty
programs
to
Fan
Club
so
that
each
property
in
the
enterprise
now
offers
Fan
Club
benefits
to
its
guests.
As
with
all
marketing
strategies,
we
will
continually
reevaluate
the
benefits
of
Fan
Club
and
make
adjustments
to
improve
the
experience
for
our
guests
and
the
efficient
of
our
marketing.
Retail Development: We
continue
our
commitment
to
retail
customers
via
enhanced
food
&
beverage
quality,
engaging
entertainment
and
fun
promotions.
Our
current
communication
strategy
is
fully-integrated,
using
digital,
social
and
traditional
media
to
reach
customers
in
a
variety
of
ways.
By
diversifying
our
communication
channels,
we
ensure
that
retail
guests
remain
engaged
with
us
regardless
of
their
individual
media
consumption
preferences.
Our
focus
on
new
and
more
9
Table
of
Contents
effective
mass
communication
strategies
will
improve
the
return
on
investment
of
our
buys
and
yield
a
better
understanding
of
how
our
media
strategy
drives
revenues.
Brand: Our
brands
are
a
reflection
of
our
culture,
our
customers
and
who
we
are.
Our
service
culture
and
commitment
to
providing
an
exceptional,
casual,
come
as
you
are
experience,
is
manifested
in
every
aspect
of
our
marketing
and
property
experience.
Employees
As
of
April
24,
2016,
we
employed
approximately
6,600
full
and
part-time
people.
We
have
a
collective
bargaining
agreement
with
UNITE
HERE
covering
approximately
470
employees
at
our
Pompano
property
which
was
renewed
in
June
2015
and
expires
on
May
31,
2018.
We
believe
that
our
relationship
with
our
employees
is
satisfactory.
Governmental
Regulations
The
gaming
and
racing
industries
are
highly
regulated
and
we
must
maintain
our
licenses
and
pay
gaming
taxes
to
continue
our
operations.
Each
of
our
facilities
is
subject
to
extensive
regulation
under
the
laws,
rules
and
regulations
of
the
jurisdiction
where
it
is
located.
These
laws,
rules
and
regulations
generally
relate
to
the
responsibility,
financial
stability
and
character
of
the
owners,
managers
and
persons
with
financial
interests
in
the
gaming
operations.
Violations
of
laws
in
one
jurisdiction
could
result
in
disciplinary
action
in
other
jurisdictions.
A
more
detailed
description
of
the
regulations
to
which
we
are
subject
is
contained
in
Exhibit
99.1
to
this
Annual
Report
on
Form
10-K.
Our
businesses
are
subject
to
various
federal,
state
and
local
laws
and
regulations
in
addition
to
gaming
regulations.
These
laws
and
regulations
include,
but
are
not
limited
to,
restrictions
and
conditions
concerning
alcoholic
beverages,
food
service,
smoking,
environmental
matters,
employees
and
employment
practices,
currency
transactions,
taxation,
zoning
and
building
codes,
and
marketing
and
advertising.
Such
laws
and
regulations
could
change
or
could
be
interpreted
differently
in
the
future,
or
new
laws
and
regulations
could
be
enacted.
Material
changes,
new
laws
or
regulations,
or
material
differences
in
interpretations
by
courts
or
governmental
authorities
could
adversely
affect
our
operating
results.
Available
Information
Our
web
site
is
www.isleofcapricasinos.com.
Our
electronic
filings
with
the
U.S.
Securities
and
Exchange
Commission
(including
all
annual
reports
on
Form
10-K,
quarter
reports
on
Form
10-Q,
and
current
reports
on
Form
8-K,
and
any
amendments
to
these
reports),
including
the
exhibits,
are
available
free
of
charge
through
our
web
site
as
soon
as
reasonably
practicable
after
we
electronically
file
them
with
or
furnish
them
to
the
U.S.
Securities
and
Exchange
Commission.
The
information
found
on
our
website
is
not
part
of
this
or
any
other
report
we
file
with,
or
furnish
to,
the
U.S.
Securities
and
Exchange
Commission.
10
Table
of
Contents
ITEM
1A.
RISK
FACTORS
An
investment
in
our
securities
is
subject
to
risks
inherent
to
our
business.
We
have
described
below
what
we
currently
believe
to
be
the
material
risks
and
uncertainties
in
our
business.
Additional
risks
and
uncertainties
not
presently
known
to
us
or
that
we
currently
consider
immaterial
may
also
impair
our
business
operations.
Before
making
an
investment
decision,
you
should
carefully
consider
the
risks
and
uncertainties
described
below,
together
with
all
of
the
other
information
included
or
incorporated
by
reference
in
this
Annual
Report
on
Form
10-K.
This
Annual
Report
on
Form
10-K
is
qualified
in
its
entirety
by
these
risk
factors.
We
also
face
other
risks
and
uncertainties
beyond
what
is
described
below.
If
any
of
the
following
risks
actually
occur,
our
business,
financial
condition
and
results
of
operations
could
be
materially
and
adversely
affected.
If
this
were
to
happen,
the
value
of
securities,
including
our
common
stock,
could
decline
significantly.
You
could
lose
all
or
part
of
your
investment.
We face significant competition from other gaming operations, including Native American gaming facilities, and from legalization or expansion of
gaming by states in or near where we own properties, that could have a material adverse effect on our future operations.
The
gaming
industry
is
intensely
competitive
and
we
face
a
high
degree
of
competition
in
the
markets
in
which
we
operate.
We
have
numerous
competitors,
including
land-based
casinos,
dockside
casinos,
riverboat
casinos,
casinos
located
on
racing
tracks,
pari-mutuel
operations
or
Native
American-owned
lands
and
video
lottery
and
poker
machines
not
located
in
casinos.
We
also
compete
with
other
forms
of
legalized
gaming
and
entertainment
such
as
online
computer
gambling,
bingo,
pull
tab
games,
card
parlors,
sports
books,
fantasy
sports
websites,
"cruise-to-nowhere"
operations,
pari-mutuel
or
telephonic
betting
on
horse
racing
and
dog
racing,
state-sponsored
lotteries,
jai-alai,
and,
in
the
future,
may
compete
with
gaming
at
other
venues.
In
addition,
we
compete
more
generally
with
other
forms
of
entertainment
for
the
discretionary
spending
of
our
customers.
We
also
face
the
risk
that
existing
competitors
will
expand
their
operations
and
the
risk
that
Native
American
gaming
will
continue
to
grow.
For
example,
an
existing
competitor
of
our
Bettendorf,
Iowa
property
in
Davenport
opened
its
land-based
gaming
facility
on
June
16,
2016
replacing
its
previous
riverboat
casino.
Some
of
our
competitors
may
have
better
name
recognition,
marketing
and
financial
resources
than
we
do;
competitors
with
more
financial
resources
may
therefore
be
able
to
improve
the
quality
of,
or
expand,
their
gaming
facilities
in
a
way
that
we
may
be
unable
to
match.
In
addition,
we
also
face
the
risk
of
further
legalization
and/or
expansion
of
gaming.
Certain
states
have
recently
legalized
and
other
states
are
currently
considering
legalizing
gaming.
Our
existing
casinos
attract
a
significant
number
of
their
customers
from
Houston,
Texas;
South
Florida;
Little
Rock,
Arkansas;
and
Denver,
Colorado.
Our
continued
success
depends
upon
drawing
customers
from
each
of
these
geographic
markets.
In
the
past,
legislation
to
legalize
or
expand
gaming
has
been
introduced
that
would
impact
some
of
these
markets.
For
example,
the
Arkansas
attorney
general
recently
certified
a
proposed
ballot
initiative
to
amend
the
Arkansas
Constitution
to
permit
up
to
four
gaming
establishments.
If
the
ballot
initiative
is
successful,
it
could
adversely
affect
our
Lula
property.
Additionally,
from
time
to
time
the
State
of
Florida
has
entered
into
or
amended
gaming
compacts
with
Native
American
Casinos
or
enacted,
amended
or
discussed
possible
changes
in
gaming
laws
which
could
have
positive
or
negative
impacts
on
our
Pompano
operations.
Recently
the
First
District
court
of
Appeals
for
the
State
of
Florida
ruled
that
a
pari-mutuel
operator
in
Gadsden
County
was
entitled
to
a
slot
license
from
the
Florida
division
of
pari-mutuel
wagering
based
on
the
court's
interpretation
of
legislation
passed
in
2010.
The
court's
ruling
was
challenged;
however,
if
the
ruling
is
upheld,
it
may
apply
to
other
counties
in
Florida
and
could
lead
to
further
expansion
of
gaming
that
could
adversely
affect
our
Pompano
operation.
11
Table
of
Contents
We
expect
similar
proposals
to
legalize
or
expand
gaming
will
be
made
in
the
future
in
various
states,
and
it
is
uncertain
whether
such
proposals
will
be
successful.
Further,
because
the
economic
recession
has
reduced
the
revenues
of
state
governments
from
traditional
tax
sources,
voters
and
state
legislatures
may
be
more
sympathetic
to
proposals
authorizing
or
expanding
gaming
in
those
jurisdictions.
In
addition,
there
is
no
limit
on
the
number
of
gaming
licenses
that
may
be
granted
in
several
of
the
jurisdictions
in
which
we
operate.
As
a
result,
new
gaming
licenses
could
be
awarded
in
these
jurisdictions,
which
could
allow
new
gaming
operators
to
enter
our
markets
that
could
have
an
adverse
effect
on
our
operating
results.
We are subject to extensive regulation from gaming and other regulatory authorities that could adversely affect us.
Licensing requirements. As
owners
and
operators
of
gaming
and
pari-mutuel
wagering
facilities,
we
are
subject
to
extensive
state
and
local
regulation.
State
and
local
authorities
require
us
and
our
subsidiaries
to
demonstrate
suitability
to
obtain
and
retain
various
licenses
and
require
that
we
have
registrations,
permits
and
approvals
to
conduct
gaming
operations.
The
regulatory
authorities
in
the
jurisdictions
in
which
we
operate
have
very
broad
discretion
with
regard
to
their
regulation
of
gaming
operators,
and
may
for
a
broad
variety
of
reasons
and
in
accordance
with
applicable
laws,
rules
and
regulations,
limit,
condition,
suspend,
fail
to
renew
or
revoke
a
license
to
conduct
gaming
operations
or
prevent
us
from
owning
the
securities
of
any
of
our
gaming
subsidiaries,
or
prevent
other
persons
from
owning
an
interest
in
us
or
doing
business
with
us.
We
may
also
be
deemed
responsible
for
the
acts
and
conduct
of
our
employees.
Substantial
fines
or
forfeiture
of
assets
for
violations
of
gaming
laws
or
regulations
may
be
levied
against
us,
our
subsidiaries
and
the
persons
involved,
and
some
regulatory
authorities
have
the
ability
to
require
us
to
suspend
our
operations.
The
suspension
or
revocation
of
any
of
our
licenses
or
our
operations
or
the
levy
on
us
or
our
subsidiaries
of
a
substantial
fine
would
have
a
material
adverse
effect
on
our
business.
To
date,
we
have
demonstrated
suitability
to
obtain
and
have
obtained
all
governmental
licenses,
registrations,
permits
and
approvals
necessary
for
us
to
operate
our
existing
gaming
facilities.
Nevertheless,
we
may
not
be
able
to
retain
these
licenses,
registrations,
permits
and
approvals,
or
be
able
to
obtain
any
new
ones
in
order
to
expand
our
business,
or
on
a
timely
basis.
Like
all
gaming
operators
in
the
jurisdictions
in
which
we
operate,
we
must
periodically
apply
to
renew
our
gaming
licenses
and
have
the
suitability
of
certain
of
our
directors,
officers
and
employees
approved.
We
may
not
be
able
to
obtain
such
renewals
or
approvals.
In
addition,
regulatory
authorities
in
certain
jurisdictions
must
approve,
in
advance,
any
restrictions
on
transfers
of,
agreements
not
to
encumber
or
pledges
of
equity
securities
issued
by
a
corporation
that
is
registered
as
an
intermediary
company
with
such
state,
or
that
holds
a
gaming
license.
If
these
restrictions
are
not
approved
in
advance,
they
will
be
invalid.
Compliance with other laws. We
are
also
subject
to
a
variety
of
other
federal,
state
and
local
laws,
rules,
regulations
and
ordinances
that
apply
to
nongaming
businesses,
including
zoning,
environmental,
construction
and
land-use
laws
and
regulations
governing
the
serving
of
alcoholic
beverages.
Under
various
federal,
state
and
local
laws
and
regulations,
an
owner
or
operator
of
real
property
may
be
held
liable
for
the
costs
of
removal
or
remediation
of
certain
hazardous
or
toxic
substances
or
wastes
located
on
its
property,
regardless
of
whether
or
not
the
present
owner
or
operator
knows
of,
or
is
responsible
for,
the
presence
of
such
substances
or
wastes.
We
have
not
identified
any
issues
associated
with
our
properties
that
could
reasonably
be
expected
to
have
a
material
adverse
effect
on
us
or
the
results
of
our
operations.
However,
several
of
our
properties
are
located
in
industrial
areas
or
were
used
for
industrial
purposes
for
many
years.
As
a
consequence,
it
is
possible
that
historical
or
neighboring
activities
have
affected
one
or
more
of
our
properties
and
that,
as
a
result,
environmental
issues
could
12
Table
of
Contents
arise
in
the
future,
the
precise
nature
of
which
we
cannot
now
predict.
The
coverage
and
attendant
compliance
costs
associated
with
these
laws,
regulations
and
ordinances
may
result
in
future
additional
costs.
Regulations
adopted
by
the
Financial
Crimes
Enforcement
Network
of
the
U.S.
Treasury
Department
require
us
to
report
currency
transactions
in
excess
of
$10,000
occurring
within
a
gaming
day,
including
identification
of
the
patron
by
name
and
social
security
number.
U.S.
Treasury
Department
regulations
also
require
us
to
report
certain
suspicious
activity,
including
any
transaction
that
exceeds
$5,000
if
we
know,
suspect
or
have
reason
to
believe
that
the
transaction
involves
funds
from
illegal
activity
or
is
designed
to
evade
federal
regulations
or
reporting
requirements.
Substantial
penalties
can
be
imposed
against
us
if
we
fail
to
comply
with
these
regulations.
The
Financial
Crime
Enforcement
Network
of
the
U.S.
Treasury
has
recently
increased
its
focus
on
gaming
companies.
We
are
required
to
report
certain
customer's
gambling
winning
via
form
W-2G's
to
comply
with
current
Internal
Revenue
Service
regulations.
Should
these
regulations
change,
we
would
expect
to
incur
additional
costs
to
comply
with
the
revised
reporting
requirements.
In
May
2016,
the
U.S.
Department
of
Labor
released
updated
rules
on
overtime
for
salaried
employees.
Effective
December
1,
2016,
certain
exempt
salaried
employees
making
below
$47,476
annually
may
qualify
for
overtime.
We
expect
to
incur
additional
costs
to
comply
with
the
revised
rules.
Several
of
our
riverboats
must
comply
with
U.S.
Coast
Guard
requirements
as
to
boat
design,
on-board
facilities,
equipment,
personnel
and
safety
and
must
hold
U.S.
Coast
Guard
Certificates
of
Documentation
and
Inspection.
The
U.S.
Coast
Guard
requirements
also
set
limits
on
the
operation
of
the
riverboats
and
mandate
licensing
of
certain
personnel
involved
with
the
operation
of
the
riverboats.
Loss
of
a
riverboat's
Certificate
of
Documentation
and
Inspection
could
preclude
its
use
as
a
riverboat
casino.
The
U.S.
Coast
Guard
shifted
inspection
duties
related
to
permanently
moored
casino
vessels
to
the
individual
states.
Louisiana,
Mississippi
and
Missouri
have
elected
to
utilize
the
services
of
the
American
Bureau
of
Shipping
to
undertake
the
inspections.
Iowa
has
elected
to
handle
the
inspections
through
the
Iowa
Department
of
Natural
Resources.
The
states
continue
the
same
inspection
criteria
as
the
U.S.
Coast
Guard
in
regard
to
annual
and
five
year
inspections.
Depending
on
the
outcome
of
these
inspections
a
vessel
could
become
subject
to
dry-docking
for
inspection
of
its
hull,
which
could
result
in
a
temporary
loss
of
service.
We
are
required
to
have
third
parties
periodically
inspect
and
certify
all
of
our
casino
barges
for
stability
and
single
compartment
flooding
integrity.
Our
casino
barges
and
other
facilities
must
also
meet
local
fire
safety
standards.
We
would
incur
additional
costs
if
any
of
our
gaming
facilities
were
not
in
compliance
with
one
or
more
of
these
regulations.
Potential changes in legislation and regulation of our operations. From
time
to
time,
legislators
and
special
interest
groups
have
proposed
legislation
that
would
expand,
restrict
or
prevent
gaming
operations
in
the
jurisdictions
in
which
we
operate.
In
addition,
from
time
to
time,
certain
anti-gaming
groups
have
challenged
constitutional
amendments
or
legislation
that
would
limit
our
ability
to
continue
to
operate
in
those
jurisdictions
in
which
these
constitutional
amendments
or
legislation
have
been
adopted.
Taxation and fees. State
and
local
authorities
raise
a
significant
amount
of
revenue
through
taxes
and
fees
on
gaming
activities.
We
believe
that
the
prospect
of
significant
revenue
is
one
of
the
primary
reasons
that
jurisdictions
permit
legalized
gaming.
As
a
result,
gaming
companies
are
typically
subject
to
significant
taxes
and
fees
in
addition
to
normal
federal,
state,
local
and
provincial
income
taxes,
and
such
taxes
and
fees
are
subject
to
increase
at
any
time.
We
pay
substantial
taxes
and
fees
with
respect
to
our
operations.
From
time
to
time,
federal,
state,
local
and
provincial
legislators
and
officials
have
proposed
changes
in
tax
laws,
or
in
the
administration
of
such
laws,
affecting
the
gaming
industry.
Any
13
Table
of
Contents
material
increase,
or
the
adoption
of
additional
taxes
or
fees,
could
have
a
material
adverse
effect
on
our
future
financial
results.
Our operations in certain jurisdictions depend on agreements with third parties.
Our
operations
in
several
jurisdictions
depend
on
agreements
with
third
parties.
If
we
are
unable
to
renew
these
agreements
on
satisfactory
terms
as
they
expire,
our
business
may
be
disrupted
and,
in
the
event
of
disruptions
in
multiple
jurisdictions,
could
have
a
material
adverse
effect
on
our
financial
condition
and
results
of
operations.
For
example,
Iowa
law
requires
that
each
gambling
venue
in
Iowa
must
have
a
licensed
"Qualified
Sponsoring
Organization,"
or
QSO,
which
is
a
tax-exempt
non-profit
organization.
The
QSO
must
donate
the
profits
it
receives
from
casino
operations
to
educational,
civic,
public,
charitable,
patriotic
or
religious
uses.
Each
of
our
three
Iowa
properties
has
an
agreement
with
a
local
QSO.
We
have
the
right
to
renew
our
agreements
for
Bettendorf
and
Waterloo
when
they
expire
in
2025
and
2018,
respectively.
In
October
2015,
we
amended
our
agreement
for
Marquette
which
extended
the
expiration
to
June
2044.
We
have
a
management
agreement
with
Nemacolin
Woodlands
Resort,
the
owner
of
the
gaming
license
issued
by
the
Pennsylvania
Gaming
Control
Board
allowing
operation
of
a
casino
at
the
resort.
Under
the
terms
of
this
agreement,
we
constructed
and
currently
operate
a
casino
at
the
resort.
Our
management
agreement
is
subject
to
a
buy-out
provision
on
or
after
December
31,
2021,
as
well
as
other
terms
and
conditions
which
could
result
in
termination
of
the
management
agreement.
The
base
term
of
the
agreement
is
ten
years,
with
four,
five-year
renewal
options.
Additionally,
each
party
to
the
management
agreement
has
certain
termination
rights.
If
the
management
agreement
is
terminated,
we
will
no
longer
have
the
right
to
manage
our
casino
at
Nemacolin
Woodlands
Resort.
Our business may be adversely affected by legislation prohibiting tobacco smoking.
Legislation
in
various
forms
to
ban
indoor
tobacco
smoking
has
been
enacted
or
introduced
in
many
states
and
local
jurisdictions,
including
several
of
the
jurisdictions
in
which
we
operate.
If
additional
restrictions
on
smoking
are
enacted
in
our
jurisdictions,
we
could
experience
a
significant
decrease
in
gaming
revenue
and
particularly,
if
such
restrictions
are
not
applicable
to
all
competitive
facilities
in
that
gaming
market,
our
business
could
be
materially
adversely
affected.
Our substantial indebtedness could adversely affect our financial health and restrict our operations.
We
have
a
significant
amount
of
indebtedness.
As
of
April
24,
2016,
we
had
approximately
$923
million
of
total
debt
outstanding.
Our
significant
indebtedness
could
have
important
consequences
to
our
financial
condition,
such
as:
•
limiting
our
ability
to
use
operating
cash
flow
or
obtain
additional
financing
to
fund
working
capital,
capital
expenditures,
expansion
and
other
important
areas
of
our
business
because
we
must
dedicate
a
significant
portion
of
our
cash
flow
to
make
principal
and
interest
payments
on
our
indebtedness;
•
causing
an
event
of
default
if
we
fail
to
satisfy
the
financial
and
restrictive
covenants
contained
in
the
indentures
and
agreements
governing
our
senior
secured
credit
facility,
our
5.875%
senior
notes,
our
8.875%
senior
subordinated
notes
and
our
other
indebtedness,
which
could
result
in
all
of
our
debt
becoming
immediately
due
and
payable,
could
permit
our
secured
lenders
to
foreclose
on
the
assets
securing
our
secured
debt
and
have
other
adverse
consequences,
any
of
which,
if
not
cured
or
waived,
could
have
a
material
adverse
effect
on
us;
14
Table
of
Contents
•
if
the
indebtedness
under
our
5.875%
senior
notes,
our
8.875%
senior
subordinated
notes,
our
senior
secured
credit
facility,
or
our
other
indebtedness
were
to
be
accelerated,
we
may
not
have
sufficient
assets
to
repay
such
indebtedness
in
full;
•
placing
us
at
a
competitive
disadvantage
to
our
competitors
who
are
not
as
highly
leveraged;
•
increasing
our
vulnerability
to
and
limiting
our
ability
to
react
to
changing
market
conditions,
changes
in
our
industry
and
economic
downturns
or
downturns
in
our
business;
and
•
our
agreements
governing
our
indebtedness,
among
other
things,
require
us
to
maintain
certain
specified
financial
ratios
and
to
meet
certain
financial
tests.
Our
debt
agreements
also
limit
our
ability
to:
i.
borrow
money;
ii.
make
capital
expenditures;
iii.
use
assets
as
security
in
other
transactions;
iv.
make
restricted
payments
or
restricted
investments;
v.
incur
contingent
obligations;
and
vi.
sell
assets
and
enter
into
leases
and
transactions
with
affiliates.
A
portion
of
our
outstanding
debt
bears
interest
at
variable
rates.
If
short-term
interest
rates
rise,
our
interest
cost
will
increase
our
variable
rate
indebtedness,
which
will
adversely
affect
our
results
of
operations
and
available
cash.
Any
of
the
factors
listed
above
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
Our
business
may
not
continue
to
generate
sufficient
cash
flow
and
future
available
draws
under
our
senior
secured
credit
facility
may
not
be
sufficient
to
enable
us
to
meet
our
liquidity
needs,
including
those
needed
to
service
our
indebtedness.
Despite our significant indebtedness, we may still be able to incur significantly more debt. This could intensify the risks described above.
The
terms
of
our
senior
secured
credit
facility,
and
the
indentures
governing
our
5.875%
senior
notes,
our
8.875%
senior
subordinated
notes
limit,
but
do
not
prohibit,
us
or
our
subsidiaries
from
incurring
significant
additional
indebtedness
in
the
future.
As
of
April
24,
2016,
we
have
the
capacity
to
incur
additional
indebtedness,
including
the
ability
to
incur
additional
indebtedness
under
our
line
of
credit,
of
approximately
$224
million,
after
taking
into
account
$8
million
in
letters
of
credit
currently
outstanding.
If
new
debt
is
added
to
our
current
level
of
indebtedness,
the
related
risks
that
we
now
face
could
intensify.
Our senior secured credit facility matures on April 19, 2018 and we may not be able to renew or extend it or enter into a new credit facility. In addition,
our ability to renew or extend our senior secured credit facility or to enter into a new credit facility may be impaired if market conditions worsen. If we are able
to renew or extend our senior secured credit facility, it may be on terms substantially less favorable than the senior secured credit facility.
Our
senior
secured
credit
facility
matures
on
April
19,
2018.
Our
ability
to
renew
or
extend
our
existing
senior
secured
credit
facility
or
to
enter
into
a
new
credit
facility
to
replace
the
existing
senior
secured
credit
facility
could
be
impaired
if
market
conditions
worsen.
In
the
current
environment,
lenders
may
seek
more
restrictive
lending
provisions
and
higher
interest
rates
that
may
reduce
our
borrowing
capacity
and
increase
our
costs.
Failure
to
obtain
sufficient
financing
or
financing
on
acceptable
terms
would
constrain
our
ability
to
operate
our
business
and
to
continue
our
development
15
Table
of
Contents
and
expansion
projects.
Any
of
these
circumstances
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
We may not be able to successfully expand to new locations or recover our investment in capital projects or new properties which would adversely affect
our operations and available resources.
We
regularly
evaluate
opportunities
for
growth
through
development
of
gaming
operations
in
existing
or
new
markets,
through
acquiring
or
managing
other
gaming
entertainment
facilities
or
through
redeveloping
our
existing
facilities.
The
expansion
of
our
operations,
whether
through
acquisitions,
development,
management
contracts
or
internal
growth,
could
divert
management's
attention
and
could
also
cause
us
to
incur
substantial
costs,
including
legal,
professional
and
consulting
fees.
To
the
extent
that
we
elect
to
pursue
any
new
gaming
acquisition,
management
or
development
opportunity,
our
ability
to
benefit
from
our
investment
will
depend
on
many
factors,
including:
•
our
ability
to
successfully
identify
attractive
acquisition
and
development
opportunities;
•
our
ability
to
successfully
operate
any
developed,
managed
or
acquired
properties;
•
our
ability
to
generate
returns,
if
any,
may
take
significantly
longer
than
we
expect;
•
our
ability
to
attract
and
retain
competent
management
and
employees
for
the
new
locations;
•
our
ability
to
secure
required
federal,
state
and
local
licenses,
permits
and
approvals,
which
in
some
jurisdictions
are
limited
in
number
and
subject
to
intense
competition;
and
•
the
availability
of
adequate
financing
on
acceptable
terms.
Many
of
these
factors
are
beyond
our
control.
Additionally,
from
time
to
time
there
are
significant
disruptions
in
the
global
capital
markets
that
may
adversely
impact
the
ability
of
borrowers
like
us
to
access
capital.
Accordingly,
we
could
be
dependent
on
free
cash
flow
from
operations
and
remaining
borrowing
capacity
under
our
senior
secured
credit
facility
to
implement
our
near-term
expansion
plans
and
fund
our
planned
capital
expenditures.
Moreover,
lower-than-expected
results
from
the
opening
of
a
new
property
may
negatively
affect
our
operating
results
and
financial
condition
and
may
make
it
more
difficult
to
raise
capital.
As
a
result
of
these
and
other
considerations,
we
may
not
be
able
to
successfully
expand
to
additional
locations
or
recover
our
investments
in
any
new
gaming
development,
management
opportunities
or
acquired
facilities.
We may experience construction delays or cost overruns during our expansion or development projects that could adversely affect our operations.
From
time
to
time,
we
may
commence
construction
projects
on
new
properties
or
at
our
current
properties.
For
example,
construction
of
a
new
$60
million
land-based
casino
at
our
Bettendorf,
Iowa
property
is
nearly
complete,
with
an
expected
opening
date
of
June
24,
2016.
We
also
evaluate
other
expansion
opportunities
as
they
become
available
and
we
may
in
the
future
engage
in
additional
construction
projects.
The
anticipated
costs
and
construction
periods
for
our
construction
projects
are
based
upon
budgets,
conceptual
design
documents
and
construction
schedule
estimates
prepared
by
us
in
consultation
with
our
architects.
Construction
projects
entail
significant
risks,
which
can
substantially
increase
costs
or
delay
completion
of
a
project.
Such
risks
include
shortages
of
materials
or
skilled
labor,
unforeseen
engineering,
environmental
or
geological
problems,
work
stoppages,
weather
interference
and
unanticipated
cost
increases.
Most
of
these
factors
are
beyond
our
control.
In
addition,
difficulties
or
delays
in
obtaining
any
of
the
requisite
licenses,
permits
or
authorizations
from
regulatory
authorities
can
increase
the
cost
or
delay
the
completion
of
an
expansion
or
development.
Significant
budget
overruns
or
delays
with
respect
to
expansion
and
development
projects
could
adversely
affect
our
results
of
operations.
16
Table
of
Contents
Our gaming operations rely heavily on technology services and an uninterrupted supply of electrical power. Our security systems and all of our slot
machines are controlled by computers and reliant on electrical power to operate.
The
absence
of
sufficient
electrical
power,
open
data
lines,
or
a
failure
of
the
technology
services
needed
to
run
our
systems
may
cause
us
to
be
unable
to
run
all
or
parts
of
gaming
operations.
Any
unscheduled
interruption
in
our
technology
services
or
interruption
in
the
supply
of
electrical
power
is
likely
to
result
in
an
immediate,
and
possibly
substantial,
loss
of
revenues
due
to
a
shutdown
of
our
gaming
operations.
Our
systems
are
also
vulnerable
to
damage
or
interruption
from
rolling
blackouts,
earthquakes,
floods,
fires,
telecommunication
failures,
terrorist
attacks,
computer
viruses,
computer
denial-of-service
attacks
and
similar
events.
Some of our casinos are located on leased property. If we default on one or more leases, the applicable lessors could terminate the affected leases and we
could lose possession of the affected casino.
We
lease
certain
parcels
of
land
on
which
several
of
our
properties
are
located.
As
a
ground
lessee,
we
have
the
right
to
use
the
leased
land;
however,
we
do
not
hold
fee
ownership
in
the
underlying
land.
Accordingly,
with
respect
to
the
leased
land,
we
will
have
no
interest
in
the
land
or
improvements
thereon
at
the
expiration
of
the
ground
leases.
Moreover,
since
we
do
not
completely
control
the
land
underlying
the
property,
a
landowner
could
take
certain
actions
to
disrupt
our
rights
in
the
land
leased
under
the
long-term
leases
which
are
beyond
our
control.
If
the
entity
owning
any
leased
land
chose
to
disrupt
our
use
either
permanently
or
for
a
significant
period
of
time,
then
the
value
of
our
assets
could
be
impaired
and
our
business
and
operations
could
be
adversely
affected.
If
we
were
to
default
on
any
one
or
more
of
these
leases,
the
applicable
lessors
could
terminate
the
affected
leases
and
we
could
lose
possession
of
the
affected
land
and
any
improvements
on
the
land,
including
the
hotels
and
casinos.
This
would
have
a
significant
adverse
effect
on
our
business,
financial
condition
and
results
of
operations
as
we
would
then
be
unable
to
operate
all
or
portions
of
the
affected
facilities
and
may
result
in
the
default
under
our
amended
and
restated
credit
facility.
If our key personnel leave us, our business could be adversely affected.
Our
continued
success
will
depend,
among
other
things,
on
the
efforts
and
skills
of
a
few
key
executive
officers
and
the
experience
of
our
property
managers.
Our
ability
to
retain
key
personnel
is
affected
by
the
competitiveness
of
our
compensation
packages
and
the
other
terms
and
conditions
of
employment,
our
continued
ability
to
compete
effectively
against
other
gaming
companies
and
our
growth
prospects.
The
loss
of
the
services
of
any
of
these
key
individuals
could
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
We
do
not
maintain
"key
man"
life
insurance
for
any
of
our
employees.
We are effectively controlled by members of the Goldstein family and their decisions may differ from those that may be made by other stockholders.
Robert
S.
Goldstein,
our
Chairman
of
the
Board,
and
Jeffrey
D.
Goldstein
and
Richard
A.
Goldstein,
two
of
our
directors,
and
various
family
trusts
associated
with
members
of
the
Goldstein
family
and
entities
associated
with
certain
members
of
the
Goldstein
family,
(collectively
the
"Goldstein
Parties")
directly
and
indirectly
collectively
own
and
control
approximately
36.5%
of
our
common
stock
as
of
April
24,
2016.
The
Goldstein
Parties
have
substantial
control
over
the
election
of
our
board
of
directors
and
the
outcome
of
the
vote
on
substantially
all
other
matters,
including
amendment
of
our
amended
and
restated
certificate
of
incorporation,
amendment
of
our
by-laws
and
significant
corporate
transactions,
such
as
the
approval
of
a
merger
or
other
transactions
involving
a
sale
of
the
Company.
Such
substantial
control
may
have
the
effect
of
discouraging
transactions
involving
an
actual
or
potential
17
Table
of
Contents
change
of
control,
which
in
turn
could
have
a
material
adverse
effect
on
the
market
price
of
our
common
stock
or
prevent
our
stockholders
from
realizing
a
premium
over
the
market
price
for
their
shares
of
common
stock.
The
interests
of
the
Goldstein
Parties
may
differ
from
those
of
our
other
stockholders.
Our amended and restated certificate of incorporation contains provisions that could delay and discourage takeover attempts that stockholders may
consider favorable.
Certain
provisions
of
our
amended
and
restated
certificate
of
incorporation
may
make
it
more
difficult
or
prevent
a
third
party
from
acquiring
control
of
us,
including:
•
we
may
not,
until
the
Supermajority
Expiration
Time
(as
defined
below)
without
the
affirmative
vote
of
the
holders
of
at
least
66
2
/
3
%
of
the
Company's
voting
power,
voting
as
a
single
class,
authorize,
adopt
or
approve
certain
extraordinary
corporate
transactions;
and
•
the
classification
of
our
board
of
directors
and
staggered
three-year
terms
of
service
for
each
class
of
directors.
"Supermajority
Expiration
Time"
means
the
first
to
occur
of
(i)
the
Goldstein
Group
ceasing
to
hold
common
stock
of
the
Company
representing
at
least
22.5%
of
our
outstanding
common
stock,
not
including
any
shares
of
Class
B
common
stock
or
shares
of
common
stock
issued
upon
conversion
of
any
preferred
stock
and
(ii)
April
8,
2021.
The
"Goldstein
Group"
means
Robert
S.
Goldstein,
our
Chairman,
and
Jeffrey
D.
Goldstein
and
Richard
A.
Goldstein,
two
of
our
directors,
spouses,
children
and
grandchildren
of
certain
members
of
the
Goldstein
family
and
entities
associated
with
certain
members
of
the
Goldstein
family.
These
provisions
may
make
mergers,
acquisitions,
tender
offers,
the
removal
of
management
and
certain
other
transactions
more
difficult
or
more
costly
and
could
discourage
or
limit
stockholder
participation
in
such
types
of
transactions,
whether
or
not
such
transactions
are
favored
by
the
stockholders.
The
provisions
also
could
limit
the
price
that
investors
might
be
willing
to
pay
in
the
future
for
shares
of
our
common
stock.
Further,
the
existence
of
these
anti-takeover
measures
may
cause
potential
bidders
to
look
elsewhere,
rather
than
initiating
acquisition
discussions
with
us.
Any
of
these
factors
could
reduce
the
price
of
our
common
stock.
We are subject to extensive governmental regulations that impose restrictions on the ownership and transfer of our securities.
No
person
may
become
the
beneficial
owner
of
five
percent
or
more
of
any
class
or
series
of
our
capital
stock
unless
such
person
agrees
in
writing
to
provide
certain
information
to,
and
consent
to
a
background
investigation
by,
any
applicable
gaming
authority.
Our
certificate
of
incorporation
requires
that,
if
in
the
judgment
of
our
board
of
directors,
a
beneficial
owner
of
our
capital
stock
may
result
in
the
disapproval,
modification,
or
non-renewal
of
any
contract
under
which
we
have
authority
to
manage
any
gaming
operations
or
the
loss
or
non-reinstatement
of
any
license
from
any
governmental
agency
to
conduct
any
portion
of
our
business,
we
may
redeem
such
person's
securities.
If
we
deem
it
necessary
or
advisable
to
redeem
such
securities,
we
will
serve
notice
on
the
holder
who
holds
securities
subject
to
redemption
and
will
call
for
the
redemption
of
the
securities
of
such
holder
at
a
redemption
price
equal
to
that
required
to
be
paid
by
the
applicable
gaming
authority,
or
if
such
gaming
authority
does
not
require
a
certain
price
per
share
to
be
paid,
a
sum
deemed
reasonable
by
us,
which
in
our
discretion
may
be
the
original
purchase
price,
the
then
current
trading
price
of
the
securities
or
another
price
we
determine.
The
redemption
price
may
be
paid
in
cash,
by
promissory
note,
or
both,
as
required
by
the
applicable
gaming
authority
and,
if
not
so
required,
as
we
elect.
Unless
the
gaming
authority
requires
otherwise,
the
redemption
price
will
in
no
event
exceed
(i)
the
closing
sale
price
of
the
securities
on
the
national
securities
exchange
on
which
such
shares
are
then
listed
or
(ii)
if
the
shares
are
not
then
listed,
then
the
mean
between
the
representative
bid
and
the
ask
price
as
quoted
by
any
other
generally
recognized
reporting
system.
18
Table
of
Contents
From
and
after
the
date
of
redemption,
such
securities
will
no
longer
be
deemed
to
be
outstanding
and
all
rights
of
the
person
who
was
determined
to
be
unsuitable,
other
than
the
right
to
receive
the
redemption
price,
will
cease.
Such
person
must
surrender
the
certificates
for
any
securities
to
be
redeemed
in
accordance
with
the
requirements
of
the
redemption
notice.
Ownership
and
transfer
of
our
securities
could
be
subjected
at
any
time
to
additional
or
more
restrictive
regulations,
including
regulation
in
applicable
jurisdictions
where
there
are
no
current
restrictions
on
the
ownership
and
transfer
of
our
securities
or
in
new
jurisdictions
where
we
may
conduct
our
operations
in
the
future.
A
detailed
description
of
such
regulations,
including
the
requirements
under
gaming
laws
of
the
jurisdictions
in
which
we
operate,
can
be
found
in
the
Exhibit
99.1
to
this
Form
10-K
and
is
incorporated
herein
by
reference.
We have a history of fluctuations in our operating income (losses) from continuing operations, and we may incur additional operating losses from
continuing operations in the future. Our operating results could fluctuate significantly on a periodic basis.
Although
we
had
income
from
continuing
operations
of
$48.3
million
in
fiscal
2016
and
$7.3
million
in
fiscal
2015,
respectively,
we
sustained
a
(loss)
from
continuing
operations
of
$(116.8)
million
in
fiscal
2014.
Companies
with
fluctuations
in
income
(loss)
from
continuing
operations
often
find
it
more
challenging
to
raise
capital
to
finance
improvements
in
their
businesses
and
to
undertake
other
activities
that
return
value
to
their
stockholders.
In
addition,
companies
with
operating
results
that
fluctuate
significantly
on
a
quarterly
or
annual
basis
may
experience
increased
volatility
in
their
stock
prices
in
addition
to
difficulties
in
raising
capital.
There
may
be
fluctuations
in
our
income
(losses)
from
continuing
operations
in
the
future,
and
should
that
occur,
we
may
suffer
adverse
consequences
to
our
business
as
a
result,
which
could
decrease
the
value
of
our
common
stock.
We may incur impairments to goodwill, indefinite-lived intangible assets, or long-lived assets, which could negatively affect our operating results.
As
of
April
24,
2016,
we
had
$162.2
million
of
goodwill
and
other
intangible
assets.
We
perform
annual
impairment
testing
for
goodwill
and
indefinite-lived
intangible
assets
as
of
the
first
day
of
the
fourth
fiscal
quarter
of
each
year,
or
on
an
interim
basis
if
indicators
of
impairment
exist.
For
properties
with
goodwill
and/or
other
intangible
assets
with
indefinite
lives,
these
tests
could
require
the
comparison
of
the
implied
fair
value
of
each
reporting
unit
to
carrying
value.
We
must
make
various
assumptions
and
estimates
in
performing
our
impairment
testing.
The
implied
fair
value
includes
estimates
of
future
cash
flows
that
are
based
on
reasonable
and
supportable
assumptions
which
represent
our
best
estimates
of
the
cash
flows
expected
to
result
from
the
use
of
the
assets
including
their
eventual
disposition
and
by
a
market
approach
based
upon
valuation
multiples
for
similar
companies.
Changes
in
estimates,
increases
in
our
cost
of
capital,
reductions
in
transaction
multiples,
operating
and
capital
expenditure
assumptions
or
application
of
alternative
assumptions
and
definitions,
could
produce
significantly
different
results.
We
also
evaluate
long-lived
assets
for
impairment
if
indicators
of
impairment
exist.
In
assessing
the
recoverability
of
the
carrying
value
of
such
property,
equipment
and
other
long-lived
assets,
we
make
assumptions
regarding
future
cash
flows
and
residual
values.
Future
cash
flow
estimates
are,
by
their
nature,
subjective
and
actual
results
may
differ
materially
from
our
estimates.
If
our
ongoing
estimates
of
future
cash
flows
are
not
met,
we
may
have
to
record
additional
impairment
charges
in
future
accounting
periods.
Our
estimates
of
cash
flows
are
based
on
the
current
regulatory,
social
and
economic
climates,
recent
operating
information
and
budgets,
and
current
operating
plans
of
the
various
properties
where
we
conduct
operations.
These
estimates
could
be
negatively
impacted
by
changes
in
federal,
state
or
local
regulations,
economic
downturns,
internal
operating
decisions,
or
other
events
affecting
various
forms
of
travel
and
access
to
our
properties.
19
Table
of
Contents
Inclement weather and other conditions could seriously disrupt our business and have a material, adverse effect on our financial condition and results of
operations.
The
operations
of
our
facilities
are
subject
to
disruptions
or
reduced
patronage
as
a
result
of
severe
weather
conditions,
natural
disasters
and
other
casualties.
Because
many
of
our
gaming
operations
are
located
on
or
adjacent
to
bodies
of
water,
these
facilities
are
subject
to
risks
in
addition
to
those
associated
with
other
casinos,
including
loss
of
service
due
to
casualty,
forces
of
nature,
mechanical
failure,
extended
or
extraordinary
maintenance,
flood,
hurricane
or
other
severe
weather
conditions
and
other
disasters.
For
example,
flooding
along
the
Mississippi
River
resulted
in
five
of
our
properties
being
closed
for
differing
periods
of
time
in
fiscal
2012
and
the
harsh
weather
in
the
winter
of
fiscal
2014
affected
regional
gaming
revenues.
In
addition,
severe
weather
such
as
high
winds
and
blizzards
occasionally
limits
access
to
our
land-based
facilities
in
Colorado.
The
proceeds
from
any
future
insurance
claim
may
not
be
sufficient
to
compensate
us
if
one
or
more
of
our
casinos
experience
a
closure.
We have three properties that each generated more than 10% of our net revenues.
In
fiscal
2016,
our
casinos
in
Pompano,
Florida,
Lake
Charles,
Louisiana
and
our
Isle
property
in
Black
Hawk,
Colorado,
each
generated
more
than
10%
of
our
net
revenues.
Our
ability
to
meet
our
operating
and
debt
service
requirements
is
dependent,
in
part,
upon
the
continued
success
of
these
facilities.
The
operations
at
these
facilities
and
any
of
our
other
facilities
could
be
adversely
affected
by
numerous
factors,
including
those
described
in
these
"Risk
Factors"
as
well
as
more
specifically
those
described
below:
•
risks
related
to
local
and
regional
economic
and
competitive
conditions,
such
as
a
decline
in
the
number
of
visitors
to
a
facility,
a
downturn
in
the
overall
economy
in
the
market,
a
decrease
in
consumer
spending
on
gaming
activities
in
the
market
or
an
increase
in
competition
within
and
outside
the
state
in
which
each
property
is
located
(for
example,
the
effect
on
our
Lake
Charles
property
due
to
the
new
competitor
which
opened
December
2014
and
the
effect
on
our
Black
Hawk
properties
due
to
a
substantially
renovated
and
expanded
casino
across
the
street);
•
changes
in
local
and
state
governmental
laws
and
regulations
(including
changes
in
laws
and
regulations
affecting
gaming
operations
and
taxes)
applicable
to
a
facility;
•
impeded
access
to
a
facility
due
to
weather,
road
construction
or
closures
of
primary
access
routes;
•
work
stoppages,
organizing
drives
and
other
labor
problems
as
well
as
issues
arising
in
connection
with
agreements
with
horsemen
and
pari-mutuel
clerks;
and
•
the
occurrence
of
natural
disasters
or
other
adverse
regional
weather
trends.
Reductions in discretionary consumer spending could have a material adverse effect on our business.
Our
business
has
been
and
may
continue
to
be
adversely
affected
by
economic
fluctuations
experienced
in
the
United
States,
as
we
are
highly
dependent
on
discretionary
spending
by
our
patrons.
Reductions
in
discretionary
consumer
spending
or
changes
in
consumer
preferences
brought
about
by
factors
such
as
increased
unemployment,
significant
increases
in
energy
prices,
perceived
or
actual
deterioration
in
general
economic
conditions,
housing
market
instability,
instability
in
the
financial
markets,
perceived
or
actual
decline
in
disposable
consumer
income
and
wealth,
and
changes
in
consumer
confidence
in
the
economy
could
reduce
customer
demand
for
the
leisure
activities
we
offer
and
may
adversely
affect
our
revenues
and
operating
cash
flow.
We
are
unable
to
predict
the
frequency,
length
or
severity
of
economic
circumstances.
20
Table
of
Contents
The market price of our common stock may fluctuate significantly.
The
market
price
of
our
common
stock
has
historically
been
volatile
and
may
continue
to
fluctuate
substantially
due
to
a
number
of
factors,
including
actual
or
anticipated
changes
in
our
results
of
operations,
the
announcement
of
significant
transactions
or
other
agreements
by
our
competitors,
conditions
or
trends
in
the
industry
or
other
entertainment
industries
with
which
we
compete,
general
economic
conditions
including
those
affecting
our
customers'
discretionary
spending,
changes
in
the
cost
of
gasoline,
changes
in
the
gaming
markets
in
which
we
operate
and
changes
in
the
trading
value
of
our
common
stock.
The
stock
market
in
general,
as
well
as
stocks
in
the
gaming
sector
have
been
subject
to
significant
volatility
and
extreme
price
fluctuations
that
have
sometimes
been
unrelated
or
disproportionate
to
individual
companies'
operating
performances.
Broad
market
or
industry
factors
may
harm
the
market
price
of
our
common
stock,
regardless
of
our
operating
performance.
Work stoppages, organizing drives and other labor problems could negatively impact our future profits.
Some
of
our
employees
at
our
Pompano,
Florida
location
are
currently
represented
by
a
labor
union.
Labor
unions
are
making
a
concerted
effort
to
recruit
more
employees
in
the
gaming
industry.
In
addition,
organized
labor
may
benefit
from
new
legislation
or
legal
interpretations
by
the
current
presidential
administration.
We
may
experience
additional
or
more
successful
union
organizing
activity
in
the
future.
Additionally,
lengthy
strikes
or
other
work
stoppages
at
any
of
our
casino
properties
or
construction
projects
could
have
an
adverse
effect
on
our
business
and
result
of
operations.
We are or may become involved in legal proceedings which, if adversely adjudicated or settled, could impact our financial condition.
From
time
to
time,
we
are
defendants
in
various
lawsuits
and
gaming
regulatory
proceedings
relating
to
matters
incidental
to
our
business.
As
with
all
litigation,
the
outcome
of
these
matters
is
uncertain
and,
in
general,
litigation
can
be
expensive
and
time
consuming.
We
may
not
be
successful
in
the
defense
or
prosecution
of
our
current
or
future
legal
proceedings,
which
could
result
in
settlements
or
damages
that
could
significantly
impact
our
business,
financial
condition
and
results
of
operations.
Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In addition, our insurance costs may increase
and we may not be able to obtain the same insurance coverage in the future.
We
may
suffer
damage
to
our
property
caused
by
a
casualty
loss
(such
as
fire,
natural
disasters,
acts
of
war
or
terrorism),
that
could
severely
disrupt
our
business
or
subject
us
to
claims
by
third
parties
who
are
injured
or
harmed.
Although
we
maintain
insurance
customary
in
our
industry,
(including
property,
casualty,
terrorism
and
business
interruption
insurance)
that
insurance
may
not
be
adequate
or
available
to
cover
all
the
risks
to
which
our
business
and
assets
may
be
subject.
The
lack
of
sufficient
insurance
for
these
types
of
acts
could
expose
us
to
heavy
losses
if
any
damages
occur,
directly
or
indirectly,
that
could
have
a
significant
adverse
impact
on
our
operations.
We
renew
our
insurance
policies
on
an
annual
basis.
The
cost
of
coverage
may
become
so
high
that
we
may
need
to
further
reduce
our
policy
limits
or
agree
to
certain
exclusions
from
our
coverage.
Among
other
factors,
it
is
possible
that
regional
political
tensions,
homeland
security
concerns,
other
catastrophic
events
or
any
change
in
government
legislation
governing
insurance
coverage
for
acts
of
terrorism
could
materially
adversely
affect
available
insurance
coverage
and
result
in
increased
premiums
on
available
coverage
(which
may
cause
us
to
elect
to
reduce
our
policy
limits),
additional
exclusions
from
coverage
or
higher
deductibles.
Among
other
potential
future
adverse
changes,
in
the
future
we
may
elect
to
not,
or
may
not
be
able
to,
obtain
any
coverage
for
losses
due
to
acts
of
terrorism.
21
Table
of
Contents
Our information technology and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of
information security.
We
collect
information
relating
to
our
guests
and
employees
for
various
business
purposes,
including
marketing
and
promotional
purposes.
The
collection
and
use
of
personal
data
are
governed
by
privacy
laws
and
regulations
enacted
in
the
United
States.
We
rely
on
information
technology
and
other
systems
to
maintain
and
transmit
this
personal
and
financial
information,
credit
card
settlements,
credit
card
funds
transmissions,
mailing
lists
and
reservations
information.
Our
information
and
processes
are
subject
to
the
ever-changing
threat
of
compromised
security,
in
the
form
of
a
risk
of
potential
breach,
system
failure,
computer
virus,
or
unauthorized
or
fraudulent
use
by
customers,
company
employees,
or
employees
of
third
party
vendors.
The
steps
we
take
to
deter
and
mitigate
these
risks
may
not
be
successful,
and
any
resulting
compromise
or
loss
of
data
or
systems
could
adversely
impact,
operations
or
regulatory
compliance
and
could
result
in
remedial
expenses,
fines,
litigation,
and
loss
of
reputation,
potentially
impacting
our
financial
results.
In
addition,
third
party
service
providers
and
other
business
partners
process
and
maintain
proprietary
business
information
and
data
related
to
our
guests,
suppliers
and
other
business
partners.
Our
information
technology
and
other
systems
that
maintain
and
transmit
this
information,
or
those
of
service
providers
or
business
partners,
may
also
be
compromised
by
a
malicious
third
party
penetration
of
our
network
security
or
that
of
a
third
party
service
provider
or
business
partner,
or
impacted
by
intentional
or
unintentional
actions
or
inactions
by
our
employees
or
those
of
a
third
party
service
provider
or
business
partner.
As
a
result,
our
business
information,
guest,
supplier,
and
other
business
partner
data
may
be
lost,
disclosed,
accessed
or
taken
without
their
consent.
Any
such
loss,
disclosure
or
misappropriation
of,
or
access
to,
guests'
or
business
partners'
information
or
other
breach
of
our
information
security
can
result
in
legal
claims
or
legal
proceedings,
including
regulatory
investigations
and
actions,
may
have
a
serious
impact
on
our
reputation
and
may
adversely
affect
our
businesses,
operating
results
and
financial
condition.
Furthermore,
the
loss,
disclosure
or
misappropriation
of
our
business
information
may
adversely
affect
our
reputation,
businesses,
operating
results
and
financial
condition.
We have recently announced social gaming initiatives, which is a new line of business for us and a rapidly evolving and highly competitive market. We
may not be able to compete effectively in this marketplace and our new initiatives may not be successful.
We
have
recently
announced
social
gaming
initiatives
and
expect
to
invest
in
and
market
social
gaming
and
other
mobile
gaming
platforms
to
our
customers
in
casinos
and
beyond.
Our
products
will
compete
in
a
rapidly
evolving
and
highly
competitive
market
against
an
increasing
number
of
competitors,
including
Caesars
Interactive,
Churchill
Downs,
Penn
National
Gaming
and
Zynga.
Given
the
open
nature
of
the
development
and
distribution
of
games
for
electronic
devices,
our
business
will
also
compete
with
developers
and
distributors
who
are
able
to
create
and
launch
games
and
other
content
for
these
devices
using
relatively
limited
resources
and
with
relatively
limited
start-up
time
or
expertise.
We
have
limited
experience
operating
in
this
rapidly
evolving
marketplace
and
may
not
be
able
to
compete
effectively.
In
addition,
our
ability
to
be
successful
with
our
social
gaming
platform
is
dependent
on
numerous
factors
beyond
our
control
that
affect
the
social
and
mobile
gaming
industry
and
the
online
gaming
industry
in
the
United
States,
including
the
occurrence
and
manner
of
legalization
of
online
real
money
gaming
in
the
United
States
beyond
Nevada,
Delaware
and
New
Jersey;
changes
in
consumer
demographics
and
public
tastes
and
preferences;
changing
laws
and
regulations
affecting
social
and
mobile
games;
the
reaction
of
regulatory
bodies
to
social
gaming
initiatives
by
holders
of
gaming
licenses;
the
availability
and
popularity
of
other
forms
of
entertainment;
any
challenges
to
the
intellectual
property
rights
underlying
our
games;
and
outages
and
disruptions
of
our
online
services
that
may
harm
our
business.
22
Table
of
Contents
Our
social
gaming
initiatives
will
result
in
increased
operating
expense
and
increased
time
and
attention
from
our
management.
Our
social
games
will
be
complementary
to
our
current
operations
and
offer
additional
avenues
of
access
and
interaction
for
our
customers.
We
do
not
expect
our
initial
social
gaming
applications
to
be
available
for
real
money
gaming,
and
we
do
not
expect
our
social
gaming
initiatives
to
generate
significant
revenues
in
the
near
future.
The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.
There
are
a
limited
number
of
slot
machine
manufacturers
servicing
the
gaming
industry
and
a
large
majority
of
our
revenues
are
derived
from
slot
machines
at
our
casinos.
It
is
important,
for
competitive
reasons,
we
offer
the
most
popular
and
up-to-date
slot
machine
games,
with
the
latest
technology
to
our
customers.
In
recent
years,
slot
machine
manufacturers
have
frequently
refused
to
sell
slot
machines
featuring
the
most
popular
games,
instead
requiring
participating
lease
arrangements.
Generally,
a
participating
lease
is
substantially
more
expensive
over
the
long-term
than
the
cost
to
purchase
a
new
slot
machine.
For
competitive
reasons,
we
may
be
forced
to
purchase
new
slot
machines,
slot
machine
systems,
or
enter
into
participating
lease
arrangements
that
are
more
expensive
than
our
current
costs
associated
with
the
continued
operation
of
our
existing
slot
machines.
If
the
newer
slot
machines
do
not
result
in
sufficient
incremental
revenues
to
offset
the
increased
investment
and
participating
lease
costs,
it
could
adversely
affect
our
profitability.
We
materially
rely
on
a
variety
of
hardware
and
software
products
to
maximize
revenue
and
efficiency
in
our
operations.
Technology
in
the
gaming
industry
is
developing
rapidly,
and
we
may
need
to
invest
substantial
amounts
to
acquire
the
most
current
gaming
and
hotel
technology
and
equipment
in
order
to
remain
competitive
in
the
markets
in
which
we
operate.
Ensuring
the
successful
implementation
and
maintenance
of
any
new
technology
acquired
is
an
additional
risk.
ITEM
1B.
UNRESOLVED
STAFF
COMMENTS
None.
ITEM
2.
PROPERTIES
Isle-Black Hawk
We
own
approximately
10
acres
of
land
in
Black
Hawk,
Colorado
for
use
in
connection
with
our
Black
Hawk
operations.
The
property
leases
an
additional
parcel
of
land
adjoining
the
Isle-Black
Hawk
to
where
the
Lady
Luck
Hotel
and
parking
are
located.
This
lease
is
for
an
initial
term
of
five
years
ending
May
2019
with
options
to
renew
for
15
additional
terms
of
five
years
each
with
the
final
option
period
concluding
May
31,
2094.
Annual
rent
is
currently
$2.57
million
through
May
31,
2019.
The
rental
rate
thereafter
shall
be
adjusted
annually
to
correspond
to
any
rise
or
fall
in
the
Consumer
Price
Index
("CPI")
at
one-year
intervals.
Lady Luck-Black Hawk
We
own
or
lease
approximately
seven
acres
of
land
in
Black
Hawk,
Colorado
for
use
in
connection
with
the
Lady
Luck-Black
Hawk.
The
property
leases
an
additional
parcel
of
land
near
the
Lady
Luck-Black
Hawk
for
parking
as
described
above.
Pompano
We
own
approximately
223
acres
at
Pompano.
23
Table
of
Contents
Lake Charles
We
own
approximately
2.7
acres
and
lease
approximately
16.2
acres
of
land
in
Calcasieu
Parish,
Louisiana
for
use
in
connection
with
our
Lake
Charles
operations.
This
lease
automatically
renewed
in
March
2015
for
five
years
and
we
have
the
option
to
renew
it
for
13
additional
terms
of
five
years
each,
subject
to
increases
based
on
the
CPI
with
a
minimum
of
10%
and
construction
of
hotel
facilities
on
the
property.
We
own
two
hotels
in
Lake
Charles
with
a
total
of
493
rooms.
Annual
rent
payments
under
the
Lake
Charles
lease
are
approximately
$2.2
million.
Bettendorf
We
own
approximately
24.6
acres
of
land
in
Bettendorf,
Iowa
used
in
connection
with
the
operations
of
our
Bettendorf
property.
We
also
operate
under
a
long-term
lease
with
the
City
of
Bettendorf,
the
QC
Waterfront
Convention
Center
that
is
adjacent
to
our
northernmost
hotel
tower.
We
also
lease
approximately
eight
acres
of
land
on
a
month-to-month
basis
from
an
entity
owned
by
members
of
the
Goldstein
family,
including
Robert
S.
Goldstein,
our
Chairman
of
the
Board
and
Jeffrey
D.
Goldstein
and
Richard
A.
Goldstein,
directors
of
our
company,
which
we
utilize
for
parking.
The
initial
term
of
the
lease
expires
60
days
after
written
notice
is
given
to
either
party
and
rent
under
the
lease
is
currently
$60,000
annually.
Marquette
We
lease
the
dock
site
in
Marquette,
Iowa
that
is
used
in
connection
with
our
Marquette
operations.
In
November
2015,
we
amended
the
lease
and
extended
the
expiration
date
to
June
2044.
Through
June
10,
2019,
annual
rent
under
the
lease
is
approximately
$180,000,
plus
$1.00
per
passenger,
plus
2.5%
of
gaming
revenues
(less
state
wagering
taxes)
in
excess
of
$20.0
million
but
less
than
$40.0
million;
5%
of
gaming
revenues
(less
state
wagering
taxes)
in
excess
of
$40.0
million
but
less
than
$60.0
million;
and
7.5%
of
gaming
revenues
(less
state
wagering
taxes)
in
excess
of
$60.0
million.
Subsequent
to
June
10,
2019,
annual
rent
under
the
lease
is
1.52%
of
gaming
revenues,
less
state
wagering
taxes.
We
have
an
easement
related
to
an
overhead
pedestrian
bridge
and
driveway
that
is
an
annual
payment
of
approximately
$6,300.
We
also
own
approximately
25
acres
of
land
for
the
pavilion,
satellite
offices,
warehouse,
lots
by
the
marina
and
other
property.
Waterloo
We
own
approximately
54
acres
of
land
in
Waterloo,
Iowa
used
in
connection
with
the
operation
of
our
Waterloo
property.
We
also
lease
17,517
square
feet
of
warehouse
space.
Subsequent
to
year
end,
the
lease
was
renewed
until
June
2018.
Rent
under
this
lease
is
currently
$5,021
per
month.
Lula
We
lease
approximately
1,000
acres
of
land
in
Coahoma
County,
Mississippi
and
utilize
approximately
50
acres
in
connection
with
the
operations
in
Lula,
Mississippi.
Unless
terminated
by
us
at
an
earlier
date,
the
lease
expires
in
2033.
Rent
under
the
lease
is
currently
5.5%
of
gross
gaming
revenue
as
reported
to
the
Mississippi
Gaming
Commission,
plus
$100,000
annually.
We
also
own
approximately
100
acres
in
Coahoma
County,
which
may
be
utilized
for
future
development.
Vicksburg
We
own
approximately
60
acres
in
Vicksburg,
Mississippi
which
are
used
in
connection
with
the
operations
of
our
Vicksburg
property.
24
Table
of
Contents
Boonville
We
lease
our
27
acre
casino
site
in
Boonville
pursuant
to
a
lease
agreement
with
the
City
of
Boonville.
Under
the
terms
of
the
agreement,
we
lease
the
site
for
a
period
of
ninety-nine
years.
In
lieu
of
rent,
we
are
assessed
additional
amounts
by
the
City
of
Boonville
based
on
a
3.5%
tax
on
gaming
revenue,
up
to
$1.0
million,
which
we
recognize
as
additional
gaming
taxes.
Cape Girardeau
We
own
approximately
22
acres
in
Cape
Girardeau,
Missouri
which
are
used
in
connection
with
the
operations
of
our
Cape
Girardeau
property.
Caruthersville
We
own
approximately
37
acres,
including
our
riverboat
casino
and
1,151
parking
spaces
in
Caruthersville,
Missouri.
Kansas City
We
lease
approximately
28
acres
of
land
from
the
Kansas
City
Port
Authority
in
connection
with
the
operation
of
our
Kansas
City
property.
The
term
of
the
original
lease
was
ten
years
and
was
renewed
in
October
2006
and
October
2011
for
additional
five-year
terms.
The
lease
includes
six
additional
five-year
renewal
options.
The
minimum
lease
payments
correspond
to
any
rise
or
fall
in
the
CPI,
initially
after
the
ten-year
term
of
the
lease
or
October
18,
2006
and
thereafter,
at
each
five
year
renewal
date.
Rent
under
the
lease
currently
is
the
greater
of
$2.9
million
(minimum
rent)
per
year,
or
3.25%
of
gross
revenues,
less
complimentaries.
Nemacolin
We
operate
under
a
long-term
lease
with
the
Nemacolin
Woodlands
Resort
for
30
acres
of
land
and
building
in
which
we
operate
our
casino.
The
lease
is
for
an
initial
term
of
10
years
which
commenced
with
the
opening
of
the
casino,
on
July
1,
2013.
The
lease
includes
options
to
renew
for
four
additional
terms
of
five
years
each,
with
the
final
option
period
concluding
June
2043.
Lease
payments
associated
with
this
space
are
$150,000
annually,
plus
2.0%
of
gross
gaming
revenues
in
excess
of
$30
million.
Other
We
own
all
of
the
riverboats
and
barges
utilized
at
our
facilities.
We
also
own
or
lease
all
of
our
gaming
and
non-gaming
equipment.
We
lease
our
principal
corporate
office
in
Creve
Coeur,
Missouri.
We
own
additional
property
and
have
various
property
leases
and
options
to
either
lease
or
purchase
property
that
are
not
directly
related
to
our
existing
operations
and
that
may
be
utilized
in
the
future
in
connection
with
expansion
projects
at
our
existing
facilities
or
development
of
new
projects.
All
of
our
operating
properties,
except
for
our
Nemacolin
property
and
a
portion
of
the
excess
land
at
our
Pompano
property,
and
most
of
our
other
owned
and
leased
property
interests
collateralize
our
obligations
under
our
senior
secured
credit
facility.
25
Table
of
Contents
ITEM
3.
LEGAL
PROCEEDINGS
In
October
2012,
we
opened
our
new
casino
in
Cape
Girardeau,
Missouri.
A
subcontractor
filed
a
mechanics'
lien
against
our
property
resulting
from
a
dispute
between
the
subcontractor
and
our
general
contractor
for
the
construction
project.
We
demanded
that
the
general
contractor
cause
the
lien
to
be
bonded
against
or
satisfied;
however,
the
general
contractor
refused
to
do
so
and
asserted
that
a
portion
of
the
subcontractor's
claim
resulted
from
additional
work
directly
requested
by
us.
In
October
2013,
the
subcontractor
filed
suit
against
our
wholly-owned
subsidiary
IOC-Cape
Girardeau,
LLC,
the
general
contractor
and
two
other
defendants
alleging
various
contract
and
equitable
claims
and
were
seeking
damages
of
approximately
$3.8
million.
In
August
2014,
we
filed
a
cross
claim
against
the
general
contractor
alleging
breach
of
contract
and
various
indemnity
claims.
In
January
2016,
all
parties
reached
a
settlement
fully
resolving
all
claims
related
to
this
matter
and
we
paid
and
capitalized
additional
construction
costs
of
$1.4
million.
We
are
subject
to
certain
federal,
state
and
local
environmental
protection,
health
and
safety
laws,
regulations
and
ordinances
that
apply
to
businesses
generally,
and
are
subject
to
cleanup
requirements
at
certain
of
our
facilities
as
a
result
thereof.
We
have
not
made,
and
do
not
anticipate
making
material
expenditures,
nor
do
we
anticipate
incurring
delays
with
respect
to
environmental
remediation
or
protection.
However,
in
part
because
our
present
and
future
development
sites
have,
in
some
cases,
been
used
as
manufacturing
facilities
or
other
facilities
that
generate
materials
that
are
required
to
be
remediated
under
environmental
laws
and
regulations,
there
can
be
no
guarantee
that
additional
pre-existing
conditions
will
not
be
discovered
and
we
will
not
experience
material
liabilities
or
delays.
We
are
subject
to
various
contingencies
and
litigation
matters
and
have
a
number
of
unresolved
claims.
Although
the
ultimate
liability
of
these
contingencies,
this
litigation
and
these
claims
cannot
be
determined
at
this
time,
we
believe
they
will
not
have
a
material
adverse
effect
on
our
consolidated
financial
position,
results
of
operations
or
cash
flows.
ITEM
4.
MINE
SAFETY
DISCLOSURES
None.
26
Table
of
Contents
PART
II
ITEM
5.
MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITY
SECURITIES
(a)
i.
(b)
Market Information. Our
common
stock
is
traded
on
the
NASDAQ
Global
Select
Market
under
the
symbol
"ISLE".
The
following
table
presents
the
high
and
low
closing
sales
prices
for
our
common
stock
as
reported
by
the
NASDAQ
Global
Select
Market
for
the
fiscal
periods
indicated.
First
Quarter
(through
June
16,
2016)
$ 17.32
$ 14.54
Fiscal
Year
Ending
April
24,
2016
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
$
Fiscal
Year
Ending
April
26,
2015
Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
$ 14.97
$ 10.04
10.64
6.80
8.60
6.42
10.24
6.39
High
15.16
20.99
19.97
20.65
Low
$
10.92
12.27
16.20
14.01
ii.
Holders of Common Stock .
As
of
June
17,
2016,
there
were
approximately
1,252
holders
of
record
of
our
common
stock.
iii.
Dividends .
We
have
never
declared
or
paid
any
dividends
with
respect
to
our
common
stock
and
the
current
policy
of
our
board
of
directors
is
to
retain
earnings
to
provide
for
the
growth
of
our
company.
In
addition,
our
senior
secured
credit
facility
and
the
indentures
governing
our
5.875%
senior
notes
and
our
8.875%
senior
subordinated
notes
limit
our
ability
to
pay
dividends.
See
"Item
8—Financial
Statements
and
Supplementary
Data-Isle
of
Capri
Casinos,
Inc.—Notes
to
Consolidated
Financial
Statements—Note
7."
Consequently,
no
cash
dividends
are
expected
to
be
paid
on
our
common
stock
in
the
near
future.
Further,
there
can
be
no
assurance
that
our
current
and
proposed
operations
would
generate
the
funds
needed
to
declare
a
cash
dividend
or
that
we
would
have
legally
available
funds
to
pay
dividends.
In
addition,
we
may
fund
part
of
our
operations
in
the
future
from
indebtedness,
the
terms
of
which
may
further
prohibit
or
restrict
the
payment
of
cash
dividends.
If
a
holder
of
common
stock
is
disqualified
by
the
regulatory
authorities
from
owning
such
shares,
such
holder
will
not
be
permitted
to
receive
any
dividends
with
respect
to
such
stock.
See
"Item
1—Business-Governmental
Regulations."
Issuance of Unregistered Securities
None.
(c)
Purchases of our Common Stock
We
have
purchased
our
common
stock
under
stock
repurchase
programs.
These
programs
allow
for
the
repurchase
of
up
to
6,000,000
shares.
To
date
we
have
purchased
4,895,792
shares
of
common
stock
under
these
programs.
These
programs
have
no
approved
dollar
amount,
nor
expiration
dates.
No
purchases
were
made
during
the
fiscal
year
ended
April
24,
2016.
27
Table
of
Contents
COMPARISON
OF
5
YEAR
CUMULATIVE
TOTAL
RETURN*
Among
Isle
of
Capri
Casinos,
Inc.,
the
NASDAQ
Composite
Index
and
the
Dow
Jones
US
Gambling
Index
*
$100
invested
on
4/24/11
in
stock
or
4/30/11
in
index,
including
reinvestment
of
dividends.
Indexes
calculated
on
month-end
basis.
Copyright©
2016
Dow
Jones
&
Co.
All
rights
reserved.
ITEM
6.
SELECTED
FINANCIAL
DATA.
The
following
table
presents
our
selected
consolidated
financial
data
for
the
five
most
recent
fiscal
years,
which
is
derived
from
our
audited
consolidated
financial
statements
and
the
notes
to
those
statements.
Because
the
data
in
this
table
does
not
provide
all
of
the
data
contained
in
our
consolidated
financial
statements,
including
the
related
notes,
you
should
read
"Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations,"
our
consolidated
financial
28
Table
of
Contents
statements,
including
the
related
notes,
contained
elsewhere
in
this
document
and
other
data
we
have
filed
with
the
U.S.
Securities
and
Exchange
Commission.
Statement
of
Operations
Revenues:
Casino
Rooms
Food,
beverage,
pari-mutuel
and
other
Insurance
recoveries
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms
Food,
beverage,
pari-mutuel
and
other
Marine
and
facilities
Marketing
and
administrative
Corporate
and
development
Valuation
charges
Litigation
accrual
reversals
Preopening
Depreciation
and
amortization
Total
operating
expenses
Operating
income
(loss)
Interest
expense
Interest
income
Loss
on
early
extinguishment
of
debt
Derivative
income
Income
(loss)
from
continuing
operations
before
income
taxes
Income
tax
(provision)
benefit
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations,
net
of
income
taxes
Net
income
(loss)
attributable
to
common
stockholders
April
24,
2016
Fiscal
Year
Ended(1)
April
26,
April
27,
April
28,
2015
2014
2013
(dollars
in
millions,
except
per
share
data)
April
29,
2012
$ 1,028.0
$ 1,032.2
$
981.1
$
938.8
$
927.1
29.5
30.4
31.3
30.3
31.0
132.4
137.2
132.4
125.1
119.6
—
—
—
—
7.4
1,189.9
1,199.8
1,144.8
1,094.2
1,085.1
(211.3) (222.8) (210.4) (196.2) (180.7)
978.6
977.0
934.4
898.0
904.4
152.7
156.5
152.9
144.5
142.2
261.9
263.3
249.6
235.4
231.4
6.8
6.6
6.8
6.4
6.8
48.5
48.9
46.2
43.5
42.2
54.1
56.0
55.3
51.9
53.1
220.1
223.9
224.0
215.7
215.2
29.0
29.1
28.5
33.9
40.3
—
9.0
151.6
34.1
30.6
—
—
(9.3) —
—
0.2
—
3.9
5.8
0.6
82.1
77.8
79.6
69.7
72.3
855.4
871.1
989.1
840.9
834.7
123.2
105.9
(54.7) 57.1
69.7
(68.0) (84.1) (81.3) (89.4) (87.9)
0.3
0.4
0.3
0.5
0.8
(3.0) (13.8) —
—
—
—
—
0.4
0.7
0.4
52.5
8.4
(135.3) (31.1) (17.0)
(4.2) (1.1) 18.5
(6.7) (15.1)
48.3
7.3
(116.8) (37.8) (32.1)
(2.1) (2.1) (10.9) (9.8) (97.6)
$
46.2
$
5.2
$ (127.7) $
(47.6) $ (129.7)
29
Table
of
Contents
Fiscal
Year
Ended(1)
April
26,
April
27,
April
28,
2015
2014
2013
(dollars
in
millions,
except
per
share
data)
April
24,
2016
$
$
$
$
$
Balance
Sheet
Data:
Cash
and
cash
equivalents
Total
assets
Long-term
debt,
including
current
portion
Stockholders'
equity
$
62.1
$
66.4
$
69.8
$
68.5
$
94.5
1,205.1
1,227.8
1,290.1
1,553.6
1,575.0
922.7
992.9
1,066.3
1,156.9
1,154.4
75.6
23.5
19.4
142.4
183.6
Operating
Data(2):
Number
of
slot
machines
Number
of
table
games
Number
of
hotel
rooms
Number
of
parking
spaces
12,026
320
2,190
20,751
$
$
$
$
$
0.18
(0.05)
0.13
0.18
(0.05)
0.13
125.6
(41.3)
(87.7)
(41.7)
12,166
320
2,195
20,968
$
$
$
$
$
(2.94)
(0.27)
(3.21)
(2.94)
(0.27)
(3.21)
86.8
6.1
(91.5)
(38.1)
12,295
327
2,229
20,894
$
$
$
$
$
Statement
of
Operations
Data
(continued):
Income
(loss)
per
common
share
attributable
to
common
stockholders
Basic
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
Net
Income
(loss)
Diluted
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
Net
Income
(loss)
Other
Data:
Net
cash
provided
by
(used
in):
Operating
activities
Investing
activities
Financing
activities
Capital
expenditures
1.19
(0.05)
1.14
1.17
(0.05)
1.12
135.9
(59.2)
(81.0)
(70.3)
April
29,
2012
(0.96)
(0.25)
(1.21)
(0.96)
(0.25)
(1.21)
116.0
(123.4)
(18.6)
(153.2)
11,873
293
2,229
20,118
$
$
$
$
$
(0.83)
(2.52)
(3.35)
(0.83)
(2.52)
(3.35)
118.1
(60.0)
(38.7)
(75.3)
11,134
275
2,229
19,787
(1)
Our
fiscal
year
ended
April
29,
2012
includes
53
weeks
while
other
fiscal
years
presented
include
52
weeks.
The
results
of
our
previously
owned
Natchez,
Mississippi,
Davenport,
Iowa
and
Biloxi,
Mississippi
casinos
are
presented
as
discontinued
operations.
We
opened
new
casino
operations
in
Nemacolin,
Pennsylvania
in
July
2013
and
Cape
Girardeau,
Missouri
in
October
2012.
(2)
Operating
data
excludes
data
for
properties
presented
as
discontinued
operations
for
all
periods
presented.
30
Table
of
Contents
ITEM
7.
MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
You should read the following discussion together with the financial statements, including the related notes and the other financial information, contained in
this Annual Report on Form 10-K.
Executive
Overview
We
are
a
developer,
owner
and
operator
of
branded
gaming
facilities
and
related
dining,
lodging
and
entertainment
facilities
in
regional
markets
in
the
United
States.
We
have
sought
and
established
geographic
diversity
to
limit
the
risks
caused
by
weather,
regional
economic
difficulties,
gaming
tax
rates
and
regulations
of
local
gaming
authorities.
We
currently
operate
casinos
in
Colorado,
Florida,
Iowa,
Louisiana,
Mississippi,
Missouri
and
Pennsylvania.
Operating Results —Our
operating
results
for
the
periods
presented
have
been
affected,
both
positively
and
negatively,
by
current
economic
conditions
and
several
other
factors
discussed
in
detail
below.
Our
net
revenues
have
increased
by
0.2%
and
4.6%
for
fiscal
years
2016
over
2015,
and
2015
over
2014,
respectively,
reflecting
improved
economic
conditions
and
changes
in
our
operations.
Our
historical
operating
results
may
not
be
indicative
of
our
future
results
of
operations
because
of
these
factors
and
the
changing
competitive
landscape
in
each
of
our
markets,
as
well
as
by
factors
discussed
elsewhere
herein.
This
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
should
be
read
in
conjunction
with
and
giving
consideration
to
the
following:
Items Impacting Income (Loss) from Continuing Operations —Significant
items
impacting
our
income
(loss)
from
continuing
operations
during
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014
are
as
follows:
Long-term Debt Transactions— During
April
2015,
proceeds
from
an
additional
$150
million
issuance
of
our
5.875%
Senior
Notes
and
borrowing
under
our
Credit
Facility
were
used
to
purchase
$237.8
million
of
our
7.75%
Senior
Notes
pursuant
to
a
tender
offer.
In
May
2015,
we
redeemed
the
remaining
$62
million
of
our
7.75%
Senior
Notes.
As
a
result
of
these
transactions,
we
incurred
a
loss
on
early
extinguishment
of
debt
of
$3.0
million
and
$13.8
million
in
fiscal
2016
and
2015,
respectively.
Colorado Referendum Costs— During
fiscal
2015,
the
Company
incurred
costs
of
$4.1
million
in
support
of
efforts
to
defeat
the
proposed
November
2014
referendum
that
would
have
expanded
gaming
to
racetracks
in
certain
Colorado
counties.
Property Tax Settlement— During
fiscal
2015,
we
reduced
property
tax
expense
by
$1.2
million
as
a
result
of
the
settlement
of
our
property
tax
appeal
at
our
Waterloo,
Iowa
property
for
calendar
years
2011
through
2014.
Corporate Restructurings— During
fiscal
2015,
we
eliminated
executive
positions
in
the
corporate
office
to
maximize
efficiency
and
streamline
reporting
lines,
resulting
in
severance
expense
of
$2.3
million.
Impairment and Other Valuation Charges— As
a
result
of
less
than
expected
operating
performance
and
projected
future
operating
results,
it
was
determined
that
the
value
of
our
long-lived
assets
were
impaired.
In
fiscal
2015
and
fiscal
2014,
we
recorded
impairment
charges
of
$9.0
million
and
$26.4
million
related
to
our
Nemacolin
property's
long-lived
assets.
The
fiscal
2014
impairment
charge
consisted
of
$12.2
million
recorded
to
write-off
our
Nemacolin
operating
licenses
and
$14.2
million
to
reduce
the
carrying
value
of
our
fixed
assets
to
their
estimated
fair
value.
31
Table
of
Contents
As
a
result
of
market
conditions
and
our
annual
impairment
tests
of
goodwill
and
indefinite
lived
intangible
assets,
we
recorded
goodwill
impairment
charges
of
$125.2
million
in
fiscal
2014.
These
impairment
charges
were
a
result
of
economic
conditions,
deteriorating
operating
performance
and
the
impact
of
new
and
forthcoming
competition
in
certain
of
our
markets.
Legal Recoveries— In
2014,
we
received
favorable
rulings
in
two
legal
matters
in
which
we
had
previously
recorded
reserves.
As
a
result,
during
fiscal
2014,
we
reversed
previously
recorded
accruals
totaling
$16.9
million,
of
which
$9.3
million
was
recorded
as
a
reduction
to
operating
expenses
and
$7.6
million
was
recorded
as
a
reduction
to
interest
expense.
Disruptions— We
began
renovation
of
one
of
our
hotel
towers
at
our
Bettendorf
property
in
February
2015,
which
was
completed
in
July
2015.
This
resulted
in
the
loss
of
approximately
4,800
and
6,800
room
nights
in
fiscal
2016
and
fiscal
2015,
respectively.
In
addition,
we
commenced
and
completed
the
renovation
of
our
hotel
in
Boonville
in
fiscal
2016
resulting
in
the
loss
of
approximately
5,500
room
nights.
Our
property
in
Lake
Charles
was
negatively
impacted
by
the
closure
of
I-10
between
Texas
and
Louisiana
for
four
days
in
March
2016
due
to
flooding.
During
fiscal
2014,
several
of
our
properties'
operating
results
were
impacted
by
disruptions.
Severe
winter
weather
negatively
impacted
visitation
and
revenues
at
several
of
our
casinos
in
December
2013
through
March
2014.
Our
Black
Hawk
property's
attendance
was
negatively
impacted
by
the
severe
weather
and
flooding
in
Colorado
during
September
2013.
Our
Boonville
property
was
affected
by
power
outages
and
was
forced
to
close
three
times
for
a
total
of
approximately
40
hours,
of
which
two
periods
were
over
the
key
holidays
of
Father's
Day
weekend
and
the
4th
of
July
2013.
New Casinos— We
opened
our
new
casino
at
the
Nemacolin
Woodlands
Resort
on
July
1,
2013.
We
incurred
preopening
expenses
of
$4.0
million
in
fiscal
2014,
related
to
the
property
prior
to
its
opening.
Income Tax (Provision) Benefit— Our
income
tax
(provision)
benefit
from
continuing
operations
was
impacted
by
changes
in
the
deferred
tax
liability
attributable
to
the
amortization
of
indefinite-lived
intangibles
and
expenses
for
state
jurisdictions
where
taxable
income
is
generated.
Our
income
tax
(provision)
benefit
from
continuing
operations
was
($4.2)
million
for
fiscal
2016,
($1.1)
million
for
fiscal
2015
and
$18.5
million
for
fiscal
2014.
Included
in
our
fiscal
2015
provision
was
the
benefit
from
reversing
a
Florida
state
income
tax
valuation
allowance
of
$2.3
million.
Included
in
our
fiscal
2014
benefit
was
$12.0
million
from
reversing
a
valuation
allowance
as
a
result
of
our
Davenport
property
sale
as
well
as
the
reversal
of
a
previously
unrecognized
tax
benefit
of
$7.7
million
as
a
result
of
a
favorable
ruling
in
a
tax
court
matter.
Items Impacting Current and Future Operations— During
the
fiscal
years
ended
April
24,
2016,
April
26,
2015,
and
April
27,
2014,
we
have
commenced
construction
or
completed
transactions
as
follows:
Construction Disruption and Preopening
Bettendorf Land-Based Construction— In
May
2015,
we
began
construction
of
a
land-based
facility
in
Bettendorf,
Iowa,
to
replace
our
current
riverboat
casino.
While
the
actual
construction
has
not
impacted
the
current
casino
operations,
we
experienced
periodic
disruption
in
accessibility
to
the
property,
which
had
an
impact
on
operating
results
in
fiscal
2016
and
will
impact
results
during
the
week
between
when
we
close
the
riverboat
casino
and
open
the
land-based
operations
on
June
24,
2016.
We
incurred
preopening
expenses
of
$0.2
million
in
fiscal
2016
related
to
Bettendorf
and
will
incur
additional
preopening
expenses
in
fiscal
2017.
32
Table
of
Contents
Discontinued Operations
Closure of Natchez Casino— On
October
19,
2015,
we
closed
our
casino
property
in
Natchez,
Mississippi
and
completed
the
previously
announced
sale
of
the
hotel
and
certain
related
non-gaming
assets
to
Casino
Holding
Investment
Partners,
LLC
for
net
cash
proceeds
of
$11.4
million.
As
a
result,
we
recorded
a
net
gain
of
$2.0
million
in
discontinued
operations
in
fiscal
2016.
The
net
gain
consisted
of
a
gain
on
the
sale
of
the
hotel
and
related
nongaming
assets
of
$6.4
million,
offset
by
a
non-cash
pretax
charge
of
$4.4
million
related
to
the
write-off
of
the
Natchez
gaming
vessel
and
certain
other
assets.
As
such,
the
operations
of
our
Natchez
property
have
been
classified
as
discontinued
for
all
periods
presented.
Sale of Davenport Casino— On
December
4,
2013,
we
entered
into
a
definitive
asset
purchase
agreement
to
sell
substantially
all
of
the
assets
and
for
the
assumption
of
certain
liabilities
related
to
our
casino
located
in
Davenport,
Iowa.
We
completed
the
sale
on
February
3,
2014
for
net
cash
proceeds
of
$48.7
million.
As
such,
the
operations
of
our
Davenport
property
have
been
classified
as
discontinued
for
all
periods
presented.
Results
of
Operations
Our
results
of
continuing
operations
for
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014
reflect
the
consolidated
operations
of
all
of
our
subsidiaries.
Our
Natchez
and
Davenport
entities
are
presented
as
discontinued
operations.
33
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
(in
thousands)
April
24,
2016
$
Net
Revenues
Fiscal
Year
Ended
April
26,
2015
129,565
176,334
71,764
25,557
88,741
186,062
121,299
51,012
31,206
82,218
78,287
61,153
34,277
73,001
246,718
36,319
$
127,722
175,588
72,981
25,793
87,762
186,536
128,413
53,042
29,876
82,918
76,934
59,628
31,369
73,070
241,001
34,755
April
27,
2014
$
121,313
164,777
73,695
25,014
85,361
184,070
129,899
50,488
29,947
80,435
74,531
54,833
29,879
70,385
229,628
23,575
Operating
Income
(Loss)
Fiscal
Year
Ended
April
24,
April
26,
April
27,
2016
2015
2014
Colorado
Black
Hawk
Florida
Pompano
Iowa
Bettendorf
Marquette
Waterloo
Iowa
Total
Louisiana
Lakes
Charles
Mississippi
Lula
Vicksburg
Mississippi
Total
Missouri
Boonville
Cape
Girardeau
Caruthersville
Kansas
City
Missouri
Total
Pennsylvania
Nemacolin(1)
$
27,825
30,353
7,337
4,116
22,977
34,430
5,965
6,732
4,470
11,202
24,591
3,323
6,922
14,151
48,987
(4,880)
$
20,614
31,122
13,271
4,060
23,901
41,232
8,650
6,630
2,719
9,349
23,778
215
4,346
13,664
42,003
(7,079)
$
Valuation
charges(2)
Corporate
and
other
From
continuing
operations
—
—
—
—
(9,000) (151,591)
77
112
712
(30,735) (30,971) (20,124)
$ 978,592
$ 977,045
$ 934,409
$ 123,147
$ 105,920
$ (54,701)
20,067
25,116
12,127
3,472
21,074
36,673
8,888
2,714
1,718
4,432
22,583
(2,359)
2,232
13,022
35,478
(13,640)
Note:
This
table
excludes
our
Natchez
and
Davenport
operations
which
have
been
classified
as
discontinued
operations.
(1)
Reflects
results
since
opening
on
July
1,
2013.
(2)
We
recorded
long-lived
asset
impairment
charges
of
$9.0
million
during
fiscal
2015
and
goodwill
impairment
charges
of
$125.2
million
and
long-lived
asset
impairment
charges
of
$26.4
million
during
fiscal
2014.
34
Table
of
Contents
Fiscal
2016
Compared
to
Fiscal
2015
Revenues
and
operating
expenses
for
the
fiscal
years
2016
and
2015
are
as
follows:
(in
thousands)
Revenues:
Casino
Rooms
Food,
beverage,
pari-mutuel
and
other
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms
Food,
beverage,
pari-mutuel
and
other
Marine
and
facilities
Marketing
and
administrative
Corporate
and
development
Valuation
charges
Preopening
Depreciation
and
amortization
Total
operating
expenses
Fiscal
Year
Ended
April
24,
April
26,
2016
2015
Variance
$ 1,028,047
$ 1,032,241
$ (4,194)
29,457
30,427
(970)
132,436
137,215
(4,779)
1,189,940
1,199,883
(9,943)
(211,348) (222,838) 11,490
978,592
977,045
1,547
152,713
156,547
(3,834)
261,916
263,362
(1,446)
6,820
6,576
244
48,481
48,903
(422)
54,111
55,994
(1,883)
220,079
223,857
(3,778)
29,066
29,088
(22)
—
9,000
(9,000)
153
—
153
82,105
77,798
4,307
$ 855,444
$ 871,125
(15,681)
Percentage
Variance –0.4%
–3.2%
–3.5%
–0.8%
–5.2%
0.2%
–2.4%
–0.5%
3.7%
–0.9%
–3.4%
–1.7%
–0.1%
N/M
N/M
5.5%
–1.8%
Casino —Casino
revenues
decreased
$4.2
million,
or
0.4%,
in
fiscal
2016
compared
to
fiscal
2015.
Our
casino
revenues
were
impacted
by
a
strategic
reduction
in
promotional
allowances
which
commenced
in
mid-fiscal
2016.
In
addition,
casino
revenue
decreased
$7.0
million,
or
5.1%,
at
our
Lake
Charles
property
which
was
impacted
by
a
full
year
of
new
competition
in
the
market.
The
majority
of
our
casino
revenues
are
derived
from
slot
machines
(representing
approximately
90.0%
of
our
casino
revenues
in
each
fiscal
2016
and
2015)
and,
to
a
lesser
extent,
table
games,
which
is
highly
dependent
upon
the
volume
and
spending
limits
of
customers
at
our
properties.
Key
performance
indicators
related
to
casino
revenue
are
slot
handle
and
table
game
drop
(volume
indicators)
and
"win"
or
"hold"
percentage.
Slot
handle
is
the
gross
amount
wagered
for
the
period
cited.
The
win
or
hold
percentage
is
the
net
amount
of
gaming
wins
and
losses,
with
liabilities
recognized
for
accruals
related
to
the
anticipated
payout
of
progressive
jackpots.
Our
slot
hold
percentages
have
been
relatively
consistent
over
the
past
several
years.
The
introduction
of
newer
slot
machines
and
changes
in
the
denominational
mix
of
our
slot
product
may
result
in
an
increase
in
our
slot
hold
percentage
over
time.
We
may
also
adjust
our
slot
hold
percentages
to
remain
competitive
within
our
markets.
Table
game
win
is
the
amount
of
drop
that
is
retained
and
recorded
as
casino
gaming
revenue,
with
liabilities
recognized
for
funds
deposited
by
customers
before
gaming
play
occurs,
for
unredeemed
gaming
chips,
and
for
accruals
related
to
the
anticipated
payout
of
progressive
jackpots.
As
we
are
focused
on
regional
gaming
markets,
our
table
hold
percentages
are
fairly
stable
as
the
majority
of
these
markets
do
not
regularly
experience
high-end
play
which
can
lead
to
volatility
in
win
percentages.
Therefore,
changes
in
table
game
win
percentages
do
not
typically
have
a
material
impact
to
our
earnings.
35
Table
of
Contents
Our
typical
property
slot
hold
percentage
is
in
the
range
of
6%
to
10%
of
slot
handle,
and
our
typical
table
game
win
percentage
is
in
the
range
of
15%
to
25%
of
table
game
drop.
Casino
operating
expenses
decreased
$3.8
million,
or
2.4%,
for
fiscal
2016
compared
to
fiscal
2015.
Our
decreased
casino
operating
expenses
are
reflective
of
our
overall
decrease
in
casino
revenues
and
our
continued
efforts
to
manage
our
overall
costs.
Gaming Taxes —State
and
local
gaming
taxes
decreased
$1.4
million,
or
0.5%,
for
fiscal
2016
compared
to
fiscal
2015
commensurate
with
a
0.4%
decrease
in
casino
revenues
with
consideration
to
various
state
gaming
tax
rates
across
our
casino
properties.
Rooms —Rooms
revenue
decreased
$1.0
million,
or
3.2%,
in
fiscal
2016
compared
to
fiscal
2015,
primarily
a
result
of
construction
disruption
at
our
Bettendorf
and
Boonville
properties
during
hotel
renovations
completed
in
fiscal
2016.
Rooms
expense
increased
$0.2
million,
or
3.7%,
in
fiscal
2016
compared
to
fiscal
2015,
primarily
at
our
Black
Hawk
property
due
to
the
competitive
labor
market.
Food, Beverage, Pari-Mutuel and Other —Food,
beverage,
pari-mutuel
and
other
revenues
decreased
$4.8
million,
or
3.5%,
in
fiscal
2016
compared
to
fiscal
2015,
primarily
the
result
of
a
strategic
reduction
in
food
complimentaries
in
fiscal
2016.
Pari-mutuel
revenue
at
our
Pompano
property
increased
$0.8
million
in
fiscal
2016
compared
to
fiscal
2015.
Food,
Beverage,
Pari-Mutuel
and
Other
operating
expenses
decreased
$0.4
million,
or
0.9%,
in
fiscal
2016
compared
to
fiscal
2015,
which
is
reflective
of
our
overall
decrease
in
food,
beverage,
pari-mutuel
and
other
revenues.
Promotional Allowances —Promotional
allowances
decreased
$11.5
million,
or
5.2%,
in
fiscal
2016
compared
to
fiscal
2015,
reflecting
a
strategic
reduction
in
our
promotional
allowances
in
fiscal
2016.
Marine and Facilities —Marine
and
facilities
expenses
decreased
$1.9
million,
or
3.4%,
for
fiscal
2016
compared
to
fiscal
2015,
primarily
on
a
reduction
in
utilities
and
repairs
and
maintenance
expenses
driven
by
increased
capital
spending.
Marketing and Administrative —Marketing
and
administrative
expenses
decreased
$3.8
million,
or
1.7%,
for
fiscal
2016
compared
to
fiscal
2015.
Excluding
fiscal
2015
costs
incurred
to
defeat
the
Colorado
referendum
of
$4.1
million
and
a
credit
related
to
the
property
tax
settlement
in
Waterloo
of
$1.2
million,
marketing
and
administrative
expenses
decreased
$0.9
million,
or
0.4%,
reflecting
changes
in
our
marketing
programs
as
well
as
savings
from
cost
reduction
initiatives.
Corporate and Development —During
fiscal
2016,
our
corporate
and
development
expenses
were
$29.1
million
compared
to
$29.1
million
for
fiscal
2015.
Fiscal
2016
includes
$0.9
million
of
expense
related
to
the
former
CEO's
exit
agreement.
Fiscal
2015
includes
$2.3
million
in
severance
expenses
related
to
the
corporate
office
restructuring.
Stock
compensation
expense
was
$4.6
million
in
fiscal
2016
and
included
a
$0.7
million
favorable
forfeiture
adjustment.
Stock
compensation
expense
was
$3.1
million
in
fiscal
2015.
Excluding
the
aforementioned
items
and
stock
compensation
expense,
corporate
expenses
decreased
$0.1
million.
Preopening expense —The
preopening
expense
of
$0.2
million
in
fiscal
2016
represents
costs
incurred
in
Bettendorf
in
preparation
for
our
land-based
casino
operations
expected
to
open
on
June
24,
2016.
Depreciation and Amortization —Depreciation
and
amortization
expense
for
fiscal
2016
compared
to
fiscal
2015
increased
$4.3
million,
primarily
due
to
accelerated
depreciation
of
approximately
$4.0
million
on
certain
assets
at
our
Bettendorf
property
of
which
will
be
disposed
pending
the
opening
of
our
new
landbased
casino.
36
Table
of
Contents
Other Income (Expense), Income Taxes and Discontinued Operations
Interest
expense,
interest
income,
loss
on
early
extinguishment
of
debt,
income
tax
provision
and
loss
from
discontinued
operations,
net
of
income
taxes
for
the
fiscal
years
2016
and
2015
are
as
follows:
(in
thousands)
Interest
expense
Interest
income
Loss
on
early
extinguishment
of
debt
Income
tax
provision
Loss
from
discontinued
operations,
net
of
income
taxes
Fiscal
Year
Ended
April
24,
April
26,
2016
2015
Variance
Percentage
Variance $ (68,025) $ (84,131) $ 16,106
311
369
(58) (2,966) (13,757) 10,791
(4,178) (1,111) (3,067) (2,085) (2,113) 28
–19.1%
–15.7%
–78.4%
276.1%
–1.3%
Interest Expense —Interest
expense
decreased
$16.1
million,
or
19.1%,
in
fiscal
2016
compared
to
fiscal
2015.
The
decrease
is
primarily
a
result
of
a
decrease
in
our
overall
debt
balance
and
the
benefit
of
refinancing
our
7.75%
Senior
Notes.
We
capitalized
interest
expense
of
$0.6
million
in
fiscal
2016,
primarily
related
to
our
land-based
casino
construction
in
Bettendorf,
Iowa.
Fiscal
2015
Compared
to
Fiscal
2014
Revenues
and
operating
expenses
for
the
fiscal
years
2015
and
2014
are
as
follows:
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
(in
thousands)
Variance
Revenues:
Casino
Rooms
Food,
beverage,
pari-mutuel
and
other
Gross
revenues
Less
promotional
allowances
Net
revenues
$ 1,032,241
$ 981,099
$
30,427
31,252
137,215
132,411
1,199,883
1,144,762
(222,838) (210,353) 977,045
934,409
Operating
expenses:
Casino
Gaming
taxes
Rooms
Food,
beverage,
pari-mutuel
and
other
Marine
and
facilities
Marketing
and
administrative
Corporate
and
development
Valuation
charges
Litigation
accrual
reversals
Preopening
Depreciation
and
amortization
Total
operating
expenses
$
156,547
263,362
6,576
48,903
55,994
223,857
29,088
9,000
—
—
77,798
871,125
$
152,914
249,638
6,853
46,184
55,318
224,011
28,455
151,591
(9,330)
3,898
79,579
989,111
Percentage
Variance 51,142
(825)
4,804
55,121
(12,485)
42,636
5.2%
–2.6%
3.6%
4.8%
5.9%
4.6%
3,633
13,724
(277)
2,719
676
(154)
633
(142,591)
9,330
(3,898)
(1,781)
(117,986)
2.4%
5.5%
–4.0%
5.9%
1.2%
–0.1%
2.2%
N/M
N/M
N/M
–2.2%
–11.9%
Casino —Casino
revenues
increased
$51.1
million,
or
5.2%,
in
fiscal
2015
compared
to
fiscal
2014.
Excluding
a
year-over-year
revenue
increase
of
$14.8
million
at
our
Nemacolin
property
which
opened
in
July
of
fiscal
2014,
casino
revenues
increased
across
most
of
our
operating
properties
by
37
Table
of
Contents
$36.3
million
or
3.7%.
Casino
revenues
decreased
at
our
Bettendorf
property
by
$1.7
million
primarily
due
to
market
conditions.
The
majority
of
our
casino
revenues
are
derived
from
slot
machines
(representing
approximately
90.0%
of
our
casino
revenues
in
each
fiscal
2015
and
2014)
and,
to
a
lesser
extent,
table
games,
which
is
highly
dependent
upon
the
volume
and
spending
limits
of
customers
at
our
properties.
Key
performance
indicators
related
to
casino
revenue
are
slot
handle
and
table
game
drop
(volume
indicators)
and
"win"
or
"hold"
percentage.
Slot
handle
is
the
gross
amount
wagered
for
the
period
cited.
The
win
or
hold
percentage
is
the
net
amount
of
gaming
wins
and
losses,
with
liabilities
recognized
for
accruals
related
to
the
anticipated
payout
of
progressive
jackpots.
Our
slot
hold
percentages
have
been
relatively
consistent
over
the
past
several
years.
The
introduction
of
newer
slot
machines
and
changes
in
the
denominational
mix
of
our
slot
product
may
result
in
an
increase
in
our
slot
hold
percentage
over
time.
We
may
also
adjust
our
slot
hold
percentages
to
remain
competitive
within
our
markets.
Table
game
win
is
the
amount
of
drop
that
is
retained
and
recorded
as
casino
gaming
revenue,
with
liabilities
recognized
for
funds
deposited
by
customers
before
gaming
play
occurs,
for
unredeemed
gaming
chips,
and
for
accruals
related
to
the
anticipated
payout
of
progressive
jackpots.
As
we
are
focused
on
regional
gaming
markets,
our
table
hold
percentages
are
fairly
stable
as
the
majority
of
these
markets
do
not
regularly
experience
high-end
play
which
can
lead
to
volatility
in
win
percentages.
Therefore,
changes
in
table
game
win
percentages
do
not
typically
have
a
material
impact
to
our
earnings.
Our
typical
property
slot
hold
percentage
is
in
the
range
of
6%
to
10%
of
slot
handle,
and
our
typical
table
game
win
percentage
is
in
the
range
of
15%
to
25%
of
table
game
drop.
Casino
operating
expenses
increased
$3.6
million,
or
2.4%
for
fiscal
2015
compared
to
fiscal
2014.
Our
increased
casino
operating
expenses
are
reflective
of
our
overall
increase
in
casino
revenues.
Gaming Taxes —State
and
local
gaming
taxes
increased
$13.7
million,
or
5.5%,
for
fiscal
2015
compared
to
fiscal
2014
commensurate
with
a
5.2%
increase
in
casino
revenues
with
consideration
to
various
state
gaming
tax
rates
across
our
casino
properties.
Rooms —Rooms
revenue
decreased
$0.8
million,
or
2.6%,
in
fiscal
2015
compared
to
fiscal
2014,
primarily
a
result
of
construction
disruption
at
our
Bettendorf
property
during
hotel
renovations
begun
in
fiscal
2015.
Rooms
expense
decreased
$0.3
million,
or
4.0%,
in
fiscal
2015
compared
to
fiscal
2014,
commensurate
with
the
decrease
in
hotel
revenues.
Food, Beverage, Pari-Mutuel and Other —Food,
beverage,
pari-mutuel
and
other
revenues
increased
$4.8
million,
or
3.6%,
in
fiscal
2015
compared
to
fiscal
2014.
Excluding
increased
year-over-year
food,
beverage
and
other
revenues
of
$1.0
million
at
our
Nemacolin
property,
our
food,
beverage,
pari-mutuel
and
other
revenues
increased
$3.8
million,
or
2.9%.
Food,
Beverage,
Pari-Mutuel
and
Other
operating
expenses
increased
$2.7
million,
or
5.9%,
in
fiscal
2015
compared
to
fiscal
2014.
Excluding
increased
yearover-year,
food,
beverage
and
other
expenses
of
$0.2
million
at
our
Nemacolin
property,
our
food,
beverage,
pari-mutuel
and
other
expenses
increased
$2.5
million,
or
5.5%.
Promotional Allowances —Promotional
allowances
increased
$12.5
million,
or
5.9%,
in
fiscal
2015
compared
to
fiscal
2014.
Excluding
increased
year-overyear
promotional
allowances
of
$4.6
million
at
our
Nemacolin
property,
promotional
allowances
increased
$7.9
million,
or
3.8%.
38
Table
of
Contents
Marine and Facilities —Marine
and
facilities
expenses
increased
$0.7
million,
or
1.2%,
for
fiscal
2015
compared
to
fiscal
2014.
Excluding
increased
yearover-year
marine
and
facilities
expenses
of
$0.1
million
at
our
Nemacolin
property,
marine
and
facilities
expenses
increased
$0.6
million.
Marketing and Administrative —Marketing
and
administrative
expenses
decreased
$0.2
million,
or
0.1%,
for
fiscal
2015
compared
to
fiscal
2014.
Excluding
increased
year-over-year
marketing
and
administrative
expenses
of
$1.8
million
at
our
Nemacolin
property,
the
$4.1
million
of
costs
incurred
to
defeat
the
Colorado
referendum
and
the
$1.2
million
credit
related
to
the
property
tax
settlement
in
Waterloo,
marketing
and
administrative
expenses
decreased
$4.9
million,
or
2.2%,
reflecting
changes
in
our
marketing
programs
as
well
as
savings
from
cost
reduction
initiatives.
Corporate and Development —During
fiscal
2015,
our
corporate
and
development
expenses
were
$29.1
million
compared
to
$28.5
million
for
fiscal
2014.
Fiscal
2015
includes
$2.3
million
in
severance
expenses.
Fiscal
2014
includes
a
gain
of
$1.0
million
from
the
sale
of
our
corporate
aircraft.
Depreciation and Amortization —Depreciation
and
amortization
expense
for
fiscal
2015
compared
to
fiscal
2014
decreased
$1.8
million,
primarily
related
certain
assets
becoming
fully
depreciated.
Other Income (Expense), Income Taxes and Discontinued Operations
Interest
expense,
interest
income,
loss
on
early
extinguishment
of
debt,
derivative
income,
income
tax
benefit
(provision)
and
loss
from
discontinued
operations,
net
of
income
taxes
for
the
fiscal
years
2015
and
2014
are
as
follows:
(in
thousands)
Interest
expense
Interest
income
Loss
on
early
extinguishment
of
debt
Derivative
income
Income
tax
(provision)
benefit
Loss
from
discontinued
operations,
net
of
income
taxes
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
Variance
Percentage
Variance $ (84,131) $ (81,342) $ (2,789) 369
349
20
(13,757) —
(13,757) —
398
(398) (1,111) 18,494
(19,605) (2,113) (10,883) 8,770
3.4%
5.7%
NM
–100.0%
NM
N/M
Interest Expense —Interest
expense
increased
$2.8
million,
or
3.4%,
in
fiscal
2015
compared
to
fiscal
2014.
Without
the
reversal
of
$7.6
million
of
interest
expense
related
to
litigation
included
in
fiscal
2014,
interest
expense
would
have
decreased
by
$4.8
million
primarily
due
to
lower
average
outstanding
borrowings
under
our
credit
facility.
Loss on early extinguishment of debt —In
April
2015,
we
purchased
$237.8
million
of
our
7.75%
Senior
Notes
pursuant
to
a
tender
offer
and
recorded
a
$13.8
million
loss
on
early
extinguishment
of
debt
primarily
reflecting
the
tender
fees
and
the
non-cash
write-off
of
related
deferred
financings
costs.
Liquidity
and
Capital
Resources
Cash Flows from Operating Activities —During
fiscal
2016,
we
generated
$135.9
million
in
cash
flows
from
operating
activities
compared
to
generating
$125.6
million
during
fiscal
2015.
The
year-over-year
increase
in
cash
flows
from
operating
activities
is
the
result
of
improved
business
volumes
and
working
capital
changes.
Cash Flows used in Investing Activities —During
fiscal
2016
we
used
$59.2
million
for
investing
activities
including
capital
expenditures
of
$70.3
million,
of
which
$19.4
million
related
to
construction
of
our
land-based
casino
in
Bettendorf,
offset
by
proceeds
received
from
sales
of
assets
held
for
sale
of
39
Table
of
Contents
$11.4
million.
In
fiscal
2015,
we
used
$41.3
million
for
investing
activities
primarily
to
fund
purchases
of
property
and
equipment.
Cash Flows used in Financing Activities —During
fiscal
2016,
our
financing
activities
utilized
$81.0
million
primarily
to
redeem
the
remaining
7.75%
Senior
Notes
and
pay
related
costs.
Significant
transactions
during
fiscal
2016
are
summarized
as
follows:
•
On
May
14,
2015,
we
redeemed
the
remaining
$62.2
million
of
our
7.75%
Senior
Notes
at
a
price
of
103.875%,
including
accrued
and
unpaid
interest.
•
Net
borrowings
under
our
Senior
Secured
Credit
Facility
("Credit
Facility")
decreased
by
$7.5
million.
•
On
May
4,
2015,
we
paid
$9.4
million
related
to
our
obligation
for
certain
bonds
issued
by
the
City
of
Bettendorf,
Iowa.
•
We
received
$0.9
million
in
proceeds
from
the
exercise
of
stock
options.
During
fiscal
2015,
our
financing
activities
utilized
$87.7
million
primarily
to
reduce
our
long-term
debt
balance
by
$73.4
million.
We
also
incurred
$13.0
million
in
costs
to
redeem
and
issue
new
long-term
debt.
Significant
debt
transactions
during
fiscal
2015
are
summarized
as
follows:
•
On
April
14,
2015,
we
issued
$150
million
of
additional
5.875%
Senior
Notes
due
2021,
at
a
price
of
102.0%,
of
which
the
proceeds
and
borrowings
under
our
Credit
Facility
were
utilized
to
purchase
$237.8
million
of
our
7.75%
Senior
Notes
pursuant
to
a
tender
offer.
•
Net
borrowings
under
our
Credit
Facility
increased
by
$10.3
million.
Our
Credit
Facility
consists
of
a
$300
million
revolving
line
of
credit
and
expires
on
April
19,
2018.
Our
5.875%
Senior
Notes
are
redeemable,
in
whole
or
in
part,
at
our
option
as
of
March
15,
2016.
Our
8.875%
Senior
Subordinated
Notes
are
redeemable,
in
whole
or
in
part,
at
our
option
as
of
June
15,
2016.
We
are
highly
leveraged
and
may
be
unable
to
obtain
additional
debt
or
equity
financing
on
acceptable
terms
if
our
current
sources
of
liquidity
are
not
sufficient
or
if
we
fail
to
stay
in
compliance
with
the
covenants
of
our
Credit
Facility.
Availability of Cash and Additional Capital —At
April
24,
2016,
we
had
cash
and
cash
equivalents
of
$62.1
million
and
marketable
securities
of
$19.3
million.
As
of
April
24,
2016,
we
had
$67.5
million
in
outstanding
revolving
credit
borrowings
under
our
senior
secured
credit
facility
and
our
net
line
of
credit
availability
was
approximately
$224
million,
after
consideration
of
$8.0
million
in
outstanding
letters
of
credit.
Capital Expenditures and Development Activities —We
will
be
opening
our
new
land-based
casino
at
our
property
in
Bettendorf
on
June
24,
2016,
which
commenced
construction
in
May
2015.
We
spent
$19.4
million
in
fiscal
2016
and
estimate
the
total
construction
cost
to
be
approximately
$60
million.
To
date,
we
have
spent
$21.6
million
on
this
project.
During
December
2015,
we
completed
renovation
of
the
hotel
at
our
Boonville,
Missouri
property.
We
spent
$5.0
million
in
fiscal
2016
to
refurbish
140
hotel
rooms,
meeting
and
convention
space
and
public
areas.
In
July
2015,
we
completed
a
$7.6
million
renovation
of
the
south
tower
hotel
in
Bettendorf,
of
which
$4.6
million
was
spent
in
fiscal
2016.
We
plan
to
continue
to
fund
capital
projects
with
cash
generated
by
our
operations
and
borrowings
under
our
Credit
Facility.
Historically,
as
part
of
our
business
development
activities,
we
have
entered
into
agreements
which
have
resulted
in
the
acquisition
or
development
of
businesses
or
assets.
These
business
development
efforts
and
related
agreements
typically
require
the
expenditure
of
cash,
which
may
be
significant.
The
amount
and
timing
of
our
cash
expenditures
relating
to
development
activities
may
vary
based
upon
our
evaluation
of
current
and
future
development
opportunities,
our
financial
condition
and
the
40
Table
of
Contents
condition
of
the
financing
markets.
Our
development
activities
are
subject
to
a
variety
of
factors
including
but
not
limited
to:
obtaining
permits,
licenses
and
approvals
from
appropriate
regulatory
and
other
agencies,
legislative
changes
and,
in
certain
circumstances,
negotiating
acceptable
leases.
Historically,
we
have
made
significant
investments
in
property
and
equipment
and
expect
that
our
operations
will
continue
to
demand
ongoing
investments
to
keep
our
properties
competitive.
The
timing,
completion
and
amount
of
additional
capital
projects
will
be
subject
to
improvement
of
economic
and
local
market
conditions,
cash
flows
from
our
continuing
operations
and
borrowing
availability
under
our
Credit
Facility.
Typically,
we
have
funded
our
daily
operations
through
net
cash
provided
by
operating
activities
and
our
significant
capital
expenditures
through
operating
cash
flow
and
debt
financing.
While
we
believe
that
cash
on
hand,
cash
flow
from
operations,
and
available
borrowings
under
our
Credit
Facility
will
be
sufficient
to
support
our
working
capital
needs,
planned
capital
expenditures
and
debt
service
requirements
for
the
foreseeable
future,
there
is
no
assurance
that
these
sources
will
in
fact
provide
adequate
funding
for
our
planned
and
necessary
expenditures
or
that
the
level
of
our
capital
investments
will
be
sufficient
to
allow
us
to
remain
competitive
in
our
existing
markets.
We
will
continue
to
evaluate
our
planned
capital
expenditures
at
each
of
our
existing
locations
in
light
of
the
operating
performance
of
the
facilities
at
such
locations.
Critical
Accounting
Estimates
Our
consolidated
financial
statements
are
prepared
in
accordance
with
U.S.
generally
accepted
accounting
principles
that
require
our
management
to
make
estimates
and
assumptions
that
affect
reported
amounts
and
related
disclosures.
Management
identifies
critical
accounting
estimates
as:
•
those
that
require
the
use
of
assumptions
about
matters
that
are
inherently
and
highly
uncertain
at
the
time
the
estimates
are
made;
•
those
estimates
where,
had
we
chosen
different
estimates
or
assumptions,
the
resulting
differences
would
have
had
a
material
impact
on
our
financial
condition,
changes
in
financial
condition
or
results
of
operations;
and
•
those
estimates
that,
if
they
were
to
change
from
period
to
period,
likely
would
result
in
a
material
impact
on
our
financial
condition,
changes
in
financial
condition
or
results
of
operations.
Based
upon
management's
discussion
of
the
development
and
selection
of
these
critical
accounting
estimates
with
the
Audit
Committee
of
our
Board
of
Directors,
we
believe
the
following
accounting
estimates
involve
a
higher
degree
of
judgment
and
complexity.
Goodwill and Other Intangible Assets —At
April
24,
2016,
we
had
goodwill
and
other
intangible
assets
of
$162.2
million,
representing
13.4%
of
total
assets.
In
accordance
with
ASC
Topic
350,
Intangibles—Goodwill
and
Other,
we
perform
an
annual
impairment
test
for
goodwill
and
indefinite-lived
intangible
assets
as
of
the
first
day
of
the
fourth
fiscal
quarter
of
each
year,
or
on
an
interim
basis
if
indicators
of
impairment
exist.
We
first
assess
the
qualitative
factors
to
determine
whether
the
existence
of
events
or
circumstances
leads
to
a
determination
that
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount.
The
qualitative
factors
include
macroeconomic
conditions,
industry
and
market
conditions,
cost
factors,
overall
financial
performance,
among
others.
If,
after
assessing
the
totality
of
events
or
circumstances,
we
determine
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
greater
than
its
carrying
amount,
then
performing
the
two-step
impairment
test
is
not
required.
However,
if
we
conclude
otherwise,
we
are
then
required
to
perform
the
first
step
of
the
twostep
quantitative
impairment
test.
Impairment
is
determined
by
comparing
the
estimated
fair
value
of
a
reporting
unit
with
its
respective
carrying
value.
41
Table
of
Contents
We
must
make
various
assumptions
and
estimates
in
performing
our
impairment
testing.
The
fair
value
determination
includes
estimates
of
future
cash
flows
that
are
based
on
reasonable
and
supportable
assumptions
which
represent
our
best
estimates
of
the
cash
flows
expected
to
result
from
the
use
of
the
assets
including
their
eventual
disposition
and
by
a
market
approach
based
upon
valuation
multiples
for
similar
companies.
Changes
in
estimates,
increases
in
our
cost
of
capital,
reductions
in
transaction
multiples,
operating
and
capital
expenditure
assumptions
or
application
of
alternative
assumptions
and
definitions,
could
produce
significantly
different
results.
Future
cash
flow
estimates
are,
by
their
nature,
subjective
and
actual
results
may
differ
materially
from
our
estimates.
If
our
ongoing
estimates
of
future
cash
flows
are
not
met,
we
may
have
to
record
additional
impairment
charges
in
future
accounting
periods.
Our
estimates
of
cash
flows
are
based
on
the
current
regulatory,
social
and
economic
climates,
recent
operating
information
and
budgets,
assumptions
regarding
the
impact
of
new
competitors,
and
current
operating
plans
of
the
various
properties
where
we
conduct
operations.
These
estimates
could
be
negatively
impacted
by
changes
in
federal,
state
or
local
regulations,
economic
downturns,
internal
operating
decisions,
or
other
events
affecting
various
forms
of
travel
and
access
to
our
properties.
Based
upon
our
fiscal
2016
and
fiscal
2015
annual
impairment
testing,
we
recorded
no
goodwill
impairment
charges
as
a
result
of
improved
operating
cash
flows
and
lower
discount
rates.
We
noted
that
our
reporting
units
with
goodwill
and/or
other
long-lived
intangibles
had
fair
values
which
exceeded
their
carrying
values
by
at
least
10%,
except
for
our
Vicksburg
property,
which
the
fair
value
of
the
goodwill
exceeded
carrying
value
by
approximately
9%.
In
conjunction
with
our
fiscal
2014
annual
impairment
testing,
we
recorded
goodwill
impairment
charges
of
$125.2
million.
These
charges
consisted
of
$60.0
million
at
our
Bettendorf
property,
$24.2
million
at
our
Lake
Charles
property,
$36.0
million
at
our
Lula
property
and
$5.0
million
at
our
Vicksburg
property.
Our
fiscal
2014
impairment
charges
were
a
result
of
deteriorating
operating
performance
and
the
impact
of
new
and
forthcoming
competition.
Three
of
our
reporting
units
with
fiscal
2014
impairment
charges
still
have
goodwill
totaling
$39.5
million.
These
reporting
units
could
be
subject
to
future
impairment
charges
to
the
extent
their
future
casino
revenues
deteriorate,
discount
rates
or
transaction
multiples
change
significantly
or
we
do
not
achieve
our
cash
flow
projections.
Property and Equipment —At
April
24,
2016,
we
had
property
and
equipment,
net
of
accumulated
depreciation
of
$899.2
million,
representing
74.5%
of
our
total
assets.
We
capitalize
the
cost
of
property
and
equipment.
Maintenance
and
repairs
that
neither
materially
add
to
the
value
of
the
property
or
equipment
nor
appreciably
prolong
its
life
are
charged
to
expense
as
incurred.
We
depreciate
property
and
equipment
on
a
straight-line
basis
over
their
estimated
useful
lives.
The
estimated
useful
lives
are
based
on
the
nature
of
the
assets
as
well
as
our
current
operating
strategy.
Future
events
such
as
property
expansions,
new
competition,
changes
in
technology
and
new
regulations
could
result
in
a
change
in
the
manner
in
which
we
are
using
certain
assets
requiring
a
change
in
the
estimated
useful
lives
of
such
assets.
Impairment of Long-lived Assets —We
evaluate
long-lived
assets
for
impairment
in
accordance
with
the
guidance
in
the
Impairment
or
Disposal
of
Long
Lived
Assets
subsection
of
ASC
Topic
360,
Property,
Plant
and
Equipment
("ASC
Topic
360").
For
a
long-lived
asset
to
be
held
and
used,
we
review
the
asset
for
impairment
whenever
events
or
changes
in
circumstances
indicate
the
carrying
amount
may
not
be
recoverable.
In
assessing
the
recoverability
of
the
carrying
value
of
such
property,
equipment
and
other
long-lived
assets,
we
make
assumptions
regarding
future
cash
flows
and
residual
values.
If
these
estimates
or
the
related
assumptions
are
not
achieved
or
change
in
the
future,
we
may
be
required
to
record
an
impairment
loss
for
these
assets.
In
evaluating
impairment
of
long-lived
assets
for
newly
opened
operations,
estimates
of
future
cash
flows
and
residual
values
may
require
some
period
of
actual
results
to
provide
the
basis
for
an
opinion
of
future
cash
flows
and
residual
values
used
in
the
determination
of
an
impairment
loss
for
these
assets.
For
assets
held
for
disposal,
we
recognize
the
asset
at
the
lower
of
carrying
value
or
fair
market
value,
less
cost
of
disposal
based
upon
42
Table
of
Contents
appraisals,
discounted
cash
flows
or
other
methods
as
appropriate.
An
impairment
loss
would
be
recognized
as
a
non-cash
component
of
operating
income.
As
a
result
of
operating
performance
and
projected
future
operating
results,
it
was
determined
that
the
value
of
our
long-lived
assets
at
our
Nemacolin
property
were
impaired.
During
fiscal
2015,
we
recorded
an
impairment
charge
related
to
our
Nemacolin
property's
long-lived
assets
of
$9.0
million
to
reduce
the
carrying
value
of
our
fixed
assets
to
their
estimated
fair
value.
During
fiscal
2014,
we
recorded
an
impairment
charge
related
to
our
Nemacolin
property
of
$26.4
million,
consisting
of
$12.2
million
recorded
to
write-off
our
gaming
licenses
and
$14.2
million
to
reduce
the
carrying
value
of
our
fixed
assets
to
their
estimated
fair
value.
A
change
in
the
way
we
operate
our
Nemacolin
property
could
result
in
future
impairment
charges.
Fan Club Liability —At
April
24,
2016
and
April
26,
2015,
our
accrual
was
$4.2
million
and
$4.8
million,
respectively,
for
the
estimated
cost
of
providing
benefits
under
our
Fan
Club.
This
liability
is
included
in
progressive
jackpots
and
slot
club
awards
in
our
consolidated
balance
sheets.
We
accrue
a
liability
for
the
estimated
cost
of
providing
Fan
Club
benefits
as
our
customer
earns
Fan
Club
points.
Estimates
and
assumptions
are
made
regarding
the
cost
of
redeeming
Fan
Club
points
for
benefits,
breakage
rates
and
the
mix
of
goods
or
services
our
customers
may
choose.
A
guest's
point
balance
under
Fan
Club
will
be
forfeited
if
the
customer
does
not
earn
any
points
during
a
period
defined
by
each
of
our
properties,
typically
up
to
thirteen
months.
We
use
historical
redemption
data
to
assist
in
the
determination
of
our
estimated
accrual
for
this
liability.
Changes
in
our
estimates
or
changes
in
customer
visitation
and
redemption
patterns
could
impact
the
overall
accrual
and
our
financial
results.
Self-Insurance Liabilities —We
are
self-funded
up
to
a
maximum
amount
per
claim
for
our
employee-related
health
care
benefits
program,
workers'
compensation
and
general
liabilities.
Claims
in
excess
of
this
maximum
are
fully
insured
through
a
stop-loss
insurance
policy.
We
accrue
a
discounted
estimate
for
workers'
compensation
and
general
liabilities
based
on
claims
filed
and
estimates
of
claims
incurred
but
not
reported.
We
rely
on
independent
consultants
to
assist
in
the
determination
of
estimated
accruals.
While
the
ultimate
cost
of
claims
incurred
depends
on
future
developments,
such
as
increases
in
health
care
costs,
in
our
opinion,
recorded
reserves
are
adequate
to
cover
future
claims
payments.
Based
upon
our
current
accrued
insurance
liabilities,
a
1%
change
in
our
discount
factor
would
cause
a
$0.6
million
change
in
our
accrued
self-insurance
liability.
Income Tax Assets and Liabilities —We
account
for
income
taxes
in
accordance
with
the
guidance
in
ASC
Topic
740,
Income
Taxes
("ASC
Topic
740").
We
are
subject
to
income
taxes
in
the
United
States
and
in
several
states
in
which
we
operate.
We
recognize
a
current
tax
asset
or
liability
for
the
estimated
taxes
refundable
or
payable
based
upon
application
of
the
enacted
tax
rates
to
taxable
income
in
the
current
year.
Additionally,
we
are
required
to
recognize
a
deferred
tax
liability
or
asset
for
the
estimated
future
tax
effects
attributable
to
temporary
differences.
Temporary
differences
occur
when
differences
arise
between:
(a)
the
amount
of
taxable
income
and
pretax
financial
income
for
a
year
and
(b)
the
tax
basis
of
assets
or
liabilities
and
their
reported
amounts
in
financial
statements.
Deferred
tax
assets
recognized
must
be
reduced
by
a
valuation
allowance
for
any
tax
benefits
that,
in
our
judgment
and
based
upon
available
evidence,
may
not
be
realizable.
At
April
24,
2016,
we
have
reduced
our
deferred
tax
assets
by
a
valuation
allowance
of
$57.2
million.
Continued
cumulative
book
income
may
result
in
a
reversal
of
our
remaining
federal
and
certain
state
valuation
allowances.
We
assess
our
tax
positions
using
a
two-step
process.
A
tax
position
is
recognized
if
it
meets
a
"more
likely
than
not"
threshold,
and
is
measured
at
the
largest
amount
of
benefit
that
has
a
greater
than
50%
likelihood
of
being
realized.
Uncertain
tax
positions
must
be
reviewed
at
each
balance
sheet
date.
Liabilities
recorded
as
a
result
of
this
analysis
must
generally
be
recorded
separately
from
any
current
or
deferred
income
tax
accounts,
and
are
classified
as
current
or
long-term
in
the
balance
sheet
accounts
accrued
liabilities-other
or
other
long-term
liabilities,
respectively,
based
on
the
time
until
43
Table
of
Contents
expected
payment.
We
recognize
accrued
interest
and
penalties
related
to
unrecognized
tax
benefits
in
income
tax
expense.
Stock Based Compensation —We
apply
the
guidance
of
ASC
Topic
718,
Compensation—Stock
Compensation
("ASC
Topic
718")
in
accounting
for
stock
compensation.
Generally,
we
are
required
to
measure
the
cost
of
employee
services
received
in
exchange
for
an
award
of
equity
instruments
based
on
the
grant-date
fair
value
of
the
award.
The
estimate
of
the
fair
value
of
the
stock
options
was
calculated
using
the
Black-Scholes-Merton
option-pricing
model.
This
model
requires
the
use
of
various
assumptions,
including
the
historical
volatility
of
our
stock
price,
the
risk
free
interest
rate,
estimated
expected
life
of
the
grants,
the
estimated
dividend
yield
and
estimated
rate
of
forfeitures.
During
fiscal
2013,
we
granted
restricted
stock
units
("RSUs")
that
contained
market
performance
conditions
which
determined
the
amount
of
shares
to
vest,
if
any.
The
fair
value
of
these
RSUs
was
determined
utilizing
a
lattice
pricing
model
which
considers
a
range
of
assumptions
including
volatility
and
risk-free
interest
rates.
Subsequent
RSU
awards
do
not
contain
market
performance
conditions.
Stock
based
compensation
expense
is
included
in
the
expense
category
corresponding
to
the
employees'
regular
compensation
in
the
accompanying
consolidated
statements
of
operations.
Contingencies —We
are
involved
in
various
legal
proceedings
and
have
identified
certain
loss
contingencies.
We
record
liabilities
related
to
these
contingencies
when
it
is
determined
that
a
loss
is
probable
and
reasonably
estimable
in
accordance
with
the
guidance
of
ASC
Topic
450,
Contingencies
("ASC
Topic
450").
These
assessments
are
based
on
our
knowledge
and
experience
as
well
as
the
advice
of
legal
counsel
regarding
current
and
past
events.
Any
such
estimates
are
also
subject
to
future
events,
court
rulings,
negotiations
between
the
parties
and
other
uncertainties.
If
an
actual
loss
differs
from
our
estimate,
or
the
actual
outcome
of
any
of
the
legal
proceedings
differs
from
expectations,
future
operating
results
could
be
impacted.
Contractual
Obligations
and
Commercial
Commitments
The
following
table
provides
information
as
of
the
end
of
fiscal
2016,
about
our
contractual
obligations
and
commercial
commitments.
The
table
presents
contractual
obligations
by
due
dates
and
related
contractual
commitments
by
expiration
dates
(in
millions).
Contractual
Obligations
Long-Term
Debt
Estimated
interest
payments
on
long-term
debt(1)
Operating
Leases
Construction
Contractual
Obligations(2)
Long-Term
Obligations
and
Other(3)
Total
Contractual
Cash
Obligations
Total
Payments
Due
by
Period
Less
Than
1
Year
1
-
3
Years 4
-
5
Years
$
920.2
280.1
165.6
36.4
46.3
$ 1,448.6
$
$
0.1
62.5
10.3
36.4
17.0
126.3
$
$
67.7
123.3
19.1
—
21.2
231.3
$
$
850.2
93.3
13.6
—
7.9
965.0
After
5
Years
$
2.2
1.0
122.6
—
0.2
$ 126.0
(1)
Estimated
interest
payment
on
long-term
debt
are
based
on
principal
amounts
outstanding
at
our
fiscal
year
end
and
forecasted
LIBOR
rates
for
our
senior
secured
credit
facility.
(2)
Construction
contractual
obligations
represent
the
estimated
remaining
capital
expenditures
on
the
construction
of
our
new
land-based
operations
at
our
casino
in
Bettendorf,
Iowa.
(3)
Long-term
obligations
and
other
include
future
purchase
commitments.
44
Table
of
Contents
Recently
Issued
Accounting
Standards
In
March
2016,
the
Financial
Accounting
Standards
Board
("FASB")
issued
Update
No.
2016-09,
"Compensation—Stock
Compensation,"
which
simplifies
the
accounting
for
share-based
compensation,
including
the
income
tax
consequences.
This
Update
amends
treatment
of
excess
tax
benefits
and
deficiencies
as
a
component
of
income
tax
expense
rather
than
equity,
the
presentation
of
excess
tax
benefits
as
an
operating
activity
on
the
statement
of
cash
flows
and
allows
an
entity
to
make
an
accounting
policy
election
to
account
for
forfeitures.
The
amendments
are
effective
for
reporting
periods
beginning
after
December
15,
2016,
with
early
adoption
permitted.
We
are
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
In
February
2016,
the
FASB
issued
Update
No.
2016-02,
"Leases."
Under
this
guidance,
lessees
will
be
required
to
recognize
operating
and
finance
leases
with
lease
terms
greater
than
12
months
as
liabilities
and
corresponding
right-of-use
assets
on
the
balance
sheet.
The
amendments
in
this
update
are
effective
for
fiscal
years
beginning
after
December
15,
2018,
including
interim
periods
within
those
fiscal
years,
on
a
modified
retrospective
basis
and
early
adoption
is
permitted.
We
are
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
In
November
2015,
the
FASB
issued
Update
No.
2015-17,
"Balance
Sheet
Classification
of
Deferred
Taxes."
This
update
requires
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position.
The
standard
is
effective
for
annual
periods
beginning
after
December
31,
2016
and
for
interim
periods
within
those
annual
periods
with
early
adoption
permitted
for
any
interim
or
annual
financial
statements
not
yet
issued.
The
amendment
may
be
applied
either
prospectively
or
retrospectively.
The
Company
has
elected
to
early
adopt
this
update
to
simplify
the
presentation
of
deferred
taxes
on
the
consolidated
financial
statements
and
disclosures
for
the
annual
period
ending
April
24,
2016.
The
Company
is
applying
this
amendment
on
a
prospective
basis
and
prior
periods
were
not
retrospectively
adjusted.
In
August
2015,
the
FASB
issued
Update
No.
2015-15,
"Presentation
and
Subsequent
Measurement
of
Debt
Issuance
Costs
Associated
with
Line-of-Credit
Arrangements,"
which
further
clarifies
the
presentation
and
subsequent
measurement
of
debt
issuance
costs
related
to
line-of-credit
arrangements.
This
update
allows
for
debt
issuance
costs
related
to
line-of-credit
arrangements
to
be
presented
as
an
asset
and
subsequent
amortization
of
the
deferred
debt
issuance
costs
ratably
over
the
term
of
the
line-of-credit
arrangement,
regardless
of
whether
there
are
any
outstanding
borrowings
on
the
line-of-credit.
The
standard
is
effective
for
financial
statements
issued
for
fiscal
years
beginning
after
December
31,
2015,
for
interim
periods
within
those
fiscal
years
and
early
adoption
is
permitted.
Management
plans
to
adopt
this
standard
beginning
in
the
first
quarter
of
fiscal
2017.
In
April
2015,
the
FASB
issued
Update
No.
2015-03,
"Interest-Imputation
of
Interest."
This
update
requires
debt
issuance
costs
to
be
presented
as
a
direct
deduction
from
the
carrying
amount
of
the
related
debt
liability.
The
standard
is
effective
for
annual
periods
beginning
after
December
15,
2015.
Early
adoption
is
permitted
for
financial
statements
that
have
not
been
previously
issued.
The
standard
requires
application
of
the
new
guidance
on
a
retrospective
basis,
wherein
the
balance
sheet
of
each
individual
period
presented
should
be
adjusted
to
reflect
the
period-specific
effects
of
applying
the
new
guidance.
Adoption
of
this
update
will
reduce
total
assets
and
total
liabilities
in
our
consolidated
balance
sheet
and
will
not
have
any
impact
on
our
statement
of
operations
or
retained
earnings.
Management
plans
to
adopt
this
standard
beginning
in
the
first
quarter
of
fiscal
2017.
In
May
2014,
the
FASB
issued
Update
No.
2014-09,
"Revenue
from
Contracts
with
Customers,"
which
converges
the
FASB's
and
the
International
Accounting
Standards
Board's
current
standards
on
revenue
recognition.
The
standard
provides
companies
with
a
single
model
to
use
in
accounting
for
revenue
arising
from
contracts
with
customers
and
supersedes
current
revenue
guidance.
The
proposed
45
Table
of
Contents
effective
date
for
the
standard
was
for
annual
and
interim
periods
beginning
after
December
15,
2016.
In
April
2105,
FASB
proposed
a
deferral
of
the
effective
date
for
one
year.
Early
adoption
is
not
permitted.
The
standard
permits
companies
to
either
apply
the
adoption
to
all
periods
presented,
or
apply
the
requirements
in
the
year
of
adoption
through
a
cumulative
adjustment.
We
are
currently
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
ITEM
7A.
QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK
Market
risk
is
the
risk
of
loss
arising
from
adverse
changes
in
market
rates
and
prices,
including
interest
rates,
foreign
currency
exchange
rates,
commodity
prices
and
equity
prices.
Our
primary
exposure
to
market
risk
is
interest
rate
risk
associated
with
our
senior
secured
credit
facility.
The
following
table
provides
information
at
April
24,
2016
about
our
financial
instruments
that
are
sensitive
to
changes
in
interest
rates.
The
table
presents
principal
cash
flows
and
related
weighted
average
interest
rates
by
expected
maturity
dates.
Interest
Rate
Sensitivity
Principal
(Notional)
Amount
by
Expected
Maturity
Fiscal
year
(dollars
in
millions)
Liabilities
Long-term
debt,
including
current
portion
Fixed
rate
Average
interest
rate
Variable
rate
Average
interest
rate(1)
(1)
2017
2018
2019
2020
2021
Thereafter
$ 0.1
$ 0.1
$ 0.1
$ 0.1
$ 850.1
$
7.11% 7.11% 7.11% 7.11% 6.23% $ —
$ 67.5
$
2.78% 2.95% —
$
—
—
$
—
—
$
—
Total
Fair
Value
4/24/2016 2.2
$ 852.7
$
7.38% 889.8
—
$ 67.5
$
—
66.2
Represents
the
annual
average
LIBOR
from
the
forward
yield
curve
at
April
24,
2016
plus
the
weighted
average
margin
above
LIBOR
on
all
consolidated
variable
rate
debt.
As
of
April
24,
2016,
our
Credit
Facility
consisted
of
a
revolving
line
of
credit
with
variable
rate
interest
based
on
LIBOR.
Based
on
current
debt
levels,
a
one
percent
change
in
our
interest
rate
increases
annual
interest
expense
by
$0.7
million.
46
Table
of
Contents
ITEM
8.
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA
The
following
consolidated
financial
statements
are
included
in
this
report:
Report
of
Independent
Registered
Public
Accounting
Firm
on
Internal
Control
Over
Financial
Reporting
Report
of
Independent
Registered
Public
Accounting
Firm
on
Consolidated
Financial
Statements
Consolidated
Balance
Sheets—April
24,
2016
and
April
26,
2015
Fiscal
Years
Ended
April
24,
2016,
April
26,
2015
and
April
27,
2014
Consolidated
Statements
of
Operations
Consolidated
Statements
of
Comprehensive
Income
(Loss)
Consolidated
Statements
of
Stockholders'
Equity
Consolidated
Statements
of
Cash
Flows
Notes
to
Consolidated
Financial
Statements
Schedule
II—Valuation
and
Qualifying
Accounts—Fiscal
Years
Ended
April
24,
2016,
April
26,
2015
and
April
27,
2014 47
48
49
50
51
52
53
54
55
91
Table
of
Contents
Report
of
Independent
Registered
Public
Accounting
Firm
The
Board
of
Directors
and
Stockholders
Isle
of
Capri
Casinos,
Inc.
We
have
audited
Isle
of
Capri
Casinos,
Inc.'s
internal
control
over
financial
reporting
as
of
April
24,
2016,
based
on
criteria
established
in
Internal Control—
Integrated Framework issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
(2013
framework)
(the
COSO
criteria).
Isle
of
Capri
Casinos,
Inc.'s
management
is
responsible
for
maintaining
effective
internal
control
over
financial
reporting,
and
for
its
assessment
of
the
effectiveness
of
internal
control
over
financial
reporting
included
in
the
accompanying
Management's
Report
on
Internal
Control
over
Financial
Reporting.
Our
responsibility
is
to
express
an
opinion
on
the
company's
internal
control
over
financial
reporting
based
on
our
audit.
We
conducted
our
audit
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
effective
internal
control
over
financial
reporting
was
maintained
in
all
material
respects.
Our
audit
included
obtaining
an
understanding
of
internal
control
over
financial
reporting,
assessing
the
risk
that
a
material
weakness
exists,
testing
and
evaluating
the
design
and
operating
effectiveness
of
internal
control
based
on
the
assessed
risk,
and
performing
such
other
procedures
as
we
considered
necessary
in
the
circumstances.
We
believe
that
our
audit
provides
a
reasonable
basis
for
our
opinion.
A
company's
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles.
A
company's
internal
control
over
financial
reporting
includes
those
policies
and
procedures
that
(1)
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
the
transactions
and
dispositions
of
the
assets
of
the
company;
(2)
provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
receipts
and
expenditures
of
the
company
are
being
made
only
in
accordance
with
authorizations
of
management
and
directors
of
the
company;
and
(3)
provide
reasonable
assurance
regarding
prevention
or
timely
detection
of
unauthorized
acquisition,
use,
or
disposition
of
the
company's
assets
that
could
have
a
material
effect
on
the
financial
statements.
Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also,
projections
of
any
evaluation
of
effectiveness
to
future
periods
are
subject
to
the
risk
that
controls
may
become
inadequate
because
of
changes
in
conditions
or
that
the
degree
of
compliance
with
the
policies
or
procedures
may
deteriorate.
In
our
opinion,
Isle
of
Capri
Casinos,
Inc.
maintained,
in
all
material
respects,
effective
internal
control
over
financial
reporting
as
of
April
24,
2016,
based
on
the
COSO
criteria.
We
also
have
audited,
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States),
the
consolidated
balance
sheets
of
Isle
of
Capri
Casinos,
Inc.
as
of
April
24,
2016
and
April
26,
2015,
and
the
related
consolidated
statements
of
operations,
comprehensive
income
(loss),
stockholders'
equity,
and
cash
flows
for
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014,
and
our
report
dated
June
21,
2016,
expressed
an
unqualified
opinion
thereon.
/s/
Ernst
&
Young
LLP
St.
Louis,
Missouri
June
21,
2016
48
Table
of
Contents
Report
of
Independent
Registered
Public
Accounting
Firm
The
Board
of
Directors
and
Stockholders
Isle
of
Capri
Casinos,
Inc.
We
have
audited
the
accompanying
consolidated
balance
sheets
of
Isle
of
Capri
Casinos,
Inc.
(the
Company)
as
of
April
24,
2016
and
April
26,
2015,
and
the
related
consolidated
statements
of
operations,
comprehensive
income
(loss),
stockholders'
equity,
and
cash
flows
for
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014.
Our
audits
also
included
the
financial
statement
schedule
listed
in
the
Index
at
Item
15(a).
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
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
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
Isle
of
Capri
Casinos,
Inc.
at
April
24,
2016
and
April
26,
2015,
and
the
consolidated
results
of
its
operations
and
its
cash
flows
for
the
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014,
in
conformity
with
U.S.
generally
accepted
accounting
principles.
We
also
have
audited,
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States),
Isle
of
Capri
Casinos,
Inc.'s
internal
control
over
financial
reporting
as
of
April
24,
2016,
based
on
criteria
established
in
Internal
Control-Integrated
Framework
issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
"(2013
framework)"
and
our
report
dated
June
21,
2016
expressed
an
unqualified
opinion
thereon.
/s/
Ernst
&
Young
LLP
St.
Louis,
Missouri
June
21,
2016
49
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
CONSOLIDATED
BALANCE
SHEETS
(In
thousands,
except
share
and
per
share
amounts)
ASSETS
Current
assets:
Cash
and
cash
equivalents
Marketable
securities
Accounts
receivable,
net
of
allowance
for
doubtful
accounts
of
$1,389
and
$1,595,
respectively Inventory
Deferred
income
taxes
Prepaid
expenses
and
other
assets
Assets
held
for
sale
Total
current
assets
Property
and
equipment,
net
Other
assets:
Goodwill
Other
intangible
assets,
net
Deferred
financing
costs,
net
Restricted
cash
and
investments
Prepaid
deposits
and
other
Deferred
income
taxes
Long-term
assets
held
for
sale
Total
assets
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Current
maturities
of
long-term
debt
Accounts
payable
Accrued
liabilities:
Payroll
and
related
Property
and
other
taxes
Income
tax
payable
Interest
Progressive
jackpots
and
slot
club
awards
Other
Total
current
liabilities
Long-term
debt,
less
current
maturities
Deferred
income
taxes
Other
accrued
liabilities
Other
long-term
liabilities
Stockholders'
equity:
Preferred
stock,
$.01
par
value;
2,000,000
shares
authorized;
none
issued
Common
stock,
$.01
par
value;
60,000,000
shares
authorized;
shares
issued:
42,066,148
at
April
24,
2016
and
April
26,
2015
Class
B
common
stock,
$.01
par
value;
3,000,000
shares
authorized;
none
issued
Additional
paid-in
capital
Retained
earnings
(deficit)
Treasury
stock,
1,300,955
shares
at
April
24,
2016
and
1,568,875
shares
at
April
26,
2015
Total
stockholders'
equity
Total
liabilities
and
stockholders'
equity
See
accompanying
notes
to
consolidated
financial
statements.
50
April
24,
2016
$ 62,126
19,338
13,252
6,305
—
11,874
—
112,895
899,167
108,970
53,236
14,702
9,819
5,216
1,144
—
$ 1,205,149
$
80
29,723
36,915
19,428
123
14,678
15,564
21,036
137,547
922,613
37,902
17,557
13,912
—
421
—
244,472
(152,868)
92,025
(16,407)
75,618
$ 1,205,149
April
26,
2015
$ 66,437
19,517
11,171
6,509
4,626
11,274
138
119,672
902,226
108,970
54,073
19,075
9,193
4,743
—
9,810
$ 1,227,762
$
170
19,690
43,371
20,456
125
15,350
16,123
18,326
133,611
992,712
37,334
18,432
22,211
—
421
—
241,899
(199,072)
43,248
(19,786)
23,462
$ 1,227,762
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
(In
thousands,
except
share
and
per
share
amounts)
Revenues:
Casino
Rooms
Food,
beverage,
pari-mutuel
and
other
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms
Food,
beverage,
pari-mutuel
and
other
Marine
and
facilities
Marketing
and
administrative
Corporate
and
development
Valuation
charges
Litigation
accrual
reversals
Preopening
expense
Depreciation
and
amortization
Total
operating
expenses
Operating
income
(loss)
Interest
expense
Interest
income
Loss
on
early
extinguishment
of
debt
Derivative
income
Income
(loss)
from
continuing
operations
before
income
taxes
Income
tax
(provision)
benefit
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations,
including
loss
on
sale,
net
of
income
tax
provision
of
$0,
$0
and
$(1,226)
for
the
fiscal
years
ended
2016,
2015
and
2014,
respectively
Net
income
(loss)
attributable
to
common
stockholders
Earnings
(loss)
per
common
share
attributable
to
common
stockholders—basic:
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
including
gain
on
sale,
net
of
income
taxes
Net
income
(loss)
attributable
to
common
stockholders
Earnings
(loss)
per
common
share
attributable
to
common
stockholders—diluted
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
including
gain
on
sale,
net
of
income
taxes
Net
income
(loss)
attributable
common
stockholders
Weighted
average
basic
shares
Weighted
average
diluted
shares
April
24,
2016
April
27,
2014
$ 1,028,047
$ 1,032,241
$
29,457
30,427
132,436
137,215
1,189,940
1,199,883
(211,348) (222,838) 978,592
977,045
152,713
156,547
261,916
263,362
6,820
6,576
48,481
48,903
54,111
55,994
220,079
223,857
29,067
29,088
—
9,000
—
—
153
—
82,105
77,798
855,445
871,125
123,147
105,920
(68,025) (84,131) 311
369
(2,966) (13,757) —
—
52,467
8,401
(4,178) (1,111) 48,289
7,290
(2,085)
$
46,204
$
1.19
(0.05)
$
1.14
$
1.17
(0.05)
$
1.12
40,690,929
41,323,473
See
accompanying
notes
to
consolidated
financial
statements.
51
Fiscal
Year
Ended
April
26,
2015
(2,113)
$
5,177
$
0.18
(0.05)
$
0.13
$
0.18
(0.05)
$
0.13
39,955,735
40,320,267
981,099
31,252
132,411
1,144,762
(210,353)
934,409
152,914
249,638
6,853
46,184
55,318
224,011
28,455
151,591
(9,330)
3,898
79,579
989,111
(54,702)
(81,342)
349
—
398
(135,297)
18,494
(116,803)
(10,883)
$ (127,686)
$
(2.94)
(0.27)
$
(3.21)
$
(2.94)
(0.27)
$
(3.21)
39,731,766
39,731,766
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
CONSOLIDATED
STATEMENTS
OF
COMPREHENSIVE
INCOME
(LOSS)
(In
thousands)
Net
income
(loss)
Other
comprehensive
income,
net
of
tax:
Deferred
hedge
adjustment,
net
of
income
tax
provision
of
$149
for
2014
Other
comprehensive
income
Comprehensive
income
(loss)
April
24,
2016
$ 46,204
$
—
—
$ 46,204
$
See
accompanying
notes
to
the
consolidated
financial
statements.
52
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
5,177
—
—
5,177
$ (127,686)
247
247
$ (127,439)
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
CONSOLIDATED
STATEMENTS
OF
STOCKHOLDERS'
EQUITY
(In
thousands,
except
share
amounts)
Balance,
April
28,
2013
Net
loss
Other
comprehensive
income,
net
of
tax
Issuance
of
restricted
stock,
net
of
forfeitures
Stock
compensation
expense Balance,
April
27,
2014
Net
income
Other
comprehensive
income,
net
of
tax
Exercise
of
stock
options
Issuance
of
restricted
stock,
net
of
forfeitures
Issuance
of
stock
under
compensation
plans
Stock
compensation
expense Balance,
April
26,
2015
Net
income
Other
comprehensive
income,
net
of
tax
Exercise
of
stock
options
Issuance
of
restricted
stock,
net
of
forfeitures
Stock
compensation
expense Balance,
April
24,
2016
Shares
of
Common
Stock
42,066,148
—
—
—
—
42,066,148
—
Additional
Paid-in
Capital
Common
Stock
Retained
Earnings
(Deficit)
Accum.
Other
Comprehensive
Income
(Loss) 421
246,214
(74,227) —
—
(127,686) —
—
—
421
—
—
—
(2,808) —
4,413
—
247,819
(201,913) —
5,177
Treasury
Stock
Total
Stockholders'
Equity
(247) (29,751) —
—
247
—
—
—
—
142,410
(127,686)
—
247
2,808
—
(26,943) —
—
4,413
19,384
5,177
—
—
—
—
—
(47) —
—
—
—
—
121
—
74
—
—
(2,392) —
—
2,392
—
4,644
—
(19,786) —
(4,586)
3,413
23,462
46,204
—
—
42,066,148
—
—
—
—
—
42,066,148
$
—
—
421
—
(6,894) (2,336) 3,413
—
241,899
(199,072) —
46,204
—
—
—
(821) —
—
—
(1,689) —
—
5,083
—
421
$ 244,472
$ (152,868) $
See
accompanying
notes
to
consolidated
financial
statements.
53
—
—
—
—
—
—
—
1,690
—
869
—
1,689
—
—
—
$ (16,407) $
—
5,083
75,618
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
CONSOLIDATED
STATEMENTS
OF
CASH
FLOWS
(In
thousands)
April
24,
2016
Fiscal
Year
Ended
April
26,
2015
Operating
activities:
Net
income
(loss)
Adjustments
to
reconcile
net
income
(loss)
to
net
cash
provided
by
operating
activities:
Depreciation
and
amortization
Amortization
and
write-off
of
deferred
financing
costs
Amortization
of
debt
(premium)
discount,
net
Loss
on
early
extinguishment
of
debt
Litigation
accrual
reversals
Valuation
charges
Deferred
income
taxes
Stock
compensation
expense
Gain
on
sale
of
discontinued
operations
Gain
on
derivative
instruments
Loss
(gain)
on
disposal
of
assets
$
46,204
$
82,451
4,237
(446)
2,966
—
4,424
4,050
5,083
(6,424)
—
143
Changes
in
operating
assets
and
liabilities:
Marketable
securites
Accounts
receivable
Income
taxes
payable/receivable
Prepaid
expenses
and
other
assets
Accounts
payable
and
accrued
liabilities
Net
cash
provided
by
operating
activities
Investing
activities:
Purchase
of
property
and
equipment
Proceeds
from
asset
sales
Payments
towards
gaming
license
Restricted
cash
and
investments
Net
cash
(used
in)
provided
by
investing
activities
Financing
activities:
Proceeds
from
long-term
debt
borrowings
Net
(repayments)
borrowings
on
line
of
credit
Principal
repayments
on
long-term
debt
Premiums
payments
on
retirement
of
long-term
debt
Payment
of
deferred
financing
costs
Payment
of
other
long-term
obligation
Proceeds
from
exercise
of
stock
options
Net
cash
used
in
financing
activities
Net
decrease
(increase)
in
cash
and
cash
equivalents
Cash
and
cash
equivalents
at
beginning
of
year
Cash
and
cash
equivalents
at
end
of
year
$
179
(1,539)
(2)
(529)
(4,885)
135,912
(70,262)
11,496
—
(425)
(59,191)
—
(7,500)
(62,399)
(2,409)
(209)
(9,384)
869
(81,032)
(4,311)
66,437
62,126
See
accompanying
notes
to
consolidated
financial
statements.
54
April
27,
2014
5,177
$ (127,686)
78,875
4,700
344
13,757
—
9,000
943
3,413
—
—
102
82,245
4,464
242
—
(16,953)
162,100
(9,913)
4,413
—
(398)
(535)
7,772
1,444
198
1,041
(1,198) 125,568
(41,686) 73
—
340
(41,273) 153,000
10,300
(238,061) (10,465) (2,536) —
74
(87,688) (3,393) 69,830
$
66,437
$
(1,769)
(1,537)
4,716
4,120
(16,760)
86,749
(38,149)
49,881
(7,500)
1,879
6,111
—
(90,200)
(626)
—
(673)
—
—
(91,499)
1,361
68,469
69,830
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(amounts
in
thousands,
except
share
and
per
share
amounts)
1.
Organization
Organization —Isle
of
Capri
Casinos,
Inc.,
a
Delaware
corporation,
was
incorporated
in
February
1990.
Except
where
otherwise
noted,
the
words
"we,"
"us,"
"our"
and
similar
terms,
as
well
as
"Company,"
refer
to
Isle
of
Capri
Casinos,
Inc.
and
all
of
its
subsidiaries.
We
are
a
developer,
owner
and
operator
of
branded
gaming
facilities
and
related
lodging
and
entertainment
facilities
in
markets
throughout
the
United
States.
Our
wholly
owned
subsidiaries
own
or
operate
fourteen
casino
gaming
facilities
in
the
United
States
located
in
Black
Hawk,
Colorado;
Pompano
Beach,
Florida;
Bettendorf,
Marquette
and
Waterloo,
Iowa;
Lake
Charles,
Louisiana;
Lula
and
Vicksburg,
Mississippi;
Boonville,
Cape
Girardeau,
Caruthersville
and
Kansas
City,
Missouri;
and
Nemacolin,
Pennsylvania.
2.
Summary
of
Significant
Accounting
Policies
Basis of Presentation —The
consolidated
financial
statements
include
the
accounts
of
the
Company
and
its
subsidiaries.
All
significant
intercompany
balances
and
transactions
have
been
eliminated.
We
view
each
property
as
an
operating
segment
and
all
operating
segments
have
been
aggregated
into
one
reporting
segment.
Discontinued
operations
include
our
Natchez,
Mississippi
property
sold
in
October
2015
and
our
Davenport,
Iowa
property
sold
in
February
2014.
Fiscal Year-End —Our
fiscal
year
ends
on
the
last
Sunday
in
April.
Periodically,
this
system
necessitates
a
53-week
year.
Fiscal
years
2016,
2015
and
2014
were
52-week
years,
which
commenced
on
April
27,
2015,
April
28,
2014
and
April
29,
2013,
respectively.
Reclassifications —Certain
reclassifications
of
prior
year
presentations
have
been
made
to
conform
to
the
fiscal
2016
presentation.
Use of Estimates —The
preparation
of
financial
statements
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
requires
management
to
make
estimates
and
assumptions
that
affect
the
amounts
reported
in
the
financial
statements
and
accompanying
notes.
Actual
results
could
differ
from
those
estimates.
Cash and Cash Equivalents —We
consider
all
highly
liquid
investments
purchased
with
an
original
maturity
of
three
months
or
less
as
cash
equivalents.
Cash
also
includes
the
minimum
operating
cash
balances
required
by
state
regulatory
bodies,
which
totaled
$23,071
and
$25,099
at
April
24,
2016
and
April
26,
2015,
respectively.
Marketable Securities —Marketable
securities
consist
primarily
of
trading
securities
held
by
our
captive
insurance
subsidiary.
The
trading
securities
are
primarily
debt
and
equity
securities
that
are
purchased
with
the
intention
to
resell
in
the
near
term.
The
trading
securities
are
carried
at
fair
value
with
changes
in
fair
value
recognized
in
current
period
income
in
the
accompanying
statements
of
operations.
Inventories —Inventories
are
stated
at
the
lower
of
weighted
average
cost
or
market
value.
Property and Equipment —Property
and
equipment
are
stated
at
cost
or
if
purchased
through
a
business
acquisition,
the
value
determined
under
purchase
accounting.
We
capitalize
the
cost
of
purchased
property
and
equipment
and
capitalize
the
cost
of
improvements
to
property
and
equipment
55
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
that
increases
the
value
or
extends
the
useful
lives
of
the
assets.
Costs
of
normal
repairs
and
maintenance
are
charged
to
expense
as
incurred.
Depreciation
is
computed
using
the
straight-line
method
over
the
following
estimated
useful
lives
of
the
assets:
Slot
machines,
software
and
computers
Furniture,
fixtures
and
equipment
Leasehold
improvements
Buildings
and
improvements
Years
3
-
5
5
-
10
Lesser
of
life
of
lease
or
estimated
useful
life
7
-
39.5
Certain
property
currently
leased
in
Bettendorf,
Iowa
and
at
our
Nemacolin,
Pennsylvania
casino
is
accounted
for
in
accordance
with
Accounting
Standards
Codification
("ASC")
Topic
840,
Leases
("ASC
840").
We
periodically
evaluate
the
carrying
value
of
long-lived
assets
to
be
held
and
used
in
accordance
with
ASC
Topic
360,
Property,
Plant
and
Equipment
("ASC
360")
which
requires
impairment
losses
to
be
recorded
on
long-lived
assets
used
in
operations
when
indicators
of
impairment
are
present
and
the
undiscounted
cash
flows
estimated
to
be
generated
by
those
assets
are
less
than
the
assets'
carrying
amounts.
In
assessing
the
recoverability
of
the
carrying
value
of
such
property,
equipment
and
other
long-lived
assets,
we
make
assumptions
regarding
future
cash
flows
and
residual
values.
In
estimating
expected
future
cash
flows,
assets
are
grouped
at
the
lowest
level
of
identifiable
cash
flows,
which
is
usually
the
individual
property.
If
the
assets
are
determined
to
be
impaired,
a
loss
is
recognized
based
on
the
amount
by
which
the
carrying
amount
exceeds
the
estimated
fair
market
value
of
the
long-lived
assets.
Capitalized Interest —The
interest
cost
associated
with
major
development
and
construction
projects
is
capitalized
and
included
in
the
cost
of
the
project.
When
no
debt
is
incurred
specifically
for
a
project,
interest
is
capitalized
on
amounts
expended
on
the
project
using
the
weighted-average
cost
of
our
borrowings.
Capitalization
of
interest
ceases
when
the
project
is
substantially
complete
or
development
activity
is
suspended.
Capitalized
interest
was
$600,
$23
and
$185
for
fiscal
years
2016,
2015
and
2014,
respectively.
Restricted Cash and Investments —We
classify
cash
and
investments
which
are
either
statutorily
or
contractually
restricted
as
to
withdrawal
or
usage
as
restricted
cash
short-term,
included
in
prepaid
expenses
and
other
assets,
or
restricted
cash
and
investments
long-term
based
on
the
duration
of
the
underlying
restriction.
Restricted
cash
primarily
includes
amounts
related
to
state
tax
bonds
and
other
gaming-related
bonds,
and
amounts
held
in
escrow
related
to
leases.
Restricted
investments
relate
to
trading
securities
pledged
as
collateral
by
our
captive
insurance
company.
Goodwill and Other Intangible Assets —Goodwill
represents
the
excess
of
cost
over
the
net
identifiable
tangible
and
intangible
assets
of
acquired
businesses
and
is
stated
at
cost,
net
of
impairments,
if
any.
Other
intangible
assets
include
values
attributable
to
acquired
gaming
licenses,
customer
lists,
and
trademarks.
ASC
Topic
350,
Intangibles—Goodwill
and
Other
("ASC
350")
requires
56
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
these
assets
be
reviewed
for
impairment
at
least
annually
or
on
an
interim
basis
if
indicators
of
impairment
exist.
We
perform
our
annual
impairment
test
as
of
the
first
day
of
the
fourth
fiscal
quarter.
We
first
assess
qualitative
factors
to
determine
whether
the
existence
of
events
or
circumstances
leads
to
a
determination
that
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
less
than
it
carrying
amount.
If,
after
assessing
the
totality
of
events
or
circumstances,
we
determine
it
is
more
likely
than
not
that
the
fair
value
of
an
indefinite-lived
intangible
or
reporting
unit
is
greater
than
its
carrying
amount,
then
performing
further
testing
is
not
required.
However,
if
we
conclude
otherwise,
we
are
required
to
perform
the
first
step
of
a
two-step
quantitative
impairment
test
using;
1)
a
discounted
cash
flow
analysis
based
on
forecasted
future
results
discounted
at
the
weighted
average
cost
of
capital
and,
2)
by
using
a
market
approach
based
upon
public
trading
and
recent
transaction
valuation
multiples
for
similar
companies.
Intangible
assets
with
indefinite
lives
not
subject
to
amortization
are
reviewed
by
comparing
the
fair
value
of
the
recoded
assets
to
their
carrying
amount.
We
review,
at
least
annually,
the
continued
use
of
an
indefinite
useful
life.
If
these
intangible
assets
are
determined
to
have
a
finite
useful
life,
they
are
amortized
over
their
estimated
remaining
useful
lives.
Deferred Financing Costs —The
costs
of
issuing
long-term
debt
are
capitalized
and
amortized
using
the
effective
interest
method
over
the
term
of
the
related
debt.
Self-Insurance —We
are
self-funded
up
to
a
maximum
amount
per
claim
for
employee-related
health
care
benefits,
workers'
compensation
and
general
liabilities.
Claims
in
excess
of
this
maximum
are
fully
insured
through
stop-loss
insurance
policies.
We
accrue
for
workers'
compensation
and
general
liabilities
on
a
discounted
basis
based
on
claims
filed
and
estimates
of
claims
incurred
but
not
reported.
The
estimates
have
been
discounted
at
1.0%
and
0.9%
at
April
24,
2016
and
April
26,
2015,
respectively,
or
a
discount
of
$645
and
$618,
respectively.
We
utilize
independent
consultants
to
assist
management
in
its
determination
of
estimated
insurance
liabilities.
While
the
total
cost
of
claims
incurred
depends
on
future
developments,
in
managements'
opinion,
recorded
reserves
are
adequate
to
cover
future
claims
payments.
Workers'
compensation
and
general
liability
claims
expense
is
included
in
corporate
and
development
expense
in
our
consolidated
statements
of
operations.
Employee
related
health
care
benefits
expenses
are
included
in
the
consolidated
statement
of
operations
lines
that
include
the
respective
employee
compensation
costs.
Reserves
for
workers'
compensation
and
employee
related
health
care
are
included
in
accrued
liabilities—payroll
and
related
in
the
consolidated
balance
sheets.
57
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
Reserves
for
general
liability
claims
are
included
in
accrued
liabilities—other
in
the
consolidated
balance
sheets.
Total
self-insurance
reserves
are
as
follows:
Beginning
balance
Additions:
Charged
to
expenses
Employee
contributions
Payments
Change
in
discount
Ending
Balance
Fiscal
Year
Ended
April
24,
April
26,
2016
2015
$ 26,253
$ 27,785
31,031
27,841
9,353
8,550
(40,830) (38,101)
(27) 178
$ 25,780
$ 26,253
Revenue Recognition —In
accordance
with
gaming
industry
practice,
we
recognize
casino
revenues
as
the
net
win
from
gaming
activities.
Casino
revenues
are
net
of
accruals
for
anticipated
payouts
of
progressive
slot
and
table
game
jackpots.
Revenues
from
rooms,
food,
beverage,
entertainment
and
the
gift
shops
are
recognized
at
the
time
the
related
service
or
sale
is
performed
or
realized.
Promotional Allowances —The
actual
retail
value
of
rooms,
food
and
beverage
and
other
services
furnished
to
guests
without
charge
or
at
a
discount
is
included
in
gross
revenues
and
then
deducted
as
promotional
allowances
to
arrive
at
net
revenues
included
in
the
accompanying
consolidated
statements
of
operations
at
the
time
such
good
or
services
are
provided
to
our
guests.
The
cost
of
providing
such
complimentary
services
from
continuing
operations
are
included
in
casino
expense
in
the
accompanying
statement
of
operations.
Rooms
Food
and
beverage
Other
Total
cost
of
complimentary
services
April
24,
2016
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
$ 8,457
$ 8,916
$ 8,504
63,555
66,745
62,958
493
527
520
$ 72,505
$ 76,188
$ 71,982
Fan Club —Our
guests
are
eligible
to
participate
in
our
Fan
Club,
our
customer
loyalty
program,
which
offers
certain
sales
incentives
accounted
for
under
ASC
605-50
"Revenue
Recognition
Customer
Payments
and
Incentives."
We
accrue
a
liability
for
the
estimated
cost
of
providing
Fan
Club
benefits
as
our
guest
earns
Fan
Club
points.
Such
sales
incentives
are
recorded
as
a
reduction
of
revenues
in
our
promotional
allowances
in
our
statements
of
operations.
The
points
earned
under
Fan
Club
may
be
redeemed
for
free
slot
play,
cash,
or
other
goods
or
services
depending
upon
the
property.
58
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
At
April
24,
2016
and
April
26,
2015,
our
accrual
was
$4,213
and
$4,787,
respectively,
for
estimated
cost
of
providing
benefits
under
our
Fan
Club
and
included
in
progressive
jackpots
and
slot
club
awards
in
our
consolidated
balance
sheets.
Beginning
balance
Earned
Redeemed
Expirations
Other
Ending
Balance
Fiscal
Year
Ended
April
24,
April
26,
2016
2015
$
4,787
$
5,197
19,544
25,886
(18,832) (22,360)
(1,651) (3,133)
365
(803)
$
4,213
$
4,787
Advertising —Advertising
costs
are
expensed
the
first
time
the
related
advertisement
appears.
Total
advertising
costs
from
continuing
operations
were
$33,913,
$33,799
and
$34,312
in
fiscal
years
2016,
2015
and
2014,
respectively.
Operating Leases —We
recognize
rent
expense
for
each
lease
on
the
straight-line
basis,
aggregating
all
future
minimum
rent
payments
including
any
predetermined
fixed
escalations
of
the
minimum
rentals.
Our
liabilities
include
the
aggregate
difference
between
rent
expense
recorded
on
the
straight-line
basis
and
amounts
paid
under
the
leases.
Development Costs —We
pursue
development
opportunities
for
new
gaming
facilities
in
an
ongoing
effort
to
expand
our
business.
In
accordance
with
ASC
Topic
720,
Other
Expenses
("ASC
720"),
costs
related
to
projects
in
the
development
stage
are
recorded
as
a
development
expense,
except
for
those
costs
capitalized
in
accordance
with
the
guidance
of
ASC
720.
Previously
capitalized
development
costs
are
expensed
when
the
development
is
deemed
less
than
probable.
Total
development
costs
expensed
from
continuing
operations
were
recorded
in
the
consolidated
statements
of
operations
in
corporate
and
development
expenses.
Pre-Opening Costs —We
expense
pre-opening
costs
as
incurred.
Pre-opening
costs
include
payroll,
outside
services,
advertising,
insurance,
utilities,
travel
and
various
other
expenses
related
to
new
operations
prior
to
opening.
Pre-opening
costs
from
continuing
operations
were
$153
in
fiscal
year
2016
related
to
preparing
for
our
new
land-based
operations
in
Bettendorf
and
$3,898
in
fiscal
2014
related
to
our
new
casino
at
the
Nemacolin
Woodlands
Resort,
which
opened
in
July
2013.
Income Taxes —We
account
for
income
taxes
in
accordance
with
ASC
Topic
740,
Income
Taxes
("ASC
740").
ASC
740
requires
the
recognition
of
deferred
income
tax
liabilities
and
deferred
income
tax
assets
for
the
difference
between
the
book
basis
and
tax
basis
of
assets
and
liabilities.
We
have
recorded
valuation
allowances
related
to
net
operating
loss
carry
forwards
and
certain
temporary
differences.
Recognizable
future
tax
benefits
are
subject
to
a
valuation
allowance,
unless
such
tax
benefits
are
determined
to
be
more
likely
than
not
realizable.
We
recognize
accrued
interest
and
penalties
related
to
unrecognized
tax
benefits
in
income
tax
expense.
59
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
Earnings (Loss) Per Common Share —In
accordance
with
the
guidance
of
ASC
260,
Earnings
Per
Share
("ASC
260"),
basic
earnings
(loss)
per
share
("EPS")
is
computed
by
dividing
net
income
(loss)
applicable
to
common
stockholders
by
the
weighted
average
common
shares
outstanding
during
the
period.
Diluted
EPS
reflects
the
additional
dilution
related
to
all
potentially
dilutive
securities
such
as
restricted
stock
units
and
stock
options.
Any
potentially
dilutive
securities
with
an
exercise
price
in
excess
of
the
average
market
price
of
our
common
stock
during
the
periods
presented
are
not
considered
when
calculating
diluted
earnings
per
share
calculations
as
they
would
be
anti-dilutive.
Stock Compensation —Our
stock
based
compensation
is
accounted
for
in
accordance
with
ASC
Topic
718,
Compensation—Stock
Compensation
("ASC
718").
Stock
compensation
cost
is
measured
at
the
grant
date,
based
on
the
estimated
fair
value
of
the
award
and
is
recognized
as
expense
on
a
straight-line
basis
over
the
requisite
service
period
for
each
separately
vesting
portion
of
the
award
as
if
the
award
was,
in-substance,
multiple
awards.
Allowance for Doubtful Accounts —We
reserve
for
receivables
that
may
not
be
collected.
Methodologies
for
estimating
the
allowance
for
doubtful
accounts
range
from
specific
reserves
to
various
percentages
applied
to
aged
receivables.
Historical
collection
rates
are
considered,
as
are
customer
relationships,
in
determining
specific
reserves.
Recently Announced Accounting Standards—
In
March
2016,
the
Financial
Accounting
Standards
Board
("FASB")
issued
Update
No.
2016-09,
"Compensation—Stock
Compensation,"
which
simplifies
the
accounting
for
share-based
compensation,
including
the
income
tax
consequences.
This
Update
amends
treatment
of
excess
tax
benefits
and
deficiencies
as
a
component
of
income
tax
expense
rather
than
equity,
the
presentation
of
excess
tax
benefits
as
an
operating
activity
on
the
statement
of
cash
flows
and
allows
an
entity
to
make
an
accounting
policy
election
to
account
for
forfeitures.
The
amendments
are
effective
for
reporting
periods
beginning
after
December
15,
2016,
with
early
adoption
permitted.
We
are
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
In
February
2016,
the
FASB
issued
Update
No.
2016-02,
"Leases."
Under
this
guidance,
lessees
will
be
required
to
recognize
operating
and
finance
leases
with
lease
terms
greater
than
12
months
as
liabilities
and
corresponding
right-of-use
assets
on
the
balance
sheet.
The
amendments
in
this
update
are
effective
for
fiscal
years
beginning
after
December
15,
2018,
including
interim
periods
within
those
fiscal
years,
on
a
modified
retrospective
basis
and
early
adoption
is
permitted.
We
are
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
In
November
2015,
the
FASB
issued
Update
No.
2015-17,
"Balance
Sheet
Classification
of
Deferred
Taxes."
This
update
requires
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position.
The
standard
is
effective
for
annual
periods
beginning
after
December
31,
2016
and
for
interim
periods
within
those
annual
periods
with
early
adoption
permitted
for
any
interim
or
annual
financial
statements
not
yet
issued.
The
amendment
may
be
applied
either
prospectively
or
retrospectively.
The
Company
has
elected
to
early
adopt
this
update
to
simplify
the
presentation
of
deferred
taxes
on
the
consolidated
financial
statements
and
disclosures
for
60
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
the
annual
period
ending
April
24,
2016.
The
Company
is
applying
this
amendment
on
a
prospective
basis
and
prior
periods
were
not
retrospectively
adjusted.
In
August
2015,
the
FASB
issued
Update
No.
2015-15,
"Presentation
and
Subsequent
Measurement
of
Debt
Issuance
Costs
Associated
with
Line-of-Credit
Arrangements,"
which
further
clarifies
the
presentation
and
subsequent
measurement
of
debt
issuance
costs
related
to
line-of-credit
arrangements.
This
update
allows
for
debt
issuance
costs
related
to
line-of-credit
arrangements
to
be
presented
as
an
asset
and
subsequent
amortization
of
the
deferred
debt
issuance
costs
ratably
over
the
term
of
the
line-of-credit
arrangement,
regardless
of
whether
there
are
any
outstanding
borrowings
on
the
line-of-credit.
The
standard
is
effective
for
financial
statements
issued
for
fiscal
years
beginning
after
December
31,
2015,
for
interim
periods
within
those
fiscal
years
and
early
adoption
is
permitted.
Management
plans
to
adopt
this
standard
beginning
in
the
first
quarter
of
fiscal
2017.
In
April
2015,
the
FASB
issued
Update
No.
2015-03,
"Interest-Imputation
of
Interest".
This
update
requires
debt
issuance
costs
to
be
presented
as
a
direct
deduction
from
the
carrying
amount
of
the
related
debt
liability.
The
standard
is
effective
for
annual
periods
beginning
after
December
15,
2015.
Early
adoption
is
permitted
for
financial
statements
that
have
not
been
previously
issued.
The
standard
requires
application
of
the
new
guidance
on
a
retrospective
basis,
wherein
the
balance
sheet
of
each
individual
period
presented
should
be
adjusted
to
reflect
the
period-specific
effects
of
applying
the
new
guidance.
Adoption
of
this
update
will
reduce
total
assets
and
total
liabilities
in
our
consolidated
balance
sheet
and
will
not
have
any
impact
on
our
statement
of
operations
or
retained
earnings.
Management
plans
to
adopt
this
standard
beginning
in
the
first
quarter
of
fiscal
2017.
In
May
2014,
the
FASB
issued
Update
No.
2014-09,
"Revenue
from
Contracts
with
Customers,"
which
converges
the
FASB's
and
the
International
Accounting
Standards
Board's
current
standards
on
revenue
recognition.
The
standard
provides
companies
with
a
single
model
to
use
in
accounting
for
revenue
arising
from
contracts
with
customers
and
supersedes
current
revenue
guidance.
The
proposed
effective
date
for
the
standard
was
for
annual
and
interim
periods
beginning
after
December
15,
2016.
In
April
2105,
FASB
proposed
a
deferral
of
the
effective
date
for
one
year.
Early
adoption
is
not
permitted.
The
standard
permits
companies
to
either
apply
the
adoption
to
all
periods
presented,
or
apply
the
requirements
in
the
year
of
adoption
through
a
cumulative
adjustment.
We
are
currently
evaluating
the
impact
of
adopting
this
accounting
standard
update
on
our
consolidated
financial
statements
and
disclosures.
3.
Discontinued
Operations
Natchez, Mississippi —On
October
19,
2015,
we
closed
our
casino
property
in
Natchez,
Mississippi
and
completed
the
previously
announced
sale
of
the
hotel
and
certain
related
non-gaming
assets
to
Casino
Holding
Investment
Partners,
LLC
for
net
cash
proceeds
of
$11,448.
As
a
result,
we
recorded
a
net
gain
of
$2,000
in
discontinued
operations
in
fiscal
2016.
The
net
gain
consisted
of
a
gain
on
the
sale
of
the
hotel
and
related
non-gaming
assets
of
$6,424,
offset
by
a
non-cash
pretax
charge
of
$4,424
related
to
the
write-off
of
the
Natchez
gaming
vessel
and
certain
other
assets.
The
results
of
our
Natchez
casino
operations
are
presented
as
discontinued
operations
for
all
periods
presented.
Davenport, Iowa —On
December
4,
2013,
we
entered
into
a
definitive
asset
purchase
agreement
to
sell
substantially
all
of
the
assets
and
for
the
assumption
of
certain
liabilities
related
to
our
casino
61
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
3.
Discontinued
Operations
(Continued)
located
in
Davenport,
Iowa,
("Davenport").
We
completed
the
sale
on
February
3,
2014
for
net
cash
proceeds
of
$48,727.
Including
closing
costs,
we
recorded
a
loss
of
$459
in
discontinued
operations.
The
results
of
our
Davenport
casino
operations
are
presented
as
discontinued
operations
for
all
periods
presented.
We
adopted
Accounting
Standards
Update
No.
2014-08,
"Reporting
Discontinued
Operations
and
Disclosures
of
Disposals
of
Components
of
an
Entity"
("ASU
2014-08")
on
April
27,
2015.
The
disposition
of
our
Natchez
reporting
unit
qualifies
for
discontinued
accounting
treatment
under
ASU
2014-08
and
as
such,
the
operations
of
our
Natchez
property
has
been
classified
as
discontinued
operations
and
as
assets
held
for
sale
for
all
periods
presented.
The
Company
incurred
$258
and
$1,215
for
capital
expenditures
at
our
Natchez
property
during
the
fiscal
year
ending
April
24,
2016
and
April
26,
2015,
respectively.
The
results
of
our
discontinued
operations
are
summarized
as
follows:
Net
revenues
Valuation
charges
Depreciation
expense
Pretax
loss
from
discontinued
operations
Income
tax
provision
from
discontinued
operations
Loss
from
discontinued
operations
Discontinued
Operations
Fiscal
Year
Ended
April
24,
April
26,
April
27,
2016
2015
2014
$ 7,992
$
(4,424) (346) (2,085) —
(2,085) 19,233
—
(1,076)
(2,113)
—
(2,113)
$ 49,349
(10,509)
(2,668)
(9,657)
(1,226)
(10,883)
Interest
expense
of
$6
for
the
fiscal
year
2014
has
been
allocated
to
discontinued
operations
related
to
third-party
debt
at
our
former
Davenport
property.
4.
Property
and
Equipment,
Net
Property
and
equipment,
net
consists
of
the
following:
Property
and
equipment:
Land
and
land
improvements
Leasehold
improvements
Buildings
and
improvements
Riverboats
and
floating
pavilions
Furniture,
fixtures
and
equipment
Construction
in
progress
Total
property
and
equipment
Less
accumulated
depreciation
and
amortization
Property
and
equipment,
net
April
24,
2016
April
26,
2015
$ 195,020
$ 195,367
144,343
144,927
720,167
711,956
101,660
101,535
515,287
507,794
39,824
12,139
1,716,301
1,673,718
(817,134) (771,492)
$ 899,167
$ 902,226
We
recorded
depreciation
expense
of
$81,267,
$76,961
and
$78,394
for
our
continuing
operations
for
the
fiscal
years
ended
2016,
2015,
and
2014,
respectively.
62
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
5.
Goodwill
and
Other
Intangible
Assets
We
have
recorded
goodwill,
net
of
impairment,
of
$108,970
at
April
24,
2016,
April
26,
2015
and
April
27,
2014,
respectively.
Goodwill
includes
accumulated
impairment
losses
of
$213,125.
Other
intangible
assets
consist
of
the
following:
April
24,
2016
Indefinite-lived
assets
Gaming
licenses
Trademarks
Historical
Cost
$ 44,342
7,149
Accumulated
Amortization $
—
—
Accumulated
Impairment $
—
—
Net
Carrying
Amount $ 44,342
7,149
Intangible
assets—subject
to
amortization
Gaming
licenses
Customer
relationships
Customer
lists
Tradename
Total
$
$
$
$
12,500
6,700
15,393
544
86,628
(347)
(4,955)
(15,393)
(544)
(21,239)
(12,153)
—
—
—
(12,153)
—
1,745
—
—
53,236
April
26,
2015
Historical
Cost
$ 44,342
7,149
Accumulated
Amortization $
—
—
Accumulated
Impairment $
—
—
Net
Carrying
Amount $ 44,342
7,149
$
$
$
$
12,500
6,700
15,393
544
86,628
(347)
(4,118)
(15,393)
(544)
(20,402)
(12,153)
—
—
—
(12,153)
—
2,582
—
—
54,073
Our
indefinite-lived
intangible
assets
consist
primarily
of
gaming
licenses
and
trademarks
for
which
it
is
reasonably
assured
that
we
will
continue
to
renew
indefinitely.
Our
other
finite-lived
intangible
assets
consist
of
customer
relationships
amortized
over
8
years,
customer
lists
amortized
over
2
to
4
years,
and
a
trade
name
amortized
over
1.5
years.
The
weighted
average
remaining
life
of
our
customer
relationships
is
approximately
2.1
years.
We
recorded
amortization
expense
of
$838,
$838
and
$1,185,
for
our
intangible
assets
subject
to
amortization
related
to
our
continuing
operations
for
the
fiscal
years
ended
2016,
2015,
and
2014,
respectively.
Future
amortization
expense
of
our
amortizable
intangible
assets
is
as
follows:
2017
2018
2019
Thereafter
Total
63
838
838
69
—
$ 1,745
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
6.
Valuation
Charges
We
recorded
valuation
charges
as
follows:
Fiscal
Year
Ended
April
24,
April
26,
April
27,
2016
2015
2014
Property
and
equipment,
net
impairment
charges
Intangible
asset
impairment
charge
Goodwill
impairment
charges:
Bettendorf
Lake
Charles
Lula
Vicksburg
Total
goodwill
impairment
charges
Total
impairment
valuation
charges
$
$
—
—
—
—
—
—
—
—
$
$
9,000
—
—
—
—
—
—
9,000
$ 14,200
12,153
60,000
24,238
36,000
5,000
125,238
$ 151,591
Other Long-Lived Assets —During
fiscal
2015,
we
recorded
a
$9,000
impairment
charge
related
to
our
Nemacolin
property
and
equipment,
net
as
a
result
of
our
impairment
testing
under
ASC
360.
The
non-recurring
fair
value
of
$15,848
used
in
our
determination
of
the
impairment
charge
considered
level
3
inputs,
including
market
valuation,
estimated
replacement
cost
values,
estimates
for
economic
obsolescence
and
estimated
risk
premiums
and
was
the
result
of
our
current
and
future
expected
cash
flows
at
the
property.
During
fiscal
2014,
we
recorded
impairment
charges
related
to
property
and
equipment,
net
of
$14,200
at
our
Nemacolin
property
and
$12,153
related
to
intangible
assets
at
our
Nemacolin
property
as
a
result
of
our
impairment
testing
under
ASC
360.
The
non-recurring
fair
values
used
in
our
determination
of
the
impairment
charges
considered
level
2
and
3
inputs,
including
the
cost
replacement
value
of
the
assets
adjusted
for
an
associated
risk
premium
or
economic
obsolescence,
and
a
market
based
valuation
multiple
method.
The
impairments
were
the
result
of
our
current
and
future
expected
cash
flows
at
our
properties.
Goodwill —Our
goodwill
impairment
charges
in
fiscal
2014
were
a
result
of
expected
decreases
in
future
cash
flows
as
a
result
of
unfavorable
economic
conditions
and
the
impact
of
changes
by
our
competitors.
Competitive
changes
included
a
proposed
land-based
casino
replacing
an
existing
riverboat
casino
competing
with
our
Bettendorf
property,
a
new
casino
competing
with
our
Lake
Charles
property
and
expansions
by
casinos
competing
with
our
Lula
property.
The
non-recurring
fair
values
used
in
our
determination
of
the
goodwill
impairment
charges
considered
level
2
and
3
inputs,
including
discounted
cash
flows
and
market
based
multiple
valuation
methods.
64
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
6.
Valuation
Charges
(Continued)
The
remaining
goodwill
balance
by
property
as
of
April
24,
2016
is
as
follows:
Bettendorf
Black
Hawk
Boonville
Kansas
City
Lula
Marquette
Vicksburg
Total
April
24,
2016
$
5,713
30,533
2,599
7,182
6,581
29,195
27,167
$ 108,970
7.
Long-Term
Debt
Long-term
debt
consists
of
the
following:
Senior
Secured
Credit
Facility:
Revolving
line
of
credit,
expires
April
19,
2018,
interest
payable
at
least
quarterly
at
either
LIBOR
and/or
prime
plus
a
margin
5.875%
Senior
Notes,
interest
payable
semi-annually
March
15
and
September
15,
net
7.75%
Senior
Notes,
interest
payable
semi-annually
March
15
and
September
15,
net
8.875%
Senior
Subordinated
Notes,
interest
payable
semi-annually
June
15
and
December
15
Other
Less
current
maturities
Long-term
debt
April
24,
2016
$
$
April
26,
2015
67,500
502,541
—
350,000
2,652
922,693
80
922,613
$
$
75,000
502,987
62,012
350,000
2,883
992,882
170
992,712
Senior Secured Credit Facility, as amended and restated —Our
Senior
Secured
Credit
Facility
as
amended
and
restated
("Credit
Facility")
consists
of
a
$300,000
revolving
line
of
credit.
The
Credit
Facility
is
secured
on
a
first
priority
basis
by
substantially
all
of
our
assets
and
guaranteed
by
all
of
our
restricted
subsidiaries.
Our
net
revolving
line
of
credit
availability
at
April
24,
2016,
as
limited
by
our
outstanding
borrowings,
was
approximately
$224,000,
after
consideration
of
$8,000
in
outstanding
letters
of
credit.
We
have
an
annual
commitment
fee
related
to
the
unused
portion
of
the
Credit
Facility
of
up
to
0.55%
which
is
included
in
interest
expense
in
the
accompanying
consolidated
statements
of
operations.
The
weighted
average
effective
interest
rates
of
the
Credit
Facility
for
fiscal
years
2016
and
2015
were
2.63%
and
3.54%,
respectively.
65
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
7.
Long-Term
Debt
(Continued)
The
Credit
Facility
includes
a
number
of
affirmative
and
negative
covenants,
as
well
as
certain
financial
covenants
including
maintenance
of
a
total
leverage
ratio,
senior
secured
leverage
ratio
and
minimum
interest
coverage
ratio.
The
Credit
Facility
also
restricts
our
ability
to
make
certain
investments
or
distributions.
We
were
in
compliance
with
the
covenants
as
of
April
24,
2016.
In
fiscal
2015,
we
amended
our
Credit
Facility
to
revise
the
definition
of
consolidated
EBITDA
to
exclude
the
costs
associated
with
the
Colorado
Referendum
and
certain
severance
expenses
related
to
the
corporate
restructuring.
In
fiscal
2014,
we
amended
our
Credit
Facility
to
modify
our
maximum
allowed
leverage
and
minimum
interest
coverage
ratio
covenants.
This
was
accounted
for
in
accordance
with
ASC
470-50,
Debt
Modifications
and
Extinguishments
and
we
capitalized
new
deferred
financing
costs
of
$673.
5.875% Senior Notes —In
March
2013,
we
issued
$350,000
of
5.875%
Senior
Notes
due
2021
("5.875%
Senior
Notes").
The
net
proceeds
were
used
to
repay
term
loan
borrowings
under
our
Credit
Facility.
On
April
14,
2015,
we
issued
an
additional
$150,000
of
5.875%
Senior
Notes
at
a
price
of
102.0%,
which
have
the
same
terms
and
are
treated
as
the
same
class
as
the
outstanding
5.875%
Senior
Notes
(the
"April
2015
issuance").
After
deducting
underwriting
fees,
the
net
proceeds
of
$151,500
from
the
April
2015
issuance
were
used
to
purchase
a
portion
of
the
7.75%
Senior
Notes
validly
tendered
pursuant
to
the
Tender
Offer
(as
defined
below).
As
a
result
of
the
April
2015
issuance,
we
capitalized
deferred
financing
costs
of
$209
in
fiscal
2016
and
$2,536
in
fiscal
2015,
respectively.
The
5.875%
Senior
Notes
are
guaranteed,
on
a
joint
and
several
basis,
by
substantially
all
of
our
significant
subsidiaries
and
certain
other
subsidiaries
as
described
in
Note
16.
All
of
the
guarantor
subsidiaries
are
wholly
owned
by
us.
The
5.875%
Senior
Notes
are
general
unsecured
obligations
and
rank
junior
to
all
of
our
senior
secured
indebtedness
and
senior
to
our
senior
subordinated
indebtedness.
The
5.875%
Senior
Notes
are
redeemable,
in
whole
or
in
part,
at
our
option
as
of
March
15,
2016,
with
call
premiums
as
defined
in
the
indenture
governing
the
5.875%
Senior
Notes.
7.75% Senior Notes —In
March
2011,
we
issued
$300,000
of
7.75%
Senior
Notes
due
2019
at
a
price
of
99.264%
("7.75%
Senior
Notes").
On
April
7,
2015,
we
launched
a
cash
tender
offer
for
any
and
all
of
our
outstanding
7.75%
Senior
Notes
(the
"Tender
Offer").
The
Tender
Offer
expired
on
April
13,
2015.
We
accepted
for
purchase
$237,832
of
the
outstanding
7.75%
Senior
Notes
validly
tendered
pursuant
to
the
Tender
Offer
and
we
funded
the
payments
utilizing
the
net
proceeds
from
the
5.875%
Senior
Notes
April
2015
issuance,
additional
borrowings
under
our
Credit
Facility
and
cash
on
hand.
The
aggregate
amount
paid
of
approximately
$250,000,
included
tender
offer
consideration
of
$1.043
per
$1.000
principal
amount
tendered,
as
well
as
accrued
and
unpaid
interest
on
the
7.75%
Senior
Notes.
As
a
result
of
the
completed
Tender
Offer,
we
incurred
expenses
related
to
the
write-off
of
deferred
financing
costs
and
the
discount,
tender
fees
and
other
related
costs
of
$13,757,
recorded
as
a
loss
on
early
extinguishment
of
debt
in
the
fiscal
2015
consolidated
statement
of
operations.
On
April
14,
2015
we
issued
an
irrevocable
notice
of
redemption
of
the
remaining
$62,168
of
outstanding
7.75%
Senior
Notes
at
a
redemption
price
of
103.875%
of
the
principal
amount,
plus
accrued
and
unpaid
interest
at
the
redemption
date
in
accordance
with
the
terms
of
the
indenture
governing
the
7.75%
Senior
Notes.
On
May
14,
2015,
we
completed
the
redemption
for
approximately
$65,000,
utilizing
additional
borrowings
under
our
Credit
Facility
and
cash
on
hand.
As
a
result
of
the
66
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
7.
Long-Term
Debt
(Continued)
redemption,
we
recorded
a
loss
of
$2,966
on
early
extinguishment
of
debt
in
the
fiscal
2016
consolidated
statement
of
operations.
8.875% Senior Subordinated Notes —On
August
7,
2012,
we
completed
the
issuance
and
sale
of
$350,000
of
8.875%
Senior
Subordinated
Notes
due
2020
("8.875%
Senior
Subordinated
Notes").
We
received
net
proceeds
of
$343,000
for
this
issuance
after
deducting
underwriting
fees.
As
a
result
of
the
issuance,
we
capitalized
deferred
financing
costs
of
$8,137.
The
8.875%
Senior
Subordinated
Notes
are
guaranteed,
on
a
joint
and
several
basis,
by
substantially
all
of
our
significant
subsidiaries
and
certain
other
subsidiaries
as
described
in
Note
16.
All
of
the
guarantor
subsidiaries
are
wholly
owned
by
us.
The
8.875%
Senior
Subordinated
Notes
are
general
unsecured
obligations
and
rank
junior
to
all
of
our
senior
indebtedness.
The
8.875%
Senior
Subordinated
Notes
are
redeemable,
in
whole
or
in
part,
at
our
option
at
any
time
as
of
June
15,
2016,
with
call
premiums
as
defined
in
the
indenture
governing
the
8.875%
Senior
Subordinated
Notes.
The
indentures
governing
the
5.875%
Senior
Notes
and
the
8.875%
Senior
Subordinated
Notes
limit,
among
other
things,
our
ability
and
our
restricted
subsidiaries'
ability
to
borrow
money,
make
restricted
payments,
use
assets
as
security
in
other
transactions,
enter
into
transactions
with
affiliates,
pay
dividends,
or
repurchase
stock.
The
indentures
also
limit
our
ability
to
issue
and
sell
capital
stock
of
subsidiaries,
sell
assets
in
excess
of
specified
amounts
or
merge
with
or
into
other
companies.
Future Principal Payments of Long-term Debt —The
aggregate
principal
payments
due
on
long-term
debt
as
of
April
24,
2016
over
the
next
five
years
and
thereafter,
are
as
follows:
Fiscal
Years
Ending:
2017
2018
2019
2020
2021
Thereafter
Debt
premium
$
80
67,587
94
102
850,111
2,178
920,152
2,541
$ 922,693
8.
Other
Long-Term
Obligations
Nemacolin Woodlands Resort —We
entered
into
agreements
with
Nemacolin
Woodland
Resort
("Resort")
in
Pennsylvania
to
construct
and
manage
a
casino,
which
we
opened
in
July
2013.
Under
terms
of
the
agreements,
the
Resort
provided
land,
land
improvements
and
a
building
for
the
casino
property.
The
Company
was
deemed,
for
accounting
purposes
only,
to
be
the
owner
of
these
assets
provided
by
the
Resort
during
the
construction
and
casino
operating
periods
due
to
our
continuing
involvement.
Therefore,
we
are
accounting
for
the
transaction
using
the
direct
financing
method.
As
of
April
24,
2016,
in
accordance
with
ASC
840,
we
have
recorded
property
and
equipment,
net
of
67
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
8.
Other
Long-Term
Obligations
(Continued)
accumulated
depreciation,
of
$5,626,
and
a
liability
of
$6,100
in
other
long-term
obligations
related
to
the
agreement.
The
other
long-term
obligations
will
be
reflected
in
our
consolidated
balance
sheets
until
completion
of
the
management
agreement,
at
which
time
the
related
fixed
assets,
net
of
accumulated
depreciation,
will
be
removed
from
our
consolidated
financial
statements
and
the
net
remaining
obligation
over
the
net
carrying
value
of
the
associated
fixed
asset
will
be
recognized
as
a
gain
(loss)
on
the
sale
of
the
facility.
Quad-Cities Waterfront Convention Center —We
entered
into
agreements
with
the
City
of
Bettendorf,
Iowa
under
which
the
City
constructed
a
convention
center
which
opened
in
January
2009,
adjacent
to
our
hotel.
We
lease,
manage,
and
provide
financial
and
operating
support
for
the
convention
center.
The
Company
was
deemed,
for
accounting
purposes
only,
to
be
the
owner
of
the
convention
center
during
the
construction
period.
Upon
completion
of
the
convention
center
we
were
precluded
from
accounting
for
the
transaction
as
a
sale
and
leaseback
due
to
our
continuing
involvement.
Therefore,
we
are
accounting
for
the
transaction
using
the
direct
financing
method.
Under
the
terms
of
our
agreements
for
the
convention
center,
we
have
guaranteed
certain
obligations
related
to
notes
issued
by
the
City
of
Bettendorf,
Iowa
for
the
convention
center.
On
May
4,
2015,
we
made
a
payment
of
approximately
$9,400
related
to
the
notes
issued
by
the
City
per
the
terms
of
our
agreement
with
borrowings
from
our
Credit
Facility.
With
this
prepayment,
we
have
fulfilled
our
financial
obligation
related
to
the
Convention
Center
and
have
no
future
payments
under
this
long-term
obligation.
The
remaining
balance
of
the
long-term
obligation
will
remain
on
our
consolidated
balance
sheet
until
completion
of
the
lease
agreement,
at
which
time
the
related
fixed
assets,
net
of
accumulated
depreciation,
and
the
net
remaining
obligation
over
the
net
carrying
value
of
the
associated
fixed
assets
will
be
recognized
as
a
gain
on
sale
of
the
facility.
As
of
April
24,
2016,
we
have
recorded
in
other
long-term
obligations
$7,812
related
to
our
liability
under
ASC
840
related
to
the
convention
center.
9.
Income
Taxes
Income
tax
(provision)
benefit
from
continuing
operations
consists
of
the
following:
Current:
Federal
State
Deferred:
Federal
State
Income
tax
(provision)
benefit
68
April
24,
2016
$
$
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
—
(128)
(128)
(2,623)
(1,427)
(4,050)
(4,178)
$
—
$
—
(167) 7,352
(167) 7,352
(3,219) 10,116
2,275
1,026
(944) 11,142
$ (1,111) $ 18,494
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
9.
Income
Taxes
(Continued)
A
reconciliation
of
income
taxes
from
continuing
operations
at
the
statutory
corporate
federal
tax
rate
of
35%
to
the
income
tax
(provision)
benefit
reported
in
the
accompanying
consolidated
statements
of
operations
is
as
follows:
Statutory
tax
(provision)
benefit
Effects
of
:
State
taxes,
net
of
federal
effect
Reduction
of
unrecognized
tax
benefits
Other
Lobbying
&
Referendum
costs
Employment
tax
credits
Fines
&
Penalties
Meals
&
Entertainment
Various
permanent
differences
Interest
Goodwill
impairment
Valuation
allowance
Expiration
of
stock
awards
Other
Income
tax
(provision)
benefit
69
April
24,
2016
Fiscal
Year
Ended
April
26,
April
27,
2015
2014
$ (18,364) $ (2,940) $ 47,354
930
3,542
10,337
—
—
5,010
(671) (2,018) (607)
767
932
1,027
(35) (17) (25)
(55) (46) (60)
(421) (14) (15)
—
—
(446)
—
—
(42,083)
12,615
(109) (1,031)
—
(611) —
1,056
170
(967)
$ (4,178) $ (1,111) $ 18,494
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
9.
Income
Taxes
(Continued)
Significant
components
of
our
domestic
net
deferred
income
tax
asset
(liability)
are
as
follows:
Fiscal
Year
Ended
April
24,
April
26,
2016
2015
Deferred
tax
liabilities:
Property
and
equipment
Goodwill
and
intangibles
Gain
on
early
extinguishment
of
debt
Other
Total
deferred
tax
liabilities
Deferred
tax
assets:
Net
operating
losses
Employment
tax
credits
Accrued
expenses
Alternative
minimum
tax
credit
Other
Total
deferred
tax
assets
Valuation
allowance
on
deferred
tax
assets
Net
deferred
tax
asset
Net
deferred
tax
liability
$
$
(40,709)
(22,727)
(9,751)
(382)
(73,569)
40,061
21,973
13,564
4,103
14,355
94,056
(57,245)
36,811
(36,758)
$
$
(37,421)
(21,527)
(14,613)
(347)
(73,908)
62,672
22,378
8,383
2,481
14,503
110,417
(69,217)
41,200
(32,708)
Deferred
income
tax
assets
represent
amounts
available
to
reduce
income
taxes
payable
on
taxable
income
in
future
years.
Such
assets
arise
from
net
operating
loss
and
tax
credit
carryforwards,
as
well
as
from
temporary
basis
differences
in
assets
and
liabilities
between
financial
reporting
and
tax.
At
April
24,
2016,
we
have
federal
net
operating
loss
carryforwards
of
$45,432
for
income
tax
purposes,
with
expiration
dates
from
fiscal
2031
to
2036.
Approximately
$10,967
of
these
net
operating
losses
are
attributable
to
our
Colorado
subsidiaries
and
can
only
be
used
to
offset
income
earned
by
these
entities.
The
remaining
federal
net
operating
losses
are
subject
to
limitations
under
the
internal
revenue
code
and
underlying
treasury
regulations,
which
may
limit
the
amount
ultimately
utilized.
We
also
have
various
state
income
tax
net
operating
loss
carryforwards
totaling
$390,804
with
expiration
dates
from
fiscal
2018
to
2036.
This
includes
both
consolidated
and
separate
company
net
operating
loss
carryforwards.
Our
federal
and
state
net
operating
loss
carryforwards
include
adjustments
of
$15,740
and
$16,733,
respectively,
for
excess
tax
benefits
from
stock
compensation
deductions
that
have
not
yet
been
recognized
for
financial
statement
purposes.
Equity
will
be
increased
if
and
when
these
deferred
tax
assets
are
realized.
We
also
have
federal
general
business
and
alternative
minimum
tax
credit
carryforwards
of
$26,075
for
income
tax
purposes,
with
expiration
dates
from
fiscal
2022
to
2036.
For
the
current
period,
all
deferred
income
taxes,
including
those
related
to
NOL
carryforwards,
have
been
classified
as
noncurrent
in
the
consolidated
balance
sheet
in
accordance
with
FASB
Update
No.
2015-17.
We
have
applied
this
amendment
on
a
prospective
basis
and
prior
period
amounts
have
not
been
retrospectively
adjusted.
70
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
9.
Income
Taxes
(Continued)
We
periodically
evaluate
the
realizability
of
our
deferred
tax
assets
and
perform
an
analysis
in
light
of
all
available
evidence,
both
positive
and
negative,
consistent
with
the
provisions
of
ASC
740.
As
of
April
24,
2016,
we
remain
in
a
three-year
cumulative
loss,
which
is
a
significant
piece
of
negative
evidence.
While
it
is
primarily
the
result
of
intangible
and
fixed
asset
impairments,
and
not
an
indication
of
continuing
operations,
we
are
required
to
give
objective
historical
evidence
significantly
more
weight
than
subjective
evidence,
such
as
forecasts
of
future
income.
Based
on
this
evidence,
we
concluded
that
a
valuation
allowance
should
continue
to
be
booked
against
our
federal
and
most
of
our
state
deferred
tax
assets
as
of
April
24,
2016.
During
fiscal
2015,
our
Florida
operations
experienced
their
third
consecutive
year
of
substantive
pretax
income.
After
considering
all
of
the
positive
and
negative
evidence,
we
concluded
that
our
deferred
income
tax
assets
related
to
our
Florida
state
operations
are
more
likely
than
not
to
be
realized.
Accordingly,
as
of
April
26,
2015,
we
released
all
of
our
valuation
allowance
against
our
net
Florida
deferred
income
tax
assets,
resulting
in
the
$2,301
benefit
in
our
provision
for
income
taxes.
A
reconciliation
of
the
beginning
and
ending
amounts
of
valuation
allowance
is
as
follows:
Balance,
April
27,
2014
(Benefit)
Provision
Release
of
Valuation
Allowance
Balance,
April
26,
2015
(Benefit)
Provision
Balance,
April
24,
2016
Federal
State
$ 40,885
$
(1,377) —
$ 39,508
$
(13,956) $ 25,552
$
Total
26,177
5,833
(2,301)
29,709
1,984
31,693
$ 67,062
4,456
(2,301)
$ 69,217
(11,972)
$ 57,245
We
allocated
the
income
tax
provision
and
valuation
allowance
between
continuing
operations
and
discontinued
operations
consistent
with
the
provisions
of
ASC
740.
During
fiscal
2016,
a
decrease
to
the
valuation
allowance
of
$11,972
was
recorded
as
an
income
tax
benefit
due
to
current
year
earnings.
The
ending
valuation
allowance
balance
does
not
preclude
us
from
utilizing
the
deferred
tax
assets
in
the
future,
nor
does
it
reflect
a
change
in
our
long-term
outlook.
If
or
when
recognized,
the
tax
benefits
relating
to
any
reversal
of
the
valuation
allowance
on
deferred
tax
assets
as
of
April
24,
2016
will
be
accounted
for
as
a
reduction
of
income
tax
expense.
We
account
for
unrecognized
tax
benefits
in
accordance
with
ASC
740.
A
reconciliation
of
the
beginning
and
ending
amounts
of
unrecognized
tax
benefits
as
follows:
Beginning
balance
Impact
of
favorable
court
ruling
Ending
balance
April
24,
April
26,
2016
2015
$
$
—
$
—
—
$
April
27,
2014
—
$ 4,072
—
(4,072)
—
$
—
On
February
13,
2014,
the
Supreme
Court
of
Mississippi
ruled
in
our
favor
with
regard
to
positions
taken
on
Mississippi
income
tax
returns
for
fiscal
years
ending
April
2002
through
April
2008.
71
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
9.
Income
Taxes
(Continued)
As
a
result,
we
recognized
a
benefit
of
$4,072
related
to
principle
and
$4,025
related
to
interest.
As
of
April
24,
2016,
we
do
not
have
any
uncertain
tax
positions.
We
recorded
interest
expense
of
$0,
$0
and
$390
in
fiscal
2016,
2015
and
2014,
respectively,
prior
to
the
favorable
ruling.
We
accrued
no
penalties
during
fiscal
2016,
2015
or
2014.
As
of
April
24,
2016,
we
were
subject
to
U.S.
federal
income
tax
examination
for
fiscal
years
2009
to
2015.
We
are
also
subject
to
state
and
local
income
tax
examinations
for
various
tax
years
in
jurisdictions
where
we
operate.
10.
Earnings
Per
Share
The
following
table
sets
forth
the
computation
of
basic
and
diluted
earnings
(loss)
per
share
(in
thousands,
except
share
and
per
share
amounts):
April
24,
2016
Numerator:
Income
(loss)
applicable
to
common
shares:
Income
(loss)
from
continuing
operations
attributable
to
common
stockholders
Loss
from
discontinued
operations
Net
income
(loss)
attributable
to
the
common
stockholders
Denominator:
Denominator
for
basic
income
(loss)
per
share—weighted
average
shares Effect
of
dilutive
securities
Employee
stock
options
Restricted
stock
units
Denominator
for
diluted
income
(loss)
per
share—adjusted
weighted
average
shares
and
assumed
conversions
Basic
income
(loss)
per
share
attributable
to
common
stockholders
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
Net
loss
attributable
to
common
stockholders
Diluted
income
(loss)
per
share
attributable
to
common
stockholders
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations
Net
income
(loss)
attributable
to
common
stockholders
72
Fiscal
Year
Ended
April
26,
2015
April
27,
2014
$
48,289
$
7,290
$
(116,803)
(2,085) (2,113) (10,883)
$
46,204
$
5,177
$
(127,686)
40,690,929
39,955,735
39,731,766
109,244
84,938
—
523,300
279,594
—
41,323,473
40,320,267
39,731,766
$
1.19
$
0.18
$
(2.94)
(0.05) (0.05) (0.27)
$
1.14
$
0.13
$
(3.21)
$
1.17
$
0.18
$
(2.94)
(0.05) (0.05) (0.27)
$
1.12
$
0.13
$
(3.21)
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
10.
Earnings
Per
Share
(Continued)
Our
basic
earnings
(loss)
per
share
are
computed
by
dividing
net
income
(loss)
by
the
weighted
average
number
of
shares
outstanding
for
the
period.
Stock
options
representing
444,365
shares,
which
were
anti-dilutive,
were
excluded
from
the
calculation
of
common
shares
for
diluted
earnings
per
share
for
fiscal
2016.
Stock
options
representing
205,060
shares,
which
were
anti-dilutive,
were
excluded
from
the
calculation
of
common
shares
for
diluted
earnings
per
share
for
fiscal
2015.
Due
to
the
loss
from
continuing
operations,
stock
options
representing
52,501
shares,
which
were
potentially
dilutive
and
753,860
stock
options,
which
were
anti-dilutive,
were
excluded
from
the
calculation
of
common
shares
for
diluted
earnings
per
share
for
fiscal
2014.
Restricted
stock
units
representing
48,362
shares,
which
were
potentially
dilutive,
and
1,254,413
restricted
stock
units
whose
minimum
market
performance
conditions
had
not
been
achieved,
were
also
excluded
from
the
calculation
of
diluted
earnings
per
share
for
fiscal
2014.
11.
Stock
Based
Compensation
Under
our
amended
and
restated
Long
Term
Incentive
Plan,
we
have
issued
restricted
stock
units,
performance-based
restricted
stock
units,
restricted
stock
and
stock
options.
Restricted Stock Units —During
fiscal
2016,
we
granted
104,982
restricted
stock
units
("RSUs")
to
employees
with
a
fair
market
value
of
$14.89
per
unit
on
the
date
of
grant.
The
RSUs
will
vest
and
be
converted
to
stock
ratably
over
three
years
commencing
on
the
one-year
anniversary
of
the
grant
date.
The
aggregate
compensation
cost
related
to
these
RSUs
was
$1,563
to
be
recognized
over
the
vesting
periods.
Our
aggregate
estimate
of
forfeitures
for
these
RSUs
is
25%.
Per
the
terms
of
the
agreement,
the
awards
are
issued
net
of
shares
necessary
to
pay
minimum
withholding
taxes.
Subsequent
to
year-end,
21,022
shares
were
issued
for
the
first
tranche
vesting
on
April
27,
2016.
A
summary
of
restricted
stock
unit
activity
for
fiscal
2016
is
presented
below:
Outstanding
at
April
26,
2015
Granted
Vested
Forfeited
and
expired
Outstanding
at
April
24,
2016
As
of
April
24,
2016:
Weighted
average
remaining
contractual
term
Aggregate
intrinsic
value:
Outstanding
Nonvested:
Unrecognized
compensation
cost
Weighted
average
remaining
vesting
period
73
Restricted
Stock
Units
Weighted
Average
Grant-Date
Fair
Value —
$
104,982
—
—
104,982
$
1.5
years
$
1,572
$
381
1.5
years
—
14.89
—
—
14.89
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
11.
Stock
Based
Compensation
(Continued)
During
fiscal
2013,
we
granted
RSUs
containing
market
performance
conditions
which
determined
the
ultimate
amount
of
RSUs
to
be
awarded.
The
market
condition
period
ended
on
April
26,
2015
and
a
gross
award
of
1,532,417
shares
was
achieved.
Per
the
terms
of
the
agreement,
the
awards
are
issued
net
of
shares
necessary
to
pay
minimum
withholding
taxes
with
50%
of
the
RSUs
vesting
on
April
26,
2015
and
the
remaining
50%
vesting
on
April
26,
2016.
On
April
26,
2015,
459,473
net
shares
were
issued
for
the
first
vested
tranche.
Subsequent
to
year-end,
467,073
net
shares
were
issued
for
the
second
vested
tranche
on
April
26,
2016.
The
fair
value
of
these
RSUs
was
initially
determined
utilizing
a
lattice
pricing
model
which
considers
a
range
of
assumptions
including
volatility
and
riskfree
interest
rates.
The
aggregate
compensation
cost
related
to
these
RSUs
was
$4,637
recognized
over
the
vesting
periods.
Performance-based Restricted Stock Units —During
fiscal
2016,
we
granted
performance-based
restricted
stock
units
("PRSUs"),
with
a
company
performance
condition
which
will
determine
the
number
of
shares
which
will
ultimately
vest,
if
any,
up
to
251,964
shares
with
a
fair
market
value
of
$14.89
per
unit
on
the
date
of
grant.
Any
shares
earned
will
vest
at
the
end
of
three
years
from
the
date
of
grant.
Probability
of
meeting
the
performance
condition
is
assessed
on
a
regular
basis
and
compensation
cost
is
adjusted
accordingly.
As
of
April
24,
2016,
our
estimated
unrecognized
compensation
cost
remaining
on
the
PRSUs
was
$1,338
with
an
estimated
aggregate
forfeiture
of
37%.
Restricted Stock —We
have
issued
shares
of
restricted
common
stock
to
employees
and
directors
under
our
Long
Term
Incentive
Plan.
Restricted
stock
awarded
to
employees
primarily
vests
one-third
on
each
of
the
first
three
anniversaries
of
the
grant
date
and
for
directors'
vests
one-half
on
the
grant
date
and
onehalf
on
the
first
anniversary
of
the
grant
date.
Our
aggregate
estimate
of
forfeitures
for
restricted
stock
for
employees
is
9%.
A
summary
of
restricted
stock
activity
for
fiscal
2016
is
presented
below:
Outstanding
at
April
26,
2015
Granted
Vested
Forfeited
and
expired
Outstanding
at
April
24,
2016
As
of
April
24,
2016:
Weighted
average
remaining
contractual
term
Aggregate
intrinsic
value:
Outstanding
Nonvested:
Unrecognized
compensation
cost
Weighted
average
remaining
vesting
period
Restricted
Stock
74
$
$
325,074
141,353
(238,669)
(7,433)
220,325
0.8
years
3,299
1,093
0.8
years
Weighted
Average
Grant-Date
Fair
Value $
$
7.28
19.80
7.88
12.72
14.33
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
11.
Stock
Based
Compensation
(Continued)
Stock Options —We
have
issued
incentive
stock
options
and
nonqualified
stock
options
which
have
a
maximum
term
of
10
years
and
are,
generally,
exercisable
in
yearly
installments
of
20%
commencing
one
year
after
the
date
of
grant.
During
fiscal
2016,
we
issued
378,905
stock
options
which
have
a
maximum
term
of
seven
years
and
are
exercisable
in
yearly
installments
of
20%
commencing
one
year
after
the
grant
date.
The
options
have
a
per
share
grant
date
fair
value
of
$5.764
utilizing
the
Black-Scholes-Merton
option
pricing
model.
Our
aggregate
estimate
of
forfeitures
for
stock
options
is
30%.
There
were
no
stock
options
granted
in
fiscal
2015
or
2014.
A
summary
of
stock
option
activity
for
fiscal
2016
is
presented
below:
Outstanding
at
April
26,
2015
Granted
Exercised
Forfeited
and
expired
Outstanding
at
April
24,
2016
As
of
April
24,
2016:
Outstanding
exercisable
options
Weighted
average
remaining
contractual
term
Aggregate
intrinsic
value:
Outstanding
exercisable
Outstanding
Nonvested:
Unrecognized
compensation
cost
Options
Weighted
Average
Exercise
Price
405,060
$
378,905
(134,000) (39,600) 610,365
$
610,365
$
4.7
years
$
1,056
$
1,100
$
743
11.18
14.86
6.48
21.35
13.84
13.84
Subsequent Event —Subsequent
to
our
fiscal
year
ended
April
24,
2016,
we
granted
restricted
stock
units
and
stock
options
to
certain
employees
under
the
Long-Term
Incentive
Plan.
We
issued
145,516
restricted
stock
units
with
a
weighted
average
fair
market
value
of
$15.16
per
unit
on
the
date
of
grant.
The
restricted
stock
units
will
vest
and
be
converted
to
stock
ratably
over
three
years
commencing
on
the
one
year
anniversary
of
the
grant
date.
We
also
issued
310,735
stock
options
which
have
a
maximum
term
of
seven
years
and
are
exercisable
in
yearly
installments
of
20%
commencing
one
year
after
the
grant
date.
The
options
have
a
per
share
grant
date
fair
value
of
$5.968
utilizing
the
Black-Scholes-Merton
option
pricing
model.
In
addition,
we
granted
performance-based
restricted
stock
units
("PRSUs"),
with
a
company
performance
condition
which
will
determine
the
number
of
shares
which
will
ultimately
vest,
if
any,
up
to
216,699
shares.
Any
shares
earned
will
vest
at
the
end
of
three
years
from
the
date
of
grant.
Probability
of
meeting
the
performance
condition
will
be
assessed
on
a
regular
basis
and
compensation
cost
will
be
adjusted
accordingly.
Stock Compensation Expense —Total
stock
compensation
expense
from
continuing
operations
in
the
accompanying
consolidated
statements
of
operations
was
$5,069,
$3,396
and
$4,383
for
the
fiscal
years
2016,
2015,
and
2014,
respectively.
We
recognize
compensation
expense
for
our
stock-based
awards
on
a
straightline
basis
over
the
requisite
service
period
for
each
separately
vesting
portion
of
the
award.
75
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
11.
Stock
Based
Compensation
(Continued)
Share Based Plans —Information
relating
to
our
share
based
plans
is
as
follows:
Restricted
Stock
Units:
Fair
value
of
restricted
stock
units
vested
during
the
year
Restricted
Stock:
Fair
value
of
restricted
stock
vested
during
the
year
Stock
Options:
Intrinsic
value
of
stock
options
exercised
Proceeds
from
stock
option
exercises
April
24,
2016
$
—
1,881
1,436
869
April
26,
2015
April
27,
2014
$ 11,451
$
3,238
57
74
—
3,660
—
—
We
have
2,949,054,
shares
available
for
future
issuance
under
our
equity
compensation
plan
as
of
April
24,
2016.
After
consideration
of
activity
subsequent
to
year-end,
we
have
2,522,355
shares
available
for
future
issuance
in
the
plan.
During
fiscal
2016,
we
added
2,000,000
shares
to
the
plan.
Upon
issuance
of
restricted
shares,
vesting
of
RSUs
or
exercise
of
stock
options,
shares
may
be
issued
from
available
treasury
or
common
shares.
Tax effect of Stock Based Compensation —Upon
the
exercise
of
stock
options,
vested
restricted
stock
and
vested
RSUs,
the
tax
benefit
(provision)
related
to
stock
compensation,
subject
to
certain
limitations,
is
recognized
as
an
addition
to
or
deduction
from
additional
paid-in
capital.
During
fiscal
year
2016,
there
was
no
impact
to
additional
paid-in
capital
related
to
the
vesting
of
restricted
stock
and
exercise
of
stock
options.
At
April
24,
2016,
we
have
$6,422
of
unrecognized
tax
benefits
associated
with
stock
exercises
and
restricted
stock
vesting
due
to
our
net
operating
loss
position.
Stock Repurchase —Our
Board
of
Directors
has
approved
a
stock
repurchase
program,
as
amended,
allowing
up
to
6,000,000
shares
of
our
common
stock
to
be
repurchased.
As
of
April
24,
2016,
we
have
repurchased
4,895,792
shares
of
common
stock,
and
retired
553,800
shares
of
common
stock
under
this
stock
repurchase
program.
No
shares
were
repurchased
in
fiscal
years
2016,
2015
or
2014.
12.
Supplemental
Disclosure
of
Cash
Flow
Information
For
the
fiscal
years
2016,
2015
and
2014,
we
made
cash
payments
for
interest,
net
of
capitalized
interest,
of
$65,061,
$81,023
and
$85,472,
respectively.
We
made
income
tax
payments,
net
of
refunds,
of
$134
in
fiscal
2016
and
received
income
tax
refunds,
net
of
payments,
of
$29
and
$4,354
in
fiscal
2015
and
2014,
respectively.
For
fiscal
2016
and
2015,
the
change
in
accrued
purchases
of
property
and
equipment
in
accounts
payable
increased
by
$7,923
and
$1,959,
respectively,
and
decreased
by
$7,149
in
fiscal
2014.
For
fiscal
2016
and
2015,
we
capitalized
interest
of
$600
and
$23,
primarily
related
to
the
land-based
and
hotel
renovations
at
our
Bettendorf
property.
For
fiscal
2014,
we
capitalized
interest
of
$185
primarily
related
to
construction
of
our
casino
at
the
Nemacolin
Woodland
Resort
in
Pennsylvania.
76
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
13.
Employee
Benefit
Plans
401(k) Plan —We
have
a
401(k)
plan
covering
substantially
all
of
our
employees
who
have
completed
90
days
of
service.
Expense
for
our
contributions
from
continuing
operations
related
to
the
401(k)
plan
was
$1,731,
$1,454
and
$1,412
in
fiscal
years
2016,
2015,
and
2014,
respectively.
Our
contribution
is
based
on
a
percentage
of
employee
contributions
and
may
include
an
additional
discretionary
amount.
2005 Deferred Compensation Plan —Our
2005
Deferred
Compensation
Plan
(the
"Plan"),
as
amended
and
restated,
is
an
unfunded
deferred
compensation
arrangement
for
the
benefit
of
key
management
officers
and
employees
of
the
Company
and
its
subsidiaries.
The
terms
of
the
Plan
include
the
ability
of
the
participants
to
defer,
on
a
pre-tax
basis,
salary,
and
bonus
payments
in
excess
of
the
amount
permitted
under
IRS
Code
Section
401(k).
The
terms
also
allow
for
a
discretionary
annual
matching
contribution
by
the
Company.
The
Plan
allows
for
the
aggregation
and
investment
of
deferred
amounts
in
notional
investment
alternatives,
including
units
representing
shares
of
our
common
stock.
The
liability
related
to
the
Plan
as
of
April
24,
2016
and
April
26,
2015
was
$3,564
and
$3,953,
respectively,
and
is
included
in
long-term
other
accrued
liabilities
in
the
consolidated
balance
sheets.
For
fiscal
2016
and
fiscal
2015,
there
were
no
discretionary
matching
contributions
by
the
Company.
For
fiscal
2014,
expense
from
continuing
operations
for
the
Company's
discretionary
matching
contribution
related
to
the
Plan
was
$79.
14.
Interest
Rate
Derivatives
We
previously
had
interest
rate
derivative
agreements
in
order
to
manage
market
risk
on
variable
rate
loans
outstanding.
We
had
an
interest
rate
swap
agreement
with
an
aggregate
notional
value
of
$50,000
that
matured
in
September
2013.
During
fiscal
2010,
our
interest
rate
swaps
no
longer
met
the
criteria
for
hedge
effectiveness
and
changes
in
the
fair
value
of
the
swaps
since
that
date
were
recorded
in
derivative
income
in
the
consolidated
statements
of
operations.
The
cumulative
loss
recorded
in
other
comprehensive
income
(loss),
through
the
date
of
ineffectiveness,
was
amortized
into
derivative
expense
over
the
remaining
term
of
the
individual
interest
rate
swap
agreements.
The
loss
recorded
in
accumulated
other
comprehensive
income
(loss)
of
our
interest
rate
swap
contracts
is
recorded
net
of
deferred
income
tax
benefits
of
$149
as
of
April
27,
2014.
Derivative
income
related
to
the
change
in
fair
value
of
interest
rate
swap
contracts
was
$794
in
fiscal
2014.
Derivative
expense
realized
associated
with
the
amortization
of
cumulative
loss
recorded
in
other
comprehensive
income
(loss)
for
the
interest
rate
swaps
through
the
date
of
ineffectiveness
is
as
follows:
Accumulated
OCI
amortization
Change
in
deferred
taxes
Derivative
expense
$
77
Fiscal
Year
Ended
April
27,
2014
247
149
(396)
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
15.
Fair
Value
ASC
Topic
820,
Fair
Value
Measurements
and
Disclosures
("ASC
820")
establishes
a
hierarchy
that
prioritizes
fair
value
measurements
based
on
the
types
of
inputs
used
for
the
various
valuation
techniques
(market
approach,
income
approach,
and
cost
approach).
The
levels
of
hierarchy
are
described
below:
Level
1:
Inputs
such
as
quoted
prices
in
active
markets
for
identical
assets
or
liabilities
that
can
be
accessed
at
the
measurement
date.
Level
2:
Inputs
other
than
quoted
prices
included
within
Level
1
that
are
observable
for
the
asset
or
liability,
either
directly
or
indirectly,
including
quoted
prices
for
similar
assets
in
active
markets,
quoted
prices
from
identical
or
similar
assets
in
inactive
markets
and
observable
inputs
such
as
interest
rate
and
yield
curves.
Level
3:
Inputs
that
are
not
observable
in
the
market
and
that
include
management's
judgments
about
assumptions
market
participants
would
use.
Items Measured at Fair Value on a Recurring Basis —The
following
table
sets
forth
the
assets
measured
at
fair
value
on
a
recurring
basis,
by
input
level,
in
the
consolidated
balance
sheets
at
April
24,
2016
and
April
26,
2015:
Assets:
Marketable
securities
Restricted
cash
and
investments
Level
1
April
24,
2016
Level
2
Total
$ 8,950
$ 10,388
$ 19,338
6,362
3,457
9,819
Assets:
Marketable
securities
Restricted
cash
and
investments
Level
1
April
26,
2015
Level
2
Total
$ 6,809
$ 12,708
$ 19,517
5,553
3,640
9,193
Marketable securities— The
estimated
fair
values
of
our
marketable
securities
are
determined
on
an
individual
asset
basis
based
upon
quoted
prices
of
identical
assets
available
in
active
markets
(Level
1),
quoted
prices
of
identical
assets
in
inactive
markets,
or
quoted
prices
for
similar
assets
in
active
and
inactive
markets
(Level
2),
and
represent
the
amounts
we
would
expect
to
receive
if
we
sold
these
marketable
securities.
Restricted cash and investments— The
estimated
fair
values
of
our
restricted
cash
and
investments
are
based
upon
quoted
prices
available
in
active
markets
(Level
1),
or
quoted
prices
for
similar
assets
in
active
and
inactive
markets
(Level
2),
and
represent
the
amounts
we
would
expect
to
receive
if
we
sold
our
restricted
cash
and
investments.
There
were
no
transfers
between
level
1
and
level
2
investments.
78
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
15.
Fair
Value
(Continued)
Other Financial Instruments —The
estimated
carrying
amounts
and
fair
values
of
our
other
financial
instruments
are
as
follows:
Financial
liabilities:
Revolving
line
of
credit
5.875%
Senior
notes
7.75%
Senior
notes
8.875%
Senior
subordinated
notes
Other
long-term
debt
Other
long-term
obligations
April
24,
2016
Carrying
Amount
Fair
Value
April
26,
2015
Carrying
Amount
Fair
Value
$ 67,500
$ 66,150
$ 75,000
$ 73,875
502,541
520,000
502,987
515,055
—
—
62,012
64,593
350,000
367,206
350,000
383,915
2,652
2,652
2,883
2,883
13,912
13,912
22,211
22,211
The
fair
value
of
our
long-term
debt
or
other
long-term
obligations
is
estimated
based
on
the
quoted
market
price
of
the
underlying
debt
issue
(Level
1)
or,
when
a
quoted
market
price
is
not
available,
the
discounted
cash
flow
of
future
payments
utilizing
current
rates
available
to
us
for
debt
of
similar
remaining
maturities
(Level
3).
Debt
obligations
with
a
short
remaining
maturity
have
a
carrying
amount
that
approximates
fair
value.
16.
Consolidating
Condensed
Financial
Information
Certain
of
our
wholly
owned
subsidiaries
have
fully
and
unconditionally
guaranteed
on
a
joint
and
several
basis,
the
payment
of
all
obligations
under
our
5.875%
Senior
Notes
and
8.875%
Senior
Subordinated
Notes.
The
following
wholly
owned
subsidiaries
of
the
Company
are
guarantors,
on
a
joint
and
several
basis,
under
the
5.875%
Senior
Notes
and
8.875%
Senior
Subordinated
Notes:
Black
Hawk
Holdings,
L.L.C.;
CCSC/Blackhawk,
Inc.;
IC
Holdings
Colorado,
Inc.;
IOC-Black
Hawk
Distribution
Company,
L.L.C.;
IOCBoonville,
Inc.;
IOC-Caruthersville,
L.L.C.;
IOC-Kansas
City,
Inc.;
IOC-Lula,
Inc.;
IOC-Natchez,
Inc.;
IOC-Black
Hawk
County,
Inc.;
IOC
Holdings,
L.L.C.;
IOC-Vicksburg,
Inc.;
IOC-Vicksburg,
LLC;
Rainbow
Casino-
Vicksburg
Partnership,
L.P.;
IOC
Cape
Girardeau,
LLC;
Isle
of
Capri
Bettendorf,
L.C;
Isle
of
Capri
Black
Hawk,
L.L.C.;
Isle
of
Capri
Marquette,
Inc.;
PPI,
Inc.;
and
St.
Charles
Gaming
Company,
L.L.C.
Each
of
the
subsidiaries'
guarantees
is
joint
and
several
with
the
guarantees
of
the
other
subsidiaries.
During
fiscal
2015,
our
wholly
owned
subsidiary,
IOC-Davenport,
Inc.,
changed
designations
from
a
Guarantor
Subsidiary
to
a
Non-Guarantor
Subsidiary.
All
periods
presented
below
reflect
the
operations
of
IOC-Davenport,
Inc.
as
a
Non-Guarantor
Subsidiary.
79
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Consolidating
condensed
balance
sheets
as
of
April
24,
2016
and
April
26,
2015
are
as
follows:
Balance
Sheet
Current
assets
Intercompany
receivables
Investments
in
subsidiaries
Property
and
equipment,
net
Other
assets
Total
assets
Current
liabilities
Intercompany
payables
Long-term
debt,
less
current
maturities
Other
accrued
liabilities
Stockholders'
equity
Total
liabilities
and
stockholders'
equity
As
of
April
24,
2016
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
Guarantor
Subsidiaries
$
10,575
$
76,646
424,693
—
586,569
3,358
3,650
871,353
15,130
169,487
$ 1,040,617
$ 1,120,844
$
35,862
$
77,128
—
371,104
922,613
—
6,524
74,267
75,618
598,345
$ 1,040,617
$ 1,120,844
Non-
Guarantor
Subsidiaries
$
$
$
$
Consolidating
and
Eliminating
Entries
25,804
—
—
24,164
26,974
76,942
24,687
53,589
—
7,084
(8,418)
76,942
Isle
of
Capri
Casinos,
Inc.
Consolidated
$
(130) $ 112,895
(424,693) —
(589,927) —
—
899,167
(18,504) 193,087
$ (1,033,254) $ 1,205,149
$
(130) $ 137,547
(424,693) —
—
922,613
(18,504) 69,371
(589,927) 75,618
$ (1,033,254) $ 1,205,149
Balance
Sheet
Current
assets
Intercompany
receivables
Investments
in
subsidiaries
Property
and
equipment,
net
Other
assets
Total
assets
Current
liabilities
Intercompany
payables
Long-term
debt,
less
current
maturities
Other
accrued
liabilities
Stockholders'
equity
Total
liabilities
and
stockholders'
equity
As
of
April
26,
2015
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
Guarantor
Subsidiaries
$
14,582
$
79,118
433,527
—
573,258
3,358
4,844
869,486
32,217
160,727
$ 1,058,428
$ 1,112,689
$
36,304
$
71,723
—
425,267
992,650
—
6,012
73,982
23,462
541,717
$ 1,058,428
$ 1,112,689
80
Non-
Guarantor
Subsidiaries
$
$
$
$
26,157
—
—
27,896
22,123
76,176
25,769
8,260
62
7,186
34,899
76,176
Consolidating
and
Eliminating
Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
$
(185) $ 119,672
(433,527) —
(576,616) —
—
902,226
(9,203) 205,864
$ (1,019,531) $ 1,227,762
$
(185) $ 133,611
(433,527) —
—
992,712
(9,203) 77,977
(576,616) 23,462
$ (1,019,531) $ 1,227,762
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Consolidating
condensed
statements
of
operations
for
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014
are
as
follows:
Statement
of
Operations
Revenues:
Casino
Rooms,
food,
beverage,
pari-mutuel
and
other
Management
fee
revenue
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms,
food,
beverage,
pari-mutuel
and
other
Management
fee
expense
Depreciation
and
amortization
Total
operating
expenses
Operating
income
(loss)
Interest
expense,
net
Loss
on
early
extinguishment
of
debt
Equity
in
income
(loss)
of
subsidiaries
Income
(loss)
from
continuing
operations
before
income
taxes
Income
tax
(provision)
benefit
Income
(loss)
from
continuining
operations
Income
(loss)
of
discontinued
operations
Net
income
(loss)
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
$
—
77
35,280
35,357
—
35,357
—
—
30,811
—
1,742
32,553
2,804
(30,499)
(2,966)
55,433
$
24,772
23,517
48,289
(2,085)
46,204
81
For
the
Fiscal
Year
Ended
April
24,
2016
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
$ 986,968
$
157,665
—
1,144,633
(202,437) 942,196
145,763
245,405
316,192
34,080
76,073
817,513
124,683
(35,281) —
—
41,079
12,039
—
53,118
(8,911)
44,207
6,950
16,511
19,596
1,200
4,290
48,547
(4,340)
(1,934)
—
—
$
—
(7,888)
(35,280)
(43,168)
—
(43,168)
—
—
(7,888)
(35,280)
—
(43,168)
—
—
—
(55,433)
$ 1,028,047
161,893
—
1,189,940
(211,348)
978,592
152,713
261,916
358,711
—
82,105
855,445
123,147
(67,714)
(2,966)
—
$
(6,274)
3,333
(2,941)
—
(2,941)
$
(55,433)
—
(55,433)
2,151
(53,282)
$
89,402
(31,028)
58,374
(2,151)
56,223
$
52,467
(4,178)
48,289
(2,085)
46,204
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Statement
of
Operations
Revenues:
Casino
Rooms,
food,
beverage,
pari-mutuel
and
other
Management
fee
revenue
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms,
food,
beverage,
pari-mutuel
and
other
Valuation
charges
Management
fee
expense
Depreciation
and
amortization
Total
operating
expenses
Operating
income
(loss)
Interest
expense,
net
Loss
on
early
extinguishment
of
debt
Equity
in
income
(loss)
of
subsidiaries
Income
(loss)
from
continuing
operations
before
income
taxes
Income
tax
(provision)
benefit
Income
(loss)
from
continuining
operations
Income
(loss)
of
discontinued
operations
Net
income
(loss)
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
For
the
Fiscal
Year
Ended
April
26,
2015
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
$
—
91
34,869
34,960
—
34,960
—
—
33,520
—
—
1,990
35,510
(550)
(43,775)
(13,757)
43,319
$ 990,785
$
163,494
—
1,154,279
(212,101) 942,178
149,778
247,395
321,692
—
33,669
70,344
822,878
119,300
(37,865) —
—
41,456
12,942
—
54,398
(10,737)
43,661
6,769
15,967
18,091
9,000
1,200
5,464
56,491
(12,830)
(2,122)
—
—
$
—
(8,885)
(34,869)
(43,754)
—
(43,754)
—
—
(8,885)
—
(34,869)
—
(43,754)
—
—
—
(43,319)
$ 1,032,241
167,642
—
1,199,883
(222,838)
977,045
156,547
263,362
364,418
9,000
—
77,798
871,125
105,920
(83,762)
(13,757)
—
$
(14,763)
22,053
7,290
(2,113)
5,177
$
(14,952)
6,253
(8,699)
—
(8,699)
$
(43,319)
—
(43,319)
2,504
(40,815)
$
82
81,435
(29,417)
52,018
(2,504)
49,514
$
8,401
(1,111)
7,290
(2,113)
5,177
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Statement
of
Operations
Revenues:
Casino
Rooms,
food,
beverage,
pari-mutuel
and
other
Management
fee
revenue
Gross
revenues
Less
promotional
allowances
Net
revenues
Operating
expenses:
Casino
Gaming
taxes
Rooms,
food,
beverage,
pari-mutuel
and
other
Valuation
charges
Litigation
accrual
reversals
Management
fee
expense
Depreciation
and
amortization
Total
operating
expenses
Operating
income
(loss)
Interest
expense,
net
Derivative
income
Equity
in
income
(loss)
of
subsidiaries
Income
(loss)
from
continuing
operations
before
income
taxes
Income
tax
(provision)
benefit
Income
(loss)
from
continuining
operations
Income
(loss)
of
discontinued
operations
Net
income
(loss)
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
For
the
Fiscal
Year
Ended
April
27,
2014
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
$
—
688
32,911
33,599
—
33,599
—
—
31,737
—
(1,979)
—
1,709
31,467
2,132
(45,829)
398
(105,831)
$ 954,395
$
159,923
—
1,114,318
(204,197) 910,121
147,166
238,970
320,904
125,238
—
32,103
72,427
936,808
(26,687) (38,780) —
—
26,704
12,237
—
38,941
(6,156)
32,785
5,748
10,668
21,263
26,353
(7,351)
808
5,443
62,932
(30,147)
3,616
—
—
$
—
(9,185)
(32,911)
(42,096)
—
(42,096)
—
—
(9,185)
—
—
(32,911)
—
(42,096)
—
—
—
105,831
$ 981,099
163,663
—
1,144,762
(210,353)
934,409
152,914
249,638
364,719
151,591
(9,330)
—
79,579
989,111
(54,702)
(80,993)
398
—
$
(149,130)
32,327
(116,803)
(10,883)
(127,686)
$
(26,531)
8,185
(18,346)
916
(17,430)
$
105,831
—
105,831
12,343
118,174
$
83
(65,467)
(22,018)
(87,485)
(13,259)
(100,744)
$
(135,297)
18,494
(116,803)
(10,883)
(127,686)
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Consolidating
condensed
statements
of
cash
flows
for
the
fiscal
years
ended
April
24,
2016,
April
26,
2015
and
April
27,
2014,
are
as
follows:
Statement
of
Cash
Flows
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
For
the
Fiscal
Year
Ended
April
24,
2016
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
Net
cash
provided
by
(used
in)
operating
activities
$
22,702
$
116,648
$
(3,438) $
Investing
Activities:
Purchase
of
property
and
equipment
Proceeds
from
sales
of
assets
Restricted
cash
and
investments
Parent
company
investment
in
subsidiaries
Net
cash
provided
by
(used
in)
investing
activities
(376)
—
—
49,242
48,866
(69,247)
11,496
—
—
(57,751)
(639)
—
(425)
—
(1,064)
—
—
—
(49,242)
(49,242)
(70,262)
11,496
(425)
—
(59,191)
Financing
Activities:
Net
repayments
on
line
of
credit
Principal
repayments
on
long-term
debt
Premium
payments
on
long-term
debt
Payment
of
deferred
financing
costs
Proceeds
from
exercise
of
stock
options
Net
proceeds
from
(payments
to)
related
parties
Payment
of
other
long-term
obligation
Net
cash
provided
by
(used
in)
financing
activities
(7,500)
(62,241)
(2,409)
(209)
869
—
—
(71,490)
—
—
—
—
—
(54,164)
(9,384)
(63,548)
—
(158)
—
—
—
4,922
—
4,764
—
—
—
—
—
49,242
—
49,242
(7,500)
(62,399)
(2,409)
(209)
869
—
(9,384)
(81,032)
Net
decrease
in
cash
and
cash
equivalents
Cash
and
cash
equivalents
at
beginning
of
period
Cash
and
cash
equivalents
at
end
of
the
period
$
—
—
—
$
(4,311)
66,437
62,126
78
5,077
5,155
$
84
(4,651) 53,033
48,382
$
262
8,327
8,589
$
—
$
135,912
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Statement
of
Cash
Flows
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
For
the
Fiscal
Year
Ended
April
26,
2015
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
Isle
of
Capri
Casinos,
Inc.
Consolidated
Net
cash
provided
by
(used
in)
operating
activities
$
(14,187) $
128,904
$
Investing
Activities:
Purchase
of
property
and
equipment
Proceeds
from
sales
of
assets
Payments
towards
gaming
license
Restricted
cash
and
investments
Parent
company
investment
in
subsidiaries
Net
cash
provided
by
(used
in)
investing
activities
(105)
—
—
—
100,844
100,739
(41,017)
73
—
—
—
(40,944)
(564)
—
—
340
—
(224)
—
—
—
—
(100,844)
(100,844)
(41,686)
73
—
340
—
(41,273)
Financing
Activities:
Proceeds
from
long-term
debt
borrowings
Net
borrowings
on
line
of
credit
Principal
repayments
on
long-term
debt
Premium
payments
on
long-term
debt
Payment
of
deferred
financing
costs
Proceeds
from
exercise
of
stock
options
Net
proceeds
from
(payments
to)
related
parties
Net
cash
provided
by
(used
in)
financing
activities
153,000
10,300
(237,899)
(10,465)
(2,536)
74
—
(87,526)
—
—
—
—
—
—
(88,714)
(88,714)
—
—
(162)
—
—
—
(12,130)
(12,292)
—
—
—
—
—
—
100,844
100,844
153,000
10,300
(238,061)
(10,465)
(2,536)
74
—
(87,688)
Net
decrease
in
cash
and
cash
equivalents
Cash
and
cash
equivalents
at
beginning
of
period
Cash
and
cash
equivalents
at
end
of
the
period
$
—
—
—
$
(3,393)
69,830
66,437
(974) 6,051
5,077
$
85
(754) 53,787
53,033
$
10,851
$
(1,665) 9,992
8,327
$
—
$
125,568
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Consolidating
Condensed
Financial
Information
(Continued)
Statement
of
Cash
Flows
Isle
of
Capri
Casinos,
Inc.
(Parent
Obligor)
Net
cash
provided
by
(used
in)
operating
activities
$
Investing
Activities:
Purchase
of
property
and
equipment
Proceeds
from
sales
of
assets
Payments
towards
gaming
license
Restricted
cash
and
investments
Parent
company
investment
in
subsidiaries
Net
cash
provided
by
(used
in)
investing
activities
(580)
—
—
—
85,222
84,642
Financing
Activities:
Net
repayments
on
line
of
credit
Principal
payments
on
debt
Payments
of
deferred
financing
costs
Net
proceeds
from
(payments
to)
related
parties
Net
cash
provided
by
(used
in)
financing
activities
(90,200)
(63)
(673)
—
(90,936)
Net
increase
(decrease)
in
cash
and
cash
equivalents Cash
and
cash
equivalents
at
beginning
of
period
Cash
and
cash
equivalents
at
end
of
the
period
$
For
the
Fiscal
Year
Ended
April
27,
2014
Consolidating
Non-
and
Guarantor
Guarantor
Eliminating
Subsidiaries Subsidiaries Entries
5,431
$
Isle
of
Capri
Casinos,
Inc.
Consolidated
103,025
$
(21,707) $
(19,063)
32
—
—
—
(19,031)
(18,506)
49,849
(7,500)
1,879
—
25,722
—
—
—
—
(85,222)
(85,222)
(38,149)
49,881
(7,500)
1,879
—
6,111
—
—
—
(84,819)
(84,819)
—
(563)
—
(403)
(966)
—
—
—
85,222
85,222
(90,200)
(626)
(673)
—
(91,499)
—
—
—
$
1,361
68,469
69,830
(863) 6,914
6,051
$
(825) 54,612
53,787
$
3,049
6,943
9,992
$
—
$
86,749
17.
Selected
Quarterly
Financial
Information
(unaudited)
Our
selected
quarterly
financial
information
includes
new
casino
operations
in
Nemacolin
opening
July
1,
2013
and
includes
reclassifications
for
amounts
shown
in
our
previously
filed
reports
on
86
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
17.
Selected
Quarterly
Financial
Information
(unaudited)
(Continued)
Forms
10-Q
to
reflect
the
discontinued
operations
presentation
for
our
Natchez,
Mississippi
property
which
was
classified
as
discontinued
operations
during
the
quarter
ended
July
26,
2015.
Net
revenues
Operating
income
Income
from
continuing
operations
Loss
from
discontinued
operations,
net
of
income
taxes
Net
income
Earnings
(loss)
per
common
share
basic:
Income
from
continuing
operations
Income
(loss)
from
discontinued
operations,
net
of
income
taxes
Net
income
Earnings
(loss)
per
common
share
diluted:
Income
from
continuing
operations
Income
(loss)
from
discontinued
operations,
net
of
income
taxes
Net
income
Weighted
average
basic
shares
Weighted
average
dilutive
shares
July
26,
2015
Fiscal
Quarters
Ended
October
25,
January
24,
2015
2016
April
24,
2016
$
$
246,924
29,647
8,468
(5,324)
3,144
0.21
$
$
236,261
25,627
7,811
3,639
11,450
0.19
$
$
230,540
24,679
7,015
(400)
6,615
0.17
$
$
264,867
43,194
24,995
—
24,995
0.61
$
$
(0.13)
0.08
0.21
$
$
0.09
0.28
0.19
$
$
(0.01)
0.16
0.17
$
$
—
0.61
0.60
(0.13) 0.09
(0.01) —
$
0.08
$
0.28
$
0.16
$
0.60
40,580,806
40,697,797
40,730,065
40,755,048
41,205,520
41,353,544
41,378,792
41,351,978
87
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
17.
Selected
Quarterly
Financial
Information
(unaudited)
(Continued)
Net
revenues
Operating
income
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations,
net
of
income
taxes
Net
income
(loss)
Earnings
(loss)
per
common
share
basic:
Income
(loss)
from
continuing
operations
Loss
from
discontinued
operations,
net
of
income
taxes
Net
income
(loss)
Earnings
(loss)
per
common
share
diluted:
Income
(loss)
from
continuing
operations
Income
(loss)
from
discontinued
operations,
net
of
income
taxes
Net
income
(loss)
Weighted
average
basic
shares
Weighted
average
dilutive
shares
July
27,
2014
236,896
20,500
(1,725)
(592)
(2,317)
(0.04)
(0.02)
(0.06)
(0.04)
Fiscal
Quarters
Ended
October
26,
January
25,
2014
2015
$
$
$
$
234,458
21,975
(71)
(950)
(1,021)
—
(0.03)
(0.03)
—
$
$
$
$
236,404
27,545
5,926
(503)
5,423
0.15
(0.01)
0.14
0.15
April
26,
2015
$
$
$
$
$
$
$
$
(0.02) (0.03) (0.02) —
$
(0.06) $
(0.03) $
0.13
$
0.08
39,827,889
39,932,856
40,028,776
40,033,404
39,827,889
39,932,856
40,336,663
41,020,503
269,287
35,900
3,160
(68)
3,092
0.08
—
0.08
0.08
A
summary
of
certain
revenues
and
expenses
from
our
continuing
operations
impacting
our
quarterly
financial
results
is
as
follows:
(1)
During
the
first
quarter
of
fiscal
2016,
we
incurred
a
loss
on
extinguishment
of
debt
of
$2,966
related
to
the
redemption
of
our
7.75%
Senior
Notes
in
May
2016.
(2)
During
the
fourth
quarter
of
fiscal
2016,
we
incurred
$153
of
expense
related
to
the
preopening
of
our
Bettendorf
property
and
$770
of
expense
related
to
an
executive's
exit
agreement.
(3)
During
the
first
quarter
of
fiscal
2015,
we
incurred
$1,013
of
expense
related
to
opposing
the
proposed
Colorado
gaming
expansion
referendum
and
$2,259
of
severance
expense
related
to
restructuring
at
the
corporate
office.
(4)
During
the
second
quarter
of
fiscal
2015,
we
incurred
$3,044
of
expense
related
to
opposing
the
proposed
Colorado
gaming
expansion
referendum
and
recorded
a
favorable
property
tax
settlement
related
to
our
Waterloo
property
of
$1,225.
(5)
During
the
fourth
quarter
of
fiscal
2015,
we
recorded
impairment
charges
of
$9,000
related
to
our
long-lived
assets
at
Nemacolin
and
$13,757
of
loss
on
early
extinguishment
of
debt.
88
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
18.
Commitments
and
Contingencies
Operating Leases —The
Company
leases
real
estate
and
various
equipment
under
operating
lease
agreements.
Future
minimum
payments
over
the
lease
term
of
non-cancelable
operating
leases
with
initial
terms
of
one
year
or
more
consisted
of
the
following
at
April
24,
2016:
Fiscal
Years
Ending:
2017
2018
2019
2020
2021
Therafter
Total
minimum
lease
payments
10,293
9,887
9,196
6,982
6,663
122,621
$ 165,642
Rent
expense
related
to
continuing
operations
was
$24,585,
$24,731
and
$25,895
in
fiscal
years
2016,
2015
and
2014,
respectively.
Such
amounts
include
contingent
rentals
of
$2,942,
$3,012
and
$2,926
in
fiscal
years
2016,
2015
and
2014,
respectively.
Contingent
rent
is
based
upon
casino
revenues
or
other
metrics
as
defined
in
our
lease
agreements.
Certain
of
our
leases
are
subject
to
renewals
and
may
contain
escalation
clauses.
Legal and Regulatory Proceedings —In
October
2012,
we
opened
our
new
casino
in
Cape
Girardeau,
Missouri.
A
subcontractor
filed
a
mechanics'
lien
against
our
property
resulting
from
a
dispute
between
the
subcontractor
and
our
general
contractor
for
the
construction
project.
We
demanded
that
the
general
contractor
cause
the
lien
to
be
bonded
against
or
satisfied;
however,
the
general
contractor
refused
to
do
so
and
asserted
that
a
portion
of
the
subcontractor's
claim
resulted
from
additional
work
directly
requested
by
us.
In
October
2013,
the
subcontractor
filed
suit
against
our
wholly-owned
subsidiary
IOC-Cape
Girardeau,
LLC,
the
general
contractor
and
two
other
defendants
alleging
various
contract
and
equitable
claims
and
were
seeking
damages
of
approximately
$3.8
million.
In
August
2014,
we
filed
a
cross
claim
against
the
general
contractor
alleging
breach
of
contract
and
various
indemnity
claims.
In
January
2016,
all
parties
reached
a
settlement
fully
resolving
all
claims
related
to
this
matter
and
we
paid
and
capitalized
additional
construction
costs
of
$1.4
million.
We
and
our
wholly-owned
subsidiary,
Riverboat
Corporation
of
Mississippi—Vicksburg,
were
defendants
in
a
lawsuit
filed
in
the
Circuit
Court
of
Adams
County,
Mississippi
by
Silver
Land,
Inc.,
alleging
breach
of
contract
in
connection
with
our
2006
sale
of
casino
operations
in
Vicksburg,
Mississippi.
The
court
originally
ruled
in
favor
of
Silver
Land
and
awarded
damages
of
$1,979,
which
we
accrued.
We
appealed
the
decision
and
in
June
2013
the
court
of
appeals
reversed
the
trial
court
and
ruled
in
our
favor.
Silver
Land
filed
a
Petition
for
Writ
of
Certiorari
in
November
2013
requesting
review
by
the
Mississippi
Supreme
Court.
On
February
20,
2014,
the
Mississippi
Supreme
Court
denied
Silver
Land's
request,
which
effectively
disposed
of
the
matter
in
its
entirety.
As
a
result,
during
fiscal
2014,
we
reversed
a
litigation
accrual
of
$2,223,
of
which
$1,979
was
recorded
as
a
reduction
to
operating
expenses
and
$244
was
recorded
as
a
reduction
to
interest
expense.
Our
wholly
owned
subsidiary,
Lady
Luck
Gaming
Corporation,
and
several
joint
venture
partners
were
defendants
in
the
Greek
Civil
Courts
and
the
Greek
Administrative
Courts
in
similar
lawsuits
brought
by
the
country
of
Greece.
The
actions
alleged
that
the
defendants
failed
to
make
specified
89
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(amounts
in
thousands,
except
share
and
per
share
amounts)
18.
Commitments
and
Contingencies
(Continued)
payments
in
connection
with
the
gaming
license
bid
process
for
Patras,
Greece.
In
the
Civil
Court
lawsuit,
the
Civil
Court
of
First
Instance
ruled
in
our
favor
and
dismissed
the
lawsuit
in
2001.
The
lawsuits
continued
through
the
appeals
process
and
in
October
2013,
the
Supreme
Administrative
Court
rejected
both
lawsuits
in
a
final
and
irrevocable
decision
which
disposed
of
this
matter
completely.
As
a
result,
during
fiscal
2014,
we
reversed
a
litigation
accrual
of
$14,730,
of
which
$7,351
was
recorded
as
a
reduction
to
operating
expenses
and
$7,379
was
recorded
as
a
reduction
to
interest
expense.
We
are
subject
to
certain
federal,
state
and
local
environmental
protection,
health
and
safety
laws,
regulations
and
ordinances
that
apply
to
businesses
generally,
and
are
subject
to
cleanup
requirements
at
certain
of
our
facilities
as
a
result
thereof.
We
have
not
made,
and
do
not
anticipate
making
material
expenditures,
nor
do
we
anticipate
incurring
delays
with
respect
to
environmental
remediation
or
protection.
However,
in
part
because
our
present
and
future
development
sites
have,
in
some
cases,
been
used
as
manufacturing
facilities
or
other
facilities
that
generate
materials
that
are
required
to
be
remediated
under
environmental
laws
and
regulations,
there
can
be
no
guarantee
that
additional
pre-existing
conditions
will
not
be
discovered
and
we
will
not
experience
material
liabilities
or
delays.
We
are
subject
to
various
contingencies
and
litigation
matters
and
have
a
number
of
unresolved
claims.
Although
the
ultimate
liability
of
these
contingencies,
this
litigation
and
these
claims
cannot
be
determined
at
this
time,
we
believe
they
will
not
have
a
material
adverse
effect
on
our
consolidated
financial
position,
results
of
operations
or
cash
flows.
90
Table
of
Contents
ISLE
OF
CAPRI
CASINOS,
INC.
SCHEDULE
II—VALUATION
AND
QUALIFYING
ACCOUNTS
(In
thousands)
Period
Year
Ended
April
24,
2016
Year
Ended
April
26,
2015
Year
Ended
April
27,
2014
Accounts
Receivable
Reserve
Balance
at
Charged
to
Beginning
of
Costs
and
Deductions
from
Year
Expenses
Reserves
$
1,595
$
2,120
2,086
—
$
79
388
Balance
at
End
of
Year
(206) $
(604) (354) 1,389
1,595
2,120
Period
Year
Ended
April
24,
2016
Year
Ended
April
26,
2015
Year
Ended
April
27,
2014
Other
Receivables
Reserve
Balance
at
Charged
to
Beginning
of
Costs
and
Deductions
from
Year
Expenses
Reserves
$
91
1,882
$
1,882
1,882
—
$
—
—
Balance
at
End
of
Year
(1,882) $
—
—
—
1,882
1,882
Table
of
Contents
ITEM
9.
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE
None.
ITEM
9A.
CONTROLS
AND
PROCEDURES
EVALUATION
OF
DISCLOSURE
CONTROLS
AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures —Based
on
their
evaluation
as
of
April
24,
2016,
our
Chief
Executive
Officer
and
Principal
Financial
Officer
have
concluded
that
our
disclosure
controls
and
procedures
(as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Exchange
Act)
were
effective
to
ensure
that
the
information
required
to
be
disclosed
by
us
in
this
Annual
Report
was
recorded,
processed,
summarized
and
reported
within
the
time
periods
specified
in
the
SEC's
rules
and
instructions
for
Form
10-K.
Management's Report on Internal Control over Financial Reporting —Our
management
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
financial
reporting
(as
defined
in
Rule
13a-15(f)
under
the
Exchange
Act).
Our
management,
including
our
Chief
Executive
Officer
and
Principal
Financial
Officer,
assessed
the
effectiveness
of
our
internal
control
over
financial
reporting
as
of
April
24,
2016.
In
making
this
assessment,
our
management
used
the
criteria
set
forth
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
in
Internal
Control—Integrated
Framework
(2013
Framework).
Our
management
has
concluded
that,
as
of
April
24,
2016,
our
internal
control
over
financial
reporting
is
effective
based
on
these
criteria.
Ernst
&
Young
LLP,
an
independent
registered
public
accounting
firm,
who
audited
and
reported
on
the
consolidated
financial
statements
included
in
this
Annual
Report
on
Form
10-K,
has
issued
an
attestation
report
on
the
effectiveness
of
the
Company's
internal
control
over
financial
reporting
as
stated
in
their
report
which
is
included
in
Item
8.
Changes in Internal Controls over Financial Reporting —There
have
been
no
changes
in
our
internal
controls
over
financial
reporting
during
the
quarter
ended
April
24,
2016
that
have
materially
affected,
or
are
reasonably
likely
to
materially
affect
our
internal
controls
over
financial
reporting.
Inherent Limitations on Effectiveness of Controls —Our
management,
including
our
Chief
Executive
Officer
and
Principal
Financial
Officer,
does
not
expect
that
our
disclosure
controls
and
procedures
or
our
internal
controls
will
prevent
all
errors
and
all
fraud.
A
control
system,
no
matter
how
well
conceived
and
operated,
can
provide
only
reasonable,
not
absolute,
assurance
that
the
objectives
of
the
control
system
are
met.
Further,
the
design
of
a
control
system
must
reflect
the
fact
that
there
are
resource
constraints,
and
the
benefits
of
controls
must
be
considered
relative
to
their
costs.
Because
of
the
inherent
limitations
in
all
control
systems,
no
evaluation
of
controls
can
provide
absolute
assurance
that
all
control
issues
and
instances
of
fraud,
if
any,
within
our
company
have
been
detected.
ITEM
9B.
OTHER
INFORMATION
None.
PART
III
ITEM
10.
DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE
This
item
has
been
omitted
from
this
report
and
is
incorporated
by
reference
to
Isle
of
Capri's
definitive
proxy
statement
to
be
filed
with
the
U.S.
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year
covered
by
this
report.
92
Table
of
Contents
ITEM
11.
EXECUTIVE
COMPENSATION
This
item
has
been
omitted
from
this
report
and
is
incorporated
by
reference
to
Isle
of
Capri's
definitive
proxy
statement
to
be
filed
with
the
U.S.
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year
covered
by
this
report.
ITEM
12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS
The
information
required
by
this
item
relating
to
security
ownership
of
management
has
been
omitted
from
this
report
and
is
incorporated
by
reference
to
Isle
of
Capri's
definitive
proxy
statement
to
be
filed
with
the
U.S.
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year
covered
by
this
report.
Equity Compensation Plans. The
following
table
provides
information
about
securities
authorized
for
issuance
under
our
2009
Long-Term
Stock
Incentive
Plan
for
fiscal
2016.
Plan
category
Equity
compensation
plans
approved
by
security
holders(1)
Equity
compensation
plans
not
approved
by
security
holders
Total
(1)
(a)
Number
of
securities
to
be
issued
upon
exercise
of
outstanding
options,
warrants
and
rights
(b)
Weighted-average
exercise
price
of
outstanding
options,
warrants
and
rights
(c)
Number
of
securities
remaining
available
for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column
(a))
1,434,384
$
13.84
2,949,054
—
1,434,384
$
—
13.84
—
2,949,054
The
securities
outstanding
above
includes
251,964
performance-based
restricted
stock
units
with
a
company
performance
condition
that
assumes
the
maximum
award
will
be
achieved.
In
addition,
the
securities
outstanding
above
includes
467,073
performance-based
restricted
stock
units
with
a
market
condition,
net
of
taxes
withheld,
of
which
the
amount
of
the
award
was
known
on
April
26,
2015,
but
the
second
tranche
of
the
award
vested
subsequent
to
April
24,
2016.
The
performance-based
restricted
stock
units
outstanding
do
not
have
an
exercise
price;
therefore
the
weighted
average
per
share
exercise
price
only
relates
to
outstanding
stock
options.
ITEM
13.
CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE
This
item
has
been
omitted
from
this
report
and
is
incorporated
by
reference
to
Isle
of
Capri's
definitive
proxy
statement
to
be
filed
with
the
U.S.
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year
covered
by
this
report.
ITEM
14.
PRINCIPAL
ACCOUNTANT
FEES
AND
SERVICES
This
item
has
been
omitted
from
this
report
and
is
incorporated
by
reference
to
Isle
of
Capri's
definitive
proxy
statement
to
be
filed
with
the
U.S.
Securities
and
Exchange
Commission
within
120
days
after
the
end
of
the
fiscal
year
covered
by
this
report.
93
Table
of
Contents
PART
IV
ITEM
15.
EXHIBITS,
FINANCIAL
STATEMENT
SCHEDULES
AND
REPORTS
ON
FORM
8-K
The
following
documents
are
filed
as
part
of
this
Form
10-K.
(a)
Consolidated
financial
statements
filed
as
part
of
this
report
are
listed
under
Part
II,
Item
8.
(b)
The
exhibits
listed
on
the
"Index
to
Exhibits"
are
filed
with
this
report
or
incorporated
by
reference
as
set
forth
below.
All
other
schedules
are
omitted
because
they
are
not
applicable
or
not
required,
or
because
the
required
information
is
included
in
the
consolidated
financial
statement
or
notes
thereto.
94
Table
of
Contents
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.
ISLE
OF
CAPRI
CASINOS,
INC.
Dated:
June
21,
2016
/s/
ERIC
L.
HAUSLER
Eric
L.
Hausler,
Chief Executive Officer
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
this
report
has
been
signed
below
by
the
following
persons
on
behalf
of
the
registrant
and
in
the
capacities
and
on
the
dates
indicated.
Dated:
June
21,
2016
/s/
ERIC
L.
HAUSLER
Eric
L.
Hausler,
Chief Executive Officer
(Principal Executive Officer)
Dated:
June
21,
2016
/s/
MICHAEL
A.
HART
Michael
A.
Hart,
Sr. Vice President, Accounting and Treasurer
(Principal Financial and Accounting Officer)
Dated:
June
21,
2016
/s/
ROBERT
S.
GOLDSTEIN
Robert
S.
Goldstein,
Chairman of the Board
Dated:
June
21,
2016
/s/
ALAN
J.
GLAZER
Alan
J.
Glazer,
Lead Director
Dated:
June
21,
2016
/s/
BONNIE
BIUMI
Bonnie
Biumi,
Director
Dated:
June
21,
2016
/s/
JEFFREY
D.
GOLDSTEIN
Jeffrey
D.
Goldstein,
Director
95
Table
of
Contents
Dated:
June
21,
2016
/s/
RICHARD
A.
GOLDSTEIN
Richard
A.
Goldstein,
Director
Dated:
June
21,
2016
/s/
GREGORY
J.
KOZICZ
Gregory
J.
Kozicz,
Director
Dated:
June
21,
2016
/s/
LEE
S.
WIELANSKY
Lee
S.
Wielansky,
Director
96
Table
of
Contents
INDEX
TO
EXHIBITS
EXHIBIT
NUMBER
2.1
2.2
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
DESCRIPTION
Securities
Purchase
Agreement,
dated
August
11,
2015,
by
and
among
Isle
of
Capri
Casinos,
Inc.,
IOC-
Natchez,
Inc,
IOC-Natchez
Sub,
LLC,
Casino
Holding
Investment
Partners,
LLC
and
Natchez
Casino
Opco,
LLC.
Corporation
Plan
(Incorporated
by
reference
to
Exhibit
2.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
September
4,
2015)
Asset
Purchase
Agreement,
dated
December
4,
2013,
by
and
among
Isle
of
Capri
Casinos,
Inc.,
IOC
Davenport,
Inc.,
Scott
County
Casino,
LLC
and
Kehl
Development
Corporation
(Incorporated
by
reference
to
Exhibit
2.1
to
the
Current
Report
on
Form
8-K
filed
on
December
4,
2013)
Amended
and
Restated
Certificate
of
Incorporation
of
Isle
of
Capri
Casinos,
Inc.
(Incorporated
by
reference
to
Exhibit
3.1
to
the
Annual
Report
on
Form
10-K
filed
on
June
16,
2011)
Bylaws,
as
amended
(Incorporated
by
reference
to
Exhibit
3.1
to
the
Current
Report
on
Form
8-K
filed
on
June
25,
2010)
Indenture,
dated
as
of
March
7,
2011,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.1
to
the
Current
Report
on
Form
8-K
filed
on
March
8,
2011)
Indenture,
dated
as
of
August
7,
2012,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.1
to
the
Current
Report
on
Form
8-K
filed
on
August
9,
2012)
Indenture,
dated
as
of
March
5,
2013,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.1
to
the
Current
Report
on
Form
8-K
filed
on
March
6,
2013)
Supplemental
Indenture,
dated
as
of
April
19,
2013,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.1
to
the
Current
Report
on
Form
8-K
filed
on
April
24,
2013)
Supplemental
Indenture,
dated
as
of
April
19,
2013,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.2
to
the
Current
Report
on
Form
8-K
filed
on
April
24,
2013)
Supplemental
Indenture,
dated
as
of
April
19,
2013,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.3
to
the
Current
Report
on
Form
8-K
filed
on
April
24,
2013)
Second
Supplemental
Indenture,
dated
as
of
April
14,
2015,
among
the
Company,
the
guarantors
named
therein
and
U.S.
Bank
National
Association,
as
trustee
(Incorporated
by
reference
to
Exhibit
4.1
to
the
Current
Report
on
Form
8-K
filed
on
April
14,
2015)
Registration
Rights
Agreement,
dated
April
14,
2015,
among
the
Company,
certain
subsidiaries
of
the
Company,
Wells
Fargo
Securities,
LLC,
Credit
Suisse
Securities
(USA)
LLC
and
Deutsche
Bank
Securities,
Inc.
(Incorporated
by
reference
to
Exhibit
4.2
to
the
Current
Report
on
Form
8-K
filed
on
April
14,
2015)
97
Table
of
Contents
EXHIBIT
NUMBER
10.1
10.2
10.3†
10.4†
10.5†*
10.6†*
10.7†*
10.8†*
10.9†*
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
DESCRIPTION
Agreement,
dated
January
19,
2011,
by
and
among
Isle
of
Capri
Casinos,
Inc.,
and
Mr.
Jeffrey
D.
Goldstein,
Mr.
Robert
S.
Goldstein,
Richard
A.
Goldstein
and
GFIL
Holdings,
LLC
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-k
filed
on
January
19,
2011)
Amendment
Number
One
to
Governance
Agreement,
dated
February
23,
2011,
by
and
among
Isle
of
Capri
Casinos,
Inc.,
GFIL
Holdings,
LLC,
Jeffrey
D.
Goldstein,
Robert
S.
Goldstein
and
Richard
A.
Goldstein
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
February
28,
2011)
Isle
of
Capri
Casinos,
Inc.
Second
Amended
and
Restated
2009
Long-Term
Stock
Incentive
Plan
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
October
9,
2015)
Isle
of
Capri
Casinos,
Inc.
Corporate
Level
Incentive
Compensation
Plan
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
December
3,
2010)
Isle
of
Capri
Casinos,
Inc.'s
Executive
Nonqualified
Excess
Plan
Isle
of
Capri
Casino,
Inc.
Executive
Nonqualified
Excess
Plan
Adoption
Agreement
Amended
and
Restated
Employment
Agreement,
dated
April
6,
2016,
between
Eric
L.
Hausler
and
Isle
of
Capri
Casinos,
Inc.
Amended
and
Restated
Employment
Agreement,
dated
April
8,
2016,
between
Arnold
L.
Block
and
Isle
of
Capri
Casinos,
Inc.
Amended
and
Restated
Employment
Agreement
dated
as
of
April
11,
2016,
between
Michael
A.
Hart
and
Isle
of
Capri
Casinos,
Inc.
Amended
and
Restated
Employment
Agreement,
dated
January
18,
2011,
between
Virginia
M.
McDowell
and
Isle
of
Capri
Casinos,
Inc.
(Incorporated
by
reference
to
Exhibit
10.2
to
the
Current
Report
on
Form
8-K
filed
on
January
18,
2011)
Employment
Agreement,
dated
as
of
July
1,
2008,
between
Isle
of
Capri
Casinos,
Inc.
and
Edmund
L.
Quatmann,
Jr.
(Incorporated
by
reference
to
Exhibit
10.18
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
First
Amendment
to
Employment
Agreement,
dated
as
of
January
9,
2014,
between
Isle
of
Capri
Casinos,
Inc.
and
Edmund
L.
Quatmann,
Jr.
(Incorporated
by
reference
to
Exhibit
10.6
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Isle
of
Capri
Casinos,
Inc.
Employment
Agreement
Compliance
Addendum—Edmund
L.
Quatmann,
Jr.
(Incorporated
by
reference
to
Exhibit
10.4
to
the
Quarterly
Report
on
Form
10-Q
filed
on
March
6,
2009)
Employment
Agreement,
dated
as
of
January
7,
2013,
between
Isle
of
Capri
Casinos,
Inc.
and
John
Wilson
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
February
20,
2013)
Form
Employment
Agreement
for
Senior
Vice
Presidents
of
Isle
of
Capri
Casinos,
Inc.
(Incorporated
by
reference
to
Exhibit
10.21
to
the
Annual
Report
on
Form
10-K
filed
on
July
2,
2013)
Form
Stock
Option
Award
Agreement
(Incorporated
by
reference
to
Exhibit
10.20
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
98
Table
of
Contents
EXHIBIT
NUMBER
10.17†
10.18†
10.19†
10.20†
10.21†
10.22
10.23
10.24
10.25
10.26
DESCRIPTION
Form
of
Restricted
Stock
Award
Agreement
(Incorporated
by
reference
to
Exhibit
10.22
to
the
Annual
Report
on
Form
10-K
filed
on
June
25,
2009)
Form
of
Performance
Based
Restricted
Stock
Unit
Agreement
(Incorporated
by
reference
to
Exhibit
10.24
to
the
Annual
Report
on
Form
10-K
filed
on
June
14,
2012)
Form
of
Non-Qualified
Stock
Option
Agreement
(Incorporated
by
reference
to
Exhibit
10.27
to
the
Annual
Report
on
Form
10-K
filed
on
June
17,
2015)
Form
of
Performance
Stock
Unit
Agreement
(Incorporated
by
reference
to
Exhibit
10.28
to
the
Annual
Report
on
Form
10-K
filed
on
June
17,
2015)
Form
of
Restricted
Stock
Unit
Agreement
(Incorporated
by
reference
to
Exhibit
10.29
to
the
Annual
Report
on
Form
10-K
filed
on
June
17,
2015)
Credit
Agreement,
dated
as
of
July
26,
2007
among
Isle
of
Capri
Casinos,
Inc.,
the
Lenders
listed
herein,
Credit
Suisse,
Cayman
Island
Branch,
as
administrative
agent,
issuing
bank
and
swing
line
lender,
Credit
Suisse
Securities
(USA)
LLC,
as
lead
arranger
and
bookrunner,
Deutsche
Bank
Securities
Inc.
and
CIBC
World
Markets
Corp.,
as
co-syndication
agents
and
U.S.
Bank,
N.A.
and
Wachovia
Bank,
National
Association,
as
co-documentation
agents
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
July
31,
2007)
Security
Agreement,
dated
as
of
July
26,
2007,
among
Isle
of
Capri
Casinos,
Inc.,
its
material
subsidiaries
party
thereto,
and
Credit
Suisse,
Cayman
Islands
Branch,
as
Administrative
Agent
for
and
representative
of
the
financial
institutions
party
to
the
Credit
Agreement
and
any
Hedge
Providers
(as
defined
therein)
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
July
31,
2007)
First
Amendment
to
Credit
Agreement,
dated
as
of
February
17,
2010,
among
the
Company,
as
borrower,
the
financial
institutions
listed
therein,
as
lenders,
Credit
Suisse
AG,
Cayman
Islands
Branch,
as
administrative
agent
and
the
other
agents
referred
to
therein
among
Isle
of
Capri
Casinos,
Inc.,
the
Lenders
listed
therein
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
February
29,
2010)
Second
Amendment
to
Credit
Agreement,
dated
as
of
March,
25,
2011,
among
Isle
of
Capri
Casinos,
Inc.,
as
borrower,
certain
subsidiaries
of
Isle
of
Capri
Casinos,
Inc.,
the
financial
institutions
listed
therein,
as
lenders,
Wells
Fargo
Bank,
National
Association,
as
administrative
agent
(as
successor
to
Credit
Suisse
AG,
Cayman
Islands
Branch
(f/k/a
Credit
Suisse,
Cayman
Islands
Branch)),
and
the
other
agents
referred
to
therein
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
March
31,
2011)
Third
Amendment
to
Credit
Agreement,
dated
as
of
November
21,
2012,
among
Isle
of
Capri
Casinos,
Inc.,
as
borrower,
certain
subsidiaries
of
isle
of
Capri
casinos,
Inc.,
the
financial
institutions
listed
therein,
as
lenders,
Wells
Fargo
Bank,
National
Association,
as
administrative
agent
(as
successor
to
Credit
Suisse
AG,
Cayman
Islands
Branch
(f/k/a
Credit
Suisse,
Cayman
Islands
Branch)),
and
the
other
agents
referred
to
therein
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
November
27,
2012)
99
Table
of
Contents
EXHIBIT
NUMBER
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
DESCRIPTION
Fourth
Amendment
Documents
to
Credit
Agreement
and
Amendments
to
Loan
Documents,
dated
as
of
April
19,
2013
among
the
Company,
the
financial
institutions
listed
therein
as
Lenders
and
Wells
Fargo
Bank,
National
Association
(as
successor
to
Credit
Suisse
AG,
Cayman
Islands
Branch
(f/k/a
Credit
Suisse,
Cayman
Islands
Branch)),
as
administrative
agent
to
the
Lenders,
Issuing
Bank
and
Swing
Line
Lender
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
April
24,
2013)
Fifth
Amendment
to
Credit
Agreement,
dated
as
of
July
2,
2013,
among
Isle
of
Capri
Casinos,
Inc.,
as
borrower,
certain
subsidiaries
of
Isle
of
Capri
Casinos,
Inc.,
the
financial
institutions
listed
therein,
as
lenders,
Wells
Fargo
Bank,
National
Association,
as
administrative
agent,
and
the
other
agents
referred
to
therein
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Current
Report
on
Form
8-K
filed
on
July
2,
2013)
Sixth
Amendment
to
Credit
Agreement,
dated
as
of
October
29,
2014,
among
Isle
of
Capri
Casinos,
Inc.,
as
borrower,
certain
subsidiaries
of
Isle
of
Capri
Casinos,
Inc.,
the
financial
institutions
listed
therein,
as
Lenders,
and
Wells
Fargo
Bank,
National
Association,
as
one
of
the
Requisite
Lenders,
Issuing
Bank,
Swing
Line
Lender
and
as
the
administrative
agent.
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
December
4,
2014)
Amended
and
Restated
Lease,
dated
as
of
April
19,
1999,
among
Port
Resources,
Inc.
and
CRU,
Inc.,
as
landlords
and
St.
Charles
Gaming
Company,
Inc.,
as
tenant
(St.
Charles)
(Incorporated
by
reference
to
Exhibit
10.28
to
the
Annual
Report
on
Form
10-K
filed
on
July
02,
1999)
Lease
of
property
in
Coahoma,
Mississippi
dated
as
of
November
16,
1993
by
and
among
Roger
Allen
Johnson,
Jr.,
Charles
Bryant
Johnson
and
Magnolia
Lady,
Inc.
(Incorporated
by
reference
to
the
Registration
Statement
on
Form
S-4/A
filed
June
19,
2002)
Addendum
to
Lease
dated
as
of
June
22,
1994
by
and
among
Roger
Allen
Johnson,
Jr.,
Charles
Bryant
Johnson
and
Magnolia
Lady,
Inc.
(Incorporated
by
reference
to
Exhibit
10.46
to
the
Annual
Report
on
Form
10-K
filed
on
July
28,
2000)
Second
addendum
to
Lease
dated
as
of
October
17,
1995
by
and
among
Roger
Allen
Johnson,
Jr.,
Charles
Bryant
Johnson
and
Magnolia
Lady,
Inc.
(Incorporated
by
reference
to
Exhibit
10.47
to
the
Annual
Report
on
Form
10-K
filed
on
July
28,
2000)
Master
Lease
between
The
City
of
Boonville,
Missouri
and
IOC-Boonville,
Inc.
formally
known
as
Davis
Gaming
Boonville,
Inc.
dated
as
of
July
18,
1997.
(Incorporated
by
reference
to
Exhibit
10.40
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Amendment
to
Master
Lease
between
The
City
of
Boonville,
Missouri
and
IOC-Boonville,
Inc.
formally
known
as
Davis
Gaming
Boonville,
Inc.
dated
as
of
April
19,
1999.
(Incorporated
by
reference
to
Exhibit
10.41
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Second
Amendment
to
Master
Lease
between
The
City
of
Boonville,
Missouri
and
IOC-Boonville,
Inc.
formerly
known
as
Davis
Gaming
Boonville,
Inc.
dated
as
of
September
17,
2001.
(Incorporated
by
reference
to
Exhibit
10.42
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
100
Table
of
Contents
EXHIBIT
NUMBER
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
DESCRIPTION
Third
Amendment
to
Master
Lease
between
The
City
of
Boonville,
Missouri
and
IOC-Boonville,
Inc.
formerly
known
as
Gold
River's
Boonville
Resort,
Inc.
and
Davis
Gaming
Boonville,
Inc.
dated
as
of
November
19,
2001.
(Incorporated
by
reference
to
Exhibit
10.43
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Amended
and
Restated
Lease
Agreement
by
and
between
the
Port
Authority
of
Kansas
City,
Missouri
and
Tenant
dated
as
of
August
21,
1995
(Incorporated
by
reference
to
Exhibit
10.44
to
the
Annual
Report
on
Form
10-K
filed
June
25,
2009)
First
Amendment
to
Amended
and
Restated
Lease
Agreement
by
and
between
the
Port
Authority
of
Kansas
City,
Missouri
and
Tenant
dated
as
of
October
31,
1995
(Incorporated
by
reference
to
Exhibit
10.45
to
the
Annual
Report
on
Form
10-K
filed
June
25,
2009)
Second
Amendment
to
Amended
and
Restated
Lease
Agreement
by
and
between
the
Port
Authority
of
Kansas
City,
Missouri
and
Tenant
dated
as
of
June
10,
1996.
(Incorporated
by
reference
to
Exhibit
10.46
to
the
Annual
Report
on
Form
10-K
filed
June
25,
2009)
Assignment
and
Assumption
Agreement
(Lease
Agreement)
between
Flamingo
Hilton
Riverboat
Casino,
LP,
Isle
of
Capri
Casinos,
Inc.
and
IOC-Kansas
City,
Inc.
dated
as
of
June
6,
2000.
(Incorporated
by
reference
to
Exhibit
10.44
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Lease
and
Agreement-Spring
1995
between
Andrianakos
Limited
Liability
Company
and
Isle
of
Capri
Black
Hawk,
LLC.
dated
as
of
August
15,
1995.
(Incorporated
by
reference
to
Exhibit
10.45
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Addendum
to
the
Lease
and
Agreement-Spring
1995
between
Andrianakos
Limited
Liability
Company
and
Isle
of
Capri
Black
Hawk,
LLC.
dated
as
of
April
4,
1996.
(Incorporated
by
reference
to
Exhibit
10.46
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Second
Addendum
to
the
Lease
and
Agreement-Spring
1995
between
Andrianakos
Limited
Liability
Company
and
Isle
of
Capri
Black
Hawk,
LLC.
dated
as
of
March
21,
2003.(Incorporated
by
reference
to
Exhibit
10.47
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Third
Addendum
to
the
Lease
and
Agreement-Spring
1995
between
Andrianakos
Limited
Liability
Company
and
Isle
of
Capri
Black
Hawk,
LLC.
dated
as
of
April
22,
2003.
(Incorporated
by
reference
to
Exhibit
10.48
to
the
Annual
Report
on
Form
10-K
filed
on
July
11,
2008)
Fourth
Addendum
to
the
Lease
and
Agreement-Spring
1995
between
Andrinakos
Limited
Liability
Company
and
Isle
of
Capri
Black
Hawk,
LLC.
Dated
as
of
December
11,
2013.
(Incorporated
by
reference
to
Exhibit
10.49
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Development
Agreement
by
and
between
IOC-Cape
Girardeau,
LLC
and
the
City
of
Cape
Girardeau,
Missouri
dated
as
of
October
4,
2010.
(Incorporated
by
reference
to
Exhibit
10.2
to
the
Quarterly
Report
on
Form
10-Q
filed
on
December
3,
2010)
Amended
and
Restated
Operator's
Contract
by
and
between
Black
Hawk
County
Gaming
Association
and
IOC
Black
Hawk
County,
Inc.
dated
as
of
November
9,
2004.
(Incorporated
by
reference
to
Exhibit
10.51
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
101
Table
of
Contents
EXHIBIT
NUMBER
10.49
10.50
10.51
10.52
10.53
10.54
10.55
21.1*
23.1*
31.1*
31.2*
32.1*
32.2*
99.1*
DESCRIPTION
Management
Agreement
by
and
between
Gamblers
Supply
Management
Company
and
the
Marquette
Gaming
Corporation
dated
as
of
June
10,
1994.
(Incorporated
by
reference
to
Exhibit
10.52
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
First
Amendment
to
the
Management
Agreement
by
and
between
Isle
of
Capri
Marquette,
Inc.,
successor
in
interest
to
Gamblers
Supply
Management
Company,
and
Upper
Mississippi
Gaming
Corporation
(formerly
known
as
Marquette
Gaming
Corporation),
dated
as
of
November
10,
2015.
(Incorporated
by
reference
to
Exhibit
10.1
to
the
Quarterly
Report
on
Form
10-Q
filed
on
December
4,
2015)
Operator's
Contract
by
and
between
the
Riverbend
Regional
Authority,
Green
Bridge
Company,
Bettendorf
Riverfront
Development
Company,
L.C.,
Lady
Luck
Gaming
Corporation
and
Lady
Luck
Bettendorf,
L.C.,
dated
as
of
August
11,
1994.
(Incorporated
by
reference
to
Exhibit
10.53
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Amendment
to
Operator's
Contract
by
and
among
Green
Bridge
Company,
Bettendorf
Riverfront
Development
Company,
L.C.,
Lady
Luck
Gaming
Corporation,
Lady
Luck
Bettendorf,
L.C.
and
Riverbend
Regional
Authority,
dated
as
of
August
27,
1998.
(Incorporated
by
reference
to
Exhibit
10.54
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Second
Amendment
to
Operator's
Contract
by
and
between
Isle
of
Capri
Bettendorf,
L.C.
and
Scott
County
Regional
Authority
dated
as
of
June
30,
2004.
(Incorporated
by
reference
to
Exhibit
10.55
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Third
Amendment
to
Operator's
Contract
by
and
between
Isle
of
Capri
Bettendorf,
L.C.
and
Scott
County
Regional
Authority
dated
as
of
October
30,
2007.
(Incorporated
by
reference
to
Exhibit
10.56
to
the
Annual
Report
on
Form
10-K
filed
on
June
23,
2014)
Fourth
Amendment
to
Operator's
Contract
by
and
between
Isle
of
Capri
Bettendorf,
L.C.
and
Scott
County
Regional
Authority
dated
as
of
March
11,
2015.
(Incorporated
by
reference
to
Exhibit
10.62
to
the
Annual
Report
on
Form
10-K
filed
on
June
17,
2015)
Significant
Subsidiaries
of
Isle
of
Capri
Casinos,
Inc.
Consent
of
Ernst
&
Young
LLP
Certification
of
Chief
Executive
Officer
pursuant
to
Rule
13a-14(a)
under
the
Securities
Exchange
Act
of
1934
Certification
of
Principal
Financial
Officer
pursuant
to
Rule
13a-14(a)
under
the
Securities
Exchange
Act
of
1934
Certification
of
Chief
Executive
Officer
Pursuant
to
18
U.S.C.
Section
1350
Certification
of
Principal
Financial
Officer
Pursuant
to
18
U.S.C.
Section
1350
Description
of
Governmental
Regulation.
102
Table
of
Contents
EXHIBIT
NUMBER
DESCRIPTION
101*
The
following
financial
statements
and
notes
from
the
Isle
of
Capri
Casinos,
Inc.
Annual
Report
on
Form
10-K
for
the
year
ended
April
24,
2016,
filed
on
June
21,
2016,
formatted
in
XBRL:
(i)
Consolidated
Balance
Sheets;
(ii)
Consolidated
Statements
of
Operations;
(iii)
Consolidated
Statement
of
Comprehensive
Income
(Loss);
(iv)
Consolidated
Statements
of
Stockholders'
Equity;
(v)
Consolidated
Statements
of
Cash
Flows;
and
(vi)
Notes
to
Consolidated
Financial
Statements.
*
Filed
herewith.
†
Management
contract
or
compensatory
plan
or
arrangement.
103
Exhibit 10.5
THE EXECUTIVE NONQUALIFIED EXCESS PLAN
PLAN DOCUMENT
THE EXECUTIVE NONQUALIFIED EXCESS PLAN
Section 1.
Purpose:
By execution of the Adoption Agreement, the Employer has adopted the Plan set forth herein, and in the Adoption Agreement, to provide a means by
which certain management Employees or Independent Contractors of the Employer may elect to defer receipt of current Compensation from the Employer in order
to provide retirement and other benefits on behalf of such Employees or Independent Contractors of the Employer, as selected in the Adoption Agreement. The
Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code (the “Code”).
The Plan is also intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation benefits for a select group of
management or highly compensated employees under Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974
(“ERISA”) and independent contractors. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner
consistent with these intentions.
Section 2.
Definitions:
As used in the Plan, including this Section 2, references to one gender shall include the other, unless otherwise indicated by the context:
2.1
“Active Participant” means, with respect to any day or date, a Participant who is in Service on such day or date; provided, that a Participant
shall cease to be an Active Participant (i) immediately upon a determination by the Committee that the Participant has ceased to be an Employee or Independent
Contractor, or (ii) at the end
1
of the Plan Year that the Committee determines the Participant no longer meets the eligibility requirements of the Plan.
2.2
“Adoption Agreement” means the written agreement pursuant to which the Employer adopts the Plan. The Adoption Agreement is a part of the
Plan as applied to the Employer.
2.3
“Beneficiary” means the person, persons, entity or entities designated or determined pursuant to the provisions of Section 13 of the Plan.
2.4
“Board” means the Board of Directors of the Company, if the Company is a corporation. If the Company is not a corporation, “Board” shall
mean the Company.
2.5
“Change in Control Event” means an event described in Section 409A(a)(2)(A)(v) of the Code (or any successor provision thereto) and the
regulations thereunder.
2.6
“Committee” means the persons or entity designated in the Adoption Agreement to administer the Plan. If the Committee designated in the
Adoption Agreement is unable to serve, the Employer shall satisfy the duties of the Committee provided for in Section 9.
2.7
“Company” means the company designated in the Adoption Agreement as such.
2.8
“Compensation” shall have the meaning designated in the Adoption Agreement.
2.9
“Crediting Date” means the date designated in the Adoption Agreement for crediting the amount of any Participant Deferral Credits or
Employer Credits to the Deferred Compensation Account of a Participant.
2
2.10
“Deferred Compensation Account” means the account maintained with respect to each Participant under the Plan. The Deferred Compensation
Account shall be credited with Participant Deferral Credits and Employer Credits, credited or debited for deemed investment gains or losses, and adjusted for
payments in accordance with the rules and elections in effect under Section 8. The Deferred Compensation Account of a Participant shall include any In-Service or
Education Account of the Participant, if applicable.
2.11
“Disabled” means Disabled within the meaning of Section 409A of the Code and the regulations thereunder. Generally, this means that the
Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less than 12 months, or is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement
benefits for a period of not less than three months under an accident and health plan covering Employees of the Employer.
2.12
“Education Account” is an In-Service Account which will be used by the Participant for educational purposes.
2.13
“Effective Date” shall be the date designated in the Adoption Agreement.
2.14
“Employee” means an individual in the Service of the Employer if the relationship between the individual and the Employer is the legal
relationship of employer and employee. An individual shall cease to be an Employee upon the Employee’s Separation from Service.
3
2.15
“Employer” means the Company, as identified in the Adoption Agreement, and any Participating Employer which adopts this Plan. An
Employer may be a corporation, a limited liability company, a partnership or sole proprietorship.
2.16
“Employer Credits” means the amounts credited to the Participant’s Deferred Compensation Account by the Employer pursuant to the
provisions of Section 4.2.
2.17
“Grandfathered Amounts” means, if applicable, the amounts that were deferred under the Plan and were earned and vested within the meaning
of Section 409A of the Code and regulations thereunder as of December 31, 2004. Grandfathered Amounts shall be subject to the terms designated in the Adoption
Agreement.
2.18
“Independent Contractor” means an individual in the Service of the Employer if the relationship between the individual and the Employer is
not the legal relationship of employer and employee. An individual shall cease to be an Independent Contractor upon the termination of the Independent
Contractor’s Service. An Independent Contractor shall include a director of the Employer who is not an Employee.
2.19
“In-Service Account” means a separate account to be kept for each Participant that has elected to take in-service distributions as described in
Section 5.4. The In-Service Account shall be adjusted in the same manner and at the same time as the Deferred Compensation Account under Section 8 and in
accordance with the rules and elections in effect under Section 8.
2.20
“Normal Retirement Age” of a Participant means the age designated in the Adoption Agreement.
4
2.21
“Participant” means with respect to any Plan Year an Employee or Independent Contractor who has been designated by the Committee as a
Participant and who has entered the Plan or who has a Deferred Compensation Account under the Plan; provided that if the Participant is an Employee, the
individual must be a highly compensated or management employee of the Employer within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
2.22
“Participant Deferral Credits” means the amounts credited to the Participant’s Deferred Compensation Account by the Employer pursuant to
the provisions of Section 4.1.
2.23
“Participating Employer” means any trade or business (whether or not incorporated) which adopts this Plan with the consent of the Company
identified in the Adoption Agreement.
2.24
“Participation Agreement” means a written agreement entered into between a Participant and the Employer pursuant to the provisions of
Section 4.1
2.25
“Performance-Based Compensation” means compensation where the amount of, or entitlement to, the compensation is contingent on the
satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve months. Organizational or
individual performance criteria are considered preestablished if established in writing within 90 days after the commencement of the period of service to which the
criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-based compensation may include payments
based upon subjective performance criteria as
5
provided in regulations and administrative guidance promulgated under Section 409A of the Code.
2.26
“Plan” means The Executive Nonqualified Excess Plan, as herein set out and as set out in the Adoption Agreement, or as duly amended. The
name of the Plan as applied to the Employer shall be designated in the Adoption Agreement.
2.27
“Plan-Approved Domestic Relations Order” shall mean a judgment, decree, or order (including the approval of a settlement agreement) which
is:
2.27.1 Issued pursuant to a State’s domestic relations law;
2.27.2 Relates to the provision of child support, alimony payments or marital property rights to a Spouse, former Spouse, child or other dependent of
the Participant;
2.27.3 Creates or recognizes the right of a Spouse, former Spouse, child or other dependent of the Participant to receive all or a portion of the
Participant’s benefits under the Plan;
2.27.4 Requires payment to such person of their interest in the Participant’s benefits in a lump sum payment at a specific time; and
2.27.5 Meets such other requirements established by the Committee.
2.28
“Plan Year” means the twelve-month period ending on the last day of the month designated in the Adoption Agreement; provided that the
initial Plan Year may have fewer than twelve months.
2.29
“Qualifying Distribution Event” means (i) the Separation from Service of the Participant, (ii) the date the Participant becomes Disabled,
(iii) the death of the Participant, (iv) the time specified by the Participant for an In-Service or Education Distribution, (v) a Change in Control Event, or (vi) an
Unforeseeable Emergency, each to the extent provided in Section 5.
6
2.30
“Seniority Date” shall have the meaning designated in the Adoption Agreement.
2.31
“Separation from Service” or “Separates from Service” means a “separation from service” within the meaning of Section 409A of the Code.
2.32
“Service” means employment by the Employer as an Employee. For purposes of the Plan, the employment relationship is treated as continuing
intact while the Employee is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so
long as the Employee’s right to reemployment is provided either by statute or contract. If the Participant is an Independent Contractor, “Service” shall mean the
period during which the contractual relationship exists between the Employer and the Participant. The contractual relationship is not terminated if the Participant
anticipates a renewal of the contract or becomes an Employee.
2.33
“Service Bonus” means any bonus paid to a Participant by the Employer which is not Performance-Based Compensation.
2.34
“Specified Employee” means an Employee who meets the requirements for key employee treatment under Section 416(i)(1)(A)(i), (ii) or (iii) of
the Code (applied in accordance with the regulations thereunder and without regard to Section 416(i)(5) of the Code) at any time during the twelve month period
ending on December 31 of each year (the “identification date”). Unless binding corporate action is taken to establish different rules for determining Specified
Employees for all plans of the Company and its controlled group members that are subject to Section 409A of the Code, the foregoing rules and the other default
rules under the regulations of Section 409A of the Code shall
7
apply. If the person is a key employee as of any identification date, the person is treated as a Specified Employee for the twelve-month period beginning on the first
day of the fourth month following the identification date.
2.35
“Spouse” or “ Surviving Spouse” means, except as otherwise provided in the Plan, a person who is the legally married spouse or surviving
spouse of a Participant.
2.36
“Unforeseeable Emergency” means an “unforeseeable emergency” within the meaning of Section 409A of the Code.
2.37
“Years of Service” means each Plan Year of Service completed by the Participant. For vesting purposes, Years of Service shall be calculated
from the date designated in the Adoption Agreement and Service shall be based on service with the Company and all Participating Employers.
Section 3.
Participation:
The Committee in its discretion shall designate each Employee or Independent Contractor who is eligible to participate in the Plan. A Participant who
Separates from Service with the Employer and who later returns to Service will not be an Active Participant under the Plan except upon satisfaction of such terms
and conditions as the Committee shall establish upon the Participant’s return to Service, whether or not the Participant shall have a balance remaining in the
Deferred Compensation Account under the Plan on the date of the return to Service.
Section 4.
Credits to Deferred Compensation Account:
4.1
Participant Deferral Credits. To the extent provided in the Adoption Agreement, each Active Participant may elect, by entering into a
Participation Agreement with the Employer, to defer the receipt of Compensation from the Employer by a dollar
8
amount or percentage specified in the Participation Agreement. The amount of Compensation the Participant elects to defer, the Participant Deferral Credit, shall be
credited by the Employer to the Deferred Compensation Account maintained for the Participant pursuant to Section 8. The following special provisions shall apply
with respect to the Participant Deferral Credits of a Participant:
4.1.1 The Employer shall credit to the Participant’s Deferred Compensation Account on each Crediting Date an amount equal to the total Participant
Deferral Credit for the period ending on such Crediting Date.
4.1.2 An election pursuant to this Section 4.1 shall be made by the Participant by executing and delivering a Participation Agreement to the
Committee. Except as otherwise provided in this Section 4.1, the Participation Agreement shall become effective with respect to such Participant as of the first day
of January following the date such Participation Agreement is received by the Committee. A Participant’s election may be changed at any time prior to the last
permissible date for making the election as permitted in this Section 4.1, and shall thereafter be irrevocable. The election of a Participant shall continue in effect for
subsequent years until modified by the Participant as permitted in this Section 4.1.
4.1.3 A Participant may execute and deliver a Participation Agreement to the Committee within 30 days after the date the Participant first becomes
eligible to participate in the Plan to be effective as of the first payroll period next following the date the Participation Agreement is fully executed by the
Participant. Whether a Participant is treated as newly eligible for participation under this Section shall be determined in accordance with Section 409A of the Code
and the regulations thereunder, including (i) rules that treat all elective deferral account balance plans as one plan, and (ii) rules that treat a previously eligible
Employee as newly eligible if his benefits had been previously distributed or if he has been ineligible for 24 months. For Compensation that is earned based upon a
specified performance period (for example, an annual bonus), where a deferral election is made under this Section but after the beginning of the performance
period, the election will only apply to the portion of the Compensation equal to the total amount of the Compensation for the service period multiplied by the ratio
of the number of days remaining in the performance period after the election over the total number of days in the performance period.
4.1.4 A Participant may unilaterally modify a Participation Agreement (either to terminate, increase or decrease the portion of his future
Compensation which is subject to deferral within the percentage limits set forth in Section 4.1 of the Adoption Agreement) by providing a written modification of
the Participation Agreement to the Committee. The modification shall become effective as of the first day of January following the date such written modification
is received by the Committee.
9
4.1.5 If the Participant performed services continuously from the later of the beginning of the performance period or the date upon which the
performance criteria are established through the date upon which the Participant makes an initial deferral election, a Participation Agreement relating to the deferral
of Performance-Based Compensation may be executed and delivered to the Committee no later than the date which is 6 months prior to the end of the performance
period, provided that in no event may an election to defer Performance-Based Compensation be made after such Compensation has become readily ascertainable.
4.1.6 If the Employer has a fiscal year other than the calendar year, Compensation relating to Service in the fiscal year of the Employer (such as a
bonus based on the fiscal year of the Employer), of which no amount is paid or payable during the fiscal year, may be deferred at the Participant’s election if the
election to defer is made not later than the close of the Employer’s fiscal year next preceding the first fiscal year in which the Participant performs any services for
which such Compensation is payable.
4.1.7 Compensation payable after the last day of the Participant’s taxable year solely for services provided during the final payroll period containing
the last day of the Participant’s taxable year (i.e., December 31) is treated for purposes of this Section 4.1 as Compensation for services performed in the
subsequent taxable year.
4.1.8 The Committee may from time to time establish policies or rules consistent with the requirements of Section 409A of the Code to govern the
manner in which Participant Deferral Credits may be made.
4.1.9 If a Participant becomes Disabled all currently effective deferral elections for such Participant shall be cancelled. At the time the participant is no
longer Disabled, subsequent elections to defer future compensation will be permitted under this Section 4.
4.1.10 If a Participant applies for and receives a distribution on account of an Unforeseeable Emergency, all currently effective deferral elections for
such Participant shall be cancelled. Subsequent elections to defer future compensation will be permitted under this Section 4.
4.1.11 If a Participant receives a hardship distribution under Section 1.401(k)-1(d)(3) of the Code or any other similar provision, all currently effective
deferral elections shall be cancelled. Subsequent elections to defer future compensation under this Section 4 will not be effective until the later of the beginning of
the next calendar year or six months after the date of the hardship distribution.
4.2
Employer Credits. If designated by the Employer in the Adoption Agreement, the Employer shall cause the Committee to credit to the Deferred
10
Compensation Account of each Active Participant an Employer Credit as determined in accordance with the Adoption Agreement. A Participant must make
distribution elections with respect to any Employer Credits credited to his Deferred Compensation Account by the deadline that would apply under Section 4.1 for
distribution elections with respect to Participant Deferral Credits credited at the same time, on a Participation Agreement that is timely executed and delivered to
the Committee pursuant to Section 4.1.
4.3
Deferred Compensation Account. All Participant Deferral Credits and Employer Credits shall be credited to the Deferred Compensation
Account of the Participant as provided in Section 8.
Section 5.
Qualifying Distribution Events:
5.1
Separation from Service. If the Participant Separates from Service with the Employer, the vested balance in the Deferred Compensation
Account shall be paid to the Participant by the Employer as provided in Section 7. Notwithstanding the foregoing, no distribution shall be made earlier than six
months after the date of Separation from Service (or, if earlier, the date of death) with respect to a Participant who as of the date of Separation from Service is a
Specified Employee of a corporation the stock in which is traded on an established securities market or otherwise. Any payments to which such Specified
Employee would be entitled during the first six months following the date of Separation from Service shall be accumulated and paid on the first day of the seventh
month following the date of Separation from Service, and shall be adjusted for deemed investment gain and loss incurred during the six month period.
11
5.2
Disability. If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan when a Participant becomes
Disabled, and the Participant becomes Disabled while in Service, the vested balance in the Deferred Compensation Account shall be paid to the Participant by the
Employer as provided in Section 7.
5.3
Death. If the Participant dies while in Service, the Employer shall pay a benefit to the Participant’s Beneficiary in the amount designated in the
Adoption Agreement. Payment of such benefit shall be made by the Employer as provided in Section 7.
5.4
In-Service or Education Distributions. If the Employer designates in the Adoption Agreement that in-service or education distributions are
permitted under the Plan, a Participant may designate in the Participation Agreement to have a specified amount credited to the Participant’s In-Service or
Education Account for in-service or education distributions at the date specified by the Participant. In no event may an in-service or education distribution of an
amount be made before the date that is two years after the first day of the year in which any deferral election to such In-Service or Education Account became
effective. Notwithstanding the foregoing, if a Participant incurs a Qualifying Distribution Event prior to the date on which the entire balance in the In-Service or
Education Account has been distributed, then the balance in the In-Service or Education Account on the date of the Qualifying Distribution Event shall be paid as
provided under Section 7.1 for payments on such Qualifying Distribution Event.
5.5
Change in Control Event. If the Employer designates in the Adoption
12
Agreement that distributions are permitted under the Plan upon the occurrence of a Change in Control Event, the Participant may designate in the Participation
Agreement to have the vested balance in the Deferred Compensation Account paid to the Participant upon a Change in Control Event by the Employer as provided
in Section 7.
5.6
Unforeseeable Emergency. If the Employer designates in the Adoption Agreement that distributions are permitted under the Plan upon the
occurrence of an Unforeseeable Emergency event, a distribution from the Deferred Compensation Account may be made to a Participant in the event of an
Unforeseeable Emergency, subject to the following provisions:
5.6.1 A Participant may, at any time prior to his Separation from Service for any reason, make application to the Committee to receive a distribution in
a lump sum of all or a portion of the vested balance in the Deferred Compensation Account (determined as of the date the distribution, if any, is made under this
Section 5.6) because of an Unforeseeable Emergency. A distribution because of an Unforeseeable Emergency shall not exceed the amount required to satisfy the
Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution, after taking into account the extent to which
the Unforeseeable Emergency may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to
the extent the liquidation of such assets would not itself cause severe financial hardship) or by stopping current deferrals under the Plan pursuant to Section 4.1.10.
5.6.2 The Participant’s request for a distribution on account of Unforeseeable Emergency must be made in writing to the Committee. The request must
specify the nature of the financial hardship, the total amount requested to be distributed from the Deferred Compensation Account, and the total amount of the
actual expense incurred or to be incurred on account of the Unforeseeable Emergency.
5.6.3 If a distribution under this Section 5.6 is approved by the Committee, such distribution will be made as soon as practicable following the date it
is approved. The processing of the request shall be completed as soon as practicable from the date on which the Committee receives the properly completed written
request for a distribution on account of an Unforeseeable Emergency. If a Participant’s Separation from Service occurs after a request is approved in accordance
with this Section 5.6.3, but prior to distribution of the full amount approved, the approval of the request shall be automatically null and void and the benefits which
the Participant is entitled to receive
13
under the Plan shall be distributed in accordance with the applicable distribution provisions of the Plan.
5.6.4 The Committee may from time to time adopt additional policies or rules consistent with the requirements of Section 409A of the Code to govern the
manner in which such distributions may be made so that the Plan may be conveniently administered.
Section 6.
Vesting:
A Participant shall be fully vested in the portion of his Deferred Compensation Account attributable to Participant Deferral Credits, and all income, gains
and losses attributable thereto. A Participant shall become fully vested in the portion of his Deferred Compensation Account attributable to Employer Credits, and
income, gains and losses attributable thereto, in accordance with the vesting schedule and provisions designated by the Employer in the Adoption Agreement. If a
Participant’s Deferred Compensation Account is not fully vested upon Separation from Service, the portion of the Deferred Compensation Account that is not fully
vested shall thereupon be forfeited.
Section 7.
Distribution Rules:
7.1
Payment Options. The Employer shall designate in the Adoption Agreement the payment options which may be elected by the Participant
(lump sum, annual installments, or a combination of both). Different payment options may be made available for each Qualifying Distribution Event, and different
payment options may be available for different types of Separations from Service, all as designated in the Adoption Agreement. The Participant shall elect in the
Participation Agreement the method under which the vested balance in the Deferred Compensation Account will be distributed from among the designated payment
options. The Participant may at such time elect a different method of payment for each Qualifying Distribution Event as specified in the Adoption Agreement. If
the Participant is permitted by the Employer in
14
the Adoption Agreement to elect different payment options and does not make a valid election, the vested balance in the Deferred Compensation Account will be
distributed as a lump sum.
Notwithstanding the foregoing, if certain Qualifying Distribution Events occur prior to the date on which the vested balance of a Participant’s Deferred
Compensation Account is completely paid pursuant to this Section 7.1 following the occurrence of certain initial Qualifying Distribution Events, the following
rules apply:
7.1.1 If the initial Qualifying Distribution Event is a Separation from Service or Disability, and the Participant subsequently dies, the remaining
unpaid vested balance of a Participant’s Deferred Compensation Account shall be paid as a lump sum.
7.1.2 If the initial Qualifying Distribution Event is a Change in Control Event, and any subsequent Qualifying Distribution Event occurs (except an InService or Education Distribution described in Section 2.29(iv)), the remaining unpaid vested balance of a Participant’s Deferred Compensation Account shall be
paid as provided under Section 7.1 for payments on such subsequent Qualifying Distribution Event.
7.2
Timing of Payments. Payment shall be made in the manner elected by the Participant and shall commence as soon as practicable after (but no
later than 60 days after) the distribution date elected for the Qualifying Distribution Event. In the event the Participant fails to make a valid election of the payment
method, the distribution will be made in a single lump sum payment as soon as practicable after (but no later than 60 days after) the Qualifying Distribution Event.
A payment may be further delayed to the extent permitted in accordance with regulations and guidance under Section 409A of the Code.
7.3
Installment Payments. If the Participant elects to receive installment payments upon a Qualifying Distribution Event, the payment of each
installment shall be made on the anniversary of the date of the first installment payment, and the amount of the installment shall be adjusted on such anniversary for
credits or debits to the
15
Participant’s account pursuant to Section 8 of the Plan. Such adjustment shall be made by dividing the balance in the Deferred Compensation Account on such date
by the number of installments remaining to be paid hereunder; provided that the last installment due under the Plan shall be the entire amount credited to the
Participant’s account on the date of payment.
7.4
De Minimis Amounts. Notwithstanding any payment election made by the Participant, if the Employer designates a pre-determined de minimis
amount in the Adoption Agreement, the vested balance in the Deferred Compensation Account of the Participant will be distributed in a single lump sum payment
if at the time of a permitted Qualifying Distribution Event the vested balance does not exceed such pre-determined de minimis amount; provided, however, that
such distribution will be made only where the Qualifying Distribution Event is a Separation from Service, death, Disability (if applicable) or Change in Control
Event (if applicable). Such payment shall be made on or before the later of (i) December 31 of the calendar year in which the Qualifying Distribution Event occurs,
or (ii) the date that is 2-1/2 months after the Qualifying Distribution Event occurs. In addition, the Employer may distribute a Participant’s vested balance at any
time if the balance does not exceed the limit in Section 402(g)(1)(B) of the Code and results in the termination of the Participant’s entire interest in the Plan as
provided under Section 409A of the Code.
7.5
Subsequent Elections. With the consent of the Committee, a Participant may delay or change the method of payment of the Deferred
Compensation Account subject to the following requirements:
7.5.1 The new election may not take effect until at least 12 months after the date on which the new election is made.
16
7.5.2 If the new election relates to a payment for a Qualifying Distribution Event other than the death of the Participant, the Participant becoming
Disabled, or an Unforeseeable Emergency, the new election must provide for the deferral of the payment for a period of at least five years from the date such
payment would otherwise have been made.
7.5.3 If the new election relates to a payment from the In-Service or Education Account, the new election must be made at least 12 months prior to the
date of the first scheduled payment from such account.
For purposes of this Section 7.5 and Section 7.6, a payment is each separately identified amount to which the Participant is entitled under the Plan; provided, that
entitlement to a series of installment payments is treated as the entitlement to a single payment.
7.6
Acceleration Prohibited. The acceleration of the time or schedule of any payment due under the Plan is prohibited except as expressly provided
in regulations and administrative guidance promulgated under Section 409A of the Code (such as accelerations for domestic relations orders and employment
taxes). It is not an acceleration of the time or schedule of payment if the Employer waives or accelerates the vesting requirements applicable to a benefit under the
Plan.
Section 8.
Accounts; Deemed Investment; Adjustments to Account:
8.1
Accounts. The Committee shall establish a book reserve account, entitled the “Deferred Compensation Account,” on behalf of each Participant.
The Committee shall also establish an In-Service or Education Account as a part of the Deferred Compensation Account of each Participant, if applicable. The
amount credited to the Deferred Compensation Account shall be adjusted pursuant to the provisions of Section 8.3.
8.2
Deemed Investments. The Deferred Compensation Account of a
17
Participant shall be credited with an investment return determined as if the account were invested in one or more investment funds made available by the
Committee. The Participant shall elect the investment funds in which his Deferred Compensation Account shall be deemed to be invested. Such election shall be
made in the manner prescribed by the Committee and shall take effect upon the entry of the Participant into the Plan. The investment election of the Participant
shall remain in effect until a new election is made by the Participant. In the event the Participant fails for any reason to make an effective election of the investment
return to be credited to his account, the investment return shall be determined by the Committee.
8.3
Adjustments to Deferred Compensation Account. With respect to each Participant who has a Deferred Compensation Account under the Plan,
the amount credited to such account shall be adjusted by the following debits and credits, at the times and in the order stated:
8.3.1 The Deferred Compensation Account shall be debited each business day with the total amount of any payments made from such account since
the last preceding business day to him or for his benefit. Unless otherwise specified by the Employer, each deemed investment fund will be debited pro-rata based
on the value of the investment funds as of the end of the preceding business day.
8.3.2 The Deferred Compensation Account shall be credited on each Crediting Date with the total amount of any Participant Deferral Credits and
Employer Credits to such account since the last preceding Crediting Date.
8.3.3 The Deferred Compensation Account shall be credited or debited on each day securities are traded on a national stock exchange with the amount of
deemed investment gain or loss resulting from the performance of the deemed investment funds elected by the Participant in accordance with Section 8.2. The
amount of such deemed investment gain or loss shall be determined by the Committee and such determination shall be final and conclusive upon all concerned.
18
Section 9.
Administration by Committee:
9.1
Membership of Committee. If the Committee consists of individuals appointed by the Board, they will serve at the pleasure of the Board. Any
member of the Committee may resign, and his successor, if any, shall be appointed by the Board.
9.2
General Administration . The Committee shall be responsible for the operation and administration of the Plan and for carrying out its
provisions. The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the
administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan. Any such
action taken by the Committee shall be final and conclusive on any party. To the extent the Committee has been granted discretionary authority under the Plan, the
Committee’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or
engaged by the Employer with respect to the Plan. The Committee may, from time to time, employ agents and delegate to such agents, including Employees of the
Employer, such administrative or other duties as it sees fit.
9.3
Indemnification . To the extent not covered by insurance, the Employer shall indemnify the Committee, each Employee, officer, director, and
agent of the Employer, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising
in connection with the exercise of their duties and responsibilities with respect to the Plan, provided however
19
that the Employer shall not indemnify any person for liabilities or expenses due to that person’s own gross negligence or willful misconduct.
Section 10.
Contractual Liability, Trust:
10.1
Contractual Liability. Unless otherwise elected in the Adoption Agreement, the Company shall be obligated to make all payments hereunder.
This obligation shall constitute a contractual liability of the Company to the Participants, and such payments shall be made from the general funds of the Company.
The Company shall not be required to establish or maintain any special or separate fund, or otherwise to segregate assets to assure that such payments shall be
made, and the Participants shall not have any interest in any particular assets of the Company by reason of its obligations hereunder. To the extent that any person
acquires a right to receive payment from the Company, such right shall be no greater than the right of an unsecured creditor of the Company.
10.2
Trust. The Employer may establish a trust to assist it in meeting its obligations under the Plan. Any such trust shall conform to the requirements
of a grantor trust under Revenue Procedures 92-64 and 92-65 and at all times during the continuance of the trust the principal and income of the trust shall be
subject to claims of general creditors of the Employer under federal and state law. The establishment of such a trust would not be intended to cause Participants to
realize current income on amounts contributed thereto, and the trust would be so interpreted and administered.
Section 11.
Allocation of Responsibilities:
The persons responsible for the Plan and the duties and responsibilities allocated to each are as follows:
20
11.1
Board.
(i) To amend the Plan;
(ii) To appoint and remove members of the Committee; and
(iii) To terminate the Plan as permitted in Section 14.
11.2
Committee.
(i) To designate Participants;
(ii) To interpret the provisions of the Plan and to determine the rights of the Participants under the Plan, except to the extent otherwise provided in
Section 16 relating to claims procedure;
(iii) To administer the Plan in accordance with its terms, except to the extent powers to administer the Plan are specifically delegated to another
person or persons as provided in the Plan;
(iv) To account for the amount credited to the Deferred Compensation Account of a Participant;
(v) To direct the Employer in the payment of benefits;
(vi) To file such reports as may be required with the United States Department of Labor, the Internal Revenue Service and any other government
agency to which reports may be required to be submitted from time to time; and
(vii) To administer the claims procedure to the extent provided in Section 16.
Section 12.
Benefits Not Assignable; Facility of Payments:
12.1
Benefits Not Assignable. No portion of any benefit credited or paid under the Plan with respect to any Participant shall be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge the same shall be void, nor shall any portion of such benefit be in any manner payable to any assignee, receiver or any one trustee, or be liable
for his debts, contracts, liabilities, engagements or torts.
21
12.2
Plan-Approved Domestic Relations Orders. The Committee shall establish procedures for determining whether an order directed to the Plan is
a Plan-Approved Domestic Relations Order. If the Committee determines that an order is a Plan-Approved Domestic Relations Order, the Committee shall cause
the payment of amounts pursuant to or segregate a separate account as provided by (and to prevent any payment or act which might be inconsistent with) the PlanApproved Domestic Relations Order.
12.3
Payments to Minors and Others. If any individual entitled to receive a payment under the Plan shall be physically, mentally or legally
incapable of receiving or acknowledging receipt of such payment, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory
evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise
payable to him to be made to such person or institution so maintaining him. Payment to such person or institution shall be in full satisfaction of all claims by or
through the Participant to the extent of the amount thereof.
Section 13.
Beneficiary:
The Participant’s beneficiary shall be the person, persons, entity or entities designated by the Participant on the beneficiary designation form provided by
and filed with the Committee or its designee. If the Participant does not designate a beneficiary, the beneficiary shall be his Surviving Spouse. If the Participant
does not designate a beneficiary and has no Surviving Spouse, the beneficiary shall be the Participant’s estate. The designation of a beneficiary may be changed or
revoked only by filing a new beneficiary designation form with the Committee or its designee. If a beneficiary (the
22
“primary beneficiary”) is receiving or is entitled to receive payments under the Plan and dies before receiving all of the payments due him, the balance to which he
is entitled shall be paid to the contingent beneficiary, if any, named in the Participant’s current beneficiary designation form. If there is no contingent beneficiary,
the balance shall be paid to the estate of the primary beneficiary. Any beneficiary may disclaim all or any part of any benefit to which such beneficiary shall be
entitled hereunder by filing a written disclaimer with the Committee before payment of such benefit is to be made. Such a disclaimer shall be made in a form
satisfactory to the Committee and shall be irrevocable when filed. Any benefit disclaimed shall be payable from the Plan in the same manner as if the beneficiary
who filed the disclaimer had predeceased the Participant.
Section 14.
Amendment and Termination of Plan:
The Company may amend any provision of the Plan or terminate the Plan at any time; provided, that in no event shall such amendment or termination
reduce the balance in any Participant’s Deferred Compensation Account as of the date of such amendment or termination, nor shall any such amendment affect the
terms of the Plan relating to the payment of such Deferred Compensation Account. Notwithstanding the foregoing, the following special provisions shall apply:
14.1
Termination in the Discretion of the Employer. Except as otherwise provided in Sections 14.2, the Company in its discretion may terminate
the Plan and distribute benefits to Participants subject to the following requirements and any others specified under Section 409A of the Code:
14.1.1 All arrangements sponsored by the Employer that would be aggregated with the Plan under Section 1.409A-l(c) of the Treasury Regulations are
terminated.
23
14.1.2 No payments other than payments that would be payable under the terms of the Plan if the termination had not occurred are made within 12
months of the termination date.
14.1.3 All benefits under the Plan are paid within 24 months of the termination date.
14.1.4 The Employer does not adopt a new arrangement that would be aggregated with the Plan under Section 1.409A-1(c) of the Treasury Regulations
providing for the deferral of compensation at any time within 3 years following the date of termination of the Plan.
14.1.5 The termination does not occur proximate to a downturn in the financial health of the Employer.
14.2
Termination Upon Change in Control Event. If the Company terminates the Plan within thirty days preceding or twelve months following a
Change in Control Event, the Deferred Compensation Account of each Participant shall become fully vested and payable to the Participant in a lump sum within
twelve months following the date of termination, subject to the requirements of Section 409A of the Code.
Section 15.
Communication to Participants:
The Employer shall make a copy of the Plan available for inspection by Participants and their beneficiaries during reasonable hours at the principal office
of the Employer.
Section 16.
Claims Procedure:
The following claims procedure shall apply with respect to the Plan:
16.1
Filing of a Claim for Benefits. If a Participant or Beneficiary (the “claimant”) believes that he is entitled to benefits under the Plan which are
not being paid to him or which are not being accrued for his benefit, he shall file a written claim therefore with the Committee.
24
16.2
Notification to Claimant of Decision. Within 90 days after receipt of a claim by the Committee (or within 180 days if special circumstances
require an extension of time), the Committee shall notify the claimant of the decision with regard to the claim. In the event of such special circumstances requiring
an extension of time, there shall be furnished to the claimant prior to expiration of the initial 90-day period written notice of the extension, which notice shall set
forth the special circumstances and the date by which the decision shall be furnished. If such claim shall be wholly or partially denied, notice thereof shall be in
writing and worded in a manner calculated to be understood by the claimant, and shall set forth: (i) the specific reason or reasons for the denial; (ii) specific
reference to pertinent provisions of the Plan on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to
perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure for review of the denial and the
time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under ERISA following an adverse benefit
determination on review. Notwithstanding the foregoing, if the claim relates to a disability determination, the Committee shall notify the claimant of the decision
within 45 days (which may be extended for an additional 30 days if required by special circumstances).
16.3
Procedure for Review. Within 60 days following receipt by the claimant of notice denying his claim, in whole or in part, or, if such notice shall
not be given, within 60 days following the latest date on which such notice could have been timely given, the claimant may appeal denial of the claim by filing a
written application for review with the Committee. Following such request for review, the Committee shall fully
25
and fairly review the decision denying the claim. Prior to the decision of the Committee, the claimant shall be given an opportunity to review pertinent documents
and to submit issues and comments in writing.
16.4
Decision on Review. The decision on review of a claim denied in whole or in part by the Committee shall be made in the following manner:
16.4.1 Within 60 days following receipt by the Committee of the request for review (or within 120 days if special circumstances require an extension of
time), the Committee shall notify the claimant in writing of its decision with regard to the claim. In the event of such special circumstances requiring an extension
of time, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. Notwithstanding the foregoing, if the claim
relates to a disability determination, the Committee shall notify the claimant of the decision within 45 days (which may be extended for an additional 45 days if
required by special circumstances).
16.4.2 With respect to a claim that is denied in whole or in part, the decision on review shall set forth specific reasons for the decision, shall be written
in a manner calculated to be understood by the claimant, and shall set forth:
(i) the specific reason or reasons for the adverse determination;
(ii) specific reference to pertinent Plan provisions on which the adverse determination is based;
(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relevant to the claimant’s claim for benefits; and
(iv) a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information
about such procedures, as well as a statement of the claimant’s right to bring an action under ERISA section 502(a).
16.4.3 The decision of the Committee shall be final and conclusive.
16.5
Action by Authorized Representative of Claimant. All actions set forth in this Section 16 to be taken by the claimant may likewise be taken
by a representative of the claimant duly authorized by him to act in his behalf on such matters. The
26
Committee may require such evidence as either may reasonably deem necessary or advisable of the authority to act of any such representative.
Section 17.
Miscellaneous Provisions:
17.1
Set off. The Employer may at any time offset a Participant’s Deferral Compensation Account by an amount up to $5,000 to collect the amount of
any loan, cash advance, extension of other credit or other obligation of the Participant to the Employer that is then due and payable in accordance with the
requirements of Section 409A of the Code.
17.2
Notices. Each Participant who is not in Service and each Beneficiary shall be responsible for furnishing the Committee or its designee with his
current address for the mailing of notices and benefit payments. Any notice required or permitted to be given to such Participant or Beneficiary shall be deemed
given if directed to such address and mailed by regular United States mail, first class, postage prepaid. If any check mailed to such address is returned as
undeliverable to the addressee, mailing of checks will be suspended until the Participant or Beneficiary furnishes the proper address. This provision shall not be
construed as requiring the mailing of any notice or notification otherwise permitted to be given by posting or by other publication.
17.3
Lost Distributees. A benefit shall be deemed forfeited if the Committee is unable to locate the Participant or Beneficiary to whom payment is
due by the fifth anniversary of the date payment is to be made or commence; provided, that the deemed investment rate of return pursuant to Section 8.2 shall cease
to be applied to the Participant’s account following the first anniversary of such date; provided further,
27
however, that such benefit shall be reinstated if a valid claim is made by or on behalf of the Participant or Beneficiary for all or part of the forfeited benefit.
17.4
Reliance on Data. The Employer and the Committee shall have the right to rely on any data provided by the Participant or by any Beneficiary.
Representations of such data shall be binding upon any party seeking to claim a benefit through a Participant, and the Employer and the Committee shall have no
obligation to inquire into the accuracy of any representation made at any time by a Participant or Beneficiary.
17.5
Headings. The headings and subheadings of the Plan have been inserted for convenience of reference and are to be ignored in any construction
of the provisions hereof.
17.6
Continuation of Employment. The establishment of the Plan shall not be construed as conferring any legal or other rights upon any Employee
or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any Employee or to deal with him without regard
to the effect thereof under the Plan.
17.7
Merger or Consolidation; Assumption of Plan. No Employer shall consolidate or merge into or with another corporation or entity, or transfer
all or substantially all of its assets to another corporation, partnership, trust or other entity (a “Successor Entity”) unless such Successor Entity shall assume the
rights, obligations and liabilities of the Employer under the Plan and upon such assumption, the Successor Entity shall become obligated to perform the terms and
conditions of the Plan. Nothing herein shall prohibit the assumption of the obligations and liabilities of the Employer under the Plan by any Successor Entity.
28
17.8
Construction. The Employer shall designate in the Adoption Agreement the state according to whose laws the provisions of the Plan shall be
construed and enforced, except to the extent that such laws are superseded by ERISA and the applicable requirements of the Code.
17.9
Taxes. The Employer or other payor may withhold a benefit payment under the Plan or a Participant’s wages, or the Employer may reduce a
Participant’s Account balance, in order to meet any federal, state, or local or employment tax withholding obligations with respect to Plan benefits, as permitted
under Section 409A of the Code. The Employer or other payor shall report Plan payments and other Plan-related information to the appropriate governmental
agencies as required under applicable laws.
Section 18.
Transition Rules:
This Section 18 does not apply to plans newly established on or after January 1, 2009.
18.1
2005 Election Termination. Notwithstanding Section 4.1.4, at any time during 2005, a Participant may terminate a Participation Agreement, or
modify a Participation Agreement to reduce the amount of Compensation subject to the deferral election, so long as the Compensation subject to the terminated or
modified Participation Agreement is includible in the income of the Participant in 2005 or, if later, in the taxable year in which the amounts are earned and vested.
18.2
2005 Deferral Election. The requirements of Section 4.1.2 relating to the timing of the Participation Agreement shall not apply to any deferral
elections made on or before March 15, 2005, provided that (a) the amounts to which the deferral election relate have not been paid or become payable at the time of
the election, (b) the Plan was in existence on or before December 31, 2004, (c) the election to defer compensation is made in accordance with the terms of the Plan
as in effect on December 31, 2005 (other than a
29
requirement to make a deferral election after March 15, 2005), and (d) the Plan is otherwise operated in accordance with the requirements of Section 409A of the
Code.
18.3
2005 Termination of Participation; Distribution. Notwithstanding anything in this Plan to the contrary, at any time during 2005, a Participant
may terminate his or her participation in the Plan and receive a distribution of his Deferred Compensation Account balance on account of that termination, so long
as the full amount of such distribution is includible in the Participant’s income in 2005 or, if later, in the taxable year of the Participant in which the amount is
earned and vested.
18.4
Payment Elections. Notwithstanding the provisions of Sections 7.1 or 7.5 of the Plan, a Participant may elect on or before December 31, 2008,
the time or form of payment of amounts subject to Section 409A of the Code provided that such election applies only to amounts that would not otherwise be
payable in the year of the election and does not cause an amount to paid in the year of the election that would not otherwise be payable in such year.
30
Exhibit 10.6
NOTE: Execution of this Adoption Agreement creates a legal liability of the Employer with significant tax consequences to the Employer and
Participants. Principal Life Insurance Company disclaims all liability for the legal and tax consequences which result from the elections made by the
Employer in this Adoption Agreement.
Principal Life Insurance Company, Raleigh, NC 27612
A member of the Principal Financial Group ®
THE EXECUTIVE NONQUALIFIED “EXCESS” PLAN
ADOPTION AGREEMENT
THIS AGREEMENT is the adoption by Isle of Capri Casinos, Inc. (the “Company”) of the Executive Nonqualified Excess Plan (“Plan”).
WITNESSETH:
WHEREAS, the Company desires to adopt the Plan as an unfunded, nonqualified deferred compensation plan; and
WHEREAS, the provisions of the Plan are intended to comply with the requirements of Section 409A of the Code and the regulations thereunder and shall
apply to amounts subject to section 409A; and
WHEREAS, the Company has been advised by Principal Life Insurance Company to obtain legal and tax advice from its professional advisors before
adopting the Plan,
NOW, THEREFORE, the Company hereby adopts the Plan in accordance with the terms and conditions set forth in this Adoption Agreement:
ARTICLE I
Terms used in this Adoption Agreement shall have the same meaning as in the Plan, unless some other meaning is expressly herein set forth. The
Employer hereby represents and warrants that the Plan has been adopted by the Employer upon proper authorization and the Employer hereby elects to adopt the
Plan for the benefit of its Participants as referred to in the Plan. By the execution of this Adoption Agreement, the Employer hereby agrees to be bound by the terms
of the Plan.
ARTICLE II
The Employer hereby makes the following designations or elections for the purpose of the Plan:
2.6
Committee:
The duties of the Committee set forth in the Plan shall be satisfied by:
o
(a)
Company
o
(b)
The administrative committee appointed by the Board to serve at the pleasure of the Board.
o
(c)
Board.
x
(d)
Other (specify): The Compensation Committee of the Board, which shall act as administrator of this plan .
2.8
Compensation:
The “Compensation” of a Participant shall mean all of a Participant’s:
x
(a)
Base salary.
x
(b)
Service Bonus.
x
(c)
Performance-Based Compensation earned in a period of 12 months or more.
o
(d)
Commissions.
o
(e)
Compensation received as an Independent Contractor reportable on Form 1099.
o
(f)
Other:
2.9
Crediting Date:
The Deferred Compensation Account of a Participant shall be credited as follows:
Participant Deferral Credits at the time designated below:
o
(a)
The last business day of each Plan Year.
o
(b)
The last business day of each calendar quarter during the Plan Year.
o
(c)
The last business day of each month during the Plan Year.
o
(d)
The last business day of each payroll period during the Plan Year.
o
(e)
Each pay day as reported by the Employer.
x
(f)
On any business day as specified by the Employer.
Employer Credits at the time designated below:
x
(a)
On any business day as specified by the Employer.
2.13
Effective Date:
o
(a)
This is a newly-established Plan, and the Effective Date of the Plan is .
x
(b)
This is an amendment and restatement of a plan named Isle of Capri Casinos, Inc. 2005 Deferred Compensation Plan with an
effective date of June 1, 1995 and January 1, 2005 . The Effective Date of this amended and restated Plan is March 31, 2014.
x
(i)
All amounts in Deferred Compensation Accounts shall be subject to the provisions of this amended and
restated Plan.
o
(ii)
Any Grandfathered Amounts shall be subject to the Plan rules in effect on October 3, 2004.
2
2.20
2.23
Normal Retirement Age: The Normal Retirement Age of a Participant shall be:
o
(a)
Age .
o
(b)
The later of age or the anniversary of the participation commencement date. The participation commencement date is
the first day of the first Plan Year in which the Participant commenced participation in the Plan.
x
(c)
Other: N/A
Participating Employer(s): As of the Effective Date, the following Participating Employer(s) are parties to the Plan:
Name of Employer
Isle of Capri Casinos, Inc.
2.26
2.28
2.30
EIN
41-1659606
Plan: The name of the Plan is
Isle of Capri Casinos, Inc. Amended and Restated Deferred Compensation Plan
Plan Year: The Plan Year shall end each year on the last day of the month of December .
Seniority Date: The date on which a Participant has:
o
(a)
Attained age .
o
(b)
Completed Years of Service from First Date of Service.
o
(c)
Attained age and completed Years of Service from First Date of Service.
x
(d)
Not applicable distribution elections for Separation from Service are not based on Seniority Date
3
4.1
Participant Deferral Credits: Subject to the limitations in Section 4.1 of the Plan, a Participant may elect to have his Compensation (as selected in
Section 2.8 of this Adoption Agreement) deferred within the annual limits below by the following percentage or amount as designated in writing to the Committee:
x
(a)
Base salary:
minimum deferral:
%
maximum deferral:
100%
x
(b)
Service Bonus:
minimum deferral:
%
maximum deferral:
100%
x
(c)
Performance-Based Compensation:
minimum deferral:
%
maximum deferral:
100%
o
(d)
Commissions:
minimum deferral:
%
maximum deferral:
%
o
(e)
Form 1099 Compensation:
minimum deferral:
%
maximum deferral:
%
o
(f)
Other:
minimum deferral:
%
maximum deferral:
%
o
(g)
Participant deferrals not allowed.
4
4.2
Employer Credits: Employer Credits will be made in the following manner:
x
(a)
Employer Discretionary Credits: The Employer may make discretionary credits to the Deferred Compensation Account of
each Active Participant in an amount determined as follows:
x
(i)
An amount determined each Plan Year by the Employer.
o
(ii)
Other: .
o
(b)
Other Employer Credits: The Employer may make other credits to the Deferred Compensation Account of each Active
Participant in an amount determined as follows:
o
(i)
An amount determined each Plan Year by the Employer.
o
(ii)
Other: .
o
(c)
Employer Credits not allowed.
5.2
Disability of a Participant:
x
(a)
A Participant’s becoming Disabled shall be a Qualifying Distribution Event and the Deferred Compensation Account shall be
paid by the Employer as provided in Section 7.1.
o
(b)
A Participant becoming Disabled shall not be a Qualifying Distribution Event.
5.3
Death of a Participant: If the Participant dies while in Service, the Employer shall pay a benefit to the Beneficiary in an amount equal to the vested
balance in the Deferred Compensation Account of the Participant determined as of the date payments to the Beneficiary commence, plus:
o
(a)
An amount to be determined by the Committee.
x
(b)
No additional benefits.
5
5.4
5.5
5.6
In-Service or Education Distributions: In-Service and Education Accounts are permitted under the Plan:
x
(a)
In-Service Accounts are allowed with respect to:
o
Participant Deferral Credits only.
o
Employer Credits only.
x
Participant Deferral and Employer Credits.
In-service distributions may be made in the following manner:
x
Single lump sum payment.
x
Annual installments over a term certain not to exceed 5 years.
Education Accounts are allowed with respect to:
o
Participant Deferral Credits only.
o
Employer Credits only.
o
Participant Deferral and Employer Credits.
Education Accounts distributions may be made in the following manner:
o
Single lump sum payment.
o
Annual installments over a term certain not to exceed years.
If applicable, amounts not vested at the time payments due under this Section cease will be:
o
Forfeited
x
Distributed at Separation from Service if vested at that time
o
(b)
No In-Service or Education Distributions permitted.
Change in Control Event:
o
(a)
Participants may elect upon initial enrollment to have accounts distributed upon a Change in Control Event.
x
(b)
A Change in Control shall not be a Qualifying Distribution Event.
Unforeseeable Emergency Event:
x
(a)
Participants may apply to have accounts distributed upon an Unforeseeable Emergency event.
o
(b)
An Unforeseeable Emergency shall not be a Qualifying Distribution Event
6
6.
Vesting : An Active Participant shall be fully vested in the Employer Credits made to the Deferred Compensation Account upon the first to occur of the
following events:
o
(a)
Normal Retirement Age.
o
(b)
Death.
o
(c)
Disability.
o
(d)
Change in Control Event
x
(e)
Satisfaction of the vesting requirement as specified below:
x
Employer Discretionary Credits:
o
(i)
Immediate 100% vesting.
o
o
x
o
(ii)
(iii)
(iv)
(v)
100% vesting after Years of Service.
100% vesting at age .
Other: Immediate 100% vesting unless otherwise specified by the employer at the time of credit .
Number of Years
Vested
of Service
Percentage
Less than 1
%
1
%
2
%
3
%
4
%
5
%
6
%
7
%
8
%
9
%
10 or more
%
For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
o
(1)
First Day of Service.
o
(2)
Effective Date of Plan Participation.
o
(3)
Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service
of a Participant from the Crediting Date on which each Employer Discretionary Credit is made to his or
her Deferred Compensation Account.
7
o
Other Employer Credits:
o
(i)
Immediate 100% vesting.
o
(ii)
100% vesting after Years of Service.
o
(iii)
100% vesting at age .
o
(iv)
Number of Years
Vested
of Service
Percentage
Less than 1
%
1
%
2
%
3
%
4
%
5
%
6
%
7
%
8
%
9
%
10 or more
%
For this purpose, Years of Service of a Participant shall be calculated from the date designated below:
o
(1)
First Day of Service.
o
(2)
Effective Date of Plan Participation.
o
(3)
Each Crediting Date. Under this option (3), each Employer Credit shall vest based on the Years of Service
of a Participant from the Crediting Date on which each Employer Discretionary Credit is made to his or
her Deferred Compensation Account.
8
7.1
Payment Options: Any benefit payable under the Plan upon a permitted Qualifying Distribution Event may be made to the Participant or his Beneficiary
(as applicable) in any of the following payment forms, as selected by the Participant in the Participation Agreement:
(a)
Separation from Service (Seniority Date is Not Applicable)
o
(i)
A lump sum.
o
(ii)
Annual installments over a term certain as elected by the Participant not to exceed years.
(b)
Separation from Service prior to Seniority Date (If Applicable)
x
(i)
A lump sum.
x
(ii)
Annual installments over a term certain as elected by the Participant not to exceed 10 years.
o
(iii)
Not Applicable
(c)
Separation from Service on or After Seniority Date (If Applicable)
x
(i)
A lump sum.
x
(ii)
Annual installments over a term certain as elected by the Participant not to exceed 10 years.
o
(iii)
Not Applicable
(d)
Separation from Service Upon a Change in Control Event
o
(i)
A lump sum.
(e)
Death
o
(i)
A lump sum.
x
(ii)
Annual installments over a term certain as elected by the Participant not to exceed 5 years.
(f)
Disability
o
(i)
A lump sum.
x
(ii)
Annual installments over a term certain as elected by the Participant not to exceed 5 years.
o
(iii)
Not applicable.
If applicable, amounts not vested at the time payments due under this Section cease will be:
o
Forfeited
o
Distributed at Separation from Service if vested at that time
9
Change in Control Event
o
(i)
A lump sum.
x
(ii)
Not applicable.
If applicable, amounts not vested at the time payments due under this Section cease will be:
o
Forfeited
o
Distributed at Separation from Service if vested at that time
7.4
De Minimis Amounts.
x
(a)
Notwithstanding any payment election made by the Participant, the vested balance in the Deferred Compensation
Account of the Participant will be distributed in a single lump sum payment at the time designated under the Plan if at
the time of a permitted Qualifying Distribution Event that is either a Separation from Service, death, Disability (if
applicable) or Change in Control Event (if applicable) the vested balance does not exceed $ 10,000 . In addition, the
Employer may distribute a Participant’s vested balance at any time if the balance does not exceed the limit in
Section 402(g)(1)(B) of the Code and results in the termination of the Participant’s entire interest in the Plan
o
(b)
There shall be no pre-determined de minimis amount under the Plan; however, the Employer may distribute a
Participant’s vested balance at any time if the balance does not exceed the limit in Section 402(g)(1)(B) of the Code
and results in the termination of the Participant’s entire interest in the Plan.
10.1
Contractual Liability: Liability for payments under the Plan shall be the responsibility of the:
x
(a)
Company.
o
(b)
Employer or Participating Employer who employed the Participant when amounts were deferred.
14.
Amendment and Termination of Plan: Notwithstanding any provision in this Adoption Agreement or the Plan to the contrary, Section 12.2 of the Plan
shall be amended to read as provided in attached Exhibit .
o
There are no amendments to the Plan.
17.9
Construction: The provisions of the Plan shall be construed and enforced according to the laws of the State of Missouri , except to the extent that such
laws are superseded by ERISA and the applicable provisions of the Code.
10
(g)
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year stated below.
Isle of Capri Casinos, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
The Plan is adopted by the following Participating Employers:
St. Charles Gaming Company, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date: 9/8/14
IOC-Kansas Cit, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date: 9/8/14
IOC-Boonville, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date: 9/8/14
IOC Lula, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
IOC-Natchez, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date: 9/8/14
11
Isle of Capri Marquette, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
Isle of Capri Bettendorf, LLC
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
PPI, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
CCSC/Blackhawk, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
IOC-PA, LLC
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
Cape Girardeau LLC
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
IOC Caruthersville, LLC
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
12
IOC Black Hawk County, Inc.
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
Rainbow Casino-Vicksburg Partnership LP
Name of Employer
By: /s/ Sarah Jackson
Authorized Person
Date:
9/8/14
13
ISLE OF CAPRI CASINOS, INC.
EXECUTIVE NONQUALIFIED EXCESS PLAN
AMENDMENT
(Domestic Relations Order)
Whereas, Isle of Capri Casinos, Inc. maintains the Executive Nonqualified Excess Plan, most recently amended and restated in the form of an adoption
agreement and related plan document, each sponsored and provided by the Principal Financial Group (the “Plan”), which plan is intended to be a nonqualified
deferred compensation plan subject to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Plan”);
Whereas, Section 9.2 of the Plan permits amendment by the Compensation Committee of the Company at any time (the “Committee”)
Now, Therefore, Section 12.2 of the Plan shall be replaced, to read in its entirety as follows:
“ Domestic Relations Orders . Notwithstanding any provision of the Plan to the contrary, the Committee is authorized to comply with any court order
purporting to be a “domestic relations order” within the meaning of Code Section 414(p)(1)(B) in any action in which the Plan or the Committee has been named as
a party, including any action involving a determination of the rights or interests in a Participant’s benefits under the Plan. In accordance with the foregoing, the
Committee shall interpret this provision in a manner that is consistent with Code Section 409A law and shall interpret any court order to determine if it meets the
requirements of Code Section 414(p)(1)(B). To the extent the Committee deems a court order to be a “domestic relations order,” payment pursuant to the order
shall be made at the time directed therein and in the form of a single-sum payment. Nothing herein shall prohibit the Committee from establishing procedures for
determining whether an order is an approved domestic relations order.”
This Amendment to the Plan was executed by the Company’s Senior Vice President, Human Resources pursuant to the authority delegated to him by the
Committee, to be effective as of the date set forth below.
/s/ Sarah Jackson
Senior Vice President, Human Resources
Date: March 31, 2014
Exhibit 10.7
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), which expressly includes and references non-competition,
non-solicitation and confidentiality provisions, is made and entered into on the 6th day of April 2016 (the “Agreement Date”) and effective as of the Effective Date
(as defined below), by and between Isle of Capri Casinos, Inc., a Delaware corporation (“Isle”, together with its subsidiary and affiliated companies, the
“Company”), and Eric L. Hausler (“Employee”).
WHEREAS, Employee and Isle are currently parties to that certain employment agreement, dated as of August 6, 2009, and amended on August 11, 2014
(as amended, the “Prior Agreement”), pursuant to which Employee is employed as Isle’s Chief Financial Officer;
WHEREAS, the parties desire that (i) Employee continue to serve as Isle’s Chief Financial Officer through April 27, 2016, and (ii) beginning on April 28,
2016 (the “Effective Date”), Employee serve as Isle’s Chief Executive Officer;
WHEREAS, Isle desires to continue to employ Employee from and after the Effective Date in the position of its Chief Executive Officer, and Employee
desires to continue to perform services for, and to continue to be employed by, Isle in such capacity, all on the terms and conditions set forth herein;
WHEREAS, as a condition of Employee’s continuing employment, the Company desires to retain certain covenants from Employee including, but not
limited to, the following: (a) to refrain from carrying on or engaging in a business similar to that of the Company; (b) to refrain from soliciting Employees of the
Company for employment elsewhere; and (c) to protect and maintain the confidentiality of the Company’s trade secrets and any proprietary information, which the
parties expressly acknowledge are a condition of Employee’s continued employment;
WHEREAS, Isle and Employee desire to set forth in writing the terms and conditions of their agreements and understandings with respect to Employee’s
continued employment at Isle, as well as the covenants referenced above, and the parties expressly acknowledge that these covenants are a condition of Employee’s
continued employment; and
WHEREAS, this Agreement shall become effective as of the Effective Date only if Employee is employed by Isle on the Effective Date and the Prior
Agreement shall remain in effect until the Effective Date, subject to the terms and conditions thereof, whereupon the Prior Agreement shall be superseded by this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth in this Agreement, Isle and Employee agree as follows:
1. Term of Employment; Duties; Compensation .
(a) Term . Isle hereby continues to employ Employee, and Employee accepts such continued employment and agrees to continue to
perform services for the Company for an
initial period beginning on the Effective Date and expiring on the first anniversary thereof (the “Initial Term”) and for successive one (1) - year periods thereafter
(the “Renewal Term(s)”), unless either: (i) the Company provides ninety (90) days’ written notice of non-renewal to Employee prior to the expiration of the Initial
Term or applicable Renewal Term, or (ii) the Agreement is terminated at an earlier date in accordance with Section 2 or Section 3 of this Agreement (the Initial
Term and the Renewal Terms together referred to as the “Term of Employment”).
(b) Service with Company . During the Term of Employment, Employee shall serve as the Company’s Chief Executive Officer reporting
to the board of directors of Isle (the “Board”). During the Term of Employment, Employee agrees to perform reasonable employment duties as the Board shall
assign to Employee from time to time, which duties and responsibilities as are customarily the duties and responsibilities of chief executive officers of companies
such as Isle. In addition, Employee agrees to serve for any period for which Employee is duly and properly elected as a member of the Board; provided, however,
that Employee shall not be entitled to any additional compensation for serving as a member of the Board.
(c) Performance of Duties . During the Term of Employment, Employee agrees to serve the Company faithfully and to the best of
Employee’s ability and to devote substantially all of Employee’s business time, attention, skill and efforts to the business and affairs of the Company. The
foregoing shall not preclude Employee from engaging in other civic endeavors and, with the approval of the Board, serving on charitable boards and other boards
of directors so long as, in any case, the same do not interfere with the performance of Employee’s duties under this Agreement.
(d) Compensation . From and after the Effective Date and during the remaining Term of Employment, Isle shall pay to Employee as
compensation for services to be rendered hereunder an aggregate base salary at an annual rate which is not less than $635,000 (the “Annual Base Salary”) payable
in substantially equal monthly, or more frequent, payments, subject to increases, if any, as may be determined by the Compensation Committee of the Board (the
“Compensation Committee”). For each fiscal year during the Term of Employment, Employee shall be eligible to receive an annual cash bonus (the “Annual
Bonus”) based upon the achievement of reasonable, objective performance targets that have been established by the Compensation Committee; provided that
Employee’s Annual Bonus for each fiscal year (beginning with fiscal 2017) at the target level shall be equal to at least 100% of Employee’s Annual Base Salary if
Employee meets the target levels set by the Compensation Committee. Employee shall be involved as a senior management executive in the establishment of
reasonable, objective performance targets. Employee shall also be entitled to participate in Isle’s long-term stock incentive plan, as in effect from time to time (the
“Equity Plan”), to the extent that similarly - situated executives of Isle participate therein. In addition to the Annual Base Salary, Annual Bonus and participation in
the Equity Plan as set forth above, Employee shall be entitled to participate in any employee benefit plans or programs of the Company as are or may be made
generally available to similarly-situated employees of Isle and those made available to similarly-situated officers of Isle. Employee shall be entitled to vacation in
accordance with Isle’s policies for similarly - situated employees.
2
(e) No Violation . Employee represents and warrants to the Company that the execution and delivery of this Agreement by Employee, and
the carrying out of Employee’s duties on behalf of the Company as contemplated hereby, do not violate or conflict with the terms of any other agreements to which
Employee is or was a party.
(f) Expense Reimbursement . The Company will pay or reimburse Employee for all reasonable and necessary out-of-pocket expenses
incurred by Employee in the performance of Employee’s duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the
Company’s policies for expense verification. To the extent that any such reimbursements are taxable to Employee, such reimbursements shall be paid to Employee
only if (i) the expenses are incurred and reimbursable pursuant to a reimbursement plan that provides an objectively determinable nondiscretionary definition of the
expenses that are eligible for reimbursement and (ii) the expenses are incurred during the Term of Employment and are submitted for reimbursement no later than
ninety (90) days after the end of the calendar year in which the expense giving rise to the claim for reimbursement is incurred. With respect to any expenses that
are reimbursable pursuant to the preceding sentence, the amount of the expenses that are eligible for reimbursement during one calendar year may not affect the
amount of reimbursements to be provided in any subsequent calendar year, the reimbursement of an eligible expense shall be made promptly upon the Company’s
receipt of such information and supporting documentation as it may reasonably request but no later than the last day of the calendar year following the calendar
year in which the expense was incurred, and the right to reimbursement of the expenses shall not be subject to liquidation or exchange for any other benefit.
2. Termination .
(a) The Term of Employment shall terminate prior to its expiration, and Employee’s employment shall terminate, in the event that at any
time during the Term of Employment:
(i) Isle terminates the Term of Employment and Employee’s employment for “Cause” by a written notice of termination delivered to
Employee. For purposes of this Agreement, “Cause” shall mean any (A) dishonesty, disloyalty or breach of corporate policies, in each case that is
material to the ability of Employee to continue to function as an effective executive given the strict regulatory standards of the industry in which the
Company does business; (B) gross misconduct on the part of Employee in the performance of Employee’s duties hereunder (as determined by the Board);
(C) Employee’s violation of Section 4 of this Agreement; or (D) Employee’s failure to be licensed as a “key person” or similar role under the laws of any
jurisdiction where the Company does business, or the loss of any such license for any reason. If Employee’s employment is terminated for Cause (after
the Board has given Employee ten (10) days’ advance written notice in the case of an event or circumstances giving rise to Isle’s ability to terminate
Employee’s employment for Cause, which event or circumstance is described in reasonable detail in such written notice and is capable of being cured
during such ten (10) day cure period and if such event or circumstance is not cured to the reasonable satisfaction of the Board within such ten (10) day
period), there shall be no severance paid to Employee and Employee’s benefits shall terminate as of Employee’s
3
termination date, except as may be required by law or the express terms of any employee benefit plan or arrangement.
(ii) Isle terminates the Term of Employment and Employee’s employment for any reason without Cause (other than as a result of
Employee’s death or Disability (as defined in Section 2(a)(iv)) (including through non-renewal of the Agreement) by a written notice of termination
delivered to Employee. In this case, within seven (7) business days following Employee’s termination date, Isle shall provide Employee with a mutual
and general release in reasonable and customary form that is acceptable to Isle (a “Release”), which Release shall provide for a release of the Company
from any and all claims that Employee may have and pursuant to which Employee affirmatively agrees not to violate any of the provisions of Section 4
hereof (which shall not be expanded beyond what is set forth in Section 4 as of the Effective Date). Employee shall be entitled to receive the severance
payments and continued benefits described in this Section 2(a)(ii) only if, no later than the Release Date (as defined below), (A) the Release has been
executed by Employee, (B) the Release is effective, and (C) the applicable revocation period has expired (collectively, the “Release Requirements”). The
“Release Date” means the sixtieth (60 th ) day following Employee’s termination date.
Subject to the foregoing, if Isle terminates the Term of Employment and Employee’s employment without Cause, then Employee shall be entitled to
(A) continue to receive Employee’s Annual Base Salary (and shall receive Employee’s earned but unpaid Annual Bonus) payable in twelve (12)
substantially equal monthly installments, the first six of which shall be payable in a lump sum on the first day following the six (6) - month anniversary of
Employee’s termination date; (B) the amount of the Annual Bonus with respect to the Company’s most recently completed fiscal year, if any, to the extent
that such Annual Bonus has not yet been paid as of the termination date, which amount shall be paid in a lump sum on the payment date generally
applicable to such bonus (but no earlier than the Release Date); and (C) Medical Continuation Benefits (as defined below). Notwithstanding the
foregoing, provided that the Release Requirements are satisfied as of an earlier payment date designated by the Board, the Board may authorize (I) that
portion of the Annual Base Salary and Employee’s earned but unpaid Annual Bonus payable in accordance with the provisions of Section 2(a)(ii)(A) that
is not subject to section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (a “409A Exempt Payment”) to be paid in a lump sum to
Employee on any date following the termination date and prior to the six (6)-month anniversary of Employee’s termination date and the remaining Annual
Base Salary and Annual Bonus (that is, the Annual Base Salary and Annual Bonus minus the 409A Exempt Payment) paid to Employee in six
(6) substantially equal monthly installments beginning on the six (6) month anniversary of Employee’s termination date and ending on the one (1) year
anniversary of Employee’s termination date and (II) the amount of the unpaid Annual Bonus with respect to the Company’s most recently completed
fiscal year payable in accordance with Section 2(a)(ii)(B) that is not subject to section 409A of the Code to be paid in a lump sum on any date after
following Employee’s termination date and prior to the Release Date.
For purposes of this Agreement, “Medical Continuation Benefits” means continuation coverage under the Company’s major medical, dental and vision
plans (collectively, the
4
“Medical Plan”) for Employee and Employee’s spouse and dependents consistent with the level of coverage otherwise in effect as of Employee’s
termination date for the period beginning on Employee’s termination date and ending on the earlier of (I) twelve (12) months after Employee’s
termination date or (II) the date on which Employee, Employee’s spouse or Employee’s dependents obtains comparable alternative group coverage during
the twelve (12) months after Employee’s termination (such period being referred to as the “Continuation Period”), at Employee’s sole expense, and for
each year (or portion thereof) during the Continuation Period, the Company shall pay to Employee an amount such that, after the payment of all income
and employment taxes due with respect to such amount, there remains an amount equal to the Company’s premium contribution paid with respect to its
similarly-situated active employees for the level of coverage provided to Employee and Employee’s spouse and Employee’s dependents under the Medical
Plan during the portion of the Continuation Period within such year. Any payments to be made to Employee pursuant to the preceding sentence shall be
made no earlier than the Release Date (and only if the Release Requirements are satisfied as of the Release Date) and no later than March 15 of the year
following the year to which they relate. The Medical Continuation Benefits shall not be deemed to offset or otherwise limit the period of continuation
coverage otherwise available to Employee and Employee’s spouse or Employee’s dependents under section 4980B of the Code which shall be deemed to
commence following the end of the Continuation Period and shall be provided at Employee’s sole expense.
As used in this Agreement, the term “earned but unpaid Annual Bonus” shall refer to the non-discretionary portion of the Annual Bonus to which
Employee would have been entitled had Employee remained employed in Employee’s position for the remainder of the fiscal year of termination and
through the payment date for such Annual Bonus, prorated for the number of days during such year that Employee was employed by the Company.
In no event shall Employee be permitted to elect the year of payment of any amount under this Section 2(a)(ii).
(iii) Employee for any reason voluntarily terminates the Term of Employment and Employee’s employment. In that case, there shall be no
severance paid to Employee and Employee’s benefits shall terminate as of Employee’s termination date, except as may be required by law or the express
terms of any employee benefit plan or arrangement. Notwithstanding the foregoing, if Employee voluntarily terminates the Term of Employment and
Employee’s employment due to Retirement (as defined below) all of Employee’s outstanding equity-based awards shall become fully vested and, if
applicable, exercisable as of Employee’s termination date. The term “Retirement” shall mean the termination of Employee’s employment with Isle (other
than for Cause) after Employee has (i) attained at least age sixty-five (65) and (ii) completed at least ten (10) years of service with the Company.
(iv) Employee dies or Isle terminates the Term of Employment and Employee’s employment as a result of Employee’s Disability by a
written notice of termination delivered to Employee. In the event Employee’s employment is terminated
5
due to Employee’s death or Disability, Employee, or, in the event of death, Employee’s estate or dependents, as applicable, shall receive (A) payment of
Employee’s earned but unpaid Annual Bonus and continuing payment of Employee’s Annual Base Salary payable in twelve (12) substantially equal
monthly installments beginning on the first day following the six (6) month anniversary of Employee’s termination date; (B) continuation coverage under
the Medical Plan for the Continuation Period; and (C) a lump sum payment to be paid on the first payroll date following Employee’s termination date
equal to the average of the last three (3) years’ Annual Bonus payments, if any, inclusive of deferred amounts.
For purposes of this Agreement, Employee shall be deemed to have a “Disability” if, by reason of a medically - determinable physical or mental
impairment that can be expected to result in death or to last for a continuous period of at least twelve (12) months, (I) Employee is unable to engage in any
substantial gainful employment, or (II) has been receiving benefits under the Company’s separate long-term disability plan for a period of at least three
(3) months. In the event of any dispute regarding the existence of Employee’s Disability hereunder, Isle may refer the same to a licensed practicing
physician of the Company’s choice who is reasonably acceptable to Executive, and Executive agrees to submit to such tests and examination as such
physician shall deem appropriate and the determination by such physician shall be binding on the Company and Executive.
(b) The vesting of equity-based awards shall be governed by the provisions of the Equity Plan.
(c) If Executive is a member of the Board (and/or the board of directors or board of managers of any of Isle’s affiliates) and Employee’s
employment hereunder terminates for any reason other than death, Employee shall, as a condition to receiving any severance payments and continued benefits
described herein, immediately tender Employee’s resignation as a member of the Board (and/or the board of directors or board of managers of any of Isle’s
affiliates).
3. Change In Control of Isle . If (i) there is a sale, acquisition, merger, or buyout of Isle to an unaffiliated person, or any person that is not an
“affiliate” (as such term is defined under the Securities Exchange Act of 1934) of Isle or any of its shareholders on the Effective Date becomes the legal and
beneficial owner of more than 50% of Isle’s common stock (a “Change in Control”), and (ii) Employee has a Qualifying Termination (as defined below), then in
lieu of the severance payments and benefits, if any, otherwise payable to Employee under Section 2 of the Agreement, Employee will vest in the following
severance payments and benefits as of the date of the Change in Control (in the event the Qualifying Termination occurs prior to the Change in Control) or
Employee’s termination date (in the event the Qualifying Termination occurs upon or following the Change in Control) and Employee shall be entitled to the
following severance payments and benefits, subject to the terms and conditions of this Section 3; provided, however, that, Employee shall be entitled to such
payments and benefits only if the Release Requirements are satisfied by the Release Date:
6
(a) (i) Two (2) times Employee’s Annual Base Salary payable in twenty-four (24) substantially equal monthly installments, the first six
(6) of which shall be made on the first day following the six (6)-month anniversary of Employee’s termination date with the eighteen (18) remaining installments
being made monthly thereafter; (ii) the amount of the Annual Bonus with respect to the Company’s most recently completed fiscal year, if any, to the extent that
such Annual Bonus has not yet been paid as of the termination date, which amount shall be paid in a lump sum on the payment date generally applicable to such
bonus (but no earlier than the Release Date); and (iii) an amount equal to the average of the previous three (3) years’ Annual Bonus payment, if any, inclusive of
deferred amounts, if any, payable in a lump sum, which lump sum shall be paid to Employee on the first day following the six (6)-month anniversary of
Employee’s termination date. Notwithstanding the foregoing, provided that the Release Requirements are satisfied as of an earlier payment date designated by the
Board, the Board may authorize (I) that portion of the payments described in Sections 3(a)(i) and (iii) that qualify as a 409A Exempt Payment (as defined in
Section 2(a)(ii)) to be paid in a lump sum to Employee on any date following the termination date and prior to the six (6)-month anniversary of Employee’s
termination date and the remaining such payments (that is, the payments described in Sections 3(a)(i) and (iii) minus the 409A Exempt Payment) paid to Employee
in accordance with this Section 3(a), and (II) the amount of the unpaid Annual Bonus with respect to the Company’s most recently completed fiscal year payable in
accordance with Section 3(a)(ii) that is not subject to section 409A of the Code to be paid in a lump sum on any date after following Employee’s termination date
and prior to the Release Date.
(b) The Medical Continuation Benefits; provided, however, that for purposes of this Section 3(b), the “Continuation Period” shall be based
on twenty four (24) months rather than twelve (12) months.
(c) Upon the occurrence of a change in control (as defined in the Equity Plan), all of Employee’s outstanding equity-based awards shall
governed by the provisions of the Equity Plan.
For purposes of this Agreement, a “Qualifying Termination” means a termination of Employee’s employment with the Company by the Company without Cause
by a written notice of termination delivered to Employee or a termination by Employee for Good Reason (as defined below), in either case within thirty (30) days
prior to the occurrence of a Change in Control or upon or within twelve (12) months after a Change in Control. For purposes of this Agreement, Employee’s
termination shall be considered to be for “Good Reason” if Employee terminates Employee’s employment with the Company within the time period described
above following (I) a significant reduction in Employee’s authority, responsibilities, position or compensation or (II) a material relocation of the principal place at
which Employee performs services hereunder, but in no event less than thirty-five (35) miles from the principal place at which Employee performs such services
immediately prior to the Change in Control, in either case which the Company has failed to remedy within thirty (30) days after receipt of Employee’s written
notice thereof.
In no event shall Employee be permitted to elect the year of payment of any amount under this Section 3. Further, notwithstanding the foregoing provisions of this
Section 3, if the definition of a Change in Control does not constitute a change in control event within the meaning of section 409A of the Code, payments pursuant
to this Section 3 shall, to the extent required to comply
7
with section 409A of the Code, be paid at the same time and in the same form as corresponding payments and benefits otherwise payable under Section 2(a)(ii).
Notwithstanding the foregoing provisions of this Section 3, if (1) during the period beginning on the first anniversary of Employee’s termination date and ending on
the second anniversary thereof (the “Second Year Period”), Employee is or becomes employed by a new employer, and (2) such new employment would be
prohibited by the provisions of Section 4(c) if the post-termination restrictions of Section 4(c) applied during the Second Year Period (which they do not), then,
Employee shall forfeit all future payments and benefits under this Section 3 and all future payments and benefits shall thereupon cease. Nothing in this paragraph
is intended to relieve Employee of the restrictions of Section 4(c) for the first year following Employee’s termination date or to result in a forfeiture of payments
and benefits during the Second Year Period if Employee is or becomes employed by a new Employer if such new employment would not be prohibited by the
provisions of Section 4(c) if the post-termination restrictions of Section 4(c) applied during the Second Year Period.
4. Confidentiality, Non-Competition and Non-Solicitation .
(a) The Company’s Business . It is expressly agreed by the parties that, as of the Effective Date, the Company is (i) engaged in the
business of owning, managing and operating gaming and casino facilities in the states of Missouri, Mississippi, Iowa, Louisiana, Colorado, Pennsylvania and
Florida, (ii) is licensed to own, manage and operate gaming and casino facilities in the state of Nevada, (iii) is in the business of seeking new gaming properties in
additional jurisdictions and (iv) is engaged in all aspects of such gaming and casino operations. Employee desires to continue to be employed by the Company
from and after the Effective Date and acknowledges and agrees that the Company would be adversely affected if Employee competes with the Company during,
and subsequent to, Employee’s employment with the Company.
(b) Trade Secrets and Confidential Information . The Company and Employee acknowledge the existence of trade secrets and other
confidential information as defined below (collectively referred to as “Confidential Information”), all of which are owned by the Company, regardless of whether
such Confidential Information was conceived, originated, devised or supplemented by Employee, the Company, or any other person or entity. Employee
acknowledges that Employee has had and will continue to have access to Confidential Information during Employee’s employment with the Company.
Except as required by law, during the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Company,
directly or indirectly disclose or disseminate to any other person, firm or organization, any Confidential Information other than on behalf of the Company. The
foregoing obligation shall not apply to any Confidential Information that shall have become known to competitors of the Company or to the public other than
through an act or omission by Employee or that shall have been disclosed to Employee by a person or entity unaffiliated with the Company who has legitimate
possession thereof in its entirety and possesses the unrestricted right to make such disclosure. Further, nothing in this Section 4 prohibits Employee from reporting
violations of law to a governmental agency or entity. Employee agrees to indemnify, defend and hold harmless the Company from and against
8
any damages (including attorneys’ fees, court costs, investigative costs and amounts paid in settlement) suffered by the Company or any of its affiliates arising out
of the unauthorized disclosure or use of Confidential Information by Employee.
“Confidential Information” shall mean any data or information and documentation, whether in tangible form, electronic form or verbally disclosed, that is
of material value to the Company and not known to the public or the Company’s competitors, and which the Company has kept confidential. To the fullest extent
consistent with the foregoing and as otherwise lawful, Confidential Information shall include, without limitation, the Company’s trade secrets, computer programs,
sales techniques and reports, formulas, data processes, methods, articles of manufacture, machines, apparatus, designs, compositions of matter, products,
improvements, inventions, discoveries, developmental or experimental work, corporate strategy, marketing techniques, pricing lists and data and other pricing
information, business plans, ideas and opportunities, accounting and financial information including financial statements and projections, personnel records,
specialized customer information, proprietary agreements with vendors, special products and services the Company may offer or provide to its customers/guests
from time to time, pending acquisitions, negotiations and transactions, or the terms of existing proposed business arrangements. Confidential Information shall also
include all customer lists, accounts and specifications, and contacts of the Company, and shall further include work in progress, plans or any other matter belonging
to or relating to the technical or business activities of the Company.
Employee, at the time of the effective date of the termination of the employment relationship with the Company, shall turn over to the Company all
“Confidential Information” and any and all copies thereof in Employee’s possession regardless of who provided Employee with such information. Should
Employee be legally served with a lawfully issued subpoena expressly directing Employee to turn over the Company’s Confidential Information, Employee shall
immediately, and certainly no later than five (5) days after notice, advise the Company in writing of the subpoena and also provide a copy of the subpoena to the
Company, at its lawful address as stated in this Agreement, thereby providing the Company with adequate time to lawfully object to the disclosure of its
Confidential Information. Employee’s failure to immediately advise the Company of the subpoena shall subject Employee to any and all remedies afforded to the
Company, including, but not limited to, damages resulting to the Company for breach of contract.
Employee agrees that all such Confidential Information is, and shall remain, the sole and exclusive property of the Company and Employee further agrees
that during and after the Term of Employment, Employee will not publish, disclose, communicate or otherwise disseminate to any entity and/or person any
Confidential Information. Employee acknowledges and agrees that such Confidential Information is of critical importance to the Company and its business, and
any unauthorized dissemination of such information would cause great harm to the Company, thereby entitling the Company to any and all rights and remedies as
provided by law, and as specifically provided in Section 5 of this Agreement.
Employee hereby assigns and agrees to assign to the Company any invention, improvement, or discovery made by Employee, alone or jointly with others,
during the Term of
9
Employment, including any period of authorized leave of absence, or as a result of Employee’s employment, and which in any way relates to, or may be useful in,
the business of the Company, together with each patent that may be obtained thereon in any country. Employee will promptly and fully disclose to the Company
any such invention, improvement or discovery and, without further consideration, will upon request by the Company execute all proper papers for use in applying
for, obtaining and maintaining any United States or foreign patent and all proper assignments thereof, at the Company’s expense and through its Patent Counsel. Each such invention, improvement or discovery, whether or not patented, shall be the exclusive property of the Company.
(c) Restrictions on Competition . In exchange for consideration of employment, and in consideration for Employee receiving and being
given access to confidential business information, including, but not limited to trade secrets, customer and supplier contacts and relationships, goodwill, loyalty and
other information, and as a condition of employment of Employee by the Company, during the term of Employee’s employment with the Company, and for a
period of one (1) year after the voluntary or involuntary termination of Employee’s employment with the Company for any reason whatsoever, Employee will
refrain from carrying on or engaging in the casino or gaming business (as defined in Section 4(a)), or, without the written consent of the Company (which shall not
be unreasonably withheld), the hotel or restaurant business, or any other business in which the Company may be engaged on Employee’s termination date, in any
case either directly or indirectly, either individually or jointly or on behalf of or in concert with any other person, as a proprietor, partner, shareholder, investor
(other than in less than 5% of any class of securities of any publicly traded company), lender, financial backer, director, officer, employee, agent, advisor,
consultant or manager, or in any other capacity or manner whatsoever. The provisions of this Section 4(c) apply to any gaming operation or gaming facility within
a 75-mile radius of (A) any gaming operation or gaming facility owned (in whole or in part) by the Company or with respect to which the Company renders or
proposes to render consulting or management services, in each case on the Effective Date or, for periods after Employee’s termination date, on such termination
date, or (B) any of the foregoing as to which the Company has taken any substantive step toward owning (in whole or in part) or managing such facility in the
future.
(d) Non-Solicitation of Employees . In exchange for and in consideration of continuing employment, and in consideration for Employee
receiving and being given access to confidential business information, including, but not limited to trade secrets, customer and supplier contacts and relationships,
goodwill, loyalty and other information, and as a condition of continuing employment of Employee by the Company, during the term of Employee’s employment
with the Company and for one (1) year after Employee’s termination date for any reason, Employee shall not, without the prior written consent of the Company,
either directly or indirectly, either individually or jointly or on behalf of or in concert with any other person, as a proprietor, partner, shareholder, investor (other
than in less than 5% of any class of securities of any publicly traded company), lender, financial backer, director, officer, employee, agent, advisor, consultant or
manager, or in any other capacity or manner whatsoever, solicit for hire, enter into any contract or other arrangement with, or interfere with, disrupt or attempt to
interfere with or disrupt the Company’s relationships with, any person, who is employed by the Company; provided that for periods after Employee’s termination
date the foregoing shall apply only to a person who, as of Employee’s termination date is employed by the Company.
10
(e) Reasonable Terms . Employee agrees that the geographic areas, duration and scope of activities outlined in this Agreement are
reasonable under the circumstances. Employee further agrees that such terms are no broader than necessary to protect the Company’s business and maintain the
confidentiality of the Confidential Information. Employee further agrees that the terms of this Agreement are not oppressive and will not impose an unreasonable
burden or restraint on Employee.
5. Miscellaneous .
(a) Successors and Assigns . This Agreement is binding on and inures to the benefit of the Company’s successors and assigns. Isle may
assign this Agreement in connection with a merger, consolidation, assignment, sale or other disposition of substantially all of its assets or business (subject to the
provisions of Section 4). This Agreement may not be assigned by Employee.
(b) Modification, Waivers . This Agreement may be modified or amended only by a writing signed by an authorized representative of Isle
and Employee. To the extent that the provision of Medical Continuation Benefits under this Agreement would subject the Company to a material tax or penalty,
the Company shall have the authority to amend the Agreement to the limited extent reasonably necessary to avoid such tax or penalty and shall use all reasonable
efforts to provide Employee with a comparable benefit that does not subject the Company to such tax or penalty. The Company’s failure, or delay in exercising any
right, or partial exercise of any right, will not waive any provision of this Agreement or preclude the Company from otherwise or further exercising any rights or
remedies hereunder, or any other rights or remedies granted by any law or any related document.
(c) Governing Law, Arbitration . The laws of Missouri will govern the validity, construction, and performance of this Agreement without
regard to the location of execution or performance of this Agreement. Except as provided in paragraph (d) below, any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by binding arbitration administered by the American Arbitration Association under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Both Isle and Employee hereby
consent to this binding arbitration provision.
(d) Remedies . Employee expressly acknowledges and the parties recognize that the restrictions contained in Section 4 herein are
reasonable and necessary to protect the business and interests of the Company, and that any violation of these restrictions will cause substantial irreparable injury
and damage to the Company, and the extent of such damage would be difficult if not impossible to calculate. Accordingly, the parties to this Agreement expressly
agree that (i) if Employee breaches any provision of Section 4 of this Agreement, the damage to the Company may be substantial, although difficult to ascertain,
and monetary damages may not afford an adequate remedy, and (ii) if Employee is in breach of any provision of this Agreement, or threatens a breach of this
Agreement, the Company shall be entitled, in addition to all other rights and remedies as may be provided by law, to seek specific performance and injunctive and
other equitable relief, including, but not limited to, restraining orders and preliminary and permanent injunctions, to enforce the provisions of Section 4 of this
Agreement, as well as to
11
prevent or restrain a breach of any provisions of this Agreement. The parties expressly agree that the Company has these specific and express rights to injunctive
relief without posting any bond that might be requested or required, and without the necessity of proving irreparable injury, and that Employee expressly agrees not
to claim in any such equitable proceedings that a remedy at law is available to the Company. The existence of any claim or cause of action by Employee, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or any of its affiliates of any provision hereof. The
parties to this Agreement also expressly agree that the Company is entitled to recover any and all damages for any losses sustained, and rights of which it has been
deprived, as well as any damages allowed by law.
(e) If any proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection
with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorney’s fees and other costs
incurred in that proceeding, in addition to any other relief to which it may be entitled. All of the remedies for breach of this Agreement available to a party shall be
cumulative and the pursuit of one remedy shall not be deemed to exclude any other remedies.
(f) Captions . The headings in this Agreement are for convenience only and do not affect the interpretation of this Agreement.
(g) Severability . To the extent any provision of this Agreement shall be invalid or enforceable with respect to Employee, it shall be
considered deleted herefrom with respect to Employee and the remainder of such provision and this Agreement shall be unaffected and shall continue in full force
and effect. In furtherance to and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provision of
this Agreement be in excess of that which is valid and enforceable under applicable law with respect to Employee, then such provision shall be construed to cover
only that duration, extent or activities which are validly and enforceably covered with respect to Employee. Employee acknowledges the uncertainty of the law in
this respect and expressly stipulates that this Agreement be given the construction which renders its provisions valid and enforceable to the maximum extent (not
exceeding its expressed terms) possible under applicable laws.
(h) Entire Agreement . This Agreement contains the entire agreement and understanding by and between the Company and Employee,
and, as of the Effective Date, supersedes all previous and contemporaneous oral negotiations, commitments, writings and understandings between the parties
concerning the matters herein or therein, including without limitation, the Prior Agreement and any policy or personnel manuals of the Company to the extent any
provisions herein are inconsistent therewith. No change to this Agreement shall be valid or binding unless it is in writing and signed by the parties.
(i) Indemnification . Isle shall indemnify Employee and hold Employee harmless to the full extent permitted by Section 145 of the
Delaware General Corporation Law from and against any and all claims, liabilities and losses Employee may suffer arising in connection with Employee’s
employment as an officer of the Company as set forth herein,
12
subject to the exceptions set forth in the Delaware General Corporation Law. The agreement of the Company set forth in this Section 5(i) shall survive the
termination of this Agreement.
(j) Notices . All notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally
or sent by registered or certified mail, return receipt requested, postage prepaid, or sent by facsimile or prepaid overnight courier to the parties at the addresses set
forth below (or such other addresses as shall be specified by the parties by like notice). Such notices and other communications shall be deemed given:
(i) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;
(ii) in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or
(iii) in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or
otherwise;
provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below:
If to the Company, to:
Isle of Capri Casinos, Inc. 600 Emerson Road
Suite 300
St. Louis, MO 63141
Attention: General Counsel
With a copy to:
Paul W. Theiss
Mayer Brown LLP 71 S. Wacker Drive
Chicago, IL 60606
If to Employee, to:
Eric L. Hausler
At the most recent address on the Company’s records
With a copy to:
Lynn A. Hinrichs
Lewis Rice
600 Washington Avenue
13
Suite 2500
St. Louis, MO 63101
(k) Independent Review and Advice . Employee represents and warrants that Employee has carefully read this Agreement; that Employee
executes this Agreement with full knowledge of the contents of this Agreement, the legal consequences thereof, and any and all rights which each party may have
with respect to each other; that Employee has had the opportunity to receive independent legal advice with respect to the matters set forth in this Agreement and
with respect to the rights and asserted rights arising out of such matters, and that Employee is entering into this Agreement of Employee’s own free will. Employee
expressly agrees that there are no expectations contrary to the Agreement and no usage of trade or regular practice in the industry shall be used to modify the
Agreement.
(l) Special 409A Provisions . Notwithstanding any other provision of this Agreement to the contrary, if any payment hereunder is subject
to section 409A of the Code and if such payment is to be paid on account of Employee’s separation from service (within the meaning of section 409A of the Code),
if Employee is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code), and if any such payment is required to be made prior to the first
day of the seventh month following Employee’s separation from service, such payment shall be delayed until the first day of the seventh month following
Employee’s separation from service. To the extent that any payments or benefits under this Agreement are subject to section 409A of the Code and are paid or
provided on account of Employee’s termination of employment or the Term of Employment, the determination as to whether Employee has had a termination of
employment (or separation from service) shall be made in accordance with section 409A of the Code and the guidance issued thereunder without application of any
alternative levels of reductions of bona fide services permitted thereunder. Any delayed payment shall be made without liability for interest or other loss of
investment opportunity. Any installment payment hereunder is treated as a separate payment for purposes of section 409A of the Code.
(m) No Mitigation or Offset . Employee shall not be required to mitigate the amount of any payment provide for herein by seeking other
employment or otherwise, and any such payment will not be reduced in the event such other employment is obtained.
14
IN WITNESS HEREOF, each party has caused this Amended and Restated Employment Agreement to be executed in a manner appropriate for such party
as of the date first above written.
ISLE OF CAPRI CASINOS, INC.
By:
/s/ Edmund L. Quatmann, Jr.
Name:
Edmund L. Quatmann, Jr.
Its:
Chief Legal Officer
EMPLOYEE
/s/ Eric Hausler
Eric. L. Hausler
15
Exhibit 10.8
Execution Copy
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), which expressly includes and references non-competition,
non-solicitation and confidentiality provisions, is made and entered into on the 8th day of April 2016 (the “Agreement Date”) and effective as of the Effective Date
(as defined below), by and between Isle of Capri Casinos, Inc., a Delaware corporation (“Isle”, together with its subsidiary and affiliated companies, the
“Company”), and Arnold L. Block (“Employee”).
WHEREAS, Employee and Isle are currently parties to that certain employment agreement, dated as of January 14, 2009, and amended on June 28, 2011
(as amended, the “Prior Agreement”), pursuant to which Employee is employed as Isle’s Chief Operating Officer;
WHEREAS, the parties desire that (i) Employee continue to serve as Isle’s Chief Operating Officer through April 27, 2016, and (ii) beginning on
April 28, 2016 (the “Effective Date”), Employee serve as Isle’s President and Chief Operating Officer;
WHEREAS, Isle desires to continue to employ Employee from and after the Effective Date in the position of its President and Chief Operating Officer,
and Employee desires to continue to perform services for, and to continue to be employed by, Isle in such capacity, all on the terms and conditions set forth herein;
WHEREAS, as a condition of Employee’s continuing employment, the Company desires to retain certain covenants from Employee including, but not
limited to, the following: (a) to refrain from carrying on or engaging in a business similar to that of the Company; (b) to refrain from soliciting Employees of the
Company for employment elsewhere; and (c) to protect and maintain the confidentiality of the Company’s trade secrets and any proprietary information, which the
parties expressly acknowledge are a condition of Employee’s continued employment;
WHEREAS, Isle and Employee desire to set forth in writing the terms and conditions of their agreements and understandings with respect to Employee’s
continued employment at Isle, as well as the covenants referenced above, and the parties expressly acknowledge that these covenants are a condition of Employee’s
continued employment; and
WHEREAS, this Agreement shall become effective as of the Effective Date only if Employee is employed by Isle on the Effective Date and the Prior
Agreement shall remain in effect until the Effective Date, subject to the terms and conditions thereof, whereupon the Prior Agreement shall be superseded by this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth in this Agreement, Isle and Employee agree as follows:
1. Term of Employment; Duties; Compensation .
(a) Term . Isle hereby continues to employ Employee, and Employee accepts such continued employment and agrees to continue to
perform services for the Company for an
initial period beginning on the Effective Date and expiring on the first anniversary thereof (the “Initial Term”) and for successive one (1) - year periods thereafter
(the “Renewal Term(s)”), unless either: (i) the Company provides ninety (90) days’ written notice of non-renewal to Employee prior to the expiration of the Initial
Term or applicable Renewal Term, or (ii) the Agreement is terminated at an earlier date in accordance with Section 2 or Section 3 of this Agreement (the Initial
Term and the Renewal Terms together referred to as the “Term of Employment”).
(b) Service with Company . During the Term of Employment, Employee shall serve as the Company’s President and Chief Operating
Officer reporting to Isle’s Chief Executive Officer. During the Term of Employment, Employee agrees to perform reasonable employment duties as the Chief
Executive Officer shall assign to Employee from time to time, which duties and responsibilities as are customarily the duties and responsibilities of presidents and
chief operating officers of companies such as Isle. In addition, Employee agrees to serve for any period for which Employee is duly and properly elected as a
member of the board of directors of Isle (the “Board”); provided, however, that Employee shall not be entitled to any additional compensation for serving as a
member of the Board.
(c) Performance of Duties . During the Term of Employment, Employee agrees to serve the Company faithfully and to the best of
Employee’s ability and to devote substantially all of Employee’s business time, attention, skill and efforts to the business and affairs of the Company. The
foregoing shall not preclude Employee from engaging in other civic endeavors and, with the approval of the Board, serving on charitable boards and other boards
of directors so long as, in any case, the same do not interfere with the performance of Employee’s duties under this Agreement.
(d) Compensation . From and after the Effective Date and during the remaining Term of Employment, Isle shall pay to Employee as
compensation for services to be rendered hereunder an aggregate base salary at an annual rate which is not less than $550,000 (the “Annual Base Salary”) payable
in substantially equal monthly, or more frequent, payments, subject to increases, if any, as may be determined by the Compensation Committee of the Board (the
“Compensation Committee”). For each fiscal year during the Term of Employment, Employee shall be eligible to receive an annual cash bonus (the “Annual
Bonus”) based upon the achievement of reasonable, objective performance targets that have been established by the Compensation Committee; provided that
Employee’s Annual Bonus for each fiscal year (beginning with fiscal 2017) at the target level shall be equal to at least 100% of Employee’s Annual Base Salary if
Employee meets the target levels set by the Compensation Committee. Employee shall be involved as a senior management executive in the establishment of
reasonable, objective performance targets. Employee shall also be entitled to participate in Isle’s long-term stock incentive plan, as in effect from time to time (the
“Equity Plan”), to the extent that similarly - situated executives of Isle participate therein. In addition to the Annual Base Salary, Annual Bonus and participation in
the Equity Plan as set forth above, Employee shall be entitled to participate in any employee benefit plans or programs of the Company as are or may be made
generally available to similarly-situated employees of Isle and those made available to similarly-situated officers of Isle. Employee shall be entitled to vacation in
accordance with Isle’s policies for similarly - situated employees.
2
(e) No Violation . Employee represents and warrants to the Company that the execution and delivery of this Agreement by Employee, and
the carrying out of Employee’s duties on behalf of the Company as contemplated hereby, do not violate or conflict with the terms of any other agreements to which
Employee is or was a party.
(f) Expense Reimbursement . The Company will pay or reimburse Employee for all reasonable and necessary out-of-pocket expenses
incurred by Employee in the performance of Employee’s duties under this Agreement, subject to the presentment of appropriate vouchers in accordance with the
Company’s policies for expense verification. To the extent that any such reimbursements are taxable to Employee, such reimbursements shall be paid to Employee
only if (i) the expenses are incurred and reimbursable pursuant to a reimbursement plan that provides an objectively determinable nondiscretionary definition of the
expenses that are eligible for reimbursement and (ii) the expenses are incurred during the Term of Employment and are submitted for reimbursement no later than
ninety (90) days after the end of the calendar year in which the expense giving rise to the claim for reimbursement is incurred. With respect to any expenses that
are reimbursable pursuant to the preceding sentence, the amount of the expenses that are eligible for reimbursement during one calendar year may not affect the
amount of reimbursements to be provided in any subsequent calendar year, the reimbursement of an eligible expense shall be made promptly upon the Company’s
receipt of such information and supporting documentation as it may reasonably request but no later than the last day of the calendar year following the calendar
year in which the expense was incurred, and the right to reimbursement of the expenses shall not be subject to liquidation or exchange for any other benefit.
2. Termination .
(a) The Term of Employment shall terminate prior to its expiration, and Employee’s employment shall terminate, in the event that at any
time during the Term of Employment:
(i) Isle terminates the Term of Employment and Employee’s employment for “Cause” by a written notice of termination delivered to
Employee. For purposes of this Agreement, “Cause” shall mean any (A) dishonesty, disloyalty or breach of corporate policies, in each case that is
material to the ability of Employee to continue to function as an effective executive given the strict regulatory standards of the industry in which the
Company does business; (B) gross misconduct on the part of Employee in the performance of Employee’s duties hereunder (as determined by the Board);
(C) Employee’s violation of Section 4 of this Agreement; or (D) Employee’s failure to be licensed as a “key person” or similar role under the laws of any
jurisdiction where the Company does business, or the loss of any such license for any reason. If Employee’s employment is terminated for Cause (after
the Board has given Employee ten (10) days’ advance written notice in the case of an event or circumstances giving rise to Isle’s ability to terminate
Employee’s employment for Cause, which event or circumstance is described in reasonable detail in such written notice and is capable of being cured
during such ten (10) day cure period and if such event or circumstance is not cured to the reasonable satisfaction of the Board within such ten (10) day
period), there shall be no severance paid to Employee and Employee’s benefits shall terminate as of Employee’s
3
termination date, except as may be required by law or the express terms of any employee benefit plan or arrangement.
(ii) Isle terminates the Term of Employment and Employee’s employment for any reason without Cause (other than as a result of
Employee’s death or Disability (as defined in Section 2(a)(iv)) (including through non-renewal of the Agreement) by a written notice of termination
delivered to Employee. In this case, within seven (7) business days following Employee’s termination date, Isle shall provide Employee with a mutual
and general release in reasonable and customary form that is acceptable to Isle (a “Release”), which Release shall provide for a release of the Company
from any and all claims that Employee may have and pursuant to which Employee affirmatively agrees not to violate any of the provisions of Section 4
hereof (which shall not be expanded beyond what is set forth in Section 4 as of the Effective Date). Employee shall be entitled to receive the severance
payments and continued benefits described in this Section 2(a)(ii) only if, no later than the Release Date (as defined below), (A) the Release has been
executed by Employee, (B) the Release is effective, and (C) the applicable revocation period has expired (collectively, the “Release Requirements”). The
“Release Date” means the sixtieth (60 th ) day following Employee’s termination date.
Subject to the foregoing, if Isle terminates the Term of Employment and Employee’s employment without Cause, then Employee shall be entitled to
(A) continue to receive Employee’s Annual Base Salary (and shall receive Employee’s earned but unpaid Annual Bonus) payable in twelve (12)
substantially equal monthly installments, the first six of which shall be payable in a lump sum on the first day following the six (6) - month anniversary of
Employee’s termination date; (B) the amount of the Annual Bonus with respect to the Company’s most recently completed fiscal year, if any, to the extent
that such Annual Bonus has not yet been paid as of the termination date, which amount shall be paid in a lump sum on the payment date generally
applicable to such bonus (but no earlier than the Release Date); and (C) Medical Continuation Benefits (as defined below). Notwithstanding the
foregoing, provided that the Release Requirements are satisfied as of an earlier payment date designated by the Board, the Board may authorize (I) that
portion of the Annual Base Salary and Employee’s earned but unpaid Annual Bonus payable in accordance with the provisions of Section 2(a)(ii)(A) that
is not subject to section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (a “409A Exempt Payment”) to be paid in a lump sum to
Employee on any date following the termination date and prior to the six (6)-month anniversary of Employee’s termination date and the remaining Annual
Base Salary and Annual Bonus (that is, the Annual Base Salary and Annual Bonus minus the 409A Exempt Payment) paid to Employee in six
(6) substantially equal monthly installments beginning on the six (6) month anniversary of Employee’s termination date and ending on the one (1) year
anniversary of Employee’s termination date and (II) the amount of the unpaid Annual Bonus with respect to the Company’s most recently completed
fiscal year payable in accordance with Section 2(a)(ii)(B) that is not subject to section 409A of the Code to be paid in a lump sum on any date after
following Employee’s termination date and prior to the Release Date.
For purposes of this Agreement, “Medical Continuation Benefits” means continuation coverage under the Company’s major medical, dental and vision
plans (collectively, the
4
“Medical Plan”) for Employee and Employee’s spouse and dependents consistent with the level of coverage otherwise in effect as of Employee’s
termination date for the period beginning on Employee’s termination date and ending on the earlier of (I) twelve (12) months after Employee’s
termination date or (II) the date on which Employee, Employee’s spouse or Employee’s dependents obtains comparable alternative group coverage during
the twelve (12) months after Employee’s termination (such period being referred to as the “Continuation Period”), at Employee’s sole expense, and for
each year (or portion thereof) during the Continuation Period, the Company shall pay to Employee an amount such that, after the payment of all income
and employment taxes due with respect to such amount, there remains an amount equal to the Company’s premium contribution paid with respect to its
similarly-situated active employees for the level of coverage provided to Employee and Employee’s spouse and Employee’s dependents under the Medical
Plan during the portion of the Continuation Period within such year. Any payments to be made to Employee pursuant to the preceding sentence shall be
made no earlier than the Release Date (and only if the Release Requirements are satisfied as of the Release Date) and no later than March 15 of the year
following the year to which they relate. The Medical Continuation Benefits shall not be deemed to offset or otherwise limit the period of continuation
coverage otherwise available to Employee and Employee’s spouse or Employee’s dependents under section 4980B of the Code which shall be deemed to
commence following the end of the Continuation Period and shall be provided at Employee’s sole expense.
As used in this Agreement, the term “earned but unpaid Annual Bonus” shall refer to the non-discretionary portion of the Annual Bonus to which
Employee would have been entitled had Employee remained employed in Employee’s position for the remainder of the fiscal year of termination and
through the payment date for such Annual Bonus, prorated for the number of days during such year that Employee was employed by the Company.
In no event shall Employee be permitted to elect the year of payment of any amount under this Section 2(a)(ii).
(iii) Employee for any reason voluntarily terminates the Term of Employment and Employee’s employment. In that case, there shall be no
severance paid to Employee and Employee’s benefits shall terminate as of Employee’s termination date, except as may be required by law or the express
terms of any employee benefit plan or arrangement.
Notwithstanding the foregoing, if Employee voluntarily terminates the Term of Employment and Employee’s employment due to Retirement (as defined
below), then Employee shall receive the following amounts and benefits, in addition to any amount or benefit payable under a separate plan, policy or
program maintained by the Company: (x) the amount of the Annual Bonus with respect to the Company’s most recently completed fiscal year, if any, to
the extent that such Annual Bonus has not yet been paid as of such date, which amount shall be paid in the form of a lump sum on the payment date
generally applicable to such bonus; (y) a monthly amount equal to the Company’s portion of Employee’s premium or similar contribution under the
Company’s group medical
5
plan, such amount to be (I) based upon Employee’s level of enrollment in the Company’s group medical plan as of his or her termination date, (II) paid
during the 12-month period following Employee’s termination date or until the date on which Employee’s continuation coverage ceases in accordance
with Code Section 4980B, if earlier, and (III) contingent upon Employee’s timely election to continue his or her coverage under the Company’s group
medical plan in accordance with Code Section 4980B; and (z) an amount equal to Employee’s average Annual Bonus paid during the Company’s three
most recently completed fiscal years, determined net of any deferral under the Deferred Bonus Plan, prorated for the number of days of Employee’s
service during the fiscal year in which Employee’s terminate date occurs, payable in a lump sum within ninety (90) days following Employee’s
termination date.
The term “Retirement” shall mean the termination of Employee’s employment with Isle (other than for Cause) after Employee has (A) attained at least age
sixty-five (65) and (B) completed at least three (3) years of service with the Company.
(iv) Employee dies or Isle terminates the Term of Employment and Employee’s employment as a result of Employee’s Disability by a
written notice of termination delivered to Employee. In the event Employee’s employment is terminated due to Employee’s death or Disability,
Employee, or, in the event of death, Employee’s estate or dependents, as applicable, shall receive (A) payment of Employee’s earned but unpaid Annual
Bonus and continuing payment of Employee’s Annual Base Salary payable in twelve (12) substantially equal monthly installments beginning on the first
day following the six (6) month anniversary of Employee’s termination date; (B) continuation coverage under the Medical Plan for the Continuation
Period; and (C) a lump sum payment to be paid on the first payroll date following Employee’s termination date equal to the average of the last three
(3) years’ Annual Bonus payments, if any, inclusive of deferred amounts.
For purposes of this Agreement, Employee shall be deemed to have a “Disability” if, by reason of a medically - determinable physical or mental
impairment that can be expected to result in death or to last for a continuous period of at least twelve (12) months, (I) Employee is unable to engage in any
substantial gainful employment, or (II) has been receiving benefits under the Company’s separate long-term disability plan for a period of at least three
(3) months. In the event of any dispute regarding the existence of Employee’s Disability hereunder, Isle may refer the same to a licensed practicing
physician of the Company’s choice who is reasonably acceptable to Employee, and Employee agrees to submit to such tests and examination as such
physician shall deem appropriate and the determination by such physician shall be binding on the Company and Employee.
(b) The vesting of equity-based awards shall be governed by the provisions of the Equity Plan.
(c) If Employee is a member of the Board (and/or the board of directors or board of managers of any of Isle’s affiliates) and Employee’s
employment hereunder terminates for any reason other than death, Employee shall, as a condition to receiving any severance
6
payments and continued benefits described herein, immediately tender Employee’s resignation as a member of the Board (and/or the board of directors or board of
managers of any of Isle’s affiliates).
3. Change In Control of Isle . If (i) there is a sale, acquisition, merger, or buyout of Isle to an unaffiliated person, or any person that is not an
“affiliate” (as such term is defined under the Securities Exchange Act of 1934) of Isle or any of its shareholders on the Effective Date becomes the legal and
beneficial owner of more than 50% of Isle’s common stock (a “Change in Control”), and (ii) Employee has a Qualifying Termination (as defined below), then in
lieu of the severance payments and benefits, if any, otherwise payable to Employee under Section 2 of the Agreement, Employee will vest in the following
severance payments and benefits as of the date of the Change in Control (in the event the Qualifying Termination occurs prior to the Change in Control) or
Employee’s termination date (in the event the Qualifying Termination occurs upon or following the Change in Control) and Employee shall be entitled to the
following severance payments and benefits, subject to the terms and conditions of this Section 3; provided, however, that, Employee shall be entitled to such
payments and benefits only if the Release Requirements are satisfied by the Release Date:
(a) (i) Two (2) times Employee’s Annual Base Salary payable in twenty-four (24) substantially equal monthly installments, the first six
(6) of which shall be made on the first day following the six (6)-month anniversary of Employee’s termination date with the eighteen (18) remaining installments
being made monthly thereafter; (ii) the amount of the Annual Bonus with respect to the Company’s most recently completed fiscal year, if any, to the extent that
such Annual Bonus has not yet been paid as of the termination date, which amount shall be paid in a lump sum on the payment date generally applicable to such
bonus (but no earlier than the Release Date); and (iii) an amount equal to the average of the previous three (3) years’ Annual Bonus payment, if any, inclusive of
deferred amounts, if any, payable in a lump sum, which lump sum shall be paid to Employee on the first day following the six (6)-month anniversary of
Employee’s termination date. Notwithstanding the foregoing, provided that the Release Requirements are satisfied as of an earlier payment date designated by the
Board, the Board may authorize (I) that portion of the payments described in Sections 3(a)(i) and (iii) that qualify as a 409A Exempt Payment (as defined in
Section 2(a)(ii)) to be paid in a lump sum to Employee on any date following the termination date and prior to the six (6)-month anniversary of Employee’s
termination date and the remaining such payments (that is, the payments described in Sections 3(a)(i) and (iii) minus the 409A Exempt Payment) paid to Employee
in accordance with this Section 3(a), and (II) the amount of the unpaid Annual Bonus with respect to the Company’s most recently completed fiscal year payable in
accordance with Section 3(a)(ii) that is not subject to section 409A of the Code to be paid in a lump sum on any date after following Employee’s termination date
and prior to the Release Date.
(b) The Medical Continuation Benefits; provided, however, that for purposes of this Section 3(b), the “Continuation Period” shall be based
on twenty four (24) months rather than twelve (12) months.
(c) Upon the occurrence of a change in control (as defined in the Equity Plan), all of Employee’s outstanding equity-based awards shall
governed by the provisions of the Equity Plan.
7
For purposes of this Agreement, a “Qualifying Termination” means a termination of Employee’s employment with the Company by the Company without Cause
by a written notice of termination delivered to Employee or a termination by Employee for Good Reason (as defined below), in either case within thirty (30) days
prior to the occurrence of a Change in Control or upon or within twelve (12) months after a Change in Control. For purposes of this Agreement, Employee’s
termination shall be considered to be for “Good Reason” if Employee terminates Employee’s employment with the Company within the time period described
above following (I) a significant reduction in Employee’s authority, responsibilities, position or compensation or (II) a material relocation of the principal place at
which Employee performs services hereunder, but in no event less than thirty-five (35) miles from the principal place at which Employee performs such services
immediately prior to the Change in Control, in either case which the Company has failed to remedy within thirty (30) days after receipt of Employee’s written
notice thereof.
In no event shall Employee be permitted to elect the year of payment of any amount under this Section 3. Further, notwithstanding the foregoing provisions of this
Section 3, if the definition of a Change in Control does not constitute a change in control event within the meaning of section 409A of the Code, payments pursuant
to this Section 3 shall, to the extent required to comply with section 409A of the Code, be paid at the same time and in the same form as corresponding payments
and benefits otherwise payable under Section 2(a)(ii).
Notwithstanding the foregoing provisions of this Section 3, if (1) during the period beginning on the first anniversary of Employee’s termination date and ending on
the second anniversary thereof (the “Second Year Period”), Employee is or becomes employed by a new employer, and (2) such new employment would be
prohibited by the provisions of Section 4(c) if the post-termination restrictions of Section 4(c) applied during the Second Year Period (which they do not), then,
Employee shall forfeit all future payments and benefits under this Section 3 and all future payments and benefits shall thereupon cease. Nothing in this paragraph
is intended to relieve Employee of the restrictions of Section 4(c) for the first year following Employee’s termination date or to result in a forfeiture of payments
and benefits during the Second Year Period if Employee is or becomes employed by a new Employer if such new employment would not be prohibited by the
provisions of Section 4(c) if the post-termination restrictions of Section 4(c) applied during the Second Year Period.
4. Confidentiality, Non-Competition and Non-Solicitation .
(a) The Company’s Business . It is expressly agreed by the parties that, as of the Effective Date, the Company is (i) engaged in the
business of owning, managing and operating gaming and casino facilities in the states of Missouri, Mississippi, Iowa, Louisiana, Colorado, Pennsylvania and
Florida, (ii) is licensed to own, manage and operate gaming and casino facilities in the state of Nevada, (iii) is in the business of seeking new gaming properties in
additional jurisdictions and (iv) is engaged in all aspects of such gaming and casino operations. Employee desires to continue to be employed by the Company
from and after the Effective Date and acknowledges and agrees that the Company would be adversely affected if Employee competes with the Company during,
and subsequent to, Employee’s employment with the Company.
8
(b) Trade Secrets and Confidential Information . The Company and Employee acknowledge the existence of trade secrets and other
confidential information as defined below (collectively referred to as “Confidential Information”), all of which are owned by the Company, regardless of whether
such Confidential Information was conceived, originated, devised or supplemented by Employee, the Company, or any other person or entity. Employee
acknowledges that Employee has had and will continue to have access to Confidential Information during Employee’s employment with the Company.
Except as required by law, during the term of this Agreement and thereafter, Employee shall not, without the prior written consent of the Company,
directly or indirectly disclose or disseminate to any other person, firm or organization, any Confidential Information other than on behalf of the Company. The
foregoing obligation shall not apply to any Confidential Information that shall have become known to competitors of the Company or to the public other than
through an act or omission by Employee or that shall have been disclosed to Employee by a person or entity unaffiliated with the Company who has legitimate
possession thereof in its entirety and possesses the unrestricted right to make such disclosure. Further, nothing in this Section 4 prohibits Employee from reporting
violations of law to a governmental agency or entity. Employee agrees to indemnify, defend and hold harmless the Company from and against any damages
(including attorneys’ fees, court costs, investigative costs and amounts paid in settlement) suffered by the Company or any of its affiliates arising out of the
unauthorized disclosure or use of Confidential Information by Employee.
“Confidential Information” shall mean any data or information and documentation, whether in tangible form, electronic form or verbally disclosed, that is
of material value to the Company and not known to the public or the Company’s competitors, and which the Company has kept confidential. To the fullest extent
consistent with the foregoing and as otherwise lawful, Confidential Information shall include, without limitation, the Company’s trade secrets, computer programs,
sales techniques and reports, formulas, data processes, methods, articles of manufacture, machines, apparatus, designs, compositions of matter, products,
improvements, inventions, discoveries, developmental or experimental work, corporate strategy, marketing techniques, pricing lists and data and other pricing
information, business plans, ideas and opportunities, accounting and financial information including financial statements and projections, personnel records,
specialized customer information, proprietary agreements with vendors, special products and services the Company may offer or provide to its customers/guests
from time to time, pending acquisitions, negotiations and transactions, or the terms of existing proposed business arrangements. Confidential Information shall also
include all customer lists, accounts and specifications, and contacts of the Company, and shall further include work in progress, plans or any other matter belonging
to or relating to the technical or business activities of the Company.
Employee, at the time of the effective date of the termination of the employment relationship with the Company, shall turn over to the Company all
“Confidential Information” and any and all copies thereof in Employee’s possession regardless of who provided Employee with such information. Should
Employee be legally served with a lawfully issued subpoena expressly directing Employee to turn over the Company’s Confidential Information, Employee shall
immediately, and certainly no later than five (5) days after notice, advise the Company in writing of the subpoena and also provide a copy of the subpoena to the
Company, at its lawful
9
address as stated in this Agreement, thereby providing the Company with adequate time to lawfully object to the disclosure of its Confidential Information. Employee’s failure to immediately advise the Company of the subpoena shall subject Employee to any and all remedies afforded to the Company, including, but
not limited to, damages resulting to the Company for breach of contract.
Employee agrees that all such Confidential Information is, and shall remain, the sole and exclusive property of the Company and Employee further agrees
that during and after the Term of Employment, Employee will not publish, disclose, communicate or otherwise disseminate to any entity and/or person any
Confidential Information. Employee acknowledges and agrees that such Confidential Information is of critical importance to the Company and its business, and
any unauthorized dissemination of such information would cause great harm to the Company, thereby entitling the Company to any and all rights and remedies as
provided by law, and as specifically provided in Section 5 of this Agreement.
Employee hereby assigns and agrees to assign to the Company any invention, improvement, or discovery made by Employee, alone or jointly with others,
during the Term of Employment, including any period of authorized leave of absence, or as a result of Employee’s employment, and which in any way relates to, or
may be useful in, the business of the Company, together with each patent that may be obtained thereon in any country. Employee will promptly and fully disclose
to the Company any such invention, improvement or discovery and, without further consideration, will upon request by the Company execute all proper papers for
use in applying for, obtaining and maintaining any United States or foreign patent and all proper assignments thereof, at the Company’s expense and through its
Patent Counsel. Each such invention, improvement or discovery, whether or not patented, shall be the exclusive property of the Company.
(c) Restrictions on Competition . In exchange for consideration of employment, and in consideration for Employee receiving and being
given access to confidential business information, including, but not limited to trade secrets, customer and supplier contacts and relationships, goodwill, loyalty and
other information, and as a condition of employment of Employee by the Company, during the term of Employee’s employment with the Company, and for a
period of one (1) year after the voluntary or involuntary termination of Employee’s employment with the Company for any reason whatsoever, Employee will
refrain from carrying on or engaging in the casino or gaming business (as defined in Section 4(a)), or, without the written consent of the Company (which shall not
be unreasonably withheld), the hotel or restaurant business, or any other business in which the Company may be engaged on Employee’s termination date, in any
case either directly or indirectly, either individually or jointly or on behalf of or in concert with any other person, as a proprietor, partner, shareholder, investor
(other than in less than 5% of any class of securities of any publicly traded company), lender, financial backer, director, officer, employee, agent, advisor,
consultant or manager, or in any other capacity or manner whatsoever. The provisions of this Section 4(c) apply to any gaming operation or gaming facility within
a 75-mile radius of (A) any gaming operation or gaming facility owned (in whole or in part) by the Company or with respect to which the Company renders or
proposes to render consulting or management services, in each case on the Effective Date or, for periods after Employee’s termination date, on such termination
date, or (B) any of
10
the foregoing as to which the Company has taken any substantive step toward owning (in whole or in part) or managing such facility in the future.
(d) Non-Solicitation of Employees . In exchange for and in consideration of continuing employment, and in consideration for Employee
receiving and being given access to confidential business information, including, but not limited to trade secrets, customer and supplier contacts and relationships,
goodwill, loyalty and other information, and as a condition of continuing employment of Employee by the Company, during the term of Employee’s employment
with the Company and for one (1) year after Employee’s termination date for any reason, Employee shall not, without the prior written consent of the Company,
either directly or indirectly, either individually or jointly or on behalf of or in concert with any other person, as a proprietor, partner, shareholder, investor (other
than in less than 5% of any class of securities of any publicly traded company), lender, financial backer, director, officer, employee, agent, advisor, consultant or
manager, or in any other capacity or manner whatsoever, solicit for hire, enter into any contract or other arrangement with, or interfere with, disrupt or attempt to
interfere with or disrupt the Company’s relationships with, any person, who is employed by the Company; provided that for periods after Employee’s termination
date the foregoing shall apply only to a person who, as of Employee’s termination date is employed by the Company.
(e) Reasonable Terms . Employee agrees that the geographic areas, duration and scope of activities outlined in this Agreement are
reasonable under the circumstances. Employee further agrees that such terms are no broader than necessary to protect the Company’s business and maintain the
confidentiality of the Confidential Information. Employee further agrees that the terms of this Agreement are not oppressive and will not impose an unreasonable
burden or restraint on Employee.
5. Miscellaneous .
(a) Successors and Assigns . This Agreement is binding on and inures to the benefit of the Company’s successors and assigns. Isle may
assign this Agreement in connection with a merger, consolidation, assignment, sale or other disposition of substantially all of its assets or business (subject to the
provisions of Section 4). This Agreement may not be assigned by Employee.
(b) Modification, Waivers . This Agreement may be modified or amended only by a writing signed by an authorized representative of Isle
and Employee. To the extent that the provision of Medical Continuation Benefits under this Agreement would subject the Company to a material tax or penalty,
the Company shall have the authority to amend the Agreement to the limited extent reasonably necessary to avoid such tax or penalty and shall use all reasonable
efforts to provide Employee with a comparable benefit that does not subject the Company to such tax or penalty. The Company’s failure, or delay in exercising any
right, or partial exercise of any right, will not waive any provision of this Agreement or preclude the Company from otherwise or further exercising any rights or
remedies hereunder, or any other rights or remedies granted by any law or any related document.
(c) Governing Law, Arbitration . The laws of Missouri will govern the validity, construction, and performance of this Agreement without
regard to the location of
11
execution or performance of this Agreement. Except as provided in paragraph (d) below, any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and
judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Both Isle and Employee hereby consent to this binding
arbitration provision.
(d) Remedies . Employee expressly acknowledges and the parties recognize that the restrictions contained in Section 4 herein are
reasonable and necessary to protect the business and interests of the Company, and that any violation of these restrictions will cause substantial irreparable injury
and damage to the Company, and the extent of such damage would be difficult if not impossible to calculate. Accordingly, the parties to this Agreement expressly
agree that (i) if Employee breaches any provision of Section 4 of this Agreement, the damage to the Company may be substantial, although difficult to ascertain,
and monetary damages may not afford an adequate remedy, and (ii) if Employee is in breach of any provision of this Agreement, or threatens a breach of this
Agreement, the Company shall be entitled, in addition to all other rights and remedies as may be provided by law, to seek specific performance and injunctive and
other equitable relief, including, but not limited to, restraining orders and preliminary and permanent injunctions, to enforce the provisions of Section 4 of this
Agreement, as well as to prevent or restrain a breach of any provisions of this Agreement. The parties expressly agree that the Company has these specific and
express rights to injunctive relief without posting any bond that might be requested or required, and without the necessity of proving irreparable injury, and that
Employee expressly agrees not to claim in any such equitable proceedings that a remedy at law is available to the Company. The existence of any claim or cause of
action by Employee, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company or any of its affiliates of
any provision hereof. The parties to this Agreement also expressly agree that the Company is entitled to recover any and all damages for any losses sustained, and
rights of which it has been deprived, as well as any damages allowed by law.
(e) If any proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection
with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorney’s fees and other costs
incurred in that proceeding, in addition to any other relief to which it may be entitled. All of the remedies for breach of this Agreement available to a party shall be
cumulative and the pursuit of one remedy shall not be deemed to exclude any other remedies.
(f) Captions . The headings in this Agreement are for convenience only and do not affect the interpretation of this Agreement.
(g) Severability . To the extent any provision of this Agreement shall be invalid or enforceable with respect to Employee, it shall be
considered deleted herefrom with respect to Employee and the remainder of such provision and this Agreement shall be unaffected and shall continue in full force
and effect. In furtherance to and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by, any provision of
this Agreement be in excess of that which is valid and enforceable under applicable
12
law with respect to Employee, then such provision shall be construed to cover only that duration, extent or activities which are validly and enforceably covered
with respect to Employee. Employee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum extent (not exceeding its expressed terms) possible under applicable laws.
(h) Entire Agreement . This Agreement contains the entire agreement and understanding by and between the Company and Employee,
and, as of the Effective Date, supersedes all previous and contemporaneous oral negotiations, commitments, writings and understandings between the parties
concerning the matters herein or therein, including without limitation, the Prior Agreement and any policy or personnel manuals of the Company to the extent any
provisions herein are inconsistent therewith. No change to this Agreement shall be valid or binding unless it is in writing and signed by the parties.
(i) Indemnification . Isle shall indemnify Employee and hold Employee harmless to the full extent permitted by Section 145 of the
Delaware General Corporation Law from and against any and all claims, liabilities and losses Employee may suffer arising in connection with Employee’s
employment as an officer of the Company as set forth herein, subject to the exceptions set forth in the Delaware General Corporation Law. The agreement of the
Company set forth in this Section 5(i) shall survive the termination of this Agreement.
(j) Notices . All notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally
or sent by registered or certified mail, return receipt requested, postage prepaid, or sent by facsimile or prepaid overnight courier to the parties at the addresses set
forth below (or such other addresses as shall be specified by the parties by like notice). Such notices and other communications shall be deemed given:
(i) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;
(ii) in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or
(iii) in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or
otherwise;
provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service are to be delivered to the addresses set forth below:
If to the Company, to:
Isle of Capri Casinos, Inc. 600 Emerson Road
Suite 300
St. Louis, MO 63141
Attention: General Counsel
13
With a copy to:
Paul W. Theiss
Mayer Brown LLP 71 S. Wacker Drive
Chicago, IL 60606
If to Employee, to:
Arnold L. Block
At the most recent address on the Company’s records
(k) Independent Review and Advice . Employee represents and warrants that Employee has carefully read this Agreement; that Employee
executes this Agreement with full knowledge of the contents of this Agreement, the legal consequences thereof, and any and all rights which each party may have
with respect to each other; that Employee has had the opportunity to receive independent legal advice with respect to the matters set forth in this Agreement and
with respect to the rights and asserted rights arising out of such matters, and that Employee is entering into this Agreement of Employee’s own free will. Employee
expressly agrees that there are no expectations contrary to the Agreement and no usage of trade or regular practice in the industry shall be used to modify the
Agreement.
(l) Special 409A Provisions . Notwithstanding any other provision of this Agreement to the contrary, if any payment hereunder is subject
to section 409A of the Code and if such payment is to be paid on account of Employee’s separation from service (within the meaning of section 409A of the Code),
if Employee is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code), and if any such payment is required to be made prior to the first
day of the seventh month following Employee’s separation from service, such payment shall be delayed until the first day of the seventh month following
Employee’s separation from service. To the extent that any payments or benefits under this Agreement are subject to section 409A of the Code and are paid or
provided on account of Employee’s termination of employment or the Term of Employment, the determination as to whether Employee has had a termination of
employment (or separation from service) shall be made in accordance with section 409A of the Code and the guidance issued thereunder without application of any
alternative levels of reductions of bona fide services permitted thereunder. Any delayed payment shall be made without liability for interest or other loss of
investment opportunity. Any installment payment hereunder is treated as a separate payment for purposes of section 409A of the Code.
(m) No Mitigation or Offset . Employee shall not be required to mitigate the amount of any payment provide for herein by seeking other
employment or otherwise, and any such payment will not be reduced in the event such other employment is obtained.
14
IN WITNESS HEREOF, each party has caused this Amended and Restated Employment Agreement to be executed in a manner appropriate for such party
as of the date first above written.
ISLE OF CAPRI CASINOS, INC.
By:
/s/ Edmund L. Quatmann, Jr.
Name: Edmund L. Quatmann, Jr.
Its:
Chief Legal Officer
EMPLOYEE
/s/ Arnold L. Block
Arnold L. Block
15
Exhibit 10.9
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and between Isle of Capri
Casinos, Inc., a Delaware corporation (the “Company”), and Michael A. Hart (“Employee”) and is intended to be effective as of the date set forth below.
WHEREAS, Employee and the Company are currently parties to that certain employment agreement, dated as of December 11, 2008 (the “Prior
Agreement”), pursuant to which Employee is currently employed as the Company’s Vice President, Treasury and Risk Management;
WHEREAS, the parties desire that (i) Employee continue to serve as the Company’s Vice President, Treasury and Risk Management through April 27,
2016, and (ii) beginning on April 28, 2016 (the “Effective Date”), Employee serve as the Company’s Senior Vice President of Accounting, Treasurer and Assistant
Secretary;
WHEREAS, the Company desires to continue to employ Employee from and after the Effective Date in the position of its Senior Vice President of
Accounting, Treasurer and Assistant Secretary, and Employee desires to continue to perform services for, and to continue to be employed by, the Company in such
capacity, all on the terms and conditions set forth herein; and
WHEREAS, this Agreement shall become effective as of the Effective Date only if Employee is employed by the Company on the Effective Date and the
Prior Agreement shall remain in effect until the Effective Date, subject to the terms and conditions thereof, whereupon the Prior Agreement shall be superseded by
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth in this Agreement, Isle and Employee agree as follows:
1.
Employment and Term.
1.1 Position. The Company and/or an affiliated employer of the Company shall employ and retain Employee as its Senior Vice President of
Accounting, Treasurer and Assistant Secretary or in such other capacity or capacities as may be mutually agreed upon from time to time, and Employee agrees to
be so employed, subject to the terms and conditions set forth herein. Employee’s duties and responsibilities shall be those assigned to him or her by the Company’s
Chief Executive Officer, to whom Employee shall initially report. Employee agrees to discharge such duties in a reasonable and customary manner.
1.2 Affiliated Employer. Employee acknowledges that he or she may perform services for the benefit of or be employed by an affiliate of the
Company and a transfer of employment between the Company or any affiliate or among or between affiliates of the Company shall not constitute a termination of
Employee’s employment unless otherwise specified herein. Employee agrees that, except as otherwise provided herein or where the context clearly indicates the
contrary, any reference to the Company herein shall be deemed to
include any such affiliate and that, to the maximum extent permitted by law, the protections described in Section 5 hereof shall be deemed to apply to the
Company, any such affiliate and any other affiliate of the Company.
1.3 Full Time and Attention. Employee agrees that he or she will devote his or her full time and attention to the performance of his or her duties
hereunder. Employee will not, without the prior written consent of the Company be engaged, whether or not during normal business hours, in any other business or
professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage.
1.4 Term. Employee’s employment shall commence as of the Effective Date and shall continue for a series of successive one-year terms, unless
earlier terminated as provided in Sections 3 or 4 hereof (the period during which Employee is employed hereunder referred to as the “Employment Term”).
2.
Compensation and Benefits. As of the Effective Date, the Company shall pay to Employee the annual base compensation set forth on Exhibit A hereto
(Employee’s “Base Compensation”) and such other bonus, equity incentive, fringe and employee benefits, as may be set forth on such exhibit, the terms of which
are incorporated herein by this reference. Such benefits and amounts may be adjusted, from time to time, on Exhibit A hereto or may be evidenced by a separate
plan, policy or program sponsored by the Company or in the form of an agreement by and between the Company and Employee.
3.
Termination and Nonrenewal.
3.1 Special Definition. As used herein, the term “Basic Severance” shall mean the aggregate of the following amounts and benefits:
a. The continuation of Employee’s annualized Base Compensation in effect as of the date on which his or her employment ceases (Employee’s
“Termination Date”), which amount shall be divided and paid in substantially equal installments during the 12-month period following such date,
in accordance with the Company’s regular pay date practices;
b. The bonus due under the Company’s annual incentive plan in which Employee participates as of his or her Termination Date (“Annual Incentive
Plan”) with respect to the Company’s most recently completed fiscal year, if any, to the extent that such bonus has not yet been paid as of
Employee’s Termination Date, which amount shall be paid on the payment date generally applicable to such bonus; and
c. A monthly amount equal to the Company’s portion of Employee’s premium or similar contribution required under the Company’s group
medical plan as an active employee, such amount to be (i) based upon Employee’s level of enrollment in such plan as of his or her Termination
Date, (ii) paid monthly during the 12-month period following Employee’s Termination Date or until Employee’s coverage ceases in accordance
with Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), if earlier, and (iii) contingent
2
upon Employee’s timely election to continue his or her coverage under the Company’s group medical plan in accordance with Code
Section 4980B.
Notwithstanding the foregoing, if Basic Severance is payable to Employee pursuant to Section 3.4, payments of the Basic Severance will commence as of
the 60 th day following Employee’s Termination Date (the “Payment Start Date”) if, as of the Payment Start Date, the release requirements described in Section 3.4
are satisfied and any payments that would otherwise have been made after Employee’s Termination Date and prior to the Payment Start Date shall be paid in a
lump sum on the Payment Start Date; provided, however, that if and to the extent that the Basic Severance is not subject to Code Section 409A, then the Company,
in its sole discretion, may commence payment of the Basic Severance prior to the Payment Start Date and after the release requirements are satisfied.
3.2 Termination on Account of Death or Disability. If Employee dies or becomes Disabled during the Employment Term, this Agreement and
Employee’s employment hereunder shall terminate. In such event, the Company shall pay or provide to Employee (or to his or her estate) (a) the amount of any
accrued but unpaid Base Compensation, (b) Basic Severance, and (c) any other amount or benefit to which Employee may be entitled under a separate plan, policy
or program maintained by the Company. Employee shall be deemed “Disabled” hereunder if he or she is (a) unable to engage in any substantial gainful activity
due to a medically-determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 12 months, or
(b) receiving benefits under the Company’s separate long-term disability plan for a period of at least three months as a result of a medically-determinable physical
or mental impairment. The Company shall certify whether Employee is Disabled as defined herein.
3.3 Termination on Account of Employee’s Voluntary Resignation. Employee may terminate this Agreement and his or her employment
hereunder, upon 30 days prior written notice to the Company or such shorter period as may be agreed upon by the parties hereto. In such event, the Company shall
pay to Employee the amount of his or her accrued but unpaid Base Compensation. No additional payments or benefits shall be due hereunder, except as may be
required under a separate plan, policy or program maintained by the Company or as may be required by law to be provided.
If Employee voluntarily terminates this Agreement and his or her employment hereunder on or after the date on which he or she attains age 65 and has
completed at least ten (10) years of service with the Company, then notwithstanding any provision of any plan, policy, contract or arrangement to the contrary, he
or she shall receive the following amounts and benefits, in addition to any amount or benefit payable under a separate plan, policy or program maintained by the
Company:
a. Treatment of any and all equity awards will be determined by the applicable award agreement and the terms of the Equity Plan (as defined in
Section 4).
b. The amount of any bonus due under the Annual Incentive Plan with respect to the Company’s most recently completed fiscal year, if any, to the
extent that such
3
bonus has not yet been paid as of such date, which amount shall be paid in the form of a single-sum on the payment date generally applicable to
such bonus;
c. A monthly amount equal to the Company’s portion of Employee’s premium or similar contribution under the Company’s group medical plan,
such amount to be (i) based upon Employee’s level of enrollment in the Company’s group medical plan as of his or her Termination Date,
(ii) paid monthly during the 12-month period following Employee’s Termination Date or until the date on which Employee’s continuation
coverage ceases in accordance with Code Section 4980B, if earlier, and (iii) contingent upon Employee’s timely election to continue his or her
coverage under the Company’s group medical plan in accordance with Code Section 4980B; and
d. An amount equal to Employee’s average bonus paid under the Annual Incentive Plan during the Company’s three most recently completed fiscal
years, multiplied by a fraction (i) the numerator of which is the number of days of Employee’s service during the fiscal year in which
Employee’s Termination Date occurs, and (ii) the denominator of which is 365.
3.4 Termination by the Company Without Cause. The Company may terminate this Agreement and Employee’s employment hereunder at any
time, without Cause (as defined below), with not less than 30 days prior written notice to Employee, unless a shorter period is agreed upon by the parties hereto. In
such event, the Company shall pay to Employee his or her accrued but unpaid Base Compensation, provide any benefits otherwise required by law to be provided,
and pay any amount or benefit otherwise required under a separate plan, policy or program maintained by the Company. In the event that Employee executes a
general release in form and substance reasonably satisfactory to the Company and if the revocation period has expired prior to the Payment Start Date, the
Company shall further provide to Employee Basic Severance in accordance with Section 3.1.
3.5 Company’s Termination for Cause. The Company may terminate this Agreement and Employee’s employment hereunder at any time for
Cause. In such event, the Company shall pay to Employee the amount of his or her accrued but unpaid Base Compensation. No additional payments or benefits
shall be due hereunder, except as may be required under a separate plan, policy or program maintained by the Company or as may be required by law to be
provided. For purposes of this Agreement, the term “Cause” shall mean that Employee has:
a. Committed an intentional act of fraud, embezzlement or theft in the course of his or her employment or otherwise engaged in any intentional
misconduct which is materially injurious to the Company’s financial condition or business reputation;
b. Committed intentional damage to the property of the Company or committed intentional wrongful disclosure of Confidential Information (as
defined below) which is materially injurious to the Company’s financial condition or business reputation;
4
c. Been indicted for the commission of a felony or a crime involving moral turpitude;
d. Willfully and substantially refused to perform the essential duties of his or her position, which has not been cured within 30 days following
written notice by the Company;
e. Committed a material breach of this Agreement, which has not been cured within 30 days following receipt of written notice of the breach from
the Company, which shall include but not be limited to, the failure to timely obtain or to maintain in good standing applicable licensure or
registration requirements;
f. Intentionally, recklessly or negligently violated any material provision of the Sarbanes-Oxley Act of 2002 or any of the rules adopted by the
Securities and Exchange Commission implementing any such provision; or
g. Committed a material breach of the Company’s policies, which breach has not been cured within 30 days following written notice by the
Company.
No act or failure to act on the part of Employee will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be
deemed “intentional” only if done or omitted to be done by Employee not in good faith and without reasonable belief that his or her action or omission was in the
best interest of the Company. In connection with any termination for Cause hereunder, the Company shall provide to Employee written notice of the event or
actions deemed to constitute such Cause.
4.
Change of Control.
4.1 Special Definitions. As used herein, the terms “Change of Control” and “Qualifying Termination” shall have the meanings ascribed to them in
the Company’s Second Amended and Restated 2009 Long-Term Stock Incentive Plan, as the same may be further amended, restated or otherwise replaced from
time to time (the “Equity Plan”).
4.2 Termination of Employment in Connection with Change of Control. In the event that Employee’s employment hereunder terminates in a
Qualifying Termination upon or within the 12-month period following the occurrence of a Change of Control, then in lieu of any benefit provided in Section 3
hereof, and in the event that Employee executes a general release in form and substance reasonably satisfactory to the Company and if the revocation period has
expired prior to the Payment Start Date, the Company shall pay or provide to or for the benefit of Employee:
a. An amount equal to 200% of his or her annualized Base Compensation then in effect, which amount shall be paid in the form of a single-sum 30
days following Employee’s Termination Date or the first business day thereafter.
b. An amount equal to the average of his or her annual bonus paid under the Annual Incentive Plan during the Company’s three most recently
completed fiscal years or such shorter period as Employee has been employed by the Company; such
5
amount shall be paid in the form of a single-sum 30 days following Employee’s Termination Date or the first business day thereafter.
c. The amount of any bonus due with respect to the Company’s most recently completed fiscal year, if any, to the extent that such bonus has not
yet been paid as of such date, which amount shall be paid on the payment date generally applicable to such bonus.
d. A monthly amount equal to the premium required to continue Employee’s coverage under the Company’s group medical plan during the 18month period following Employee’s Termination Date, such amount to be (i) based upon Employee’s level of enrollment in the Company’s
group medical plan as of the date of his or her Termination Date, (ii) paid monthly during the 18-month period following Employee’s
Termination Date, and (ii) contingent upon Employee’s timely election to continue his or her coverage under the Company’s group medical plan
in accordance with Code Section 4980B.
e. Treatment of any and all equity awards will be determined by the applicable award agreement and the Equity Plan.
If the Change in Control does not constitute a change in control event within the meaning of Code Section 409A, payments pursuant to this Section 4.2 shall, to the
extent required to comply with Code Section 409A, be paid at the same time and in the same form as payments of Basic Severance in the case of covered
terminations prior to the Change in Control.
4.3 Excise Tax.
If the aggregate present value of all payments and benefits due to Employee under this Agreement and any other payment or
benefit due from the Company or any successor thereto (the “Aggregate Payments”) would be subject to the excise tax imposed by Code Section 4999, such
payments or benefits shall be reduced by the minimum amount necessary to result in no portion of the Aggregate Payments, so reduced, being subject to the excise
tax under Code Section 4999. The determination of whether a reduction is required hereunder shall be made by the Company’s registered independent public
accounting firm and shall be binding upon the parties hereto. To the extent practicable, Employee shall be entitled to select the payments or benefits subject to
reduction hereunder; provided, however, that no such selection shall be permitted with respect to any payments or benefits which are subject to Code Section 409A.
5.
Business Protection.
5.1 Consideration. Employee acknowledges that the execution of this Agreement and his or her access to Confidential Information (as defined
herein) shall constitute adequate consideration for each of the limitations and restrictions set forth in this Section 5, the sufficiency of which is hereby
acknowledged.
5.2 Protection of Confidential Information . The Company and Employee acknowledge the existence of Confidential Information, which is
owned by the Company, regardless of whether such Confidential Information was conceived, originated, devised,
6
supplemented, discovered or developed by Employee, the Company, or any other person or entity. Employee acknowledges that he or she will have access to
Confidential Information during the Employment Term and agrees that all such Confidential Information is, and shall remain, the sole and exclusive property of the
Company. Except as required by law, during the Employment Term and at all times thereafter, Employee agrees that he or she shall not, without the prior written
consent of the Company, directly or indirectly use, disclose or disseminate to any person or otherwise use any Confidential Information, other than on behalf of the
Company. If Employee is legally served with a lawfully issued subpoena directing Employee to disclose Confidential Information, Employee shall immediately,
but no later than five days after receipt of such subpoena, provide written notice to the Company, including a copy thereof. Nothing in this Section 5.2 prohibits
Employee from reporting violations of the law to a governmental agency or entity.
As used herein, the term “Confidential Information” shall mean, in addition to the Company’s trade secrets as defined under applicable law, any data or
information and documentation, whether in tangible form, electronic form or verbally disclosed, that is valuable to the Company and not generally known to the
public. To the fullest extent consistent with the foregoing and applicable law, Confidential Information shall further include, without limitation, the Company’s
computer programs, sales techniques and reports, formulas, data processes, methods, articles of manufacture, machines, apparatus, designs, compositions of matter,
products, ideas, improvements, inventions, discoveries, developmental or experimental work, corporate strategy, marketing techniques, pricing lists and data and
other pricing information, business plans, ideas and opportunities, accounting and financial information including financial statements and projections, personnel
records, specialized customer information, proprietary agreement with vendors, supplier information, special products and services the Company may offer or
provide to its customers/guests from time to time, pending acquisitions, negotiations and transactions, or the terms of existing proposed business arrangements. Confidential Information shall also include all customer/guest lists, accounts and specifications, and contacts of the Company, and shall further include work in
progress, plans or any other matter belonging to or relating to the technical or business activities of the Company.
5.3 Patents; Intellectual Property . Employee hereby assigns and agrees to assign to the Company any invention, improvement, or discovery
made by Employee, alone or jointly with others, during the Employment Term, including any period of authorized leave of absence, or as a result of his or her
employment, and which in any way relates to, or may be useful in, the business of the Company, together with each patent that may be obtained thereon in any
country. Employee shall promptly and fully disclose to the Company any such invention, improvement or discovery and, without further consideration, will upon
request by the Company execute all proper papers for use in applying for, obtaining and maintaining any United States or foreign patent and all proper assignments
thereof, at the Company’s expense and through its patent counsel. Each such invention, improvement or discovery, whether or not patented, shall be the exclusive
property of the Company.
5.4 Noncompetition. The parties agree that, as of the Effective Date, the Company is engaged in: (a) the business of owning, managing and
operating gaming and casino facilities in the States of Missouri, Mississippi, Iowa, Louisiana, Colorado and Florida, Nevada and Pennsylvania, (b) seeking new
gaming properties in additional jurisdictions, and (c) all aspects of
7
such gaming and casino operations (collectively, the “Company’s Business”). Employee acknowledges that the Company would be adversely affected if he or she
competes with the Company, and, accordingly, Employee agrees that, during the Employment Term and the one-year period thereafter, Employee shall refrain
from carrying on or engaging in a business similar to the Company’s Business, either individually or jointly or on behalf of or in concert with any other person, as a
proprietor, partner, shareholder, investor, lender, financial backer, director, officer, employee, agent, advisor, consultant or manager. The provisions of this
Section 5.4 shall apply to (a) any operation or facility located within a 75-mile radius of any gaming operation or gaming facility owned by the Company, whether
in whole or in part, (b) any such operation or facility, which is not owned by the Company but with respect to which the Company renders or proposes to render
consulting or management services, and (c) any of the foregoing as to which the Company has taken any substantive step toward owning, in whole or in part, or
managing. In each case, such determination shall be made as of the date hereof and Employee’s Termination Date.
5.5 Nonsolicitation. During the Employment Term and the six-month period thereafter, Employee shall not, without the prior written consent of the
Company, either directly or indirectly, whether individually or jointly or on behalf of or in concert with any other person, as a proprietor, partner, shareholder,
investor, lender, financial backer, director, officer, employee, agent, advisor, consultant or manager, or in any other capacity or manner whatsoever, solicit, hire or
attempt to hire, enter into any contract or other arrangement with, or interfere with, disrupt or attempt to interfere with or disrupt the Company’s relationships with
any person who is employed by the Company.
5.6 Reasonable Terms. By execution below, Employee agrees that the geographic areas, duration and scope of activities outlined in this Section 5
are reasonable. Employee further agrees that (a) such terms are no broader than necessary to protect the Company’s business, (b) such terms are necessary to
protect and maintain the Company’s interest in Confidential Information with respect to which Employee has or shall have access, and (c) such terms are not
oppressive and will not impose an unreasonable burden or restraint on Employee.
The Company agrees that the provisions of this Section 5 shall not be construed to prohibit the acquisition by Employee of less than 5% of any class of
securities issued by a publicly traded company.
5.7 Return of Company’s Property. Upon termination or expiration of this Agreement and the employment of Employee hereunder, for any
reason, Employee or his or her estate shall promptly return to the Company all of the property of the Company, including, without limitation, access cards, keys and
similar items, automobiles, equipment, computers, fax machines, portable telephones, printers, software, credit cards, manuals, customer lists, financial data, letters,
notes, notebooks, reports and copies of any of the above and any Confidential Information that is in the possession or under the control of Employee, without
regard to the form thereof. Employee, or his or her estate, shall provide to the Company written certification that he or she has complied with the provisions of this
Section 5.7 not later than five days after his or her Termination Date or, in the event of Employee’s death or Disability, such later time as the parties may mutually
agree.
8
5.8 Indemnification. The Company shall indemnify and hold harmless Employee to the extent provided under the Company’s organizational
documents, from time to time, whether during the Employment Term or after Employee’s Termination Date.
5.9 Survival. Notwithstanding any provision of this Agreement to the contrary, Employee and the Company acknowledge that the restrictions and
limitations set forth in this Section 5 shall survive the termination of this Agreement and Employee’s employment hereunder for any reason.
6.
General.
6.1 Specified Employee Delay and Code Section 409A. Notwithstanding any other provision of this Agreement to the contrary, if any payment
hereunder is subject to Code Section 409A and if such payment is to be paid on account of Employee’s separation from service (within the meaning of Code
Section 409A), if Employee is a specified employee (within the meaning of Code Section 409A(a)(2)(B)), and if any such payment is required to be made prior to
the first day of the seventh month following Employee’s separation from service, such payment shall be delayed until the first day of the seventh month following
Employee’s separation from service. To the extent that any payments or benefits under this Agreement are subject to Code Section 409A and are paid or provided
on account of Employee’s termination of employment, the determination as to whether Employee has had a termination of employment (or separation from service)
shall be made in accordance with Code Section 409A and the guidance issued thereunder without application of any alternative levels of reductions of bona fide
services permitted thereunder. Any delayed payment shall be made without liability for interest or other loss of investment opportunity. Any installment payment
hereunder is treated as a separate payment for purposes of Code Section 409A. It is the intent of the parties that all provisions of this Agreement comply with the
requirements of Code Section 409A.
6.2 Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of the Company’s successors and assigns. The
Company may assign this Agreement in connection with a merger, consolidation, assignment, sale or other disposition of substantially all of its assets or business,
without the consent of Employee. This Agreement may not be assigned by Employee.
6.3 Modification and Waiver . This Agreement may be amended by written agreement signed by the parties hereto. The Company’s failure, or
delay in exercising any right, or partial exercise of any right will not waive any provision of this Agreement or preclude the Company from otherwise or further
exercising any rights or remedies hereunder, including any other rights or remedies granted by any law or any related document.
6.4 Governing Law. This Agreement shall be governed by the internal laws of the State of Missouri, without regard to the conflicts of law
provisions thereof.
6.5 Arbitration, Remedies and Attorneys’ Fees. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall
be settled by binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules,
9
and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Both the Company and Employee hereby consent
to this binding arbitration provision.
The parties agree that (a) if Employee breaches any provision of this Agreement, the damage to the Company may be substantial, although difficult to
ascertain, and monetary damages may not afford an adequate remedy, and (b) notwithstanding the provisions of this Section 6.5, if Employee is in breach of any
provision of this Agreement, or threatens a breach of this Agreement, the Company shall be entitled, in addition to all other rights and remedies as may be provided
by law, to seek specific performance and injunctive and other equitable relief, including, but not limited to, restraining orders and preliminary and permanent
injunctions, to enforce the provision of this Agreement. The parties expressly agree that the Company has these specific and express rights to injunctive relief
without posting bond, and without the necessity of proving irreparable injury, and that Employee expressly agrees not to claim in any such equitable proceedings
that a remedy at law is available to the Company. The existence of any claim or cause of action by Employee, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any provision hereof. The Company’s remedies for breach of this
Agreement shall be cumulative and the pursuit of one remedy shall not be deemed to exclude any other remedies. The parties hereto expressly agree that the
Company shall be entitled to recover damages for any loss sustained or right to which it has been deprived, including any damages provided by law.
If any proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that
proceeding, in addition to any other relief to which it may be entitled.
6.6 Severability and Reformation. To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted
and the remainder of such provision and this Agreement shall continue in full force and effect. In furtherance of the foregoing, should the duration or geographical
extent of, or business activities covered by, any provision of this Agreement be in excess of that which is valid and enforceable under applicable law, such
provision shall be construed to cover only the duration, extent or activities that is valid and enforceable. Employee acknowledges the uncertainty of the law in this
respect, and expressly stipulates that this Agreement is to be given the construction which renders its provisions valid and enforceable to the maximum extent
permitted under applicable law.
6.7 Entire Agreement . This Agreement contains the entire agreement and understanding by and between the parties and supersedes and replaces
any previous and contemporaneous oral negotiations, commitments, writings and understandings concerning the matters herein, including without limitation, the
Prior Agreement.
6.8 Notices . All notices and other communications required or permitted under this Agreement shall be in writing and sent by certified or first class
mail, postage prepaid, and shall be deemed delivered upon hand delivery or upon mailing to the following address (or such other address as may be furnished by a
party hereto):
10
If to the Company:
Isle of Capri Casinos, Inc.
600 Emerson Drive, Suite 300
St. Louis, MO 63141
Attn: Senior Vice President, Human Resources
If to Employee:
Employee’s last address in Company’s personnel files
6.9 Employee’s Representation. Employee represents and warrants to the Company that the execution and delivery of this Agreement and the
performance of his or her duties and obligations hereunder shall not constitute a violation of any other agreement to which Employee is a party.
6.10 Taxes. The Company shall be entitled to withhold as a condition of any payment or benefit described herein, any Federal, state or local taxes
required by law to be withheld.
6.11 Review and Advice. By execution below, Employee represents and warrants that he or she has read this Agreement and obtained independent
advice concerning the terms and conditions thereof. Employee voluntarily executes this Agreement with full knowledge of its terms and conditions and the rights
and obligations of the parties set forth herein.
11
THIS EMPLOYMENT AGREEMENT is executed in multiple counterparts, each of which shall be deemed an original, as of the dates set forth below,
to be effective as provided above.
Employee:
Isle of Capri Casinos, Inc.:
By:
/s/ Michael Hart
By:
/s/ Edmund L. Quatmann, Jr.
Date:
4/11/16
Date 4/11/16
12
EXHIBIT A
COMPENSATION AND BENEFITS
The terms of this Exhibit A, as it may be amended from time to time, are intended to form a part of that certain employment agreement by and between
Isle of Capri Casinos, Inc. and the employee named below (the “Agreement”).
Name of Employee:
Michael A. Hart
Date of this Exhibit:
Effective Date (as defined in the Agreement)
Base Compensation:
$270,000 annually
Bonus Opportunity:
50% of base compensation
Long-Term Incentive :
Eligible to participate in the Equity Plan
Benefits :
During the Employment Term, Employee shall be eligible to participate in the pension, medical, dental, disability and life
insurance plans applicable to similarly-situated senior executives of the Company generally in accordance with the terms
of such plans as in effect from time to time.
13
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
21.1
SIGNIFICANT
SUBSIDIARIES
OF
ISLE
OF
CAPRI
CASINOS,
INC.
WHOLLY-OWNED
SUBSIDIARIES
Black
Hawk
Holdings,
L.L.C.
Capri
Insurance
Company
CCSC
Blackhawk,
Inc.
IC
Holdings
Colorado,
Inc.
IOC-Black
Hawk
Distribution
Company,
LLC
IOC-Boonville,
Inc.
IOC-Caruthersville,
L.L.C
IOC-Kansas
City,
Inc.
IOC-Lula,
Inc.
IOC-Vicksburg,
Inc.
IOC-Vicksburg,
L.L.C.
IOC
Black
Hawk
County,
Inc.
IOC
Cape
Girardeau,
LLC
IOC
Holdings,
L.L.C.
IOC-PA,
L.L.C.
Isle
of
Capri
Bettendorf,
L.C.
Isle
of
Capri
Black
Hawk,
L.L.C.
Isle
of
Capri
Marquette,
Inc.
PPI,
Inc.
Rainbow
Casino—Vicksburg
Partnership,
L.P.
St.
Charles
Gaming
Company,
LLC
STATE
OF
INCORPORATION
Colorado
Hawaii
Colorado
Colorado
Colorado
Nevada
Missouri
Missouri
Mississippi
Delaware
Delaware
Iowa
Missouri
Louisiana
Pennsylvania
Iowa
Colorado
Iowa
Florida
Mississippi
Louisiana
QuickLinks Exhibit
21.1
SIGNIFICANT
SUBSIDIARIES
OF
ISLE
OF
CAPRI
CASINOS,
INC.
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
23.1
Consent
of
Independent
Registered
Public
Accounting
Firm
We
consent
to
the
incorporation
by
reference
in
the
following
Registration
Statements:
(1)
Registration
Statement
(Form
S-8
Nos.
333-50774,
333-50776,
333-111498,
333-123233,
333-153337,
333-163543,
333-184576
and
333-208273)
of
Isle
of
Capri
Casinos,
Inc.
of
our
reports
dated
June
21,
2016,
with
respect
to
the
consolidated
financial
statements
and
schedule
of
Isle
of
Capri
Casinos,
Inc.
and
the
effectiveness
of
internal
control
over
financial
reporting
of
Isle
of
Capri
Casinos,
Inc.
included
in
this
Annual
Report
(Form
10-K)
of
Isle
of
Capri
Casinos,
Inc.
for
the
year
ended
April
24,
2016.
/s/
Ernst
&
Young
LLP
St.
Louis,
Missouri
June
21,
2016
QuickLinks Exhibit
23.1
Consent
of
Independent
Registered
Public
Accounting
Firm
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
31.1
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
PURSUANT
TO
RULE
13A-14(A)
UNDER
THE
SECURITIES
EXCHANGE
ACT
OF
1934
I,
Eric
L.
Hausler,
Chief
Executive
Officer
of
Isle
of
Capri
Casinos,
Inc.,
certify
that:
1.
I
have
reviewed
this
annual
report
on
Form
10-K
of
Isle
of
Capri
Casinos,
Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
4.
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrant
and
have:
(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
first
fiscal
quarter
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant's
internal
control
over
financial
reporting;
and
5.
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant's
auditors
and
the
audit
committee
of
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.
Date:
June
21,
2016
/s/
ERIC
L.
HAUSLER
Eric
L.
Hausler
Chief Executive Officer
QuickLinks Exhibit
31.1
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
PURSUANT
TO
RULE
13A-14(A)
UNDER
THE
SECURITIES
EXCHANGE
ACT
OF
1934
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
31.2
CERTIFICATION
OF
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
RULE
13A-14(A)
UNDER
THE
SECURITIES
EXCHANGE
ACT
OF
1934
I,
Michael
Hart,
Sr.
Vice
President,
Accounting
and
Treasurer
of
Isle
of
Capri
Casinos,
Inc.,
certify
that:
1.
I
have
reviewed
this
annual
report
on
Form
10-K
of
Isle
of
Capri
Casinos,
Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
4.
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrant
and
have:
(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
first
fiscal
quarter
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant's
internal
control
over
financial
reporting;
and
5.
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant's
auditors
and
the
audit
committee
of
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.
Date:
June
21,
2016
/s/
MICHAEL
A.
HART
Michael
A.
Hart
Sr. Vice President, Accounting and Treasurer (Principal
Financial Officer)
QuickLinks Exhibit
31.2
CERTIFICATION
OF
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
RULE
13A-14(A)
UNDER
THE
SECURITIES
EXCHANGE
ACT
OF
1934
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
32.1
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
(18
U.S.C.
SECTION
1350)
In
connection
with
the
Annual
Report
of
Isle
of
Capri
Casinos,
Inc.
(the
"Company")
on
Form
10-K
for
the
period
ended
April
24,
2016,
as
filed
with
the
Securities
and
Exchange
Commission
on
the
date
hereof
(the
"Annual
Report"),
I,
Eric.
L.
Hausler,
Chief
Executive
Officer
of
the
Company,
certify,
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
of
2002
(18
U.S.C.
Section
1350),
that:
(1)
The
Annual
Report
fully
complies
with
the
requirements
of
Section
13(a)
of
the
Securities
Exchange
Act
of
1934;
and
(2)
The
information
contained
in
the
Annual
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operation
of
the
Company.
Date:
June
21,
2016
/s/
ERIC
L.
HAUSLER
Eric
L.
Hausler
Chief Executive Officer
QuickLinks Exhibit
32.1
CERTIFICATION
OF
CHIEF
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
(18
U.S.C.
SECTION
1350)
QuickLinks -- Click here to rapidly navigate through this document
Exhibit
32.2
CERTIFICATION
OF
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
(18
U.S.C.
SECTION
1350)
In
connection
with
the
Annual
Report
of
Isle
of
Capri
Casinos,
Inc.
(the
"Company")
on
Form
10-K
for
the
period
ended
April
24,
2016
as
filed
with
the
Securities
and
Exchange
Commission
on
the
date
hereof
(the
"Annual
Report"),
I,
Michael
A.
Hart,
Principal
Financial
Officer
of
the
Company,
certify,
pursuant
to
Section
906
of
the
Sarbanes-Oxley
Act
of
2002
(18
U.S.C.
Section
1350),
that:
(1)
The
Annual
Report
fully
complies
with
the
requirements
of
Section
13(a)
of
the
Securities
Exchange
Act
of
1934;
and
(2)
The
information
contained
in
the
Annual
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operation
of
the
Company.
Date:
June
21,
2016
/s/
MICHAEL
A.
HART
Michael
A.
Hart
Sr. Vice President, Accounting and Treasurer (Principal
Financial Officer)
QuickLinks Exhibit
32.2
CERTIFICATION
OF
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
(18
U.S.C.
SECTION
1350)
Exhibit 99.1
DESCRIPTION OF GOVERNMENT REGULATIONS
The ownership and operation of casino gaming facilities are subject to extensive state and local regulations. We are required to obtain and maintain gaming
licenses in each of the jurisdictions in which we conduct gaming. The limitation, conditioning or suspension of gaming licenses could (and the revocation or nonrenewal of gaming licenses, or the failure to reauthorize gaming in certain jurisdictions, would) materially adversely affect our operation in that jurisdiction. In
addition, changes in law that restrict or prohibit our gaming operations in any jurisdiction could have a material adverse effect on us.
Colorado
The State of Colorado created the Division of Gaming (“Colorado Division”) within the Department of Revenue to license, implement, regulate and supervise the
conduct of limited gaming under the Colorado Limited Gaming Act. The Director of the Colorado Division (“Colorado Director”), pursuant to regulations
promulgated by, and subject to the review of, a five-member Colorado Limited Gaming Control Commission (“Colorado Commission”), has been granted broad
power to ensure compliance with the Colorado gaming laws and regulations (collectively, the “Colorado Regulations”). The Colorado Director may inspect without
notice, impound or remove any gaming device. The Colorado Director may examine and copy any licensee’s records, may investigate the background and conduct
of licensees and their employees, and may bring disciplinary actions against licensees and their employees. The Colorado Director may also conduct detailed
background investigations of persons who loan money to, or otherwise provide financing to, a licensee.
The Colorado Commission is empowered to issue five types of gaming and gaming-related licenses, and has delegated authority to the Colorado Director to issue
certain types of licenses and approve certain changes in ownership. The licenses are revocable and non-transferable. The failure or inability of the Isle of Capri
Black Hawk, LLC or CCSC/Blackhawk, Inc. (each, a “Colorado Casino” or collectively, the “Colorado Casinos”), or the failure or inability of others associated
with any of the Colorado Casinos, including us, to maintain necessary gaming licenses or approvals would have a material adverse effect on our operations. All
persons employed by any of the Colorado Casinos, and involved, directly or indirectly, in gaming operations in Colorado also are required to obtain a Colorado
gaming license. All licenses must be renewed every two years. As a general rule, under the Colorado Regulations, no person may have an “ownership interest” in
more than three retail gaming licenses in Colorado. The Colorado Commission has ruled that a person does not have an ownership interest in a retail gaming
licensee for purposes of the multiple license prohibition if:
·
that person has less than a 5% ownership interest in an institutional investor that has an ownership interest in a publicly traded licensee or publicly traded
company affiliated with a licensee;
·
a person has a 5% or more ownership interest in an institutional investor, but the institutional investor has less than a 5% ownership interest in a publicly
traded licensee or publicly traded company affiliated with a licensee;
·
an institutional investor has less than a 5% ownership interest in a publicly traded licensee or publicly traded company affiliated with a licensee;
·
an institutional investor possesses voting securities in a fiduciary capacity for another person, and does not exercise voting control over 5% or more of the
outstanding voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee;
·
a registered broker or dealer retains possession of voting securities of a publicly traded licensee or of a publicly traded company affiliated with a licensee
for its customers and not for its own account, and exercises voting rights for less than 5% of the outstanding voting securities of a publicly traded licensee
or publicly traded company affiliated with a licensee;
·
a registered broker or dealer acts as a market maker for the stock of a publicly traded licensee or of a publicly traded company affiliated with a licensee
and exercises voting rights in less than 5% of the outstanding voting securities of the publicly traded licensee or publicly traded company affiliated with a
licensee;
·
an underwriter is holding securities of a publicly traded licensee or publicly traded company affiliated with a licensee as part of an underwriting for no
more than 90 days after the beginning of such underwriting if it exercises voting rights of less than 5% of the outstanding voting securities of a publicly
traded licensee or publicly traded company affiliated with a licensee;
·
a book entry transfer facility holds voting securities for third parties, if it exercises voting rights with respect to less than 5% of the outstanding voting
securities of a publicly traded licensee or publicly traded company affiliated with a licensee; or
·
a person’s sole ownership interest is less than 5% of the outstanding voting securities of the publicly traded licensee or publicly traded company affiliated
with a licensee.
Because we own the Colorado Casinos, our business opportunities, and those of persons with an “ownership interest” in us, or any of the Colorado Casinos, are
limited to interests that comply with the Colorado Regulations and the Colorado Commission’s rule.
In addition, pursuant to the Colorado Regulations, no manufacturer or distributor of slot machines or associated equipment may, without notification being
provided to the Colorado Division within ten days, knowingly have an interest in any casino operator, allow any of its officers or any other person with a
substantial interest in such business to have such an interest, employ any person if that person is employed by a casino operator, or allow any casino operator or
person with a substantial interest therein to have an interest in a manufacturer’s or distributor’s business. A “substantial interest” means the lesser of (i) as large an
interest in an entity as any other person or (ii) any financial or equity interest equal to or greater than 5%. The Colorado Commission has ruled that a person does
not have a “substantial interest” if such person’s sole ownership interest in such licensee is through the ownership of less than 5% of the outstanding voting
securities of a publicly traded licensee or publicly traded affiliated company of a licensee.
We are a “publicly traded corporation” under the Colorado Regulations.
Under the Colorado Regulations, any person or entity having any direct or indirect interest in a gaming licensee or an applicant for a gaming license, including, but
not limited to, us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos
and their security holders, may be required to supply the Colorado Commission with substantial information, including, but not limited to, background information,
source of funding information, a sworn statement that such person or entity is not holding his or her interest for any other party, and fingerprints. Such information,
investigation and licensing (or finding of suitability) as an “associated person” automatically will be required of all persons (other than certain institutional
investors discussed below) which directly or indirectly beneficially own 10% or more of a direct or indirect beneficial ownership or interest in either of the two
Colorado Casinos, through their beneficial ownership of any class of voting securities of us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC Black
Hawk Distribution Company, LLC or either of the two Colorado Casinos. Those persons must report their interest within 10 days (including institutional investors)
and file appropriate applications within 45 days after acquiring that interest (other than certain institutional investors discussed below). Persons (including
institutional investors) who directly or indirectly beneficially own 5% or more (but less than 10%) of a direct or indirect beneficial ownership or interest in either of
the two Colorado Casinos, through their beneficial ownership of any class of voting securities of us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC
Black Hawk Distribution Company, LLC or either of the two Colorado Casinos, must report their interest to the Colorado Commission within 10 days after
acquiring that interest and may be required to provide additional information and to be found suitable. (It is the current practice of the gaming regulators to require
findings of suitability for persons beneficially owning 5% or more of a direct or indirect beneficial ownership or interest, other than certain institutional investors
discussed below.) If
certain institutional investors provide specified information to the Colorado Commission within 45 days after acquiring their interest (which, under the current
practice of the gaming regulators is an interest of 5% or more, directly or indirectly) and are holding for investment purposes only, those investors, in the Colorado
Commission’s discretion, may be permitted to own up to 14.99% of the Colorado Casinos through their beneficial ownership in any class of voting of securities of
us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos, before being
required to be found suitable. All licensing and investigation fees will have to be paid by the person in question.
The Colorado Regulations define a “voting security” to be a security the holder of which is entitled to vote generally for the election of a member or members of
the board of directors or board of trustees of a corporation or a comparable person or persons of another form of business organization.
The Colorado Commission also has the right to request information from any person directly or indirectly interested in, or employed by, a licensee, and to
investigate the moral character, honesty, integrity, prior activities, criminal record, reputation, habits and associations of: (1) all persons licensed pursuant to the
Colorado Limited Gaming Act; (2) all officers, directors and stockholders of a licensed privately held corporation; (3) all officers, directors and stockholders
holding either a 5% or greater interest or a controlling interest in a licensed publicly traded corporation; (4) all general partners and all limited partners of a licensed
partnership; (5) all persons that have a relationship similar to that of an officer, director or stockholder of a corporation (such as members and managers of a limited
liability company); (6) all persons supplying financing or loaning money to any licensee connected with the establishment or operation of limited gaming; (7) all
persons having a contract, lease or ongoing financial or business arrangement with any licensee, where such contract, lease or arrangement relates to limited
gaming operations, equipment devices or premises; and (8) all persons contracting with or supplying any goods and services to the gaming regulators.
Certain public officials and employees are prohibited from having any direct or indirect interest in a license or limited gaming.
In addition, under the Colorado Regulations, every person who is a party to a “gaming contract” (as defined below) or lease with an applicant for a license, or with
a licensee, upon the request of the Colorado Commission or the Colorado Director, must promptly provide the Colorado Commission or Colorado Director all
information that may be requested concerning financial history, financial holdings, real and personal property ownership, interests in other companies, criminal
history, personal history and associations, character, reputation in the community and all other information that might be relevant to a determination of whether a
person would be suitable to be licensed by the Colorado Commission. Failure to provide all information requested constitutes sufficient grounds for the Colorado
Director or the Colorado Commission to require a licensee or applicant to terminate its “gaming contract” or lease with any person who failed to provide the
information requested. In addition, the Colorado Director or the Colorado Commission may require changes in “gaming contracts” before an application is
approved or participation in the contract is allowed. A “gaming contract” is defined as an agreement in which a person does business with or on the premises of a
licensed entity.
The Colorado Commission and the Colorado Division have interpreted the Colorado Regulations to permit the Colorado Commission to investigate and find
suitable persons or entities providing financing to or acquiring securities from us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC Black Hawk
Distribution Company, LLC or either of the two Colorado Casinos. As noted above, any person or entity required to file information, be licensed or found suitable
would be required to pay the costs thereof and of any investigation. Although the Colorado Regulations do not require the prior approval for the execution of credit
facilities or issuance of debt securities, the Colorado regulators reserve the right to approve, require changes to or require the termination of any financing,
including if a person or entity is required to be found suitable and is not found suitable. In any event, lenders, note holders, and others providing financing will not
be able to exercise certain rights and remedies without the prior approval of the Colorado gaming authorities. Information regarding lenders and holders of
securities will be periodically reported to the Colorado gaming authorities.
Except under certain limited circumstances relating to slot machine manufacturers and distributors, every person supplying goods, equipment, devices or services to
any licensee in return for payment of a percentage, or calculated
upon a percentage, of limited gaming activity or income must obtain an operator license or be listed on the retailer’s license where such gaming will take place.
An application for licensure or suitability may be denied for any cause deemed reasonable by the Colorado Commission or the Colorado Director, as appropriate.
Specifically, the Colorado Commission and the Colorado Director must deny a license to any applicant who, among other things: (1) fails to prove by clear and
convincing evidence that the applicant is qualified; (2) fails to provide information and documentation requested; (3) fails to reveal any fact material to
qualification, or supplies information which is untrue or misleading as to a material fact pertaining to qualification; (4) has been convicted of, or has a director,
officer, general partner, stockholder, limited partner or other person who has a financial or equity interest in the applicant who has been convicted of, specified
crimes, including the service of a sentence upon conviction of a felony in a correctional facility, city or county jail, or community correctional facility or under the
state board of parole or any probation department within ten years prior to the date of the application, gambling-related offenses, theft by deception or crimes
involving fraud or misrepresentation, is under current prosecution for such crimes (during the pendency of which license determination may be deferred), is a
career offender or a member or associate of a career offender cartel, or is a professional gambler; or (5) has refused to cooperate with any state or federal body
investigating organized crime, official corruption or gaming offenses. If the Colorado Commission determines that a person or entity is unsuitable to directly or
indirectly own interests in us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., or either of the two Colorado Casinos, one or more of the Colorado Casinos
may be sanctioned, which may include the loss of our approvals and licenses.
The Colorado Commission does not need to approve in advance a public offering of securities but rather requires the filing of notice and additional documents prior
to a public offering of (i) voting securities, and (ii) non-voting securities if any of the proceeds will be used to pay for the construction of gaming facilities in
Colorado, to directly or indirectly acquire an interest in a gaming facility in Colorado, to finance the operation of a gaming facility in Colorado or to retire or extend
obligations for any of the foregoing. The Colorado Commission may, in its discretion, require additional information and prior approval of such public offering.
In addition, the Colorado Regulations prohibit a licensee or affiliated company thereof, such as us Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC
Black Hawk Distribution Company, LLC or either of the two Colorado Casinos, from paying any unsuitable person any dividends or interest upon any voting
securities or any payments or distributions of any kind (except as set forth below), or paying any unsuitable person any remuneration for services or recognizing the
exercise of any voting rights by any unsuitable person. Further, under the Colorado Regulations, each of the Colorado Casinos and IOC Black Hawk Distribution
Company, LLC may repurchase its voting securities from anyone found unsuitable at the lesser of the cash equivalent to the original investment in the applicable
Colorado Casino or IOC Black Hawk Distribution Company, LLC or the current market price as of the date of the finding of unsuitability unless such voting
securities are transferred to a suitable person (as determined by the Colorado Commission) within sixty (60) days after the finding of unsuitability. A licensee or
affiliated company must pursue all lawful efforts to require an unsuitable person to relinquish all voting securities, including purchasing such voting securities. The
staff of Colorado Division has taken the position that a licensee or affiliated company may not pay any unsuitable person any interest, dividends or other payments
with respect to non-voting securities, other than with respect to pursuing all lawful efforts to require an unsuitable person to relinquish non-voting securities,
including by purchasing or redeeming such securities. Further, the regulations require anyone with a material involvement with a licensee, including a director or
officer of a holding company, such as us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC or either of the
two Colorado Casinos, to file for a finding of suitability if required by the Colorado Commission.
Because of their authority to deny an application for a license or suitability, the Colorado Commission and the Colorado Director effectively can disapprove a
change in corporate position of a licensee and with respect to any entity which is required to be found suitable, or indirectly can cause us, Black Hawk Holdings,
LLC, IC Holdings Colorado, Inc., IOC Black Hawk Distribution Company, LLC or the applicable Colorado Casino to suspend or dismiss managers, officers,
directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or who the authorities find unsuitable to act
in such capacities.
Generally, a sale, lease, purchase, conveyance or acquisition of any interest in a licensee is prohibited without the Colorado Commission’s prior approval.
However, because we are a publicly traded corporation, persons may
acquire an interest in us (even, under current staff interpretations, a controlling interest) without the Colorado Commission’s prior approval, but such persons may
be required to file notices with the Colorado Commission and applications for suitability (as discussed above) and the Colorado Commission may, after such
acquisition, find such person unsuitable and require them to dispose of their interest. Under some circumstances, we may not sell any interest in our Colorado
gaming businesses without the prior approval of the Colorado Commission.
Each Colorado Casino must meet specified architectural requirements, fire safety standards and standards for access for disabled persons. Each Colorado Casino
also must not exceed specified gaming square footage limits as a total of each floor and the full building. Each Colorado Casino may permit only individuals 21 or
older to gamble in the casino. No Colorado Casino may provide credit to its gaming patrons. Each Colorado Casino must comply with Colorado’s Gambling
Payment Intercept Act, which governs the collection of unpaid child support costs on certain cash winnings from limited gaming. Each casino in Colorado also
must take measures to prevent the use of Electronic Benefits Transfer cards at automated teller machines located on its premises. Further, on November 3, 2015, the
Colorado Division issued an industry bulletin explaining that legal and illegal Colorado marijuana operations may be using casinos in Colorado to launder money,
and reminding casinos to be diligent in complying with federal anti-money laundering reporting requirements so that unusual financial transactions or suspected
incidents of money laundering, particularly by legal and illegal Colorado marijuana operations, may be promptly and sufficiently investigated.
As originally enacted by amendment to the Colorado Constitution, limited stakes gaming in Colorado was limited to slot machines, blackjack and poker, with a
maximum single bet of $5.00, and casinos could operate only between 8 a.m. and 2 a.m. On November 4, 2008, however, Colorado voters approved a subsequent
amendment to the Colorado Constitution that allowed the towns of Cripple Creek, Black Hawk, and Central City to add table games of craps and roulette, increase
the maximum single bet to $100.00, and increase the permitted hours of operation to 24 hours per day effective July 2, 2009. In 2006, a statewide indoor smoking
ban went into effect in the State of Colorado, but casinos were exempted from the original legislation. Effective January 1, 2008, the Colorado legislature repealed
the exemption and extended the indoor smoking ban to casinos.
A licensee is required to provide information and file periodic reports with the Colorado Division, including identifying those who have a 5% or greater ownership,
financial or equity interest in the licensee, or who have the ability to control the licensee, or who have the ability to exercise significant influence over the licensee,
or who loan money or other things of value to a licensee, or who have the right to share in revenues of limited gaming, or to whom any interest or share in profits of
limited gaming has been pledged as security for a debt or performance of an act. A licensee, and any parent company or subsidiary of a licensee, who has applied to
a foreign jurisdiction for licensure or permission to conduct gaming, or who possesses a license to conduct foreign gaming, is required to notify the Colorado
Division. Any person licensed by the Colorado Commission and any associated person of a licensee must report criminal convictions and criminal charges to the
Colorado Division.
The Colorado Commission has broad authority to sanction, fine, suspend and revoke a license for violations of the Colorado Regulations. Violations of many
provisions of the Colorado Regulations also can result in criminal penalties.
The Colorado Constitution currently permits gaming only in a limited number of cities and certain commercial districts in such cities.
The Colorado Constitution permits a gaming tax of up to 40% on adjusted gross gaming proceeds, and authorizes the Colorado Commission to change the rate
annually. The current gaming tax rate is 0.25% on adjusted gross gaming proceeds of up to and including $2.0 million, 2% over $2.0 million up to and including
$5.0 million, 9% over $5.0 million up to and including $8.0 million, 11% over $8.0 million up to and including $10.0 million, 16% over $10.0 million up to and
including $13.0 million and 20% on adjusted gross gaming proceeds in excess of $13.0 million. The City of Black Hawk imposes an annual device fee of $945 per
gaming device, which may be revised from time to time and which was increased to the current fee amount in 2014. The City of Black Hawk also has imposed
other fees, including a business improvement district fee and transportation fee, calculated based on the number of devices and may revise the same or impose
additional such fees.
Colorado participates in multi-state lotteries.
The sale of alcoholic beverages is subject to licensing, control and regulation by the Colorado liquor agencies. All persons who directly or indirectly hold a 10% or
more interest in, or 10% or more of the issued and outstanding capital stock of, any of the Colorado Casinos, through their ownership of us, Black Hawk Holdings,
LLC, IC Holdings Colorado, Inc., or either of the two Colorado Casinos, must file applications and possibly be investigated by the Colorado liquor agencies. The
Colorado liquor agencies also may investigate those persons who, directly or indirectly, loan money to or have any financial interest in liquor licensees. In addition,
there are restrictions on stockholders, directors and officers of liquor licensees preventing such persons from being a stockholder, director, officer or otherwise
interested in some persons lending money to liquor licensees and from making loans to other liquor licensees. All licenses are revocable and transferable only in
accordance with all applicable laws. The Colorado liquor agencies have the full power to limit, condition, suspend or revoke any liquor license and any disciplinary
action could (and revocation would) have a material adverse effect upon the operations of us, Black Hawk Holdings, LLC, IC Holdings Colorado, Inc., or the
applicable Colorado Casino. Each Colorado Casino holds a retail gaming tavern liquor license for its casino, hotel and restaurant operations.
Persons directly or indirectly interested in either of the two Colorado Casinos may be limited in certain other types of liquor licenses in which they may have an
interest, and specifically cannot have an interest in a retail liquor license (but may have an interest in a hotel and restaurant liquor license and several other types of
liquor licenses). No person can hold more than three retail gaming tavern liquor licenses. The remedies of certain lenders may be limited by applicable liquor laws
and regulations.
Florida
In June 1995, the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering (the “Division”), issued its final order approving
the transfer to the company’s wholly owned subsidiary, PPI, Inc. (“PPI”), the pari-mutuel wagering permits which authorize the acceptance of pari-mutuel wagers
on harness horse and quarter horse races conducted at the Pompano Park Racetrack (“Pompano Park”) located in Pompano Beach, Florida. Harness horse racing at
Pompano Park has been continuously conducted by PPI since the time it acquired the foregoing described harness horse racing permit through the present. The
license to conduct live evening harness racing performances at Pompano Park must be renewed annually and was most recently renewed in March 2016 for the
State of Florida’s fiscal year of July 1, 2016 to June 30, 2017. PPI also has a quarterhorse racing permit that is not currently active.
The Florida statutes and the applicable rules and regulations of the Division set forth in the Florida Administrative Code (the “Florida Law”) establish a regulatory
framework for pari-mutuel wagering activities in the State of Florida, including licensing requirements, a taxing structure on pari-mutuel permitholders and
requirements for payments to the horsemen, including owners and breeders. Florida Law grants to the Division full regulatory power over all permitholders and
licensees, including the power to revoke or suspend any permit or license upon the willful violation of Florida Law by a permitholder or a licensee. The Division
must approve any transfer of five percent (5%) or more of the stock or other evidence of ownership or equity in all pari-mutuel racing permitholders such as PPI. In
addition to the power to suspend or revoke a permit or license for a willful violation of Florida Law, the Division also is granted the power to impose various civil
penalties on the permitholder or licensee. Penalties may not exceed $1,000 for each count or separate offense.
PPI races 126 live performances annually, down from 140 live performances annually due to a one-time statutory reduction recently implemented. PPI also is
authorized to conduct full-card pari-mutuel wagering on: (1) simulcast harness races from outside of Florida throughout the racing season; and (2) night-time (after
6 p.m.) thoroughbred races conducted outside of Florida. Such races may be simulcast only to a Florida thoroughbred track. If the Florida thoroughbred track
accepts wagers on those races, it is required by law to rebroadcast the signal to PPI which will accept pari-mutuel wagers on the races. PPI also has the right under
Florida Law to conduct full-card simulcasting of harness racing on days during which no live racing is held at Pompano Park; however, on non-race days, Pompano
Park must rebroadcast the simulcast signals to other pari-mutuel facilities that are eligible to conduct intertrack wagering. In addition, Pompano Park may transmit
its live harness races into any dog racing or jai alai facility in Florida, including facilities in Miami-Dade and Broward Counties, for intertrack wagering. Pompano
Park also receives live races from other Florida pari-mutuel facilities for intertrack wagering. Florida Law establishes the allocation of contributions to the parimutuel pools between Pompano Park and the other facilities sharing such signals.
Florida Law authorizes pari-mutuel facilities, including Pompano Park, to operate card rooms in those counties in which card rooms have been approved by a
majority vote of the County Commission and a local ordinance adopted. The County Commission of Broward County, where Pompano Park is located, has
approved the operation of card rooms in Broward County. Although the provisions of Florida Law regarding card room operations have been amended frequently
by the Florida Legislature, the amendments generally have resulted in the regulatory scheme becoming more liberal as opposed to becoming more restrictive.
Under amendments which became effective on July 1, 2007, the beneficial changes included permitting daily operations for any twelve (12) hour period without
the requirement for live racing, raising the limit on the maximum bet amount from $2.00 to $5.00 with up to three (3) raises allowed per round, providing less
restrictive regulations for tournaments and allowing the operator to award prizes and create jackpots not tied to the amount bet.
In November 2004, the voters in the State of Florida amended the Florida State Constitution to allow the voters of Miami-Dade and Broward Counties to decide
whether to approve slot machines at existing racetracks and jai alai frontons which had conducted live racing or games in the calendar years 2002 and 2003, in their
respective counties. Broward County voters approved that county’s local referendum in 2005 and Miami-Dade voters approved that county’s local referendum in
2008. Legislation enacted by the Florida Legislature in 2005, and amended in 2007, (the “Florida Slot Law”) implemented the constitutional amendment by
authorizing Pompano Park and three (3) other pari-mutuel facilities in Broward and the pari-mutuel facilities in Miami-Dade County to offer slot machine gaming
to patrons at those facilities. Although there are pari-mutuel facilities in numerous other counties, slot machine gaming presently is authorized only in Broward and
Miami-Dade Counties. In April 2007, PPI opened a new casino facility at Pompano Park adjacent to the harness race facility.
Florida slot machine gaming laws require the slot licensee to continue to be in compliance with the pari-mutuel laws and maintain the pari-mutuel license in good
standing by, among other things, conducting a full schedule of live racing. The following regulatory provisions also are applicable to slot machine gaming at
Pompano Park:
·
The facility may be operated 365 days per year, eighteen (18) hours per weekday and twenty-four (24) hours on weekends.
·
The maximum number of machines is 2,000 Vegas-style (Class III) slot machines per facility, with a payout percentage of at least eightyfive percent (85%).
·
The annual license fee is $2,000,000.00.
·
Effective July 1, 2010, the tax payable to the State of Florida is thirty-five percent (35%) of net slot machine revenue.
·
The machines will not accept coins or currency, but are ticket in/ticket out.
·
The minimum age to play the machines is twenty-one (21) years.
·
ATMs are permitted in the facility but not on the gaming floor.
·
The Division is the regulatory agency charged with the duty of enforcing the provisions of the Florida Law.
PPI also pays combined county and city taxes of approximately three and one-half percent (3.5%) on the first $250 million of net slot machine revenue and five
percent (5%) on net slot machine revenue over $250 million.
In April 2009, legislation was passed which set forth and granted the parameters under which the Governor has authority to enter into an Indian Gaming Compact
(“Compact”) with the Seminole Indian Tribe of Florida on behalf of the State of Florida for the purpose of authorizing Class III gaming. Additionally, the
legislation provided for a reduction of the tax rate on slot machines operated by pari-mutuel facilities from fifty percent (50%) to thirty-five percent (35%) with a
guarantee of tax revenue to the state, from all slot facilities, of no less than the amount that was collected in the fiscal year ended June 30, 2009, from all slot
facilities. The tax guarantee was easily met. After the proposed effective date of the legislation, two (2) new slot facilities opened in Miami-Dade County. These
facilities created enough new tax revenue to ensure that total revenues exceeded revenue collected in the base year. The legislation also reduced the annual license
fee from $3 million to $2.5 million for the State of Florida’s 2010 Fiscal Year and to $2 million each fiscal year thereafter. It allowed slot machines to be linked
using a progressive system and expanded poker operations to allow operation for eighteen (18) hours per day on week days and twenty-four (24) hours per day on
weekends. In addition, it authorized no-limit poker games and tournaments.
The legislation was subject to certain conditions, all of which were met, rendering the above referenced provisions effective as of July 1, 2010. The same act
expanded the number of slot facilities in Miami-Dade County by authorizing a new slot license for Hialeah race track, which was not an eligible slot facility under
the 2004 constitutional amendment. The act also set forth a method for further expansion of slots at other pari-mutuel facilities throughout the state by authorizing,
under certain conditions, a countywide referendum on slots. After several counties attempted to authorize slots by referendum, the Attorney General officially
opined that further legislative or constitutional authorization was necessary before any expansion could proceed. The Division has adopted the same position.
The position of the Division was appealed to the 1 st District Court of Appeal in 2015, which upheld the Division’s position. The 1 st District’s opinion was
certified to the Florida Supreme Court and Oral argument was held June 7, 2016.
Iowa
In 1989, the State of Iowa legalized riverboat gaming on the Mississippi River and other navigable waterways located in Iowa. The legislation authorized the
granting of licenses to “qualified sponsoring organizations.” A “qualified sponsoring organization” is defined as a nonprofit corporation organized under the laws
of the State of Iowa, or a person or association that can show to the satisfaction of the Iowa Racing and Gaming Commission (the “Iowa Racing and Gaming
Commission”) that the person or association is eligible for exemption from federal income taxation under Section 501(c)(3), (4), (5), (6), (7), (8), (10) or (19) of the
Internal Revenue Code (hereinafter “not-for-profit corporation”). The not-for-profit corporations can, in turn, enter into operating agreements with qualified
persons who actually conduct riverboat gaming operations. Such operators must likewise be approved and licensed by the Iowa Racing and Gaming Commission.
The Isle-Bettendorf’s operator’s contract with the Scott County Regional Authority, a non-profit corporation organized for the purpose of facilitating riverboat
gaming in Bettendorf, Iowa, was amended in March 2015. The amendment extends the term for a period of ten years and provides for automatic renewals for
succeeding five-year periods as long as gaming remains approved in Scott County. Under the amended operator’s contract, the Isle-Bettendorf continues to pay the
Scott County Regional Authority a fee equal to 4.1% of the adjusted gross receipts; however, once the land-based gaming facility opens to the public, the revenue
share will convert from a fixed rate to a variable rate based on the level of adjusted gross receipts (as defined in Section 99F.1(1) of the Iowa Code). Further, the
Isle-Bettendorf pays a fee to the City of Bettendorf equal to 1.65% of adjusted gross receipts.
In June 1994, Upper Mississippi Gaming Corporation, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in Marquette, Iowa,
entered into an operator’s agreement for the Isle-Marquette for a period of twenty-five years. Under the operator’s agreement, the not-for-profit corporation is to be
paid a fee of $0.50 per passenger. The operator’s agreement between Upper Mississippi Gaming Corporation and the Isle-Marquette was amended on
November 10, 2015 (the “First Amendment — Marquette”) to extend the term of the operator’s agreement until June 10, 2044. The First Amendment — Marquette
also amends the payments from the Isle-Marquette to the not-for-profit corporation to include a $50,000 lump sum payment due July 31, 2016; a $100,000 lump
sum payment due July 31, 2017; a $100,000 lump sum payment due July 31, 2018; a $200,000 lump sum payment due July 31, 2019; and beginning on July 1,
2019 and continuing through the end of the term of the First Amendment — Marquette a monthly payment shall be made from the Isle-Marquette to the not-forprofit corporation equal to 3.25% of the adjusted gross receipts of the Isle-Marquette’s gaming operation.
Further, pursuant to a dock site agreement dated June 10, 1994 (which also has a term of twenty-five years), the Isle-Marquette is required to pay a fee to the City
of Marquette in the amount of $1.00 per passenger, plus a fixed amount of $15,000 per month and 2.5% of gaming revenues (less state wagering taxes) in excess of
$20.0 million but less than $40.0 million; 5% of gaming revenues (less state wagering taxes) in excess of $40.0 million but less than $60.0 million; and 7.5% of
gaming revenues (less state wagering taxes) in excess of $60.0 million. The dock site agreement with the City of Marquette was amended on November 19, 2015 to
extend its term until June 10, 2044 (matching that of the operator’s contract with Upper Mississippi Gaming Corporation). The amendment to the dock site
agreement also changes the terms of the rental payments to the City of Marquette. Beginning June 10, 2019, the Isle-Marquette will pay the city 1.52% of net
gambling receipts. Such payments will be made in lieu of any per passenger admission fees.
In November 2004, the Black Hawk County Gaming Association, a not-for-profit corporation organized for the purpose of facilitating riverboat gaming in
Waterloo, Iowa entered into an operator’s agreement with the Isle-Waterloo to conduct riverboat gaming in Waterloo, Iowa. The operating agreement requires that
Isle-Waterloo make weekly payments to the qualified sponsoring organization equal to 4.1% of each week’s adjusted gross receipts and an additional fee of 1.65%
of each week’s adjusted gross receipts in lieu of any admission or docking fee which might otherwise be charged by the county or any city (as defined in
Section 99F.1(1) of the Iowa Code). This agreement will remain in effect through March 31, 2018 and may be extended by the Isle-Waterloo for three-year periods
so long as it has substantially complied with gaming laws and regulations and holds a license to conduct gaming. In addition, the Isle-Waterloo has agreed to pay a
development fee to the City. Pursuant to an admission fee administration and development agreement with the City and Black Hawk County Gaming Association
the Isle-Waterloo shall pay a development fee equal to 1% of each week’s adjusted gross receipts.
Iowa law permits gaming licensees to offer unlimited stakes gaming on games approved by the Iowa Racing and Gaming Commission on a 24-hour basis. Landbased casino gaming was authorized on July 1, 2007 and the Iowa Racing and Gaming Commission now permits licensees the option to operate on permanently
moored vessels, moored barges, or approved gambling structures. The legal age for gaming is 21.
All Iowa licenses were approved for renewal at the March 3, 2016 Iowa Racing and Gaming Commission meeting. These licenses are not transferable and will need
to be renewed in March 2017 and prior to the commencement of each subsequent annual renewal period.
The ownership and operation of gaming facilities in Iowa are subject to extensive state laws, regulations of the Iowa Racing and Gaming Commission and various
county and municipal ordinances (collectively, the “Iowa Gaming Laws”), concerning the responsibility, financial stability and character of gaming operators and
persons financially interested or involved in gaming operations. Iowa Gaming Laws seek to: (1) prevent unsavory or unsuitable persons from having direct or
indirect involvement with gaming at any time or in any capacity; (2) establish and maintain responsible accounting practices and procedures; (3) maintain effective
control over the financial practices of licensees (including the establishment of minimum procedures for internal fiscal affairs, the safeguarding of assets and
revenues, the provision of reliable record keeping and the filing of periodic reports with the Iowa Gaming Commission); (4) prevent cheating and fraudulent
practices; and (5) provide a source of state and local revenues through taxation and licensing fees. Changes in Iowa Gaming Laws could have a material adverse
effect on the Iowa gaming operations.
The Iowa gaming operations must submit detailed financial and operating reports to the Iowa Racing and Gaming Commission. Certain contracts of licensees in
excess of $100,000 must be submitted to and approved by the Iowa Racing and Gaming Commission. Certain officers, directors, managers and key employees of
the Iowa gaming operations are required to be licensed by the Iowa Racing and Gaming Commission. Gaming licenses granted to individuals must be renewed
every three years, and licensing authorities have broad discretion with regard to such renewals. Licenses are not transferable. Employees associated with gaming
must obtain occupational licenses that are subject to immediate suspension under specific circumstances. In addition, anyone having a material relationship or
involvement with the Iowa gaming operations may be required to be found suitable or to be licensed, in which case those persons would be required to pay the
costs and fees of the Iowa Racing and Gaming Commission and Division of Criminal Investigation in connection with the investigation. The Iowa Racing and
Gaming Commission may require any person who acquires 5% or more of a licensee’s equity securities to submit to a background investigation and be found
suitable. The applicant stockholder is required to pay all costs of this investigation. The Iowa Racing and Gaming Commission may deny an application for a
license for any cause deemed reasonable. In addition to its authority to deny an application for license, the Iowa Racing and Gaming Commission has jurisdiction to
disapprove a change in position by officers or key employees and the power to require the Iowa gaming operations to suspend or dismiss officers, directors or other
key employees or sever relationships with other persons who refuse to file appropriate applications or whom the Iowa Racing and Gaming Commission finds
unsuitable to act in such capacities.
The Iowa Racing and Gaming Commission may revoke a gaming license if the licensee:
·
has been suspended from operating a gaming operation in another jurisdiction by a board or
commission of that jurisdiction;
·
·
·
·
has failed to demonstrate financial responsibility sufficient to meet adequately the requirements of the gaming enterprise;
is not the true owner of the enterprise;
has failed to disclose ownership of other persons in the enterprise;
is a corporation 10% of the stock of which is subject to a contract or option to purchase at any time during the period for which the license was
issued, unless the contract or option was disclosed to the Iowa Racing and Gaming Commission and the Iowa Racing and Gaming Commission
approved the sale or transfer during the period of the license;
·
·
·
·
·
knowingly makes a false statement of a material fact to the Iowa Racing and Gaming Commission;
fails to meet a monetary obligation in connection with an excursion gaming boat;
pleads guilty to, or is convicted of a felony;
loans to any person, money or other thing of value for the purpose of permitting that person to wager on any game of chance;
is delinquent in the payment of property taxes or other taxes or fees or a payment of any other contractual obligation or debt due or owed to a city or
county; or
·
assigns, grants or turns over to another person the operation of a licensed excursion boat (this provision does not prohibit assignment of a
management contract approved by the Iowa Racing and Gaming Commission) or permits another person to have a share of the money received for
admission to the excursion boat.
If it were determined that the Iowa Gaming Laws were violated by a licensee, the gaming licenses held by a licensee could be limited, made conditional, suspended
or revoked. In addition, the licensee and the persons involved could be subject to substantial fines for each separate violation of the Iowa Gaming Laws in the
discretion of the Iowa Racing and Gaming Commission. Limitations, conditioning or suspension of any gaming license could (and revocation of any gaming
license would) have a material adverse effect on operations.
Gaming taxes approximating 22% of the adjusted gross receipts will be payable by each licensee on its operations to the State of Iowa. The state of Iowa is also
reimbursed by the licensees for all costs associated with monitoring and enforcement by the Iowa Racing and Gaming Commission and the Iowa Department of
Criminal Investigation. The Iowa Racing and Gaming Commission may approve a qualifying licensee’s debt transactions via a shelf application process. Licensees
are eligible to make a shelf application where the parent company of the licensee has (1) a class of securities listed on the New York Stock Exchange, the American
Stock Exchange or the National Association of Securities Dealers Automatic Quotation System (NASDAQ) or has stockholders’ equity in the amount of $15
million or more as reported in the parent company’s most recent report on Form 10-K or Form 10-Q filed with the Securities and Exchange Commission (SEC)
immediately preceding application; and (2) filed all reports required by the SEC. The Iowa Racing and Gaming Commission may grant approval of a shelf
application for a period not to exceed three years. The Iowa Racing and Gaming Commission representative may rescind a shelf approval without prior written
notice, and may lift the rescission upon the satisfaction of any such terms and conditions as required by the Iowa Racing and Gaming Commission.
Louisiana
In July 1991, Louisiana enacted legislation permitting certain types of gaming activity on certain rivers and waterways in Louisiana. The legislation granted
authority to supervise riverboat gaming activities to the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement Division of the
Louisiana State Police. The Louisiana Riverboat Gaming Commission was authorized to hear and determine all appeals relative to the granting, suspension,
revocation, condition or renewal of all licenses, permits and applications. In addition, the Louisiana Riverboat Gaming Commission established regulations
concerning authorized routes, duration of excursions, minimum levels of insurance, construction of riverboats and periodic inspections. The Riverboat Gaming
Enforcement Division of the Louisiana State Police was authorized to investigate applicants and issue licenses, investigate violations of the statute and conduct
continuing reviews of gaming activities.
In May 1996, regulatory oversight of riverboat gaming was transferred to the Louisiana Gaming Control Board, which is comprised of nine voting members
appointed by the governor. The Louisiana Gaming Control Board now oversees all licensing matters for riverboat casinos, land-based casinos, racinos, video poker
and certain aspects of Native American gaming other than those responsibilities reserved to the Louisiana State Police.
The Louisiana Gaming Control Board is empowered to issue up to 15 licenses to conduct gaming activities on a riverboat in accordance with applicable law.
However, no more than six licenses may be granted to riverboats operating from any one designated waterway.
The Louisiana State Police continues to be involved broadly in gaming enforcement and reports to the Louisiana Gaming Control Board. Louisiana law permits the
Louisiana State Police, among other things, to continue to (1) conduct suitability investigations, (2) audit, investigate and enforce compliance with standing
regulations, (3) initiate enforcement and administrative actions and (4) perform “all other duties and functions necessary for the efficient, efficacious, and thorough
regulation and control of gaming activities and operations” under the Louisiana Gaming Control Board’s jurisdiction.
Louisiana gaming law specifies certain restrictions relating to the operation of riverboat gaming, including the following:
·
agents of the Louisiana State Police are permitted on board at any time during gaming operations;
·
gaming devices, equipment and supplies may only be purchased or leased from permitted suppliers and, with respect to gaming equipment, from
permitted manufacturers;
·
gaming may only take place in the designated gaming area while the riverboat is docked on a designated river or waterway;
·
gaming equipment may not be possessed, maintained or exhibited by any person on a riverboat except in the specifically designated gaming area or
in a secure area used for inspection, repair or storage of such equipment;
·
wagers may be received only from a person present on a licensed riverboat;
·
persons under 21 are not permitted in designated gaming areas;
·
except for slot machine play, wagers may be made only with tokens, chips or electronic cards purchased from the licensee aboard a riverboat;
·
licensees may only use docking facilities and routes for which they are licensed and may only board and discharge passengers at the riverboat’s
licensed berth;
·
licensees must have adequate protection and indemnity insurance;
·
licensees must have all necessary federal and state licenses, certificates and other regulatory approvals prior to operating a riverboat; and
·
gaming may only be conducted in accordance with the terms of the license and Louisiana law.
To receive a gaming license in Louisiana, an applicant must be found to be a person of good character, honesty and integrity and a person whose prior activities,
criminal record, if any, reputation, habits and associations do not (1) pose a threat to the public interest of the State of Louisiana or to the effective regulation and
control of gaming or (2) create or enhance the dangers of unsuitable, unfair or illegal practices, methods and activities in the conduct of
gaming or the carrying on of business and financial arrangements of gaming activities. In addition, the Louisiana Gaming Control Board will not grant a license
unless it finds that, among other things:
·
the applicant can demonstrate the capability, either through training, education, business experience or a combination of the preceding, to operate a
gaming operation;
·
the proposed financing of the riverboat and the gaming operations is adequate for the nature of the proposed operation and is from a suitable and
acceptable source;
·
the applicant demonstrates a proven ability to operate a vessel of comparable size, capacity and complexity to a riverboat so as to ensure the safety of
its passengers;
·
the applicant submits with its application for a license a detailed plan of design of the riverboat;
·
the applicant designates the docking facilities to be used by the riverboat;
·
the applicant shows adequate financial ability to construct and maintain a riverboat; and
·
the applicant has a good faith plan to recruit, train and upgrade minorities in all employment classifications.
An initial license to conduct riverboat gaming operations is valid for a term of five years and legislation passed in the 1999 legislative session provides for renewals
every five years thereafter. Louisiana gaming law provides that a renewal application for the period succeeding the initial five-year term of an operator’s license
must be made to the Louisiana Gaming Control Board and must include a statement under oath of any and all changes in information, including financial
information, provided in the previous application. The transfer of a license or an interest in a license is prohibited. A gaming license is deemed to be a privilege
under Louisiana law and, as such, may be denied, revoked, suspended, conditioned or limited at any time by the Louisiana Gaming Control Board.
St. Charles Gaming Company, L.L.C. (“St. Charles Gaming”) is the sole Isle licensee in Louisiana operating its gaming operations on the riverboat known as Grand
Palais in Calcasieu Parish. St. Charles Gaming received its initial approval in March 1993. Isle received approval in July 1995 to acquire its interest in St. Charles
Gaming. St. Charles Gaming has been awarded four (4) five-year renewals on July 20, 1999, March 29, 2005, February 23, 2010 and March 29, 2015.
Certain persons affiliated with a riverboat gaming licensee, including directors and officers of the licensee, directors and officers of any holding company of the
licensee involved in gaming operations, persons holding 5% or greater interests in the licensee and persons exercising influence over a licensee, are subject to the
application and suitability requirements of Louisiana gaming law.
The sale, purchase, assignment, transfer, pledge or other hypothecation, lease, disposition or acquisition by any person of securities that represent 5% or more of
the total outstanding shares issued by a licensee is subject to the approval of the Louisiana Gaming Control Board. A security issued by a licensee must generally
disclose these restrictions. Prior approval from the Louisiana Gaming Control Board is required for the sale, purchase, assignment, transfer, pledge or other
hypothecation, lease, disposition or acquisition of any ownership interest of 5% or more of any non-corporate licensee or for the transfer of any “economic interest”
of 5% or more of any licensee or affiliated gaming person. An “economic interest” is defined as any interest whereby a person receives or is entitled to receive, by
agreement or otherwise, a profit, gain, thing of value, loan, credit, security interest, ownership interest or other benefit.
Fees payable to the state for conducting gaming activities on a riverboat include (1) $50,000 per riverboat for the first year of operation and $100,000 per year per
riverboat thereafter, plus (2) 21.5% of net gaming proceeds. Legislation was passed during the 2001 legislative session that allowed those riverboats that had been
required to conduct cruises, including the riverboat at the Isle-Lake Charles, to remain permanently dockside beginning April 1, 2001. The legislation also
increased the gaming tax for operators from 18.5% to 21.5%. A statute also authorizes
local governing authorities to levy boarding fees. We currently have a development agreement with the Calcasieu Parish Police Jury pursuant to which we make
payments in lieu of boarding fees.
A licensee must notify and/or seek approval from the Louisiana Gaming Control Board in connection with any withdrawals of capital, loans, advances or
distributions in excess of 5% of retained earnings for a corporate licensee, or of capital accounts for a partnership or limited liability company licensee, upon
completion of any such transaction. The Louisiana Gaming Control Board may issue an emergency order for not more than ten days prohibiting payment of profits,
income or accruals by, or investments in, a licensee., Riverboat gaming licensees and their affiliates must notify the Louisiana Gaming Control Board of all debt,
credit, financing and loan transactions, including the identity of debt holders, no less than 20 days prior to the proposed transaction. The Louisiana Gaming Control
Board is required to investigate the reported loan, extension of credit or modification thereof to determine whether an exemption exists or, if such exemption is not
applicable, to either approve or disapprove the transaction. If the Louisiana Gaming Control Board disapproves of a transaction, the transaction cannot be entered
into by the licensee or affiliate. We are an affiliate of our subsidiary that holds the license to conduct riverboat gaming at the Isle-Lake Charles. An affiliate of a
licensee which is a publicly traded company may apply to the Louisiana Gaming Control Board for shelf approval of debt transactions. An affiliate of a licensee is
eligible to file a shelf application if it has a class of securities listed on either the New York Stock Exchange (NYSE), the American Stock Exchange (ASE) or the
National Association of Securities Dealers Automatic Quotation System (NASDAQ), or has stockholders’ equity in the amount of $15 million or more as reported
in its most recent report on Form 10-K or Form 10-Q filed with the Securities Exchange Commission (SEC) immediately preceding application and 2.) has filed all
reports required to be filed by section 13, or section 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months, or for such a shorter period
that the affiliate has been required to file such reports. Approvals for shelf applications may be granted for a period not to exceed 3 years under such terms and
conditions determined by the Louisiana Gaming Control Board including a limitation on the maximum amount of total debt permitted to be borrowed. We have
received a shelf approval for debt transactions.
The failure of a licensee to comply with the requirements set forth above may result in the suspension or revocation of that licensee’s gaming license. Additionally,
if the Louisiana Gaming Control Board finds that the individual owner or holder of a security of a corporate license or intermediary company or any person with an
economic interest in a licensee is not qualified under Louisiana law, the Louisiana Gaming Control Board may require, under penalty of suspension or revocation
of the license, that the person not:
·
receive dividends or interest on securities of the corporation;
·
exercise directly or indirectly a right conferred by securities of the corporation;
·
receive remuneration or economic benefit from the licensee;
·
exercise significant influence over activities of the licensee; or
·
continue its ownership or economic interest in the licensee.
A licensee must periodically report the following information to the Louisiana Gaming Control Board, which is not confidential and is available for public
inspection: (1) the licensee’s net gaming proceeds from all authorized games, (2) the amount of net gaming proceeds tax paid and (3) all quarterly and annual
financial statements presenting historical data, including annual financial statements that have been audited by an independent certified public auditor.
During the 1996 special session of the Louisiana legislature, legislation was enacted placing on the ballot for a statewide election a constitutional amendment
limiting the expansion of gaming, which was subsequently passed by the voters. As a result, local option elections are required before new or additional forms of
gaming can be brought into a parish.
Proposals to amend or supplement Louisiana’s riverboat gaming statute are frequently introduced in the Louisiana State Legislature. There is no assurance that
changes in Louisiana gaming law will not occur or that such changes will not have a material adverse effect on our business in Louisiana.
Mississippi
In June 1990, Mississippi enacted legislation legalizing dockside casino gaming for counties along the Mississippi River, which is the western border for most of
the state, and the Gulf Coast, which is the southern border for most of the state. The legislation gave each of those counties the opportunity to hold a referendum on
whether to allow dockside casino gaming within its boundaries.
In its 2005 regular session, the legislature amended Mississippi law to allow gaming to be conducted on vessels or cruise vessels placed upon permanent structures
located on, in or above the Mississippi River, on, in or above navigable waters in eligible counties along the Mississippi River or on, in or above the waters lying
south of the counties along the Mississippi Gulf Coast. Later, after Hurricane Katrina, the Mississippi legislature again amended the law to allow land-based
gaming along the Gulf Coast in very limited circumstances. Mississippi law permits unlimited stakes gaming on a 24-hour basis and does not restrict the percentage
of space that may be utilized for gaming. There are no limitations on the number of gaming licenses that may be issued in Mississippi.
The ownership and operation of gaming facilities in Mississippi are subject to extensive state and local regulation intended to:
·
prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity;
·
establish and maintain responsible accounting practices and procedures for gaming operations;
·
maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and
safeguarding of assets and revenues, providing reliable record keeping and making periodic reports;
·
provide a source of state and local revenues through taxation and licensing fees;
·
prevent cheating and fraudulent practices; and
·
ensure that gaming licensees, to the extent practicable, employ Mississippi residents.
State gaming regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi laws or regulations may
limit or otherwise materially affect the types of gaming that may be conducted in Mississippi and such changes, if enacted, could have an adverse effect on us and
our Mississippi gaming operations.
We are registered as a publicly traded corporation under the Mississippi Gaming Control Act. Our gaming operations in Mississippi are subject to regulatory
control by the Mississippi Gaming Commission, the Mississippi Department of Revenue and various other local, city and county regulatory agencies (collectively
referred to as the “Mississippi Gaming Authorities”). Our subsidiaries have obtained gaming licenses from the Mississippi Gaming Authorities. We must obtain a
waiver from the Mississippi Gaming Commission before beginning certain proposed gaming operations outside of Mississippi, and we must notify the Mississippi
Gaming Commission in writing within 30 days after commencing certain gaming operations outside the state. The licenses held by our Mississippi gaming
operations have terms of three years and are not transferable. The Isle-Lula and the Lady Luck Casino Vicksburg property hold licenses effective from May 23,
2015, through May 22, 2018. In addition, our wholly-owned subsidiary, IOC Manufacturing, Inc., holds a manufacturer and distributor’s license, so that we may
perform certain upgrades to our Mississippi player tracking system. This license has a term of three years effective June 16, 2014 through June 15, 2017. The
license is not transferable. There is no assurance that new licenses can be obtained at the end of each three-year period of a license. Moreover, the Mississippi
Gaming Commission may, at any time, and for any cause it deems reasonable, revoke, suspend, condition, limit or restrict a license or approval to own shares of
stock in our subsidiaries that operate in Mississippi.
Substantial fines for each violation of Mississippi’s gaming laws or regulations may be levied against us, our subsidiaries and the persons involved. Disciplinary
action against us or one of our subsidiary gaming licensees in any jurisdiction may lead to disciplinary action against us or any of our subsidiary licensees in
Mississippi, including, but not limited to, the revocation or suspension of any such subsidiary gaming license.
We, along with each of our Mississippi gaming subsidiaries, must periodically submit detailed financial, operating and other reports to the Mississippi Gaming
Commission and/or the Mississippi Department of Revenue. Numerous transactions, including but not limited to substantially all loans, leases, sales of securities
and similar financing transactions entered into by any of our Mississippi gaming subsidiaries must be reported to or approved by the Mississippi Gaming
Commission. In addition, the Mississippi Gaming Commission may, at its discretion, require additional information about our operations.
Certain of our officers and employees and the officers, directors and certain key employees of our Mississippi gaming subsidiaries must be found suitable or be
licensed by the Mississippi Gaming Commission. We believe that all required findings of suitability related to all of our Mississippi properties have been applied
for or obtained, although the Mississippi Gaming Commission at its discretion may require additional persons to file applications for findings of suitability. In
addition, any person having a material relationship or involvement with us may be required to be found suitable or licensed, in which case those persons must pay
the costs and fees associated with such investigation. The Mississippi Gaming Commission may deny an application for a finding of suitability for any cause that it
deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Gaming Commission. In addition to its authority to deny an application
for a finding of suitability, the Mississippi Gaming Commission has jurisdiction to disapprove a change in a licensed position. The Mississippi Gaming
Commission has the power to require us and any of our Mississippi gaming subsidiaries to suspend or dismiss officers, directors and other key employees or to
sever relationships with other persons who refuse to file appropriate applications or who the authorities find unsuitable to act in such capacities.
Employees associated with gaming must obtain work permits that are subject to immediate suspension under certain circumstances. The Mississippi Gaming
Commission will refuse to issue a work permit to a person who has been convicted of a felony, committed certain misdemeanors or knowingly violated the
Mississippi Gaming Control Act, and it may refuse to issue a work permit to a gaming employee for any other reasonable cause.
At any time, the Mississippi Gaming Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of ours.
The Mississippi Gaming Control Act requires any person who individually or in association with others acquires, directly or indirectly, beneficial ownership of
more than 5% of our common stock to report the acquisition to the Mississippi Gaming Commission, and such person may be required to be found suitable. In
addition, the Mississippi Gaming Control Act requires any person who, individually or in association with others, becomes, directly or indirectly, a beneficial
owner of more than 10% of our common stock, as reported to the U.S. Securities and Exchange Commission, to apply for a finding of suitability by the Mississippi
Gaming Commission and pay the costs and fees that the Mississippi Gaming Commission incurs in conducting the investigation.
The Mississippi Gaming Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of 5% or more of a registered
publicly traded corporation’s stock. However, the Mississippi Gaming Commission has adopted a regulation that may permit certain “institutional” investors to
obtain waivers that allow them to beneficially own, directly or indirectly, up to 15% (19% in certain specific instances) of the voting securities of a registered
publicly traded corporation without a finding of suitability. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information, including a list of beneficial owners.
Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Mississippi Gaming Commission
may be found unsuitable. We believe that compliance by us with the licensing procedures and regulatory requirements of the Mississippi Gaming Commission will
not affect the marketability of our securities. Any person found unsuitable who holds, directly or indirectly, any beneficial ownership of our securities beyond such
time as the Mississippi Gaming Commission prescribes may be guilty of a misdemeanor. We are subject to disciplinary action if, after receiving notice that a
person is unsuitable to be a stockholder or to have any other relationship with us or our subsidiaries operating casinos in Mississippi, we:
·
·
·
·
pay the unsuitable person any dividend or other distribution upon its voting securities;
recognize the exercise, directly or indirectly, of any voting rights conferred by its securities;
pay the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or
fail to pursue all lawful efforts to require the unsuitable person to divest itself of the securities, including, if necessary, our immediate purchase of the
securities for cash at a fair market value.
We may be required to disclose to the Mississippi Gaming Commission upon request the identities of the holders of any of our debt securities. In addition, under
the Mississippi Gaming Control Act, the Mississippi Gaming Commission may, in its discretion, (1) require holders of our securities, including our notes, to file
applications, (2) investigate such holders and (3) require such holders to be found suitable to own such securities. Although the Mississippi Gaming Commission
generally does not require the individual holders of obligations such as our notes to be investigated and found suitable, the Mississippi Gaming Commission retains
the discretion to do so for any reason, including but not limited to a default, or where the holder of the debt instrument exercises a material influence over the
gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of
the Mississippi Gaming Commission in connection with such an investigation.
The Mississippi regulations provide that a change in control of us may not occur without the prior approval of the Mississippi Gaming Commission. Mississippi
law prohibits us from making a public offering of our securities without the approval of the Mississippi Gaming Commission if any part of the proceeds of the
offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi, or to retire or extend obligations incurred for one or
more such purposes. The Mississippi Gaming Commission has the authority to grant a continuous approval of securities offerings and has granted such approval to
us, subject to renewal every three years.
Regulations of the Mississippi Gaming Commission prohibit certain repurchases of securities of publicly traded corporations registered with the Mississippi
Gaming Commission, including holding companies such as ours, without prior approval of the Mississippi Gaming Commission. Transactions covered by these
regulations are generally aimed at discouraging repurchases of securities at a premium over market price from certain holders of greater than 3% of the outstanding
securities of the registered publicly traded corporation. The regulations of the Mississippi Gaming Commission also require prior approval for a “plan of
recapitalization” as defined in such regulations.
We must maintain in the State of Mississippi current stock ledgers, which may be examined by the Mississippi Gaming Authorities at any time. If any securities are
held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Gaming Authorities.
A failure to make such disclosure may be grounds for finding the record holder unsuitable. We must render maximum assistance in determining the identity of the
beneficial owner.
Mississippi law requires that certificates representing shares of our common stock bear a legend to the general effect that the securities are subject to the
Mississippi Gaming Control Act and regulations of the Mississippi Gaming Commission. The Mississippi Gaming Commission has the authority to grant a waiver
from the legend requirement, which we have obtained. The Mississippi Gaming Commission, through the power to regulate licenses, has the power to impose
additional restrictions on the holders of our securities at any time.
The Mississippi Gaming Commission enacted a regulation in 1994 requiring that, as a condition to licensure, an applicant must provide a plan to develop
“infrastructure” amounting to 25% of the cost of the casino and a parking facility capable of accommodating 500 cars. The regulation was amended in 1999 to
increase the infrastructure requirement from 25% to 100% for new casinos (or upon acquisition of a closed casino) but grandfathered existing licensees and
development plans approved prior to the effective date of the new regulation. In 2003, 2006, 2007, and 2013, the Mississippi Gaming Commission made additional
changes to this regulation.
The 2013 amendment removed the 100% reference and, among other things, specifies that a proposed gaming development must include the following:
·
A 500-car or larger parking facility in close proximity to the casino complex;
·
A 300-room or larger hotel of at least a three diamond rating as defined by an acceptable travel publication to be determined by the
Mississippi Gaming Commission;
·
A 200-seat or larger restaurant;
·
A 75-seat or larger fine dining facility; and
·
A 40,000-square foot or larger casino floor.
The proposed gaming development must also have or support an amenity that is unique to the market and encourages economic development and promotes
tourism. The Mississippi Gaming Commission may, in its discretion, reduce these requirements or allow an amenity of high value to the overall tourism market to
supplant the requisite hotel and dining facilities. This 2013 amendment applies only to new applicants for gaming licenses and to acquisitions / purchases of
existing licensees or gaming facilities that have ceased gaming operations prior to the acquisition / purchase; it does not apply to licensees licensed by the
Mississippi Gaming Commission, or to persons receiving Approval to Proceed with Development from the Mississippi Gaming Commission, before December 31,
2013.
License fees and taxes are payable to the State of Mississippi and to the counties and cities in which a Mississippi gaming subsidiary’s respective operations will be
conducted. The license fee payable to the state of Mississippi is based upon gross revenue of the licensee (generally defined as gaming receipts less payout to
customers as winnings) and equals 4% of gross revenue of $50,000 or less per month, 6% of gross revenue in excess of $50,000 but less than $134,000 per calendar
month, and 8% of gross revenue in excess of $134,000 per calendar month. The foregoing license fees are allowed as a credit against the licensee’s Mississippi
income tax liability for the year paid. Additionally, a licensee must pay a $5,000 annual license fee and an annual fee based upon the number of games it operates.
The gross revenue tax imposed by the Mississippi communities and counties in which our casino operations are located equals 0.4% of gross revenue of $50,000 or
less per calendar month, 0.6% of gross revenue over $50,000 and less than $134,000 per calendar month and 0.8% of gross revenue greater than $134,000 per
calendar month. These fees have been imposed in, among other cities and counties, Biloxi and Coahoma County. Certain local and private laws of the state of
Mississippi may impose fees or taxes on the Mississippi gaming subsidiaries in addition to the fees described above.
In April 2010, the Mississippi Gaming Commission adopted a regulation amendment that imposes a flat annual fee on each casino operator licensee, covering all
investigative fees for that year associated with an operator licensee, any entity registered as a holding company or publicly traded corporation of that licensee, and
any person required to be found suitable in connection with that licensee or any holding company or publicly traded corporation of that licensee. The particular fee
is based on the average number of gaming devices operated by the licensee during a twelve (12) month period, as reported to the Mississippi Gaming Commission. The investigative fee is $325,000 for licensees with 1500 or more gaming devices, $250,000 for licensees with 1000 to 1499 gaming devices, and $150,000 for
licensees with less than 1000 gaming devices. The fee is payable in four (4) equal quarterly installments. The amendment provides that should such total
investigative fees collected by the Mississippi Gaming Commission exceed the amount allowed by Mississippi statute, then the excess fees will be credited to the
licensees for the following year. The amended regulation also provides a schedule of various fees applicable to licensees and persons not covered by the annual
investigative fee.
The sale of food or alcoholic beverages at our Mississippi gaming locations is subject to licensing, control and regulation by the applicable state and local
authorities. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation
would) have a material adverse effect upon the operations of the affected casino or casinos. Certain of our officers and managers and our Mississippi gaming
subsidiaries must be investigated by the Alcoholic Beverage Control Division of the Mississippi Department of Revenue in connection with liquor permits that
have been issued. The Alcoholic Beverage Control Division of the Mississippi Department of Revenue must approve all changes in licensed positions.
On three separate occasions since 1998, certain anti-gaming groups have proposed referenda that, if adopted, would have banned gaming in Mississippi and
required that gaming entities cease operations within two years after the ban. All three referenda were declared invalid by Mississippi courts because each lacked a
required government revenue impact statement.
Missouri
Conducting gambling activities and operating a riverboat gaming facility in Missouri are subject to extensive regulation under Missouri’s Riverboat Gambling Act
and the rules and regulations promulgated thereunder. The Missouri Gaming Commission (the “Commission”) was created by the Missouri Riverboat Gambling
Act and is charged with regulatory authority over riverboat gaming operations in Missouri, including the issuance of gaming licenses to owners, operators,
suppliers and certain affiliates of riverboat gaming facilities. In June 2000, IOC-Kansas City, Inc., a subsidiary of ours, was issued a riverboat gaming license in
connection with our Kansas City operation. In December 2001, IOC-Boonville, Inc., a subsidiary of ours, was issued a riverboat gaming license for our Boonville
operation. In June of 2007, IOC-Caruthersville, LLC f/k/a Aztar Missouri Riverboat Gaming Company, L.L.C. was acquired by us and began operations as a
subsidiary of ours under a Missouri riverboat gaming license. In October 2012, IOC-Cape Girardeau LLC, a subsidiary of ours, was issued a riverboat gaming
license for our Cape Girardeau operation.
In order to obtain a license to operate a riverboat gaming facility, the proposed operating business entity must complete a Riverboat Gaming Application form
requesting a Class B License. In order to obtain a license to own and/or control a Class B Licensee as its ultimate holding company, a company must complete a
Riverboat Gaming Application form requesting a Class A License. The Riverboat Gaming Application form is comprised of comprehensive questions regarding
the nature and suitability of the applicant. Applicants who submit the Riverboat Gaming Application form requesting either a Class A or Class B License undergo
an extensive background investigation by the Commission. In addition, each key person associated with the applicant (including directors, officers, managers and
owners of a significant direct or indirect interest in the Class A or Class B License applicant) must complete a Key Person and Level 1 Application (Personal
Disclosure Form 1) and undergo a substantial background investigation. Certain key business entities closely related to the applicant must undergo a similar
application process and background check. An applicant for a Class A or Class B License will not receive a license if the applicant and its key persons, including
key business entities, have not established good repute and moral character, and no licensee shall either employ or contract with any person who has pled guilty to,
or been convicted of, a felony, to perform any duties directly connected with the licensee’s privileges under a license granted by the Commission.
Each Class B License granted entitles a licensee to conduct gambling activities at a specific riverboat gaming operation. Each Class A License granted entitles the
licensee to develop and operate a Class B licensee or, if authorized, multiple Class B licensees. The duration of both the Class A and Class B License initially runs
for two one-year terms; thereafter, for four-year terms. In conjunction with the renewal of each license, the Commission requires the filing of a Riverboat Gaming
Renewal Application form and renewal fees. In conjunction with each renewal, the Commission may conduct an additional investigation of the licensee with
specific emphasis on new information provided in the Riverboat Gaming Renewal Application form. The Commission also possesses the right to periodically
conduct a comprehensive investigation on any Class A, Class B, supplier or key person licensee since the date on which the last comprehensive investigation was
conducted. The Commission also licenses the serving of alcoholic beverages on riverboats and related facilities operated by the Class A or Class B.
In determining whether to grant and allow the continued possession of a gaming license, the Commission considers the following factors, among others: (i) the
integrity of the applicant; (ii) the types and variety of games the applicant may offer; (iii) the quality of the physical facility, together with improvements and
equipment; (iv) the financial ability of the applicant to develop and operate the facility successfully; (v) the status of governmental actions required by the facility;
(vi) the management ability of the applicant; (vii) compliance with applicable statutes, rules, charters and ordinances; (viii) the economic, ecological and social
impact of the facility as well as the cost of public improvements; (ix) the extent of public support or opposition; (x) the plan adopted by the home dock city or
county; and (xi) effects on competition.
A licensee is subject to the imposition of penalties, suspension or revocation of its license for any act that is injurious to the public health, safety, morals, good
order and general welfare of the people of the State of Missouri, or that would discredit or tend to discredit the Missouri gaming industry or the State of Missouri,
including without limitation: (i) failing to comply with or make provision for compliance with the legislation, the rules promulgated thereunder or any federal, state
or local law or regulation; (ii) failing to comply with any rules, order or ruling of the Commission or its agents pertaining to gaming; (iii) receiving goods or
services from a person or business entity who does not hold a supplier’s license but who is required to hold such license by the legislation or the rules; (iv) being
suspended or ruled ineligible or having a license revoked or suspended in any state or gaming jurisdiction; (v) associating with, either socially or in business affairs,
or employing persons of notorious or unsavory reputation or who have extensive police records, or who have failed to cooperate with any officially constituted
investigatory or administrative body and would adversely affect public confidence and trust in gaming; (vi) employing in any Missouri gaming operation any
person known to have been found guilty of cheating or using any improper device in connection with any gambling game; (vii) use of fraud, deception,
misrepresentation or bribery in securing any license or permit issued pursuant to the legislation; (viii) obtaining any fee, charge or other compensation by fraud,
deception or misrepresentation; and (ix) incompetence, misconduct, gross negligence, fraud, misrepresentation or dishonesty in the performance of the functions or
duties regulated by the Missouri Riverboat Gambling Act.
Any transfer or issuance of ownership interests in a publicly held gaming licensee or its holding company that results in an entity or group of entities acting in
concert owning, directly or indirectly, an aggregate ownership interest of 5% or more in the gaming licensee must be reported to the Commission within seven
days. Further, any pledge or hypothecation of, or grant of a security interest in, 5% or more of the ownership interest in a publicly held gaming licensee or its
holding company must be reported to the Commission within seven days. The Commission will impose certain licensing requirements upon a holder of an
aggregate ownership interest of 5% or more in a publicly-traded Missouri Class A or Class B licensee, unless such holder applies for and obtains an institutional
investor exemption in accordance with the Missouri gaming regulations. The Executive Director of the Commission may grant a waiver to an institutional investor
that holds up to 10% of the outstanding equity of the Missouri licensee. The Commission itself may grant a waiver to an institutional investor that holds up to 20%
of the outstanding equity of the Missouri licensee. No investor may increase holdings above 25% without triggering a change in control that requires prior
approval by the Commission. The Commission may grant a petition to approve a change in control if the petitioner proves that (i) the transfer is in the best interest
of the state of Missouri and would have no potential to affect suitability of the gaming operation; (ii) the transfer is not injurious to the public health, safety, morals,
good order, or general welfare of the state; (iii) it would have no material negative competitive impact; and (iv) it would not potentially result in any significant
negative changes in the financial condition of the licensee. In addition, any sale, transfer or lease of the Class B’s real estate (outside of the normal course of
business) shall trigger a change in control that requires prior approval by the Commission. The petition to approve a change in control in such an instance will be
considered by the Commission using the same criteria set forth above for an ownership interest change in control.
Every employee participating in a riverboat gaming operation must hold an occupational license. In addition, the Commission issues supplier’s licenses, which
authorize the supplier licensee to sell or lease gaming equipment and supplies to any licensee involved in the operation of gaming activities. Class A and Class B
licensees may not be licensed as suppliers.
Riverboat gaming activities may only be conducted on, or within 1,000 feet of the main channel of, the Missouri River or Mississippi River. Minimum and
maximum wagers on games are set by the licensee, and wagering may be conducted only with a cashless wagering system, whereby money is converted to tokens,
electronic cards or chips that can only be used for wagering. No person under the age of 21 is permitted to wager, and wagers may only be taken from a person
present on a licensed excursion gambling boat.
The Missouri Riverboat Gambling Act imposes a 21% wagering tax on adjusted gross receipts (generally defined as gross receipts less winnings paid to wagerers)
from gambling games. The tax imposed is to be paid by the licensee to the Commission on the day after the day when the wagers were made. Of the proceeds of the
wagering tax, 10% of such proceeds go to the local government where the home dock is located, and the remainder goes to the State of Missouri.
The Missouri Riverboat Gambling Act also requires that licensees pay a two dollar admission tax to the Commission for each person admitted to a gaming cruise.
One dollar of the admission fee goes to the State of Missouri, and one dollar goes to the home dock city in which the licensee operates. The licensee is required to
maintain public books and records clearly showing amounts received from admission fees, the total amount of gross receipts and the total amount of adjusted gross
receipts. In addition, all local income, earnings, use, property and sales taxes are applicable to licensees. From time to time, there have been several proposed bills
pending before the Missouri General Assembly which, individually or in combination, if adopted, would (1) allow gaming credits to be used in food and beverage
purchases, (2) adjust the amount of wagering tax imposed on adjusted gross receipts of licensees and/or (3) adjust the amount of admission tax paid by the licensee
for each person admitted for a gaming cruise.
After many failed attempts in prior legislative sessions, a new law to become effective August 28, 2014 authorizes casino operators to provide lines of credit to
persons they deem creditworthy. Each patron must be approved for credit in an amount of at least $10,000, and the underlying credit instruments shall not be due
more than 30 days from issuance, are to be unsecured and shall not bear interest.
Pennsylvania
In 2004, the Commonwealth of Pennsylvania established the Pennsylvania Gaming Control Board (“PGCB”) to oversee the creation of the new casino industry. Initially, only slot machines were permitted, but in 2010, the law was revised to authorize table games as well (collectively, the “PA Gaming Law”). The law
created three categories of licenses — Category 1 slot machine licenses for up to seven licensed racetrack facilities, five Category 2 licenses (two in Philadelphia,
one in Pittsburgh and two “at large”), and three Category 3 licenses to well-established resort hotels having no fewer than 275 guest rooms under common
ownership and having substantial year-around recreational guest amenities, one of which Category 3 licenses cannot be issued before July, 2017. Holders of
Category 1 and Category 2 licenses are entitled to up to 5,000 slot machines and 250 table games. Holders of Category 3 licenses are entitled to up to 600 slot
machines and 50 table games.
The license fee for a Category 1 and 2 slot machine license is $50 million and for a Category 3 slot machine license is $5 million. The license fee for a Category 1
and 2 table game operation certificate is $16.5 million for a petition submitted on or before June 1, 2010 and $24.75 million thereafter, and for a Category 3 table
game operation certificate is $7.5 million for a petition submitted on or before June 1, 2010 and $11.25 million thereafter. The licenses to be issued to slot machine
licensees and managers are valid for three years from the date the license or renewal is approved by the PGCB.
Unlike the Category 1 and 2 licensed facilities which are open to the general public, the holder of a Category 3 license may only permit entry into the gaming area
of the facility by the following:
(1) A registered overnight guest of the resort.
(2) A patron of one or more of the amenities of the resort. A patron of an amenity is any individual who is a registered attendee of a convention,
meeting or banquet event or participant in a sport or recreational event or any other social, cultural or business event held at a resort hotel or who participates in one
or more of the amenities provided to registered guests of the hotel in return for non-de minimis consideration, currently defined by the PGCB as $10.00. A patron
of an amenity at the resort may be permitted unlimited access to the gaming floor for one 24 hour period within 72 hours of use of the amenity.
(3) An authorized employee of the licensee or gaming service provider, of the PGCB or any regulatory, emergency response or law enforcement
agency while engaged in the performance of the employee’s duties.
(4) An individual holding a valid membership approved by the PGCB or a guest of such individual. The PGCB may approve seasonal or yearround memberships that allow an individual to use one or more of the amenities provided by the resort, based upon the duration of the membership, the amenity
covered by the membership and whether the fee charged represents the fair market value for the use of the amenity.
The Category 2 licensed facilities located in Philadelphia are not to be within 10 linear miles of a Category 1 licensed facility and, other than the two Philadelphia
licenses, no Category 2 licensed facility is to be located within 20 linear miles of another Category 2 licensed facility. The first two Category 3 licenses are not to
be located within 15 linear miles of another licensed facility. The third Category 3 license to be issued on or after July 20, 2017 is not to be located within 30 linear
miles of another licensed facility.
IOC-PA, LLC (“IOC-PA”), a wholly-owned subsidiary of Isle, teamed up with Nemacolin Woodlands Resort (“Nemacolin”) and Woodlands Fayette, LLC
(“Woodlands Fayette”) to develop and manage a proposed Category 3 casino at Nemacolin in Fayette County, Pennsylvania. The casino is called “Lady Luck
Casino — Nemacolin”. In April 2011, Woodlands Fayette was awarded the Category 3 license after a competitive process and on August 20, 2012, the
Pennsylvania Supreme Court affirmed the award. On January 9, 2013, the PGCB approved IOC-PA as the manager of Lady Luck Casino — Nemacolin, and
approved the Management Agreement with Nemacolin and Woodlands Fayette. In addition, a table game operation certificate was awarded on February 20, 2013. All final regulatory approvals were received and the casino opened on July 1, 2013.
Any amendments to the management agreement must be submitted to the PGCB 30 days prior to the effective date of the proposed amendment and shall not
become effective until the PGCB has reviewed and approved the terms and conditions thereof. As the management company, IOC-PA, may be jointly and
severally liable for any act or omission by Woodlands Fayette as the slot machine licensee for any violation of the Act or the regulations, regardless of actual
knowledge by IOC-PA of the act or omission.
Certain persons affiliated with IOC-PA, including our directors, key employees, and any person who acquires a 5% or greater beneficial interest of our voting
securities, will be required to apply to the PGCB for licensure, obtain licensure and remain licensed. Licensure requires, among other things, that the applicant
establish by clear and convincing evidence the applicant’s good character, honesty and integrity. In addition, any trust that holds 5% percent or more of our voting
securities is required to be licensed by the PGCB and each individual who is a grantor, trustee or beneficiary of the trust is also required to be licensed by the
PGCB. Under certain circumstances and under the regulations of the PGCB, an “institutional investor,” as defined under the regulations, which acquires ownership
of 5% or more, but less than 10% of our voting securities, may not be required to be licensed by the PGCB provided that a notice of ownership form is filed with
the PGCB. In addition, any beneficial owner of our voting securities, regardless of the number of shares beneficially owned, may be required at the discretion of
the PGCB to file an application for licensure. The PGCB also licenses or registers various categories of individuals employed by the casino in gaming and nongaming capacities.
Non-renewal, suspension or revocation of a license, permit, certification or registration may occur for sufficient cause consistent with the PA Gaming Law and
public interest. A person whose application has been denied or whose license, permit, certification or registration has been revoked may not apply for a license,
permit, certification or registration for five years from the date of denial or revocation, except under certain circumstances. In the event any of our security holders
is required to be licensed and is not found qualified, the security holder may be required by the PGCB to divest its interest at a price not exceeding the cost of the
interest.
It is the continuing duty of all holders of licenses, permits, certifications or registrations to fully cooperate with the PGCB in the conduct of any inquiry or
investigation and to provide supplementary information requested by the PGCB.
IOC-PA is required to notify the PGCB of any proposed appointment, appointment, proposed nomination, nomination, election, hiring, tender of resignation,
resignation, removal, firing, incapacitation or death of any person required to be licensed as a principal or key employee under the PA Gaming Law or the
regulations promulgated thereunder. In addition, IOC-PA is also required to notify the PGCB as soon as it becomes aware that it intends to enter into a transaction
which may result in any new financial backers.
The PGCB has broad authority to sanction, fine, suspend and revoke a license for violations of the PA Gaming Law.
IOC-PA is required to submit to the PGCB with respect to its project: (1) fully signed copies of all written agreements with manufacturers, suppliers and vendors;
(2) a description of any oral agreements with any manufacturers, suppliers and vendors; (3) copies of all agreements relating to land and real estate; and (4) copies
of
all written agreements or a description of any oral agreements with a person which involves or may involve payments of $500,000 or more per year to a
Pennsylvania slot machine licensee; together with any changes or amendments thereto and any other agreements as requested by the PGCB.
We must notify the PGCB immediately upon becoming aware of any proposed or contemplated change in the ownership of Isle or IOC-PA by a person or a group
of persons acting in concert which involves any of the following:
(1) more than 5% percent of our securities or other ownership interest;
(2) more than 5% of the securities or other ownership interests of a corporation or other form of business entity that owns, directly or indirectly, at
least 20% of our voting or other securities or ownership interests;
(3) the sale, other than the normal course of business, of Isle’s or IOC-PA’s assets; and
(4) other transactions or occurrences deemed by the PGCB to be relevant to license qualification.
PGCB approval is required prior to the completion of any proposed change of ownership that meets the above criteria.
Upon a change of control of Woodlands Fayette, the acquirer of the ownership interest would be required to qualify for licensure and pay a new license fee of $5
million. The PGCB retains the discretion to eliminate the need for qualification and/or reduce the license fee required upon a change of control.
Pennsylvania imposes up to a 55% tax on slot machine revenues, consisting of 34% of slot machine revenues to the State Gaming Fund, 2% to the host county and
2% to the host township or city (provided that for a licensed facility located in Philadelphia, the entire 4% goes to Philadelphia County), up to 12% to the
Pennsylvania Race Horse Development Fund and 5% to the Pennsylvania Gaming Economic Development and Tourism Fund. In addition, during the initial two
years of table game operations, Pennsylvania imposes a table game tax of 14% of table game revenues to the Commonwealth, plus a 2% local share to each of host
county and host township, provided that for a licensed facility located in Philadelphia, the entire 4% local share goes to Philadelphia County. Following the initial
two years of operation, the table game tax to the Commonwealth is reduced to 12% of table game revenues, plus 2% local share to each of host county and host
township, provided that for a licensed facility located in Philadelphia, the entire 4% local share goes to Philadelphia County. In addition, the table game tax to the
Commonwealth is 34% of table games revenues from fully automated electronic gaming tables.
Slot machine operators in Pennsylvania are also required to reimburse the PGCB, Pennsylvania State Police, the Department of Revenue of the Commonwealth and
the Office of the Attorney General for the costs and expenses as well as for the repayment of loans associated with carrying out its responsibilities under the PA
Gaming Law. This amount may vary from time to time. We recently received notice of a .5% increase from 1.5% to 2% of gross gaming revenue for the
Commonwealth’s fiscal 16/17 year. In addition, in order to fund operations of the PGCB, an initial loan of approximately $36.1 million was granted to the PGCB
from gaming tax funds received by the Commonwealth of Pennsylvania, followed by additional loans in the aggregate amount of approximately $63.8 million, all
of which was to fund the PGCB’s operational costs.
On July 11, 2011, the PGCB adopted a schedule governing the repayment of the approximately $63.8 million in loans by licensed gaming entities. The schedule
provides that the loans will be repaid in quarterly installments over ten years, with one-tenth of the total initial loan balance as it existed on July 1, 2011 repaid each
year by the operating gaming facilities, commencing on January 1, 2012. Each operating facility’s portion of the payment for each year is calculated on a pro rata
basis in relation to an average of the facility’s annual and cumulative gross terminal revenue. The repayment of the initial $36.1 million in appropriation continues
to be deferred until all licensees have commenced operations. Currently there are twelve licensed facilities operational in Pennsylvania.