-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VeleHJRSXj1LNL/UXde+yvkmv0xXqB3rjfIiwWjILn0pEOpiobiVJi0JsCpJ6kW8 QDdqB0QPx4xeGJhcM37O6A== 0000311359-95-000002.txt : 19960624 0000311359-95-000002.hdr.sgml : 19960624 ACCESSION NUMBER: 0000311359-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALLYS PARK PLACE INC CENTRAL INDEX KEY: 0000311359 STANDARD INDUSTRIAL CLASSIFICATION: 7990 IRS NUMBER: 222264974 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-25258 FILM NUMBER: 95525421 BUSINESS ADDRESS: STREET 1: PARK PL & BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401-6709 BUSINESS PHONE: 6093402000 10-K 1 FORM 10-K FOR DECEMBER 31, 1994 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) {X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1994 OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. Commission file number: 1-8540 BALLY'S PARK PLACE, INC. (Exact name of registrant as specified in its charter) Delaware 36-3432384 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) Park Place & The Boardwalk Atlantic City, New Jersey 08401 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (609) 340-2000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None 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 X No Indicate by check mark if the 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. X At March 23, 1995, all 100 outstanding shares of the registrant's common stock were held by Bally's Casino Holdings, Inc., an indirect wholly owned subsidiary of Bally Entertainment Corporation. The registrant meets the conditions set forth in General Instruction J (1) (a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. PART I Except as otherwise stated, the information contained in this Annual Report is as of December 31, 1994, the end of the registrant's last fiscal year. ITEMS 1 and 2. BUSINESS AND PROPERTIES Introduction The registrant, Bally's Park Place, Inc. (the "Company"), is incorporated in Delaware and was a wholly owned subsidiary of Bally Entertainment Corporation ("BEC") until June 16, 1993, when BEC contributed all of the capital stock of the Company to Bally's Casino Holdings, Inc. ("Casino Holdings"). Casino Holdings was formed as a subsidiary of BEC in April 1993 for acquiring and developing gaming operations, including those in newly emerging gaming jurisdictions. The Company, through its wholly owned subsidiary Bally's Park Place, Inc., a New Jersey corporation ("Bally's Park Place--New Jersey"), operates a casino hotel resort in Atlantic City, New Jersey. Unless otherwise specified in the text, references to the Company include the Company and its subsidiaries. Bally's Park Place Bally's Park Place--New Jersey operates the Bally's Park Place Casino Hotel and Tower ("Bally's Park Place") situated on an eight-acre site with ocean frontage at the well-known intersection of Park Place and the Boardwalk in Atlantic City, New Jersey. The casino hotel resort is centrally located among the nine other casino hotels adjacent to the Boardwalk and is within four blocks of both the existing Atlantic City Convention Hall and the new convention facility, which is currently under construction. A corridor project which will link the Boardwalk with the new convention center is under development. The Company's strategic location on the Boardwalk contributes to its success in attracting significant walk-in casino business, including strong crossover business from competing casinos located nearby. Equipped with two multi-story parking garages and surface valet parking lots, management believes that the Company is also strongly positioned to attract desirable drive-in business. The Company is one of the largest casino hotel resorts in Atlantic City, currently encompassing approximately 2.2 million square feet of space, including approximately 80,100 square feet of gaming space, a 30-story hotel tower, a 12-story hotel facility and two multi-story parking garages providing over 2,000 parking spaces. In 1994, the casino floor space was expanded from 68,100 to 71,400 square feet and another 8,700 square feet of gaming space was added to accommodate 24 poker tables, horse race simulcasting and keno. At December 31, 1994, the Company offered over 2,200 slot machines and 95 table games, including baccarat, blackjack, craps, roulette and poker, among others. The Company recently completed a slot machine upgrade, replacing the majority of its slot machine inventory with state-of-the-art machines with embedded bill acceptors. In conjunction with the expansion of casino floor space, the Company added approximately 220 slot machines, including nearly 130 machines in its new high denomination slot area and opened Magnums, a posh new premium players lounge. The Company employs the latest slot machine technology and places particular emphasis on the location, design and lighting of its slot machine areas to further develop and compete for slot machine play. The Company has more than 1,250 rooms (including 98 suites), making it the largest four-star hotel in New Jersey, and contains approximately 50,000 square feet of meeting and exhibition space and a 38,000-square foot health spa facility. Dining areas include three specialty restaurants, two cocktail lounges, a coffee shop, a buffet, a delicatessen, two fast food facilities and a restaurant with a bar and lounge in the spa. The Company offers a variety of other facilities and amenities to its patrons. The Company's operating strategy continues to capitalize on its central location and quality facilities, which serves to maximize the profitability of the Company and allows the Company to increase its gaming offerings to expand its success with mid-level and high-end players. Historically believed to be a leader in Atlantic City's middle to upper-middle tier slot player segments, the Company intends to broaden its appeal and target premium table game and slot players through enhanced facility accommodations without compromising its focus on mid-level slot play. During 1994, the Company expanded its marketing efforts to attract table game players. Increased spending for marketing and promotional programs, as well as the hiring of additional host and player development personnel, were implemented to grow its share of table game players and revenues. The marketing strategy of the Company is to generate a high volume of play from casino customers from New York, Philadelphia and other northeastern metropolitan areas, as well as to further develop its position in all segments of the Atlantic City hotel and convention market. The Company plans to make capital expenditures of approximately $13 million during 1995 for the completion of the penthouse floor in the hotel tower, restaurant and kitchen renovations and other improvements and equipment necessary to maintain the facility in first-class condition. In December 1994, the Company acquired 3.1 acres of land adjacent to its existing facility, which the Company intends to develop to provide additional casino space and a state-of-the-art entertainment complex. This project is presently in the planning stage; therefore, the cost and specifics of the design and funding of this project have yet to be determined. The Company's revenues and earnings from its casino hotel peak during the summer season, with less favorable operating results during the winter. The Company employs approximately 4,100 persons. Casino Hotel Competition The Company faces intense competition in the Atlantic City market from other companies in the gaming industry, some of which have significantly greater financial resources than the Company. Since April 1990, there have been 11 casino hotel facilities operating in Atlantic City in competition with the Company, including GNAC, CORP., another wholly owned subsidiary of BEC which owns and operates the casino hotel resort known as "The Grand." Several Atlantic City casino hotels have recently expanded or are currently in the process of expanding their facilities. These expansions will increase competition in the Atlantic City market, particularly as additional slot machines and rooms are added. The Company believes that casino competition in Atlantic City is based primarily on the location and physical design of the casino and hotel accommodations, the extent and quality of personalized service offered to guests and casino customers, the price and quality of rooms and food and beverages, the number and quality of its restaurants, convention and other public facilities, promotional allowances, the entertainment offered, the variety of table games and slot machines, table limits, casino credit granted to customers and parking availability. Management believes that the Company's reputation as a first-class facility enhances its competitiveness in the Atlantic City market. In addition, the Company's central location positively affects its competitive position. The Company also competes for gaming customers to a lesser extent with casino hotel operations located in Nevada and elsewhere and with other forms of legalized gaming, including state-sponsored lotteries and off-track wagering. The Company believes that the legalization of casino gaming in various jurisdictions over the last several years and the opening of gaming facilities operated by Native Americans have not, to date, had a material adverse impact on its operations. There have been proposals made for casinos in several jurisdictions near New Jersey. The Company believes that the adoption of legislation approving casino gaming in any of these jurisdictions (particularly New York or Pennsylvania) or the advent of full-scale gaming on nearby Native American lands could have a material adverse effect on its operations. New Jersey Regulation Gaming activities in Atlantic City are subject to the New Jersey Casino Control Act (the "Act"), regulations of the New Jersey Casino Control Commission (the "CCC") and other applicable laws. No casino may operate unless the required permits or licenses and approvals are obtained from the CCC. The CCC is authorized under the Act to adopt regulations covering a broad spectrum of gaming and gaming-related activities and to prescribe the methods and forms of applications from all classes of licensees. These laws and regulations concern primarily: (i) the financial stability, integrity, responsibility, good character, honesty and business ability of casino service suppliers and casino operators, their directors, officers and employees, their security holders and others financially interested in casino operations, (ii) the nature of casino hotel facilities, and (iii) the operating methods and financial and accounting practices used in connection with the casino operations. Taxes are imposed by the State of New Jersey on gaming operations at the rate of 8% of gross gaming revenues. In addition, the Act provides for an investment alternative tax of 2 1/2% of gross gaming revenues. This investment alternative tax may be offset by investment tax credits equal to 1 1/4% of gross gaming revenues, which are obtained by purchasing bonds issued by or investing in housing or other development projects approved by the New Jersey Casino Reinvestment Development Authority (the "CRDA"), a state agency. New laws and regulations, as well as amendments to existing laws and regulations, relating to gaming activities in Atlantic City are periodically introduced or proposed and sometimes adopted. In January 1995, a comprehensive package of amendments to the Act was enacted into law, which amendments, among other things, reduce certain regulatory requirements. The CCC has broad discretion with regard to the issuance, renewal and revocation or suspension of casino licenses. A casino license is not transferable, is issued for a term of up to one year for the first two renewals and thereafter for a term of up to two years (subject to discretionary reopening of the licensing hearing by the CCC at any time), and must be renewed by filing an application which must be acted on by the CCC prior to the expiration of the license in force. At any time, upon a finding of disqualification or noncompliance, the CCC may revoke or suspend a license or impose fines. An amendment to the Act signed into law in January 1995 provides that casino licenses may be renewed for a period up to four years. The Act imposes certain restrictions on the ownership and transfer of securities issued by a corporation that holds a casino license or is deemed a holding company, intermediary company, subsidiary or entity qualifier (each, an "affiliate") of a casino licensee. "Security" is defined by the Act to include instruments that evidence either a beneficial ownership in an entity (such as common stock or preferred stock) or a creditor interest in an entity (such as a bond, note or mortgage). Pursuant to the Act, the corporate charter of a publicly traded affiliate of a casino licensee must require that a holder of the company's securities dispose of such securities if the holder's continued holding would result in the company or any other affiliate being no longer qualified to continue as a casino licensee under the Act. The corporate charter of a casino licensee or any privately held affiliate of the licensee must: (i) establish the right of prior approval by the CCC with regard to a transfer of any security in the company and (ii) create the absolute right of the company to repurchase at the market price or purchase price, whichever is less, any security in the company in the event the CCC disapproves a transfer of such security under the Act. The corporate charter of the Company and the charters of its privately held affiliates conform with the Act's requirements described above for privately held companies. If the CCC finds that an individual owner or holder of securities of a corporate licensee or an affiliate of such corporate licensee is not qualified under the Act, the CCC may propose remedial action. The CCC may require divestiture of the securities held by any disqualified holder who is required to be qualified under the Act (e.g., officers, directors, security holders and key casino and other employees). In the event that disqualified persons fail to divest themselves of such securities, the CCC may revoke or suspend the license. However, if an affiliate of a casino licensee is a publicly traded company and the CCC finds disqualified any holder of any security thereof who is required to be qualified, and the CCC also finds that: (i) such company has complied with aforesaid charter provisions, (ii) such company has made a good faith effort, including the prosecution of all legal remedies, to comply with any order of the CCC requiring the divestiture of the security interest held by the disqualified holder, and (iii) such disqualified holder does not have the ability to control the corporate licensee or the affiliate, or to elect one or more members of the board of directors of such affiliate, the CCC will not take action against the casino licensee or its affiliate with respect to the continued ownership of the security interest by the disqualified holder. For purposes of the Act, a security holder is presumed to have the ability to control a publicly traded corporation, or to elect one or more members of its board of directors, if such holder owns or beneficially holds 5% or more of any class of the equity securities of such corporation, unless such presumption of control or ability to elect is rebutted by clear and convincing evidence. An "institutional investor," as that term is defined under the Act, is entitled to a waiver of qualification if it holds less than 10% of any class of the equity securities of a publicly traded holding or intermediary company of a casino licensee and: (i) the holdings were purchased for investment purposes only, (ii) there is no cause to believe the institutional investor may be found unqualified, and (iii) upon request by the CCC, the institutional investor files a certified statement to the effect that it has no intention of influencing or affecting the affairs of the issuer, the casino licensee or its other affiliates. The CCC may grant a waiver of qualification to an institutional investor holding 10% or more of such securities upon a showing of good cause and if the conditions specified above are met. With respect to debt securities, the CCC generally requires a person holding 15% or more of a debt issue of a publicly traded affiliate of a casino licensee to qualify as a "financial source" where the use of the proceeds from the debt issue is related in any way to the financing of the casino licensee. There can be no assurance that the CCC will continue to apply the 15% threshold, and the CCC could at any time establish a lower threshold for qualification. An exception to the qualification requirement is made for institutional investors, in which case the institutional holder is entitled to a waiver of qualification if the holder's position in the aggregate is less than 20% of the total outstanding debt of the affiliate and less than 50% of any outstanding publicly traded issue of such debt, and if the conditions specified in the above paragraph are met. As with equity securities, a waiver of qualification may be granted to institutional investors holding larger positions upon a showing of good cause and if all conditions specified in the above paragraph are met. Generally, the CCC would require each institutional holder seeking a waiver of qualification to execute a certificate to the effect that: (i) the holder has reviewed the definition of institutional investor under the Act and believes that it meets the definition of institutional investor, (ii) the holder purchased the securities for investment purposes only and holds them in the ordinary course of business, (iii) the holder has no involvement in the business activities of, and no intention of influencing or affecting the affairs of, the issuer, the casino licensee or any affiliate, and (iv) if the holder subsequently determines to influence or affect the affairs of the issuer, the casino licensee or any affiliate, it shall provide not less than 30 days' notice of such intent and shall file with the CCC an application for qualification before taking any such action. Commencing on the date the CCC serves notice on a corporate licensee or an affiliate of such corporate licensee that a security holder of such corporation has been found disqualified, it will be unlawful for the security holder to: (i) receive any dividends or interest upon any such securities, (ii) exercise, directly or through any trustee or nominee, any right conferred by such securities, or (iii) receive any remuneration in any form from the corporate licensee for services rendered or otherwise. Persons who are required to qualify under the Act by reason of holding debt or equity securities are required to place the securities into an Interim Casino Authorization ("ICA") trust pending qualification. Unless and until the CCC has reason to believe that the investor may not qualify, the investor will retain the ability to direct the trustee how to vote, or whether to dispose of, the securities. If at any time the CCC finds reasonable cause to believe that the investor may be found unqualified, it can order the trust to become "operative," in which case the investor will lose voting power, if any, over the securities but will retain the right to petition the CCC to order the trustee to dispose of the securities. Once an ICA trust is created and funded, and regardless of whether it becomes operative, the investor has no right to receive a return on the investment until the investor becomes qualified. Should an investor ultimately be found unqualified, the trustee would dispose of the trust property, and the proceeds would be distributed to the unqualified applicant only in an amount not exceeding the actual cost of the trust property. Any excess proceeds would be paid to the State of New Jersey. If the securities were sold by the trustee pending qualification, the investor would receive only actual cost, with disposition of the remainder of the proceeds, if any, to await the investor's qualification hearing. In the event it is determined that a licensee has violated the Act or its regulations, then under certain circumstances, the licensee could be subject to fines or have its license suspended or revoked. In addition, if a person who is required to qualify under the Act fails to qualify, or if a security holder who is required to qualify fails to qualify and does not dispose of the related securities in the licensee or in any affiliate of the licensee, as may be required by the Act, then, under certain circumstances, the licensee could have its license suspended or revoked. If a casino license was not renewed, was suspended for more than 120 days or was revoked, the CCC could appoint a conservator. The conservator would be charged with the duty of conserving and preserving the assets so acquired and continuing the operation of the hotel and casino of a suspended licensee or with operating and disposing of the casino hotel facilities of a former licensee. Such suspended licensee or former licensee, however, would be entitled only to a fair return on its investment, to be determined under New Jersey law, with any excess to go to the State of New Jersey, if so directed by the CCC. Suspension or revocation of any licenses or the appointment of a conservator by the CCC would have a material adverse effect on the business of the Company. In June 1994, the CCC renewed the casino license of the Company through June 1996. Federal Registration The Company is required to make annual filings with the Attorney General of the United States in connection with the operation of slot machines. All requisite filings for the present year have been made. ITEM 3. LEGAL PROCEEDINGS None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Item 4 is omitted pursuant to General Instruction J of Form 10-K. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Item 5 is inapplicable. ITEM 6. SELECTED FINANCIAL DATA Item 6 is omitted pursuant to General Instruction J of Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7 is presented in the reduced disclosure format pursuant to General Instruction J of Form 10-K. RESULTS OF OPERATIONS Revenues of the Company for 1994 were $377.0 million compared to $352.8 million for 1993, an increase of $24.2 million (7%). The Company achieved this increase in revenues despite extremely adverse weather in the first quarter of 1994 when revenues grew only $.3 million. Casino revenues for 1994 were $321.5 million compared to $297.7 million in 1993, an increase of $23.8 million (8%). Slot revenues increased $13.5 million (7%) due to a 16% increase in slot handle (volume) offset, in part, by a decline in the win percentage from 9.6% in 1993 (which includes the positive impact from the discontinuation of certain progressive linked jackpots) to 8.8% in 1994. The Company added 223 slot machines (an 11% increase) during 1994. Slot revenues represented 68% of the Company's casino revenues in 1994 compared to 69% in 1993. Table game revenues, excluding poker, increased $6.4 million (7%) from 1993 due to a 3% increase in the drop (amount wagered) and an increase in the hold percentage from 16.5% in 1993 to 17.1% in 1994. Poker operations, which commenced in July 1993, generated revenues of $4.7 million for 1994 compared to $2.6 million for 1993. Horse race simulcasting and keno operations, which commenced in June 1994, contributed $1.8 million to casino revenues for 1994. Rooms and food and beverage revenues remained essentially unchanged. Other revenues increased $1.0 million (11%) due to higher entrance fees for promotional events, dividends from a multi-casino linked progressive trust and increased interest income. Atlantic City 1994 citywide casino revenues for all operators, excluding poker, horse race simulcasting and keno, increased approximately 3% from 1993 due to a 4% increase in slot revenues and a 1% increase in table game revenues. During the first quarter of 1994 and 1993, Atlantic City's results were negatively affected by severe weather in the northeastern United States. However, management believes the severity, duration and number of storms in 1994 had a more dramatic impact on attendance and operating performance than in 1993. During 1994, the number of slot machines in Atlantic City increased approximately 10%, while the number of table games, excluding poker tables, decreased approximately 1%. Slot revenues represented 67% of total gaming revenues in Atlantic City for 1994 and 1993. Management believes that the reduced rate of slot revenue growth in Atlantic City as compared to the last several years, in conjunction with the expanded number of slot machines, has caused and will continue to cause intense promotional efforts to attract slot players as both the Company and its competitors seek to expand their share of slot revenues and maximize the utilization of their slot machine inventory. Further, as a result of the aggressive competition for slot patrons, the Atlantic City slot win percentage has declined. Management believes that the slot win percentage will continue to be subject to competitive pressure and may further decline. However, the addition of poker, horse race simulcasting and keno over the last year has had a favorable impact on the Atlantic City gaming environment. The Company believes it is well-positioned to compete for additional casino revenues by continuing to offer attractive promotional slot and table game programs and special events and by enhancing the appearance and comfort of its gaming space. In February 1994, the Company expanded its casino floor space from 68,100 to 71,400 square feet and in June 1994, the Company added another 8,700 square feet of gaming space to offer horse race simulcasting and keno, and to relocate and expand its poker operations. In July 1994, the Company placed in operation an additional 127 high denomination slot machines in the gaming space formerly occupied by its poker operations. Further, the Company recently completed a slot machine upgrade, replacing the majority of its slot machine inventory with state-of-the-art machines with embedded bill acceptors, and reconfigured its slot machine layout, adding additional slot stools and aisle space. Operating income of the Company for 1994 was $88.3 million compared to $85.8 million for 1993, an increase of $2.5 million (3%) as the aforementioned revenue increase was offset, in part, by a $21.7 million (8%) increase in operating expenses. Despite the increase in operating expenses, the 1994 operating margin (before depreciation and amortization) remained unchanged from 1993's level of nearly 32%. Casino expenses increased $11.3 million (10%) due to an increase in salaries, benefits and other costs associated with the introduction and operation of horse race simulcasting and keno in 1994 and the operation of poker throughout all of 1994 compared to only six months in 1993, and expanded marketing and promotional efforts. Rooms expense increased $.7 million (7%) mainly due to increased salaries and benefits associated with higher room occupancy. Food and beverage expenses remained essentially unchanged. Other operating expenses increased $3.1 million (6%) due to an increase in the cost of property operations and ancillary services. Selling, general and administrative expenses remained essentially unchanged. Depreciation and amortization expense increased $5.2 million (20%) primarily due to accelerated depreciation associated with the slot machine upgrade and an increase in capital expenditures in 1994 and 1993. In addition, operating costs and expenses include allocations from BEC of its overhead (including executive salaries and benefits, public company reporting costs and other corporate headquarters' costs) of $5.7 million and $4.1 million for 1994 and 1993, respectively. Management of BEC believes that the methods used to allocate these costs are reasonable and expects similar allocations (subject to changes in circumstances which may warrant modification) in future years. Interest expense was $42.3 million for 1994 compared to $44.9 million for 1993. The decrease of $2.6 million (6%) reflects the March 1994 refinancing of the Company's long-term debt at a more favorable rate, as well as lower average line of credit and intercompany borrowings. Effective rates of the provision for income taxes were 40% in 1994 and 45% in 1993. The 1994 and 1993 income tax rates differ from the U.S. statutory tax rate of 35% due principally to state income taxes, net of the related federal income tax benefit. In addition, the provision for income taxes for 1993 was affected by adjustments of prior years' taxes. A reconciliation of the provision for income taxes with amounts determined by applying the U.S. statutory tax rate to income before income taxes, extraordinary item and cumulative effect on prior years of change in accounting for income taxes is included in Notes to consolidated financial statements. Effective January 1, 1993, the Company changed its method of accounting for income taxes as required by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." As permitted by SFAS No. 109, the Company elected to use the cumulative effect approach rather than to restate the consolidated financial statements of any prior years to apply the provisions of SFAS No. 109. The cumulative effect on prior years of this change in accounting for income taxes was a charge of $11.4 million. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX Reference Report of independent auditors. . . . . . . . . . . . . . . . . . 12 Consolidated balance sheet. . . . . . . . . . . . . . . . . . . . 13 Consolidated statement of income. . . . . . . . . . . . . . . . . 15 Consolidated statement of stockholder's equity. . . . . . . . . . 16 Consolidated statement of cash flows. . . . . . . . . . . . . . . 17 Notes to consolidated financial statements. . . . . . . . . . . . 19 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholder BALLY'S PARK PLACE, INC. We have audited the accompanying consolidated balance sheet of Bally's Park Place, Inc. (an indirect wholly owned subsidiary of Bally Entertainment Corporation) as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and the schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bally's Park Place, Inc. at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in the "Summary of significant accounting policies -- Income taxes" note to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes. ERNST & YOUNG LLP Philadelphia, Pennsylvania February 15, 1995 BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED BALANCE SHEET (In thousands)
December 31 -------------------- 1994 1993 -------- -------- ASSETS Current assets: Cash and equivalents. . . . . . . . . . . . . $ 13,949 $ 12,295 Receivables - Hotel and casino, less allowances of $1,167 and $1,265 . . . . . . . . . . . . 2,936 3,964 Affiliates. . . . . . . . . . . . . . . . . 731 555 Notes and other . . . . . . . . . . . . . . 2,178 1,469 -------- -------- 5,845 5,988 Income taxes receivable . . . . . . . . . . . 5,378 --- Inventories . . . . . . . . . . . . . . . . . 2,228 1,834 Prepaid expenses. . . . . . . . . . . . . . . 1,748 1,025 Deferred income taxes . . . . . . . . . . . . 6,972 6,161 -------- -------- Total current assets . . . . . . . 36,120 27,303 Property and equipment, at cost: Land. . . . . . . . . . . . . . . . . . . . . 90,745 82,825 Buildings and improvements. . . . . . . . . . 549,466 541,667 Furniture, fixtures and equipment . . . . . . 152,323 142,250 Construction in progress. . . . . . . . . . . 507 4,447 -------- -------- 793,041 771,189 Accumulated depreciation. . . . . . . . . . . 309,672 284,691 -------- -------- Net property and equipment . . . . 483,369 486,498 Deferred finance costs, less accumulated amortization of $1,270 and $7,388 . . . . . . 13,628 7,502 Casino Reinvestment Development Authority investment obligations. . . . . . . . . . . . 11,681 11,314 Other assets. . . . . . . . . . . . . . . . . . 1,516 1,236 -------- -------- $546,314 $533,853 ======== ======== (Continued)
BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED BALANCE SHEET (In thousands, except share data)
December 31 -------------------- 1994 1993 -------- -------- LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . $ 2,805 $ 4,479 Payable to affiliates. . . . . . . . . . . . . 707 944 Income taxes payable . . . . . . . . . . . . . 1,159 5,562 Accrued liabilities - Interest . . . . . . . . . . . . . . . . . . 11,933 15,655 Compensation and payroll taxes . . . . . . . 8,038 7,895 Group insurance. . . . . . . . . . . . . . . 2,350 1,950 Other. . . . . . . . . . . . . . . . . . . . 15,630 15,497 Current maturities of long-term debt . . . . . 47 44 -------- -------- Total current liabilities . . . . . 42,669 52,026 Long-term debt, less current maturities. . . . . 427,641 354,727 Deferred income taxes. . . . . . . . . . . . . . 41,306 31,760 Pension liability. . . . . . . . . . . . . . . . 9,866 9,089 Other long-term liabilities. . . . . . . . . . . 859 1,071 Stockholder's equity: Common stock, no par value, at stated value, 3,000 shares authorized, 100 shares issued and outstanding . . . . . . . . . . . 1 1 Additional paid-in capital . . . . . . . . . . 23,972 85,179 Retained earnings. . . . . . . . . . . . . . . --- --- -------- -------- Total stockholder's equity. . . . . 23,973 85,180 -------- -------- $546,314 $533,853 ======== ======== See accompanying notes.
BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED STATEMENT OF INCOME (In thousands)
Years Ended December 31 -------------------------------- 1994 1993 1992 -------- -------- -------- Revenues: Casino . . . . . . . . . . . . . . $321,465 $297,688 $277,997 Rooms. . . . . . . . . . . . . . . 24,988 25,019 23,724 Food and beverage. . . . . . . . . 20,432 20,993 20,515 Other. . . . . . . . . . . . . . . 10,118 9,107 8,896 -------- -------- -------- 377,003 352,807 331,132 Costs and expenses: Casino . . . . . . . . . . . . . . 129,060 117,718 116,879 Rooms. . . . . . . . . . . . . . . 10,784 10,116 8,049 Food and beverage. . . . . . . . . 18,995 18,993 17,844 Other operating expenses . . . . . 56,149 53,060 54,154 Selling, general and administrative . . . . . . . . . 36,240 36,352 40,488 Depreciation and amortization. . . 31,819 26,581 27,358 Allocations from Bally Entertainment Corporation. . . . 5,659 4,141 3,660 -------- -------- -------- 288,706 266,961 268,432 -------- -------- -------- Operating income . . . . . . . . . . 88,297 85,846 62,700 Interest expense . . . . . . . . . . 42,260 44,919 47,960 -------- -------- -------- Income before income taxes, extraordinary item and cumulative effect on prior years of change in accounting for income taxes . . 46,037 40,927 14,740 Provision for income taxes . . . . . 18,450 18,500 6,800 -------- -------- -------- Income before extraordinary item and cumulative effect on prior years of change in accounting for income taxes . . . . . . . . . 27,587 22,427 7,940 Extraordinary loss on extinguishment of debt . . . . . . (20,735) --- --- Cumulative effect on prior years of change in accounting for income taxes. . . . . . . . . . . . . . . --- (11,377) --- -------- -------- -------- Net income . . . . . . . . . . . . . $ 6,852 $ 11,050 $ 7,940 ======== ======== ======== See accompanying notes. /TABLE BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (In thousands, except share data)
Number Additional Total of shares Common paid-in Retained stockholder's issued stock capital earnings equity --------- ------- ---------- --------- ------------- Balance at December 31, 1991 . . . . . 100 $ 1 $128,640 $ 4,249 $132,890 Net income . . . . . . . . . . . . -- -- -- 7,940 7,940 Receivable due from Bally Entertainment Corporation declared as a dividend . . . . . -- -- (37,811) (12,189) (50,000) ----- ----- -------- -------- -------- Balance at December 31, 1992 . . . . . 100 1 90,829 --- 90,830 Net income . . . . . . . . . . . . -- -- -- 11,050 11,050 Dividends paid . . . . . . . . . . -- -- (5,650) (11,050) (16,700) ----- ----- -------- -------- -------- Balance at December 31, 1993 . . . . . 100 1 85,179 --- 85,180 Net income . . . . . . . . . . . . -- -- -- 6,852 6,852 Dividends paid . . . . . . . . . . -- -- (61,207) (6,852) (68,059) ----- ----- -------- -------- -------- Balance at December 31, 1994 . . . . . 100 $ 1 $ 23,972 $ --- $ 23,973 ===== ===== ======== ======== ======== See accompanying notes. /TABLE BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
Years Ended December 31 ------------------------------ 1994 1993 1992 -------- -------- -------- Operating: Income before extraordinary item and cumulative effect on prior years of change in accounting for income taxes. $ 27,587 $ 22,427 $ 7,940 Adjustments to reconcile to cash provided- Depreciation and amortization. . . . . 31,819 26,581 27,358 Other amortization included in interest expense . . . . . . . . . . 1,592 1,712 3,209 Deferred income taxes. . . . . . . . . 8,735 6,753 1,049 Provision for doubtful receivables . . 144 421 889 Change in operating assets and liabilities. . . . . . . . . . . . . (1,434) (8,092) (5,089) -------- -------- -------- Cash provided by operating activities . . . . . . . . . . . 68,443 49,802 35,356 Investing: Purchases of property and equipment. . . (27,906) (14,436) (10,268) Proceeds from disposal of property and equipment. . . . . . . . . . . . . 293 750 345 Purchases of Casino Reinvestment Development Authority investment obligations and credits. . . . . . . . (1,444) (1,350) (2,692) -------- -------- -------- Cash used in investing activities . . . . . . . . . . . (29,057) (15,036) (12,615) Financing: Debt transactions - Net repayments under revolving credit agreements. . . . . . . . . . (2,000) (1,000) (22,000) Advances from (repayments to) affiliate, net . . . . . . . . . . . --- (16,000) 1,700 Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . 425,000 --- --- Repayments of long-term debt . . . . . (377,775) (1,046) (2,296) Debt issuance costs. . . . . . . . . . (14,898) --- (375) -------- -------- -------- Cash provided by (used in) debt transactions . . . . . . . . . . 30,327 (18,046) (22,971) Equity transactions - Dividends paid to Bally's Casino Holdings, Inc. . . . . . . . . . . . (68,059) (16,700) --- -------- -------- -------- Cash used in financing activities . . . . . . . . . . . (37,732) (34,746) (22,971) -------- -------- -------- Increase (decrease) in cash and equivalents. . . . . . . . . . . . . . 1,654 20 (230) Cash and equivalents, beginning of year . . . . . . . . . . . . . . . . . 12,295 12,275 12,505 -------- -------- -------- Cash and equivalents, end of year. . . . . $ 13,949 $ 12,295 $ 12,275 ======== ======== ======== (Continued) /TABLE BALLY'S PARK PLACE, INC. (An Indirect Wholly Owned Subsidiary of Bally Entertainment Corporation) CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
Years Ended December 31 ------------------------------- 1994 1993 1992 -------- -------- --------- SUPPLEMENTAL CASH FLOW INFORMATION Changes in operating assets and liabilities were as follows: Increase in receivables. . . . . . . . $ (1) $ (2,506) $ (189) Increase in income taxes receivable. . (5,378) --- --- (Increase) decrease in inventories . . (394) 138 151 (Increase) decrease in prepaid expenses. . . . . . . . . . . . . . (1,003) 4,082 (612) Increase (decrease) in accounts payable, payable to affiliates and accrued liabilities . . . . . . (4,957) 2,160 (463) Increase in income taxes payable . . . 9,734 1,374 1,956 Increase (decrease) in pension liability . . . . . . . . . . . . . 777 (13,150) (5,764) Decrease in other long-term liabilities. . . . . . . . . . . . . (212) (190) (168) -------- -------- -------- $ (1,434) $ (8,092) $ (5,089) ======== ======== ======== Operating activities include cash payments for interest and income taxes as follows: Interest paid. . . . . . . . . . . . . $ 44,733 $ 43,278 $ 45,141 Interest capitalized . . . . . . . . . (342) (71) (74) Income taxes paid (net of refunds) . . 5,359 10,373 3,795 Investing and financing activities exclude the following non-cash activities: Donation of Casino Reinvestment Development Authority investment obligations, net . . . . . . . . . . $ 245 $ 950 $ --- Receivable due from Bally Entertainment Corporation declared as a dividend . . . . . . . --- --- 50,000 See accompanying notes.
Summary of significant accounting policies Basis of presentation The accompanying consolidated financial statements include the accounts of Bally's Park Place, Inc., a Delaware corporation (the "Company") and its subsidiaries. The Company was a direct wholly owned subsidiary of Bally Entertainment Corporation ("BEC") until June 16, 1993, when BEC contributed all of the capital stock of the Company to Bally's Casino Holdings, Inc. ("Casino Holdings"). Casino Holdings was formed as a subsidiary of BEC in April 1993 for acquiring and developing gaming operations, including those in emerging gaming jurisdictions. Unless otherwise specified in the text, references to the Company include the Company and its subsidiaries. The Company operates in one industry segment. All significant revenues arise from its casino and supporting hotel operations. Certain reclassifications have been made to prior years' financial statements to conform with the 1994 presentation. Cash equivalents The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Inventories Inventories of provisions and supplies are stated at the lower of cost (first-in, first-out basis) or market, which approximates replacement cost. Property and equipment Depreciation of property and equipment is provided principally on the straight-line method over the estimated economic lives of the related assets and the terms of the applicable leases for leasehold improvements. Depreciation expense was $30,742, $26,581 and $26,462 for 1994, 1993 and 1992, respectively. Deferred finance costs Deferred finance costs are amortized over the terms of the related debt using the bonds outstanding method. Revenue recognition Casino revenues consist of the net win from gaming activities, which is the difference between gaming wins and losses. Operating revenues exclude the retail value of complimentary food, beverage and hotel services furnished to customers, which were approximately $34,920, $31,780 and $36,809 for 1994, 1993 and 1992, respectively. The estimated costs of providing such complimentary services, which are classified as casino expenses through interdepartment allocations from the departments granting the services, were as follows:
1994 1993 1992 -------- -------- -------- Rooms................................... $ 5,653 $ 4,919 $ 5,592 Food and beverage....................... 19,818 17,449 16,478 Other................................... 892 513 630 -------- -------- -------- $ 26,363 $ 22,881 $ 22,700 ======== ======== ========
Income taxes Taxable income or loss of the Company is included in the consolidated federal income tax return of BEC. Under agreements between the Company, BEC and Casino Holdings, income taxes are allocated to the Company based on amounts the Company would pay or receive if it filed a separate consolidated federal income tax return, except that the Company receives credit from BEC for the tax benefit of the Company's net operating losses and tax credits, if any, that can be utilized in BEC's consolidated federal income tax return, regardless of whether these losses or credits could be utilized by the Company on a separate consolidated federal income tax return basis. Payments to BEC are due at such time and in such amounts as payments are required to be made for income tax purposes. Payments by BEC for such tax benefits are due at the time BEC files the applicable consolidated federal income tax return. Under the tax sharing agreement, the Company had federal income taxes receivable from BEC of $5,378 at December 31, 1994 and federal income taxes payable to BEC of $5,013 at December 31, 1993, which are included in income taxes receivable and income taxes payable, respectively, on the accompanying consolidated balance sheet. Effective January 1, 1993, the Company changed its method of accounting for income taxes as required by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." As permitted by SFAS No. 109, the Company elected to use the cumulative effect approach rather than to restate the consolidated financial statements of any prior years to apply the provisions of SFAS No. 109. The cumulative effect on prior years of this change in accounting for income taxes was a charge of $11,377. Fair value of financial instruments The fair value of the Company's financial instruments approximates their recorded book values at December 31, 1994 and 1993, excluding the 9 1/4% First Mortgage Notes due 2004 (the "9 1/4% Notes") whose fair market value based on quoted market prices was approximately $361,250 at December 31, 1994 and the 11 7/8% First Mortgage Notes due 1999 (the "11 7/8% Notes") whose fair market value was approximately $378,875 at December 31, 1993. The fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. Casino licensing In June 1994, the New Jersey Casino Control Commission (the "CCC") granted a renewal of the Company's casino license to operate Bally's Park Place-New Jersey through June 1996. A New Jersey casino license is not transferable and must be renewed by filing an application. The CCC requires notification and in some instances prior approval of dividends and other payments made by the Company to BEC and Casino Holdings, other than specifically defined payments made in the ordinary course of business. Casino Reinvestment Development Authority investment obligations The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1 1/4% of their gross gaming revenues in lieu of an investment alternative tax equal to 2 1/2% of gross gaming revenues. The Company may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the New Jersey Casino Reinvestment Development Authority ("CRDA"). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. CRDA bonds have terms up to fifty years and bear interest at below market rates. The Company records a charge to operations when it deposits funds with the CRDA to reflect the estimated realizable value of its CRDA investment obligations and these charges totaled $2,604, $2,059 and $2,228 in 1994, 1993 and 1992, respectively. Allocations from BEC and transactions with related parties BEC allocates costs to the Company consisting of the Company's allocable share of BEC's corporate overhead including executive salaries and benefits, public company reporting costs and other corporate headquarters' costs. While the Company does not obtain a measurable direct benefit from these allocated costs, management believes that the Company receives an indirect benefit from BEC's oversight. BEC's method for allocating costs is designed to apportion the majority of its operating costs to its subsidiaries and is generally based upon many subjective factors including various measures of operational size and extent of BEC's oversight requirements. Management of BEC believes that the methods used to allocate these costs are reasonable and expects similar allocations in future years. Because of BEC's controlling relationship with the Company and the allocation of certain BEC costs, the operating results of the Company could be significantly different if the Company operated autonomously. In addition, certain of the Company's insurance coverage is negotiated by BEC pursuant to corporate-wide programs. In these circumstances, BEC charges the Company its proportionate share of the respective insurance premiums. Certain executive officers of the Company function in a similar capacity for GNAC, CORP. (a wholly owned subsidiary of BEC which owns and operates the casino hotel resort in Atlantic City known as the "The Grand"), and exercise decision-making and operational authority over both entities. No allocation of cost is made from the Company to The Grand for these executive officers as management deems the direct allocable cost to be immaterial. In addition, certain administrative and support operations of the Company and The Grand are consolidated, including limousine services, legal services and purchasing. Costs of these operations are allocated to or from the Company either directly or using various formulas based on estimates of utilization of such services. On a net basis, allocations to The Grand were $99, $1,096 and $2,568 in 1994, 1993 and 1992, respectively, which management believes were reasonable. The Company leases surface area parking lots to The Grand, and rental income was $696 in each of 1994, 1993 and 1992. In addition, the Company paid $869 to The Grand during 1992 for CRDA credits which were used by the Company in satisfaction of a portion of its CRDA obligations. The Company and The Grand have a cash management arrangement whereby The Grand has advanced excess funds to the Company which the Company used to reduce the outstanding balance under its revolving credit agreement. The Company paid interest monthly on these advances (at the prime rate of its agent bank) which totaled $432 and $1,249 in 1993 and 1992, respectively. No amounts were advanced during 1994. In April 1990, the Company advanced BEC $50,000, with interest earned at the prime rate of its agent bank. In October 1992, BEC petitioned the CCC to allow the Company to declare the receivable due from BEC as a dividend. The CCC approved this request in December 1992. No interest was paid to the Company subsequent to April 1, 1992. Intercompany interest earned on this advance was $808 in 1992. Long-term debt
December 31 --------------------- 1994 1993 --------- --------- 9 1/4% Notes................................... $ 425,000 $ --- 11 7/8% Notes.................................. --- 350,000 Revolving credit agreement..................... --- 2,000 Other secured and unsecured debt............... 2,688 2,771 --------- --------- Total long-term debt......................... 427,688 354,771 Less current maturities........................ 47 44 --------- --------- Total long-term debt less current maturities. $ 427,641 $ 354,727 ========= =========
In March 1994, the Company issued $425,000 principal amount of the 9 1/4% Notes. The 9 1/4% Notes are not subject to any sinking fund requirement, but may be redeemed beginning March 1999, in whole or in part, with premiums ranging from 4.5% in 1999 to zero in 2002 and thereafter. In addition, on or before March 15, 1997, a portion of the 9 1/4% Notes may be redeemed at a premium of 9.25% out of the proceeds of one or more public equity offerings by the Company or Casino Holdings if such offerings were to occur, provided that at least $100,000 principal amount of the 9 1/4% Notes remains outstanding after the redemption. The 9 1/4% Notes are secured by a first mortgage on and security interest in substantially all property and equipment of the Company. The Company used the net proceeds from the sale of the 9 1/4% Notes to purchase and retire certain of its 11 7/8% Notes, defease the remaining 11 7/8% Notes at a price of 104.45% of their principal amount plus accrued interest through the redemption date, thereby satisfying all obligations thereunder, and pay dividends of $30,214 to Casino Holdings. The retirement and defeasance of the 11 7/8% Notes resulted in an extraordinary loss of $20,735, net of an income tax benefit of $14,137. In connection with the sale of the 9 1/4% Notes, the Company terminated its former credit facility and entered into an agreement for a new $50,000 revolving credit facility which expires on December 31, 1996, at which time all amounts outstanding become due. The new credit facility provides for interest on borrowings payable, at the Company's option, at the agent bank's prime rate or the LIBOR rate plus 2%, each of which increases as the balance outstanding increases. The new credit facility is secured by a pari passu lien on the collateral securing the 9 1/4% Notes. The Company pays a fee of 1/2% on the unused commitment and the entire credit line was available at December 31, 1994. The indenture for the 9 1/4% Notes and the new credit facility impose restrictions on the Company's ability to incur debt and issue preferred stock, make acquisitions and certain restricted payments, create liens, sell assets or enter into transactions with affiliates. The new credit facility is, in certain circumstances, more restrictive than the indenture for the 9 1/4 % Notes. In connection with the sale of the 9 1/4% Notes, the CCC requires, among other things, that dividends paid by the Company to Casino Holdings which are not paid pursuant to a net income test (generally limited to 50% of aggregate consolidated net income, as defined, earned since April 1, 1994) receive prior approval from the CCC. The indenture for the 9 1/4% Notes limits dividends that are not paid pursuant to the net income test to $50,000 in aggregate, of which $25,000 was paid in 1994. At December 31, 1994, $2,059 was available to be paid under the net income test. The Company has aggregate annual maturities of long-term debt for the five years after December 31, 1994 of $47, $49, $51, $53 and $55. Income taxes The provision for income taxes consists of the following:
1994 1993 1992 -------- -------- -------- Current: Federal.......................... $ 5,217 $ 9,792 $ 4,539 State............................ 4,498 1,955 1,212 -------- -------- -------- 9,715 11,747 5,751 Deferred: Federal.......................... 9,583 4,627 764 State............................ (848) 2,126 285 -------- -------- -------- 8,735 6,753 1,049 -------- -------- -------- $ 18,450 $ 18,500 $ 6,800 ======== ======== ========
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1994 and 1993, along with their classification, are as follows:
1994 1993 --------------------- --------------------- Assets Liabilities Assets Liabilities ------- ----------- ------- ----------- Expenses which are not currently deductible for tax purposes: Bad debts............... $ 484 $ --- $ 500 $ --- Deferred compensation and pension........... 4,038 --- 3,739 --- CRDA investment obligation............ 4,156 --- 2,405 --- Other................... 6,569 --- 5,956 --- Depreciation and capitalized costs......... --- 40,508 --- 41,225 Other, net.................. --- 9,073 3,026 --- ------- ------- ------- ------- $15,247 $49,581 $15,626 $41,225 ======= ======= ======= ======= Current..................... $ 6,972 $ --- $ 6,161 $ --- Long-term................... 8,275 49,581 9,465 41,225 ------- ------- ------- ------- $15,247 $49,581 $15,626 $41,225 ======= ======= ======= =======
The deferred income tax provision for 1992, which was determined pursuant to Accounting Principles Board Opinion No. 11, arose from the tax effect of timing differences primarily related to deferred compensation and pension, accrued expenses and depreciation and amortization. A reconciliation of the provision for income taxes with amounts determined by applying the U.S. statutory tax rate to income before income taxes, extraordinary item and cumulative effect on prior years of change in accounting for income taxes is as follows:
1994 1993 1992 -------- -------- -------- Provision at U.S. statutory tax rate (35% in 1994 and 1993 and 34% in 1992)...... $ 16,113 $ 14,324 $ 5,012 Add (deduct): State income taxes, net of related federal income tax benefit........... 2,376 2,647 988 Effect of change in state (1994) and U.S. (1993) statutory tax rates on deferred tax balances................ (171) 427 --- Prior years' taxes..................... --- 1,107 380 Other, net............................. 132 (5) 420 -------- -------- -------- Provision for income taxes................. $ 18,450 $ 18,500 $ 6,800 ======== ======== ========
Retirement and stock plans The Company has a noncontributory supplemental executive retirement plan (the "SERP") for certain key executives. Normal retirement under the SERP is age 60 and participants receive benefits based on years of service and compensation. Pension costs of the SERP are unfunded. The net periodic pension cost for the Company's SERP consists of the following:
1994 1993 1992 -------- -------- -------- Amortization of transition costs........... $ 142 $ 251 $ 126 Service cost-benefits earned during the year................................. 100 2,329 412 Interest cost on projected benefit obligations.............................. 707 510 478 Other...................................... --- --- 220 -------- -------- -------- Net periodic pension cost............. $ 949 $ 3,090 $ 1,236 ======== ======== ========
The benefit obligations and funded status of the SERP as of December 31, 1994 and 1993 are as follows:
1994 1993 -------- -------- Actuarial present value of benefit obligations: Vested benefits................................... $ 7,976 $ 6,773 Nonvested benefits................................ --- 694 -------- -------- Accumulated benefit obligations................... 7,976 7,467 Effect of projected salary increases.............. 3,756 4,235 -------- -------- Projected benefit obligations..................... 11,732 11,702 Unrecognized transition obligation.................. (462) (603) Unrecognized obligation due to change in assumptions....................................... (1,404) (2,010) -------- -------- Accrued pension liability........................... $ 9,866 $ 9,089 ======== ========
The discount rate was 6.0% in 1994 and 1993 and 8.0% in 1992, and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations was 6.0% in 1994, 1993 and 1992. In addition to the defined benefit pension plan described above, the Company also has defined contribution plans that provide retirement benefits for eligible non-union employees. Eligible employees may elect to participate by contributing a percentage of their pre-tax earnings to the plans. Employee contributions to the plans, up to certain limits, are matched in various percentages by the Company. In addition, one plan has profit sharing features, with discretionary Company contributions allocable based on eligible employee compensation. The expense for such plans was $3,101, $3,129 and $2,608 for 1994, 1993 and 1992, respectively. Certain employees of the Company are covered by union-sponsored, collectively bargained, multi-employer defined benefit pension plans. The contributions and charges to expense for these plans were $638, $583 and $562 in 1994, 1993 and 1992, respectively. Eligible employees of the Company may also participate in BEC's Employee Stock Purchase Plan, which provides participating employees the opportunity to purchase (through payroll deductions) shares of BEC common stock at a price equal to 85% of the fair market value of the stock at specified dates. In addition, certain officers and key employees of the Company participate in the 1989 Incentive Plan of BEC, pursuant to which BEC has granted these individuals options (generally becoming exercisable in three equal annual installments commencing one year after the date of grant) to purchase BEC common stock at a price equal to the fair market value of the stock at the date of grant. Since these plans are noncompensatory, no expense has been recorded by the Company in connection with the plans. Guarantee At December 31, 1994, the Company was contingently liable for the guarantee of payments (up to $24,100) in the event certain affiliates fail to make required payments pursuant to various contractual obligations. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Item 9 is inapplicable. PART III Part III is omitted pursuant to General Instruction J of Form 10-K. PART IV ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. Index to Financial Statements. Reference Report of independent auditors . . . . . . . . . . . . . . . . . . 12 Consolidated balance sheet at December 31, 1994 and 1993 . . . . . 13 For each of the three years in the period ended December 31, 1994: Consolidated statement of income . . . . . . . . . . . . . . . . 15 Consolidated statement of stockholder's equity . . . . . . . . . 16 Consolidated statement of cash flows . . . . . . . . . . . . . . 17 Notes to consolidated financial statements . . . . . . . . . . . . 19 2. Index to Financial Statement Schedules. Schedule II Valuation and qualifying accounts for each of the three years in the period ended December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . 32 All other schedules specified under Regulation S-X are omitted because they are not applicable, not required under the instructions or all information required is set forth in the Notes to consolidated financial statements. 3. Index to Exhibits. *3.1 Restated Certificate of Incorporation of the Company. **3.2 Amended and Restated By-laws of the Company. **3.3 Certificate of Incorporation of Bally's Park Place Funding, Inc. **3.4 Amended and Restated By-laws of Bally's Park Place Funding, Inc. *3.5 Amended and Restated Certificate of Incorporation of Bally's Park Place-New Jersey. *3.6 Amended and Restated By-laws of Bally's Park Place-New Jersey. *4.1 Form of Indenture governing 11 7/8% First Mortgage Notes due 1999 of Bally's Park Place Funding, Inc. *4.1.1 Form of First Mortgage Note. *4.1.2 Form of Guaranty of the Company. **4.2 Form of Indenture governing 9 1/4% First Mortgage Notes due 2004 of Bally's Park Place Funding, Inc. **4.2.1 Form of Note (included as part of Article II of the Indenture). **4.2.2 Form of Guaranty of the Company of the Notes (included as part of Article II of the Indenture). ***10(i).1 Intercorporate Agreement dated as of June 24, 1993 among Casino Holdings, Bally's Park Place-New Jersey and BEC. ***10(i).2 Tax Sharing Agreement dated as of June 17, 1993 between BEC and Casino Holdings. ***10(i).3 Tax Sharing Agreement dated as of June 17, 1993 between BEC and Bally's Park Place-New Jersey. *10(i).4 Amended and Restated Loan Agreement dated as of June 30, 1992 among Bally's Park Place-New Jersey, the Company, Bally's Park Place Realty Co. ("Realty Co."), and the Senior Lender, as agent and the other banks named therein governing the existing credit facility (filed as an exhibit to the Annual Report on Form 10-K for the Company for the year ended December 31, 1992). **10(i).5 Form of Mortgage and Security Agreement with Assignment of Rents among Bally's Park Place-New Jersey, Realty Co., Bally's Park Place Funding, Inc. and First Bank. **10(i).6 Form of Assignment of Leases and Rents among Bally's Park Place- New Jersey, Realty Co. and First Bank. **10(i).7 Form of Note Pledge Agreement among Bally's Park Place-New Jersey, Bally's Park Place Funding, Inc. and First Bank. **10(i).8 Form of Note. **10(i).9 Form of Intercreditor Agreement. *10(i).10 Mortgage and Security Agreement with Assignment of Rents dated August 31, 1989 among Bally's Park Place-New Jersey, Realty Co., Bally's Park Place Funding, Inc. and First Fidelity Bank. *10(i).11 Assignment of Leases and Rents dated August 31, 1989 among Bally's Park Place-New Jersey, Realty Co. and First Fidelity Bank. *10(i).12 Note Pledge Agreement dated August 31, 1989 among Bally's Park Place-New Jersey, Realty Co. and First Fidelity Bank. *10(i).13 $350,000,000 Note dated August 31, 1989. 10(i).14 Loan and Guaranty Agreement dated March 8, 1994 among the Company, Bally's Park Place-New Jersey, Realty Co., Inc. and First Fidelity Bank, as agent and lender and Midlantic National Bank as lender. 10(i).15 First Amendment to Credit and Guaranty Agreement dated as of December 5, 1994 among the Company, Bally's Park Place-New Jersey, Realty Co., Inc. And First Fidelity Bank, as agent and lender and Midlantic National Bank as lender. 10(i).16 Guaranty of the Company to Arthur Goldberg in an amount up to $10,000,000. *10(ii).1 Lease Agreement dated June 8, 1977, between Bally's Park Place- New Jersey and the Palley Blatt Company respecting the Marlborough-Blenheim Hotel Property (filed as an exhibit to the Company's Registration Statement on Form S-1, Registration No. 2-65017). *10(ii).2 Letter dated April 27, 1979, from Bally's Park Place-New Jersey to Alexander K. Blatt and Norman Palley, as Trustees, agreeing to the purchase and modification of the First Peoples National Bank of New Jersey's $4,000,000 mortgage loan to the Palley Blatt Company (filed as an exhibit to the Company's Registration Statement on Form S-1, Registration No. 2-65017). *10(iii).1 Retirement and Separation Agreement dated January 8, 1993 between BEC, Bally's Park Place-New Jersey and Richard Gillman (filed as an exhibit to the Company's Annual Report on Form 10K for the year ended December 31, 1992). *10(iii).2 Split-Dollar Life Insurance Agreements and Collateral Assignments by and among the Company's, Bally's Park Place-New Jersey, Richard Gillman and Scott Gillman dated February 1, 1985. *10(iii).3 Split-Dollar Life Insurance Agreements and Collateral Assignments by and among the Company's, Bally's Park Place-New Jersey, Richard Gillman and Marc Gillman dated February 1, 1985. *10(iii).4 Employee Incentive Stock Option Plan of Bally's Park Place-New Jersey (filed as an exhibit to the Company's Registration Statement on Form S-8, Registration No. 2-76757). *10(iii).5 Amendment to Employee Incentive Stock Option Plan of Bally's Park Place-New Jersey dated May 6, 1985. *10(iii).6 Amendments to Employee Incentive Stock Option Plan of Bally's Park Place-New Jersey dated January 24, 1986. *10(iii).7 Supplemental Executive Retirement Plan of Bally's Park Place-New Jersey effective as of January 1, 1987. *10(iii).8 Group Travel Accident Policy between Bally's Park Place-New Jersey and Hartford Insurance Group effective February 5, 1988. *10(iv).1 Employment Agreement dated as of November 1, 1990, as amended, between BEC and Arthur Goldberg (filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). *10(iv).1.1 First Amendment to Employment Agreement effective as of November 1, 1991 between BEC and Arthur Goldberg (filed as an exhibit to the Company's Annual Report on Form 10K for the year ended December 31, 1992). **10(iv).1.2 Second Amendment to Employment Agreement effective September 29, 1993 between BEC and Arthur Goldberg. ***10(iv).2 Employment Agreement effective as of January 1, 1993 between BEC and Wallace R. Barr. ***10(iv).3 Employment Agreement effective as of July 1, 1992 between BEC and Robert Conover. **10(iv).4 Severance Agreement effective as of March 1, 1993 between Bally's Park Place-New Jersey and C. Patrick McKoy. ***10(iv).5 Settlement Agreement and Release dated July 30, 1993 between Bally's Park Place-New Jersey and Charles Tannenbaum. **22 Subsidiaries of Bally's Park Place-New Jersey. 27 Financial Data Schedule. (Filed electronically only.) *Incorporated herein by reference and filed as an exhibit to Bally Park Place Funding's, Inc. Registration Statement on Form S-1, Registration No. 33-26464, unless otherwise indicated. **Incorporated herein by reference and filed as an exhibit to Bally's Park Place Funding's, Inc. Registration Statement on Form S-1, Registration No. 33-51765. ***Incorporated herein by reference and filed as an exhibit to Bally's Casino Holdings, Inc. Registration Statement on Form S-1, Registration No. 33-654438. BALLY'S PARK PLACE, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1994, 1993 and 1992 (In thousands)
Additions -------------------- Balance at Charged to Charged Balance at beginning costs and to other end of Description of period expenses accounts Deductions period -------------- ---------- ----------- -------- ------------ ---------- Allowance for doubtful receivables: 1994. . . . . $1,265 $ 144 $ --- $ 242 $1,167 ====== ====== ====== ====== ====== 1993. . . . . $1,800 $ 421 $ --- $ 956 $1,265 ====== ====== ====== ====== ====== 1992. . . . . $6,210 $ 889 $ --- $5,299 $1,800 ====== ====== ====== ====== ====== Note: Deductions consist of write-offs of uncollectible amounts, net of recoveries.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized. Bally's Park Place, Inc. Dated: March 31, 1995 /s/ Joseph A. D'Amato --------------------------------- Joseph A. D'Amato Vice President and Treasurer (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. This Annual Report may be signed in multiple identical counterparts, all of which taken together, shall constitute a single document. Dated: March 31, 1995 /s/ Arthur M. Goldberg --------------------------------- Arthur M. Goldberg Chairman of the Board, Chief Executive Officer and Director (principal executive officer) Dated: March 31, 1995 /s/ Wallace R. Barr --------------------------------- Wallace R. Barr President, Chief Operating Officer and Director Dated: March 31, 1995 /s/ Joseph A. D'Amato --------------------------------- Joseph A. D'Amato Vice President and Treasurer (principal financial and accounting officer) Dated: March 31, 1995 /s/ Lee S. Hillman --------------------------------- Lee S. Hillman Director Dated: March 31, 1995 /s/ J. Kenneth Looloian --------------------------------- J. Kenneth Looloian Director EX-27 2 FINANCIAL DATA SCHEDULE FOR 12/31/94 FOR 10-K
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1994, AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND THE CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY FOR THE YEAR ENDED DECEMBER 31,1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1994 DEC-31-1994 13,949 0 2,936 1,167 2,228 36,120 793,041 309,672 546,314 42,669 427,641 1 0 0 23,972 546,314 0 377,003 0 158,695 56,149 144 42,260 46,037 18,450 27,587 0 (20,735) 0 6,852 0 0 THE PROVISION FOR DOUBTFUL ACCOUNTS IS INCLUDED IN CASINO OPERATING COSTS AND EXPENSES IN THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994.
EX-10 3 GUARANTY GUARANTY Bally's Park Place, Inc. a Delaware corporation ("Company"), hereby unconditionally guarantees to Arthur M. Goldberg ("Holder") the full payment (up to an aggregate of $10,000,000.00) of amounts ("Obligations") due Holder (i) on optional and mandatory redemption of the Series A Cumulative Exchangeable Preferred Stock, par value $1.00 per share ("Preferred Stock") of Bally's Casino, Inc., a Delaware corporation ("Bally's Casino"), in accordance with the terms ("Terms") of that certain Certificate of the Designations, Preferences and Relative, Participating, Optional or other Special Rights of the Series A Cumulative Exchangeable Preferred Stock, Par Value $1.00 Per Share of Bally's Casino, Inc., as filed with the Secretary of State of Delaware on December 28, 1994; (ii) if Holder is entitled to payment of the Underlying Value (as defined in Section ID1 of the Terms) and (iii) on account of monetary damages sustained by Holder as the result of the failure of Bally's Casino to deliver Bally Common Stock (as defined in Section ID1 of the Terms) when and as required under Article D of the Terms under circumstances when the provisions entitling Holder to payment of the Underlying Value would be inapplicable. This Guaranty is made for valuable consideration, receipt of which the Company hereby acknowledges, and in order to induce Holder to enter into that certain Stock Subscription Agreement dated as of December 30, 1994 among Holder, Bally's Casino, Inc., a Delaware corporation ("Casino") and Bally Entertainment Corporation which provides for the subscription by Holder for shares of preferred stock of Casino. Failing payment when due of any amounts so guaranteed for whatever reason, Company agrees to pay the same immediately. This is a guaranty of payment and not of collectibility. Company hereby agrees that its obligations hereunder shall be unconditional irrespective of the validity of the Preferred Stock or the enforceability (in whole or in part) of the Terms. Company hereby waives acceptance of this Guaranty, diligence, presentment and demand of payment, and covenants that this Guaranty will not be discharged except by complete performance by Bally's Casino of the Obligations or complete performance by the Company hereunder. Payment by the Company under this Guaranty shall not be made (a) if at the time such payment is due (the "Payment Date"), there exists a Payment Postponement Condition (as hereinafter defined) and (b) unless First Fidelity Bank, N.A. and Midlantic Bank, N.A. (the "Lenders") are in receipt of a Compliance Certificate (as hereinafter defined) delivered within the prior 10 days; provided, however, that such payment, together with interest at the rate of eight (8%) percent per annum from the Payment Date to the date such payment is made (subject to the $10,000,000 aggregate limit of this Guaranty), shall be made by the Company as soon after the Payment Date as no Payment Postponement Condition shall exist and the Lenders are in receipt of a Compliance Certificate delivered within the prior 10 days. As used herein, "Loan Agreement" shall mean that certain Loan and Security Agreement dated March 8, 1994 as amended by the First Amendment to Credit and Guaranty Agreement dated December 5, 1994, by and among Bally's Park Place, Inc., a New Jersey corporation as borrower, and the Lenders; and "Payment Postponement Condition" shall mean the following: (a) An Event of Default (as defined in the Loan Agreement as in effect on the date of this Agreement [the "Current Loan Agreement"] or as defined in any amendment to the Current Loan Agreement, if the effect of such amendment is to delete an Event of Default or to define any Event of Default so that it is less restrictive than under the Current Loan Agreement) shall have occurred and is continuing on the Payment Date; or (b) The Company is aware of any event that is likely to occur before (i) the end of the fiscal quarter after the fiscal quarter in which the Payment Date occurs or (ii) the next 90 days, whichever is later, which would cause there to be such an Event of Default. If payment is due to Holder under this Guaranty and no Payment Postponement Condition exists, the Company shall, upon the demand of the Holder and from time to time, deliver to the Lenders a certificate of the Chief Executive Officer of the Company stating that no Payment Postponement Condition exists (a "Compliance Certificate"). Without in any way limiting the generality of the foregoing, Company covenants and agrees that this Guaranty shall be a continuing guaranty, and that Holder may at any time and from time to time, without in any way affecting, diminishing or impairing Company's obligations under this Guaranty or Holder's rights to enforce this Guaranty, do any of the following, all whether with or without notice to Company and with or without Company's consent: (a) Upon the occurrence of any default in the payment of the Obligations when due, exercise or not exercise any and all rights and remedies available to Holder in such circumstances; (b) Change the manner, place or terms of payment of the Obligations, or extend the time for payment or performance, or renew or compromise any of the Obligations; (c) Release Bally's Casino from liability in respect of the Obligations, in whole or in part; (d) Settle or compromise any of the Obligations or subordinate the payment of all or any part of the Obligations to the payment of any other liability of Bally's Casino to creditors other than Holder; or (e) Consent to or waive any breach, omission or default in the performance by Bally's Casino of all or any of its obligations created by the Terms, and amend, modify or supplement the Terms. In addition, without in any way limiting the generality of the foregoing, Company covenants and agrees that Company's obligations under this Guaranty, and Holder's rights to enforce this Guaranty, shall not in any way be affected, diminished or impaired by: (a) Any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding up, assignment for the benefit of creditors, receivership or trusteeship involving Bally's Casino, any of its affiliates or any other person or entity liable on the Obligations as guarantor or otherwise; or (b) Any merger, consolidation, or sale of all or substantially all of the assets of, or of a controlling stock interest in, Bally's Casino, any of its affiliates or any other person or entity liable on the Obligations as a guarantor or otherwise, even if following the transaction, Company no longer is a subsidiary of Bally's Casino; or (c) The existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor under applicable law. Company covenants and agrees that Holder may at all times deal with Bally's Casino and its affiliates in the same manner and as freely as if this Guaranty did not exist, without in any way terminating, diminishing or impairing the validity of this Guaranty or Company's obligations under this Guaranty. Company waives any claim for reimbursement, contribution, subrogation, indemnification, or other relief which Company may have against Bally's Casino, any of its affiliates or anyone else who may be liable in respect of the Obligations as obligor, guarantor or otherwise, by reason of Company's making any payment or otherwise performing in respect of this Guaranty. If any payments made to Holder in respect of the Obligations are required to be rescinded or must otherwise be restored or surrendered by Holder in the event of the bankruptcy, insolvency, reorganization or similar event involving Bally's Casino, any of its affiliates, or any other person who may be liable in respect of the Obligations as obligor or guarantor, or for any other reason, Company covenants and agrees that this Guaranty shall continue in effect or shall be reinstated, as the case may be, and that Company shall remain liable under this Guaranty for the payment and performance in full of the Obligations, including any portion required to be rescinded, restored or surrendered by Holder, subject to the $10,000,000 aggregate limit of this Guaranty. If pursuant to any proceeding before any court or administrative body having jurisdiction, or any settlement or compromise of such a proceeding, claim is ever made on Holder for repayment or recovery of any amount received in payment of the Obligations, Company agrees that such proceeding or settlement or compromise shall be binding upon Company, and that in addition to Company's other obligations under this Guaranty, Company shall be liable to Holder for the entire amount so repaid or recovered, subject to the $10,000,000 aggregate limit of this Guaranty. Company covenants and agrees to be responsible for and to pay all costs, charges and expenses, including reasonable attorneys' fees and disbursements, incurred by Holder to enforce this Guaranty or to exercise any rights or remedies available to Holder under this Guaranty or under applicable law, together with interest. Any amount payable under this paragraph shall be subject to the $10,000,000 aggregate limit of this Guaranty. In the event any agreement contained in this Guaranty shall be breached by Company but waived by Holder, such waiver shall be limited to the particular breach so waived and shall not be deemed to apply to any other breach. Company covenants and agrees that this Guaranty shall be binding on Company and on Company's successors and assigns, and that this Guaranty is made for the benefit of Holder and Holder's heirs, personal representatives and assigns, and may be enforced against Company by any of them. Company hereby waives all rights to trial by jury in any litigation relating to this Guaranty. This Guaranty shall be governed by and construed in accordance with the laws of the State of New Jersey. BALLY'S PARK PLACE, INC. /s/ Dennis P. Venuti Senior Vice President EX-10 4 FIRST AMENDMENT TO CREDIT AND GUARANTY AGREEMENT FIRST AMENDMENT TO CREDIT AND GUARANTY AGREEMENT This is the first amendment (the "Amendment") dated December 5, 1994, to a credit and guaranty agreement dated as of March, 8, 1994 (the "Agreement") by and among: Bally's Park Place, Inc., New Jersey corporation (the "Borrower"), Bally's Park Place, Inc., a Delaware corporation, and Bally's Park Place Realty Corp., a New Jersey corporation (each a "Guarantor" and collectively the "Guarantors), and First Fidelity Bank, National Association and Midlantic Bank, National Association, successor by consolidation to Midlantic National Bank, (each a "Bank" and collectively the "Banks"). RECITALS A. The Borrower, the Guarantors and the Banks have previously entered into the Agreement. B. The Banks, the Guarantors and the Borrower desire to make the amendments to the Agreement set forth herein. NOW, THEREFORE, in consideration of the agreement of the parties contained herein, and intending to be legally bound, the parties hereto agree as follows: 1. Amendments to Section 1.01 - The following definition is added in SECTION 1.01 and reads as follows: "Required Banks" means at any time, Banks holding at least 66-2/3% of the Commitment Percentages." 2. Amendment to Subsection 5.05(B) - Subsection 5.05(B) of the Agreement is amended to read as follows: "(B) obligations of Bally's Casino, Inc. to the holders of certain shares of preferred stock of Bally's Casino, Inc., whether or not issued on the date hereof and one of which holders may be an officer of Park Place-Delaware, in an amount up to $10,000,000 under a written agreement satisfactory to the Banks (the "Preferred Stock Guaranty"), which agreement provides, among other things, that it will be a condition precedent to payment under the Preferred Stock Guaranty that (i) no Event of Default (as defined in the Preferred Stock Guaranty) shall have occurred or be continuing, and (ii) Park Place-Delaware is not aware of any event that is likely to occur before the end of the next fiscal quarter or the next 90 days, whichever is later, which would cause there to be such an Event of Default. If payment under the Preferred Stock Guaranty is to be made, satisfaction of the two conditions listed as (i) and (ii), above, shall be evidenced by a certificate of the Chief Executive Officer of Park Place-Delaware delivered to the Banks no more than ten days prior to such payment. Prior to the issuance of the Preferred Stock Guaranty, Park Place-Delaware shall provide to the Banks an opinion of Counsel containing customary exclusions and exceptions, and reasonably acceptable in form and substance to the Banks in the form of Exhibit 5.05B." 3. Amendment to Section 9.01 - Section 9.01 is amended to read as follows: "SECTION 9.01. Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. With the prior written consent of the Required Banks, the Agent, the Guarantors and the Borrower may, from time to time, enter into written amendments, supplements or modifications to the Loan Documents for the purpose of adding any provisions or changing in any manner the rights of the Banks, the Guarantors or the Borrower hereunder or thereunder or waiving, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of the Loan Documents or any Potential Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (a) (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all of the Banks) or subject any Bank to any additional obligation for reimbursement or indemnification, or (ii) reduce the principal of or rate of interest on any Loan or Letter of Credit Obligation or any fees hereunder, (iii) change any payment date, or (b) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Banks, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or the other Loan Documents or consent to the release of all or substantially all of the collateral upon which Liens have been created pursuant to the Loan Documents or consent to the release of any guaranty, in each case without the prior written consent of all the Lenders, or (c) amend, modify or waive any provision of Article VIII without the prior written consent of the then Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Borrower, the Banks, the Guarantors, the Agent and all future holders of the Revolving Credit Notes. In the case of any waiver, the Borrower, the Banks, the Guarantors and the Agent shall be restored to their former position and rights hereunder and under the outstanding Notes and any other Loan Documents, and any Potential Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Potential Default or Event of Default, or impair any right consequent thereon." 4. Approval of forms of Guaranty and Opinion of Counsel - It is agreed that the form of guaranty attached to the Amendment as Exhibit A and the form of opinion of counsel attached as Exhibit B are, for purposes of determining compliance with Section 5.05(B) of the Agreement, satisfactory to the Banks and that such guaranty, when executed, shall be a "Preferred Stock Guaranty" for purposes of 5.05(B) of the Agreement. It is expressly understood that the Banks may, at their sole discretion, condition any further amendments of the Agreement on an amendment to the definition of the term "Event of Default" under the Preferred Stock Guaranty. 5. Representations and Warranties. a. The representations and warranties contained in the Loan Agreement are true and correct in all material respects except to the extent that (i) such statements expressly are made only as of the Closing Date, or (ii) the Borrower has previously provided to the Banks written notice of any material change in the facts set forth in such representations and warranties. b. No Potential Default or Event of Default has occurred and is continuing. c. This amendment has been duly executed and delivered by the Borrower and each of the Guarantors and is enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally or general principles of equity. 6. Continuing Effect; No other Amendments - Except as expressly amendment hereby, all the terms and provisions of the Agreement are and shall remain in full force and effect. The amendments provided for herein are limited to the specific subsection of the Agreement specified herein and shall not constitute an amendment of, or an indication of the Banks' willingness to amend any other provisions of the Agreement. 7. Fees of Agent's Counsel - The Borrower shall pay the fees and expenses of McCarter & English, counsel to the Agent, and Robinson, St. John and Wayne, counsel to Midlantic Bank, National Association, in connection with the preparation and negotiation of this Amendment. 8. Counterparts - This Amendment may be executed by one or more of the parties on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. Address and Telecopier Nos. BALLY'S PARK PLACE, INC., Park Place and the Boardwalk a New Jersey corporation, Atlantic City, NJ 08401 as Borrower Telecopier: 609-340-2647 /s/Joseph A. D'Amato Vice President BALLY'S PARK PLACE, INC., Park Place and the Boardwalk a Delaware corporation, Atlantic City, NJ 08401 as Guarantor Telecopier: 609-340-2647 /s/Joseph A. D'Amato Vice President BALLY'S PARK PLACE REALTY CO., Park Place and the Boardwalk a New Jersey corporation, Atlantic City, NJ 08401 as Guarantor Telecopier: 609-340-2647 /s/Joseph A. D'Amato Vice President MIDLANTIC BANK, NATIONAL 499 Thornall Street ASSOCIATION as lender Metro Park Plaza Edison, NJ 08137 Telecopier: 908-321-2144 Attention: Edward M. Tessalone /s/Edward M. Tessalone Vice President FIRST FIDELITY BANK, 550 Broad Street NATIONAL ASSOCIATION, Newark, NJ 07102 as lender and Agent Telecopier: 201-565-6681 Attention: Robert K. Strunk, II /s/Robert K. Strunk, II Vice President -----END PRIVACY-ENHANCED MESSAGE-----