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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
sureBET CASINOS, INC.
(Name of Small Business Issuer in its charter)
UTAH 75-1878071
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1610 BARRANCAS AVENUE, PENSACOLA, FLORIDA 32501
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (850) 438-9647
Securities to be registered under Section 12(b) of the Act: NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
(Title of class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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sureBET Casinos, Inc. ("the Company") is a corporation organized under the
laws of the State of Utah on June 13, 1985. Although the Company has been in
existence since June 1985, it recently changed its business strategy to enter
into the casino business and therefore, should be considered a development stage
company. The Company intends to develop, acquire, joint venture, manage, and
operate gaming establishments with an initial focus on water-based gaming, the
emerging gaming markets, and the rehabilitation and reorganization of casinos
that are underperforming financially.
CORPORATE HISTORY
The company was formed in Utah on June 13, 1985 under the name Navis, Bona,
Inc. On March 29, 1988, the company merged with I Love Yogurt Corporation, a
Texas corporation. Navis Bona, Inc., the surviving corporation, changed its name
upon completion of the merger to I Love Yogurt Corporation.
On June 24, 1992, I Love Yogurt Corporation merged with Chelsea Street
Holding Company, Inc., a Delaware corporation. I Love Yogurt Corporation was the
surviving corporation after the merger. Pursuant to the Merger Agreement, I Love
Yogurt Corporation changed its name to Chelsea Street Financial Holding
Corporation. On November 23, 1993, Chelsea Street Financial Holding Corporation
amended its Articles of Incorporation changing the name of the corporation to
Wexford Technology Incorporated.
On March 5, 1999, the Company entered into an Asset Purchase Agreement with
its controlling shareholder, Imperial Petroleum, Inc. ("Imperial"). Pursuant to
the Agreement, Imperial acquired all of the assets and liabilities of the
Company. No consideration was exchanged in return for the sale of the assets and
transfer of the liabilities.
On May 12, 1999, the Company entered into an Agreement to Exchange Common
Stock with U.S. Gaming & Leisure Corp. ("USGL"). Pursuant to the agreement with
USGL. The Company is to issue 6,000,000 new common shares to shareholders of
USGL for 100% of the outstanding shares of USGL. This transaction is contingent
on a private placement of the Company's common stock which as of this date has
not been completed. At such time as the private placement is completed and the
exchange of stock is completed, USGL will become a wholly-owned subsidiary of
the Company.
On June 7, 1999, there was a change in the Board of Directors of the
Company. The new board changed the Company's business strategy and decided to
enter into the casino business. On June 24, 1999, the Articles of Incorporation
of the Company were amended to change the name of the Company to sureBET
Casinos, Inc.
Under the direction of its new management, the Company intends to develop,
acquire, joint venture, manage, and operate gaming establishments with an
initial focus on water-based gaming, the emerging gaming markets, and the
rehabilitation and reorganization of casinos that are underperforming
financially.
On October 1, 1999, the Company entered into a Management Contract with
Casino Padre Investment Company, LLC, a Nevada limited liability company. Under
the terms of the contract, the Company has an exclusive agreement to operate the
gaming ship M/V Entertainer and the gaming operations located on the ship on
behalf of and for the account of Casino Padre Investment Company, LLC.
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On October 27, 1999, the Company acquired 50 membership units in Casino
Padre Investment Company LLC in exchange for 5,000,000 shares of the common
stock of the Company. Immediately following the transaction, the Company owned
83% of Casino Padre Investment Company LLC. The shares were acquired from
Charles S. Liberis, the President of the Company. The LLC was formed on
September 14, 1999 and at the time of the acquisition, was still in a
developmental stage. Casino Padre commenced operations on November 18, 1999. As
of March 29, 2000, the Company owns 74% of the LLC. See Part I - Item 7. Certain
Relationships and Related Transactions.
On December 20, 1999, the Company entered into an agreement with Black Hawk
Hotel Corporation, an unaffiliated entity, to lease Lilly Belle's Casino, an
existing casino facility located in Black Hawk, Colorado. Pursuant to the terms
of the lease, the Company has an option to purchase the premises. The lease is
contingent on the Company receiving approval for the transaction and issuance of
regulatory licenses from the Colorado Gaming Commission.
M/V ENTERTAINER (TEXAS) OPERATIONS
The Company operates the M/V Entertainer as a casino boat conducting day
and evening cruises of approximately six hours each from South Padre Island,
Texas. In addition to casino operations, the cruises feature a variety of ship
board activities including sightseeing, live music, and other entertainment. The
Company markets its cruises and conducts its casino operations in international
waters in such a manner as to comply with applicable Federal and State laws and
regulations.
Casino Vessel. The M/V Entertainer was built in January 1965 and underwent
a major conversion and refit in 1994 into a day cruise vessel at Bender
Shipbuilding and Repair Yard in Mobile, Alabama, and is a U.S. registered,
American flagged vessel. The vessel is 202 feet haul length, 36.6 foot beam, and
over 473 gross tons. The vessel has a capacity of 400 passengers which may be
increased to 600 by the addition of certain lifesaving equipment. The vessel has
over 350 gaming positions including craps, roulette, blackjack, Caribbean stud,
slot machines, video poker, and keno. The vessel also has a 150-seat restaurant,
kitchen, gift shop, entertainment areas and bars. The M/V Entertainer is
chartered from CSL Development Corporation, an affiliated company. See Part I -
Item 7. Certain Relationships and Related Transactions.
Casino Padre Investment Company LLC charters the vessel, "MV Entertainer",
and the equipment associated therewith, pursuant to a Charter Agreement (the
"Charter Agreement") with CSL Development Corporation ("CSLD"). The initial
charter period is for five (5) years commencing on October 1, 1999. Under the
Charter Agreement, the Company makes monthly charter payments in the amount of
$125,000 per month. During the charter period, the Company shall have an option
to purchase the vessel at a price of $6,000,000. The Company is required, at its
expense, to obtain and maintain at all times during the charter period adequate
insurance on the vessel. The Company assumes (1) all risk of liability for the
vessel and for its use and operations, and is required to indemnify the Owner
from and against any claim, penalty, damage or liability resulting therefrom;
and (2) all obligations with respect to the maintenance, repair and inspection
of the vessel. CSLD has agreed to waive the Charter payments for the months of
October, and November and December 1999 ($375,000) as well as the security
deposit required under the Charter Agreement ($200,000) and in return, CSLD will
receive 50% of net operating income once the investors have received 100% of
their capital. CSLD will have a 50% interest in working capital and
undistributed income. CSLD is owned by The Liberis Charitable Settlement Trust
("the Liberis Trust"). The Liberis Trust was established in 1994 by Charles S.
Liberis ("Liberis") as Grantor. The Company believes that the terms of the
Charter Agreement are competitive with terms that could have been obtained from
unrelated third parties for a comparable vessel.
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South Padre Island Sublease and Dockage. The Company leases a berth, office
space and parking on South Padre Island, Texas, from an unaffiliated third
party. The Sublease and Dockage Agreement was entered into on June 23, 1999, for
an initial term of five years and assigned to Casino Padre Investment Company
LLC on October 11, 1999. The Company has an option to renew the lease for two
additional terms of five years each. Under the Sublease and Dockage Agreement,
the Company is responsible for all taxes, improvements, repairs and maintenance,
and payment of utilities related to the dock space. The Company is also required
to indemnify the sublessor from all claims, liabilities, loss and damages
against the sublessor occurring on the premises, vessel or in any way related to
the Company's business. The Company operates a portside ticketing and
administrative holding area referred to as the portside facility. The portside
facility consists of approximately 800 square feet and includes a ticketing
area, gift shop, coat check, public restrooms and waiting area for casino
cruises, as well as several small offices and a player development booth.
Competition. At the present time, the Company's vessel has no competition
in the immediate market area. A competing vessel, the Casino Del Mar, operated
in the market from Port Isabel, Texas, from October 1999 until February 2000.
Competition was fierce and the Company's vessel operated at a loss.
There are approximately 28 casino boats operating on the Gulf and Atlantic
Coasts; one or more of them could reposition to the South Padre area. All of the
competing firms offer casino cruises, with published fares ranging from $0 to
$39.95. These fares vary due to competitive pressures.
Many of the competing firms offer free cruises or minimally priced cruises.
Should a competing vessel move to the South Padre area, it could force the
Company to adjust its fares and to offer free cruises to remain competitive. Any
increase in competition would have an adverse impact on operations and the
Company's financial position.
In addition to competition in the casino cruise industry, the Company
competes with a variety of other activities in its market area. These include,
but are not limited to, parimutuel betting, short-term cruises, resort
attractions, various sports activities and other recreational activities.
Weather and Seasonal Fluctuations. The business of the Company suffers as a
direct result of inclement weather. Inclement weather has a direct effect on the
number of cruises conducted and on passenger counts. In addition, passenger
counts are reduced immediately before and immediately after inclement weather
conditions. The business of the Company is also subject to seasonal
fluctuations. Since commencing operations, weather conditions have severely
affected the Company's operations and revenues causing a cancellation in cruises
from November 1, 1999 to February 29, 2000 of 35%.
Marketing and Promotion. The Company does not have sufficient funds with
which to advertise, market and promote its cruises through a mass media
campaign. The Company focuses its marketing efforts on its repeat customers, the
local population and tourists. The Company tries to attract customers from the
local population within a 70-mile radius to survive the seasonal fluctuations
that are known to occur in the South Padre tourist industry. The Company
currently markets its cruises primarily through direct mail, print, and radio.
The Company's financial ability to advertise was minimal compared to the heavy
advertising, marketing and promotion of the Company's competition, the Casino
Del Mar, prior to the closing of Casino Del Mar in February 2000.
Gaming Laws & Regulations Affecting Casino Boats. The Company's operations
are directly affected by current and future federal, state and local regulations
and ordinances and could be interrupted or terminated on the basis of such laws,
regulations and ordinances. Moreover, the
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Company is potentially subject to significant financial penalties if it violates
such laws, regulations or ordinances. Compliance with such laws, regulations and
ordinances may necessitate significant capital outlays.
o Federal Legislation. Federal legislation enacted in 1948, 18 U.S.C.
Sections 1082 et seq. (the "Gambling Devices Act"), prohibits any citizen,
resident of the United States or any other person within the jurisdiction
of the United States from establishing, operating or owning an interest in
a gambling ship on the high seas or otherwise within the jurisdiction of
the United States. In 1992, the federal government enacted an amendment to
the Gambling Devices Act. This amendment was designed to make the laws
pertaining to gaming activities on United States flag vessels and foreign
flag vessels essentially the same. Prior to being amended, the Act forbade
gaming on United States flagged vessels but allowed foreign flagged vessels
to carry gaming equipment into United States ports. The 1992 amendment gave
United States flagged vessels the same right, preempting state laws. The
amendment allowed states to elect to "opt out" of the Act by enacting a
statute which would prohibit "cruise-to-nowhere" operations. A number of
states have enacted legislation opting out. Texas did not. However, there
can be no assurance that at some time in the future a bill "opting out"
will not be introduced by Texas.
On January 6, 1999, Congressmen Wolf, Gilchrest and Shays introduced a
Bill, H.R. 316, (the "Cruises-to-Nowhere Act of 1999"), to amend the
Johnson Act to restore the authority of state laws over gambling
cruises-to-nowhere. This Bill did not pass but may be reintroduced in 2000.
Should it become law, it would give states the ability to apply their own
laws to gambling on cruises to no-where. The passage of this law would
allow the State of Texas and other states to ban cruises-to-nowhere. Such a
ban would destroy the business of the Company in Texas.
o State Regulation - Texas. Texas Penal Code Section 47.06 prohibits the
possession of gambling devices, equipment, or paraphernalia within the
State of Texas or within the territorial waters of the State of Texas. The
violation of this Section is a felony. However, there is a provision to
allow the possession of gambling devices, equipment, or paraphernalia
onboard an ongoing vessel which departs from the State of Texas and
conducts its gambling activities outside the territorial waters of the
State of Texas. Specifically, Section 47.09(b) provides that it is an
affirmative defense to prosecution under Section 47.09(b). It is the
Company's belief that it at all times complies with the provisions of the
Texas Penal Code.
Further, Texas Penal Code Section 48.10 (American Documentation of Vessel
Required) provides that "if 18 USC Section 1082 is repealed, the
affirmative defenses provided by Section 47.09(b) apply only if the vessel
is documented under the laws of the United States." Accordingly, it would
appear even if a bill similar to the "Cruise to Nowhere Act of 1999" were
introduced and passed, that the State of Texas would continue to exempt
casino cruises so long as they were conducted on U.S. flagged American
documented vessels. The M/V Entertainer is a U.S. flagged American
documented vessel.
Future Ports. The Company has no present intent to open additional ports in
Texas or elsewhere.
LILLY BELLE'S CASINO (COLORADO) BUSINESS
The Company, through its wholly owned subsidiary, Lilly Belle's Casino
Investment Company LLC (hereinafter "Lilly Belle's"), intends to operate Lilly
Belle's Casino located at 301 Gregory Street, Black Hawk, Colorado, pursuant to
the Colorado Gaming Act and the Colorado Gaming Regulations.
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Gaming in Colorado is "limited stakes" which restricts any single wager to
a maximum of $5.00. While this limits the revenue potential of table games,
management believes that slot machine play, which accounts for over 95% of total
gaming revenues, is currently impacted only marginally by the $5.00 limitation.
Lilly Belle's Casino. Lilly Belle's Casino is located at 301 Gregory
Street, Black Hawk, Colorado. The casino is contained in a three and
one-half-story, 12,000-square foot building which was constructed as a casino in
1993 and operated until November 1994. The structure is fully sprinkled, air
conditioned and serviced by a hydraulic elevator to each floor. The building is
completely furnished for a casino operation including all furniture and
fixtures, surveillance equipment, cage equipment, Black Jack tables, poker
tables, coins and tokens. There are no slot machines presently on the premises.
The Company leases the casino as well as an adjacent Victorian bed and breakfast
and an adjacent area which will provide approximately 100 parking spaces as well
as all the furniture, fixtures, and equipment, from an unaffiliated third party.
A lease with an option to purchase was entered into on December 20, 1999, for an
initial term of five years. The Company has an option to renew the lease for
three additional terms of five years each. The Company has the option to
purchase the premises during the term of the lease. Under the terms of the
lease, the Company is responsible for all taxes, improvements, repairs and
maintenance and payment of utilities related to the premises. The Company is
also required to indemnify the lessor from all claims, liabilities, loss and
damages against the lessor occurring on the premises in any way related to the
Company's business.
The Black Hawk Market. Black Hawk is a small mountain town located
approximately 30 miles from Denver. Black hawk is an historic mining town
originally founded in the late 1800's following a large gold strike. Black Hawk
is a tourist town and its heaviest traffic is in the summer months. Traffic
generally decreases to its low point in the winter months.
Black Hawk is one of only three Colorado cities where casino gaming is
legal, the others being Cripple Creek and Central City. Black Hawk operated
approximately 51% of the gaming devices and generated 67.6% of gaming revenues
for these three cities during the year ended December 31, 1999. As of December
31, 1999, there were 19 casinos operating in Black Hawk.
Competition. There are presently 19 casinos operating in Black Hawk,
Colorado. In addition, there are 9 casinos operating in Central City which is
adjacent to Black Hawk. The Company will be competing with many established
casino companies, most of which have greater financial resources than the
Company in the same market that the Company will be operating.
Weather and Seasonal Fluctuations. The business of the Company will suffer
as a direct result of inclement weather. Inclement weather has a direct affect
on driving conditions between Black Hawk and Denver, Colorado, which is the
major metropolitan area from which Black Hawk derives most of its business. The
business of Lilly Belle's will be subject to seasonal fluctuations with the
slowest months being the months of January, February, and March.
Marketing and Promotion. The Company does not have sufficient funds with
which to advertise market and promote its casino through a mass media campaign.
The Company will focus its marketing efforts on direct mail to customers who are
on a customer list obtained by the Company pursuant to its lease agreement. In
addition, the Company will market into Denver through a limited amount of print,
radio and billboard advertising.
State Regulation - Colorado. The ownership and operation of a gaming
business in Colorado is subject to extensive laws and regulations including the
Colorado Limited Gaming Act of 1991 (the "Colorado Act") and the rules and
regulations (the "Colorado Regulations") promulgated thereunder by
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The Colorado Limited Gaming Commission (the "Colorado Commission") which is
empowered to oversee and enforce the Colorado Act.
Neither the Company nor any of its subsidiaries has a license to operate a
casino in Colorado or in any other jurisdiction. The Colorado Act requires that
a person (including any corporation or other entity) must be licensed by
Colorado to conduct gaming activities in Colorado. A license will be issued only
for a specified location that has been approved a s a gaming site by the
Colorado Commission prior to issuing a license. The Colorado Act also requires
that each officer or director of a gaming licensee, or other person who
exercises a material degree of control over the licensee, must be found suitable
by the Colorado Gaming Commission. Any person who, directly or indirectly, or in
association with others, acquires beneficial ownership of more than 5% of the
common stock of any gaming enterprise must notify the Colorado Gaming Commission
of this acquisition and must be found suitable by the Colorado Gaming
Commission. The granting of a license requires submission of detailed personal
financial information followed by a thorough investigation. In addition, the
Colorado Gaming Commission will not issue a license unless it is satisfied that
the licensee is adequately financed or has a reasonable plan to finance its
proposed operations from acceptable sources.
The political and regulatory environment in which the Company is and will
be operated with respect to gaming activities, is uncertain, dynamic and subject
to rapid change. Existing operators often support legislation and litigation
designed to make it more difficult or impossible for competition to develop and
operate gaming facilities. This environment makes it impossible to predict the
effects, including cost, that the adoption of and changes in gaming law, rules
and regulations and/or competition will have on proposed gaming operations.
Except for historical information contained herein, the matters discussed
in this Item 1, in particular, statements that use the words "believes",
"expects", "intends", or "anticipates", are intended to identify forward looking
statements that are subject to risks and uncertainties including, but not
limited to, inclement weather, mechanical failures, increased competition,
financing, governmental action, environmental opposition, legal actions, and
other unforeseen factors. The development of the Black Hawk project, in
particular, is subject to additional risks and uncertainties, including, but not
limited to, risks relating to permitting, financing, the activities of
environmental groups, the outcome of litigation and the actions of federal,
state, or local governments or agencies.
EMPLOYEES
As of February 29, 2000, the Company employed approximately 59 employees.
Of the Company's 59 employees, 3 are executive and management personnel and 3
are engaged primarily in administrative positions. The remaining employees are
ship officers, crew, casino, reservations, food service and other staff employed
by the Company who work on or about the Company's vessel. None fo the Company's
employees is a party to a collective bargaining agreement. The Company considers
its employee relations to be generally satisfactory.
The Company's continued future success depends in significant part upon the
continued service of its key senior management personnel and its continuing
ability to attract and retain highly qualified managerial personnel. The time
that the officers and directors devote to the business affairs of the Company
and the skill with which they discharge their responsibilities will
substantially impact the Company's success. To the extent the services of these
individuals would be unavailable to the Company for any reason, the Company
would be required to identify, hire, train and retain other highly qualified
managerial personnel to manage and operate the Company. The Company's business
could be adversely affected to the extent such key individuals could not be
replaced.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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The Company ceased conducting an active trade or business in April 1997.
During the fiscal years ended March 31, 1999 and 1998, the Company had no
operating business. The Company entered into an Asset Purchase Agreement (the
"Agreement") on March 5, 1999 with its controlling shareholder, Imperial
petroleum, Inc. ("Imperial"). The Agreement provided that Imperial would acquire
all of the assets and liabilities of the Company. No consideration was exchanged
in return for the sale of the net liabilities of the Company. As a result of the
Agreement, the Company had no assets or liabilities as of March 31, 1999. For
the fiscal year ended March 31, 1999, the Company recognized a gain of
$1,561,127 on the transfer of the liabilities, resulting in net income of
$1,201,414 for the period.
Accordingly, as a result of the Company's liquidation and abandonment of
its assets and liabilities to a "shell" status, the Company has accounted for
its former operations as discontinued for all periods presented.
On June 7, 1999, there was a change in the control of the Board of
Directors of the Company. The new Board changed the Company's business strategy
and decided to enter into the casino business. On June 24, 199, the Articles of
Incorporation of the Company were amended to change the name of the Company to
sureBET Casinos, Inc.
Under the direction of its new management, the Company intends to develop,
acquire, joint venture, manage, and operate gaming establishments with an
initial focus on water-based gaming, the emerging gaming markets, and the
rehabilitation and reorganization of casinos that are underperforming
financially.
RESULTS OF OPERATIONS
The sole source of revenue for the Company through December 31, 1999 was
derived from the operation of Casino Padre. Casino Padre began operations on
November 18, 1999 and for the two months ended December 1999 the Company
incurred a net loss of $409,701.
For the nine months ended December 31, 1999, the Company's pro rata share
of the operating loss of Casino Padre was $188,671. During that period, revenues
from operations were $163,445 while cost of sales were $17,637 and operating
expenses were $772,667. A total of $60,409 was allocated to the minority
interest in Casino Padre.
General and administrative expenses for the nine months ended December 31,
1999 totaled $163,352. A total of $79,224 was expended for the operation of the
casino and $142,601 for the operation of the vessel. Sales and marketing
expenses were $53,791 for the period with an additional $21,902 being expended
to support the food and beverage department. Depreciation and amortization for
the nine months ending December 31, 1999 was $12,548. In addition, $142,500 was
attributable to the issuance of stock for services rendered in connection with
the reorganization of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had a working capital deficiency of
$148,890. The Company does not believe that it will be able to meet its normal
operating costs and expenses from management fees and cash flow of Casino Padre.
The cash requirements of funding the Company's operations and expansion
have exceeded cash flow from operations. To date, the Company has satisfied its
capital needs primarily through debt and
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equity financing. During the nine months ended December 31, 1999, the Company
issued 1,425,000 shares of Common Stock for services valued at $142,500, sold
25,000 shares for cash of $13,000, and issued 5,000,000 shares in lieu of
$500,000 in payments. The Company continually explores raising additional
capital through such means.
The Company believes that it will be able to raise additional capital
through debt and equity financing which, along with anticipated cash from
operations, will be sufficient to meet the Company's current working capital
needs for at least the next twelve months. However, there can be no assurance
that the Company will not need to raise additional capital sooner, particularly
to take advantage of any expansion opportunities, not currently anticipated that
may become available. In such event, there can be no assurance that additional
capital will be available at all, at an acceptable cost, or on a basis that is
timely to allow the Company to finance any such opportunities.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed
in this Item 6, in particular, statements that use the words "believes",
"intends", "anticipates", or "expects" are intended to identify forward looking
statements that are subject to risks and uncertainties including, but not
limited to, inclement weather, mechanical failures, increased competition,
financing, governmental action, environmental opposition, legal actions, and
other unforeseen factors.
The development of the Black Hawk, Colorado project, in particular, is
subject to additional risks and uncertainties, including, but not limited to,
risks relating to permitting, financing, the activities of environmental groups,
the outcome of litigation and the actions of federal, state, or local
governments and agencies. The results of financial operations reported herein
are not necessarily an indication of future prospects of the Company. Future
results may differ materially.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Board issued Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires companies to recognize all derivative
contracts as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to mach the time
of gain or loss recognition on the hedging derivative with the recognition of
(i) the changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging instrument,
the gain or loss is recognized in operations in the period of change. SFAS No.
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 1999.
The Company has not entered into derivative contracts either to hedge
existing risks or for speculative purposes. Accordingly, the Company does not
expect adoption of the new standard on January 1, 2000 to have a material effect
on its consolidated financial statements.
ITEM 3. DESCRIPTION OF PROPERTY.
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The Company's administrative offices are located in 1,996 square feet of
office space in Pensacola, Florida, under a month-to-month lease with Charles S.
Liberis, the Company's Chairman of the Board of Directors, Chief Executive
Officer and principal stockholder. The lease provides for monthly rental
payments of $1,663 which the Company believes are competitive with rents which
could have been obtained from unrelated third parties for comparable office
space.
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The Company leased the following locations for its operations during the year
ended 1999:
<TABLE>
<CAPTION>
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LOCATION LEASE TERM
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<S> <C>
One South Padre Blvd 180 Days commencing November 1, 1999. Thereafter, 2
South Padre Island, Texas 78597 additional terms of 5 years each.
Berth & Sublease Agreement
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301 Gregory Street 5 years commencing the earlier of Oct 1, 2000 or the
Black Hawk, Colorado issuance of a gaming license by the Colorado Gaming
Lease of Lilly Belle's Casino Commission. Thereafter, 3 additional terms of 5 years
each.
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</TABLE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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The following table provides certain information as to the officers and
directors individually and as a group, and the holders of more than 5% of the
Common Stock of the Company, as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED PERCENT OF CLASS (1)
<S> <C> <C>
Charles S. Liberis 6,000,000 80.1%
1610 Barrancas Avenue
Pensacola, FL 32501
Wayne E. Marks 200,000 2.7%
1464 Heartstone
Baton Rouge, LA 70808
Michael Georgilas 75,000 1.0%
Ellis 26
N. Erythrea 14671
Athens, Greece
Officers and directors as a group 6,275,000 83.8%
(3 persons)
</TABLE>
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(1) This table is based on 7,490,050 shares of Common Stock outstanding on
December 31, 1999. Where the persons listed on this table have the right to
obtain additional shares of common stock within 60 days from December 31,
1999, these additional shares are deemed to be outstanding for the purpose
of computing the percentage of class owned by such persons, but are not
deemed to be outstanding for the purpose of computing the percentage of any
other person.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
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The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Charles S. Liberis 57 Chairman of the Board of Directors, President, Chief Operating Officer
Wayne E. Marks 53 Vice President Finance, Controller and Director
Michael Georgilas 46 Director
</TABLE>
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The term of office of each director of the Company ends at the next annual
meeting of the Company's stockholders or when the director's successor is
elected and qualified. No date for the next annual meeting of stockholders is
specified in the Company's Bylaws, nor has a meeting been fixed by the Board of
Directors. The term of office of each officer of the Company ends at the next
annual meeting of the Company's Board of Directors, which is expected to take
place immediately after the next annual meeting of stockholders, or when such
officer's successor is elected and qualified.
Charles S. Liberis. Mr. Liberis was elected Chairman, President and Chief
Operating Officer of the Company on July 8, 1999. Since 1992, Mr. Liberis served
as President of CSL Development Corporation, a private company. CSL Development
Corporation has been engaged in general development of real estate property
including condominiums, resorts, golf courses, and casinos. Mr. Liberis was a
founder of Europa Cruises Corporation (NASDAQ - KRUZ), Pensacola, Florida, and
served as its Chief Executive Officer from 1989 to 1992. Prior to joining
Europa, Mr. Liberis was a practicing attorney for over twenty years and was a
Senior Partner in the law firm of Liberis, Sauls, and Fleming, P.A., with
offices in Pensacola and Tallahassee, Florida, and Atlanta, Georgia. His
practice consisted primarily of real estate and corporate reorganization law and
he has had an extensive background in the reorganization of numerous hospitality
operations. Mr. Liberis was a founder and served on the Board of Directors and
as General Counsel of Southern National Bankshares, Atlanta, Georgia, from
1983_to 1985. Mr. Liberis majored in business and finance and received his Juris
Doctorate from Stetson University College of Law in 1977. He is a member of the
American and Florida Bar Associations and the International Association of
Gaming Attorneys. Mr. Liberis has previously been found suitable for licensing
by the Mississippi Gaming Commission.
Wayne E. Marks. Mr. Marks was elected to the Board and as Vice President
Finance and Controller of the Company on July 8, 1999. Since June 1997, Mr.
Marks has served as Vice President of CSL Development, Pensacola, Florida, and
General Manager of Fiesta Casino, Lima, Peru. CSL Development Corporation has
been engaged in general development of real estate property including
condominiums, resorts, golf courses, and casinos. From September 1991 to June
1997, Mr. Marks served as partner in DB & Associates, Jackson, Mississippi, a
consulting firm specializing in project development. From 1973 to 1991, Mr.
Marks worked in the Farm Credit System. Mr. Marks served on the Executive
Committee of the Farm Credit Banks of Jackson and the Farm Credit Banks of New
Orleans from 1979 to 1988. Federal Intermediate Credit Bank of New Orleans from
1979 to 1985, and The Jackson Bank for Cooperatives from 1985 to 1988. He is a
graduate of the University of New Orleans, New Orleans, Louisiana.
Michael Georgilas. Mr. Georgilas was elected to the Board of Directors of
the Company in June 1999. Since September 1996, Mr. Georgilas has served as
Chairman and Chief Executive Officer of Mondial Group Inc, Athens, Greece, an
international casino development and management company. From July 1993 to
August 1996, he was Vice President of Gaming and Director of Gaming Development
for ITT/Sheraton Corporation, Boston, Massachusetts. From June 1992 to December
1992, he served as Chief Operating Officer of Europa Cruises Corporation,
Pensacola, Florida. From 1991 to 1992, he served as Associate Director of the
Casino and Gaming Management Division at the University of Nevada in Las Vegas.
From 1986 through 1991, he held various positions with Hilton Corporation having
last served as President and General Manager of the Flamingo Hilton Reno. Mr.
Georgilas holds a Bachelor of Science Degree in Hotel Administration and a
Master of Science Degree in Hotel Administration from the University of Nevada,
Las Vegas.
11
<PAGE> 12
Mr. Liberis may be deemed to be the "promoter" of the Company within the meaning
of the Rules and Regulations under federal securities laws.
ITEM 6. EXECUTIVE COMPENSATION.
- --------------------------------------------------------------------------------
The following table sets forth information for Jeffrey T. Wilson. Mr.
Wilson served as the Company's Chief Executive Officer ("CEO") during the fiscal
year ended March 31, 1999. No disclosure need be provided for any executive
officer, other than the CEO, whose total annual salary and bonus for the last
completed fiscal year did not exceed $100,000. Accordingly, no other executive
officers of the Company are included in the table. The following table sets
forth information for all persons who have served as the chief executive officer
of the Company during the last completed fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- -------------------------------------
AWARDS PAYOUTS
------------------------ ------------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL COMPENSA AWARD(S) OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY ($) BONUS ($) TION ($) ($) SARS (#) PAYOUTS SATION ($)
- -------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jeffrey T. 1999 $0.00 $0.00 $0.00 $ 0.00 0 0 $0.00
Wilson,
President
(1)
Charles S. 2000 $0.00 $0.00 $0.00 $100,000 0 0 $0.00
Liberis, (3)
President (2)
</TABLE>
- ---------------
(1) Jeffrey T. Wilson was the President of the Company from April 8, 1996 to
July 8, 1999.
(2) Charles S. Liberis was the President of the Company from July 8, 1999 to
present.
(3) Mr. Liberis received no cash compensation or other benefits for the period
ended December 31, 1999. Mr. Liberis received 1,000,000 of restricted
common stock for services rendered as a consultant, director, and executive
officer of the Company through July 12, 1999.
The Company does not have any employment contracts with any of its officers
or directors. Such persons are employed by the Company on an at will basis, and
the terms and conditions of employment are subject to change by the Company.
STOCK OPTION PLANS
The Company has no stock option plans.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted as executive compensation during the past
year.
DIRECTOR COMPENSATION
No employees will receive additional compensation as directors.
Non-Employee directors will be compensated at the rate of $500 per meeting for
attendance at meetings with the Board of Directors.
12
<PAGE> 13
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------------------------------
On March 5, 1999, the Company entered into an Asset Purchase Agreement with
its controlling shareholder, Imperial Petroleum, Inc. ("Imperial"). Pursuant to
the Agreement, Imperial acquired all of the assets and liabilities of the
Company. No consideration was exchanged in return for the sale of the assets and
transfer of the liabilities.
On May 12, 1999, the Company entered into an Agreement to Exchange Common
Stock with U.S. Gaming & Leisure Corp. ("USGL"). USGL is controlled by Charles
S. Liberis, the President of the Company. Pursuant to the agreement with USGL,
the Company is to issue 6,000,000 new common shares to shareholders of USGL for
100% of the outstanding shares of USGL. This transaction is contingent on a
private placement of the Company's common stock which as of this date has not
been completed. At such time as the private placement is completed and the
exchange of stock is completed, USGL will become a wholly-owned subsidiary of
the Company.
In contemplation of the Agreement with USGL, there was a change in the
Board of Directors of the Company on July 8, 1999. The new board changed the
Company's business strategy and decided to enter into the casino business.
On October 1, 1999, Casino Padre Investment Company LLC entered into a
Charter Agreement to charter the vessel, "MV Entertainer", and the equipment
associated therewith, pursuant to a Charter Agreement (the "Charter Agreement")
with CSL Development Corporation (CSLD). The initial charter period is for five
(5) years commencing on October 1, 1999. Under the Charter Agreement, the
Company makes monthly charter payments in the amount of $125,000 per month.
During the charter period, the Company shall have an option to purchase the
vessel at a price of $6,000,000. The Company is required, at its expense, to
obtain and maintain at all times during the charter period adequate insurance on
the vessel. The Company assumes (1) all risk of liability for the vessel and for
its use and operations, and is required to indemnify the Owner from and against
any claim, penalty, damage or liability resulting therefrom; and (2) all
obligations with respect to the maintenance, repair and inspection of the
vessel. CSLD has agreed to waive the Charter payments for the months of October,
and November and December 1999 ($375,000) as well as the security deposit
required under the Charter Agreement ($200,000) and in return, CSLD will receive
50% of net operating income once the investors have received 100% of their
capital. CSLD will have a 50% interest in working capital and undistributed
income. CSLD is owned by The Liberis Charitable Settlement Trust ("the Liberis
Trust"). The Liberis Trust was established in 1994 by Charles S. Liberis
("Liberis") as Grantor. The Company believes that the terms of the Charter
Agreement are competitive with terms that could have been obtained from
unrelated third parties for a comparable vessel.
On October 1, 1999, the Company entered into a Management Contract with
Casino Padre Investment Company, LLC, ("Casino Padre") a Nevada limited
liability company. Under the terms of the contract, the Company has an exclusive
agreement to operate the gaming ship M/V Entertainer and the gaming operations
located on the ship on behalf of and for the account of Casino Padre Investment
Company, LLC. At the time that the Management Contract was entered into, Charles
Liberis, the President of the Company, owned 83%of the membership units of
Casino Padre Investment Company LLC.
On October 27, 1999, the Company acquired 50 membership units in Casino
Padre Investment Company LLC in exchange for 5,000,000 shares of the common
stock of the Company. Following the transaction, the Company owned 83% of Casino
Padre Investment Company LLC. The membership units were acquired from Charles S.
Liberis, the President of the Company. The price of the units was $500,000,
which is the same price paid for the units by Mr. Liberis. Casino Padre was
formed on
13
<PAGE> 14
September 14, 1999. At the time of the acquisition Casino Padre was still in the
development stage. Casino Padre commenced operations on November 18, 1999.
From May 31, 1999 to March 28, 2000, Charles Liberis, the President of the
Company, advanced to the Company a total of $34,157. The loans are not evidenced
by promissory notes. There is no fixed date for repayment.
From July 31, 1999 to December 31, 1999, CSL Development Corporation
advanced to the Company a total of $46,207. The loans are not evidenced by
promissory notes. There is no fixed date for replacement. Charles S. Liberis,
the President of the Company is also President of CSL Development Corporation.
The Company's administrative offices are located in 1,996 square feet of
office space in Pensacola, Florida, under a month-to-month lease with Charles S.
Liberis, the Company's Chairman of the Board of Directors, Chief Executive
Officer and principal stockholder. The lease provides for monthly rental
payments of $1,663 which the Company believes are competitive with rents which
could have been obtained from unrelated third parties for comparable office
space.
ITEM 8. DESCRIPTION OF SECURITIES.
- --------------------------------------------------------------------------------
The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, each with $0.001 par value per share, and 5,000,000 shares of
Preferred Stock, each with $1.00 par value per share. There are presently
outstanding 7,490,050 shares of common stock and "0" shares of Preferred Stock.
COMMON STOCK
Each share of Common Stock has one vote with respect to all matters voted
upon by the shareholders. The shares of Common Stock do not have cumulative
voting rights.
Holders of Common Stock are entitled to receive dividends, when and if
declared by the Board of Directors, out of funds of the Company legally
available therefor. The Company has never declared a dividend on its Common
Stock and has no present intention of declaring any dividends in the future.
Holders of Common Stock do not have any preemptive rights or other rights
to subscribe for additional shares, or any conversion rights. Upon a
liquidation, dissolution, or winding up of the affairs of the Company, holders
of the Common Stock will be entitled to share ratably in the assets available
for distribution to such stockholders after the payment of all liabilities.
The outstanding shares of the Common Stock of the Company are fully paid
and non-assessable.
The registrar and transfer agent for the Company's Common Stock is Kevin
Halter, President, Securities Transfer Corporation, 16910 Dallas Parkway, Suite
100, Dallas TX 75248.
PREFERRED STOCK
The Articles of Incorporation permit the Board of Directors, without
further shareholder authorization, to issue Preferred Stock in one or more
series and to fix the price and the terms and provisions of each series,
including dividend rights and preferences, conversion rights, voting rights,
redemption rights, and rights on liquidation, including preferences over the
Common Stock, all of which
14
<PAGE> 15
could adversely affect the rights of the holders of the Common Stock. The Board
of Directors has not issued nor established a series of Preferred Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
- --------------------------------------------------------------------------------
The Company's Common Stock is not traded on a registered securities
exchange, or on NASDAQ. The Company's Common Stock has been quoted on the OTC
Bulletin Board since 1987, and currently trades under the symbol "DICE". The
following table sets forth the range of high and low bid quotations for each
fiscal quarter within the last two fiscal years, as well as the current fiscal
year. These quotations reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED HIGH BID LOW BID
<S> <C> <C>
December 31, 1997........................... $8.40 $0.94
March 31, 1998.............................. $3.19 $0.94
June 30, 1998............................... $4.50 $2.25
September 30, 1998.......................... $2.25 $0.60
December 31, 1998........................... $0.06 $0.06
March 31, 1999.............................. $0.06 $0.06
June 30, 1999............................... $0.06 $0.06
September 30, 1999.......................... $1.38 $0.75
December 31, 1999........................... $2.00 $0.13
</TABLE>
On March 23, 2000, the high and low bid prices for the Common Stock were
both $1.50.
As of December 31, 1999 there were 7,490,050 shares outstanding and
291 record holders of the Company's Common Stock. Since the Company's inception,
no cash dividends have been declared on the Company's Common Stock.
The Securities and Exchange Commission (SEC) has adopted rules that
regulate broker-dealer practices in connection with transactions in "penny
stocks". Generally, penny stocks are equity securities with a price of less than
$5.00 (other than securities registered on certain national exchanges or quoted
on the NASDAQ system). If the Company's shares are traded for less than $5 per
share, as they currently are, the shares will be subject to the SEC's penny
stock rules unless (1) the Company's net tangible assets exceed $5,000,000
during the Company's first three years of continuous operations or $2,000,000
after the Company's first three years of continuous operations; or (2) the
Company has had average revenue of at least $6,000,000 for the last three years.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prescribed by the SEC that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock,
15
<PAGE> 16
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that prior
to a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. As long as the Company's Common Stock is
subject to the penny stock rules, the holders of the Common Stock may find it
difficult to sell the Common Stock of the Company.
ITEM 2. LEGAL PROCEEDINGS.
- --------------------------------------------------------------------------------
o Betty Butron Smith v. Charles Liberis and sureBET Casinos, Inc.
On or about January 26, 2000, Betty Butron Smith filed a law suit in the
United States District Court for the Southern District of Texas, Brownsville
Division, against Charles Liberis, the Company, and Casino Padre Investment
Company. The suit alleges wrongful termination, fraud and inducement, libel,
slander, and defamation. Although management believed that there was no support
for Plaintiff's factual allegations, management entered into a settlement
agreement for an amount that was less than the legal fees would have been
incurred in defending the matter. On March 10, 2000, a Compromise, Settlement,
Release, Indemnity and Confidentiality Agreement was entered into between the
Plaintiff and the Defendants.
o Newpark Shipbuilding-Pasadena, Inc. v. Vessel Casino Padre f/k/a/
Entertainer, its equipment, apparel, etc., in rem, and CSL Development
Corporation, Casino Padre Investment Company LLC, and sureBET Casinos,
Inc., its owners and/or operators, in personam, C.A. No. H-00-1014
Admiralty
On or about March 23, 2000, Newpark Shipbuilding-Pasadena, Inc. filed a
lawsuit in the United States District Court Southern District of Texas, Houston,
Division, against Vessel Casino Padre f/k/a/ Entertainer, its equipment,
apparel, etc., in rem, and CSL Development Corporation, Casino Padre Investment
Company LLC, and sureBET Casinos, Inc., seeking the sum of $139,193.36 for
repair work on the M/V Entertainer. The Defendants dispute the amount of the
claim, have posted a bond in the amount claimed and have counterclaimed against
Newpark Shipbuilding-Pasadena, Inc. for deceptive trade practices, damages for
improper workmanship and damages for delays caused by Newpark
Shipbuilding-Pasadena, Inc.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
- --------------------------------------------------------------------------------
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
- --------------------------------------------------------------------------------
During the last three years, the Company issued and sold unregistered
securities as described below:
During the twelve months ended March 31, 1998, the company issued
restricted stock totaling 271,062 shares valued at $275,535 in exchange for the
elimination of interest on debt owed by the Company; 10,233 shares of restricted
common stock valued at $10,552 in exchange for services
16
<PAGE> 17
rendered and 116,667 shares of restricted common stock valued at $327,669 in
exchange for the elimination of debt owed by the Company. A breakdown of these
issues is as follows:
<TABLE>
<CAPTION>
DATE NAME NO OF SHARES REASON
<S> <C> <C> <C>
May 26, 1997 Jeffrey T. Wilson 16,667 Interest on debt
May 26, 1997 Imperial Petroleum 116,667 Conversion Note Payable
June 24, 1997 Richard Pizitz 1,575 Interest on debt
June 24, 1997 Michael Pizitz 1,575 Interest on debt
June 24, 1997 Thomas J. Patrick 4,167 Interest on debt
June 24, 1997 J.R. Roth & Associates 1,167 Services
August 15, 1997 Carolyn Hill 167 Interest on debt
August 15, 1997 Earl Frudeger 33 Interest on debt
August 15, 1997 Howard Farmer 1667 Interest on debt
August 15, 1997 Andrew Bodulti 1,400 Services
August 15, 1997 World Equity Group 333 Services
August 15, 1997 Matrix Capital 333 Services
August 27, 1997 John Matthews 333 Services
August 27, 1997 Robert F. Scheman 1,078 Interest on debt
August 27, 1997 Terry Underwood 539 Interest on debt
August 27, 1997 Don C. Fee 494 Interest on debt
August 27, 1997 Earl Frudeger 156 Interest on debt
August 27, 1997 David Shedelbower 839 Interest on debt
August 27, 1997 Eric Sanders 1,047 Interest on debt
August 27, 1997 David Gilson 1,356 Interest on debt
August 27, 1997 Stephen S. Buckly 1,075 Interest on debt
August 27, 1997 Rodney E. Schultz 790 Interest on debt
August 27, 1997 Jeffrey T. Wilson 55,334 Interest on debt
November 17, 1997 George Hagen 491 Interest on debt
November 17, 1997 John Nordhaus 1,153 Interest on debt
November 17, 1997 Robert Novenson 1,040 Interest on debt
November 17, 1997 Jeff Rogee 1,080 Interest on debt
November 17, 1997 Roman Fortin 1,046 Interest on debt
November 17, 1997 John Byrne 3,334 Interest on debt
November 17, 1997 Thomas J. Patrick 1,667 Interest on debt
November 17, 1997 David Winkler 1,095 Interest on debt
November 17, 1997 Richard Wagner 755 Interest on debt
March 26, 1998 John Byrne 16,667 Interest on debt
March 26, 1998 Ret.Trust Princeton 8,334 Interest on debt
March 26, 1998 Bennie Avrahami 37,500 Interest on debt
March 26, 1998 Jeffrey T. Wilson 16,667 Interest on debt
March 26, 1998 Imperial Petroleum 83,334 Interest on debt
March 26, 1998 Howard Farmer 8,334 Interest on debt
March 28, 1998 Credit Mobil 6,667 Services
</TABLE>
17
<PAGE> 18
During the twelve months ended March 31, 1999, the Company issued
restricted stock of 83,333 shares valued at $100,000 in exchange for cash and
41,859 shares of restricted common stock valued at $8,790 in exchange for
services. A breakdown of these issues is as follows:
<TABLE>
<CAPTION>
DATE NAME NO. OF SHARES REASON
<S> <C> <C> <C>
August 8, 1998 Lambert LLC/DNS Ent. 83,333 Cash
January 7, 1999 HN Corp 8,334 Services
January 7, 1999 Phillip Archer 16,857 Services
February 19, 1999 Hille Zola 8,334 Services
February 19, 1999 George Wortley 8,334 Services
</TABLE>
On July 12, 1999, the Company issued 1,425,000 shares of restricted common
stock valued at $142,500 to officers, directors and employees for services
rendered to the Company in lieu of cash compensation. A breakdown of these
issues is as follows:
<TABLE>
<CAPTION>
DATE NAME NO. OF SHARES REASON
<S> <C> <C> <C>
July 12, 1999 Charles S. Liberis 1,000,000 Services
July 12, 1999 Wayne E. Marks 200,000 Services
July 12, 1999 Ronald G. Dunston 75,000 Services
July 12, 1999 Michael Georgilas 75,000 Services
July 12, 1999 Debbie M. Scullin 75,000 Services
</TABLE>
On October 27, 1999, the Company agreed to issue 5,000,000 shares to
Charles S. Liberis, its President, in exchange for 50 Units which at that time
represented 83.3% of the outstanding membership units in Casino Padre Investment
Company LLC.
On December 8, 1999, the Company sold 25,000 shares to John Vellianitis, an
accredited investor for $13,000.
On February 15, 2000, the Company entered into a Subscription Agreement
with Gary Williky for the purchase of no more than 500,000 units consisting of
one share of common stock and one warrant to purchase one share of common stock
at $0.687 for a period of five years. The purchase price for the units was
$0.65625 per share.
On February 1, 2000, the Company entered into a Subscription Agreement with
David Brannen for the purchase of no more than 500,000 units consisting of one
share of common stock and one warrant to purchase one share of common stock at
$0.687 for a period of five years. The purchase price was $0.65625 per share.
On March 22, 2000, the Company sold 100,000 shares to Wynn Betts, an
accredited Investor, for $100,000.
The sale and issuance of securities and the transactions described above
were deemed to be exempt of registration under the Securities Act by virtue of
Section 4(2). Appropriate legends were affixed to stock certificates issued in
the above transactions. Some restrictive legends were imposed in connection with
any subsequent sales of these such securities. The securities were offered and
sold by the Company without any underwriters. All of the purchasers were deemed
to be sophisticated with respect to the investment and securities of the Company
by virtue of their financial condition and/or relationship to members of the
management of the Company.
18
<PAGE> 19
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
- --------------------------------------------------------------------------------
Section 16-10a-902 et seq. of the Utah Business Corporation Act and Article
XII of the Company's Articles of Incorporation permit the Company to indemnify
its officers and directors and certain other persons against expenses in defense
of a suit to which they are parties by reason of such office, so long as the
persons conducted themselves in good faith and the persons reasonably believed
that their conduct was in the Company's best interests or not opposed to the
Company's best interests, and with respect to any criminal action or proceeding,
had no reasonable cause to believe their conduct was unlawful. Indemnification
is not permitted in connection with a proceeding by or in the right of the
corporation in which the officer or director was adjudged liable to the
corporation or in connection with any other proceeding charging that the officer
or director derived an improper personal benefit, whether or not involving
action in an official capacity.
PART F/S
See pages beginning with F-1.
PART III
The following exhibits are included with this registration statement:
REGULATION
S-B
NUMBER DOCUMENT
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure Corp.
3.1 Articles of Incorporation, as amended
3.2 Bylaws, as amended
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc.
10.2 Management Contract with Casino Padre Investment Company, LLC
10.3 Lilly Belle lease
10.4 South Padre Island Sublease and Dockage Agreement
10.5 Charter Agreement with CSL Development Corporation
10.6 Operating Agreement of Casino Padre Investment Company, LLC
21 Subsidiaries of the Registrant
27 Financial Data Schedule
19
<PAGE> 20
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUREBET CASINOS, INC.
Date: April 5, 2000 By: /s/ Charles S. Liberis
-------------------------------------
Charles S. Liberis, President
20
<PAGE> 21
sureBET CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
(Unaudited) Audited
December 31 March 31
--------------------------
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash $ 83,308 -- --
Accounts Receivable 36,776 -- --
----------- ----------- -----------
Total Current Assets 120,085 -- --
Fixed Assets (Net of Depreciation) 383,469
Other Assets 11,220 -- --
----------- ----------- -----------
Total Assets $ 514,774 -- --
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 163,226 -- --
Other Payables 45,340 -- --
Minority Interest Casino Padre 60,409
Liabilities of discontinued operations 1,310,566
----------- ----------- -----------
Total Liabilities $ 268,975 -- $ 1,310,566
Stockholders' Equity (Deficit)
Preferred stock, 5,000,000 shares authorized,
$1.00 par value, none issued or outstanding
Common Stock 50,000,000 shares authorized,
$.001 par value, 7,490,050, 1,040,050 and
914,858 shares issued and outstanding 7,490 1,040 915
Additional paid-in capital 5,217,013 4,567,963 4,459,298
Accumulated deficit (4,978,704) (4,569,003) (5,770,417)
----------- ----------- -----------
Total stockholders equity (deficit) 245,799 -- (1,310,204)
----------- ----------- -----------
$ 514,774 $ -- $ 362
=========== =========== ===========
</TABLE>
F-1
<PAGE> 22
sureBET CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited) Audited
Nine Months ------------------------
Ended Year Ended March 31
December 31 ------------------------
1999 1999 1998
------------ ----------- ---------
REVENUES
<S> <C> <C> <C>
Casino Revenue $ 163,445
Cost of Goods Sold 17,637
-----------
Gross Profit 145,807
DEPARTMENTAL EXPENSES:
Casino Department 79,224
Marine Department 142,601
Administrative Department 163,352
Sales & Marketing 53,791
Food & Beverage 21,902
Depreciation & Amortization 12,548
Other Expenses 142,500
----------- ----------- ---------
Total Operating Expenses 615,917
Net Loss from continuing operations $ (470,110)
Allocation of Minority Interest 60,409
Gain on transfer of net liabilities to Imperial 1,561,127
Operating losses from discontinued operations (359,713) (617,502)
----------- ----------- ---------
Net losses from discontinued operations 1,201,414 (617,502)
Net Income (Loss) $ (409,701) $ 1,201,414 $(617,502)
=========== =========== =========
Basic net income (loss) per common share:
From continuing operations $ (0.13) -- --
From discontinued operations 1.23 (0.80)
----------- ----------- ---------
Net Income (Loss) $ (0.13) $ 1.23 $ (0.80)
=========== =========== =========
Weighted average shares outstanding 3,106,717 979,489 769,348
=========== =========== =========
</TABLE>
F-2
<PAGE> 23
sureBET CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
--------------------------- Paid-in Earnings
Shares Amount Capital (Deficit) Total
--------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1997 516,896 $ 517 $3,845,940 $(5,152,915) $(1,306,458)
Common stock issued for interest on
debt 271,062 271 275,264 -- 275,535
Common Stock issued for services
rendered 10,233 10 10,542 -- 10,552
Conversion of Notes payable to
stockholders equity 116,667 117 327,552 -- 327,669
Net loss -- (617,502) (617,502)
--------- ------ ---------- ----------- -----------
Balances at March 31, 1998 914,858 915 4,459,298 (5,770,417) (1,310,204)
Common stock issued for cash 83,333 83 99,917 -- 100,000
Common Stock issued for services
rendered 41,859 42 8,748 8790
Net Income (Loss) -- -- -- 1,201,414 1,201,414
--------- ------ ---------- ----------- -----------
Balances at March 31, 1999 1,040,050 1,040 4,567,963 (4,569,003) --
Common stock issued for cash 25,000 25 12,975 13,000
Common Stock issued for services
rendered 1,425,000 1425 141,075 142,500
Conversion of Notes payable to
stockholders equity 5,000,000 5000 495,000 500,000
Net Income (Loss) -- -- -- (409,701) (409,701)
--------- ------ ---------- ----------- -----------
Balances at December 31, 1999 7,490,050 $7,490 $5,217,013 $(4,978,704) $ 245,799
</TABLE>
F-3
<PAGE> 24
sureBET CASINOS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited) Audited
Nine Months ------------------------
Ended Year Ended March 31
December 31 ------------------------
1999 1999 1998
----------- ----------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $(409,701) $ 1,201,414 $(617,502)
Adjustments to reconcile net loss to net cash
used by discontinued operating activities:
Gain on transfer of net liabilities to Imperial (1,561,127)
Issuance of stock for services 142,500 8,790 286,087
Change in other Assets
Increase in receivables (36,776)
Increase in fixed assets (383,469)
Increase in other assets (11,220)
Change in Net Liabilities
Discontinued Operations 250,561 328,752
Continuing Operations 268,975
--------- ----------- ---------
Net cash provided by operations (429,692) (100,362) (2,663)
Cash flow from financing activities:
Issuance of common stock for cash 13,000 100,000
Issuance of common stock for payments 500,000
--------- ----------- ---------
Net cash provided by financing activities 513,000 100,000 --
Net Increase (decrease) in cash 83,308 (362) (2,663)
Cash at beginning of period -- 362 3,025
--------- ----------- ---------
Cash at end of period $ 83,308 $ -- 362
========= =========== =========
</TABLE>
F-4
<PAGE> 25
sureBET CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED)
SUMMARY:
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of
sureBet Casinos Inc. and its majority-owned subsidiaries (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the rules and regulations of the U.S.
Securities and Exchange Commission. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
corporate financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended December 31, 1999 are not necessarily indicative of the results that may
be expected for the year ending March 31, 2000.
The accompanying condensed consolidated financial statements, and related notes
thereto, should be read in conjunction with the audited financial statements of
the Company, and notes thereto, for the year ended March 31, 1999 included as an
addendum to this filing.
1. DISCONTINUED OPERATIONS AND REVERSE MERGER
During the years ended March 31, 1999 and 1998 and the periods ended August 31,
1999 and 1998, sureBET Casinos, Inc. ("the Company") had no operating assets and
has been investigating the acquisition of an operating business. The Company
changed its name on June 24, 1999 from Wexford Technology, Incorporated. In
connection with an Agreement to Exchange Stock with U.S. Gaming and Leisure
Corp. ("USG&L") (see below), the Company entered into an Asset Purchase
Agreement (the "Agreement") on March 5, 1999 with its controlling shareholder,
Imperial Petroleum, Inc. ("Imperial"). The Agreement provides that Imperial
would acquire all the assets and liabilities of the Company. No consideration
was exchanged in return for the sale of the net liabilities of the Company. As a
result of the Agreement, the Company has no assets or liabilities as of March
31, 1999 or August 31, 1999.
Accordingly, as a result of the Company's liquidation and abandonment of its
assets and liabilities to a "shell" status, the Company has accounted for its
former operations as discontinued for all periods presented. The common stock
issued for services for the period ended August 31, 1999 has been reported as
continuing operations since the shares were issued to new continuing management
of the Company.
In connection with the Agreement to Exchange Common Stock with USG&L, dated May
12, 1999, which is contingent on a private placement which has not been
completed, the Company will issue 6,000,000 new common shares to stockholders of
USG&L for 100% of the outstanding shares of USG&L. As a result of the tax-free
transaction, USG&L will become a wholly owned subsidiary of the Company. The
owners of USG&L obtained effective control Of the Company in July 1999 by
obtaining control of the Board of Directors of the Company. USG&L is presently
in the business of operating a cruise ship and, after a private offering to
raise additional capital, intends to also enter the gaming business. The
transaction will be accounted for as a reverse acquisition whereby USG&L will be
the acquiring company for accounting purposes.
On June 7, 1999, there was a change in the Board of Directors of the Company.
The new board changed the Company's business strategy and decided to enter into
the casino business. On June 24, 1999, the Articles of Incorporation of the
Company were amended to change the name of the Company to sureBET Casinos, Inc.
F-5
<PAGE> 26
sureBET CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
(UNAUDITED)
Under the direction of its new management, the Company intends to develop,
acquire, joint venture, manage, and operate gaming establishments with an
initial focus on water-based gaming, the emerging gaming markets, and the
rehabilitation and reorganization of casinos that are underperforming
financially.
On October 1, 1999, the Company entered into a Management Contract with Casino
Padre Investment Company, LLC, a Nevada limited liability company. Under the
terms of the contract, the Company has an exclusive agreement to operate the
gaming ship M/V Entertainer and the gaming operations located on the ship on
behalf of and for the account of Casino Padre Investment Company, LLC.
On October 27, 1999, the Company acquired 50 membership units in Casino Padre
Investment Company LLC in exchange for 5,000,000 shares of the common stock of
the Company. Immediately following the transaction, the Company owned 83% of
Casino Padre Investment Company LLC. The shares were acquired from Charles S.
Liberis, the President of the Company. The LLC was formed on September 14, 1999
and at the time of the acquisition, was still in a developmental stage. Casino
Padre commenced operations on November 18, 1999. As of March 29, 2000, the
Company owns 74% of the LLC. See Part I - Item 7. Certain Relationships and
Related Transactions.
On December 20, 1999, the Company entered into an agreement with Black Hawk
Hotel Corporation, an unaffiliated entity, to lease Lilly Belle's Casino, an
existing casino facility located in Black Hawk, Colorado. Pursuant to the terms
of the lease, the Company has an option to purchase the premises. The lease is
contingent on the Company receiving approval for the transaction and issuance of
regulatory licenses from the Colorado Gaming Commission.
M/V Entertainer (Texas) Operations
The Company operates the M/V Entertainer as a casino boat, conducting day and
evening cruises of approximately six hours each from South Padre Island, Texas.
In addition to casino operations, the cruises feature a variety of shipboard
activities including sightseeing, live music, and other entertainment. The
Company markets its cruises and conducts its casino operations in international
waters in such a manner as to comply with applicable Federal and State laws and
regulations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Discontinued Operations
See Note I regarding the accounting for the discontinued business operations of
the Company.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments, with an original maturity of three months or less when purchased,
to be cash equivalents.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 utilizes the asset and liability method of computing deferred income taxes.
The objective of the asset and liability method is to establish
F-6
<PAGE> 27
sureBET CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
(UNAUDITED)
deferred tax assets and liabilities for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Net Loss Per Common Share and Reverse Stock Split
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than was
formerly used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilutive
earnings per share reflects the potential dilution of securities that could
share in the earnings of the Company. Because the Company has no potential
dilutive securities, the accompanying presentation is only of basic loss per
share. All share and per share amounts in the accompanying financial statements
have been retroactively restated as a result for a 1 -for-6 reverse stock split
on May 3, 1999 and a 1-for-5 reverse split on November 17, 1997.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 129, Disclosure of Information
about Capital Structure ("SFAS 129"), effective for periods ending after
December 15, 1997, establishes standards for disclosing information about an
entity's capital structure. SFAS 129 requires disclosure of the pertinent rights
and privileges of various securities outstanding (stock, options, warrants,
preferred stock, debt and participating rights) including dividend and
liquidations preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 has had no
effect on the Company as it currently discloses the information specified.
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position are unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
SFAS 132, Statement of Financial Accounting Standards (SFAS) 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits," revises standards
for disclosures regarding pensions and other postretirement benefits. It also
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis. This statement
does not change the
F-7
<PAGE> 28
sureBET CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
(UNAUDITED)
measurement or recognition of the pension and other postretirement plans. The
financial statements are unaffected by implementation of this new standard.
SFAS 133, Statement of Financial Accounting Standards (SFAS) 133, "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for sale security, or a foreign-currency-denominated forecasted
transaction. Because the Company has no derivatives, this accounting
pronouncement has no effect on the Company's financial statements.
3. RESULTS OF OPERATIONS
The sole source of revenue for the Company through December 31, 1999 was derived
from the operation of Casino Padre. Casino Padre began operations on November
18, 1999 and for the two months ended December 1999 the Company incurred a net
loss of $409,701.
For the nine months ended December 31, 1999, the Company's pro rata share of the
operating loss of Casino Padre was $188,671. During that period, revenues from
operations were $163,445 while cost of sales were $17,637 and operating expenses
were $772,667. A total of $60,409 was allocated to the minority interest in
Casino Padre.
General and administrative expenses for the nine months ended December 31, 1999
totaled $163,352. A total of $79,224 was expended for the operation of the
casino and $142,601 for the operation of the vessel. Sales and marketing
expenses were $53,791 for the period with an additional $21,902 being expended
to support the food and beverage department. Depreciation and amortization for
the nine months ending December 31, 1999 was $12,548. In addition, $142,500 was
attributable to the issuance of stock for services rendered in connection with
the reorganization of the Company.
Liquidity and Capital Resources
At December 31, 1999, the Company had a working capital deficiency of $148,890.
The Company does not believe that it will be able to meet its normal operating
costs and expenses from management fees and cash flow of Casino Padre.
The cash requirements of funding the Company's operations and expansion have
exceeded cash flow from operations. To date, the Company has satisfied its
capital needs primarily through debt and equity financing. During the nine
months ended December 31, 1999, the Company issued 1,425,000 shares of Common
Stock for services valued at $142,500, sold 25,000 shares for cash of $13,000,
and issued 5,000,000 shares in lieu of $500,000 in payments. The Company
continually explores raising additional capital through such means.
The Company believes that it will be able to raise additional capital through
debt and equity financing which, along with anticipated cash from operations,
will be sufficient to meet the Company's current working capital needs for at
least the next twelve months. However, there can be no assurance that the
Company will not need to raise additional capital sooner, particularly to take
advantage of any expansion opportunities, not currently anticipated that may
become available. In such event, there can be no
F-8
<PAGE> 29
sureBET CASINOS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
(UNAUDITED)
assurance that additional capital will be available at all, at an acceptable
cost, or on a basis that is timely to allow the Company to finance any such
opportunities.
Forward Looking Statements
Except for historical information contained herein, the matters discussed in
this Item 6, in particular, statements that use the words "believes", "intends",
"anticipates", or "expects" are intended to identify forward looking statements
that are subject to risks and uncertainties including, but not limited to,
inclement weather, mechanical failures, increased competition, financing,
governmental action, environmental opposition, legal actions, and other
unforeseen factors.
The development of the Black Hawk, Colorado project, in particular, is subject
to additional risks and uncertainties, including, but not limited to, risks
relating to permitting, financing, the activities of environmental groups, the
outcome of litigation and the actions of federal, state, or local governments
and agencies. The results of financial operations reported herein are not
necessarily an indication of future prospects of the Company. Future results may
differ materially.
4. COMMON STOCK
During the year ended March 31, 1998, the Company issued 116,667 of common stock
for conversion of notes payable to Imperial. The Company also issued 271,062
shares of common stock for interest on other notes payable. The shares issued
for interest were valued at $1.48 per share, the amount of interest accrued. The
Company also issued 10,233 shares for services rendered during the year.
During the year ended March 31, 1999, the Company issued 83,333 shares for cash
of $100,000 and 41,859 shares for services valued at $8,790. The shares for
services were valued at the vendors' invoiced cost.
During the period ended August 31, 1999, the Company issued 1,425,000 shares of
common stock to officers and directors for services rendered. The shares were
valued at the most recent value based on issuance of stock at vendors' invoiced
cost.
On October 27, 1999, the Company agreed to issue 5,000,000 shares to Charles S.
Liberis, its President, in exchange for 50 Units, which at that time represented
83.3% of the outstanding membership units in Casino Padre Investment Company
LLC.
On December 8, 1999, the Company sold 25,000 shares to John Vellianitis, an
accredited investor for $13,000.
F-9
<PAGE> 30
SUREBET CASINOS, INC.
FINANCIAL STATEMENTS
March 31, 1999 and 1998
with
Independent Auditors' Report
-------------------------------
F-10
<PAGE> 31
SUREBET CASINOS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-12
Balance Sheets for the Five Month Period Ended
August 31, 1999 (Unaudited) and the Years Ended
March 31, 1999 and 1998 F-13
Statements of Operations for the Five Months Ended
August 31, 1999 and 1998 (Unaudited) and the
Years Ended March 31, 1999 and 1998 F-14
Statements of Changes in Stockholders' Equity (Deficit)
for the Five Months Ended August 31, 1999 (Unaudited)
and for the Years Ended March 31, 1999 and 1998 F-15
Statements of Cash Flows for the Five Months Ended
August 31, 1999 and 1998 (Unaudited) and for the
Years Ended March 31, 1999 and 1998 F-16
Notes to Financial Statements F-17-21
</TABLE>
F-11
<PAGE> 32
[JACKSON & RHODES P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
SureBET Casinos, Inc.
We have audited the accompanying balance sheets of SureBET Casinos, Inc. as of
March 31, 1999 and 1998, and the related statements of operations, changes in
stockholders' equity and cash flows. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SureBET Casinos, Inc. as of
March 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/Jackson & Rhodes P.C.
Dallas, Texas
October 11, 1999
F-12
<PAGE> 33
SUREBET CASINOS, INC.
BALANCE SHEETS
AUGUST 31, 1999 AND MARCH 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1999 1998
(Unaudited)
<S> <C> <C> <C>
Cash $ -- $ -- $ 362
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Net liabilities of discontinued operations $ -- $ -- $ 1,310,566
(Note 1)
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 5,000,000 shares authorized,
$ 1. 00 par value, none issued or outstanding
(Note 5) - --
Common stock, 50,000,000 shares authorized,
$.001 par value, 2,465,050, 1,040,050 and
914,858 shares issued and outstanding 2,465 1,040 915
Additional paid-in capital 4,709,038 4,567,963 4,459,298
Accumulated deficit (4,711,503) (4,569,003) (5,770,417)
Total stockholders' equity (deficit) (1,310,204)
$ -- $ -- $ 362
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-13
<PAGE> 34
SUREBET CASINOS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Five Months Ended August 31, Year Ended March 31,
1999 1998 1999 1998
(Unaudited)
<S> <C> <C> <C> <C>
General and administrative expenses $ 142,500 $ -- $ $
----------- ----------- ----------- -----------
Net loss from continuing operations (142,500) --
Discontinued Operations (Note 1):
Gain on transfer of net liabilities to Imperial (Note 1) 1,561,127
Operating losses of discontinued business (87,155) (359,713) (617,502)
Net income (loss) from discontinued operations (87,155) 1,201,414 (617,502)
Net income (loss) $ (142,500) $ (87,155) $ 1,201,414 $ (617,502)
Basic net income (loss) per common share:
From continuing operations $ (0.09) $ -- $ -- $
From discontinued operations (0.14) 1.23 (0.80)
Net income (loss) $ (0.09) $ (0.14) $ 1.23 $ (0.80)
Weighted average shares outstanding 1,610,050 642,050 979,489 769,348
</TABLE>
See notes to financial statements.
F-14
<PAGE> 35
SUREBET CASINOS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 31, 1999 AND 1998
AND FIVE MONTHS ENDED AUGUST 31,1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional Retained
-------------------------- Paid-IN Earnings
Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1997 516,896 $ 517 $ 3,845,940 $(5,152,915) $(1,306,458)
Common stock issued for interest
on debt 271,062 271 275,264 275,535
Common stock issued for services
rendered 10,233 10 10,542 10,552
Conversion of notes payable to
stockholders' equity 116,667 117 327,552 327,669
Net loss (617,502) (617,502)
----------- ----------- ----------- ----------- -----------
Balances at March 31, 1998 914,858 915 4,459,298 (5,770,417) (1,310,204)
Common stock issued for cash 83,333 83 99,917 100,000
Common stock issued for services
rendered 41,859 42 8,748 8,790
Net income (loss) 1,201,414 1,201,414
----------- ----------- ----------- ----------- -----------
Balances at March 31, 1999 1,040,050 1,040 4,567,963 (4,569,003)
Common stock issued for services
rendered 1,425,000 1,425 141,075 142,500
Net income (loss) (142,500) (142,500)
----------- ----------- ----------- ----------- -----------
Balances at August 31, 1999 2,465,050 $ 2,465 $ 4,709,038 $(4,711,503) $
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-15
<PAGE> 36
SUREBET CASINOS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Five Months Ended August 31, Year Ended March 31
----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flow from discontinued operating activities:
Net income (loss) $ (142,500) $ (87,155) $ 1,201,414 $ (617,502)
Adjustments to reconcile net loss to net cash
used by discontinued operating activities:
Gain on transfer of net liabilities to Imperial (1,561,127)
Issuance of stock for interest and services 142,500 8,790 286,087
Change in net liabilities of discontinued
operations 1,568 250,56 328,752
----------- ----------- ----------- -----------
Net cash used by discontinued
operating activities (85,587) (100,362) (2,663)
----------- ----------- ----------- -----------
Cash flow from financing activities:
Issuance of common stock for Cash 100,000 100,000
----------- ----------- ----------- -----------
Net cash provided from financing activities 100,000 100,000
----------- ----------- ----------- -----------
Net increase (decrease) in cash 14,413 362 (2,663)
Cash at beginning of period 362 362 3,025
----------- ----------- ----------- -----------
Cash at end of period $ 14,775 $ $
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-16
<PAGE> 37
SUREBET CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999 AND 1998 (UNAUDITED)
AND MARCH 31, 1999 AND 1998
1. DISCONTINUED OPERATIONS AND REVERSE MERGER
During the years ended March 31, 1999 and 1998 and the periods ended August 31,
1999 and 1998, SureBET Casinos, Inc. ("the Company") had no operating assets and
has been investigating the acquisition of an operating business. The Company
changed its name on June 24, 1999 from Wexford Technology, Incorporated. In
connection with an Agreement to Exchange Stock with U.S. Gaming and Leisure
Corp. ("USG&L") (see below), the Company entered into an Asset Purchase
Agreement (the "Agreement") on March 5, 1999 with its controlling shareholder,
Imperial Petroleum, Inc. ("Imperial"). The Agreement provides that Imperial
would acquire all the assets and liabilities of the Company. No consideration
was exchanged in return for the sale of the net liabilities of the Company. As a
result of the Agreement, the Company has no assets or liabilities as of March
31, 1999 or August 31, 1999.
Accordingly, as a result of the Company's liquidation and abandonment of its
assets and liabilities to a "shell" status, the Company has accounted for its
former operations as discontinued for all periods presented. The common stock
issued for services for the period ended August 31, 1999 has been reported as
continuing operations since the shares were issued to new continuing management
of the Company.
In connection with the Agreement to Exchange Common Stock with USG&L, dated May
12, 1999, which is contingent on a private placement which has not been
completed, the Company will issue 6,000,000 new common shares to stockholders of
USG&L for 100% of the outstanding shares of USG&L. As a result of the tax-free
transaction, USG&L will become a wholly owned subsidiary of the Company. The
owners of USG&L obtained effective control Of the Company in July 1999 by
obtaining control of the Board of Directors of the Company. USG&L is presently
in the business of operating a cruise ship and, after a private offering to
raise additional capital, intends to also enter the gaming business. The
transaction will be accounted for as a reverse acquisition whereby USG&L will be
the acquiring company for accounting purposes.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Discontinued Operations
See Note I regarding the accounting for the discontinued business operations of
the Company.
Statement of Cash Flows
For statement of cash flow purposes, the Company considers short-term
investments, with an original maturity of three months or less when purchased,
to be cash equivalents.
F-17
<PAGE> 38
SUREBET CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 utilizes the asset and liability method of computing deferred income taxes.
The objective of the asset and liability method is to establish deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Net Loss Per Common Share and Reverse Stock Split
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than was
formerly used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilutive
earnings per share reflects the potential dilution of securities that could
share in the earnings of the Company. Because the Company has no potential
dilutive securities, the accompanying presentation is only of basic loss per
share. All share and per share amounts in the accompanying financial statements
have been retroactively restated as a result for a 1 -for-6 reverse stock split
on May 3, 1999 and a 1-for-5 reverse split on November 17, 1997.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 129, Disclosure of Information
about Capital Structure ("SFAS 129"), effective for periods ending after
December 15, 1997, establishes standards for disclosing information about an
entity's capital structure. SFAS
F-18
<PAGE> 39
SUREBET CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
129 requires disclosure of the pertinent rights and privileges of various
securities outstanding (stock, options, warrants, preferred stock, debt and
participating rights) including dividend and liquidations preferences,
participant rights, call prices and dates, conversion or exercise prices and
redemption requirements. Adoption of SFAS 129 has had no effect on the Company
as it currently discloses the information specified.
In June 1997, the Financial Accounting Standards Board issued two new disclosure
standards. Results of operations and financial position are unaffected by
implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive
Income", establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS 13 1, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decisionmaker in deciding how to allocate resources and in assessing
performance.
SFAS 132, Statement of Financial Accounting Standards (SFAS) 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits," revises standards
for disclosures regarding pensions and other postretirement benefits. It also
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis. This statement
does not change the measurement or recognition of the pension and other
postretirement plans. The financial statements are unaffected by implementation
of this new standard.
F-19
<PAGE> 40
SUREBET CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
SFAS 133, Statement of Financial Accounting Standards (SFAS) 133, "Accounting
for Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign currency exposure of
a net investment in a foreign operation, an unrecognized firm commitment, an
available-for sale security, or a foreign-currency-denominated forecasted
transaction. Because the Company has no derivatives, this accounting
pronouncement has no effect on the Company's financial statements.
3. INCOME TAXES
At August 31, 1999 the Company had net operating loss carryforwards totaling
approximately $4,700,000 available to reduce future taxable income through the
year 2014. Due to changes in control of the Company, these carryforwards are
limited on an annual basis.
Deferred taxes are determined based on temporary differences between the
financial statement and income tax basis of assets and liabilities as measured
by the enacted tax rates which will be in effect when these differences reverse.
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
August 31, March 31,
----------- --------------------------
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net operating loss carryforwards $ 1,598,000 $ 1,530,000 $ 1,940,000
Valuation allowance (1,598,000) (1,530,000) (1,940,000)
Net defer-red tax asset $ $ $
</TABLE>
The Company has recorded a full valuation allowance against all deferred tax
assets because it could not determine whether it was more likely than not that
the deferred tax asset would be realized.
F-20
<PAGE> 41
SUREBET CASINOS, INC.
NOTES TO FINANCIAL STATEMENTS
4. COMMON STOCK
During the year ended March 31, 1998, the Company issued 116,667 of common stock
for conversion of notes payable to Imperial. The Company also issued 271,062
shares of common stock for interest on other notes payable. The shares issued
for interest were valued at $1.48 per share, the amount of interest accrued. The
Company also issued 10,233 shares for services rendered during the year.
During the year ended March 31, 1999, the Company issued 83,333 shares for cash
of $100,000 and 41,859 shares for services valued at $8,790. The shares for
services were valued at the vendors' invoiced cost.
During the period ended August 31, 1999, the Company issued 1,425,000 shares of
common stock to officers and directors for services rendered. The shares were
valued at the most recent value based on issuance of stock at vendors' invoiced
cost.
5. CONTINGENT LIABILITIES
Concentration of Credit Risk
The Company invests its cash and certificates of deposit primarily in deposits
with major banks. Certain deposits, at times, are in excess of federally insured
limits. The Company has not incurred losses related to its cash.
6. DISCONTINUED OPERATIONS
Following is a summary of the net liabilities of discontinued operations as of
March 3 1, 1998:
<TABLE>
<S> <C>
Accrued liabilities, principally accrued
salaries to Officer $ 757,421
Accounts payable 30,290
Notes payable 522,855
----------
$1,310,566
</TABLE>
Notes payable consisted of 10% notes payable to various individuals and to
Imperial. Interest has been paid by the issuance of common stock. The Company
has received a release of liability from all creditors.
F-21
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Agreement to Exchange Common Stock with U.S. Gaming & Leisure Corp.
3.1 Articles of Incorporation, as amended
3.2 Bylaws, as amended
10.1 Asset Purchase Agreement with Imperial Petroleum, Inc.
10.2 Management Contract with Casino Padre Investment Company, LLC
10.3 Lilly Belle lease
10.4 South Padre Island Sublease and Dockage Agreement
10.5 Charter Agreement with CSL Development Corporation
10.6 Operating Agreement of Casino Padre Investment Company, LLC
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2.1
2.1 Agreement to Exchange Common Stock with US Gaming & Leisure Corp.
<PAGE> 2
<TABLE>
<S> <C>
1. Exchange of Common Stock.........................................................................1
1.01 Exchange .........................................................................1
1.02 Closing ..........................................................................1
1.03 Disposition of Wexford's Current Business Interests and Subsidiaries .............1
2. Representations and Warranties of the USGL Stockholders .........................................2
2.01 Authorization ....................................................................2
2.02 Non-contravention ................................................................2
2.03 Ownership ........................................................................2
2.04 Speculative Nature and Risk ......................................................2
2.05 Federal or State Securities Laws .................................................2
2.06 Acquisition for Own Account ......................................................3
2.07 Limitations on Resale or Transfer ................................................3
3. Representations and Warranties Concerning USGL ..................................................3
3.01 Good Standing ....................................................................3
3.02 Capitalization ...................................................................3
3.03 Financial Statements .............................................................3
3.04 Undisclosed Liabilities ..........................................................4
3.05 Events Subsequent ................................................................4
3.06 Litigation .......................................................................4
3.07 Employment Matters ...............................................................4
3.08 Subsidiaries .....................................................................4
3.09 Tax Matters ......................................................................4
3.10 Properties .......................................................................4
3.11 Adverse Changes ..................................................................4
3.12 Books and Records ................................................................4
3.13 Independent Investigation of Wexford .............................................4
3.14 Disclosure .......................................................................5
4. Representations and Warranties of Wexford .......................................................5
4.01 Organization, Qualification and Corporate Power ..................................5
4.02 Capitalization ...................................................................5
4.03 Non-contravention ................................................................6
4.04 Subsidiaries .....................................................................6
4.05 Common Stock Trading Market ......................................................6
4.06 Financial Statements .............................................................6
4.07 Absence of Certain Changes .......................................................6
4.08 Events Subsequent ................................................................7
4.09 No Undisclosed Liabilities .......................................................7
4.10 Tax Matters ......................................................................7
4.11 Title to Properties ..............................................................8
4.12 Real Property Leases .............................................................8
4.13 Intellectual Property ............................................................8
4.14 Tangible Assets ..................................................................8
4.15 Inventory ........................................................................8
4.16 Litigation .......................................................................8
4.17 Books and Records ................................................................8
4.18 Certain Business Relationships with Wexford ......................................8
4.19 Independent Investigation of USGL ................................................8
4.20 Disclosure .......................................................................8
4.21 Employment Matters ...............................................................8
5. Expiration of Warranties ........................................................................8
5.01 Expiration of Warranties .........................................................8
6. Conduct and Transactions prior to Closing .......................................................9
6.01 New Directors and Officers .......................................................9
6.02 Private Placement ................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7. Shareholder Consents ............................................................................9
7.01 Consents..........................................................................9
8. Conditions to Closing ...........................................................................9
8.01 General Conditions ...............................................................9
8.02 Conditions of Obligations of Wexford .............................................9
8.03 Conditions to Obligation of the USGL Stockholders ...............................10
9. Indemnification ................................................................................11
9.01 Intentions of the Parties .......................................................11
9.02 Wexford and Imperial Petroleum, Inc. ............................................12
9.03 Imperial Indemnity ..............................................................12
9.04 USGL ............................................................................12
9.05 USGL Indemnity ..................................................................12
10. Actions at Closing ............................................................................13
10.01 Actions at the Closing ..........................................................13
10.02 Deliveries by Wexford ...........................................................13
10.03 Deliveries by the USGL Stockholders .............................................13
11. Termination ...................................................................................13
11.01 Termination of the Agreement ....................................................13
11.02 Effect of Termination ...........................................................14
12. General .......................................................................................14
12.01 Brokers and Finders .............................................................14
12.02 Press Releases and Public Announcements .........................................14
12.03 Schedules .......................................................................14
12.04 Survival of Covenants, Representations and Warranties ...........................14
12.05 Governing Law ...................................................................14
12.06 Notices .........................................................................14
12.07 No Assignment ...................................................................15
</TABLE>
<PAGE> 4
AGREEMENT TO EXCHANGE STOCK
THIS AGREEMENT TO EXCHANGE STOCK (the "Agreement"), dated as of the 12th
day of May 1999, by and between Wexford Technology,Incorporated, a Utah
corporation ("Wexford"), U.S. Gaming & Leisure, Corp.,a Nevada corporation
("USGL"), and those persons listed on Exhibit "A" attached hereto (such persons
listed on Exhibit "A" attached hereto are sometimes collectively referred to
herein as the "USGL Stockholders") and Imperial Petroleum, Inc. ("Imperial").
W I T N E S S E T H
WHEREAS, the USGL Stockholders and the Board of Directors of USGL and
Wexford deem it advisable and in the best interests of USGL, the USGL
Stockholders and Wexford that Wexford acquire 100% of the issued and outstanding
capital stock of USGL in accordance with the terms of this Agreement in exchange
for (1) 6,000,000 newly-issued shares of Wexford common stock (after adjustment
for a one for six reverse split) referred herein as the "Wexford Shares";
pursuant to this Agreement and applicable provisions of law (such transaction
being hereinafter referred to as the "USGL" Acquisition"); and
WHEREAS, in connection with and as a condition precedent to the USGL
Acquisition, Wexford will sell, assign, convey or otherwise dispose of all of
its current business activities and subsidiaries, such that at the time of the
USGL Acquisition, Wexford shall have no assets and no liabilities; and
WHEREAS, USGL will, at the time of the closing of the USGL/Wexford
Acquisition, have assets exceeding liabilities of at least $4.0 million
including assets and cash which may be acquired after this agreement by sale of
USGL of its shares, merger, or otherwise be held in escrow pending closing; and
WHEREAS, the Board of Directors of Wexford and the Board of Directors of
USGL have approved and adopted this Agreement; and
WHEREAS, the USGL Stockholders own and have the right to sell, transfer and
exchange 100% of the issued and outstanding capital stock of USGL to Wexford in
accordance with the terms of this Agreement and applicable provisions of law;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows:
1. Exchange of Common Stock.
1.01 Exchange. Subject to the terms and conditions herein set forth, at the
time of closing set forth in Section 1.02 hereof, Wexford will issue and
deliver or cause to be issued and delivered to the USGL Stockholders the
following: (1) a total of 6,000,000 shares of Wexford's authorized and
unissued common stock, par value $0.001 per share (the "Wexford Shares")
after giving consideration to a proposed one for five reverse split of the
capital stock of Wexford, in exchange for the conveyance by the USGL
Stockholders to Wexford of a total of 1,000,000 shares of USGL common stock
(the "USGL Shares"), representing 100% of the issued and outstanding
capital stock of USGL.
1.02 Closing. Subject to the terms and provisions of this Agreement, the
closing of the Wexford Acquisition will be at 10:00 a.m. at 1610 Barrancas
Avenue, Pensacola FL 32501 on or before June 30, 1999, or at such earlier
or later date or such other place as shall be mutually agreed upon by
Wexford and the USGL Stockholders, such date and time sometimes being
referred to herein as the "Closing" or "Closing Date."
1.03 Disposition of Wexford's Current Business Interests and Subsidiaries. In
connection with and as a precedent to the USGL Acquisition, Wexford shall
dispose of its current business interests and subsidiaries, including any
pending acquisitions other than the USGL Acquisition, such that at the time
of the USGL Acquisition Wexford shall have no assets and no liabilities. It
is further understood and agreed between USGL and Wexford that Wexford
shall receive releases of liability or satisfactions of indebtedness in
form and content
1
<PAGE> 5
satisfactory to USGL from all current creditors including, but not limited
to those creditors. It is expressly understood and agreed between USGL and
Wexford that as part of the sale, assignment, conveyance or other
disposition of the Wexford assets and liabilities that Wexford intends to
enter into agreements with its current directors or affiliated companies in
order to complete the dispositions and that Wexford does not intend to
obtain third party fairness opinions or any other review of the
dispositions.
2. Representations and Warranties of the USGL Stockholders.
Each of the USGL Stockholders severally, and not jointly, represents and
warrants to Wexford that, with respect to the USGL shares owned by such USGL
Stockholder as set forth on Exhibit "A" attached hereto, the statements
contained in this Section 2 are correct and complete as of the date of this
Agreement and except as otherwise provided for herein to the contrary will be
correct and complete as of the Closing Date as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 2.
2.01 Authorization. The USGL Stockholder has full power and authority to
execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the USGL Stockholder, enforceable in accordance with its
terms and conditions. The USGL Stockholder need not give any notice to,
make any filing with, or obtain any authorization, consent or approval of
any government, governmental agency, or other person in order to consummate
the transactions contemplated by this Agreement.
2.02 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any government,
governmental agency or court to which the USGL Stockholder is subject or
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any contract,
lease, sublease, license, sub-license, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness,
security interest, or other arrangement to which the USGL Stockholder is a
party or by which he is bound or to which any of his assets are subject.
2.03 Ownership. The USGL Stockholder holds of record and owns beneficially the
number of USGL Shares set forth opposite his name as set forth on Exhibit
"A" attached hereto. The USGL Stockholder holds his USGL Shares free and
clear of any restrictions on transfer (other than restrictions under
federal and state securities laws), claims, taxes, security interests,
options, warrants, rights, contracts, calls, commitments, equities and
demands. The USGL Stockholder is not a party to any option, warrant,
contract, call, put or other agreement or commitment providing for the
disposition or acquisition of any capital stock of USGL (other than this
Agreement). The USGL Stockholder is not a party to any voting trust, proxy
or other agreement or understanding with respect to the voting of any
capital stock of USGL.
2.04 Speculative Nature and Risk. The USGL Stockholders each understand and
acknowledge the speculative nature of and substantial risk of loss
associated with an investment in the Wexford Shares which may be subject to
substantial dilution. The USGL Stockholders each represent and warrant that
the Wexford Shares constitute an investment which is suitable and
consistent with their respective financial conditions and that they are
each able to bear the risks of this investment for an indefinite period of
time, which may include the total loss of their investment in Wexford. The
USGL Stockholders each further represent that they have adequate means of
providing for their respective current financial needs and corporate and
personal contingencies and no need for liquidity in their investment in
Wexford and that they each have sufficient financial and business
experience to evaluate the merits and risks of an investment in Wexford.
2.05 Federal or State Securities Laws. The USGL Stockholders each understand
and acknowledge that the Wexford Shares have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "1933 Act"),
or applicable state securities laws and the USGL Stockholders are each
aware that no federal or state agency has made any review, finding or
determination regarding the terms of their acquisition of the Wexford
Shares nor any recommendation or endorsement of the Wexford Shares as an
investment, and the USGL Stockholders must each forego the security, if
any, that such a review would provide.
2
<PAGE> 6
2.06 Acquisition for Own Account. The USGL Stockholders each understand and
acknowledge that the Wexford Shares are being offered and sold under
exemptions from registration provided by the 1933 Act and exemptions
provided by applicable state securities laws and the USGL Stockholders each
warrant and represent that the Wexford Shares are being acquired by them
solely for their own account, for investment purposes only, and not with a
view to or for the resale, distribution, subdivision or fractionalization
thereof. The USGL Stockholders each represent and warrant that they have no
agreement or other arrangement, formal or informal, with any person to
sell, transfer or pledge any part of the Wexford Shares or which would
guarantee them any profit or protect them against any loss with respect to
the Wexford Shares. Further, the USGL Stockholders have no plans to enter
into any such agreement or arrangement, and, consequently, they must each
bear the economic risk of an investment in the Wexford Shares for an
indefinite period of time.
2.07 Limitations on Resale or Transfer. The USGL Stockholders each understand
and acknowledge that the Wexford Shares will be "restricted" as defined in
Rule 144 under the Act and that therefore they cannot offer to sell, sell
or otherwise transfer or distribute the Wexford Shares without registration
thereof, which Wexford is not obligated to do, under both the Act and any
applicable state securities laws, or unless an exemption is, in the opinion
of Wexford's counsel, available to them under the Act and any applicable
state securities laws. Such exemption is not now available and it is not
anticipated that any such exemption will become available in the future.
The USGL Stockholders each further understand and acknowledge that the
restrictions on the transfer of the Wexford Shares will be noted on the
books of Wexford and that the stock certificate representing the Wexford
Shares will bear a written legend setting forth the restriction on the
transferability of the Wexford Shares in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
3. Representations and Warranties Concerning USGL.
USGL represents and warrants to Wexford that the statements contained in
this Section 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date except as otherwise provided
for herein to the contrary or as set forth in the disclosure schedule delivered
by USGL to Wexford on the date hereof and initialed by the parties (the "USGL
Disclosure Schedule"). Nothing in the USGL Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the USGL Disclosure Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
items itself). The USGL Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
3.
3.01 Good Standing. USGL is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada with full corporate
power to own and operate its properties and to carry on its business as and
in places where such properties are owned, operated and conducted.
3.02 Capitalization. The entire authorized capital stock of USGL consists of
25,000 of common stock, par value $0.00 per share, of which 1,000 shares
are issued and outstanding. All of the issued and outstanding shares of
USGL common stock have been duly authorized, are validly issued, fully
paid, and non-assessable. Notwithstanding anything in this Agreement to the
contrary, USGL may, after this Agreement, issue additional shares for cash
or assets.
3.03 Financial Statements. Attached as Section 3.03 of the USGL Disclosure
Schedule are the following financial statements (collectively, the "USGL
Financial Statements"): (i) unaudited balance sheet of USGL as of December
31, 1998 ("Most Recent USGL Balance sheet"); and (ii) unaudited statements
of operations, retained earnings and cash flows for the year ended December
31, 1998. The USGL Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
3
<PAGE> 7
throughout the periods covered thereby, are correct and complete and are
consistent with the books and records of USGL which books and records are
correct and complete.
3.04 Undisclosed Liabilities. Except to the extent reflected or reserved
against in the Most Recent USGL Balance Sheet on the dates shown, or as
set forth in Section 3.04 of the USGL Disclosure Schedule, as of those
dates, USGL had no liabilities or obligations of any material nature,
whether accrued, absolute, contingent or otherwise and, as of such dates,
knows nor has reasonable grounds to know any basis for the assertion
against USGL of any material liability of any nature or in any amount not
fully reflected or reserved against in the Most Recent USGL Balance Sheet.
3.05 Events Subsequent. Subsequent to the Most Recent USGL Balance Sheet and
except as set forth in Section 3.05 of the USGL Disclosure Schedule, USGL
has not (i) incurred any material liabilities or obligations, absolute or
contingent, except current liabilities and obligations under contracts
entered into in the ordinary course of business; (ii) declared or made any
payment or distribution to stockholders or purchased or redeemed any of
its capital stock; (iii) mortgaged or pledged or subjected to lien, charge
or any other encumbrance, any of its assets, tangible or intangible,
excepting extensions or renewals of liens for liabilities set forth on the
Most Recent USGL Balance Sheet; (iv) sold or transferred any of its
tangible assets or canceled any debts or claims except in each case in the
ordinary course of business; (v) made any capital expenditures other than
in the ordinary course of business; or (vi) incurred any material or
adverse losses or damages, to be involved in strikes, or other labor
disputes.
3.06 Litigation. Except as set forth in Section 3.06 of the USGL Disclosure
Schedule, there are no actions, suits or proceedings at law or in equity
pending or, to the knowledge of USGL, threatened against USGL seeking
damages nor are there any suits threatened or pending before any federal,
state or municipal government or any board, department or agency thereof
involving USGL. To the best of USGL's knowledge, USGL has no pending
violation proceedings relating to state or federal environmental
regulations.
3.07 Employment Matters. USGL is not a party to any employment contract with
any officer, director or other employee. USGL is not bound by a contract
with a labor union, pension or profit share plan or employee benefit plan,
other than as listed in Section 3.07 of the USGL Disclosure Schedule.
3.08 Subsidiaries. USGL has no subsidiaries.
3.09 Tax Matters. USGL has no knowledge or any reasonable grounds to know of
any tax deficiencies which might be asserted against USGL. Since the date
of the USGL Financial Statements, USGL has paid or has provided for
payment of all federal and state withholding and unemployment insurance
taxes and has filed all federal, state and local tax returns and reports
when due.
3.10 Properties. Section 3.10 of the USGL Disclosure Schedule sets forth a true
and complete list of all material leases, contracts, understandings,
commitments, plans or mortgages now in effect, to which USGL is a party,
or under which it is obligated, or which materially affect its properties.
USGL has complied with all material provisions of such leases, contracts,
understandings, commitments, plans and mortgages and is not in material
default with respect to any thereof.
3.11 Adverse Changes. There has been no material adverse change in the
condition, financial or otherwise, of USGL from that set forth in the Most
Recent USGL Balance Sheet. To the best of USGL's knowledge, USGL is not
aware of any facts that might result in any actions, suit or other
proceeding that would result in any adverse change in the financial
condition of USGL. The business, properties and assets reflected in the
USGL Financial Statements have not been materially and adversely affected
as a result of any fire, explosion, earthquake, accident, strike, lockout,
requisition or taking of property by any government or agency thereof,
flood, drought, embargo, riot, activities of armed forces or acts of God
or the public.
3.12 Booksand Records. All of the minute books, Stock certificate books and
stock transfer ledgers of USGL are complete and accurate in all material
respects.
3.13 Independent Investigation of Wexford. USGL confirms that it has received,
reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein) for purposes of
its
4
<PAGE> 8
acquisition of the Wexford Shares, the business prospects and leases of
Wexford. USGL acknowledges that (i) Wexford has limited financial
resources and will need additional sources of capital to implement its
current business plan, the availability of which is uncertain and cannot
be assured, and (ii) the Wexford Shares are a highly speculative
investment with a high degree of risk of loss by USGL of its investment
therein. USGL represents and warrants that in making the decision to
acquire the Wexford Shares, it has relied upon its own independent
investigation of Wexford and the independent investigations by its
representatives, including its own professional legal, tax and business
advisors, and that USGL and its representatives have been given the
opportunity to examine all relevant documents and to ask questions of and
to receive answers from Wexford, or person(s) acting on its behalf,
concerning the terms and conditions of acquisition by USGL of the Wexford
Shares and any other matters concerning an investment in Wexford, and to
obtain any additional information USGL deems necessary to verify the
accuracy of the information provided.
3.14 Disclosure. The representations and warranties contained in this Section 3
do not contain any material untrue statement of a fact or omit to state
any fact necessary in order to make the statements and information
contained in this Section 3 not misleading.
4. Representations and Warranties of Wexford
Wexford represents and warrants to the USGL Stockholders and USGL that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date except
as set forth in the disclosure schedule, Schedule 4, delivered by Wexford to the
USGL Stockholders and USGL on the date hereof and initialed by the parties (the
"Wexford Disclosure Schedule"). Nothing in the Wexford Disclosure Schedule shall
be deemed adequate to disclose an exception to a representation or warranty made
herein, however, unless the Wexford Disclosure Schedule identifies the exception
with reasonable particularity and describes the relevant facts in reasonable
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
items itself).
The Wexford Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Section
4.
4.01 Organization, Qualification and Corporate Power. Wexford is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Utah. Wexford is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature
of its business or the ownership or leasing of its properties requires
such qualification. Wexford has full corporate power and authority to
carry on the business in which it is engaged and to own and use the
properties owned and used by it. Section 4.01 of the Wexford Disclosure
Schedule lists the directors and officers of Wexford.
Wexford has made available for inspection by the USGL Stockholders correct
and complete copies of the Certificate of Incorporation and Bylaws of
Wexford (as amended to date). The minute books containing the records of
meetings of the stockholders, the Board of Directors and any committees of
the Board of Directors, the stock certificate books and the stock record
books of Wexford are correct and complete. Wexford is not in default under
or in violation of any provision of its Certificate of Incorporation or
Bylaws.
4.02 Capitalization. The entire authorized capital stock of Wexford consists of
(i) 50,000,000 shares of common stock, par value $0.001 per share, of
which 6,297,799 shares are issued and outstanding; (ii) 5,000,000 shares
of preferred stock, par value $0.001 per share , of which no shares are
issued and outstanding. All of the issued and outstanding shares have been
duly authorized, are validly issued, fully paid, and non-assessable and
are held of record by the respective Wexford shareholders as set forth in
Wexford's stock record books. There are no outstanding or authorized
options, warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights or other agreements or commitments to which Wexford is a
party or which are binding upon Wexford providing for the issuance,
disposition or acquisition of any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to Wexford. There are no voting trusts, proxies or any
other agreements or understandings with respect to the voting of the
capital stock of Wexford. Upon issuance, the Wexford Shares to be issued
to the USGL
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Stockholders pursuant to this Agreement will be duly authorized, validly
issued, fully paid and non-assessable.
4.03 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any government,
governmental agency or court to which the Wexford is subject or any
provision of its Certificate of Incorporation or Bylaws of Wexford or (ii)
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel or require any notice under any contract,
lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness,
security interest or other arrangement to which Wexford is a party or by
which it is bound or to which any of its assets is subject or result in the
imposition of any security interest upon any of its assets. Wexford is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government, governmental agency
or other person in order for Wexford to consummate the transactions
contemplated by this Agreement.
4.04 Subsidiaries. At the time of the USGL Acquisition, Wexford will not own,
directly or indirectly, any capital stock, security, partnership interest
or other interest of any kind in any corporation, partnership, joint
venture, association or other entity.
4.05 Common Stock Trading Market. The common stock of Wexford is eligible for
quotation and is quoted on the National Association of Securities Dealers
("NASD") OTC Bulletin Board under the symbol "WXFD" in accordance with the
applicable rules of the NASD and Securities and Exchange Commission ("SEC")
and is in compliance with applicable NASD and SEC rules for continuing
quotation on the NASD Bulletin Board. The broker-dealers which are
market-makers in the common stock of Wexford are listed in the Wexford
Disclosure Schedule under Section 4.05 ("Market-Makers") . Wexford has
furnished each Market-Maker and each other broker-dealer effecting
transactions in the Company's common stock with all information required by
SEC Rule 15c2-11. Wexford, its officers, directors and affiliates have
fully complied with any and all requests for information by the
Market-Makers and all other broker-dealers, whether or not acting in the
capacity of a market- maker, pursuant to SEC Rule 15c2-11. Any and all
information provided by Wexford to the Market-Makers and all other
broker-dealers, whether or not acting in the capacity of a market-maker,
was, at the time if was furnished, accurate in all material respects, did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading.
4.06 Financial Statements. Attached as Section 4.06 of the Wexford Disclosure
Schedule are the following Wexford financial statements (collectively, the
"Wexford Financial Statements") : (i) audited consolidated balance
(referred herein as the "Most Recent Wexford Balance Sheet")and
consolidated statements of income, changes in stockholders' equity,
statements of operations, retained earnings and cash flows for the two
years ended March 31, 1998 and March 31, 1999, and unaudited consolidated
balance sheets, statements of income, change in stockholder's equity, cash
flow as of and for the months of April and May 1999, and unaudited proforma
balance sheet reflecting the disposition of the assets and liabilities of
Wexford at the time of the USGL Acquisition, (referred herein as the
""Proforma Wexford Balance Sheet"). The Wexford Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby, are
correct and complete and are consistent with the books and records of
Wexford which books and records are correct and complete. All books and
records of Wexford will be turned over for inspection upon execution of
this agreement.
4.07 Absence of Certain Changes. Except as set forth in Section 4.06 of the
Wexford Disclosure Schedule, there has not been:
(i) Any event that has had or may reasonably be expected to have a Material
Adverse Effect;
(ii) Any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company;
(iii) Any alteration in any material term of any outstanding security of
the Company or any Subsidiary, other than as required by this Agreement;
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<PAGE> 10
(iv) Any (A) incurrence, assumption or guarantee by the Company or any
Subsidiary of any debt for borrowed money, (B) issuance or sale of any
securities convertible into or exchangeable for debt securities of the
Company or any Subsidiary or (C) issuance or sale of options or other
rights to acquire from the Company or any Subsidiary, directly or
indirectly, debt securities of the Company or any Subsidiary or any
securities convertible into or exchangeable for any such debt securities;
(v) any creation or assumption by the Company or any Subsidiary of any
Lien on any material asset lien;
(vi) any making of any loan, advance or capital contribution to or
investment in any person or entity;
(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any Subsidiary;
(viii) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other
right;
(ix) any change in any method of accounting or accounting practice by the
Company and Subsidiaries;
(x) any grant of any severance or termination pay to any officer or
employee of the Company or any Subsidiary;
(xi) any labor dispute, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or any
Subsidiary;
(xii) any agreement or arrangement made by the Company or any Subsidiary
to take any action which, if taken prior to the date hereof, would have
made any representation or warranty in this Section untrue or incorrect;
or
(xiii) any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other
ownership interests in or other securities of the Company or any
Subsidiary.
4.08 Events Subsequent. Subsequent to the Most Recent Wexford Balance Sheet and
except as set forth in Section 4.07 of the Wexford Disclosure Schedule and
except in connection with the sale or other disposition of assets and
liabilities as provided herein, Wexford has not (i) incurred any material
liabilities or obligations, absolute or contingent, except current
liabilities and obligations under contracts entered into in the ordinary
course of business; (ii) declared or made any payment or distribution to
stockholders or purchased or redeemed any of its capital stock; (iii)
mortgaged or pledged or subjected to lien, charge or any other
encumbrance, any of its assets, tangible or intangible, excepting
extensions or renewals of liens for liabilities set forth on the Most
Recent Wexford Balance Sheet; (iv) sold or transferred any of its tangible
assets or canceled any debts or claims except in each case in the ordinary
course of business; (v) made any capital expenditures other than in the
ordinary course of business; or (vi) incurred any material or adverse
losses or damages, to be involved in strikes, or other labor disputes.
4.09 No Undisclosed Liabilities. At the time of the USGL Acquisition, Wexford
will have no material liability of any kind whatsoever (and there is no
condition which could result in any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand against
it giving rise to any liability), except for liabilities set forth on the
face of the Wexford Balance Sheet (including any notes thereto).
4.10 Tax Matters. At the time of the USGL Acquisition, Wexford has no knowledge
or any reasonable grounds to know of any tax deficiencies which might be
asserted against Wexford. Since the date of the Wexford Financial
Statements, Wexford has paid or has provided for payment of all federal
and state withholding and unemployment insurance taxes and has filed all
federal, state and local tax returns and reports when due. Wexford shall
provide copies of tax returns for fiscal 1998 and fiscal 1999 at the time
of execution of this Agreement.
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4.11 Title to Properties. At the time of the USGL Acquisition, Wexford will own
no tangible property.
4.12 Real Property Leases. At the time of the USGL Acquisition, Wexford will
not be not a party to any lease or sublease of real property.
4.13 Intellectual Property. At the time of the USGL Acquisition, Wexford will
not own any Intellectual Property or rights.
4.14 Tangible Assets. At the time of the USGL Acquisition, Wexford will not own
or lease any tangible assets of any kind or nature.
4.15 Inventory. Wexford has no inventory of products, raw materials or other
supplies.
4.16 Litigation. Wexford (i) is not and will not on the date of closing be
subject to any unsatisfied judgment, order, decree, stipulation,
injunction or charge, and (ii) is a not presently a party and will not on
the date of closing be a party, and, to the knowledge of any of the
directors and officers (and employees with responsibility for litigation
matters) of Wexford, is not threatened to be made a party to any charge,
complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator.
4.17 Booksand Records. All of the minute books, stock certificate books and
stock transfer ledgers of Wexford are complete and accurate in all
material respects.
4.18 Certain Business Relationships with Wexford. Except as provided in the
Wexford Disclosure Schedule, none of the USGL shareholders and their
affiliates has been involved in any business arrangement or relationship
with Wexford within the past 36 months, and none of the USGL shareholders
and their affiliates owns any property or right, tangible or intangible,
which is used in the business of Wexford.
4.19 Independent Investigation of USGL. Wexford confirms that it has received,
reviewed, understands and has fully considered (including, without
limitation, the financial statements contained therein)for purposes of its
acquisition of the USGL Shares, the business prospects and leases of USGL.
Wexford acknowledges that (i) USGL has limited financial resources and
will need additional sources of capital to implement its current business
plan, the availability of which is uncertain and cannot be assured,
and(ii)the USGL Shares area highly speculative investment with a high
degree of risk of loss by Wexford of its investment therein. Wexford
represents and warrants that in making the decision to acquire the USGL
Shares, it has relied upon its own independent investigation of USGL and
the independent investigations by its representatives, including its own
professional legal, tax and business advisors, and that Wexford and its
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from USGL, or
person(s) acting on its behalf, concerning the terms and conditions of
acquisition by Wexford of the USGL shares and any other matters concerning
an investment in USGL, and to obtain any additional information Wexford
deems necessary to verify the accuracy of the information provided.
4.20 Disclosure. The representations and warranties contained in this Section 4
do not contain any material untrue statement of a fact or omit to state
any fact necessary in order to make the statements and information
contained in this Section 4 not misleading.
4.21 Employment Matters. Wexford is not a party to any employment contract with
any officer, director, or other employee. Wexford is not a party to any
type of employee benefit or retirement plan whatsoever. On the date of
closing, there will be no payments of any nature, due or accrued to
officers, directors, or employees nor any withholding or SSI payments due
or accrued.
5. Expiration of Warranties.
5.01 Expiration of Warranties. All of the representations and warranties of the
parties contained in this Agreement shall be true as of the date of
closing and shall survive the Closing for a period of one year from the
closing.
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6.Conduct and Transactions prior to Closing
6.01 New Directors and Officers. Within seven (7) days following the execution
of this Agreement, the current Board of Directors and the officers of
Wexford shall resign in favor of a newly elected Board comprising
individuals nominated by USGL.
6.02 Private Placement. The newly elected Board shall cause Wexford to conduct
a private placement in escrow of 500,000 shares of its common stock,
resulting in net proceeds of $1,000,000. The proceeds shall be earmarked
for the expansion of the business of USGL and not to pay any Wexford
liabilities.
7. Shareholder Consents.
7.01 Consents. Prior to Closing, USGL, the USGL Stockholders and Wexford shall
each use his or its respective reasonable efforts to obtain the consent or
approval of each person whose consent or approval shall be required in
order to permit USGL, the USGL Stockholders or Wexford, as the case may
be, to consummate the USGL Acquisition.
8. Conditions to Closing.
8.01 General Conditions. The obligations of the parties to effect the Wexford
Acquisition shall be subject to the following conditions:
(a) The Board of Directors and, to the extent required by law, the
shareholders of Wexford, shall have approved this Agreement in accordance
with applicable provisions of state law.
(b) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, filing or charge
would (i) prevent consummation of any of the transactions contemplated by
this Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of Wexford to acquire and own the USGL Shares, (iv) affect
adversely the right of the USGL Stockholders to acquire and own the
Wexford Shares; or (v) affect adversely the right of either Wexford or
USGL to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect).
(c) All governmental approvals, the absence of which would have a
materially adverse effect on Wexford or USGL, respectively, on a
consolidated basis, after the Closing Date, shall have been received.
8.02 Conditions of Obligations of Wexford. The obligation of Wexford to effect
the Wexford Acquisition and to proceed with the Closing on the Closing
Date shall at all times be subject to the following conditions precedent,
any of which may be waived by Wexford in writing:
(a) (i) the representations and warranties of the USGL Stockholders and
USGL contained herein shall be true and correct in all material respects
at the Closing Date with the same effect as though made at such time, and
(ii) the USGL Stockholders shall have each performed all material
obligations and complied with all material covenants required by this
Agreement to be performed or complied with by him or it prior to the
Closing Date.
(b) The USGL Stockholders shall have each obtained and delivered to
Wexford consents to the transactions contemplated by this Agreement from
the parties to all material contracts, referred to in the USGL Disclosure
Schedule attached hereto in accordance with this Agreement, which require
such consent.
(c) There shall not have occurred (i) any material adverse change, since
the Most Recent USGL Balance Sheet, in the business, properties, results
of operations or financial condition of USGL, or (ii) any loss or damage
to any of the properties or assets (whether or not covered by insurance)
of USGL which will materially affect or impair the ability of USGL to
conduct after the USGL Acquisition the business now being conducted by
USGL.
(d) All statutory requirements for the valid consummation by the USGL
Stockholders of the transactions
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<PAGE> 13
contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to
permit consummation by the USGL Stockholders of the transactions
contemplated by this Agreement and to permit the business presently
carried on by USGL to continue unimpaired to any material degree
immediately following the Closing Date shall have been obtained. Between
the date of this Agreement and the Closing Date, no governmental agency,
whether federal, state or local, shall have instituted (or threatened to
institute in a writing directed to the USGL Stockholders, USGL, Wexford or
any of their subsidiaries or affiliates) an investigation which is pending
at the Closing Date relating to the USGL Acquisition and between the date
of this Agreement and the Closing Date no action or proceeding shall have
been instituted or, to the knowledge of the USGL Stockholders, shall have
been threatened by any party (public or private) before a court or other
governmental body to restrain or prohibit the transactions contemplated by
this Agreement or to obtain damages in respect thereof,
(e) The stockholders of USGL shall have each acknowledged to Wexford in
writing (i) that the shares of Wexford common stock to be issued to them
pursuant to the Wexford Acquisition will be issued without registration
under the Securities Act of 1933, as amended (the "Securities Act"), or
the securities laws of any state in reliance upon available exemptions
from the registration requirements thereof; (ii) that all such shares of
Wexford common stock will be subject to restrictions on transferability
and may not be offered for sale, sold or otherwise transferred unless
subsequently registered under the Securities Act and all other applicable
securities laws or unless exemptions from the registration requirements of
the Securities Act and all other applicable securities laws are available,
as established to the satisfaction of Wexford, and (iii) the certificates
evidencing such Wexford common stock will bear an appropriate legend
evidencing the above referenced restrictions on transferability.
(f) USGL shall have furnished Wexford with a certificate, dated the
Closing Date, stating that the respective representations and warranties
of USGL contained in Section 3 are true and correct on the Closing Date in
all material respects as if then made.
(g) all papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 10.03 shall be delivered at
Closing.
8.03 Conditions to Obligation of the USGL Stockholders. The obligation of the
USGL Stockholders to effect the Wexford Acquisition and to proceed with
the Closing on the Closing Date shall at all times be subject to the
following conditions precedent, any of which may be waived by the USGL
Stockholders in writing:
(a) Wexford shall have furnished the USGL Stockholders with certified
copies of resolutions duly adopted by its Board of Directors and, to the
extent required by law, the shareholders of Wexford, authorizing all
necessary and proper corporate action to enable Wexford to comply with
terms of this Agreement and approving the execution, delivery and
performance of this Agreement, including the issuance of the Wexford
Shares, and (ii) an Incumbency Certificate for the appropriate officers of
Wexford.
(b) (i) the representations and warranties of Wexford herein shall be true
in all material respects at the Closing Date with the same effect as
though made at such time; and (ii) Wexford shall have performed all
material obligations and complied with all material covenants required by
this Agreement to be performed or complied with by it prior to the Closing
Date.
(c) Wexford shall have obtained and delivered to the USGL Stockholders
consents to the transactions contemplated by this Agreement from the
parties to all material contracts, referred to in the Wexford Disclosure
Schedule attached hereto in accordance with this Agreement, which require
such consent.
(d) There shall not have occurred (i) any material adverse change since
the Most Recent Wexford Fiscal Quarter in the business, properties,
results of operations or financial condition of Wexford, or (ii) any loss
or damage to any of the properties or assets (whether or not covered by
insurance) of Wexford which will materially affect or impair the ability
of Wexford to conduct, after the Wexford Acquisition, the business now
being conducted by Wexford.
(e) All statutory requirements for the valid consummation by Wexford of
the transactions contemplated by
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<PAGE> 14
this Agreement shall have been fulfilled and all authorizations, consents
and approvals of all federal, state, local and foreign governmental
agencies and authorities required to be obtained in order to permit
consummation by Wexford of the transactions contemplated by this Agreement
shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local,
shall have instituted (or threatened to institute in a writing directed to
the USGL Stockholders, USGL, Wexford or any of their subsidiaries or
affiliates) an investigation which is pending at the Closing Date relating
to the USGL Acquisition and between the date of this Agreement and the
Closing Date no action or proceeding shall have been instituted or, to the
knowledge of Wexford shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit
the transaction contemplated by this Agreement or to obtain the damages in
respect thereof.
(f) Wexford shall have furnished USGL with a certificate, signed by its
President and Secretary, dated the Closing Date, stating that the
representations and warranties of Wexford contained in Section 4 are true
and correct on the Closing Date in all material respects as if then made.
(g) all papers, documents, agreements and other items required to be
delivered at Closing pursuant to Section 10.02 shall have been delivered
at Closing.
(h) Wexford shall have completed a one for six reverse split of its common
stock and there shall be no more than 1,041,299 shares of common stock
issued and outstanding.
(i) Wexford shall have disposed of its current businesses and subsidiaries
such that at the closing Wexford shall have no assets and no liabilities
and shall have received release of liabilities or satisfaction of
indebtedness in such form and substance as may be acceptable to USGL.
(j) Officers' certificate. Wexford shall have delivered to USGL a
certificate of the Company's president and treasurer, dated the closing
date, certifying in such detail as may be required by USGL the fulfillment
of the conditions of this Agreement.
(k) Opinion of company's counsel. Wexford shall have delivered to USGL an
opinion of the Company's counsel, dated the closing date, that the
Company's corporate existence, good standing, and authorized and issued
stock are as stated, and that, except as may be specified by such counsel,
they do not know or have any reasonable grounds to know of any litigation,
proceeding, or governmental investigation pending or threatened against,
or relating to, the Company, its properties, or business, and that all
necessary and proper corporate actions have been taken to comply and
perform with the terms of this Agreement.
(l) Opinion of USGL's counsel. USGL shall have received from its counsel,
an opinion to the effect that the Company's corporate existence, good
standing, and authorized and issued stock are as stated in paragraph 4.01
and that all actions and approvals with regards to this transaction comply
with the corporate laws of Utah and Nevada.
(m) Transfer Agent Representation. USGL shall have received a certificate
from Wexford's transfer agent that the shares issued are as specified in
paragraph 4.02 and 8.03(h) herein.
(n) Private Placement. Wexford under the direction of its new officers and
directors shall have completed a private placement in escrow of 500,000
shares of its common stock resulting in net proceeds of $1,000,000. The
proceeds shall be earmarked for the expansion of the business of USGL and
not to pay for any Wexford liabilities.
9. Indemnification.
9.01 Intentions of the Parties. It is the intent of the parties that Wexford
and Imperial Petroleum, Inc. shall indemnify and hold harmless USGL for
the operation of Wexford prior to the time that new management is put in
place pursuant to Section 6.01 above, and that USGL shall indemnify and
hold harmless Wexford for the operation of Wexford after the time that new
management is put in place pursuant to Section 6.01 above. It is also the
intent of the parties that any claim for indemnity pursuant to this
section shall be for matters of
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<PAGE> 15
a material nature only that arise within one year from date of closing.
For the purposes of this Agreement, "material" means matters in excess of
$5,000.00.
9.02 Wexford and Imperial Petroleum, Inc. Wexford and Imperial Petroleum, Inc.
("Imperial") shall indemnify and hold harmless USGL at all times after the
date of this Agreement against and in respect of:
(a) All liabilities of Wexford of any nature, whether accrued, absolute,
contingent, or otherwise, existing prior to the election of the new
Board, to the extent not reflected or reserved against in full in
Wexford's Balance Sheet, including, without limitation, any tax
liabilities to the extent not so reflected or reserved against,
accrued in respect of or measured by Wexford's income for any period
prior to the election of the new board or arising out of transactions
entered into, or any state of facts existing prior to the date of this
Agreement;
(b) All liabilities of , or claims against Wexford arising out of the
conduct of Wexford's business prior to the election of the new board;
(c) Any nonpayment on demand, when due of any of Wexford's accounts
receivable, following the date of this Agreement and prior to the
election of the new board;
(d) Any damage or deficiency resulting from any misrepresentation, breach
of warranty, or nonfulfillment of any agreement on the part of Wexford
under this Agreement, or from any misrepresentation in or omission
from any certificate or other instrument furnished or to be furnished
to USGL hereunder;
(e) All actions, suits, proceedings, demands, assessments, judgments,
costs, and expenses incident to any of the foregoing; and
(f) Any costs related to the successful exercise by a Wexford shareholder
of dissenter's right in connection with this transaction.
The indemnity shall expire twelve (12) months from closing unless a claim,
action, or notice is filed pursuant to 9.02(a) - (f).
9.03 Imperial Indemnity. In the event of a claim for indemnity against
Imperial, USGL shall notify Imperial of its claim in writing. Imperial
shall have sixty (60) days to cure the breach. If there is no cure within
that time period, Imperial shall reimburse Wexford or USGL for any payment
made by Wexford or USGL in respect of any liability or claim to which the
indemnity described in Section 9.02 above relates.
9.04 USGL. USGL shall indemnify and hold harmless Wexford at all times after
the date of this Agreement against and in respect of:
(a) All liabilities of, or claims against Wexford arising out of the
conduct of Wexford's business after the date of the election of the
new board;
(b) Any damage or deficiency resulting from any misrepresentation, breach
of warranty, or nonfulfillment of any agreement on the part of USGL
under this Agreement, or from any misrepresentation in or omission
from any certificate or other instrument furnished or to be furnished
to Wexford hereunder; and
(c) All actions, suits, proceedings, demands, assessments, judgments,
costs, and expenses incident to any of the foregoing.
The indemnity shall expire twelve (12) months from closing unless a claim,
action, or notice is filed pursuant to 9.04 (a) - (c).
9.05 USGL Indemnity. In the event of a claim for indemnity against USGL,
Wexford shall notify USGL of its claim in writing. USGL shall have sixty
(60) days to cure the breach. If there is no cure within that time period,
USGL shall reimburse Wexford for any payment made by Wexford in respect of
any liability or claim to which the indemnity described in Section 9.04
above relates.
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10. Actions at Closing.
10.01 Actions at the Closing. At the Closing, Wexford and the USGL Stockholders
will each deliver, or cause to be delivered to the other, the securities
to be exchanged in accordance with Section 1.01 of this Agreement, and
each party shall pay any and all federal and state taxes required to be
paid in connection with the issuance of delivery of their own securities.
Certificates representing the Wexford Shares shall be issued and delivered
as set forth on Exhibit "A" attached hereto. Certificates representing the
USGL Shares shall be duly endorsed by each of the USGL Stockholders for
transfer to Wexford or in blank, or have appropriately executed powers of
attorney attached, and signatures shall be witnesses.
10.02 Deliveries by Wexford. At Closing, Wexford will deliver to USGL or the
USGL Stockholders as the case may be:
(a)certificates for the Wexford Shares as provided by Section 1.01 hereof;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by Wexford to authorize the execution, delivery and
performance of this Agreement;
(c) a certificate of Incumbency and signatures of officers of Wexford
dated as of the date of this Agreement; and
(d) all financial books and records as well as corporate books and
records.
10.03 Deliveries by the USGL Stockholders. At Closing, the USGL Stockholders
shall deliver to Wexford:
(a) certificates for the USGL Shares as provided by Section 1.01 hereof;
(b) certified copies of corporate resolutions and other corporate
proceedings taken by USGL to authorize the execution, delivery and
performance of this Agreement and the appointment of Mr. Jeffrey T. Wilson
on behalf of Wexford as a member of the Board of Directors of USGL;(c)
certificate of Incumbency and signatures of the Board of Directors of USGL
dated as of the date of this Agreement;
11. Termination.
11.01 Termination of the Agreement. The parties may terminate this Agreement as
provided below:
(a) Wexford, USGL and the USGL Stockholders may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(b) Either party may terminate this Agreement by giving written notice to
the other party on or before the Closing Date if the either party is not
satisfied with the results of their continuing business, legal and
accounting due diligence regarding each other;
(c) USGL and/or the USGL Stockholders may terminate this Agreement by
giving written notice to Wexford at any time prior to the Closing (i) in
the event Wexford has breached any representation, warranty or covenant
contained in this Agreement in any material respect, and the breach has
continued without cure for a period of 10 days after the notice of breach,
or (ii) if the Closing shall not have occurred on or before July 31, 1999,
or such later date as may be agreed to by USGL, the USGL Stockholders and
Wexford, in writing, by reason of the failure of any condition precedent
under Section 8.03 hereof (unless the failure results primarily from USGL
or the USGL Stockholders themselves breaching any representation, warranty
or covenant contained in this Agreement); and
(d) Wexford may terminate this Agreement by giving written notice to USGL
and the USGL Stockholders at any time prior to the Closing (i) in the
event USGL or any USGL Stockholder has breached any representation,
warranty or covenant contained in this Agreement in any material respect,
Wexford has notified USGL and
13
<PAGE> 17
the USGL Stockholders of the breach and the breach has continued without
cure for a period of 10 days after the notice of breach or (ii) if the
Closing shall not have occurred on or before July 31, 1999, or such later
date as may be agreed to by USGL, the USGL Stockholders and Wexford in
writing, by reason of the failure of any condition precedent under Section
8.02 hereof (unless the failure results primarily from Wexford itself
breaching any representation, warranty or covenant contained in this
Agreement).
11.02 Effect of Termination. If either USGL and/or the USGL Stockholders or
Wexford terminates this Agreement pursuant to Section 11.01 above,
(a) all rights and obligations of the parties hereunder shall terminate
without any liability of any party to any other party;
(b) the Board of Directors of Wexford that was elected pursuant to Section
6.01 above shall resign in favor of Wexford's former directors; and
(c) the private offering conducted pursuant to Section 6.02 above shall be
terminated and any escrowed stock subscriptions shall be returned to
investors.
12. General.
12.01 Brokers and Finders. Each Party hereto represents that no broker, agent,
finder or other party has been retained by either Party, and no brokerage
or finder's fees or agent's commissions or other like payment has been
agreed to be paid by him or it in connection with this Agreement or on
account of the transactions contemplated by this Agreement. Each Party
agrees to indemnify and hold harmless the other parties from and against
any and every claim arising by breach of the aforesaid representation and
warranty and all costs and expenses, legal or otherwise, which any such
party may incur as the result of any such claim.
12.02 Press Releases and Public Announcements. Neither USGL nor Wexford shall
issue any press release or make any public announcement prior to the
election of the new Board of Directors. Thereafter, neither party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other Parties.
12.03 Schedules. The USGL and Wexford Disclosure Schedules delivered pursuant to
the terms of this Agreement shall be bound together, initialed by Wexford
and USGL and deemed attached hereto and made a part hereof.
12.04 Survival of Covenants, Representations and Warranties. Except as otherwise
specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the
Closing Date.
12.05 Governing Law. This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the
State of Utah.
12.06 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or
certified mail, postage prepaid if addressed as follows:
If to Wexford:
Wexford Technology, Inc.
100 NW Second Street
Suite 312
Evansville, IN 47708
Attn: Mr. Jeffrey T. Wilson
President
14
<PAGE> 18
If to USGL and USGL Stockholders:
U.S. Gaming & Leisure, Corp.
1610 Barrancas Avenue
Pensacola, FL 32501
Attn: Mr. Charles S. Liberis
President
12.07 No Assignment. This Agreement may not be assigned by operation of law or
otherwise, without the express written consent of each party hereto which
consent will not be unreasonably withheld except that USGL may assign this
Agreement to a wholly owned subsidiary or an affiliate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
[SIGNATURE PAGE FOLLOWS]
15
<PAGE> 19
WEXFORD TECHNOLOGY, INC. Witness:
By: /s/ Jeffrey T. Wilson ------------------------------------
Jeffrey T. Wilson, President
IMPERIAL PETROLEUM, INC. Witness:
By: /s/ Jeffrey T. Wilson ------------------------------------
As to Paragraph 9 Only
U.S. GAMING & LEISURE, CORP. Witness:
By: /s/ Charles S. Liberis /s/ Wayne E. Marks
Charles S. Liberis, President
THE USGL SHAREHOLDERS Witness:
By: /s/ Charles S. Liberis /s/ Wayne E Marks
Charles S. Liberis
By:
-------------------------------- ------------------------------------
By:
-------------------------------- ------------------------------------
By:
-------------------------------- ------------------------------------
16
<PAGE> 20
EXHIBIT "A"
<TABLE>
<CAPTION>
NAME # OF # OF
OF SHAREHOLDER USGL SHARES WEXFORD SHARES
- -------------- ----------- --------------
<S> <C> <C>
</TABLE>
17
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF INC.
NAVIS BONA, INC.
(GOOD SHIP,INC.)
We, the undersigned natural persons of the age of eighteen (18) or more, acting
as incorporators under the provisions of the Utah Business Corporation Act
(hereinafter referred to as the "Act") adopt the following Articles of
Incorporation for such Corporation:
ARTICLE I
NAME
The name of the Corporation is Navis Bona, Inc. (Good Ship, Inc.)
ARTICLE II
DURATION
The duration of the Corporation shall be perpetual.
ARTICLE III
PURPOSES AND POWERS
The Corporation is organized and authorized to pursue any lawful purpose or
purposes including, but not limited to, a blind pool for establishing,
acquiring, consolidating, merging with or into, or being acquired by, a business
in the field of high technology, manufacturing and marketing.
The Corporation shall further have all powers specified in Sections Four and
Five of the Act (UCA Sections 16-10-4,5), and any amendments thereto.
ARTICLE IV
AUTHORIZED SHARES
The aggregate number of shares which the Corporation shall have the authority to
issue is 50,000,000 shares of common voting stock having a par value of one
tenth of one cent ($.001) per share; when issued said shares shall be fully paid
and non assessable.
ARTICLE V
PREEMPTIVE RIGHTS
No shareholder of the Corporation shall, because of his ownership of the shares,
have any preemptive or other rights to purchase, subscribe for, or take all or
part of any shares or all or part of any notes, debentures, bonds or securities
convertible into or carrying options for warrants to purchase shares of the
Corporation issued, optioned or sold by it after its incorporation. Such shares
may be sold or disposed of by the Corporation pursuant to resolution of its
Board of Directors to such persons and upon such terms as may, to such Board of
Directors, seem proper without first offering such shares or securities or any
part thereof to existing shareholders.
ARTICLE VI
COMMENCEMENT OF BUSINESS
The Corporation shall not commence business until at least One Thousand Dollars
($1,000.00) has been received by the Corporation as consideration for the
issuance of shares.
ARTICLE VII
VOTING OF SHARES
Each outstanding share of the common stock of the Corporation shall be entitled
to one vote on each matter submitted to a vote at a meeting of the shareholders,
each shareholder being entitled to vote his shares in person or by proxy
executed in writing by such shareholder or by his duly authorized
attorney-in-fact. At each election of directors, each shareholder entitled to
vote at such election shall. have the right to vote in person
<PAGE> 2
or by proxy the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote, but the
shareholder shall have no right whatsoever to accumulate his votes with regard
to such election.
ARTICLE VIII
OFFICE AND AGENT
(a) The address of the Corporation's initial registered office is 9 Exchange
Place, Suite 200, Salt Lake City, Utah 84106.
(b) The name of the Corporation's initial registered agent at such address is
Ronald L. Poulton.
ARTICLE IX
BOARD OF DIRECTORS
The management of the affairs, property and interests of the Corporation shall
be vested in a Board of Directors.
(a) The number of directors constituting the initial board shall be three (3) in
number, provided, however, that the number of directors may be changed from time
to time by a provision of the By-laws, but in no event shall the number of
directors be less than three (3) nor more than ten (10).
(b) The following shall be the names and addresses of the persons who are to
serve as directors until the first annual meeting of the shareholders, or until
their successors shall be elected and qualified:
Scott Hart 1735 East 7000 South
Salt Lake City, Utah 84121
Scott M. Gygi 2216 Lauri Kay Drive
Salt Lake City, Utah 84124
Mark Marquardson 3856 South Cliff Drive
Salt Lake City, Utah 84109
ARTICLE X
INTERNAL MANAGEMENT
MEETINGS.
Meetings of the shareholders of the Corporation may be held at such place within
or without the State of Utah, as may be provided in the By-laws.
The meetings of the Board of Directors of the Corporation, regular or special,
may be held either within or without the State of Utah.
BY-LAWS.
Bylaws of the Corporation shall be adopted by its Board of Directors. The Bylaws
may be altered, amended or repealed from time to time by a majority vote of the
Board of Directors. The By-laws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the laws of
the State of Utah or these Articles of Incorporation.
ARTICLE XI
INCORPORATORS
The name and address of each incorporator is as follows:
Ronald L. Poulton 9 Exchange Place, Suite 200
Salt Lake City, Utah 84111
Paul R. Lovell 9 Exchange Place, Suite 200
Salt Lake City, Utah 84111
George Ralphs 9 Exchange Place, Suite 200
Salt Lake City, Utah 84111
<PAGE> 3
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall indemnify any and all persons who may serve at any time as
directors or officers or who at the request of the Board of Directors of the
Corporation may serve or at any time have served as directors or officers of
another corporation in which the Corporation at such time owned or may own
shares of stock or of which it was or may be a creditor, and their respective
heirs, administrators, successors, and assignees, against any and all expenses,
including amounts paid upon judgments, counsel fees and amounts paid in
settlement (before or after suit is commenced), actually and necessarily
incurred by such persons in connection with the defense or settlement of any
claim, action, suit or proceeding in which they, or any of them are made
parties, or a party, or which may be asserted against them or any of them, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or such other corporation, except in relation to matters as to
which any such director or officer or former director or officer or person shall
be adjudged in any action, suit or proceeding to be liable for his own
negligence or misconduct in the performance of his duty. Such indemnification
shall be in addition to any other rights to which those indemnified may be
entitled under any law, By-law, agreement, vote of shareholders or otherwise.
ARTICLE XIII
CONTRACTS
No contract or transaction entered into by the Corporation shall be affected by
the fact that any director, officer, employee or shareholder of the Corporation
may in any way be interested in or connected with any party to such contract or
transaction, provided that this interest be first disclosed or have been known
to the Board of Directors or by a majority of such members thereof and that the
contract or transaction be approved by a majority of the directors or
shareholders present at the meeting where such contract or transaction is
authorized or confirmed; nor shall any director or shareholder be incapacitated
from having his vote be counted in determining the existence of the quorum at
any meeting of the Board of Directors or shareholders which shall authorize any
such contract or transaction and any interested director or shareholder may vote
thereat to authorize any such contract or transaction.
IN WITNESS WHEREOF, the undersigned, being the incorporators, execute these
Articles of Incorporation and certify to the truth of the facts herein stated
this 13th day of June, 1985.
/s/ Ronald L. Poulton
------------------------------
RONALD L. POULTON
/s/ Paul R. Lovell
------------------------------
PAUL R. LOVELL
/s/ George Ralphs
------------------------------
GEORGE RALPHS
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
We, the undersigned, being first duly sworn on oath, depose and say.- That we
are the incorporators hereinbefore named; that we have read the foregoing
Articles of Incorporation and know the contents thereof and that the same are
true of our own knowledge, except as to matters therein stated upon information
and belief, and as to those, we believe them to be true.
/s/ Ronald L. Poulton
------------------------------
RONALD L. POULTON
/s/ Paul R. Lovell
------------------------------
PAUL R. LOVELL
/s/ George Ralphs
------------------------------
GEORGE RALPHS
<PAGE> 4
On the 13th day of June, 1985, personally appeared before me, RONALD L.POULTON,
PAUL R. LOVELL and GEORGE RALPHS, signers of the above Articles of
Incorporation, who duly acknowledged to me that they executed the same.
------------------------------
NOTARY PUBLIC
Residing in: Salt Lake County
My Commission Expires:
4-14-86
- --------------------
<PAGE> 5
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
I LOVE YOGURT CORPORATION
Pursuant to the provisions of Section 16-10-15 of the Utah Business Corporation
Act, the undersigned corporation adopts the following Articles of Amendment to
the Articles of Incorporation of I Love Yogurt Corporation.
ARTICLE I
The name of the corporation is I Love Yogurt Corporation.
ARTICLE II
The following amendment to the Articles of Incorporation was adopted by the
Shareholders of the Corporation on April 20, 1992:
Article IV is hereby amended by inserting the following language after
the first paragraph of Article IV:
"The corporation is authorized to issue 5,000,000 shares of Preferred
Stock, $1.00 par value per share. Such shares of Preferred Stock may be
issued in such series and subject to such terms as the Board of
Directors of the corporation may determine in its discretion."
ARTICLE III
The number of shares of the Corporation outstanding at the time of such adoption
was 6,374,387 and the number of shares entitled to vote thereon was 6,374,387.
None of such shares was entitled to vote as a class.
ARTICLE IV
The total number of shares voting in favor of such amendment was 5,274,594 and
the total number of shares voting against such amendment was 18,700.
Dated: June 16, 1992
I LOVE YOGURT CORPORATION
ATTEST:
/s/Sheldon Frankel By: /s/Jeffrey S. Frankel
- ------------------ -----------------------
Sheldon Frankel Jeffrey S. Frankel
Secretary President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, a Notary Public on this 16th day of June, 1992, personally
appeared Jeffrey S. Frankel, known to me to be the person whose name is
subscribed to the foregoing document as President of I Love Yogurt Corporation
and, being by me first duly sworn, declared that the statements therein are true
and correct.
Given under my hand and seal of office this 16th day of June, 1992.
/s/ Geoff Newlan
--------------------------
Notary Public
Geoff Newlan, Notary Public
State of Texas
My Commission Expires August 26, 1995
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CHELSEA STREET FINANCIAL HOLDING CORPORATION
The undersigned, being all of the directors of Chelsea Street Financial Holding
Corporation, a Utah corporation, hereby take the following action and adopt the
following resolutions in Lieu of a Meeting:
FIRST: That at a meeting of the Board of Directors of Chelsea Street Financial
Holding Corporation, duly held and convened, resolutions were adopted setting
forth a proposed amendment to the Certificate of Incorporation of Chelsea Street
Financial Holding Corporation, and declaring said amendment advisable by the
Board of Directors, and shareholder approval was not required.
SECOND: That the following amendment to the Certificate of Incorporation was
duly adopted in accordance with the laws of the State of Utah, as amended:
ARTICLE 1: The name of this Corporation is WEXFORD TECHNOLOGY, INCORPORATED
THIRD: That the capital of the corporation shall not be reduced by reason of the
above set forth amendment.
Under penalties of perjury, I declared that this Certificate of Amendment, has
been examined by me and is, to the best of my knowledge and belief, true,
correct and complete.
Dated this 23rd day of November, 1993.
Attest: Chelsea Street Financial Holding Corporation
/s/ Greg Wells /s/ Gary S. Williky
- ---------------------- ----------------------------------------
Greg Wells Gary S. Williky
Director President
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WEXFORD TECHNOLOGY, INCORPORATED
A telephonic meeting of all of the Directors of Wexford Technology,
Incorporated, duly held and convened, resolutions were unanimously adopted
setting forth a proposed amendment to the Certificate of Incorporation of
Wexford Technology, Incorporated.
RESOLVED, That the following amendment to the Certificate of Incorporation was
duly adopted in accordance with the laws of the State of Utah, as amended:
Article 1: The name of this Corporation is sureBET Casinos, Inc.
This amendment shall be effective on June 24, 1999.
This amendment was adopted by the Board of Directors without Shareholder
approval. Shareholder approval was not required.
Under penalties of perjury, I declare that this Certificate of Amendment, has
been examined by me and is, to the best of my knowledge and belief, true,
correct and complete.
Dated this 24th day of June, 1999.
Attest: Wexford Technology, Incorporated
/s/ Jeffrey T. Wilson
-----------------------------------
Jeffrey T. Wilson, President
/s/ Stacey D. Smothers
-----------------------------------
Stacey D. Smother, Secretary
<PAGE> 1
EXHIBIT 3.2
BYLAWS OF
NAVIS BONA, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
OFFICE...................................................................................................1
Section 1.1 Office.......................................................................................1
ARTICLE II
SHAREHOLDERS' MEETING....................................................................................1
Section 2.1 Annual Meetings..............................................................................1
Section 2.2 Special Meetings.............................................................................1
Section 2.3 Notice of Shareholders' Meetings.............................................................1
Section 2.4 Waiver of Notice.............................................................................1
Section 2.5 Place of Meeting.............................................................................1
Section 2.6 Closing of Transfer Books or Fixing Record Date..............................................1
Section 2.7 Quorum of Shareholders.......................................................................2
Section 2.8 Voting Lists.................................................................................2
Section 2.9 Voting.......................................................................................2
Section 2.10 Proxies.....................................................................................2
Section 2.11 Informal Action by Shareholders.............................................................2
ARTICLE III
BOARD OF DIRECTORS.......................................................................................2
Section 3.1 General Powers...............................................................................2
Section 3.2 Number, Tenure and Qualifications............................................................2
Section 3.3 Election of Board of Directors...............................................................2
Section 3.4 Regular Meetings.............................................................................3
Section 3.5 Special Meetings.............................................................................3
Section 3.6 Waiver of Notice.............................................................................3
Section 3.7 Quorum.......................................................................................3
Section 3.8 Manner of Acting.............................................................................3
Section 3.9 Powers of Directors..........................................................................3
Section 3.10 Vacancies...................................................................................3
Section 3.11 Removals....................................................................................3
Section 3.12 Resignations................................................................................4
Section 3.13 Presumption of Assent.......................................................................4
Section 3.14 Compensation................................................................................4
Section 3.15 Emergency Power.............................................................................4
Section 3.16 Chairman....................................................................................4
ARTICLE IV
OFFICERS.................................................................................................4
Section 4.1 Number.......................................................................................4
Section 4.2 Election and Term of Office..................................................................4
Section 4.3 Resignation..................................................................................4
Section 4.4 Removal......................................................................................4
Section 4.5 Vacancies....................................................................................5
Section 4.6 President....................................................................................5
Section 4.7 Vice President...............................................................................5
Section 4.8 Secretary....................................................................................5
Section 4.9 Treasurer....................................................................................5
Section 4.10 General Manager.............................................................................5
Section 4.11 Other Officers..............................................................................5
Section 4.12 Salaries....................................................................................5
Section 4.13 Surety Bonds................................................................................6
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE V
COMMITTEES...............................................................................................6
Section 5.1 Executive Committee..........................................................................6
Section 5.2 Other Committees.............................................................................6
ARTICLE VI
CONTRACTS, LOANS, DEPOSITS AND CHECKS....................................................................6
Section 6.1 Contracts....................................................................................6
Section 6.2 Loans........................................................................................6
Section 6.3 Deposits.....................................................................................6
Section 6.4 Checks and Drafts............................................................................6
Section 6.5 Bonds and Debentures.........................................................................6
ARTICLE VII
CAPITAL STOCK............................................................................................6
Section 7.1 Certificate of Share.........................................................................6
Section 7.2 Transfer of Shares...........................................................................6
Section 7.3 Transfer Agent and Registrar.................................................................6
Section 7.4 Lost or Destroyed Certificates...............................................................6
Section 7.5 Consideration for Shares.....................................................................6
Section 7.6 Registered Shareholders......................................................................6
ARTICLE VIII
INDEMNIFICATION..........................................................................................7
Section 8.1 Indemnification..............................................................................7
Section 8.2 Other Indemnification........................................................................8
Section 8.3 Insurance....................................................................................8
Section 8.4 Settlement by Corporation....................................................................8
ARTICLE IX
AMENDMENTS...............................................................................................8
ARTICLE X
FISCAL YEAR..............................................................................................8
ARTICLE XI
DIVIDENDS................................................................................................8
ARTICLE XII
CORPORATE SEAL...........................................................................................8
</TABLE>
<PAGE> 3
BY-LAWS
OF
NAVIS BONA, INC.
ARTICLE I
OFFICE
Section 1.1 Office. The principal office of the Corporation in the State of Utah
shall be located at 9 Exchange Place, Suite 200, Salt Lake City, Utah 84111. The
Corporation may maintain such other offices, within or without the State of
Utah, as the Board of Directors may from time to time designate. The location of
the principal office may be changed by the Board of Directors.
ARTICLE II
SHAREHOLDERS' MEETING
Section 2.1 Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held at such place within or without the State of Utah as
shall be set forth in compliance with these By-laws. The meeting shall be held
on the second Tuesday of the month of July of each year beginning with the year
1985 at 10:00 am. If such day is a legal holiday, the meeting shall be on the
next business day. This meeting shall be for the election of directors and for
the transaction of such other business as may properly come before it.
In the event that such annual meeting is omitted by oversight or otherwise on
the date herein provided for, the directors shall cause a meeting in lieu
thereof to be held as soon thereafter as conveniently may be, and any business
transacted or elections held at such meeting shall be as valid as if transacted
or held at the annual meeting. If the election of directors shall not be held on
the date designated herein for any annual meeting of shareholders, or at any
adjournment thereof, the Board of Directors as may conveniently be called. Such
subsequent meetings shall be called in the same manner as is provided for the
annual meeting of shareholders.
Section 2.2 Special Meetings. Special meetings of shareholders, other than those
regulated by statute, may be called at any time by the President, or by a
majority of the directors, and must be called by the President upon written
request of the holders of not less than 10% of the issued and outstanding shares
entitled to vote at such special meeting.
Section 2.3 Notice of Shareholders' Meetings. The President, Vice President or
Secretary shall give written notice stating the place, day and hour of the
meeting, and in the case of a special meeting the purpose or purposes for which
the meeting is called, which shall be delivered not less than ten nor more than
fifty days before the day of the meeting, either personally or by mail to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the books of the
Corporation, with postage thereon prepaid.
Any meeting of which all shareholders shall at any time waive or have waived
notice in writing shall be a legal meeting for the transaction of business
notwithstanding that notice has not been given as hereinbefore provided.
Section 2.4 Waiver of Notice. Whenever any notice whatever is required to be
given by these Bylaws, or the Articles of Incorporation, or by any of the
Corporation Laws of the State of Utah, a shareholder may waive the notice of
meeting by attendance, either in person or by proxy, at the meeting, or by so
stating in writing, either before or after such meeting. Attendance at a meeting
for the express purpose of objecting that the meeting was not lawfully called or
convened shall not, however, constitute a waiver of notice.
Section 2.5 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Utah, as the place of meeting for any
annual meeting or for any special meeting called by the Board of Directors. If
no designation is made, or if a special meeting be otherwise called, the place
of meeting shall be the registered office of the Corporation.
Section 2.6 Closing of Transfer Books or Fixing Record Date. For the purpose of
determining shareholders entitled to notice or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a period not to exceed in any
case 50 days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least 10 days immediately
preceding
1
<PAGE> 4
the date determined to be the date of record. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than 50 days and in case of a meeting of shareholders not less than 10 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice or
to vote at a meeting of shareholders or shareholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be deemed the date of record for such
determination of shareholders. When a determination-of shareholders entitled to
vote at any meeting-of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
Section 2.7 Quorum of Shareholders. Except as herein provided and as otherwise
provided by law, at any meeting of shareholders a majority in interest of all
the Type A shares issued and outstanding represented by shareholders of record
in person or by proxy shall constitute a quorum, but a less interest may adjourn
any meeting and the meeting may be held as adjourned without further notice;
provided, however, that directors shall not be elected at the meeting so
adjourned. When a quorum is present at any meeting, a majority in interest of
the shares represented thereat shall decide any question brought before such
meeting, unless the question is one upon which the express provision of law or
of the Articles of Incorporation or of these Bylaws a larger or different vote
is required, in which case such express provision shall govern and control the
decision of such question.
Section 2.8 Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder, for
any purpose germane to the meeting, during the whole time of the meeting. The
original stock transfer books shall be primafacie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 2.9 Voting. A holder of an outstanding share entitled to vote at a
meeting may vote at such meeting in person or by proxy. Except as may otherwise
be provided in-the Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing in his name on the record of
shareholders. Except as herein or in the Articles of Incorporation otherwise
provided, all corporate action shall be determined by a majority of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
Section 2.10 Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 2.11 Informal Action by Shareholders. Any action required to be taken at
a meeting of the shareholders, or any action which may be taken at a meeting of
the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1 General Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors. The Board of Directors may adopt such rules
and regulations for the conduct of their meetings and the management of the
Corporation as they deem proper.
Section 3.2 Number, Tenure and Qualifications. The number of directors for the
Board of Directors of the Corporation shall be not less than three nor more than
ten. Each director shall hold office until the next annual meeting of
shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Utah or shareholders of the
Corporation.
Section 3.3 Election of Board of Directors. The Board of Directors shall be
chosen by ballot at the annual meeting of shareholders or at any meeting held in
place thereof as provided by law.
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Section 3.4 Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than by this Bylaw, immediately following and at
the same place as the annual meeting of the shareholders. The Board of Directors
may provide by resolution the time and place for the holding of additional
regular meetings without other notice than this resolution.
Members of the Board of Directors may participate in a meeting of the Board by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other and participation in a
meeting under this subsection shall constitute presence in person at the
meeting, pursuant to Utah Code Annotated, Section 16-10-40(d).
Section 3.5 Special Meetings. Special meetings of the Board of Directors may be
called by order of the Chairman of the Board, the President or by one-third of
the directors. The Secretary shall give notice of the time, place and purpose or
purposes of each special meeting by mailing the same at least two days before
the meeting or by telephoning or telegraphing the same at least one day before
the meeting to each director.
Section 3.6 Waiver of Notice. Whenever any notice whatever is required to be
given by these Bylaws, or the Articles of Incorporation of the Corporation, or
by any of the Corporation Laws of the State of Utah, a director may waive the
notice of meeting by attendance in person at the meeting, or by so stating in
writing, either before or after such meeting. Attendance at a meeting for the
express purpose of objecting- that-the meeting was not lawfully called or
convened shall not, however, constitute a waiver of notice.
Section 3.7 Quorum. A majority of the members of the Board of Directors shall
constitute a quorum for the transaction of business, but less than a quorum may
adjourn any meeting from time to time until a quorum shall be present, whereupon
the meeting may be held, as adjourned, without further notice. At any meeting at
which every director shall be present, even though without any notice, any
business may be transacted.
Section 3.8 Manner of Acting. At all meetings of the Board of Directors, each
director shall have one vote. The act of a majority present at a meeting shall
be the act of the Board of Directors, provided a quorum is present. Any action
required to be taken or which may be taken at a meeting of the directors may be
taken without a meeting if a consent in writing setting forth the action so
taken shall be signed by all the directors. The directors may conduct a meeting
by means of a conference telephone or any similar communication equipment by
which all persons participating in the meeting can hear each other.
Section 3.9 Powers of Directors. The Board of Directors shall have the
responsibility for the entire management of the business of the Corporation. In
the management and control of the property, business and affairs of the
Corporation the Board of Directors is hereby vested with all of the powers
possessed by the Corporation itself so far as this delegation of authority is
not inconsistent with the laws of the State of Utah and with the Articles of
Incorporation or with these Bylaws. The Board of Directors shall have the power
to determine what constitutes net earnings., profits and surplus, respectively,
and what amounts shall be reserved for working capital and for any other purpose
and what amounts shall be declared as dividends, and such determination by the
Board of Directors shall be final and conclusive.
Section 3.10 Vacancies. A vacancy in the Board of Directors shall be deemed to
exist in case of death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at. any
meeting of shareholders at which any director is to be elected, to elect the
full authorized number to be elected at that meeting.
Any vacancy occurring in the Board of Directors may be filled by an affirmative
vote of the majority of the remaining directors though less than a quorum of the
Board of Directors, unless otherwise provided by law or the Articles of
Incorporation. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors shall be filled by election at
the annual meeting or at a special meeting of shareholders called for that
purpose.
Section 3.11 Removals. Directors may be removed at any time, at a meeting called
expressly for that purpose by a vote of the shareholders holding a majority of
the shares issued and outstanding and entitled to vote. Such vacancy shall be
filled by the directors then in office, though less than a quorum, to hold
office-until the next annual meeting or until his successor is duly elected and
qualified, except that any directorship to be filled by reason of removal by the
shareholders may be fined by election, by the shareholders, at the meeting at
which the director is removed. No reduction of the authorized number of
directors shall have the effect of removing any director prior to the expiration
of his term of office.
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Section 3.12 Resignations. A director may resign at any time by delivering
written notification thereof to the President or Secretary of the Corporation.
Such resignation shall become effective upon its acceptance by the Board of
Directors; provided, however, that if the Board of Directors has not acted
thereon within ten days from the date of its delivery, the resignation shall
upon the tenth day be deemed accepted.
Section 3.13 Presumption of Assent. A director of the Corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 3.14 Compensation. By resolution of the Board of Directors, the
directors shall be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.15 Emergency Power. When, due to a national disaster or death, a
majority of the directors are incapacitated or otherwise unable to attend the
meetings and function as directors, the remaining members of the Board of
Directors shall have all the powers necessary to function as a complete Board
and, for the purpose of doing business and filling vacancies, shall constitute a
quorum until such time as all directors can attend or vacancies can be filled
pursuant to these Bylaws.
Section 3.16 Chairman. The Board of Directors may elect from its own number a
Chairman of the Board, who shall preside at all meetings of the Board of
Directors, and shall perform such other duties as may be prescribed from time to
time by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.1 Number. The officers of the Corporation shall be a President, one or
more Vice Presidents, a Secretary and a Treasurer, each of whom shall be elected
by a majority of the Board of Directors. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors. In its discretion the Board of Directors may leave unfilled for any
such period as it may determine any office except those of President and
Secretary. Any two or more offices may be held by the same person, except the
offices of President and Secretary. Officers may or may not be directors or
shareholders of the Corporation.
Section 4.2 Election and Term of Office. The officers of the Corporation are to
be elected by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as convenient. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
Section 4.3 Resignation. Any officer may resign at any time by delivering a
written resignation either to the President or to the Secretary. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 4.4 Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create-contract rights. Any such removal shall
require a majority vote of the Board of Directors, exclusive of the officer in
question if he is also a director.
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Section 4.5 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, or if a new office shall be created, may
be filled by the Board of Directors for the unexpired portion of the term.
Section 4.6 President. The President shall be the chief executive and
administrative officer of the Corporation. He shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, at meetings
of the Board of Directors. He shall exercise such duties as customarily pertain
to the office of President and shall have general and active supervision over
the property, business and affairs of the Corporation and over its several
officers. He may appoint officers, agents or employees other than those
appointed by the Board of Directors. He may sign, execute and deliver in the
name of the Corporation, powers of attorney, certificates of stock, contracts,
bonds, deeds, mortgages and other obligations and shall perform such other
duties as may be prescribed from time to time by the Board of Directors or by
the Bylaws.
Section 4.7 Vice President. The Vice President shall have such powers and
perform such duties as may be assigned to him by the Board of Directors or the
President. In the absence or disability of the President, the Vice President
designated by the board or the President shall perform the duties and exercise
the powers of the President. In the event there is more than one Vice President
and the Board of Directors has not designated which Vice President is to act as
President, then the Vice President who was elected first shall act as President.
A Vice President may sign and execute contracts and other obligations pertaining
to the regular course of his duties.
Section 4.8 Secretary. The Secretary shall keep the minutes of all meetings of
the shareholders and of the Board of Directors and to the extent ordered by the
Board of Directors-w-the President, the minutes of meetings of all committees.
He shall cause notice to be given of the meetings of. shareholders, of the Board
of Directors and of any committee appointed by the board. He shall have custody
of the corporate seal and general charge of the records, documents and papers of
the Corporation not pertaining to the performance of the duties vested in other
officers, which shall at all reasonable times be open to the examination of any
director. He may sign or execute contracts with the President or Vice President
thereunto authorized in the name of the Corporation and affix the seal of the
Corporation thereto. He shall perform such other duties as may be prescribed
from time to time by the Board of Directors or by the Bylaws. He shall be sworn
to the faithful discharge of his duties. Assistant Secretaries shall assist the
Secretary and shall keep and record such minutes of meetings as shall be
directed by the Board of Directors.
Section 4.9 Treasurer. The Treasurer shall have general custody of the
collection and disbursement of funds of the Corporation for collection checks,
notes, and other obligations, and shall deposit the same to the credit of the
Corporation in such bank or banks or depositories as the Board of Directors may
designate. He may sign, with the President, or such other persons as may be
designated for the purpose by the Board of Directors, all bills of exchange or
promissory notes of the Corporation. He shall enter or cause to be entered
regularly in the books of the Corporation full and accurate accounts of all
monies received and paid by him on account of the Corporation; shall at all
reasonable times exhibit his books and accounts to any director of the
Corporation upon application at the office of the Corporation during business
hours; and, whenever required by the Board of Directors or the President, shall
render a statement of his accounts. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws.
Section 4.10 General Manager. The Board of Directors may employ and appoint a
General Manager who may, or may not, be one of the officers or directors of the
Corporation. If employed by the Board of Directors he shall be the chief
operating officer of the Corporation and, subject to the directions of the Board
of Directors, shall have general charge of the business operations of the
Corporation and general supervision over its employees and agents. He shall have
the exclusive management of the business of the Corporation and of all of its
dealings, but at all times subject to the control of the Board of Directors.
Subject to the approval of the Board of Directors or the executive committee, he
shall employ all employees of the Corporation, or delegate such employment to
subordinate officers, or such division officers, or such division chiefs, and
shall have authority to discharge any person so employed. He shall make a
quarterly report to the President and directors, or more often if required to do
so, setting forth the result of the operations under his charge, together with
suggestions looking to the improvement and betterment of the condition of the
Corporation, and to perform such other duties as the Board of Directors shall
require.
Section 4.11 Other Officers. Other officers shall perform such duties and have
such powers as may be assigned to them by the Board of Directors.
Section 4.12 Salaries. The salaries or other compensation of the officers of the
Corporation shall be fixed from time to time by the Board of Directors except
that the Board of Directors may delegate to any person or group of persons the
power to fix the salaries or other compensation of any subordinate officers or
agents. No officer shall be prevented from
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receiving any such salary or compensation by reason of the fact that he is also
a director of the Corporation.
Section 4.13 Surety Bonds. In case the Board of Directors shall so require, any
officer or agent of the Corporation shall execute to the Corporation a bond in
such sums and with sureties as the Board of Directors may direct, conditioned
upon the faithful performance of his duties to the Corporation, including
responsibility for negligence and -- for the accounting for all property, monies
or securities of the Corporation which may come into his hands.
ARTICLE V
COMMITTEES
Section 5.1 Executive Committee. The Board of Directors may appoint from among
its members an Executive Committee of not less than two nor more than seven
members, one of whom shall be the President, and shall designate one or more of
its members as alternates to serve as a member or members of the Executive
Committee in the absence of a regular member or members. The Board of Directors
reserves to itself alone the power to declare dividends, issue stock, recommend
to shareholders any action requiring their approval, change the membership of
any committee at any time, fill vacancies therein, and discharge any committee
either with or without cause at any time. Subject to the foregoing limitations,
the Executive Committee shall possess and exercise all other powers of the Board
of Directors during the intervals between meetings.
Section 5.2 Other Committees. The Board of Directors may also appoint from among
its own members such other committees as the Board may determine, which shall in
each case consist of not less than two directors, and which shall have such
powers and duties as shall from time to time be prescribed by the Board. The
President shall be a member ex officio of each committee appointed by the Board
of Directors. A majority of the members of any committee may fix its rules of
procedure.
ARTICLE VI
CONTRACTS, LOANS, DEPOSITS AND CHECKS
Section 6.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or-confined to specific instances.
Section 6.2 Loans. No loan or advances shall be contracted on behalf of the
Corporation, no negotiable paper or other evidence of its obligation under any
loan or advance shall be issued in its name, and no property of the Corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of the corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
Section 6.3 Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select, or
as may be selected by any officer or agent authorized to do so by the Board of
Directors.
Section 6.4 Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the Corporation shall be signed by
such officer or officers or such agent or agents of the Corporation and in such
manner as the Board of Directors from time to time may determine. Endorsements
for deposit to the credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
Section 6.5 Bonds and Debentures. Every bond or debenture issued by the
Corporation shall be evidenced by an appropriate instrument which shall be
signed by the President or a Vice President and by the Treasurer or by the
Secretary., and sealed with the seal of the Corporation. The seal may be
facsimile, engraved or printed. Where such bond or debenture is authenticated
with the manual signature of an authorized officer of the Corporation or other
trustee designated by the indenture of trust or other agreement under which such
security is issued, the signature of any of the Corporation's officers named
thereon may be facsimile. In case any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, shall cease to be an
officer of the Corporation for any reason before the same has been delivered by
the Corporation, such bond or debenture may nevertheless be adopted by the
Corporation and issued and delivered as though the person who signed it or whose
fascimile signature has been used thereon had not ceased to be such officer.
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ARTICLE VII
CAPITAL STOCK
Section 7.1 Certificate of Share. The shares of the Corporation shall be
represented by certificates prepared by the Board of Directors and signed by the
President or the Vice President, and by the Secretary, or an Assistant
Secretary, and sealed with the seal of the Corporation or a facsimile. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the Corporation itself or one of its employees. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe.
Section 7.2 Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or-by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
Section 7.3 Transfer Agent and Registrar. The Board of Directors shall have
power to appoint one or more transfer agents and registrars for the transfer and
registration of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
Section 7.4 Lost or Destroyed Certificates. The Corporation may issue a new
certificate to replace any certificate theretofore issued by it alleged to have
been lost or destroyed. The Board of Directors may require the owner of such a
certificate or his legal representatives to give the Corporation a bond in such
sum and with such sureties as the Board of Directors may direct to indemnify the
Corporation and its transfer agents and registrars, if any, against claims that
may be made on account of the issuance of such new certificates. A new
certificate may be issued without requiring any bond.
Section 7.5 Consideration for Shares. The capital stock of the Corporation shall
be issued for such consideration, but not less than the par value thereof, as
shall be fixed from time to time by the Board of Directors. In the absence of
fraud, the determination of the Board of Directors as to the value of any
property or services received in full or partial payment of shares shall be
conclusive.
Section 7.6 Registered Shareholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder thereof in
fact, and shall not be bound to recognize any equitable or other claim to or on
behalf of the Corporation, -- any and all of the rights and powers incident to
the ownership of such stock at any such meeting, and shall have power and
authority to execute and deliver proxies and consents on behalf of the
Corporation in connection with the exercise by the Corporation of the rights and
powers incident to the ownership of such stock. The Board of Directors, from
time to time may confer like powers upon any other person or persons.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification. No officer or director shall be personally liable
for any obligations arising out of any acts or conduct of said officer or
director performed for or on behalf of the Corporation. The Corporation shall
and does hereby indemnify and hold harmless each person and his heirs and
administrators who shall serve at any time hereafter as a director or officer of
the Corporation from and against any and all claims, judgments and liabilities
to which such persons shall become subject by reason of any action alleged to
have been heretofore or hereafter taken or omitted to have been taken by him as
such director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability; including power to defend such person from all suits as provided for
under the provisions of the Utah Corporation Laws; provided, however that no
such person shall be indemnified against, or be reimbursed for, any expense
incurred in connection with any claim or liability arising out of his own
negligence or willful misconduct. The rights accruing to any person under the
foregoing provisions of this section shall not exclude any other right to which
he may lawfully be entitled, nor shall
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anything herein contained restrict the right of the Corporation to indemnify or
reimburse such person in any proper case, even though not specifically herein
provided for. The Corporation, its directors, officers, employees and agents
shall be fully protected in taking any action or-making any payment or in
refusing so to do in reliance upon the advice of counsel.
Section 8.2 Other Indemnification. The indemnification herein provided shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 8.3 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer or employee of the
Corporation, or is or was serving at the request of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any capacity, or arising out of his
status as such whether or not the Corporation would have the power to indemnify
him against liability under the provisions of this Article 8 or the laws of the
State of Utah.
Section 8.4 Settlement by Corporation. The right of any person to be indemnified
shall be subject always to the right of the Corporation by its Board of
Directors, in lieu of such indemnity, to settle any such claim, action, suit or
proceeding at the expense of the Corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended, repealed, or added to by the affirmative
vote of the holders of a majority of the shares entitled to vote in the election
of any director at an annual meeting or at a special meeting called for that
purpose, provided that a written-notice shall have been sent to each shareholder
of record entitled to vote at such meetings at least ten days before the date of
such annual or special meetings, which notice shall state the alterations,
amendments, additions, or changes which are proposed to be made in such By-laws.
Only such changes shall be made as have been specified in the notice. The
By-laws may also be altered, amended, repealed, or new By-laws adopted by a
majority of the entire Board of Directors at any regular or special meeting. Any
By-laws adopted by the Board may be altered, amended, or repealed by a majority
of the shareholders entitled to vote.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XI
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the unreserved and unrestricted
earned surplus of the Corporation except the directors may declare dividends in
accordance with Section 16 -10-41 of the Act.
ARTICLE XII
CORPORATE SEAL
The seal of the Corporation shall be in the form of a circle and shall bear the
name of the Corporation and the year of incorporation.
Adopted by resolution of the Board of Directors the 17th day of June, 1985.
/s/ Scott M. Gygi
Secretary
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT"), is entered into as of this
5th day of May, 1999, by and between Wexford Technology, Inc. ("Wexford") a Utah
corporation, as SELLER and Imperial Petroleum, Inc., a Nevada corporation
("Imperial"), as BUYER.
W I T N E S S E T H:
WHEREAS, Wexford is the owner of certain assets, stock, notes receivable,
notes payable and other liabilities and certain other rights comprising those
properties and subsidiaries set forth on Exhibit A attached hereto; and
WHEREAS, in connection with its acquisition of U.S. Gaming & Leisure Corp.
("USGL"), Wexford is obligated prior to the closing with USGL to dispose of its
business interests and subsidiaries with the result that Wexford shall have no
assets or liabilities; and
WHEREAS, Wexford desires to sell, transfer and assign to Imperial all of
its right, title and interest in and to those assets, stock, notes and accounts
receivable, notes and accounts payable and other liabilities and certain other
rights comprising those properties and subsidiaries as described on Exhibit A
and any and all equipment used by Wexford in conjunction with the operation of
said properties and subsidiaries and located on the premises, collectively
referred to as the "Acquired Assets"; and
WHEREAS, it is the intent of both Wexford and Imperial that Imperial
acquire all of the assets and liabilities of Wexford at the time of closing
whether or not specifically identified on Exhibit "A"; and
WHEREAS, the Board of Directors of both Wexford and Imperial deem it in the
best interests of each to complete the transaction herein contemplated;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions, covenants, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS.
1.01 PURCHASE AND SALE. On and subject to the terms and conditions of this
Agreement, Imperial agrees to purchase from Wexford and Wexford agrees to sell,
transfer, convey and deliver to Imperial all of Wexford's right, title and
interest in and to the Acquired Assets, including without limitation, the
following assets:
(a) all of Wexford' right, title and interest in and to each of the
properties as more particularly described on Exhibit A attached hereto, and all
equipment, buildings, fixtures and other improvements located thereon and all
rights, easements, rights-of-way and other interests incidental thereto and used
or necessary for the use and enjoyment of the properties by Imperial;
(b) all machinery, equipment, trucks, tractors and trailers and related
spare components and parts, inventories of raw materials, supplies and minerals,
processed goods, goods in process, and tools located on the properties or used
in connection with the properties described in Exhibit A;
(c) all certificates, licenses, permits, registrations and applications
therefor necessary, useful for, used or held for use by Wexford in the ownership
or operation of the properties (collectively, the "Permits"); whether held in
the name of Wexford or in an affiliate entity;
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(d) all water wells and water rights, licenses, permits and applications
therefor to locate, drill for, produce, use, gather, restrict flow, store or
remove water on, from or to the properties (collectively, the "Water Rights");
and
(e) all books, records, ledgers, files, documents, correspondence, lists,
plats, maps, plans, drawings, blueprints, specifications, assays, studies,
reports and other written or printed materials necessary, useful for, held for
use by Wexford useful in the ownership or operation of the properties on Exhibit
A, including any stock certificates, stock appreciation rights, warrant
certificates or similar documents conveying ownership of the properties;
1.02 PURCHASE PRICE. Imperial agrees to purchase the Acquired Assets from
Wexford at Closing for the following consideration:
(a) Imperial will retire the note receivable from Wexford to Imperial in
the principal amount of $467,835, including accrued interest thereon
to the date of closing.
(b) Imperial will retire the accounts payable from Wexford to Imperial
in the amount of $45,000.
(c) Imperial will assume outstanding notes and accounts payable to third
parties from Wexford in the principal amount of $ 885,845, including
accrued interest thereon to the date of closing.
(d) Imperial will assume outstanding notes and accounts receivable owed
by Wexford from third parties on the amount of $218,300, including
accrued interest through January 31, 1999 of $19,647.
1.03 CLOSING. Subject to the terms and provisions of this Agreement, the
closing of the transactions contemplated by this Agreement will be at 10:00 a.m.
at the offices Imperial Petroleum, Inc., 100 NW Second Street, Suite 312,
Evansville, IN 47708, on or before, March 9, 1999, or at such earlier or later
date or such other place as shall be mutually agreed upon by Imperial and
Wexford, such date and time sometimes being referred to herein as the "Closing"
or "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF IMPERIAL.
Imperial represents and warrants to Wexford that, to the best of its
knowledge, the statements contained in this Section 2 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date as though made then and as though the Closing Date were substituted
for the date of this Agreement throughout this Section 2.
2.01 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Imperial is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Imperial is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. Imperial has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it.
2.02 AUTHORITY. Imperial has all requisite corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by Imperial hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by Imperial
and all agreements, instruments, and documents to be executed and delivered by
Imperial hereunder, the performance by Imperial of all the terms and conditions
hereto to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of Imperial, and no other corporate proceedings of Imperial are
necessary with respect thereto. All persons
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who have executed and delivered this Agreement, and all persons who will execute
and deliver the other agreements, documents and instruments to be executed and
delivered by Imperial hereunder, have been duly authorized to do so by all
necessary actions on the part of Imperial. This Agreement constitutes, and each
other agreement and instrument to be executed by Imperial hereunder, when
executed and delivered by Imperial, will constitute, the valid and binding
obligation of Imperial enforceable against it in accordance with its terms.
2.03 CAPITALIZATION. The entire authorized capital stock of Imperial, as of
the date of the Agreement, consists of 50,000,000 shares of common stock, par
value $0.06 per share, of which 8,985,413 shares are, as of the date of this
Agreement, issued and outstanding, including 152,290 shares held in treasury.
Certain employees and other individuals have been granted warrants to acquire
restricted common stock of Imperial, which if exercised would result in the
issuance of an additional 966,666 shares of common stock as more fully described
in the Imperial Disclosure Schedule Section 2.03 attached hereto and made a part
hereof. All of the issued and outstanding shares of Imperial common stock have
been duly authorized, are validly issued, fully paid, and non-assessable. Except
as disclosed in the Imperial Disclosure Schedule, there are no outstanding or
authorized options, warrants, rights, contracts, calls, puts, rights to
subscribe, conversion rights or other agreements or commitments to which
Imperial is a party or which are binding upon Imperial providing for the
issuance, disposition or acquisition of any of its capital stock. Upon issuance,
the Imperial Shares to be issued to Sellers, pursuant to this Agreement will be
duly authorized, validly issued, fully paid and non-assessable.
2.04 NON-CONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which Imperial is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of Imperial or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Imperial is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Imperial is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for Imperial to consummate the transactions contemplated by this
Agreement.
2.05 SUBSIDIARIES. The subsidiaries of Imperial are disclosed in the
Imperial Disclosure Schedule, Section 2.06 attached hereto and made a part
hereof.
2.06 DISCLOSURE. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
2.07 REPRESENTATION. Imperial represents and warrants that in making the
decision to acquire the Acquired Assets, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that
Imperial and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from Wexford.
3. REPRESENTATIONS AND WARRANTIES CONCERNING WEXFORD.
Wexford, represents and warrants to Imperial that, to the best of their
knowledge, the statements contained in this Section 3 are correct and complete
as of the date of this Agreement and will be correct and
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complete as of the Closing Date as though the Closing Date were substituted for
the date of this Agreement throughout this Section 3.
3.01 AUTHORITY. Wexford has all requisite power and authority to execute
and deliver this Agreement and all agreements, instruments and documents to be
executed and delivered by Wexford hereunder, to consummate the transactions
contemplated hereby and to perform all terms and conditions hereof to be
performed by it. This Agreement constitutes, and each other agreement and
instrument to be executed by Wexford hereunder, when executed and delivered by
Wexford, will constitute, the valid and binding obligation of Wexford
enforceable against it in accordance with its terms.
3.02 NON-CONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which Wexford is subject or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Wexford is a party
or by which it is bound or to which any of its assets is subject or result in
the imposition of any security interest upon any of its assets. Wexford is not
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other party in order for
Wexford and Imperial to consummate the transactions contemplated by this
Agreement.
3.03 TITLE. Wexford has, and upon the Closing Date will have, valid and
binding contractual rights to acquire the Acquired Assets, free and clear of all
liens, claims, mortgages, security interests, pledges, encumbrances or
restrictions on transfer of any kind or nature.
3.04 ACQUIRED ASSETS.
(a) Each of the properties comprising the Acquired Assets is legal, valid,
binding, enforceable and in full force and effect. Wexford has performed each
and every obligation and requirement under each agreement affecting the Acquired
Assets necessary to create, preserve and maintain each of the properties
comprising the Acquired Assets as legal, valid, binding, enforceable and in full
force and effect. Wexford has made each and every required filing with all
federal, state and local governmental authorities, and similar documents,
necessary to create, preserve and maintain the Acquired Assets and all such
filings are complete, true and correct. Wexford is not in breach of or default
under any agreements affecting the properties comprising the Acquired Assets and
no event has occurred which, with notice or passage of time, would constitute a
breach of or default under or permit revocation, termination or modification of
the Acquired Assets and Wexford has received no notice and have no knowledge of
any such breach, default, revocation, termination or modification which would
materially affect the Acquired Assets.
(b) With respect to each property comprising the Acquired Assets: (i)
Wexford has good and marketable title, free and clear of any security interest,
easement, covenant or other restriction; (ii) there are no pending or threatened
condemnation proceedings, lawsuits or administrative actions relating to any
Acquired Assets or other matters affecting adversely the current use, occupancy
or value thereof; (iii) the legal description for each property as set forth on
Exhibit A attached hereto describes such property fully and adequately; (iv) all
facilities thereon have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules and regulations; (v) there are no leases, subleases,
licenses, concessions or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the Acquired
Assets; (vi) there are no outstanding options or rights of first refusal to
purchase the Acquired Assets, or any portion thereof or interest therein.
3.05 PERMITS. Each of the Permits is legal, valid, binding, enforceable and
in full force and effect. Wexford has made all payments and performed each and
every obligation and requirement under each Permit necessary to preserve and
maintain each Permit as legal, valid, binding, enforceable and in full force
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and effect. Wexford is not in breach of or default under any Permit and no event
has occurred which, with notice or the passage of time, would constitute a
breach of or default under or permit revocation, termination or modification of
any Permit and Wexford has received no notice and have no knowledge of any such
revocation, termination or modification of any Permit.
3.07 GOVERNMENTAL APPROVALS. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority (including, without limitation, any
department, bureau or agency), is required to be obtained or made in connection
with the execution and delivery of this Agreement by Wexford or the consummation
by Wexford of the transactions contemplated hereby the failure of which to
obtain would have a material adverse affect on the Acquired Assets, Imperial or
Imperial's ability to own, operate or exploit the Acquired Assets.
3.08 TAX MATTERS. Wexford has filed or will file all federal, state and
local tax returns that it is required to file. All federal, state and local
taxes owed by Wexford (whether or not shown on any tax return) including,
without limitation, income, withholding, excise, ad valorem, social security,
unemployment, occupation, transfer, sales, use and property taxes, have been or
will be paid. Wexford is not currently the beneficiary of any extension of time
within which to file any tax return. No claim has ever been made by an authority
in a jurisdiction where Wexford does not file tax returns that it is or may be
subject to taxation by that jurisdiction. There are no security interests or
liens on any of the assets of Wexford that arose in connection with any failure
(or alleged failure) by Wexford to pay any federal, state or local tax. Wexford
have withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party. No director or officer (or employee responsible
for tax matters) of Wexford or any affiliate expects any federal, state or local
authority to assess any additional taxes for any period for which tax returns
have been filed. There is no dispute or claim concerning any federal, state or
local tax liability either (A) claimed or raised by any authority in writing or
(B) as to which Wexford or any of the directors and officers (and employees
responsible for tax matters) of Wexford or any affiliate have knowledge based
upon personal contact with any agent of such authority.
3.09 LITIGATION. There is no litigation and there are no arbitration
proceedings or governmental proceedings, suits or investigations pending,
instituted or threatened against Wexford or any of the Acquired Assets. Neither
Wexford nor any of the Acquired Assets, are subject to any judicial or
administrative judgment, order, decree or restraint currently affecting Wexford
in a manner that is material and adverse to the Acquired Assets. Wexford has not
received any notifications or charges from any federal, state, or local
governmental authority involving oil and gas, occupational safety and health or
water quality or other environmental matters.
3.10 ENVIRONMENT, HEALTH AND SAFETY.
(a) Wexford and its predecessors and affiliates have each complied with all
laws (including rules and regulations thereunder) of federal, state and local
governments (and all agencies thereof) concerning the environment, public health
and safety and employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, demand or notice has been filed
or commenced against any of them alleging any failure to comply with any such
law or regulation.
(b) Wexford has no liability (and there is no basis related to the past or
present operations, properties or facilities of Wexford and its respective
predecessors and affiliates) for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim or demand against
Wexford giving rise to any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean
Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances
Control Act of 1976, the Refuse Act of 1899, or the Emergency Planning and
Community Right-to-Know Act of 1986 (each as
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amended), or any other law (or rule or regulation thereunder) of any federal,
state or local government (or agency thereof), concerning release or threatened
release of hazardous substances, public health and safety, or pollution or
protection of the environment.
(c) Wexford has no liability and none of their predecessors and affiliates
have handled or disposed of any substance, arranged for the disposal of any
substance or owned or operated any property or facility in any manner that could
form the basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand (under the common law or
pursuant to any statute) against giving rise to any liability for damage to any
site, location, or body of water (surface or subsurface) or for illness or
personal injury.
(d) Wexford has no liability and there is no basis for any present or
future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against Sellers giving rise to any liability under the
Occupational Safety and Health Act, as amended, or any other law (or rule or
regulation thereunder) of any federal, state or local government (or agency
thereof) concerning employee health and safety.
(e) Wexford has no liability and has not exposed any employee or contractor
to any substance or condition that could form the basis for any present or
future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand (under the common law or pursuant to statute) against Wexford
giving rise to any liability for any illness of or personal injury to any
employee or contractor.
(f) Wexford has obtained and been in compliance with all of the terms and
conditions of all permits, licenses and other authorizations which are required
under, and have complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
which are contained in, all federal, state and local laws (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations, injunctions
and charges thereunder) relating to public health and safety, worker health and
safety and pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, groundwater, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or chemical, industrial,
hazardous, or toxic materials or wastes.
(g) All properties and equipment used in the business of Wexford have been
free of asbestos, PCB's, methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and other hazardous substances.
(h) All product labeling of Wexford has been in conformity with applicable
laws (including rules and regulations thereunder).
(i) No pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored, spilled, leaked, discharged,
emitted, or released on any real property comprising the Acquired Assets.
(j) There are no underground storage tanks located on the Acquired Assets.
3.11 LEGAL COMPLIANCE.
(a) Wexford has complied with all laws (including rules and regulations
thereunder) of federal, state and local governments (and all agencies thereof),
and no charge, complaint, action, suit, proceeding, hearing, investigation,
claim, demand, or notice has been filed or commenced against Wexford alleging
any failure to comply with any such law or regulation.
(b) Wexford has complied with all applicable laws (including rules and
regulations thereunder) relating to the employment of labor, employee civil
rights, and equal employment opportunities.
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(c) Wexford has complied with all applicable federal, state and local laws
(including rules and regulations thereunder) relating to crude oil and natural
gas production, exploration and extraction or the processing or transportation
and storage of crude oil and natural gas.
(d) Wexford has not violated in any respect or received a notice or charge
asserting any violation of the Sherman Act, the Clayton Act, the Robinson-Patman
Act, or the Federal Trade Commission Act, each as amended.
(e) Wexford has not: (i) made or agreed to make any contribution, payment
or gift of funds or property to any governmental official, employee, or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under the laws of any federal, state, local or foreign jurisdiction;
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false entries on any books or records for any reason; (iii) made or
agreed to make any contribution made by any other person, to any candidate for
federal, state, local or foreign public office.
(f) Wexford has filed in a timely manner all reports, documents, and other
materials it was required to file (and the information contained therein was
correct and complete in all respects) under all applicable laws (including rules
and regulations thereunder).
(g) Wexford has possession of all records and documents it was required to
retain under all applicable laws (including rules and regulations thereunder).
3.12 DISCLOSURE. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
4. SURVIVAL AND INDEMNITY.
4.01 SURVIVAL. All of the representations and warranties of Wexford
contained in this Agreement and the representations of Imperial contained in
this Agreement shall survive the Closing Date, even if the damaged party knew or
had reason to know of any misrepresentation or breach of warranty at the time of
the Closing Date, and shall continue in full force and effect for a period of
six months thereafter.
4.02 INDEMNIFICATION FOR BENEFIT OF THE IMPERIAL . In the event Wexford
breaches any of their joint and several representations, warranties or covenants
contained herein, and provided that Imperial makes a written claim for
indemnification against Wexford pursuant to Section 9.04, then Wexford agrees to
indemnify and hold harmless Imperial from and against the entirety of any
Adverse Consequences Imperial may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences Imperial may suffer
after the end of the applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
4.03 INDEMNIFICATION FOR BENEFIT OF WEXFORD. In the event Imperial breaches
any of its representations, warranties and covenants contained herein, and
provided that Wexford makes a written claim for indemnification against Imperial
pursuant to Section 9.04, then Imperial agrees to indemnify and hold harmless
Wexford from and against the entirety of any Adverse Consequences Wexford may
suffer through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of or caused by the breach.
4.04 INDEMNIFICATION PROCEDURE. If any third party shall notify any party
to this Agreement (the "Indemnified Party") with respect to any matter which may
give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 4, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided however, that no delay
on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any liability or
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obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within 10 days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, (i) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of the Indemnified Party's choice reasonably satisfactory to the
Indemnifying Party, (ii) the Indemnified Party may retain separate co-counsel at
its sole cost and expense, (iii) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the matter
without the written consent of the Indemnifying Party not to be withheld
unreasonably, and (iv) the Indemnifying Party will not consent to the entry of
any judgment with respect to the matter, or enter into any settlement which does
not include a provision whereby the plaintiff or claimant in the matter releases
the Indemnified Party for all liability with respect thereto, without the
written consent of the Indemnified Party not to be withheld unreasonably. In the
event no Indemnifying Party notifies the Indemnified Party with 10 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
is assuming the defense thereof, however, the Indemnified Party may defend
against, or enter into any settlement with respect to, the matter in any manner
it reasonably may deem appropriate.
4.05 DETERMINATION OF LOSS. The parties shall make appropriate adjustment
for tax benefits and insurance proceeds (reasonably certain of receipt and
utility in each case) and for the time cost of money in determining the amount
of loss for purposes of this Section 4.
4.06 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory or common
law remedy any party may have for breach of representation, warranty or
covenant.
4.07 DEFINITION OF ADVERSE CONSEQUENCES. As used in this Section 4,
"Adverse Consequences" means all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demand, judgments, orders,
decrees, stipulations, injunctions, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses
(including any losses resulting from the loss or invalidity of the leases
comprising the Acquired Assets), expenses and fees, including all attorneys'
fees and court costs.
5. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.
5.01 COVENANTS OF WEXFORD. Between the date of this Agreement and the
Closing Date or, if earlier termination of this Agreement:
(a) Wexford agrees to give Imperial its agents and representatives, full
access to the Acquired Assets and all of Wexford's premises and books and
records relating to the Acquired Assets and its operation, and to furnish
Imperial with such financial and operating data and other information with
respect to the Acquired Assets and its ownership and operation as Imperial shall
from time to time request; provided, however, that any such investigation shall
not affect any of the representations and warranties of Wexford hereunder; and
provided further, that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the operation of the business of Wexford.
In the event of termination of this Agreement, Imperial will return to Wexford
all documents, work papers, and other material obtained from Wexford in
connection with the transactions contemplated hereby and will keep confidential
any information obtained pursuant to this Agreement unless such information is
ascertainable from public or published information or trade sources.
(b) Wexford, to the extent required for continued ownership and operation
of the Acquired Assets and Permits without impairment, will use its best efforts
to preserve substantially intact the business organization of Wexford, to keep
available the services of the present officers and employees of Wexford, and to
preserve the present relationships of Wexford with persons having significant
business relationships with Wexford. All lease and rental payments required
pursuant to Wexford's existing agreement will be current at the time of Closing.
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(c) Wexford will conduct its business relating to the Acquired Assets and
Permits only in the ordinary course and will not engage in any practice, take
any action or enter into any transaction relating to the Acquired Assets or
Permits outside the ordinary course of business. By way of amplification and not
limitation and except as otherwise provided in this Agreement, Wexford will not,
without the prior written consent of Imperial, (i) make any material change in
the conduct of the business of the Acquired Assets or fail to conduct its
operations in the ordinary course consistent with past practice; (ii) fail to
maintain and keep the Acquired Assets and Permits in the same condition in all
material respects in which the Acquired Assets were on the date of this
Agreement, normal wear and tear excepted, or fail to perform routine maintenance
on the Acquired Assets not materially less frequently and to a degree not
materially less in magnitude than in accordance with the schedule and magnitude
of routine maintenance carried out by Wexford prior to the date of the
Agreement; (iii) sell or dispose of any of its assets employed in the business
conducted on the Acquired Assets; or (iv) commit itself to do any of the
foregoing.
(d) Wexford will: (i) promptly notify Imperial of the receipt of any
written notice or written claim of a material breach or default by Wexford, or
of any termination or cancellation, or written threat of termination or
cancellation, of any of the Acquired Assets or Permits; (ii) promptly notify
Imperial of any action, suit, proceeding, claim or investigation which is
threatened or commenced against Wexford which relates to or affects in any
material respect the ownership or operation of the Acquired Assets by Imperial
after the Closing of this Agreement or the transactions contemplated thereby;
(iii) promptly notify Imperial of any condition or circumstance occurring from
the date hereof up to and including the Closing Date that would cause the
representations and warranties of Wexford contained herein to become untrue in
any material respect; and (iv) cooperate with Imperial to effect an orderly
transition of the ownership and operation of the Acquired Assets and Permits and
use its best efforts to protect the relationships with Wexford's existing
customers and suppliers relating to the Acquired Assets.
(e) Wexford agrees that neither it nor its affiliates nor any employee,
representative or advisor of Wexford or their affiliates will, directly or
indirectly, (i) solicit, initiate or encourage any Acquisition Proposal (as
defined below) relating to the Acquired Assets or afford access to the
properties or permits or the books and records relating to the Acquired Assets
or Permits, to any person that may be considering making or has made an
Acquisition Proposal. Wexford shall immediately cease or cause to be terminated
any existing activities, discussions or negotiations with any persons conducted
heretofore with respect to any Acquisition Proposal. As used herein, the term
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, (i) the acquisition of all or a substantial portion of the Acquired
Assets (other than the transactions contemplated by this Agreement). The
provisions of this Section 5.01 shall remain in effect until the earlier of the
termination of this Agreement pursuant to Section 8 or the Closing.
5.02 COVENANTS OF IMPERIAL.
(a) Between the date of this Agreement and the Closing Date, Imperial
agrees to give to Wexford, their agents and representatives, full access to all
premises and books and records, and to cause Imperial's officers to furnish
Wexford with such financial and operating data and other information with
respect to the business and properties of Imperial as Wexford shall from time to
time reasonably request; provided, however, that any such investigation shall
not affect any of the representations and warranties of Imperial hereunder; and
provided further, that any such investigation shall be conducted in such manner
as not to interfere unreasonably with the operation of the business of Imperial.
In the event of termination of this Agreement, Wexford will return to Imperial
all documents, work papers and other material obtained from Imperial in
connection with the transactions contemplated hereby and will use all reasonable
efforts to keep confidential any information obtained pursuant to this Agreement
unless such information is ascertainable from public or published information or
trade sources.
(b) Imperial waives compliance by Wexford with the bulk sales law of the
Texas Uniform Commercial Code and any other applicable bulk sales law in
connection with the sale of Acquired Assets contemplated by this Agreement.
Wexford hereby agrees to indemnify and hold Imperial harmless from and against
all losses, damages and expenses incurred by Imperial as a result of such
noncompliance.
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5.03 CONSENTS. Prior to Closing, Wexford and Imperial shall each use their
or its respective best efforts to obtain the consent or approval of each person
(including any federal, state or local governmental authority) whose consent or
approval shall be required in order to permit Imperial or Wexford, as the case
may be, to consummate the transactions contemplated by this Agreement.
6. CONDITIONS TO CLOSING.
6.01 CONDITIONS TO OBLIGATIONS OF IMPERIAL. The obligation of Imperial to
effect the Closing of the transactions contemplated by this Agreement shall be
subject to the following conditions:
(a) Wexford shall have furnished Imperial with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Wexford contained herein shall be true and correct in all material
respects at the Closing Date with the same effect as though made at such time;
and (ii) Wexford shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied by them prior
to the Closing Date.
(c) Wexford shall have obtained and delivered to Imperial all consents
required to consummate the transactions contemplated by this Agreement.
(d) There shall not have occurred (i) any material adverse change in the
Acquired Assets or the business, properties, results of operations or financial
condition of Wexford, (ii) any loss of or damage to any of the Acquired Assets
(whether or not covered by insurance) of Wexford which will materially affect or
impair the ability of Imperial to own or operate the Acquired Assets.
(e) All statutory requirements for the valid consummation by Wexford of the
transactions contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
consummation by Wexford of the transactions contemplated by this Agreement and
to permit the business now or previously carried on by Wexford at the Acquired
Assets to continue unimpaired to any material degree immediately following the
Closing Date shall have been obtained. Between the date of this Agreement and
the Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute) an investigation or other
proceeding which is pending at the Closing Date relating to the transactions
contemplated by this Agreement and between the date of this Agreement and the
Closing Date no action or proceeding shall have been instituted or, to the
knowledge of Wexford, shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit the
transactions contemplated by this Agreement or to obtain damages in respect
thereof.
(f) Imperial shall have received from Wexford all files and records,
including without limitation, contracts, assignments, agreements, receipts,
deeds, leases, assays and correspondence and any other documents or files, which
in any way relate to the current or former operations of the Acquired Assets.
(g) Wexford shall have complied with the delivery requirements set forth in
Section 7.03 of this Agreement.
6.02 CONDITIONS TO OBLIGATIONS OF WEXFORD. The obligation of Wexford to
effect the Closing of the transactions contemplated by this Agreement shall be
subject to the following conditions:
(a) Imperial shall have furnished Wexford with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
10
<PAGE> 11
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Imperial contained herein shall be true in all material respects
at the Closing Date with the same effect as though made at such time; and (ii)
Imperial shall have performed all material obligations and complied with all
material covenants required by this Agreement to be performed or complied with
by it prior to the Closing Date.
(c) All statutory requirements for the valid consummation by Imperial of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be obtained in order
to permit consummation by Imperial of the transactions contemplated by this
Agreement shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute) in a writing directed to Wexford,
Imperial or any of their subsidiaries, an investigation which is pending at the
Closing Date relating to the transactions contemplated by this Agreement and
between the date of this Agreement and the Closing Date no action or proceeding
shall have been instituted or, to the knowledge of Imperial, shall have been
threatened by any party (public or private) before a court or other governmental
body to restrain or prohibit the transactions contemplated by this Agreement or
to obtain the damages in respect thereof.
7. ACTIONS AT CLOSING.
7.01 TRANSACTIONS AT THE CLOSING. At the Closing the following events shall
occur, each event under the control of one party hereto being a condition
precedent to the events under the control of the other party, and each event
being deemed to have occurred simultaneously with the other events.
7.02 DELIVERIES BY IMPERIAL. At Closing, Imperial will deliver to Wexford:
(a) certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement; and
(b) Certificates of Incumbency and signatures of officers of Imperial dated
as of the date of this Agreement.
7.03 DELIVERIES BY WEXFORD. At Closing, Wexford shall deliver to Imperial:
(a) such bills of sale, deeds, mineral deeds, assignments, certificates of
title, stock certificates and other instruments of transfer, assignment and
conveyance as Imperial shall reasonably request to vest in Imperial good and
marketable title to the Acquired Assets; and
(b) certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement; and
(c) duly executed copies of consents to the assignment, if necessary, of
any outstanding notes or accounts payable from the third parties owed by
Wexford.
8. TERMINATION.
8.01 TERMINATION OF THE AGREEMENT. The parties may terminate this Agreement
as provided below:
(a) Imperial and Wexford may terminate this Agreement by mutual written
consent at any time prior to the Closing;
11
<PAGE> 12
(b) Imperial may terminate this Agreement by giving written notice to
Wexford on or before the Closing Date if Imperial is not satisfied with the
results of its continuing business, legal and accounting due diligence regarding
Wexford;
(c) Imperial may terminate this Agreement by giving written notice to
Wexford at any time prior to the Closing (i) in the event Wexford has breached
any material representation, warranty or covenant contained in this Agreement in
any material respect, Imperial has notified Wexford of the breach and the breach
has continued without cure for a period of 10 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before February 28, 1999, or
such later date as may be agreed to by Imperial and Wexford in writing, by
reason of the failure of any condition precedent under Section 6.01 hereof
(unless the failure results primarily from Imperial itself breaching any
representation, warranty or covenant contained in this Agreement); and
(d) Wexford may terminate this Agreement by giving written notice to
Imperial at any time prior to the Closing (i) in the event Imperial has breached
any material representation, warranty or covenant contained in this Agreement in
any material respect, Wexford has notified Imperial of the breach and the breach
has continued without cure for a period of 10 days after the notice of breach or
(ii) if the Closing shall not have occurred on or before February 28, 1999, or
such later date as may be agreed to by Imperial and Wexford in writing, by
reason of the failure of any condition precedent under Section 6.02 hereof
(unless the failure results primarily from Wexford itself breaching any
representation, warranty or covenant contained in this Agreement).
8.02 EFFECT OF TERMINATION. If either Imperial or Wexford terminates this
Agreement pursuant to Section 8.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party.
9. MISCELLANEOUS.
9.01 SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished at the Closing
Date.
9.02 GOVERNING LAW. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Nevada.
9.03 NOTICES. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
To: Imperial
Imperial Petroleum, Inc.
100 NW Second Street, Suite 312
Evansville, IN 47708
Attention: Mr. Jeffrey T. Wilson,
President
To: Wexford
Wexford Technology, Inc.
5555 North Three Notch Street
Troy, AL 36081
Attention: Mr. Carleton B. Foster
Vice President
12
<PAGE> 13
9.04 NO ASSIGNMENT. This Agreement may not be assigned by either party or
by operation of law or otherwise and, in the event of an attempted assignment,
this Agreement shall terminate.
9.05 ENTIRE AGREEMENT. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
9.06 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.07 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.08 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Imperial and Wexford. No waiver by an party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.09 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10 EXPENSES. Except as otherwise expressly provided herein, each of the
parties will bear his or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
9.11 CONSTRUCTION. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
IMPERIAL PETROLEUM, INC.
BY: /s/ JEFFREY T. WILSON
-------------------------------------
JEFFREY T. WILSON
PRESIDENT
WEXFORD TECHNOLOGY, INC.
BY:
-------------------------------------
JEFFREY T. WILSON
PRESIDENT
13
<PAGE> 14
EXHIBIT A
DESCRIPTION:
STOCKS:
100% of the capital stock of Waste Conversion Corporation, a Delaware
corporation, including all equipment, inventory, vehicles, buildings, spare
parts, leases, claims, rights of way, or any other rights or obligations owned
by or used in the operations of the company. Includes all notes and accounts
receivable, notes and accounts payable and any and all assets and liabilities of
the company. (See attached unaudited financial statements for Waste Conversion).
AGREEMENTS:
That certain Agreement to Exchange Stock by and between Wexford Technology,
Inc. and AquaDyn Technologies, Inc. dated November 26, 1997, including all
amendments thereto.
That certain Joint Venture Agreement for The Recovery of Precious Metals by
and between Wexford Technology, Inc. and Phoenix Metals, Inc. dated June 3,
1997, including all amendments thereto.
That certain Joint Venture Agreement for the Recovery of Crude Oil by and
between Waste Conversion Corporation and Crude Environmental Technologies, LLC
dated August 20, 1998, including all amendments thereto.
NOTES AND ACCOUNTS RECEIVABLE:
That certain Note Receivable from AquaDyn Technologies, Inc. in the
principal amount of $218,300 as of January 31, 1999 and the Account Receivable
from AquaDyn Technologies, Inc. represented by accrued interest thereon in the
amount of $19,647 as of January 31, 1999.
NOTES AND ACCOUNTS PAYABLE:
Those certain Notes and Accounts Payable as outlined below, including
accrued interest thereon:
NOTES PAYABLE
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1999
NAME DATE OF NOTE PRINCIPAL
- ---- ------------ ---------
<S> <C> <C>
Thomas J. Patrick 9/25/97 $ 25,000
Phillip R. Archer 8/19/97 $ 50,000
Eric Dezell 1/17/95 $ 10,000
John P. Byrne 8/19/98 $ 53,878
Howard S. Farmer 8/15/98 $ 26,939
Robert Novenson 7/14/94 $ 7,500
John P. Nordhaus 2/27/94 $ 25,000
Jeffrey S. Rogge 3/ 7/94 $ 25,000
George L. Hagen 7/14/94 $ 12,500
HN Corporation 1/20/98 $ 25,000
Imperial Petroleum, Inc. 8/28/97 $467,835
Jeffrey T. Wilson 1/5/98 $ 25,000
TOTAL $753,652
</TABLE>
14
<PAGE> 15
EXHIBIT "A" (C0NT'D)
ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
AS OF JANUARY 31, 1999
DESCRIPTION: TOTAL
------------ -----
<S> <C>
WCC Accounts Payable $175,028
Jeffrey T. Wilson - Account Payable $425,000
Imperial Petroleum, Inc. - Account Payable $ 45,000
TOTAL $645,028
</TABLE>
NOTE: IT IS THE EXPRESS INTENT OF THE PARTIES HERETO THAT WHETHER LISTED OR NOT,
IMPERIAL WILL ACQUIRE ALL OF THE ASSETS AND LIABILITIES OF WEXFORD AT THE TIME
OF THE CLOSING.
15
<PAGE> 1
EXHIBIT 10.2
10.2 Management Contract with Casino Padre Investment Company, LLC
<PAGE> 2
<TABLE>
<S> <C>
1. Term of This Agreement..........................................................2
2. Services Provided by the Management Company.....................................2
3. The Management Company's Duties - Operational Term/Operational Phase............4
4. The Management Company's Compensation..........................................10
5. Owner's Duties.................................................................11
6. Insurance......................................................................12
7. Indemnification................................................................13
8. Conflicts of Interest..........................................................13
9. Casualty.......................................................................14
10. Early Termination of Agreement.................................................14
11. Damage or Destruction of Ship..................................................16
12. Arbitration....................................................................17
13. No Partnership or Joint Venture................................................17
14. Severability...................................................................17
15. Notices........................................................................17
16. Assignment.....................................................................18
17. Controlling Law................................................................18
18. Binding Effect.................................................................18
19. Counterparts...................................................................18
20. Interpretation and Rules of Construction.......................................18
21. Further Assurances.............................................................19
22. Attorneys' Fees................................................................19
23. Entire Agreement...............................................................19
</TABLE>
<PAGE> 3
MANAGEMENT CONTRACT
This Agreement, dated and executed this 1st day of October, 1999 by and
between Casino Padre Investment Company LLC, a Limited Liability Company
organized under the laws of Nevada, (hereinafter referred to as the "Owner"),
with its principal offices in __________________________________, and sureBET
Casinos Inc. (sureBET), a corporation organized under the laws of the State of
Utah (hereinafter referred to as "The Management Company"), with its principal
office at 1610 Barrancas Avenue, Pensacola, FL 32501.
W I T N E S S E T H :
WHEREAS, Owner will lease and operate the excursion gambling ship known
as the MV Entertainer (Official No. 500021) ("The Ship") from a docking site in
South Padre Island, Texas, together with it's supporting portside facility ( the
"Site"). The business to be conducted on the Ship and Site shall be called "the
Operations".
WHEREAS, The Management Company covenants, represents and warrants,
that The Management Company has substantial experience in managing gaming ships
and casino operations including the management and operation of gaming tables,
coin operated slot machines, video poker machines, lottery, and keno
(hereinafter "gaming operations") and
WHEREAS, Owner desires to employ The Management Company on an exclusive
basis as an independent contractor to assist Owner with the Operations to
provide employee training and necessary pre-opening activities, and, upon
opening to manage and operate the ship and gaming operations on behalf of and
for the account and benefit of Owner; and
WHEREAS, the Owner is ready and willing to contract exclusively with
The Management Company to operate and manage the Ship and Gaming Operations, and
WHEREAS, this Agreement will cover the following two phases with
respect to the Operations:
o Pre-Operating Phase (period from the day of signing
this Agreement until the commencement of operations)
and
o Operating Phase (period from the commencement of
operations until termination of this Agreement); and
WHEREAS, The Management Company will act on behalf of and for the
benefit of Owner and as Owner's agent upon and subject to the terms and
conditions hereinafter set forth during all phases of this Agreement.
1
<PAGE> 4
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein, and for other valuable considerations acknowledged
by each of the parties to be satisfactory and adequate, the parties hereto
covenant and agree as follows:
1. TERM OF THIS AGREEMENT
1.1 The term of this Agreement shall commence on the date first
above written and shall expire and terminate at such time as
owners no longer lease or own the MV Entertainer and/or at the
dock site at South Padre Island, Texas unless earlier
terminated and provided in Section 9 herein.
2. SERVICES PROVIDED BY THE MANAGEMENT COMPANY
2.1 EXCLUSIVE MANAGER. Subject to the limitations and conditions
herein set forth, owner hereby appoints The Management
Company, and The Management Company hereby accepts appointment
as the exclusive manager of the Ship. The Management Company
shall use its best efforts to do and perform all services,
acts, or things necessary to oversee the design, layout,
construction, and interior decoration of the Ship and shall
assume full responsibility for employee training and other
pre-opening activities of the Gaming Operation, and,
thereafter, upon opening, to direct, supervise and manage the
operation. The operations and activities undertaken by The
Management Company pursuant to this Agreement shall be on
behalf of, and for the account and benefit of the Owner.
2.2 ACTIVITIES. For purposes of this Agreement, Operations and
management hereunder shall include operations and management
related to food, beverage (including licensed liquor and
hospitality operations), showroom or entertainment, arcade or
parking operations or facilities ancillary to or undertaken in
conjunction with, but not directly related to Operations
(referred to herein as the "Ancillary Operations and
Facilities").
2.3 THE MANAGEMENT COMPANY'S DUTIES - INITIAL TERM/PRE-OPERATIONAL
PHASE. Commencing with the execution of this Agreement and
continuing until commencement of the Operations, The
Management Company shall perform the following services:
2.3.1 The Management Company shall prepare pre-opening
budgets, preliminary proformas for the first year of
the operation and any other requirements related to
the Operations. The Management Company shall prepare
line item budgets for pre-opening and operations. The
pre-opening budgets and operational plans (herein the
"Pre-Opening Budget and Operational Plan") shall
include a schedule of expenditures, personnel
requirements, hiring schedules, employees' training
program, pre-marketing plan, organizational aspects
of the Operations during pre-
2
<PAGE> 5
opening, and other matters which should be
accomplished for timely opening and a successful
operation.
2.3.2 Prepare detailed plans for the design, the layout and
construction of all facilities on the Operations, the
selection of all gaming equipment, tokens, chips,
cards, currency counters, wrapping machines, safes
and other security equipment the furniture and
furnishings to be utilized in all casino facilities,
and the uniforms to be worn by employees.
2.3.3 Select applicants and establish training programs for
all staff at a location provided by the Owner. All
training costs, including travel and accommodations,
salaries for trainers, training equipment, and
advertising will be borne and paid by the Owner. The
Management Company shall provide Owner a training
plan and budget in a timely manner.
2.3.4 Establish such accounting, auditing, recordkeeping
and reporting systems and systems of internal control
as are required.
2.3.5 Prepare Cash Flow Projections and Statements of
Pre-Opening cash requirements.
2.3.6 Commence recruitment and hiring of executives, key
employees, professionals and other personnel for and
on behalf of the Owner necessary to staff the Ship
and the Ancillary Operations and Facilities in a
timely fashion to insure the adequacy of such staff
upon commencement of operations.
2.3.7 The Management Company shall select and purchase or
lease the necessary gaming equipment (principally,
slot machines and gaming tables) in the name and for
the account of Owner utilizing funds made available
and provided by Owner. In addition, The Management
Company will select with the prior approval of the
Owner and purchase for the account of Owner, all
related accessory equipment, including, but not
limited to, gaming machine tokens, chips and cards
for table games, coin handling equipment, currency
counters, wrapping machines, special tools and other
equipment as well as spare parts. Owner reserves the
option to purchase or lease the aforementioned gaming
and accessory equipment directly from third parties
in the event that such purchase or lease form third
parties results in a lower cost to Owner. Owner shall
retain ownership over all of the foregoing gaming
equipment and related accessory equipment whether or
not described above, and will be responsible for
payment of any customs, export or other duties.
2.3.8 The Management Company shall establish a computerized
security and management system, a double key system,
a standardized security log machine cash box,
double-check accounting procedures, etc., as well as
appropriate control, supervision and surveillance
techniques.
3
<PAGE> 6
2.3.9 The Management Company shall supervise the
installation of the gaming equipment.
2.3.10 The Management Company shall assist the Owner's
accounting and bookkeeping staff in order to keep
proper and detailed books, accounts and records as
required by Owner showing complete Pre-Operational
activities, the receipt and expenditure of monies in
connection therewith or otherwise for the account of
Owner or its authorized employees or agents, to
assist the members of the Owner's internal Audit
Department in carrying out an audit of such books,
accounts and records as Owner may from time to time
reasonably require. Owner may have a Finance and
Internal Audit Department which will review the
operations for internal controls, financial controls
and internal compliance at Owner's sole discretion.
2.3.11 The Management Company shall supervise the Owner's
accountants in order to submit to owner a
pre-Operating Phase budget, by month, within one week
after the pre-opening period has commenced.
2.3.12 The Management Company shall credit and allow, in
full, to Owner any commission, discount, rebate,
deduction or other allowance of any description,
which The Management Company shall receive or be
allowed in the course of its managing activities;
including and concerning the purchase of any gaming
equipment, gaming devices, gaming machinery and their
accessories, and other items described in Section
2.3.7 of this Agreement.
2.3.13 The Management Company shall submit to Owner at least
fourteen (14) days prior to the end of each month a
notice of The Management Company's anticipated cash
requirements for the following month. At the end of
each month, The Management Company shall provide
Owner with a statement which itemizes for that month
both the funds advanced to it by Owner and the cash
disbursements made during last month. All excess
funds held by The Management Company shall be held in
interest bearing accounts with interest accruing to
Owner.
3. THE MANAGEMENT COMPANY'S DUTIES - OPERATIONAL TERM/OPERATIONAL PHASE
3.1 During the Operational Term, The Management Company shall on
behalf of Owner, and for the benefit and account of, and at
Owner's expense, perform the following enumerated duties upon
the opening of the commencement of operations:
3.1.1 Comply with federal, state, county and city laws.
4
<PAGE> 7
3.1.2 All business and casino affairs in connection with
the day-to-day operation, management, and maintenance
of the Ship shall be the sole and exclusive
responsibility of The Management Company who is
hereby granted the necessary power and authority to
carry out The Management Company's duties and
responsibilities under this Agreement. Owner hereby
warrants to The Management Company uninterrupted
control of the Operation and warrants that it will
not interfere or involve itself in any way with the
day-to-day operations. The owner shall direct any
questions regarding management in writing to an
officer of The Management Company on any matter
connected with the Operation or this Agreement. Any
comments, recommendations, suggestions or requests
for change shall be made only to officers of The
Management Company and shall not be made to the local
general The Management Company or any other employee
on the premises. The Management Company shall have
absolute discretion in the determination of: (1)
ticket rates, (2) food and beverage selection and
prices, (3) all charges of any nature to passengers
for services performed by The Management Company for
the Ship, (4) the terms of admittance on the Ship,
(5) terms of rental for entertainer, (6) labor
policies, (7) publicity and promotion, (8) rules and
regulations regarding gaming and wagering, and (9)
contracts, leases and agreements int he ordinary and
customary course of business operations.
3.1.3 At the time of commencement of business, The
Management Company shall provide at Owner's expense
all necessary inventories of marine supplies, food,
beverage, paper products, gaming supplies and other
operational supplies and consumables as The
Management Company deems necessary for the Operation.
3.1.4 In the name of and on behalf of the Owner, The
Management Company shall hire, promote, discharge and
supervise the work of the executive staff, including
the General Manager, assistant manager, and
department heads. Through such executive staff, the
General Manager shall supervise the hiring,
promotion, discharge and work of all other operating
and service employees. All of The Management
Company's corporate employees not employed in or
about the Operation, shall be employees of The
Management Company and on The Management Company's
payroll, and Owner shall not be liable to such
employees for their wages or compensation, nor to The
Management Company or others for any act or omission
on the part of such employees, except with respect to
the General Manager as provided herein. Except for
the General Manager, all Casino employees employed in
or about the Casino shall be employees and paid by
the Owner. The Management Company shall have the
authority in all cases to create appropriate job
descriptions for and hire, promote, discharge and
supervise the work of any such employees. The
Management Company shall procure and maintain, at the
Owner's expense, adequate workmen's compensation
insurance and such other insurance as parties
required covering all the Owner's employees.
5
<PAGE> 8
3.1.5 The Management Company shall appoint one of its
principal executive officers to serve as the General
Manager. The General Manager shall perform his duties
on-site and shall relocate to the South Padre Island,
Texas area. Owner shall be responsible for
reimbursement of all costs attributable to the
General Manager, including but not limited to salary,
bonuses, relocation costs, fringe benefits,
retirement benefits, and housing allowances.
3.1.6 The Management Company shall establish and supervise,
at Owner's expense, an accounting department with
appropriate casino accounting and cost systems,
including such accounting, recordkeeping and
reporting systems as may be required. and in
accordance with Standard Operating Procedures. At
Owner's expense, The Management Company shall prepare
and timely file or cause the preparation and timely
filing of all reports and returns required by such
laws and regulations, and all reports and returns
relating to withholding taxes, social security taxes,
unemployment insurance, disability insurance, and all
other statements and reports pertaining to employment
with respect to The Management Company's and Owner's
payroll in or about the Casino. The Management
Company shall provide copies of all such reports and
returns to Owner not later than the time such are
required to be filed or otherwise submitted to the
appropriate governmental authority, and shall furnish
the Owner with proof of payment of taxes and fees
required to be paid pursuant to federal, state or
local laws. The Management Company shall be
responsible for the preparation or filing of any
federal, state or local income tax or franchise tax
returns on behalf of Owner.
3.1.7 On behalf of, for the benefit of, at the expense of
the Owner, and in accordance with Standard Operating
Procedures prepared by The Management Company,
arrange for an appropriate security force sufficient
to reasonably assure safety of customers, personnel,
monies, and property of the Operation facility. Any
security force shall be comprised of security
officers employed directly by the Owner or provided
under a contract with a third party and the Owner.
The third party or security officer shall report
directly to The Management Company. Each security
officer shall be bonded in sufficient amounts
commensurate with their enforcement duties and
obligations. The cost of such security force shall be
included in the operating expenses of the gaming
facility. The Management Company shall also receive,
consider and handle the complaints of all guests or
users of all facilities or gaming devices.
3.1.8 Manage the selecting of vendors for the furnishing
electricity, gas, water, steam, telephone, cleaning,
vermin exterminators, air-conditioning maintenance,
master television antennas and/or master cable
television service, and at the expense of the Owner,
purchase or lease all materials and supplies,
including gaming devices and equipment.
6
<PAGE> 9
3.1.9 Arrange for the making or installation, in the name
of and at the expense of Owner, of alterations,
repairs, decorations, replacements, equipment or
installations.
3.1.10 Open and maintain, in accordance with Standard
Operating Procedures prepared by The Management
Company, and on behalf of the Owner, one or more
operating account(s) in a money market fund or funds
or banking institution or institutions selected by
the Owner and deposit therein all monies furnished by
the Owner as bankroll or other working funds, all
monies received, retained or set aside as reserves by
The Management Company for or on behalf of Owner and
deposit daily therein all monies generated by the
daily operations. The Management Company shall be the
signer on all such accounts. Provided, further, that
Owner shall indemnify and hold The Management Company
harmless from any liability for payroll taxes or sums
owed which have been incurred in the operation with
respect to Owner's employees and payroll, but for
which there are insufficient funds to pay. The
amounts of such bankroll, working funds and reserves
shall be in an amount determined necessary and
appropriate by the Owner. The Management Company
shall pay from such accounts, expenses reasonably
required for the operation , including without
limitation, all gaming equipment taxes and fees, and
all assessments and charges of every kind imposed by
any governmental authority having jurisdiction and
interest and appraisal fees; fines, penalties and
court disbursements incurred in connection with the
operation; premiums on policies and insurance and all
expenses and payments authorized by this Agreement.
3.1.11 Comply with all statutes, ordinances, laws, rules,
regulations, orders and determinations affecting or
issued in connection with the Operation by any
governmental authority having jurisdiction thereof.
The Management Company shall notify Owner of all such
orders, determinations and requirements and any
alleged violation of any statute, ordinance, law,
rule, regulations, order determination or requirement
as soon as The Management Company receives notice
(formal or informal) thereof. The Management Company
shall make any alterations or repairs so ordered or
so required. Unless otherwise directed by Owner, The
Management Company, at Owner's expense may protest or
contest in an appropriate court or forum any order,
rule or regulation or claimed violation thereof
affecting the Operation. The Management Company may
settle or compromise any such claim for less than
$25,000.00 in its discretion (and shall notify Owner
promptly of such settlement or compromise). All fines
and penalties imposed on The Management Company or
Owner under this subsection except as a result of The
Management Company's gross negligence (unless at the
specific direction of Owner) shall be paid by the
Owner and Owner shall indemnify, protect and defend
The Management Company from and against any liability
therefore. All fines and penalties imposed upon
Owner, or imposed on The Management Company as the
result of The Management Company's compliance with
Owner's specific
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directions, shall be paid by Owner. Legal fees for
any action shall be limited to $25,000.00 unless
otherwise agreed to by Owner.
3.1.12 Determine the number and types of gaming tables and
gaming machines, pay back percentages, table limits,
changes in table limits, number of decks and manner
of dealing blackjack, general casino rules and game
rules, treatment of customers by casino personnel and
dealers, settlement of disputes with patrons, the
conduct of casino personnel while off duty, including
but not limited to consumption of alcoholic
beverages, meals, break area, association with
casino, and other activities which reflect on the
business of the Owner and The Management Company.
3.1.13 Institute any necessary legal action or proceeding to
collect charges, rents or other income for, or debts
owing to the Operation or to oust or dispossess
guests, or other persons in possession or to cancel
or terminate any lease for the breach thereof or
default thereunder, all in accordance with Standard
Operating Procedures.
3.1.14 At Owner's expense, render statements to the Owner as
follows:
(a) On or before the fifteenth (15th) day of
each calendar month, The Management Company
shall render to Owner, and to any persons
designated by Owner, a detailed profit and
loss statement prepared on a cash basis for
the operation for the preceding calendar
month and for the portion of the operating
year ended on the last day of such preceding
calendar month and for such calendar month
and calendar year a statement of all capital
expenditures made by The Management Company
for the account of the Owner, a statement of
management compensation, lease payments, and
any amounts distributable to the Owner.
(b) The Management Company shall render to
Owner, to the certified public accountants
designated Owner and to any other persons
designated by Owner, in a timely fashion,
copies of such records, reports, financial
statements, audits and supplemental
information as may be reasonably requested
by Owner and a required by all applicable
federal, state, county and city laws and
regulations.
(c) The Management Company shall make available
to the Owner and its designated agents, who
shall have the right to inspect, copy and
analyze them, all journals, ledgers and any
other original source documents, internal
statements and reports, analyzes and other
information kept or used by The Management
Company in connection with rendering the
reports, balance sheets and statements
described in this Section 3.1, which are
deemed necessary by Owner to determine and
satisfy Owner that The Management Company is
complying with this Agreement.
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3.1.15(a) The Management Company shall, at Casino
Padre's expense, maintain and repair the
Ship, its furnishings, equipment in
accordance with The Management Company's
operational standards. Except as set forth
in subsection (c) below, The Management
Company is authorized to enter into in the
name of and expense of Owner all contracts
and agreements as are in The Management
Company's opinion necessary for the
operation, supply and maintenance of the
Ship and to pay the same when due. It is
accepted that over the term of this
Agreement, expenditure on maintenance and
repairs will average five (5%) of gross
revenue annually.
(b) In addition to ordinary maintenance and
repair, Owner authorizes The Management
Company to expend such amounts for ordinary
capital replacement items as are required to
operate the Ship in accordance with The
Management Company's standards and comply
with The Management Company's programs for
renovation, modernization and improvement
then in effect. There shall be deducted in
each fiscal month an amount equal to Ten
Thousand Dollars ($10,000.00) per month for
a "reserve fund" which shall be recorded on
the books of account as "Reserve for Capital
Replacements" (appearing as a deduction
below the "net profit after tax" level in
the income and expense statement). Each
fiscal month , the amount so deducted shall
be placed into an interest bearing account
established in Owner's name at a financial
institution of Owner's selection with The
Management Company's designees being the
only authorized signatories on said account.
Any expenditures for capital replacements,
substitutions or additions, which have been
budgeted, may be made without Owner's
approval, by The Management Company to the
extent available from the reserve fund
(including unused accumulations from earlier
years).
In the event that the reserve fund balance
is below budget for the ensuring year, Owner
shall supply the necessary funds by deposit
to that account within ten (10) days of
receipt of notice to that effect. All
amounts remaining in the reserve fund at the
close of each fiscal year shall be carried
forward and retained in the reserve until
fully used as herein provided.
Upon termination of this Agreement, The
Management Company's rights to any unused
portion of the reserve fund shall terminate
and the balance of the fund shall be paid
over to Owner.
(c) The Management Company shall be required to
obtain the prior written consent of Owner,
which shall not be unreasonably withheld,
before entering into any contract, agreement
or purchase involving structural repair or
rehabilitation of the Ship or the repair
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or replacement of any furnishings, fixtures
and equipment if the amount payable under
such contract exceeds the sum of Twenty-Five
Thousand Dollars ($25,000.00) unless said
amount was approved as an annual or
quarterly budgeted item. The foregoing
amount is based upon the purchasing power of
money at the date of this Agreement and
shall be adjusted by The Management Company
when deemed necessary to retain the same
purchasing power, using the Cost of Living
Index figures of the United States Bureau of
labor Statistics as may be adjusted. In the
event of an emergency situation requiring
immediate action to protect persons or
property or if required by governmental
regulations, The Management Company in its
sole discretion is hereby authorized upon
notice to Owner but without Owner's prior
consent, to enter into contracts occasioned
by such emergency or governmental
regulations in excess of such sum.
(d) The Management Company shall have the right
to make such alterations, additions or
improvements in or to the Ship as are
customarily made in the operation of ships,
provided, however, that no alterations,
additions or improvements involving a
fundamental change in the character of the
Ship shall be made without Owner's prior
written approval if the amount payable under
the contract for said alteration, addition
or improvement exceeds the sum of
Twenty-Five Thousand Dollars ($25,000.00)
which amount shall be adjusted as provided
in (c), immediately above.
4. THE MANAGEMENT COMPANY'S COMPENSATION
4.1 INITIAL TERM FEES. During the Pre-Operational Phase (i.e., the
Initial Term), and in accordance with the plan and budgets
prepared jointly by the Owner and The Management Company, no
fees shall be paid to The Management Company for its services
provided pursuant to this Agreement, except for training of
the Casino employees in anticipation of the Casino opening
("Pre-Opening Casino Employee Training Services"). Owner shall
bear all out-of-pocket training costs incurred by The
Management Company and pay in advance such sums as may be
reasonably requested by The Management Company for anticipated
training costs. The Management Company will use its best
efforts to coordinate such training activities within the two
months preceding an anticipated Casino opening date, subject
to any changes therein.
4.2 OPERATIONAL TERM MANAGEMENT FEE. In consideration of the
services to be provided by The Management Company pursuant to
the provisions of this Agreement, Owner shall pay to The
Management Company fee (hereinafter referred to as the
"Operational Term Management Fee") in an amount equal to the
sum of the following:
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4.2.1 Basic Management Fee. An amount equal to two (2%)
percent of the accumulated "Gross Revenue" payable
monthly in arrears on the 10th day of each month.
4.2.2 Incentive Management Fee. An amount equal to seven
(7%) percent of Operating Profit referred to as
"Earnings Before Interest Taxes Depreciation and
Amortization" (EBITDA), as such terms are hereinafter
defined, payable quarterly.
4.3. Gross Revenue. For purposes of computing the Operational Term
Management Fee herein, "Gross Revenue" shall mean revenue from
all sources at the Operation including, but not limited to,
ticket fares, food and beverage sales, gift shop sales, casino
win, as well as the proceeds of any business interruption
insurance policy carried by Owner. Gross Revenue shall not
include interest income or tips given to employees.
4.4 Operating Profit shall be defined as gross revenue, less all
operational expenses of the operation excluding however;
(a) Depreciation of furniture, fixtures, and equipment.
(b) Debt service payments including principal and
interest, under mortgages or liens on the operation
or personal property or rental payments under leases
of capital assets with options to purchase.
(c) Property taxes and assessments
(d) Amortization of pre-opening expenses
(e) Capital expenditures including replacement of
furniture, fixtures, and equipment, but not excluding
maintenance and normal repairs.
(f) Charter payments for the vessel.
4.5 Management fees and all reimbursable expenses due The
Management Company shall be a first charge and priority on
gross revenue and shall be paid prior to the payment of any
other expenses incurred in said operation and shall be paid in
arrears monthly on the tenth day of each month during the term
hereof. Any adjustments to the Management fees shall be based
on the final adjustments to the Company's operating statements
by its auditors.
5. OWNER'S DUTIES
5.1 Owner shall provide consultants, policy support, and
information to reasonably assist The Management Company in the
discharge of The Management Company's duties and
responsibilities hereunder.
5.2 During the Operational Term, Owner shall be responsible for
providing and maintaining all necessary cash and cash reserves
adequate for the opening of the operation and the day-to-day
operation.
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5.3 During the term of this Agreement, Owner shall provide
sufficient funds to bankroll gaming operations and working
capital in amounts which the Owner and The Management Company
mutually agree are adequate to assure the uninterrupted and
efficient operation.
6. INSURANCE
6.1 The Management Company shall maintain, at Owner's expense,
insurance of such kinds and amounts as shall be required to
carry pursuant to the provisions of any deed of trust, loan
agreement, lease, charter or other agreement affecting the
operation, as well as any other insurance that may be required
or necessary by applicable gaming regulations. The Management
Company shall provide the Owner with copies of all insurance
policies as The Management Company may from time to time
request.
6.2 There shall be maintained, at the expense of Owner, throughout
the term of this Agreement such fidelity and other bonds as
may be required from time to time for the protection of the
respective interests of the Owner and The Management Company.
Any such bonds shall also protect the interests of the holder
of any mortgage, or deed of trust, and shall be in such
amounts and obtained from such surety companies as The
Management Company, lender or mortgage holder shall direct.
6.3 All policies insuring against liability, damage to the Ship or
portions thereof or interruption of business, rent or the like
and fidelity and other bonds shall name Owner, The Management
Company, and such other parties as may be required by the
provisions of any mortgage, lease, other agreement or
regulation as the insured thereunder, as their respective
interest may appear. All policies of hazard insurance shall
include loss payment clauses in the form required by any deed
of trust, lease or other agreement. All insurance and bond
premiums shall be paid from the Casino operating accounts.
Certificates of all policies of insurance and duplicates
thereof shall be delivered to the Owner, The Management
Company, any holder of any deed of trust or to such other
persons or governmental authorities as Owner shall direct.
6.4 Provided The Management Company or Owner shall procure and
keep in force all of the procurable insurance mutually agreed
upon by Owner and The Management Company and required to be
obtained pursuant to the foregoing provisions of this Section,
and shall name The Management Company as additional insured
thereon, then to the extent that the same are covered by such
insurance, neither Owner nor The Management Company shall
assert against the other any claims for any losses, damages,
liability or expenses (including attorneys' fees) incurred or
sustained by either of them on account of damage or injury to
person or property arising out of the ownership, operation or
maintenance of the Casino. The parties agree that all policies
of insurance to be procured by The Management Company or Owner
shall permit the foregoing waiver.
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6.5 Owner shall give to The Management Company, and The Management
Company shall give to Owner, prompt notice of any claim made
against Owner or The Management Company in excess of Five
Thousand and no/100 Dollars ($5,000.00), and each party shall
cooperate fully with each other and with any insurance carrier
to the end that all such claims will be properly investigated,
defended and compromised. Claims should be promptly submitted
to the insurance carrier, and if said claims are less than the
deductible, they may be settled by The Management Company, in
its sole discretion.
7. INDEMNIFICATION
7.1 Owner shall indemnify and hold The Management Company, its
officers, directors, agents, employees or affiliates harmless
against any losses, damages or expenses, or claims of third
parties (including legal and other fees) in excess of the
amount of any insurance proceeds paid to The Management
Company, which is incurred or sustained by The Management
Company as a result of or attributable to any breach of this
Agreement, negligent or intentional acts, violation of any
law, rule, regulation or agreement with any governmental
authority by Owner or any person or entity acting on behalf of
or who is under the control or supervision of Owner.
7.2 The Management Company shall indemnify and hold Owner, its
officers, directors, agents, employees or affiliates harmless
against any losses, damages or expenses, or claims of third
parties (including legal and other fees) in excess of the
amount of any insurance proceeds paid to Owner, which is
incurred or sustained by Owner as a result of or attributable
to any breach of this agreement with any governmental
authority by Owner or any person or entity acting on behalf of
or who is under the control or supervision of Manager.
8. CONFLICTS OF INTEREST
The Company may be subject to conflicts of interest arising out of its
relationship with The Management Company. The Management Company,
through its officers and directors intends to exercise its best
business judgment and discretion in resolving such conflicts which may
rise but do not intend necessarily to accord priority to the Company
with respect to any other company or entity with which it may be
affiliated. The conflicts of interest which may arise include, but are
not limited to, the following:
8.1 Other Investments by The Management Company. The Management
Company may in the future, directly or indirectly engage in
other business ventures, including casino vessels or casino
ventures, and neither the Company nor any Unit Holder will be
entitled to any interest with respect to such other ventures.
These other business ventures could be in competition with the
business of this Company. The Management Company intends to
continue other activities in the casino industry and to enter
into other ventures in the future.
8.2 Lack of Separate Representation. The Company and The
Management Company are not represented by separate counsel.
The attorneys, accountants and other experts performing
services for the Company in connection with the formation of
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the Company and this offering also have represented The
Management Company and may provide future services to both
entities. Should a dispute arise between the Company and The
Management Company, the Management Company will, if and when
appropriate, cause the Company to retain separate counsel. The
Company has not retained independent counsel to represent
interests of investors in connection with the offering of the
Units or the preparation of the Management. SUCH COUNSEL DO
NOT PURPORT TO HAVE ACTED ON BEHALF OF THE UNIT HOLDERS. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT INDEPENDENT COUNSEL IN
CONNECTION WITH AN INVESTMENT IN THE COMPANY.
9. CASUALTY
9.1 In the event of any damage or loss to the Casino by fire or
other casualty, The Management Company shall act as follows:
If the damage or loss involves more than Five Thousand Dollars
($5,000.00), The Management Company shall give immediate
written notice thereof to Owner.
9.2 Regardless of the amount of such damage or loss, as agent for
Owner, The Management Company shall promptly make claim for
the proceeds of any insurance covering such damage or loss,
and in owner's name shall litigate or negotiate for payment of
such proceeds, selecting counsel if necessary for such
purpose, unless counsel is designated by Owner.
9.3 The Management Company shall give written notice of any
proposed settlement to Owner, shall settle such claim and, on
behalf of Owner, collect the proceeds thereof; provided that,
Owner's written consent, which shall not be unreasonably
withheld or delayed, shall be required to validate the
settlement of any claim for loss or damage in excess of
Twenty-Five Thousand Dollars ($25,000.00).
10. EARLY TERMINATION OF AGREEMENT
10.1 Except as to liabilities or claims which shall have accrued or
arisen prior to such termination, including, without
limitation, the amount of all accrued Operational Term
Management Fee payable to The Management Company pursuant to
Section 4.2, through the date of any such termination (which
shall survive termination), at the election of Owner, all
obligations hereunder may be terminated only upon the
occurrence of any of the following events:
(1) If The Management Company or any of it's officers or
Directors convicted of a felony or misdemeanor (other
than a conviction for a traffic offense), or if the
Owner reasonably believes The Management Company
jeopardizes or causes the withdrawal of any gaming
license, permit or authorization necessary to conduct
the business of the Owner, or
(2) If there shall be filed by The Management Company in
any court pursuant to any statute either of the
United States or of any state a petition in
bankruptcy or insolvency or for a reorganization or
for the appointment of
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a receiver or trustee of all or a substantial part of
The Management Company's property, or if The
Management Company makes an assignment for or
petitions for or enters into an arrangement for the
benefit of creditors or if an involuntary petition in
bankruptcy is filed against The Management Company
which is not dismissed within ninety (90) days
thereafter.
10.2 Except as to liabilities or claims which shall have accrued or
arisen prior to such termination, including, without
limitation, the amount of all accrued Operational Term
management Fee payable to The Management Company pursuant to
Section 4.2, through the date of any such termination (which
shall survive termination), at the election of The Management
Company, all obligations hereunder may be terminated only upon
the occurrence of any of the following events:
(1) If the Owner shall fail or refuse to provide the
capital and operating funds required pursuant to a
budget previously approved by owner, after ten days
prior written notice of such failure or refusal, or
(2) Owner's failure or refusal to pay The Management
Company the Operational Term Management Fee payable
to The Management Company pursuant to Section 4.2, or
(3) the occurrence of a default under any of the Loan
Agreements, or
(4) In the event of the sale of all or substantially all
of the assets of the Operation, in which event The
Management Company may elect to terminate this
Agreement and Owner shall pay The Management Company
the sum of One Hundred Thousand Dollars ($100,000.00)
which shall be paid at the time of the closing of any
such sale. Owner and The Management Company have
negotiated the amount provided for above and agree
and acknowledge that it represents fair payment and
is not intended to be nor shall it be deemed to be a
penalty, or
(5) In the event more than fifty (50%) percent of the
outstanding voting capital stock of Owner is sold, or
in the event of the merger or liquidation and
dissolution of Owner, or
(6) If there shall be filed by Owner in any court
pursuant to any statute either of the United States
or of any state a petition in bankruptcy or
insolvency or for a reorganization or for the
appointment of a receiver or trustee of all or a
substantial part of Owner's property, or if Owner
makes an assignment for or petitions for or enters
into an arrangement for the benefit of creditors or
if an involuntary petition in bankruptcy is filed
against Owner which is not dismissed within ninety
(90) days thereafter.
10.3 Upon termination of this Agreement by either party, The
Management Company shall turn over to Owner all property,
books and records of the Casino, and Owner
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and The Management Company shall fully cooperate with each
other in connection with all matters relating to the Casino
which took place prior to termination.
11. DAMAGE OR DESTRUCTION OF SHIP
11.1 Subject to the requirements of any deed of trust, mortgage or
other security device encumbering the Ship or its property and
to the extent that there are insurance proceeds available to
Owner, if the Ship, or any portion thereof, shall be damaged
or destroyed at any time or times during the term of this
Agreement by storm, fire or any other casualty, Owner, at no
expense or risk to The Management Company, shall apply
available insurance proceeds to repair, rebuild or replace the
same (such repairing, rebuilding or replacing being herein
called "restoration") so that after such restorations the Ship
shall be substantially the same as prior to such damage or
destruction, and all proceeds of insurance, other than
business interruption, shall be made available to Owner for
such purpose; provided that, The Management Company shall have
the right to ensure that such proceeds of insurance shall be
applied to such restoration. If Owner fails to undertake such
restoration within ninety (90) days after such storm, fire or
other casualty, or shall fail to complete the same diligently,
The Management Company may, but shall not be obligated to
undertake or complete such restoration and, to the extent of
available insurance proceeds, shall be entitled, upon demand,
to be repaid therefor, including all necessary incidental
costs and expense incurred in connection therewith, together
with interest on the aggregate out-of-pocket amount expended
at a per annum rate equal to the prime or base rate for
commercial loans publicly announced by Chase Manhattan Bank,
National Association, or its successors, at the time of such
expenditure, plus two percent (2%) per annum (but not to
exceed the maximum interest allowed by law) from the date of
making such expenditure or expenditures until repayment
thereof. In such case, the proceeds of insurance shall be made
available to The Management Company for this purpose; provided
that, Owner shall have the right to ensure that such proceeds
of insurance shall be applied to such restoration. If the
restoration costs less than One Hundred Thousand and 00/100
Dollars ($100,000.00) to complete, The Management Company
shall supervise all aspects of the restoration at no
additional cost to the Owner, provided, however, if the
proceeds of insurance provide for a supervisory fee, such fee
shall be paid to The Management Company up to an amount not to
exceed Twenty Five Thousand and 00/100 Dollars ($25,000.00).
11.2 Notwithstanding anything contained in this Section 11.2 to the
contrary, if, in connection with any casualty, the Ship shall
be so damaged or destroyed such that it cannot be restored
within nine (9) months after the casualty, and Owner shall
elect not to use the proceeds of insurance to rebuild, repair
or restore the Ship, then either Owner or The Management
Company shall have the right, exercisable by written notice to
the other, given within ninety (90) days form the occurrence
of such casualty, to terminate this Agreement as to such
damaged or destroyed Ship.
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11.3 Should the period of restoration exceed ninety (90) days, then
commencing on the 91st day, The Management Company shall be
entitled to one-half of its Management Fees during the
remaining period of restoration based on the average monthly
fee paid to The Management Company during the three months
immediately preceding the casualty.
12. ARBITRATION
The parties agree that any dispute arising out of interpretation or
performance of this Agreement involving an aggregate sum of Two Hundred
Thousand and 00/100 Dollars ($200,000.00) or less, shall be submitted
to binding arbitration in Pensacola, Florida in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by
arbitrators chosen and paid for as provided in this Section 12. Owner
and The Management Company shall each select and pay the fees and
expenses of one arbitrator and those two shall select a third
arbitrator. The fees of the third arbitrator shall be paid one-half by
the Owner and one-half by The Management Company. The arbitrators shall
have the power to award attorneys' fees and costs of arbitration to the
prevailing party in any arbitration under this Section. The arbitrators
shall set forth the reasons for any decision.
13. NO PARTNERSHIP OR JOINT VENTURE
Unless specifically provided for by a separate written agreement, the
relationship between the Owner and The Management Company is not
intended to be nor shall it be deemed a partnership or joint venture.
The Owner and The Management Company agree that neither shall pledge
the other's credit in any manner and sum and that all property in and
about the Ship shall be and will remain the property of the Owner free
and clear of all liens and security interests of or incurred by The
Management Company except as may otherwise be specifically provided for
in this Agreement.
14. SEVERABILITY
If any provisions of this Agreement shall be determined by a court of
competent jurisdiction to be illegal, invalid or unenforceable, such
determination shall not effect or impair the validity, legality, or
enforceability of the remaining provisions contained herein.
15. NOTICES
Any notice, demand, request or other instrument which may be or is
required to be given under this Agreement shall be delivered in person
by prepaid recognized national or international courier service, return
receipt requested, or sent by United States registered or certified
mail, postage prepaid, return receipt requested, addressed to the
respective parties at the addresses set forth on the signature page(s)
below or at such other address as such party shall designate by like
written notice, and shall be effective upon receipt. A copy of any
notice, demand, request or other instrument which may be or is required
to be given under this Agreement shall be sent to:
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(names and addresses)
A copy of each notice, demand, request or other instrument transmitted
in accordance with this Section shall simultaneously be transmitted by
facsimile machine to the Owner, The Management Company, and above-named
counsel at the following telephone numbers:
Owner Facsimile No:
The Management Company Facsimile No: (850) 433-5409
16. ASSIGNMENT
Neither this agreement nor any other rights or obligations hereunder
may be assigned or transferred by either party without express written
consent of The Management Company and Owner, which consent shall not be
unreasonably withheld.
17. CONTROLLING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the United States where applicable and otherwise by the
laws of the State of Florida, except those pertaining to choice of law.
Venue for all disputes shall be in the State of Florida, USA, and the
parties consent to such venue in all cases.
18. BINDING EFFECT
This Agreement shall be only for the benefit of and binding upon the
Owner and The Management Company and their respective successors and
assigns.
19. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original of this Agreement.
20. INTERPRETATION AND RULES OF CONSTRUCTION
Section and subsection headings are for reference purposes only and are
not intended to affect the meaning, interpretation, or construction of
this Agreement. All references to amounts expressed in dollars shall
refer to the lawful currency of the United States of America. Owner and
The Management Company acknowledge and agree that they have each
reviewed this Agreement and that any rule of construction resolving
ambiguities against the drafting party shall not be employed in the
interpretation of this Agreement or any amendment, exhibit or schedule
hereto.
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21. FURTHER ASSURANCES
Owner and The Management Company hereby agree for themselves and for
their respective successors and assigns to execute and deliver any
instruments and to perform any acts which may be necessary or helpful
to carry out the purposes of this Agreement.
22. ATTORNEYS' FEES
In the event a suit or proceeding is brought by Owner or The Management
Company to enforce or to defend its provisions, or to seek remedy for
any breach hereof, the prevailing party shall be entitled to receive
its reasonable attorneys' fees and disbursements incurred in connection
with such suit or proceeding, including fees and expenses incurred in
any appellate proceedings.
23. ENTIRE AGREEMENT
This Agreement contains the final and entire agreement between the
parties hereto regarding management of the Casinos. No change or
modification of this agreement shall be valid or binding upon the
parties hereto unless such change or modification shall be in writing
and signed by the parties hereto, and neither the parties nor their
agents shall be bound by any terms, conditions, statements, warranties
or representations, oral or written, not herein contained.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement the day and year first above written.
OWNER
CASINO PADRE INVESTMENT COMPANY LLC, A
NEVADA LIMITED LIABILITY COMPANY
ONE PADRE BOULEVARD
SOUTH PADRE ISLAND TX 78597
WITNESS:
BY:
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ITS:
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THE MANAGEMENT COMPANY
sureBET CASINOS, INC., A UTAH CORPORATION
1610 BARRANCAS AVENUE
PENSACOLA FL 32501
BY:
- ----------------------------- ------------------------------------------
ITS:
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EXHIBIT 10.3
LEASE
This lease, dated the 20th day of December 1999, is between sureBET Casinos,
Inc., as Lessee, and Black Hawk Hotel Corporation, as Lessor.
THE LESSEE AND LESSOR, IN CONSIDERATION OF THIS LEASING AGREE AS FOLLOWS:
1. THE LEASED PREMISES. In consideration of the payment of the rent and
the performance of the covenants and the agreements by the Lessee set
forth herein, the Lessor does hereby lease to the Lessee the Colvin
Tract, Lots 1 - 6 and the West 25 ft of Lot 7 and Lots 9, 10, 11, 12,
13 and part of Lot 14, all in Block 26, City of Black Hawk, County of
Gilpin, State of Colorado along with all personal property located in
or on the premises and more particularly described in Exhibit A
attached hereto and the exclusive license to the name "Lilly Belle's
Casino, all of which are referred to as "The Premises."
2. TERMS AND RENT.
2.1 The premises, with all appurtenances are leased to the Lessee
for a period of five years commencing on the first day of the
month following the issuance of a temporary or permanent
Colorado gaming license, but not later than October 1, 2000.
2.2 The monthly rental payment for the first year, beginning with
the granting of a temporary or permanent Colorado Gaming
License to Lessee, but not to be later than October 1, 2000,
shall be the greater of $45,000.00 monthly base rent or 4.9%
of the Adjusted Gross Proceeds (AGP as defined by the State of
Colorado), less Colorado gaming taxes and Black Hawk device
fees. If after the best efforts of Lessee in the most timely
means, a permanent or temporary gaming license to operate
Lilly Belle's Casino is not approved from the state by October
1, 2000, then Lessee may at Lessee's option, pay $10,000.00
per month plus all triple net lease expenses until the license
is issued or until March 31, 2001, whichever is earlier. If
the Colorado gaming license is not issued by March 31, 2001,
then this lease shall be null and void and all monies and
security deposit forfeited to Lessor. All monies paid
including security deposit and any improvements made by Lessee
to the property will be forfeited to Lessor under any
conditions Lessee does not fulfill this lease including, but
not limited to, the non-issuance of a Colorado gaming license
to Lessee.
2.3 For the period January 1, 2001 through December 31, 2001, the
monthly payment shall be the greater of $50,000.00 base rent
or 4.9% (four point nine percent) of AGP, less Colorado gaming
taxes and Black Hawk device fees
2.4 For the period January 1, 2002 through December 31, 2002, the
monthly payment shall be $55,000.00 base rent or 4.9% of AGP,
less gaming taxes and device fees, as described above.
2.5 For the period January 1, 2003 through December 31, 2003, the
monthly payment shall be $60,000.00 base rent or 4.9% of AGP,
less gaming taxes and device fees, as described above.
2.6 Commencing January 1, 2004, the base rent shall increase 7%
compounded for each year.
2.7 The base rent shall be due, without notice, in advance, on the
first day of each month. The percentage rent, if any, shall be
paid in arrears on the fifteenth of the following month for
the previous month. Lessee shall furnish Lessor or Lessors
agent, monthly, with complete copies of all accounting records
for income and expenses, including but not limited to, copy of
signed Colorado gaming return, taxes, fees, insurance, food,
liquor, trash, services, maintenance and all other income and
expenses. Lessor shall have the right to audit and examine the
complete books and records of Lessee, upon reasonable notice.
If any additional expense is caused to Lessee as a result of
this examination of the books, then this additional reasonable
expense shall be at Lessor's expense. Lessee shall furnish to
Lessor or Lessor's agent by the end of the month following
year end, at Lessee's expense, an audited year end P&L
statement on the entire casino and any associated
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operations. The Lessee shall pay the rent for the premises
above-described and all payments, documentation, etc.
described above shall be made directly to Black Hawk Hotel
Corporation, Lessor, or at Lessor's option, to agent for
Lessor.
3. MAINTENANCE OF PREMISES. The Lessee shall, at the expiration of this
lease, barring improvements and changes, surrender the premises in as
good a condition as when the Lessee entered the premises, ordinary wear
and tear excepted. The Lessee shall keep all sidewalks on and around
the premises free and clear of ice and snow, keep the entire exterior
premises free from all litter, dirt, debris and obstructions, and keep
the premises in a clean and sanitary condition as required by the
ordinances of the state, city and county in which the property is
situated. The Lessee agrees to keep all the improvements upon the
property, including, but not limited to, inventory, fixtures,
mechanical systems, security systems and all related security
equipment, exterior buildings with first class paint and maintenance,
sewer connection, plumbing, wiring, rock walls, parking lots, glass,
and any and all other components etc., in good maintenance and repair
at Lessee's expense. This lease shall be considered a triple net lease
with any and all expenses pertaining to the property, buildings, taxes,
operation, insurance, maintenance, and any other related expenses,
etc., whatsoever, paid by Lessee. The Lessor shall be responsible for
the basic components of the building, including exterior walls,
foundation and roof. Lessee may, at its expense, install an elevator.
4. IMPROVEMENTS TO PREMISES. Any improvements by Lessee over $10,000.00
must be approved in advance by Lessor in writing.
5. ASSIGNMENT AND SUBLEASE. The Lessee shall not sublet any part of the
premises, nor assign this lease, or any interest therein, without the
written consent of the Lessor. Lessee shall have the right to assign
its interest to a subsidiary corporation or affiliate without requiring
prior written consent of Lessor. Lessee intends to assign this
agreement to an operating entity to be formed under Colorado law in
conformity with the rules and requirements of the Colorado Gaming
Commission.
6. USE. The Lessee shall use the premises only as gaming property as
allowed by law, which shall include, but not be limited to, off track
betting, bars, restaurants, parking, lodging and any reasonable uses
associated with a casino in Black Hawk, and shall not use the premises
for any purposes prohibited by the laws of the United States, or the
State of Colorado, or of the ordinances of the City of Black Hawk, or
the County of Gilpin, and shall neither permit nor suffer any
disorderly conduct. No noxious, offensive or illegal activity shall be
carried on upon the premises nor shall anything be done or kept on the
premises which may become a public or private nuisance or which may
cause embarrassment, disturbance, to others on adjacent or nearby
property.
7. DAMAGE TO PREMISES. The Lessee shall neither hold, nor attempt to hold,
the Lessor, its agents, contractors and employees, liable for any
injury, damage, claims or loss to person or property occasioned by any
accident, condition or casualty to, upon, or about the premises
including, but not limited to, defective wiring, the breaking or
stopping of the plumbing or sewage upon the premises, unless such
accident, condition or casualty is directly caused by intentional or
reckless acts or omission of the Lessor. Notwithstanding any duty the
Lessor may have hereunder to repair or maintain the premises, in the
event that the improvements upon the premises are damaged by the
negligent, reckless or intentional act or omission of the Lessee or any
employees, agents, invites, licensees or contractors, the Lessee shall
bear the full cost of such repair or replacement and monthly rent shall
be due and payable according to the lease. The Lessee shall hold
Lessor, Lessor's agents and their respective successors and assigns,
harmless and indemnified from all injury, loss, claims or damage to any
person or property while on the demised premises or any other part of
Lessor's property, or arising in any way out of Lessee's business,
which is occasioned by an act or omission of Lessee, its employees,
agents, invites, licensees or contractors. The Lessor is not
responsible for any damage or destruction to the Lessee's personal
property. The Lessee shall neither permit nor suffer said premises to
be endangered by overloading, nor said property to be used for any
purpose which would render the insurance thereon void, or the insurance
risk more hazardous, nor make any alterations 'in, or changes in, upon,
or about said premises, without first obtaining the written consent of
the Lessor.
8. DESTRUCTION OF PREMISES. If the property or the premises shall be
destroyed in whole, or in part by fire, the elements, or other casualty
and if, in the sole opinion of the Lessor, they cannot be repaired
within one
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hundred and twenty (120) days from said injury and the Lessor informs
the Lessee it does not desire to repair same and desires to terminate
this lease, then this lease shall terminate on the date of such injury.
In the event of such termination, the Lessee shall immediately
surrender the possession of the premises and all rights therein to the
Lessor, Lessee shall be granted a license to enter the premises at
reasonable times to remove the Lessee's property, and shall not be
liable for rent accruing subsequent to said event. The Lessor shall
have the right to immediately enter and take possession of the premises
and shall not be liable for any loss, damage or injury to the property
or person of the Lessee or occupancy of, in or upon the premises.
If the Lessor repairs the premises within one hundred and twenty (120)
days, this lease shall continue in full force and effect and the Lessee
shall not be required to pay rent for any portion of said one hundred
and twenty (120) days during which the premises are wholly unfit for
occupancy.
9. INSURANCE. Lessee shall obtain and keep in full force, at Lessee's
expense, a complete insurance policy commencing at the time Lessor
closes on the purchase of the Talcott property. Lessor and Esther
Talcott shall be named as a named insured, and policy must be a full
replacement policy for any damage or misplacement, including structure
and contents as applicable. During the entire time of the lease, Lessee
shall provide liability insurance in the amount of $2,500,000 and name
Lessor as an additional insured. All insurance to cover all property
including all parking areas included in this lease. During this lease
and renewal period(s), Lessor may request these limits be raised within
reasonable limits and Lessee shall cooperate at Lessee's expense with
these reasonable requests. Lessee shall provide copies of insurance
policies to Lessor.
10. REMARKETING OF PROPERTY. The Lessee shall permit the Lessor to market
for sale or lease, leased premises, at any time, 120 days prior to the
end of this lease.
11. LESSOR'S INSPECTION . The Lessee shall allow the Lessor and Lessor's
agent to enter upon the property during normal business hours. Lessor
or its agents shall not take any action that will interfere with
Lessee's business or disturb Lessee's employees or customers.
12. TAXES. Commencing at the time that Lease payments begin, the Lessee
shall be responsible for paying all taxes connected with all leased
properties including, but not limited to real estate taxes, parking
impact fees, city, county, state and federal taxes, special
improvements district taxes and fees, assessments, personal property
taxes and all gaming related taxes including, but not limited to,
gaming equipment and any other entities used in business. Lessee shall
furnish to Lessor, or Lessor's agent, monthly real estate taxes based
upon the most recent mill levy and tax bill. These tax payments are to
be kept in a joint savings account by Lessor and Lessee for the purpose
of paying the taxes when due. Any interest shall belong to Lessee.
Lessor shall inform Lessee of all real estate tax increases imposed by
County, City, State or Federal agencies.
13. UTILITIES. The Lessee shall be responsible for paying, including, but
not limited to, electric, gas, water, sewer, special improvement
assessments, phone, refuse disposal, janitorial services and all other
required maintenance services.
14. NO WAIVER OF BREACH . No assent, expressed or implied, to any breach or
default of any one or more of the agreements hereof shall be deemed or
taken to be a waiver of any succeeding or other breach or default.
15. HOLDOVER. If, after the expiration of this lease, the Lessee shall
remain in possession of the premises and continue to pay rent without a
written agreement as to such possession, then such tenancy shall be
regarded as a month-to-month tenancy, at a monthly rental, payable in
advance, equivalent to the last month's rent paid under this lease, and
subject to all the terms, escalations, etc. and conditions of this
lease.
16. DEPOSIT. At the execution of the lease, Lessee will deposit 200,000
shares of common stock of sureBET Casinos, Inc. (OTCBB: DICE) in the
name of Lessor, with Lessor's attorney as a deposit. The Lessor may
apply the deposit to cure any default under the terms of this lease and
shall account to the Lessee for the balance. The Lessee may not apply
the deposit hereunder to the payment of the rent reserved hereunder or
the performance of other obligations. At the termination of this lease,
and there being no default, 200,000 shares of common stock of sureBET
Casinos, Inc. shall be returned to Lessee.
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17. PARKING LOT. All structures are to be removed and the addresses of 305,
311 and 321 Gregory St., are to be converted to a paved parking lot
next to Lilly Belle's at Lessee's expense and responsibility,
contingent upon approval by all applicable government agencies. Should
final approval be unobtainable after Lessee's best efforts, Lessee
shall not be obligated to do same, but shall keep these structures in
first class condition; a shelter shall be constructed around the water
sources located at 305 Gregory St. to prevent damage from water
freezing, or Lessee may place utilities underground, at Lessee's
expense.
18. LESSOR'S REMEDIES FOR BREACH . If the Lessee shall be in arrears in
payment of any installment of rent, or any portion thereof, or in
default of any other covenants or agreements set forth in this lease,
and the default remains uncorrected for a period of ten (10) days after
the Lessor has given written notice thereof pursuant to applicable law,
then the Lessor may, at the Lessor's option, undertake any of the
following remedies without limitation: (a) declare the term of the
lease ended; (b) terminate the Lessee's right to possession of the
premises and reenter and repossess the premises pursuant to applicable
provisions of the Colorado Forcible Entry and Detainer Statute; (c)
recover all present and future damages, costs and other relief to which
the Lessor is entitled; (d) pursue breach of contract remedies; and/or
(e) pursue an and all available remedies in law or equity. In the event
possession is terminated by a reason of default prior to expiration of
the term, the Lessee shall be responsible for the rent occurring for
the remainder of the term, subject to the Lessor's duty to mitigate
such damages. Pursuant to applicable law [1340-104(d.5), (e.5) and
13-40-107.5, C.R.S.] which is incorporated by this reference, in the
event repeated or substantial default(s) under the lease occur, the
Lessor may terminate the Lessee's possession upon a written Notice to
Quit, without a right to cure. Upon such termination, the Lessor shall
have available any and all of the above-listed remedies.
19. ATTORNEY FEES. In the event any dispute arises concerning the terms of
this lease or the non-payment of any sums under this lease, and the
matter is turned over to an attorney, the party prevailing in such
dispute shall be entitled, in addition to other damages and costs, to
receive reasonable attorneys' fees from the other party.
20. LATE CHARGES. In the event any payment required hereunder is not made
within ten (10) days after the payment is due, a late charge in the
amount of 10% of the payment will be paid by the Lessee.
21. CONDEMNATION. In the event of a condemnation or other taking by a
governmental agency, all proceeds for the premises of Lessor shall be
paid to the Lessor hereunder, the Lessee waiving all right to any such
payments. However all proceeds for business interruption or loss of
business shall be paid to lessee.
22. INSOLVENCY OF LESSEE. This lease is made with the express understanding
and agreement that 'in the event the Lessee becomes insolvent, the
Lessor may declare this lease ended, and all rights of the Lessee
hereunder shall terminate and cease.
23. REMOVAL OF PROPERTY AT TERMINATION . At the termination of this lease,
Lessor shall retain possession of all items included in lease and all
replacements thereto. Lessee may remove all of its personal property,
whether or not attached to the leased premises, so long as it does not
cause damage to the premises, and Lessee repairs any damage caused by
such removal, at Lessee's expense.
24. LICENSING. Lessee and all applicable parties shall immediately apply
for all necessary licenses upon signing of this lease, including, but
not limited to, gaming, liquor, building, etc., at Lessee's expense,
and furnish to Lessor copies of gaming license application(s).
25. NO LIENS. Lessee shall not cause any lien to be placed on, including,
but not limited to, properties, or any of its equipment owned by
Lessor. A lien waiver must be signed for all construction and or work
on any property or items owned by Lessor and a lien waiver notice shall
be posted in a conspicuous location on building or property.
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26. OPTION TO PURCHASE. Lessee shall have the option to purchase the
premises for the sum of $5,800,000 between June 1, 2003 and May 30,
2005. In the event Lessee exercises its option to extend this Lease
then in that event, the purchase price shall be increased by 7%
compounded per year, for each year, or apportioned part of each year,
from the base price of $5,800,000. To exercise this option, Lessee
shall submit its notice of intent to exercise option through Lessor or
Lessor's agent. Purchase shall include all inventory, the trade name
Lilly Belle's, Real Estate, rights, equipment, improvements and any
other items included in this lease.
27. CONFIDENTIALLY. All terms and conditions of this lease shall remain
fully confidential and non-disclosure by all parties and by all third
parties with the exception that Lessee, Lessor or their agents may
supply material to banks, lenders or financial groups for the purpose
of loans and financial decisions. A copy of this lease will be supplied
to the Colorado Gaming Commission.
28. OPTION TO RENEW. Lessee shall have, at its option, the right to renew
this lease for three (3) additional terms of five (5) years each.
29. TERMS OF LESSORS MORTGAGE. Any mortgage(s) or security interest(s) by
Lessor encumbering the premises shall provide for the right of
prepayment and release of the leased premises for an amount that does
not exceed the applicable exercise price of Lessee's option to
purchase.
Any mortgage or lien securing the property shall contain the following
language: "Mortgagee hereby consents to the lease of the property and
equipment by Lessor to Lessee pursuant to the terms of this lease.
Mortgagee agrees that the rights of Lessee under the lease shall remain
in full force and effect and Lessee's possession of the leased premises
and the equipment thereon under the lease will remain undisturbed by
mortgagee during the term of the lease so long as Lessee satisfies all
of its obligations under the lease. This lease shall survive and will
be honored by Mortgagee and any subsequent purchaser in the event of
default by Lessor and foreclosure of the leased property.
30. CONTINGENT LEASE. This lease is entirely contingent on Black Hawk Hotel
Corporation closing on its option to purchase from Esther Talcott, by
January 31, 2000, 301 Gregory St., Black Hawk, Colorado.
31. LEASING OF PARKING. Lessor may continue to lease out current parking
spaces and collect rents from those until Lessee opens for operation.
32. REAL ESTATE COMMISSIONS. Lessee shall not be obligated for any real
estate commission or fees payable to Lessor's agent(s) in connection
with this transaction and lessor shall indemnify Lessee against any
claim to commissions or fees and all cost associated therewith
including, reasonable attorney's fees.
33. PROTECTION OF PROPERTY. Lessee covenants and agrees that nothing shall
be done or kept on the premises which might impair the value of the
premises or which would constitute waste.
34. NEW STREETSCAPE. It is understood that the City of Black Hawk or
another Government Agency may purchase, condemn or otherwise make use
of some property in front of, or behind, all the properties on Gregory
Street for a new streetscape plan or wall rebuilding or other uses, and
if any property is thus used, it shall not change any of the terms of
this lease or Lessee's purchase options.
35. NO RELIANCE . Lessee has not relied upon any projections, figures,
estimates, etc., oral or written and shall hold Lessor and his agent
harmless of such supplied by Lessor or his agent. Lessee acknowledges
to making an informed decision based upon its own due diligence and
legal advice from attorneys, professionals, accountants, etc. and
tenant is well experienced in gaming matters, leases, Real Estate and
takes full responsibility for all decisions in these matters.
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36. NOTICES . All notices shall be in writing and be personally delivered,
faxed or sent by first class mail, unless otherwise provided by law, to
the respective parties.
37. PARTIAL INVALIDITY. If any term or provision of this lease shall be
invalid or unenforceable, the remainder of this lease shall not be
affected thereby and shall be valid and enforceable to the full extent
permitted by law.
38. BINDING EFFECT. This lease shall be binding on the parties, their
personal representatives, successors and assigns. If there is more than
one entity or persons which are the Lessees under this lease, all
covenants and agreements herein to be performed by the Lessees shall be
joint and several.
39. PURCHASE OF sureBET SHARES. Lessor shall purchase 250,000 shares of
Class A common stock in sureBET Casinos, Inc. for the sum of $250,000
cash to be paid to Lessee on or before March 1, 2000. The shares shall
bear a restrictive legend and not be fully transferable for a period of
twelve (12) months from issuance. Lessor shall also be granted an
option to purchase an additional 265,000 shares of sureBET Class A
common stock at $2.25 per share for a period of five years. In the
event that Lessor does not complete the purchase of the initial 250,000
shares, then in that event, this agreement and the underlying Lease
shall be null and void and all consideration paid by Lessee, in cash or
stock, shall be returned to Lessee.
40. EXECUTION BY FACSIMILE . Facsimile copies of this lease will be
accepted as binding, to be followed up with original signed and
notarized copies to each party.
LESSOR LESSEE
Black Hawk Hotel Corporation sureBET Casinos, Inc.
By: /s/ Edwin H. Betts, Jr. By: /s/ Charles S. Liberis
---------------------------------- --------------------------------
Edwin H. Betts, Jr. Charles S. Liberis
President and Secretary President
5501 South University Blvd. 1610 Barrancas Avenue
Littleton CO 80121 Pensacola FL 32501
Date: 12/24/99 Date: 12/20/99
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STATE OF COLORADO STATE OF FLORIDA
County of Arapahoe County of Escambia
The foregoing instrument was
The foregoing instrument was acknowledged before me this 20th
acknowledged before me this 24th day of Dec, 1999, by Charles S.
day of Dec, 1999, by Edwin H. Liberis who is personally known to
Betts, Jr., who is personally known me or produced identification in
to me or produced identification in the form of _____________________
the form of Colorado Drivers _________________ and acknowledged
License and acknowledged that that he executed the same for the
he/she executed the same for the uses and purposes therein
uses and purposes therein expressed.
expressed.
/s/ Deborah M Scullin
/s/ Sally M. Dolan NOTARY PUBLIC
NOTARY PUBLIC
My commission CC622168
My commission expires 1/21/2001 Expires March 15, 2001
2323 E Arapahoe Road
Littleton CO 80122
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EXHIBIT 10.4
BERTH AND SUBLEASE AGREEMENT
THIS BERTH AND SUBLEASE AGREEMENT ("Agreement") is made and entered into
effective the 23rd day of June, 1999 (the "Effective Date") by and between SOUTH
PADRE ISLAND FISHING CENTER JOINT VENTURE, a Texas joint venture ("Sublessor")
whose address is One Padre Boulevard, South Padre Island, Texas 78597, and CSL
DEVELOPMENT CORPORATION ("Sublessee"), a Delaware corporation whose address is
1610 Barrancas Avenue, Pensacola Florida 32501.
PREAMBLE
Pursuant to that Lease Agreement LC No. 94-027 (the "Ground Lease") dated as of
June 30, 1994, by and between the State of Texas, (the "State"), as Lessor, and
Sublessor, as Lessee, Sublessor has a leasehold interest in the premises
described in Exhibit "A" thereto (the "Premises").
Approximately 17.52 acres of the Premises is comprised of submerged land on
which Sublessor has constructed a pier and other improvements (the "Pier").
Subject to the terms and conditions of the Lease and the conditions set forth
herein, Sublessor desires to sublease to Sublessee, and Sublessee desires to
sublease from Sublessor, a berth and appurtenant rights.
Now, therefore, Sublessor and Sublessee agree as follows:
1. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor the following, all of which are located on the Premises
in Cameron County, Texas:
1.1 Berth. The exclusive right to a berth for one (1) cruise ship
(herein the "Cruise Ship"), initially to be the "M/V
Entertainer." The berth is located at the end of the Pier, as
more particularly described on Exhibit "A" attached hereto and
initialed by Sublessor and Sublessee for identification
(hereinafter, the "Plat").
1.2 Ticket Counter. The non-exclusive right to use of the area
designated "Ticket Counter" on the Plat for the sale of Cruise
Ship tickets.
1
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1.3 Modular Office. The non-exclusive right to use the area
designated "Office" on the Plat for non-retail general offices
purposes and, subject to compliance with applicable provisions
of the Ground Lease (including, without limitation, Article VI
thereof), to construct improvements thereon.
1.4 Parking. The non-exclusive right to use a maximum of two
hundred (200) parking spaces in the area designated as
"Parking" on the Plat for free parking of passenger vehicles
operated by Sublessee's employee and customers; provided,
Sublessor shall have no obligation to provide more than fifty
(50) parking spaces for such use until expiration of the
thirtieth (30th) day after the Sublessor's receipt of the
Security Deposit (as defined in Section 4.3 below).
Unless referred to individually, the foregoing are hereinafter referred to,
collectively, as the "Subleased Premises". SUBLESSEE HEREBY CONFIRMS THAT
SUBLESSEE HAS INSPECTED THE PHYSICAL AND TOPOGRAPHICAL CONDITION OF THE
SUBLEASED PREMISES AND ACCEPTS THE SAME "AS IS" IN ITS EXISTING PHYSICAL AND
TOPOGRAPHIC CONDITION. SUBLESSOR DISCLAIMS ANY AND ALL WARRANTIES OF
HABITABILITY, SUITABILITY, FITNESS FOR ANY PURPOSE AND ANY OTHER EXPRESS OR
IMPLIED WARRANTY NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. SUBLESSOR AND
SUBLESSEE HEREBY AGREE AND ACKNOWLEDGE THAT THE USE OF THE TERM "GRANT" AND/OR
"CONVEY" IN NO WAY IMPLIES THAT THIS AGREEMENT IS FREE OF LIENS, ENCUMBRANCES
AND/OR PRIOR RIGHTS. SUBLESSEE IS HEREBY PUT ON NOTICE THAT ANY PRIOR GRANT
AND/OR ENCUMBRANCE MAY BE OF RECORD AND SUBLESSEE IS ADVISED TO EXAMINE THOSE
RECORDS AND ALL OTHER LAND TITLE RECORDS IN WHICH THE SUBLEASED PREMISES ARE
LOCATED IN THE ARCHIVES AND RECORDS DIVISION OF THE TEXAS GENERAL LAND OFFICE,
1700 NORTH CONGRESS AVENUE, AUSTIN, TEXAS, 78701, AND ALL OTHER LAND TITLE
RECORDS IN WHICH THE SUBLEASED PREMISES ARE LOCATED.
2. TERM. The term of this Agreement shall be for a period commencing on the
Effective Date and terminating on the expiration of the one hundred eightieth
(180th) day after the date of the Rent Commencement Date (as hereinafter
defined), unless earlier terminated or extended as provided herein.
2.1 Failure to Obtain Permits. Notwithstanding the foregoing to
the contrary, in the event Sublessee, after diligent effort,
is unable on or before September 1, 1999, to obtain all
governmental and regulatory approvals necessary for the
operation of its Offshore Business (as defined in Section 3.2
below), then Sublessee shall have the right to terminate this
Agreement upon written notice delivered to Sublessor on or
before September 5, 1999; Sublessor shall retain all sums paid
as Rent (as
2
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hereinafter defined) prior to the effective date of
termination; and, thereafter, neither party shall have any
further obligations to the other except for those obligations
which accrued prior to the effective date of termination.
1.2 Future Government Regulation. In the event that, subsequent to
the Rent Commencement Date (as hereinafter defined),
governmental laws or regulations prohibit Sublessee's use of
the Subleased Premises for the purposes provided herein in
such a manner as to preclude Sublessee's operation of its
Offshore Business (i.e., docking a Cruise Ship which contains
gaming equipment and machinery to be operated elsewhere),
Sublessee may terminate this Agreement effective upon written
notice to Sublessor. In the event Sublessee terminates this
Agreement pursuant to this Section 2.2, along with its notice
of termination, Sublessee shall provide Sublessor with a copy
of the subject law(s) or regulation(s) and, upon Sublessor's
receipt of such notice, this Agreement shall terminate and
neither party shall have any further obligations to the other
except for those obligations which accrued prior to the
effective date of termination.
3. USE. The Subleased Premises may be used only for the purposes specified in
Sections 1.1 through 1.4 above, and no other.
3.1 Compliance with Laws. At all times Sublessee shall conduct its
affairs and use the Subleased Premises in accordance with the
provisions of the Ground Lease, this Agreement and all
applicable statutes, ordinances, rules and regulations. Any
breach by Sublessee of its obligations under this Agreement
shall entitle Sublessor, at its option, to terminate this
Agreement upon written notice to Sublessee as specified in
Section 14 below, or to pursue remedies available at law or in
equity. In the event Sublessor elects to terminate this
Agreement, upon Sublessor's written notice of such termination
to Sublessee, this Agreement shall terminate and neither party
shall have any further obligations to the other except for
those obligations which accrued prior to the effective date of
termination.
3.2 Offshore Business. Though the parties acknowledge that
Sublessee intends, provided appropriate governmental
authorization is obtained, to operate a day cruise casino
business on the Cruise Ship and provide on- board
entertainment, including gaming (the "Offshore Business"),
Sublessee agrees not to accept any orders for gaming
activities from the Subleased Premises and at all times to
conduct such activities at locations other than the Subleased
Premises. The parties specifically acknowledge and agree that
Sublessee shall have no right to use the Subleased Premises
for the Offshore Business and that any such use on or adjacent
to the Subleased Premises shall constitute a breach of this
Agreement for which Sublessor may terminate this Agreement
upon notice to Sublessee.
4. CONSIDERATION. Sublessee agrees to pay to Sublessor the following
consideration for use of the Subleased Premises ("Rent"):
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3.1 Rent. Commencing on the earlier to occur of (a September 1,
1999, or (b) the thirtieth (30th) day after the date Sublessee
receives all regulatory approvals required to commence
operation of the Offshore Business, or (c) the date Sublessor
departs from the Subleased Premises on its initial cruise for
the purpose of operating the Offshore Business (such date
hereinafter the "Rent Commencement Date"), Sublessee agrees to
pay to Sublessor, monthly, as "Rent" for the Subleased
Premises the greater of (1) $10,000.00 per month, or (2) a sum
per month equal to the product of One and NO/100 Dollars
($1.00) multiplied by the number of passenger cruise tickets
sold to "paying passengers" (as hereinafter defined) over and
above the number of 10,000 per month. Rent in the minimum
amount of $10,000 shall be payable each month in advance. Any
additional sums owing Sublessor as Rent shall be due and
payable on the fifteenth (15th)) day of the following month
and shall be delivered with a statement certified by an
officer of Sublessee which itemizes ticket sales for the
subject month on a per day basis. Sublessor shall be entitled,
during normal business hours, to inspect Sublessee's records
to determine appropriate accounting and remittance of Rent.
Should the Rent Commencement Date occur on a day other than
the first day of a month, Rent shall be prorated for such
month. For the purposes of this Agreement a "paying passenger"
is a person who purchases a Cruise Ship ticket for a scheduled
cruise for the purpose of engaging in Sublessee's Offshore
Business, and passengers who are given complimentary tickets
or admissions based on the volume or quality of their casino
play shall be deemed paying passengers.
4.2 Taxes and Assessments. During the term of this Agreement, the
Sublessee shall pay directly to the applicable taxing or other
authority any State or
local sales taxes or assessments which are, or may be, in
effect and applicable to Sublessee's business.
4.3 Security Deposit. On the Rent Commencement Date Sublessee
agrees to deposit with Sublessor the sum of Ten Thousand and
NO/100 Dollars ($10,000.00) (the "Security Deposit") as
security for Sublessee's faithful performance of its
obligations under this Sublease. Sublessor and Sublessee agree
that the Security Deposit may be commingled with funds of
Sublessor and Sublessor shall have no obligation or liability
for payment of interest on such deposit. Sublessee shall not
mortgage, assign, transfer or encumber the Security Deposit
without the prior written consent of Sublessor and any attempt
by Sublessee to do so shall be void, without force or effect
and shall not be binding upon Sublessor. If Sublessee fails to
pay any Rent or other amount when due and payable under this
Sublease, or fails to perform any of the terms hereof,
Sublessor may appropriate and apply or use all or any portion
of the Security Deposit for Rent payments or any other amount
then due and unpaid, for payment of any amount for which
Sublessor has become obligated as a result of Sublessee's
default or breach, and for any loss or damage sustained by
Sublessor as a result of Sublessee's default or breach, and
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Sublessor may so apply or use the Security Deposit without
prejudice to any other remedy Sublessor may have by reason of
Sublessee's default or breach. If Sublessor so uses any of the
Security Deposit, Sublessee shall, within ten (10) days after
written demand therefor, restore the Security Deposit to the
full amount originally deposited; Sublessee's failure to do so
shall constitute a default hereunder for which Sublessor shall
have the right to exercise any remedy provided for in Section
14 below. Provided Sublessee is not then in default on any of
its obligations hereunder, on the first day of the last month
of the Sublease term (or renewal period, if applicable),
Sublessor shall return the Security Deposit to Sublessee or,
if Sublessee has assigned its interest under this Sublease, to
the last assignee of Sublessee. If Sublessor sells or assigns
its interest in the Subleased Premises, Sublessor may deliver
the Security Deposit to Sublessor's successor in interest
under this Sublease and thereupon be relieved of any further
liability or obligation with respect to the Security Deposit.
5. INSURANCE. Sublessee agrees to purchase and maintain insurance coverage, and
provide certificates and renewals thereof, as required pursuant to the Ground
Lease; provided (a) all such policies shall name both the State and Sublessor as
additional insureds, and (b) Sublessee shall maintain commercial general
liability insurance and liquor liability insurance in minimum amounts of Two
Million Five Hundred Thousand and NO/100 Dollars ($2,500,000.00).
6. UTILITIES. Sublessor shall, at its expense, provide water and 480-volt
3-phase 200AMP electrical stub-outs at the locations specified on the Plat.
Except as provided herein, Sublessor shall have no responsibility for the
provision of any utility stub-out or service, and Sublessee shall be responsible
for the payment of all electricity, water, wastewater, gas, phone and other
utility extension and service and for disposal of all trash generated at the
Subleased Premises. Trash containers shall located near the berth in a location
approved by Sublessor, shall be of a type reasonably approved by Sublessor, and
shall be screened from view. Notwithstanding any other term or provision of this
Agreement to the contrary, (a) Sublessee acknowledges and agrees that it shall
not locate or use sewage pump-out facilities on or near the Subleased Premises,
and (b) in the event Sublessee is required to extend electric utility
infrastructure beyond the location specified on the Plat, upon the first renewal
of the term of this Agreement as provided below, Sublessee shall be entitled to
a credit against Rent, not to exceed, in the aggregate $8,000.00; provided, if
Sublessee reasonably determines that the cost of any such extension shall exceed
$8,000.00, then Sublessee shall so advise Sublessor and Sublessor may elect to
either (y) undertake such work at its own cost and expense, or (z) authorize
Sublessee to expend an amount in excess of $8,000 for such work, which amount
shall also be credited against Rent until recouped.
7. CONDEMNATION. If during the term of this Agreement or any extension or
renewal thereof, all of the Subleased Premises should be taken for any public or
quasi-public use under any law, ordinance, or regulation, or by right of eminent
domain, or should be sold to the condemning authority under threat of
condemnation, this Agreement shall terminate and the
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Rent shall be abated during the unexpired portion of this Agreement, effective
as of the date of the taking of said premises by the condemning authority.
7.1 Sublessor's Right to Restore. If less than all of the
Subleased Premises shall be taken for any public or
quasi-public use under any law, ordinance or regulation, or by
right of eminent domain, or should be sold to the condemning
authority under threat of condemnation, Sublessor may elect to
terminate this Agreement or to restore the Subleased Premises
as mutually agreed between Sublessor Sublessee. In the event
this Agreement is not terminated, then Sublessor shall perform
such restoration with available condemnation proceeds within a
reasonable time of the taking., and the Rent payable during
the unexpired portion of this Agreement shall be adjusted
equitably.
7.2 Allocation of Awards. Sublessor shall be entitled to receive
and retain all proceeds payable for a taking of the leasehold
estate and improvements located on the Subleased Premises.
Sublessee shall be entitled to receive and retain any separate
awards for loss of profits and moving expenses. The
termination of this Agreement shall not affect the rights of
the respective parties to such awards.
8. ASSIGNMENT. Sublessee hereby acknowledges and agrees that it shall not have
the right to assign or sublet the Subleased Premises, whether by operation of
law or otherwise, without Sublessor's prior written consent, which consent shall
not be unreasonably withheld; provided, Sublessee may assign Sublessee's
interest in this Agreement to an Affiliate (as hereinafter defined) upon written
notice to Sublessor. For the purposes of this Agreement, "Affiliate" shall mean
and refer to an entity which is controlled by Sublessee (i.e., an entity of
which Sublessee owns at least fifty-one percent [51%] of the outstanding shares,
membership interests or otherwise of such entity), or which controls Sublessee
(i.e., an entity which owns at least fifty-one percent [51%] of Sublessee), or
which is under common control with Sublessee (such as a brother-sister
relationship). Sublessor and Sublessee acknowledge and agree that Sublessee
intends to assign this Agreement to an Affiliate to be formed under Texas law on
or before expiration of the First Renewal Period and, upon such assignment and
assumption by such Affiliate of Sublessee's obligations hereunder, Sublessee
shall be released from its obligations hereunder.
9. INDEMNIFICATION AND HOLD HARMLESS AGREEMENTS. Sublessor and Sublessee hereby
agree as follows:
9.1 Sublessee. SUBLESSEE SHALL PROTECT, DEFEND AND HOLD SUBLESSOR
AND THE STATE HARMLESS IN ACCORDANCE WITH THE TERMS OF THE
INDEMNIFICATION PROVISIONS OF THE GROUND LEASE. SUBLESSEE
AGREES TO INDEMNIFY AND HOLD SUBLESSOR AND THE STATE HARMLESS
AGAINST ANY AND ALL ACTIONS, CLAIMS, DEMANDS, DAMAGES,
LIABILITIES AND EXPENSES
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(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COURT
COSTS) ASSERTED AGAINST, IMPOSED UPON OR INCURRED BY SUBLESSOR
BY REASON OF ANY VIOLATION CAUSED, SUFFERED OR PERMITTED BY
SUBLESSEE AND/OR SUBLESSEE'S OFFICERS, DIRECTORS, VENTURERS,
AGENTS, REPRESENTATIVES, SERVANTS, EMPLOYEES, CONTRACTORS,
SUBCONTRACTORS, LICENSEES OR INVITEES ("SUBLESSEE
REPRESENTATIVES") OF ANY OF THE TERMS, COVENANTS OR CONDITIONS
OF THE GROUND LEASE. Notwithstanding the foregoing, in no
event shall Sublessee be liable to Sublessee for any
matter relating to this Agreement in an amount in excess of
the total of all Rent paid to Sublessee hereunder. The
foregoing agreements shall survive expiration or earlier
termination of this Agreement.
9.2 Sublessor. SUBJECT TO THE PROVISIONS OF THIS AGREEMENT,
SUBLESSOR SHALL AND HEREBY DOES INDEMNIFY AND HOLD SUB-LESSEE
HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CLAIMS,
DEMANDS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS' FEES AND COURT COSTS)
ASSERTED AGAINST, IMPOSED UPON OR INCURRED BY SUBLESSEE BY
REASON OF ANY VIOLATION CAUSED, SUFFERED OR PERMITTED BY
SUBLESSOR, ITS OFFICERS, DIRECTORS, VENTURERS,
REPRESENTATIVES, AGENTS, SERVANTS, CONTRACTORS,
SUBCONTRACTORS, LICENSEES OR EMPLOYEES OF ANY OF THE TERMS,
COVENANTS OR CONDITIONS OF THE GROUND LEASE THAT SUBLESSEE HAS
NOT COVENANTED AND AGREED TO COMPLY WITH UNDER THE TERMS OF
THIS AGREEMENT. Notwithstanding the foregoing, in no event
shall Sublessor be liable to Sublessee or any third party for
any matter relating to this Agreement in an amount in excess
of the total of all Rent paid to Sublessor hereunder. The
foregoing agreements shall survive expiration or earlier
termination of this Agreement.
10. SUBLESSOR'S OBLIGATIONS.
10.1 Unobstructed Access. Sublessor shall provide unobstructed
access to the Subleased Premises from the upland portion of
the Premises all times for the Cruise Ship at its berth and
for Sublessee's vendors, employees and passengers. Sublessor
and Sublessee acknowledge and agree that Sublessor shall have
no obligation to police navigable waters or to dredge the
channel in which Sublessee which access the Pier.
10.2 Sublessor's Maintenance. Except for damage occasioned by
Sublessee and/or Sublessee's Representatives, Sublessor shall
maintain the Leased Premises
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(exclusive of Sublessee's improvements and fixtures thereto)
in a safe and usable condition, including, but not limited to,
replacement of damaged and deteriorated dock and pilings.
Sublessor shall have no further repair and maintenance
obligations hereunder.
10.3 Right to Sublease. Sublessor represents and warrants to
Sublessee that it has the right to sublease the Subleased
Premises for the purposes set forth approval is required to
grant Sublessee the right to use the Subleased Premises as
provided herein.
11. SUBLESSEE'S OBLIGATIONS. Sublessee hereby acknowledges and agrees to use the
Subleased Premises pursuant to the terms of the Ground Lease, this Agreement and
in accordance with all applicable laws, ordinances, rules and regulations, and
reasonable rules and regulations imposed by the State and/or Sublessor from time
to time.
11.1 No Waste. Sublessee hereby acknowledges and agrees it shall
not commit, or suffer to be committed, any waste on the
Subleased Premises nor shall it maintain, or permit the
maintenance or commission
of, any nuisance on the Subleased Premises.
11.2 Maintenance. Except as otherwise provided herein, Sublessee
hereby acknowledges and agrees to keep and maintain the
Subleased Premises and the Cruise Ship in good condition and
repair, as the same existed on the Effective Date, reasonable
wear and tear excepted. Damage caused by Sublessee or
Sublessee's Representatives shall be repaired at Sublessee's
sole expense.
11.3 Alterations. Sublessee hereby acknowledges and agrees not to
make any alterations or changes in the Subleased Premises
without the express, prior written consent of Sublessor, and
all such alterations or changes shall be made in conformance
with the provisions of the Ground Lease.
11.4 Conduct. Sublessee shall be responsible for the conduct and
acts of Sublessee and Sublessee's Representatives on the
Subleased Premises at all times during term of this Agreement,
and shall indemnify and hold Sublessor harmless therefrom as
provided herein.
12. INSPECTION BY SUBLESSOR. Sublessee hereby acknowledges and agrees that the
State, Sublessor and/or their respective agents or representatives may enter
into and upon the Subleased Premises (but not the Cruise Ship) at all reasonable
times for the purpose of inspection, making repairs or alterations.
13. OPTION TO RENEW. Provided Sublessee has fully performed all of its
obligations hereunder, at the option of Sublessee, this Agreement may be renewed
for two (2) additional
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terms of five (5) years each. Renewal shall be by written notice delivered, with
respect to the first renewal period, no later than thirty (30) days prior to
expiration of the initial term (such period, the "First Notice Period") and,
with respect to the second renewal period, no later than sixty (60) days prior
to expiration of the first renewal period. Each renewal term, if any, shall be
referred to as a "renewal period". If Sublessee fails to timely exercise any
renewal, such renewal and all subsequent renewal options shall lapse and be of
no further force and effect.
13.1 Additional Premises. Subject to Sublessor's an Sublessee's
mutual agreement reduced to writing on or before expiration of
the First Notice Period (which agreement shall be subject to
an agreed joint use and/or reciprocal easement agreement, a
space/use plan and the approval of third parties, as
applicable), commencing with the first renewal period, the
Subleased Premises as defined in Section 1 above can be
expanded to grant to Sublessee the non-exclusive use and
occupancy of certain vertical improvements then located on the
Premises and the exclusive right to use and occupancy, as
applicable, of the area on which the business known as
"Hookers is located as of the Effective Date, all furniture,
fixtures and equipment located therein and a license to use
the name "Hookers" for Sublessee's business at such location.
13.2 Renewal Period Terms. Commencing on the first day of the first
renewal period, Sublessee shall pay Sublessor monthly Rent
equal to the greater of (1) $10,000.00 per month, or (2) a sum
per month equal to the product of One and 75/100 Dollars
($1.75) multiplied by the number of passenger cruise tickets
sold to paying passengers over and above the number of 10,000
per month. Commencing on the first day of the second renewal
period, Sublessee shall pay Sublessor monthly Rent equal to
the greater of (1) $10,000.00 per month, or (2) a sum per
month equal to the product of Two and NO/100 Dollars ($2.00)
multiplied by the number of passenger cruise tickets sold to
paying passengers over and above the number of 10,000 per
month. product of Two and NO/100 Dollars ($2.00) multiplied by
the number of passenger cruise tickets issued over and above
the number of 10,000 per month. Except as set forth above and
in any amendment to this Agreement, all other terms and
provisions shall remain in full force and effect during the
renewal period(s).
13.3 Other Provisions. Except as otherwise provided in Sections
13.1 and 13.2, all other terms and provisions of this
Agreement shall continue in full force and effect during each
renewal period.
14. DEFAULTS AND REMEDIES. If Sublessee shall allow the Rent to be in arrears
more than five (5) days after the date due, or shall any other default on the
part of the Sublessee continue for five (5) days after delivery of written
notice from Sublessor of such element of default, or should any other person
than Sublessee secure possession of the Subleased Premises, or any part thereof,
by reason of receivership, bankruptcy proceedings or other operation of law in
any
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manner whatsoever, Sublessor may, at its discretion, without notice to
Sublessee, declare Sublessor in default of this Agreement and either (a)
terminate this Agreement, or (b) enter onto and take possession of the Subleased
Premises and remove all persons and property therefrom without being deemed
guilty of any manner of trespass, and re-let the Subleased Premises or any part
thereof, for all or any part of the remainder of the term. In the event
Sublessor exercises its option to take possession, and should Sublessor be
unable to re-let after reasonable efforts to do so, or should such monthly Rent
be less than the Rent Sublessee was obligated to pay hereunder, then Sublessee
shall pay the amount of such deficiency to Sublessor plus any applicable costs
of reletting, collections and other reasonable expenses incurred in enforcing
Sublessor's rights hereunder. In no event shall Sublessor be obligated to find a
new tenant on behalf of Sublessee. In the event the Rent is not paid within the
five (5) days after the date due, a late charge (which charge constitutes a
penalty and not interest) of one and one-half percent (1-1/2%) per month on the
unpaid balance shall be applicable.
14.1 No Cruise Ship Lien. The Cruise Ship will be operated pursuant
to a Charter Agreement which provides, among other things,
that during the charter period, neither the Operator, nor its
agents, nor the Master of the Vessel, shall have any right,
power, or authority to create, incur or permit to be imposed
upon the Cruise Ship any liens whatsoever. Accordingly,
Sublessor acknowledges that this Agreement is entered into on
the credit of the Sublessee and not on the credit of the
Cruise Ship or her owner or mortgagee and that the Sublessor
claims no maritime or other lien against the Cruise Ship, and
therefore waives any liens, whether statutory landlord liens
or otherwise, against the Cruise Ship that it currently has or
may have in the future or that may arise from operation of law
or custom, usage and practice.
15. SIGNAGE. Upon Sublessee's receipt of all approvals required to operate its
Offshore Business and subject to Sublessor's approval of location and content,
which consent shall not be unreasonably withheld or delayed, Sublessee will be
permitted, at its sole expense, to erect signs upon the Subleased Premises.
16. JOINT USE AREAS. Subject to Sublessor's prior written consent with respect
to location, improvements, if any, to be located thereon and Sublessee's
provision of insurance in favor of the State and Sublessor, Sublessee may use
certain areas of the Pier as passenger waiting areas and for other purposes
(each a "Joint Use Area" and, collectively, the "Joint Use Areas"). Each Joint
Use Area shall be clearly marked and, subject to Sublessee's rights pursuant to
Section 13.1 at the time of renewal, subject to pre-existing uses. Such use
shall additionally be subject to the rights of the general public as provided in
the Ground Lease. At Sublessor's option exercised prior to expiration or
termination of this Agreement, all permanent improvements erected or installed
by Sublessee within the Joint Use Areas shall become the property of Sublessor.
17. EXCLUSIVITY. Provided Sublessee is not in default of this Agreement, during
the term of this Agreement, Sublessor agrees not to sublease a dock or berth
space for use by any vessel
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which conducts one day gaming cruises, "Cruises to Nowhere", river boat
gambling, or similar activities.
18. INGRESS/EGRESS. Sublessor may relocate required parking hereunder to another
location within the Subdivision (as hereinafter defined) and/or ingress and
egress points to the Subleased Premises so long as the required number of spaces
are provided in similar or better facilities. For the purposes of this section
"Subdivision" shall mean and refer to approximately 18.587 acres of land legally
described as Lot 1, Block 1 TALMWD Subdivision, Cameron County, Texas.
19. NOTICES. All notices provided to be given under this Agreement shall be
given by certified or registered mail, addressed to the proper party, at the
following addresses:
Sublessor: South Padre Island Fishing Center Joint Venture
One Padre Blvd.
South Padre Island, Texas 78597
Attention: Dave Friedman
With a copy to:
Stanley E. McElroy
3304 Thousand Oaks Cove
Austin, Texas 78746
Sublessee: CSL Development Corporation
1610 Barrancas Avenue
Pensacola FL 32501
20. HOLDOVER. If Sublessee continues in possession of the Subleased Premises
after the expiration of this Agreement and, therefore, holds over after the
expiration of this Sublease, Sublessee will be deemed to be occupying the
Subleased Premises on a month-to-month tenancy basis. Sublessee will be subject
to all the terms and conditions of this Agreement, except that all Rent and
other sums payable to Sublessor by Sublessee shall be increased one hundred
twenty-five percent (125%) as liquidated damages for the hold- over period
(provided, in the event Sublessee's holdover causes Sublessor to holdover
pursuant to the Ground Lease, then, notwithstanding the foregoing to the
contrary, Sublessee shall pay all of Sublessor's costs under the Ground Lease,
including, without limitation, holdover rent at the rate of two hundred percent
[200%]). The above- described tenancy from month-to-month may be terminated by
either party upon thirty (30) days written notice to the other.
21. INDEPENDENT OBLIGATIONS. The obligation of Sublessee to pay all Rent and
other sums under this Agreement and the obligation of Sublessee to perform
Sublessee's other covenants
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and duties under this Agreement constitute independent, unconditional
obligations to be performed at all times required under this Agreement, except
when an abatement or reduction is expressly provided for in this Agreement.
Sublessee waives and relinquishes any right to assert, either as a claim or as a
defense, that Sublessor is bound to perform or is liable for the nonperformance
of any implied covenant or implied duty of Sublessor not expressly set forth in
this Agreement.
22. SPECIAL DAMAGES. Under no circumstances whatsoever shall Sublessor or
Sublessee ever be liable for consequential damages or special damages. The term
"Sublessor" shall mean only the Lessee of the Premises, and in the event of such
Lessee's transfer of its interest in the Subleased Premises, it shall thereupon
be released and discharged from all covenants and obligations shall be binding
during the term of this Agreement
23. PERFORMANCE OF OBLIGATIONS. All monetary obligations of Sublessor and
Sublessee are performable exclusively in Cameron County, Texas (including,
without limitation, any monetary obligation of Sublessor or Sublessee for
damages for any breach of the respective covenants, duties or obligations of
Sublessor or Sublessee under this Agreement).
24. PROHIBITED NAME. Sublessor and Sublessee acknowledge and agree that
Sublessee is prohibited from naming or referring to the Subleased Premises, any
portion thereof, any business operated thereon and/or the Cruise Ship as "Queen
Isabella", "Old Queen Isabella" and/or any similar designation.
25. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns when permitted by
this Agreement.
26. SEVERABILITY. The invalidity of any clause or portion of this Agreement
shall not affect any other provisions thereof and this Agreement shall be
construed as if such invalid, illegal or unenforceable provisions had never been
contained therein.
27. AMENDMENT. No amendment, modification or alteration of the terms hereof
shall be binding unless the same be in writing, dated subsequent to the date
hereof, and duly executed by the parties hereto.
28. RIGHTS CUMULATIVE. Time is of the essence pursuant to this Agreement. The
rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by either party shall not preclude or waive its right to use
any or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may be by law, statute, ordinance or otherwise.
29. NO WAIVER. No waiver by the parties hereto of any default or breach of any
term, condition or covenant of this Agreement shall be deemed to be a waiver of
any other breach of the same or any other term, condition or covenant contained
herein.
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30. RECORDING. Neither this Sublease nor any memorandum hereof may be recorded
by Sublessee among the land records of the jurisdiction in which the Subleased
Premises are located or in any other place of public record without the express
written consent of Sublessor.
31. ATTORNEY'S FEES. In the event Sublessor or Sublessee breach any of the terms
of this Agreement whereby the party not in default employs attorneys to protect
or enforce their rights hereunder, subject to the terms hereof, the prevailing
party shall be entitled to recover reasonable costs, including reasonable
attorney's fees, through the appellate level of court. This Agreement shall be
construed under and in accordance with the laws of the State of Texas. Venue
shall be in Cameron County.
32. FORCE MAJEURE. Neither Sublessor nor Sublessee shall be required to perform
any term, condition or covenant in this Agreement so long as such performance is
delayed or prevented by any acts of God, strikes, lockouts, material or labor
restrictions by any governmental authority, civil riot, floods and any other
cause not reasonably within the control of Sublessor or Sublessee and which by
the exercise of due diligence Sublessor or Sublessee is unable, wholly or in
part, to prevent or overcome.
33. NO COMPETE. During the term of the Agreement and so long as Sublessee is not
in default, Sublessor agrees that it shall not engage in any business activity
on or around the Subleased Premises which is in competition in any way with
Sublessee's Offshore Business, specifically including leasing space to any other
cruise ship operation involved in on-board gaming or Sublessor itself engaging
in such business.
34. FACSIMILE SIGNATURE. The facsimile signature of a party to this Agreement
shall be binding on such party.
35. STATUS AND IDENTIFICATION OF SUBLESSEE. Sublessee agree to provide Sublessor
with the following on or before the Rent Commencement Date: (a) a current
financial statement, (b) a copy of its articles of incorporation and bylaws (or,
if this Agreement has been assigned to an Affiliate or third party as provided
herein, its articles of organization and regulations or such other
organizational documents as are applicable to such entity), and (c) the name,
address, phone and fax number of its authorized representative in Texas.
34. ENTIRE AGREEMENT. This Agreement constitutes the sole and only Agreement of
the parties hereto and supersedes any prior understandings or written or oral
agreements between the parties respecting the subject matter within it.
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IN WITNESS WHEREOF, the undersigned Sublessor and Sublessee have
executed this Agreement in multiple counterparts, each of which shall be deemed
an original, as of the Effective Date.
SUBLESSEE:
CSL DEVELOPMENT CORPORATION, a
Delaware corporation
By: /s/ Charles S. Liberis
Name:
-----------------------------
Title:
----------------------------
14
<PAGE> 15
SUBLESSOR:
SOUTH PADRE ISLAND FISHING JOINT
VENTURE, a Texas joint venture
By: SRFP, Inc., a Texas corporation.
its Managing Venturer
By: /s/ David Friedman, President
15
<PAGE> 16
EXHIBIT "A"
PLAT
(to be attached)
16
<PAGE> 1
EXHIBIT 10.5
CHARTER AGREEMENT
This CHARTER AGREEMENT is made this 1st day of October 1999, between
CSL DEVELOPMENT CORPORATION, a Delaware corporation, Three Christina Centre, 201
North Walnut Street, Wilmington DE 19801, (the "Owner"), and Casino Padre
Investment Company LLC, a Nevada limited liability company, 1610 Barrancas
Avenue, Pensacola, Florida 32501 (the "Operator"):
The Owner is the registered Owner of the vessel M/V Entertainer, O.N.
500051, built in Warren, Rhode Island in 1965, and converted at Bender
ShipBuilding & Repair Co., Inc., Mobile, Alabama in January 1995, a U.S.
registered ship (the "Vessel").
1. Charter, Vessel; Charter Period. Upon the terms and conditions of this
Dry Boat Charter, Owner agrees to let and Operator agrees to hire the
Vessel, together with the gear, machinery, equipment, furnishings and
other articles and appurtenances thereto ("Owner's supplied equipment")
as well as certain casino equipment as shown on the inventory lists, to
be jointly prepared by Owner and Operator, and attached hereto in the
form of Exhibits I through III and incorporated herein, for a Charter,
commencing on October 1, 1999, and continuing until September 30, 2001,
unless extended by written agreement or unless sooner terminated as
otherwise herein provided.
2. Inventory. An inventory shall be made jointly by Owner and Operator
prior to delivery of the Vessel of all galley, salon, bar and public
rooms furnishings and gaming equipment that is to be available for
Operator's use as of the date of delivery of the Vessel, and shall be
signed by Operator and Owner as of the time of delivery of the Vessel.
A photo log will be taken to record Vessel delivery condition (for
Owner's account). At the time of redelivery, this Inventory shall be
checked at Operator's expense and any missing or damaged articles shall
be replaced or paid for by Operator at cost price.
3. Charter Hire. The Charter Hire shall be $1,500,000 annually. In
addition, Operator shall pay all applicable state and federal taxes
resulting from Charter and operation of the Vessel. The monthly Charter
Hire payments of One-Hundred Twenty-Five Thousand Dollars ($125,000.00)
plus applicable taxes thereon shall be paid by Operator quarterly in
advance to Owner by wire transfer to Owner's account or by check as
instructed by Owner in writing. Operator shall concurrently fax to
Owner a copy of each such payment. All amounts expressed as dollars in
this Agreement shall mean United States dollars. All deposits shall be
deemed earned and non-refundable.
4. Deposit. Upon execution of this Agreement, Operator shall pay to Owner
One-Hundred Twenty-Five Thousand Dollars ($125,000.00) plus applicable
taxes representing the first full month's Charter Hire. Prior to the
Vessel departing from Pensacola, Operator shall pay to Owner the sum of
Two-Hundred Fifty-Thousand Dollars ($250,000.00) plus applicable taxes
representing the first three month's Charter Hire. Failure to make any
of these deposits will constitute a breach of this Agreement and it
shall immediately become null and void. All deposits hereunder are
non-refundable.
5. Term. The term of this Agreement shall be an initial term of
twenty-four (24) months commencing October 1, 1999, or at such time as
Operator takes delivery of the Vessel, whichever shall occur first.
6. Operator's Inspection and Owner's Warranties. At the time of delivery
of the Vessel, it shall, at Owner's sole expense have current U.S.
Coast Guard certification and an ABS Load Line certification for its
Port of Operation and shall be technically ready to trade in U.S.
waters (Certifications for Operator's crew, safety inspection, and
inspection by OCMI for Certificate of Inspection at new port of
operation are Operator's responsibility).
Upon acceptance of the Vessel by Operator, it is understood and agreed
by the Operator that the charter is on an "as is" basis and no warranty
either real, expressed, or implied and no representation as to
condition, seaworthiness, merchantability or fitness for any purpose or
use whatsoever of the Vessel (including among other uses gambling
activities), including but not limited to whether current or future
United States Federal
Charter Agreement Casino Padre
October 1, 1999 1
<PAGE> 2
or State law or regulations, will permit the Vessel to operate for
Operator's intended purposes as a day cruise vessel in its intended
area of operation, has been given by the Owner or its authorized
representatives. It is further agreed that the Owner shall have no
responsibility for any incidental, special or consequential damages or
any other damages of any nature whatsoever arising from this Agreement,
including, without limitation, damages for lost profits or personal
injury, which result or are claimed to result from any defect, failure,
fault, or condition in the Vessel or related assets. The warranties set
forth in this section are in lieu of all other warranties, whether
express or implied or statutory, and there are no warranties which
extend beyond the description on the face hereof.
7. Escrow Deposit. Upon the execution of this Agreement, the Operator
shall deposit the sum of Five-Hundred Thousand Dollars ($500,000.00)
(the "escrow deposit") in Trust with Bank of Pensacola (the "Escrow
Agent") which sum shall be deposited in a money market account with all
interest thereon accruing in the account as additional security. In
lieu of a cash deposit, the Operator may deposit a Certificate of
Deposit or U.S. Treasury Bonds satisfactory to Owner and endorsed for
benefit of Owner or an unconditional and irrevocable Letter of
Guarantee in favor of Owner in form and from a Federally chartered U.S.
Bank acceptable to Owner. The deposit shall be security in favor of
Owner and Mortgagee to cover any and all monies which may be payable by
the Operator to the Owner under this Agreement included but not limited
to:
a. Unpaid Charter Hire;
b. Insurance deductible, attorney fees, third party
administration charges in connection with any employee or
passenger injury claims;
c. Amounts payable under any indemnity;
d. Damages;
e. Vessel repair;
f. Unpaid salaries and wages of Operator's employees;
g. Unpaid bills of Operator's vendors and suppliers;
h. Unpaid charges of any nature that may become a lien on the
Vessel; and
i. Discharge of any liens created by the Operator
The deposit shall be continuously maintained at $500,000 during the
remaining term of this Agreement except that it shall be increased by
$25,000 for each filed claim for injury in excess of six claims.
Payment of the deposit or a portion thereof by Escrow Agent shall be
made on demand upon receipt of demand and affidavit of nonpayment and
default from Owner in which event Escrow Agent shall immediately comply
with Owner's demand for payment.
The deposit shall remain in trust with Escrow Agent during the term of
the Charter and for a period of 365 days after the Vessel has been
returned to Owner. At the end of such 365 day period, if no arbitration
or dispute is pending and if no claims have been made against the
deposit, the balance of the deposit, if any, shall be returned to
Operator together with the interest. If any arbitration or dispute is
pending or any claim is made against the deposit, then the monies shall
remain in escrow until final resolution is made of such claims and all
appeal periods have expired.
All of the Parties herein hereby release and discharge Escrow Agent,
and its officers, directors and employees from any and all actions,
proceedings, claims, demands or other liability arising from the
performance of said services by Escrow Agent and further all of the
Parties herein shall at all times indemnify and keep indemnified, and
hold harmless and defend Escrow Agent and its officers, directors and
employees, from the same arising from the performance of said services
by Escrow Agent. The sole duty of Escrow Agent shall be to make payment
honestly in response to demands pursuant to the above terms and
conditions.
8. The Mortgage. The Vessel is subject to a First Preferred Ship's
Mortgage in favor of Bank of Pensacola. This Charter shall be subject
and subordinate to the Mortgage and any new or additional mortgages.
9. Time for Delivery and Use of Vessel. The Vessel, together with Owner's
supplied equipment, shall be delivered to and taken over by the
Operator no later than October 1, 1999, after Owner's receipt of all
deposits as set forth in Paragraph 4 above, and the Certificates of
Insurance referenced in Paragraph 24 and after the Deposit to Escrow
Agent referenced in Paragraph 7. The Operator having already inspected
the Vessel is
Charter Agreement Casino Padre
October 1, 1999 2
<PAGE> 3
satisfied that the Vessel is suitable for its required purpose, and the
Operator is responsible for obtaining from the authorities necessary
approvals to operate the Vessel in its proposed area of operations and
for its intended purpose. The Vessel shall not carry more passengers or
cargo than can lawfully and safely be carried and shall not in any
event exceed the number of passengers as stipulated by local and survey
authorities. Cargo capacity is limited to passengers personal luggage
only. The Vessel shall not sail in any territorial waters outside the
United States. Vessel shall only operate out of South Padre Island
("Port of Operation") as may be permitted by its then current survey,
and shall be restricted to voyage within the number of miles from shore
as permitted by its then current survey.
10. Risk of Loss Prior to Delivery. The risk of loss, damage or destruction
of the Vessel shall be borne by Owner until this transaction is
consummated by delivery (evidenced by written acknowledgment received
by Owner from Operator or Operator's vessel captain) of the Vessel to
Operator. In the event there is no such delivery due to loss, damage or
destruction of the Vessel, any monies paid by Operator, shall be
returned to Operator and this Agreement shall be deemed null and void.
11. Documentation. Throughout the Charter period, the Operator at its
expense will maintain the registration and documentation of Vessel in
Owner's name under the laws and regulations of the United States. Owner
will, at the expense of Operator, execute such documents and furnish
such information as Operator may reasonably require to enable Operator
to obtain and maintain the documentation of the Vessel, and Operator
will not permit the Vessel to be registered or documented or operated
under any flag other than that of the United States or suffer or permit
to be done anything which might injuriously affect or prejudice in any
way the registration and documentation of the Vessel under the laws and
regulations of The United States. Owner will not change the Port of
Documentation of the Vessel.
12. Maintenance. Operator shall have full responsibility for maintenance
and repair of the Vessel and all of its fixtures, furnishings and
equipment throughout the Charter period and at its expense will (a)
maintain and preserve the Vessel and maintain and preserve or replace
Owner's supplied equipment to the end that (i) the Vessel and her
equipment will at all times during the Charter period be in the same
condition, running order and repair as on delivery, and (ii) the Vessel
shall be tight, staunch, strong and well and sufficient tackled,
appareled, furnished, equipped and in every respect seaworthy and in
good operating condition, and (b) cause the Vessel to be overhauled,
drydocked, cleaned and bottom-painted as may be required to maintain
the Vessel in class to maintain its load line certificate and in
compliance with all regulatory and survey requirements. Operator will
notify Owner of each proposed drydocking as far in advance as
practicable. All replacement to Owner's supplied equipment placed on or
installed in the Vessel shall be of identical or superior quality free
and clear of all liens, encumbrances and rights of others and shall
immediately become the property of Owner and be subject to this
Charter.
Operator will permit representatives of Owner at any time and without
notice to inspect the Vessel and the Vessel's logs, papers and cargo
but in such a manner as to not unduly disrupt the operations of the
Vessel. All reasonable expenses in connection with any such inspection
shall be paid by Operator. Operator agrees to undertake at its expense
to perform any repair work that in Owner's reasonable opinion is
necessary.
Without limitation, any repair or maintenance requested by Owner shall
be deemed reasonable and shall be performed promptly if:
a. Requested by U.S. Coast Guard, the American Bureau of Shipping
or any other regulatory agency having jurisdiction over the
Vessel.
b. As to any matter affecting passenger safety or comfort to a
standard that existed on the date of this Agreement as
determined by Boris Kirilloff, the Naval Architect who
supervised conversion of the Vessel in 1995 or another Naval
Architect selected by Owner.
c. As to any matter relating to the maintaining of the
mechanical, electrical, plumbing, and HVAC to a standard that
existed on the date of this Agreement as determined by
International Marine Diesel Specialists, Inc., independent
Marine consultants.
13. Relocation Expenses. All of the preparation expenses for relocating the
Vessel and all of the expenses incurred in relocating the Vessel shall
be paid by Operator.
Charter Agreement Casino Padre
October 1, 1999 3
<PAGE> 4
14. Payment of Taxes and Compliance with Governmental Laws and Regulations.
All applicable state and federal taxes on the Charter payment and taxes
that may be imposed as a result of the operation or from income earned
by Operator are the responsibility of Operator and Operator shall
indemnify, defend and hold Owner harmless from payment of same and
shall not permit any lien to be imposed against the Vessel with regard
to the same. Any and all taxes that may be imposed against the Owner as
a result of income earned by Owner (except for sales tax on the
Charter) are the responsibility of Owner and Owner shall indemnify,
defend and hold Operator harmless from payment of same and shall not
permit any lien to be imposed against the Vessel with regard to the
same. Any duties, taxes or fees on the Vessel of any country, state,
city, regulatory or taxing authority incurred prior to the date of this
Agreement shall be the responsibility of the Owner, and validation of
such payment is the responsibility of Owner. Any duties, taxes, or fees
of the Vessel, incurred on or after the date of this Agreement shall be
the responsibility of Operator, and validation of such payment is the
responsibility of Operator. Further, the Operator warrants that the
Operator shall comply with all operational requirements imposed by any
governmental agency or law of the United States including but not
limited to surveys or other inspections.
It shall be Operator's responsibility to comply with all United States
Federal, State and local laws and regulations relating to crew manning
and operation of the Vessel, including compliance with all drug and
alcohol regulations.
Operator warrants that during the term of this Charter the Vessel will
comply with all applicable U.S. Federal and State laws and regulations
relating to navigation, pollution and safety, including, but not
limited to, the U.S.C.G. Regulations contained in Titles 33 and 46 of
the Code of Federal Regulations, as amended, and will reimburse Owner
for any expenses, insurance premiums, costs of modifications to the
Vessel, or other costs that Mortgagee and/or Owner may incur in
complying with such laws and regulations.
15. Assignment and Sub-Demise. The Operator shall not assign this Agreement
nor transfer possession or control the Vessel or cause a change in
control in or of the Operator or of management except with the prior
consent in writing of the Owner. The Operator may not sub-let the
Vessel.
16. Sale, Option to Purchase and Right of First Refusal.
a. The Owner may continue to market the Vessel for sale subject
to the terms and conditions of this Agreement. Operator shall
provide reasonable access and inspection, including reasonable
sea trials, to the Vessel during normal business hours to
Owner and prospective buyers in connection with Owner's
marketing of the Vessel of sale. Such inspections shall be at
such times as the Vessel is in port. Sea trials shall be
conducted at times when there are no regularly scheduled
cruises for the Vessel. Such inspections and sea trials shall
be at Owner's expenses.
b. Owner hereby grants Operator the irrevocable option to
purchase the Vessel and equipment thereon, provided Operator
is not then in default of this Agreement, during the term of
the charter period for a purchase price of Six Million Dollars
($6,000,000.00) exclusive of any on-board equipment not owned
by Owner, for cash. Owner shall deliver and warrant good title
to the Vessel, free and clear of all liens and encumbrances or
Operator shall have the right to apply the purchase price to
satisfy any such liens and encumbrances. Should Operator
desire to purchase the Vessel, Operator shall give written
notice to Owner of Operator's exercise of this right to
purchase. The closing of the purchase shall be at a place
designated by Owner which may include but not be limited to
the Vessel while it is out of the territorial waters of the
United States. Fifty percent (50%) of the Charter Hire
payments that are provided for by the terms of the Charter and
which have been made prior to the time that the option is
exercised and the purchase is closed shall be applied and
credited to the purchase price if the option is exercised and
the purchase price is paid on or before 365 days from the date
of the Agreement.
17. Officers and Crew. During the Charter period, the Operator shall
provide and pay the master and such other officers and seamen as
required by the authorities and governments that shall have
jurisdiction in the areas in which the Vessel is to be operated and, in
any event, a sufficient complement of master, officers and seamen as
shall be required for the safe and efficient operation of the Vessel.
The Operator shall at all times
Charter Agreement Casino Padre
October 1, 1999 4
<PAGE> 5
indemnify and keep indemnified, and hold harmless and defend the Owner,
Vessel and Mortgagee and their servants or agents from any actions,
proceedings, claims or demands made against them or any one of them by
any master, officer or crew member of the Vessel for crew's wages,
salvage or otherwise. The senior captain and chief engineer shall be
employees of Operator but must be pre-approved in writing by Owner
which approval shall not be unreasonably withheld. At Owner's option,
the master, marine manager and/or chief engineer may be employed by
Owner in which event their salary will be reimbursed to Owner by
Operator.
18. Working Expenses. The Operator shall provide and pay for all
provisions, fuel oil, greases and other consumables and shall pay all
port charges, pilotage, agencies, commissions and all other charges
whatsoever.
19. Liens Against Vessel. During the Charter period, neither the Operator,
nor its agents, nor the Master of the Vessel, shall have any right,
power, or authority to create, incur, or permit to be imposed upon the
Vessel any liens whatsoever except for crews' wages and salvage. The
Operator agrees to carry a properly certified copy of this Agreement,
and any addendum thereto, with the ship's papers. In no event shall
Operator procure or permit to be procured for the Vessel any supplies,
necessaries or services, except for crew services and salvage, without
previously obtaining a statement signed by an authorized representative
of the furnisher thereof acknowledging such supplies, necessaries or
services are being furnished on the credit of the Operator and not on
the credit of the Vessel or her Owner or Mortgagee, and that the
furnisher claims no maritime lien against the Vessel, and therefore
waives any such lien that may arise from operation of law or customer,
usage and practice. The Operator shall notify any person furnishing
repairs, supplies, towage, or other necessaries to the Vessel that
neither the Operator, nor its agents, nor the Master, has any right to
create, incur, or permit to be imposed upon the Vessel any liens
whatsoever. Such notice shall be in writing with copy to Owner. The
Operator further agrees to fasten to the Vessel at all points of
entrance, in the engine room, the wheelhouse, and other locations in
the Vessel where notices are normally displayed, and to maintain during
the life of this Agreement, a conspicuous notice reading as follows:
"This Vessel is the property of CSL Development Corporation.
It is under charter to Casino Padre Investment Company LLC and
by the terms of the Charter Agreement, neither Casino Padre
Investment Company LLC or the Master nor anyone in possession
of the vessel has any right, power, or authority to create,
incur, or permit to be imposed upon the Vessel any liens
whatsoever."
Should any lien or liens, excluding the Preferred Mortgages, be placed
against the Vessel for any reason whatsoever including but not limited
to crew's wages, salvage, or otherwise, Operator is responsible and
agrees at its expense and cost to discharge and eliminate any and all
such liens within 24 hours of placement of said lien. Failure to do so
shall at Owner's option, result in immediate termination of this
Charter Agreement. Owner, at its option, may discharge liens with funds
from the Escrow Deposit as set forth in paragraph 7(h) herein.
Operator waives any lien it currently has or may have in the future
against the Vessel.
20. Survey.
a. On or before delivery, Owner shall cause to be issued such
U.S. Coast Guard and regulatory certificates to the Vessel
sufficient to permit transit of the Vessel to its destination.
The United States Coast Guard, shall inspect the Vessel's work
list, manning and preparation for the sea voyage prior to
delivery and issue current Certificate of Inspection.
b. The Vessel is a U.S. registered Vessel as evidenced by the
Survey Certificate inspected by the Operator. The Vessel shall
remain a U.S. registered ship.
c. After the delivery, Operator shall be responsible for keeping
the Vessel in Survey and in obtaining the necessary approvals
from the surveying authorities, depending on its area of
operation. The Vessel
Charter Agreement Casino Padre
October 1, 1999 5
<PAGE> 6
shall be dry docked as required by the authorities, and during
that period the Operator shall pay all costs and expenses of
the dry docking and Survey.
21. Change of Name. Operator shall have the right, at its expense, to
rename and to change the name of the Vessel, to paint the Vessel it its
own colors, to install and display its tack insignia, and to fly its
own house flag. Owner will, at the cost and expense of Operator,
cooperate in the execution and filing of any documents necessary to
affect a change in the name of the Vessel. At time of redelivery to
Owner, Operator, at its expense, shall return Vessel to its original
colors, flag and name.
22. Owner Cooperation. Operator intends to operate the Vessel as a day
cruise vessel on voyages out of the Port of Operation. Operator will be
required to obtain necessary approvals from United States governmental
authorities, including the United States Coast Guard, for operation of
the Vessel. Owner shall fully cooperate and assist Operator, as
reasonably necessary, with regard to Operator's dealings with such
authorities. Such cooperation shall include Owners making the Marine
Manager or other appropriate representative of Owner reasonably
available at mutually convenient times and places for meetings with
such authorities, provided however that Operator shall pay a reasonable
fee and reasonable travel expenses, including lodging and meals of
Owner's representatives.
21. Security Bonds. Any security bonds or deposits required by the
governments or other authorities in the area of operation shall be
provided by the operator and all costs and expenses incurred in
providing such shall be met by the Operator.
22. Area of Operation. The Vessel shall only be employed in lawful trade
and carriage of passengers from the Port of Operation only. Further,
the Vessel may only be operated in such areas or in such parts of that
area in which the Vessel can be safely operated and can always safely
lie afloat and within the limits imposed by the authorities under which
the Vessel is registered.
23. Notice of Loss, Requisition, Liable, Sale, Casualties. In the event of
(a) actual total loss of the Vessel, (b) requisition of the use of or
title to, or seizure of, the Vessel by any governmental authority or
persons acting under the color thereof, (c) the filing of any libel
against the Vessel, or the attachment, levying upon, detection,
sequestration or taking into custody of the Vessel in connection with
any proceeding, and (d) Marshal's or other sale of the Vessel, or (e)
any casualty, accident or damage to the Vessel, Operator will
immediately give verbal notice thereof (containing full particulars) to
Owner and Mortgagee and no later than 24 hours given written notice by
facsimile and registered mail.
24. Insurance.
a. Hull & Machinery. During the term of this Agreement, the
Vessel and Owner's supplied equipment shall be kept insured by
the Operator at its expense against Fire, Collision, Hull,
Machinery, Salvage marine and War Risks in the names of the
Operator, the Owner and Mortgagee as their interests may
appear. The hull and machinery insurance coverage shall be for
an amount no less than $6,500,000 and for on-board gambling
equipment in the amount no less than $700,000 with a carrier
acceptable to Owner exclusive of coverage for any equipment
owned or leased by Operator. Operator, at its expense, shall
carry appropriate personal property insurance with a carrier
reasonably suitable to Owner for any equipment owned or leased
by operator in an amount equal to its fair market value.
b. Protection and Indemnity. The Operator shall purchase
Protection and Indemnity Insurance with a carrier acceptable
to Owner in the names of the Operator, the Owner and Mortgagee
as their interests may appear, in an amount not less than U.S.
Ten Million Dollars ($10,000,000.00) the cost of which shall
be payable by the Operator. Deductibles, if any, shall not
exceed Twenty-Five Thousand Dollars ($25,000.00). Operators
shall be responsible for the deductible on any insurance claim
for injury to anyone on the vessel including but not limited
to employees, independent contractors, concessionaires,
passengers and guests.
Charter Agreement Casino Padre
October 1, 1999 6
<PAGE> 7
c. Carrier and Coverage. The insurances shall be underwritten by
a first class insurer who shall be approved by the Owner and
Mortgagee, and Certificates of Currency showing the Owner's
and Mortgagee's interest shall be supplied to the Owner and
Mortgagee. The above insurance shall include both an Innocent
Owner's Interest Clause and a Loss Payable and
Non-Cancellation Clause in forms similar to those examples as
set forth on Exhibit ____ attached hereto and incorporated
herein acceptable to Owner.
25. War.
a. Unless the Owner's consent in writing be first obtained, the
Vessel shall not be ordered to voyage to nor continue to any
place or on any voyage nor be used on any service which will
bring the Vessel within a zone which is dangerous as a result
of any actual or threatened act of war, war-like operations,
acts of piracy or hostility, revolution, civil war, civil
commotion or the operation of international law, nor be
exposed in any way to any risks or penalties whatsoever
consequent upon the imposition of sanctions, nor carry goods
that may in any way expose the Vessel to any risks of seizure,
capture, penalties or any other interferences of any kind
whatsoever by belligerent or fighting powers or parties or by
governments or rulers.
b. Should the Vessel approach or be brought or ordered within
such zone or be exposed in any way to the said risks, the
Charter Hire payments shall be paid for all the time lost,
including any loss owing to loss or injury to the Master,
officers or crew or to the action of the crew in refusing to
proceed to such zone or to be exposed to such risks.
c. If the insurance and/or war risks insurance premiums are
increased by reason of or during the existence of any matters
set forth in Sub-Paragraph _____, the amount of the increase
shall be paid by the Operator.
d. The Operator shall have the liberty to comply with any orders
or directions as to departure, arrival, routes, ports of call,
stoppages, destinations, delivery or in any other ways
whatsoever given by any government or any person or body
acting or purporting to act with the authority of such
government of by any committee or any persons having under the
terms of the way risk insurance on the Vessel the right to
give such orders or directions.
26. Salvage. The Operator will not permit the Vessel to be used in salvage
operations of any nature save as required by law. All delays occasioned
by attempting or rendering towage or salvage services as required by
law or repairing damage occasioned thereby shall be borne by the
Operator, and all benefits arising from such salvage operations shall
be for the Operator's sole benefit.
27. Modification. During the term of this Agreement, the Operator shall not
modify or alter the Vessel in any respect without the prior approval of
the Owner in writing, which consent (in case of minor and not
structural modifications) shall not unreasonably be withheld. Any
modifications or alterations to the Vessel agreed by the Owner shall be
carried out to a standard approved by the Owner and the Survey
authorities, and the cost and expenses incurred in such modifications
or alterations shall be paid by the Operator.
28. Corporate Authority. Operator and Owner warrant that they each have the
power and authority to enter into this Agreement and all other
documents executed, received or delivered hereunder. Each represents
that all necessary corporate and stock Owner action has been to
authorize and direct the execution hereof by Operator and Owner and to
consummate this transaction, and that Operator shall obtain, as
required, permits and approvals in accordance with all governmental
regulatory requirements.
29. Re-Delivery. At the expiration of the Charter period (unless this
Charter shall have been sooner terminated pursuant to its terms),
Operator at its expense will re-deliver the Vessel to Owner at a Port
on the Atlantic or Gulf Coast to be designated by Owner.
30. No Set-Off. No payment of Charter Hire or other payment required to be
made by Operator by the terms of this Charter shall be subject to any
right of set-off, counterclaim, defense, abatement, suspension,
deferment or reduction, and Operator shall have no right to terminate
this Charter (except as expressly provided herein)
Charter Agreement Casino Padre
October 1, 1999 7
<PAGE> 8
or to be released, relieved or discharged from any obligation or
liability under this Charter for any reason whatsoever, including
without limitation: (a) any damage to, or loss, requisition, seizure,
forfeiture or Marshal's or other sale of the Vessel; (b) any libel,
attachment, levy, detention, sequestration or taking into custody of
the Vessel, or any restriction of or prevention of or interference with
the use of the Vessel; (c) any title defect or encumbrance or any
disposition from the Vessel not by reason of some act, omission or
breach on the part of Owner or a third party, whether or not resulting
from accident and whether or not without fault on the part of Operator,
Operator will continue to make all payments required of Operator by the
terms of this Charter without interruption or abatement.
31. Events of Default; Retaking. If any of the following events ("Events of
Default") shall occur, namely, if (a) Operator shall fail to pay any
Charter Hire on the due date hereof, or (b) Operator shall fail to
perform or comply with any of the provisions of this Charter; then and
in any such event, Owner may, at its option, immediately withdraw the
Vessel from the service of Operator upon giving written notice to
Operator, without compensation of liability to Operator and without
prejudice to any claim for damage suffered or to be suffered by reason
of any such default which Owner might otherwise have had against
Operator in the absence of such withdrawal, and, upon the giving of
such notice, retaking this Vessel, wherever found, whether upon the
high seas or in any port, harbor or other place, without prior demand
and without legal process, and for that purpose enter upon any dock,
pier or other premises where the Vessel may be and take possession
thereof, or require Operator, at Operator's expense, forthwith to
redeliver the Vessel to Owner at such port as Owner may require and/or
exercise any rights and privileges Owner may have in law and/or in
equity.
32. Assignment of Lease. Operator does hereby assign, transfer and set over
unto the Owner, with the right to reassign, all of its rights, title
and interest in and to the Lease and in and to the demised premises and
berth located at One Padre Blvd, South Padre Island, Texas, as set
forth in Exhibit _____ attached hereto; it being expressly understood
and agreed that this Assignment of lease is made by the Operator to the
Owner upon the following terms, covenants, limitations, and conditions:
a. Operator shall retain possession of the leased premises in
accordance with the terms and conditions of the Lease so long
as no default is made in this Charter Agreement.
b. If default be made by the Operator in the performance of the
Charter, then Owner shall have the option of taking over the
leased premises, provided, however, that in the event Owner
elects to exercise said option of taking over the demised
premises for the purpose of operating the same, written notice
of its election so to do shall be mailed promptly by Owner to
the Lessor. Upon the exercise of such option, the Owner shall
be deemed to be substituted as the Lessee in said Lease in the
place and instead of the Operator, and shall be deemed to have
assumed expressly all of the terms, covenants, and obligations
of the Lease theretofore applicable to the Operator, and shall
likewise be entitled to enjoy all of the rights and privileges
granted to the Operator under the terms and conditions of the
Lease, with the right to reassign same.
c. It is understood and agreed that so long as the Owner shall
not have exercised its option under the foregoing provisions
hereof as to the leased premises, the Owner shall not be
liable for rent or any obligation of the Operator under and by
virtue of or in connection with the Lease, and the Operator
shall remain liable for such rent and obligations.
d. a condition precedent to this Charter taking effect, Lessor
shall execute its approval in form set forth in Exhibit _____.
33. Termination of Agreement and Turnover of Business. In the event that
this Agreement terminates for any reason whatsoever, other than by
Operator exercising and closing on its option to purchase the Vessel,
including but not limited to, termination of the initial term (or
extensions thereof), or upon a material default by Operator hereunder,
then in that event, Operator at Owner's sole option, shall use
reasonable efforts to deliver and turn over the business conducted on
the vessel as a going concern and without disruption in service ("the
Turnover"). The Turnover shall include but not be limited to:
a. Operator delivery to Owner of the name, address and pay
schedule of each employee;
Charter Agreement Casino Padre
October 1, 1999 8
<PAGE> 9
b. Operator granting a release of any employee who will not be
employed by Operator or its affiliates from any contractual
arrangement that would prevent said employee from being
employed by Owner;
c. All customer lists and rating cards;
d. All mailing lists;
e. An assignment of all telephone numbers and yellow page
listings;
f. All advertising promotion and collateral material;
g. An assignment of all media contracts;
h. All software including but not limited to reservations and
accounting software;
i. Group sales lists, lead lists and existing group contracts;
j. Operating manuals;
k. Internal controls; and
l. Employee procedure manuals.
34. Right of First Refusal. In the event that Operator elects for the
business to be turned over, then in that event, Owner shall have the
right of first refusal for a period of thirty (30) days to purchase at
a mutually agreed upon fair market value, all furniture, fixtures and
equipment used by Operator in the conduct of the Business.
35. Remedies Cumulative. Each and every power and remedy herein given to
Owner or otherwise existing shall be cumulative and in addition to
every other remedy herein so given or now or hereafter existing at law,
in equity, in admiralty, or under statute, and each and every power and
remedy, whether herein so given or otherwise existing, maybe exercised
from time to time and as often and in such order as may be deemed
expedient by Owner, and the exercise, or the beginning of the exercise,
of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time, or thereafter, any other right,
power or remedy. No delay or omission by Owner in the exercise of any
right or power or in the pursuit of any remedy shall impair any such
right or be construed a waiver of any default or to be an acquiescence
therein.
36. Owner May Cure Defaults; Reimbursement of Expenses. If Operator shall
fail to perform or observe any of the terms of this Charter, Owner may
, in its discretion, do all acts and make all expenditures necessary to
remedy such failure, including without limitation, the taking out of
insurance on the Vessel and entry upon the Vessel to make repairs, and
Operator shall promptly reimburse Owner, with interest at the rate of
12% per annum for any and all expenditures so made; but Owner, though
privileged so to do, shall be under no obligation to Operator to do any
such act or make any such expenditures nor shall the making thereof
relieve Operator of any default in that respect. Operator will also
reimburse Owner promptly, with interest at the rate of 12% per annum
for any and all expenditures made by Owner at any time in withdrawing
the Vessel from service of Operator or otherwise protecting its rights
hereunder and for any and all damages sustained by Owner from or by
reason of any default or defaults of Operator.
37. Purchase of fuel and inventory. The Operator shall purchase from the
Owner the fuel on the vessel at the time of the closing at the cost
price thereof to the Owner and the Operator shall pay the Owner for the
same at the time of delivery of the Vessel. The written statement of
the Marine Manager as to the amount of fuel on the Vessel at such time
shall be accepted as conclusive by the parties. Operator shall purchase
all unopened liquor and groceries, unopened food stuffs, paper and
plastic goods, stores, disposables, oils, lubricants, and other
operating inventories on the Vessel from Owner at Owner's invoiced
cost.
38. Indemnity. The Operator shall at all times indemnify and keep
indemnified, and hold harmless and defend the Owner and Mortgagee and
their servants or agents from any actions, proceedings, claims or
demands made against them or anyone of them by any passenger, servant
or agent or guest of the Operator arising out of any act of any
passenger, servant, agent or guest of the Operator.
Should the Vessel be arrested, confiscated or detained as a result of
the act or omission of the Operator or of the unlawful use of the
Vessel by the Operator during the currency of this Agreement, the
Operator indemnifies the Owner against all costs, expenses and damages
sustained by the Owner resulting from such arrest, confiscation or
detention. Operator shall take all steps reasonably required to insure
that no illegal drugs or other substances are transported aboard the
Vessel, whether by crew, passengers or otherwise.
Charter Agreement Casino Padre
October 1, 1999 9
<PAGE> 10
Such steps shall include, but not be limited to, the adoption of
policies specifically prohibiting the use or carriage of illegal drugs
aboard the Vessel and publicizing such policies to passengers and crew.
39. Insolvency of Operator. The filing of any petition in bankruptcy, or
the adjudication of Operator as a bankrupt or insolvent, or the
appointment of a receiver or trustee to take possession of all or
substantially all of the assets of Operator, or a general assignment by
Operator for the benefit of creditors, or any action taken or suffered
by Operator under any state or federal Insolvency or Bankruptcy Act
shall constitute a breach and a default of this agreement by Operator
and in such event Owner may at its option terminate this Agreement and
exercise any and all of its rights as set forth in this Agreement.
It is understood and agreed that neither this Agreement, or any
interest herein or hereunder, or any estate created hereby, shall pass
by operation of law under any state or Federal Insolvency or Bankruptcy
Act to any trustee, receiver, assignee for the benefit of creditors, or
any other person whatsoever without the express written consent of
Owner and Mortgagee first had and obtained. Any purported transfer in
violation of the provisions of this Paragraph shall constitute a breach
and a default of this Agreement and in such event Owner may at its
option declare this Agreement terminated and exercise any and all of
its rights and remedies as set forth in this Agreement.
40. Arbitration. If at any time any question, dispute or difference
whatsoever shall arise between the parties hereto out of or in
connection with this Agreement which the parties cannot settle by
reaching a mutual understanding, then any party shall give notice to
the other in writing of the existence of such question, dispute or
difference, and the same shall be submitted within fourteen days (14)
days, of such notice by a party, to and thereafter shall be settled and
decided by arbitration in accordance with the laws of the State of
Florida which arbitration shall be final. Such dispute or difference
shall be referred to the decision of three (3) arbitrators who are
members of the American Maritime Association, who shall conduct all
proceedings in Pensacola, Florida. Within seven (7) days of such notice
by a party to the other of such question, dispute or difference, each
party shall select one arbitrator and thereafter such arbitrators shall
in turn mutually select the third arbitrator. If any party fails to
select an arbitrator within the seven (7) days, the other party may
select such arbitrator.
41. Applicable law. This Agreement shall be interpreted in accordance with
the laws of the State of Florida. All arbitration and litigation shall
take place in Escambia County, Florida and the parties hereto agree and
consent to jurisdiction of the State and Federal courts located in
Escambia County, Florida.
42. Notices. All notices, requests, demands or other communications to or
upon the respective parties hereto shall be deemed to have been duly
given or made seven (7) business days after dispatch if set by prepaid
registered post and one (1) business day after dispatch if made by
telex, cable or facsimile transmission to the party to which such
notice, request, demand or other communication is required or permitted
to be given or made under this Agreement addressed as follows:
If to the Owner: CSL Development Corporation
Three Christina Centre
201 North Walnut Street
Wilmington DE 19801
If to the Operator: Casino Padre Investment Company LLC
1610 Barrancas Avenue
Pensacola FL 32501
43. Time. This is of the essence for the performance of all obligations and
the satisfaction of all conditions of this Agreement.
44. Attorneys' Fees. Should any party hereto employ an attorney for the
purpose of enforcing or construing this Agreement, or any judgment
based on this Agreement, in any legal proceeding whatsoever, including
but not limited to insolvency, bankruptcy, arbitration, declaratory
relief, or other litigation as well as any appeals thereof, the
prevailing party shall be entitled to receive from the other party or
parties thereof reimbursement
Charter Agreement Casino Padre
October 1, 1999 10
<PAGE> 11
for reasonable attorneys' fees and costs, including, but not limited
to, service of process costs, filing fees, court and court reporter
costs, investigative costs, expert witness fees, and the cost of any
bonds, and such reimbursement shall be included in any judgment or
final order issued in that proceeding.
45. Counterparts. This Agreement may be executed in any manner of identical
counterparts, each of which shall be deemed to be an original, and all
of which together shall be deemed to be one and the same instrument
when each party has signed one (1) such counterpart. In addition,
facsimile signed copies of this Agreement shall serve and have the
effect of binding originals until such time as the parties hereto are
able to exchange original signed copies.
46. Severability. In the event that any of the terms, conditions, or
provisions of this Agreement are held to be illegal, unenforceable, or
invalid by any court of competent jurisdiction, the legality, validity,
and enforceability of the remaining terms, conditions, or provisions
shall not be affected thereby.
47. Lien on Equipment. Operator does hereby pledge to Owner as security for
the Charter payments and performance of this Charter, all furniture,
fixtures, gaming equipment, cash in banks, and personal property of
every nature used by Operator whether located on the Vessel or
elsewhere. Operator agrees to execute any further documentation
necessary to protect Owner's security interest in the above.
48. Guarantee and Pledge of Ownership Interest. For valuable consideration,
N/A , and N/A jointly and severally, ("Guarantor") do hereby guarantee
the performance of the terms and conditions and the payments of the
sums set forth in this Agreement by Operator. Notice of Default, Demand
for Payment, and Demand for Performance as a Condition to Liability on
this Guarantee are hereby waived. In addition, Guarantor agrees to pay
any attorneys' fees and costs incurred in enforcing this Guarantee, and
hereby waive diligence, demand and Notice of Non-Payment and of
Non-Performance, and authorize extensions of time and changes in the
terms of this Agreement without notice to and without affecting the
liability of the Guarantor. It is further agreed that any assignment of
this Agreement shall not release the Guarantor from his obligations as
Guarantor hereunder. Guarantor hereby further waives the right to
require Owner to proceed against Operator or its assignees, or to
pursue any other remedy in its power and Guarantor hereby authorizes
Owner to proceed directly against the Guarantor. Performance of the
Guarantee shall be secured by a pledge of all of Guarantor's interest
in Operator which interest will represent no less than One-Hundred
percent (100%).
49. Complete Agreement. The parties acknowledge receipt of a copy of this
Agreement; that the terms of the Agreement are the entire agreement
between them; and that they have not received or relied on any
representations that are not expressed in this Agreement. NO PRIOR,
PRESENT, OR FUTURE AGREEMENTS OR REPRESENTATIONS WILL BE RELIED ON OR
WILL BIND THE PARTIES UNLESS IN WRITING AND INCORPORATED INTO THIS
AGREEMENT. Modifications of this Agreement will not be binding unless
in writing, signed and delivered by the party to be bound. Handwritten
or typewritten terms inserted in or attached to this Agreement prevail
over preprinted terms. Signatures, initials and modifications
communicated by facsimile or telecopy will be considered as original.
The parties should promptly deliver originals of faxed or telecopied
documents. If any provision of this Agreement is or becomes invalid or
unenforceable, all remaining provisions will continue to be fully
effective unless said provision specifically provides to the contrary.
50. Pilot, Tugboat or Stevedor Negligence. The Operator shall be
responsible for all losses substained by Owner or Vessel or Mortgagee
through the negligence of pilots, tugboats or stevedores, even Operator
and/or it's Agents engage or furnish such services.
51. Tickets. Operator shall use a form of passenger ticket approved by the
insurance carrier.
52. Attorney Disclosure. Operator is aware that Charles S. Liberis is an
attorney and represents that Charles S. Liberis has not given any legal
advice to Operator. Operator further represents that it has received
its own independent legal advice regarding this Agreement or that
Operator has voluntarily chosen not to seek independent legal advice in
connection with this Agreement.
Charter Agreement Casino Padre
October 1, 1999 11
<PAGE> 12
53. Miscellaneous. This Agreement constitutes the entire agreement between
the Parties hereto and it is agreed and understood that there are no
other duties, obligations, liability or warranties implied or
otherwise. This Agreement is binding on Owner and Operator, their
successors or assigns, as soon as executed by both parties hereto.
WITNESS: OWNER:
CSL DEVELOPMENT CORPORATION,
A DELAWARE CORPORATION
By: /s/ Debbie Scullin
- ----------------------------- -----------------------------
Its: Vice President
OPERATOR:
CASINO PADRE INVESTMENT
COMPANY LLC, A NEVADA LIMITED
LIABILITY COMPANY
By: /s/ Charles S. Liberis
- ----------------------------- -----------------------------
Its: Managing Member
GUARANTOR(S):
- ----------------------------- By: N/A
Charter Agreement Casino Padre
October 1, 1999 12
<PAGE> 13
CSL DEVELOPMENT CORPORATION [LETTERHEAD]
- -------------------------------------------------------------------------------
November 2, 1999
Casino Padre Investment Company, LLC
One Padre Blvd.
South Padre Island TX 78597
RE: AMENDMENT TO CHARTER AGREEMENT
Gentlemen:
The purpose of this letter is to confirm an amendment to the Charter Agreement
to comply with the Private Placement Memorandum of Casino Padre Investment
Company, LLC of August 1999 and the agreements between the investors, Wayne
Welch and Mark Echols, as follows:
1. The first three months charter deposit ($375,000.00) and the damage
deposit ($200,000.00) are hereby waived in consideration of receiving a
fifty percent (50%) interest in working capital and a fifty percent
(50%) distribution of operating income.
This letter will serve as the formal amendment to the Charter Agreement.
Sincerely,
CSL DEVELOPMENT CORPORATION
/s/ Debbie Scullin
Debbie Scullin
Vice President
Agreed and Accepted:
Casino Padre Investment Company, LLC
By: /s/ Charles S. Liberis Date:11/2/99
--------------------------------------------
Charles S. Liberis, Managing Member
<PAGE> 1
EXHIBIT 10.6
10.6 OPERATING AGREEMENT CASINO PADRE INVESTMENT COMPANY, LLC
<PAGE> 2
<TABLE>
<S> <C> <C>
SECTION 1. OFFICES
SECTION 2. MEMBERS
A. ANNUAL MEETING ......................................... 1
B. SPECIAL MEETING ........................................ 1
C. PLACE OF MEETING ....................................... 1
D. MEETINGS ............................................... 1
E. RECORD DATE ............................................ 1
F. VOTING LIST ............................................ 2
G. VOTING PROCEDURES ..................................... 2
H. PROXIES ................................................ 2
I. TELEPHONIC COMMUNICATION .............................. 2
J. VOTING BY CERTAIN MEMBERS ............................. 2
K. INFORMAL ACTION OF MEMBERS ............................. 3
SECTION 3. MANAGEMENT .............................................. 3
A. MANAGER ................................................ 3
B. GENERAL POWERS ......................................... 3
C. LIMITATION ON AUTHORITY OF MEMBERS ..................... 3
D. GENERAL STANDARDS OF CONDUCT FOR MANAGERS .............. 4
E. REMOVAL OF MANAGERS .................................... 4
F. INDEMNIFICATION OF MANAGERS ............................ 4
SECTION 4. FINANCIAL ............................................... 5
A. CONTRIBUTIONS .......................................... 5
B. CAPITAL ACCOUNTS ....................................... 5
C. PROFITS, LOSSES AND DISTRIBUTIONS ...................... 6
D. COMPLIANCE WITH INTERNAL REVENUE CODE .................. 6
SECTION 5. CERTIFICATES OF MEMBERSHIP INTEREST AND TRANSFER......... 6
A. CERTIFICATES ........................................... 6
B. CERTIFICATE REGISTER ................................... 6
C. TRANSFERS OF MEMBERSHIP INTERESTS ...................... 6
D. CONDITIONS PRECEDENT TO TRANSFER ....................... 7
E. NO DISSOLUTION OR TERMINATION .......................... 7
F. PROHIBITION OF ASSIGNMENT .............................. 7
SECTION 6. DISSOLUTION OF THE COMPANY AND CONTINUANCE
OF THE COMPANY'S BUSINESS .................................... 8
SECTION 7. AMENDMENT OF ARTICLES OF ORGANIZATION,
RESTATEMENT THEREOF, MERGER, SALE, OR DISSOLUTION ............ 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 8. LIQUIDATION ................................................ 8
A. DISTRIBUTIONS ON LIQUIDATION .............................. 8
B. COMPLIANCE WITH INTERNAL REVENUE CODE REGULATIONS.......... 9
C. PROFITS, GAINS AND LOSSES DURING WINDING UP ............... 9
D. NO RIGHT TO DEMAND DISTRIBUTIONS IN-KIND .................. 9
SECTION 9. MISCELLANEOUS .............................................. 9
A. INDEMNIFICATION ........................................... 9
B. APPLICABLE LAW ............................................ 9
C. CAPTIONS .................................................. 9
D. VALIDITY .................................................. 9
E. BINDING EFFECT ............................................ 9
F. INTERPRETATION ............................................ 9
G. COUNTERPARTS .............................................. 9
H. WAIVER OF NOTICE ......................................... 10
I. FISCAL YEAR .............................................. 10
J. MANAGER AS ATTORNEY-IN-FACT FOR MEMBERS .................. 10
SECTION 10. CONSENT TO OPERATING AGREEMENT ........................... 10
</TABLE>
<PAGE> 4
APPENDIX "D"
CASINO PADRE INVESTMENT COMPANY, LLC.
OPERATING AGREEMENT
OF
CASINO PADRE INVESTMENT COMPANY, LLC
<PAGE> 5
OPERATING AGREEMENT
OF
CASINO PADRE INVESTMENT COMPANY, L.C.
The following operating Agreement is adopted pursuant to applicable provisions
of the State of Nevada:
SECTION 1. OFFICES.
The principal office of the company shall be located at 1610 Barrancas Avenue
Pensacola, Florida 32501 or at such other address as the company should choose
from time to time. The registered office and agent of the company required
under the Nevada Limited Liability Company Act shall be as initially provided
in the Articles of Organization, and shall be subject to change from time to
time as duly provided by law.
SECTION 2. MEMBERS.
A. ANNUAL MEETING. The annual meeting of members shall be held each year
during the month of June, on such date and at such time as determined by the
Manager. The Manager shall give the annual company report and general review of
business status of the company. Any other business properly coming before the
membership may be discussed and acted upon.
B. SPECIAL MEETING. Special meetings of the members may be called by the
Manager or by the holders of at least 20% of all votes entitled to be cast on
any issue proposed to be considered at the proposed special meeting.
C. PLACE OF MEETING. The Manager may designate any place in or outside the
State of Nevada as the meeting place for any annual meeting or special meeting
of the members. A consent signed by all members may designate any place, either
in or out of the State of Nevada, as the place for holding such meeting.
D. NOTICE OF MEETINGS. Written notice stating the date, time, and place of the
meeting and, in the case of any special meeting, a description of the purpose
or purposes for which the meeting is called, shall be mailed to each member of
record entitled to vote at the meeting, unless oral notice is reasonable under
the circumstances, not fewer than ten nor more than sixty days before the date
of the meeting, by or at the direction of the Manager or persons calling the
meeting. Such written notice is effective when mailed addressed to the members'
addresses shown in the company's record of members, with postage prepaid.
Attendance at any meeting constitutes a waiver of notice required to be given,
unless such attending member appears for the purpose of objecting to the
calling of the meeting.
E. RECORD DATE. For purposes of determining members entitled to notice or to
vote at any meeting of members or any adjournment thereof, or entitled to
receive payment of any distribution, or in order to make a determination of
members for any other purpose, the Manager may fix in advance a date as the
record date of any such determination of members; such date in any case to be
not more than seventy days and, prior to
1
<PAGE> 6
the date on which the particular action, requiring such determination of
members, is to be taken. If no record date is fixed for determination of
members entitled to vote or members entitled to receive payment of any
distribution, the date on which the notice of meeting is mailed or the date on
which the Manager's declaration of any distribution is adopted, as the case may
be, shall be the record date for such determination of members.
When a determination of members entitled to vote at any meeting of members has
been made as provided herein, such determination shall apply to any adjournment
of such meeting, unless the Manager fixes a new record date, which the Manager
must do if the meeting is adjourned to a date more than ninety days after the
date fixed for the original meeting.
F. VOTING LIST. The Manager, who shall have charge of the membership books for
Certificates of Membership interest of the company shall make, within three
business days after notice of each meeting of members is given, a complete
alphabetical list of the members entitled to notice of such meeting or any
adjournment thereof, with the address of each member and the number of Units of
Ownership applicable to each member. Such members list must be available for
inspection by any member, beginning three days after notice of the meeting is
given for which a list was prepared, and continuing through the meeting, at the
company's principal office. Such list shall be available to any member,
member's agent or attorney, for written inspection and copying during regular
business hours at the requesting member's expense. The company shall make the
members list available at the meeting, and any member, member's agent or
attorney, is entitled to inspect the list during the meeting.
G. VOTING PROCEDURES. Each member shall be entitled to vote based upon the
number of Units of ownership owned by the member. Each Certificate of
Membership shall state the number of Units of Ownership owned by such member.
Each member's vote shall have a value equal to such member's proportion of
Units of Ownership when compared to total outstanding Units of ownership
issued. Example: If 80 Units of Ownership are issued, and a member owns 2 Units
of Ownership, such member will be entitled to cast 2 votes, which votes shall
have a value of 2/80 of the total votes entitled to be cast.
A quorum of members is required to conduct any business at a meeting of
members, and a quorum shall consist of a majority of votes entitled to be cast.
H. PROXIES. At all meetings of members, a member may vote by proxy executed in
writing by the member or by such member's duly authorized attorney in fact. An
appointment of a proxy is effective when received by the Manager or other
officer or agent authorized to tabulate votes, and the company is entitled to
accept the proxy's vote or other action as that of the member making the
appointment. An appointment is valid for eleven months unless a longer period
is expressly provided in the appointment form. The death or incapacity of the
member appointing a proxy does not affect the right of the company to accept
the proxy's authority under the appointment unless notice of the death or
incapacity is received by the Manager or other officer or agent authorized to
tabulate votes.
I. TELEPHONIC COMMUNICATION. The Manager may permit any or all members to
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all members participating may
simultaneously hear each other during the meeting. A member participating in a
meeting by this means is deemed to be present in person at the meeting.
J. VOTING BY CERTAIN MEMBERS. Membership interests held in the name of a
corporation, partnership or company may be voted by such officer, partner,
agent or proxy as the Bylaws of such entity may
2
<PAGE> 7
prescribe, or, in the absence of such provision, as the Board of Directors or
other governing body of such entity may determine. Membership interests held by
a personal representative, administrator, executor, guardian or conservator may
be voted by such person, either in person or by proxy, without a transfer of
the Membership interest into the name of such person. Membership interests held
in joint tenancy with rights of survivorship may be voted by any joint owner,
and such joint owner's vote shall be accepted unless the Manager has knowledge
that another joint owner dissents.
K. INFORMAL ACTION OF MEMBERS. Except as otherwise provided by law or this
Agreement, any action required to be taken at a meeting of the members, or any
other action which may be taken at a meeting of the members, may be taken
without a meeting if one or more written consents, setting forth the action so
taken, are signed by the holders of Units of Ownership representing a majority
of the total votes entitled to be cast with respect the subject matter thereof
(or such other greater percentage as may be required by law or this Agreement)
and delivered to the Manager; provided that notice of the intended action to be
taken (in writing or by facsimile) is provided to all members at least ten days
prior to the date of the written consents.
A written consent shall bear the date of signature of each member who signs the
consent and no written consent shall b effective unless, within sixty days of
the earliest dated consent delivered to the Manager, written consents signed by
a sufficient number of holders are delivered to the Manager. A consent signed
under this provision has the effect of a meeting vote and may be described as
such in any document.
Prompt notice of the taking of action without a meeting by less than unanimous
written consent shall be given to those members who have not consented in
writing.
SECTION 3. MANAGEMENT
A. MANAGER. sureBET Casinos, Inc. ("sureBET") is hereby appointed the manager
of the Company (the "Manager"). The business and affairs of the Company shall
be managed under the direction and control of the Manager, and all powers of
the Company shall be exercised by or under the authority of the Manager. No
other person shall have any right or authority to act for or bind the Company
except as permitted in this Operating Agreement.
B. GENERAL POWERS. The Manager shall have the full power to execute and
deliver, for and on behalf of the Company, any and all documents and
instruments which may be necessary or desirable to carry on the business of the
Company, including without limitation, any and all deeds, contracts, leases,
mortgages, deeds of trust, promissory notes, security agreements, and financing
statements pertaining to the Company's assets or obligations, and to authorize
the confession of judgement against the Company. No person dealing with the
Manager need inquire into the validity or propriety of any document or
instrument executed in the name of the Company by the Manager, or as to the
authority of the Manager in executing the same.
C. LIMITATION ON AUTHORITY OF MEMBERS. No Member is an agent of the Company
solely by virtue of being a Member, and no Member has authority to act for the
Company solely by virtue of being a Member. This Section supercedes any
authority granted to the Members pursuant to the Act. Any Member who takes any
action or binds the Company in violation of this Section shall be solely
responsible for any loss and expense incurred by the Company as a result of the
unauthorized action and shall indemnify and hold the Company harmless with
respect to the loss or expense.
3
<PAGE> 8
D. GENERAL STANDARDS OF CONDUCT FOR MANAGERS. A Manager shall discharge that
Manager's duties as a Manager in good faith, with the care an ordinary prudent
person in a like position would exercise under similar circumstances, and in a
manner the Manager believes to be in the best interests of the company.
E. REMOVAL OF MANAGERS. The Members may remove the Manager and elect a new
manager only if:
(1) The Management Company or any of its officers or Directors convicted of a
felony or misdemeanor (other than a conviction for a traffic offense), or if
the Owner reasonably believes The Management Company jeopardizes or causes the
withdrawal of any gaming license, permit or authorization necessary to conduct
the business of the Owner, or
(2) There shall be filed by The Management Company in any court pursuant to any
statute either of the United States or of any state a petition in bankruptcy or
insolvency or for a reorganization or for the appointment of a receiver or
trustee of all or a substantial part of The Management Company's property, or
if The Management Company makes an assignment for or petitions for or enters
into an arrangement for the benefit of creditors or if an involuntary petition
in bankruptcy is filed against The Management Company which is not dismissed
within ninety (90) days thereafter.
F. INDEMNIFICATION OF MANAGERS. The Partnership, its receiver, or its trustee
shall indemnify and save harmless, and pay all judgement and claims against
each Manager or officer or Director of the Manager, including for acts of
negligence of any of the forgoing, relating to any liability or damage incurred
by reason by any act performed or omitted to be preformed by that Manager,
officer, or director in connection with the business of the Partnership,
including Attorneys' fees incurred by the Company, officer, or director in
connection with the defense of any action based on any act or omission, which
attorneys' fees may be paid as incurred, including all such liabilities under
federal and state securities laws ( including the Securities Act of 1933, as
amended) as permitted by law.
The Partnership, its receiver, or its trustee shall indemnify and hold
harmless, to the maximum extent permitted by law, each Manager and Unit Holder
from and against any and all liabilities, sums paid in settlement of claims (if
such settlement is consented to by the Manager), obligations, charges, actions
(formal or informal), claims ( including but not limited , claims for personal
injury under any theory or for real or personal property damage), liens, taxes,
administrative proceedings, losses, damages (including without limitation,
punitive damages), penalties, fines, court cost, administrative service fees,
response and remediation costs, stabilization costs, encapsulation costs,
treatment, storage, or disposal costs, groundwater monitoring or environmental
study, sampling, or monitoring cost, other courses of action, and any other
costs and reasonable expenses ( including, without limitation, reasonable
attorneys', experts', and consultants' fees and disbursements and
investigating, laboratory, and data review fees) imposed upon or incurred by
any Manager or Unit Holder ( whether or not indemnified against by any other
party) arising from and after the date of this agreement directly or indirectly
out of:
(i) The past, present, or future treatment, storage, disposal,
generation, use, transport, movement, presence, release, threatened
release, spill, emission, injection, leaching, dumping, escaping, or
seeping of any Hazardous Substances, material containing or alleged to
contain Hazardous Substances at or from any past, present, or future
properties, or assets of the Company; or
4
<PAGE> 9
(ii) The violation or alleged violation by the Company or any third
party of any Environmental Laws with regard to past, present or future
ownership, operation, use, or occupying of any property or asset of
the Company.
In the event of any action by a Unit Holder against any Manager, including a
derivative suit, the Company shall indemnify, save harmless, and pay all
expenses of the Manager including attorneys' fees, incurred in the defense of
that action, if that Manager is successful in the action.
Except as may be otherwise provided in this agreement, the Company shall
indemnify, save harmless and pay all expenses, costs, or liabilities of any
Manager who for the benefit of the Company makes any deposit' acquires any
option, or makes any similar payment or assumes any obligation in connection
with any property proposed to be acquired by the Company and who suffers any
financial loss as a result of that action excluding any guarantees or leases
entered into by the Manager to acquire or finance the Project.
Not withstanding anything contained in this section to the contrary, no Manager
or Unit Holder shall be indemnified from any liability for fraud, bad faith,
willful misconduct, or gross negligence.
In the event that any subsection or provision is determined to be invalid in
whole or in part, the remainder of this section shall be enforced to the
maximum extent permitted by law.
SECTION 4. FINANCIAL.
A. CONTRIBUTIONS. Ownership interests in the company will be held in the form
of Units of Ownership, and each member's Certificate of Membership shall
disclose the Units of Ownership to which said member has title. Members may
make contributions, as provided in Section 490A.801, in the form of cash,
property, or services performed. There are no initial members of the company
and the no Units held as of August 22, 1999.
The company shall authorize a total of not more than 80 Units to be issued.
Additional Units over and above 80 would only be authorized upon approval of
the Manager and approval by not less than 75% of the members.
B. CAPITAL ACCOUNTS. A separate capital account shall be maintained for each
member. Each member's capital account shall be increased by:
(1) The cumulative amount of cash and the net fair market value
of any property that has been contributed to the capital of
the company by such member (or such member's predecessors in
interest); and
(2) The cumulative amount of the company's net profit that has
been allocated to such member (or such member's predecessors
in interest); and
shall be decreased by:
(1) The cumulative amount of the company's net loss that have
been allocated to such member (or predecessors in interest of
such member);
(2) The cumulative amount of cash and the fair market value of
all other property that has been distributed to such member
(or predecessors in interest of such member).
5
<PAGE> 10
C. PROFITS, LOSSES AND DISTRIBUTIONS. Except as may be required by Section
704(c) of the Internal Revenue Code, the profits, losses, and distributions of
the company shall be allocated among the members in proportion to each member's
respective percentage of Units of Ownership when compared with total Units of
ownership issued. The company shall make, to the extent possible and advisable,
one or more tax distributions (the "Tax Distributions") to its members totaling
an amount equal to the additional state and federal income taxes owed by the
members as a result of the members' ownership of Units of the company. Such Tax
Distributions shall be computed by the company's accountants assuming that each
member is an Nevada resident subject to the highest marginal state and federal
tax rates applicable to individuals (taking into consideration the
deductibility of income taxes) for the calendar year in which the company's tax
year ends. Any and all distributions shall be proportionate to Units owned. No
member has the right to demand and receive any distribution from the company
other than in cash.
No distribution shall be made if as a result thereof the company would not be
able to pay its debts as they become due in the usual course of business, if
the company would be in violation of any loan agreement, or if the company's
total assets would be less than the sum of its total liabilities.
D. COMPLIANCE WITH INTERNAL REVENUE CODE. The provisions of this Section as
they relate to the maintenance of capital accounts are intended, and shall be
construed, and, if necessary, modified, to cause the allocations of profits,
losses, income, gain and credit to have substantial economic effect under the
Regulations promulgated under Section 704 (b) of the Internal Revenue Code.
Notwithstanding anything herein to the contrary, this Agreement shall not be
construed as creating a deficit restoration obligation or otherwise personally
obligate any member to make a capital contribution in excess of such member's
initial contribution.
SECTION 5. CERTIFICATES OF MEMBERSHIP INTEREST AND TRANSFER.
A. CERTIFICATES. Certificates representing each member's membership interest
shall be in such form as shall be determined by the Manager. Such certificates
shall be signed by the Manager and shall be consecutively numbered or otherwise
identified. Certificates shall bear a legend which indicates that the
membership interest represented by the certificate cannot be transferred or
assigned except in compliance with this Agreement. In case of a lost, destroyed
or mutilated certificate, a new one may be issued upon such terms and indemnity
to the company as the Manager may prescribe.
B. CERTIFICATE REGISTER. The name and address of the member to whom each
certificate is issued, together with the capital contribution and the date of
issue, shall be entered in the Certificate Register of the company. Any and all
changes in members or their amount of capital contribution shall be reflected
by the Manager in the Certificate Register of the company.
C. TRANSFERS OF MEMBERSHIP INTERESTS. Any sale, exchange or transfer of a
member's interest in the company shall not be effective unless the transaction
is approved (1) by the Manager, in writing, and (2) by a vote of the members
holding a majority of the remaining Units and by a majority vote of the
remaining members (per capita) at a meeting of the members.
The granting of a security interest, pledge, lien, or encumbrance against any
membership interest shall be distinguished from a sale, exchange or transfer of
a member's interest as above provided. Such various grant of security interests
shall not cause the member to cease to be a member, and shall not deprive the
member of such member's voting rights. Whether such pledge, grant of security
6
<PAGE> 11
interest, lien, or other encumbrance results in a transfer of the member's
right to distributions shall depend upon the terms of such pledge, grant of
security interest, lien, or other encumbrance. The company and the Manager
shall be entitled to be saved, indemnified, and held harmless by all interested
parties to the transaction in respect to any distribution or other action taken
in reliance upon any pledge, grant of security interest, lien, or encumbrance,
or in respect to any such action taken in respect to an assignment. The fact
that a member's interest may have been attached, executed upon, or charged by
the court in any way shall not vitiate the provisions relating to approval
being required for membership by a Manager and a majority of other members as
heretofore stated.
If a member dies, or a court of competent jurisdiction adjudges a member to be
incompetent, the member's executor, administrator, guardian, conservator, or
other legal representative may exercise all of the member's rights for the
purpose of settling the member's estate or administering the member's property;
and if the member is a corporation, trust, or other entity, and is dissolved or
terminated, the powers of that member may be exercised by its legal
representative or successor.
D. CONDITIONS PRECEDENT TO TRANSFER. In addition to the conditions set forth
above, no sale, exchange or transfer of a member's membership interest shall be
effective unless and until all of the following conditions have been satisfied;
(1) The instrument of transfer shall be in form and substance
reasonably satisfactory to the Manager;
(2) The transferor and transferee named therein shall execute and
acknowledge such other instrument or instruments as the
Manager may deem necessary or desirable to effectuate the
acceptance of the transferee as a member;
(3) The transferee shall execute a written acceptance of all of
the terms and provisions of this Agreement as, and to the
extent that, the same may have been amended;
(4) The transferee shall meet all applicable licensing and other
regulatory requirements imposed by any applicable racing and
gaming commission; and
(5) The transferor or transferee shall pay all reasonable expenses
connected with acceptance of a member and incurred as a result
of security issues or regulatory matters arising as a result
of such transfer, including, but not limited to, legal fees
and costs.
E. NO DISSOLUTION OR TERMINATION. The transfer of a membership interest in the
company pursuant to the terms of this Section shall not dissolve or terminate
the company. No Member shall have the right to have the company dissolved or to
have such Member's capital contribution returned except as provided in this
Agreement.
F. PROHIBITION OF ASSIGNMENT. Notwithstanding the foregoing provisions of this
Section, no sale, exchange or transfer of a member's membership interest may be
made if the membership interest sought to be sold, exchanged or transferred,
when added to the total of all other membership interests sold, exchanged or
transferred within the period of twelve (12) consecutive months prior thereto,
would result in the termination of the company under Section 708 of the
Internal Revenue Code. In the event of a transfer of any membership interest,
the members will determine, in their sole discretion, whether or not the
company will elect pursuant to Section 754 of the Internal Revenue Code (or
corresponding provisions of future law) to adjust the basis of the assets of
the company.
7
<PAGE> 12
SECTION 6. DISSOLUTION OF THE COMPANY AND CONTINUANCE OF THE
COMPANY'S BUSINESS.
The withdrawal, death or dissolution, adjudication of incompetence or
adjudication of bankruptcy of a member ("Triggering Events") shall immediately
dissolve the company unless a majority in interest of the remaining members, as
defined in Rev. Proc. 94-46, agree to continue the business of the company.
Said vote shall be taken as soon as is practical, but not more than 90 days
after the company first has knowledge of a Triggering Event. A member shall
immediately notify the Manager of any Triggering Event of which the member has
knowledge.
SECTION 7. AMENDMENT OF ARTICLES OF ORGANIZATION, RESTATEMENT
THEREOF, MERGER, SALE, OR DISSOLUTION.
The applicable provisions of the Code of Nevada as amended shall govern any
amendments to the Articles of Organization, Restatement thereof, merger of the
company, or dissolution of the company, except where other voting percentages
are specified in this Operating Agreement. A 75% affirmative vote of all
members entitled to vote, based upon the proportionate ownership of Units of
Ownership to which the voter holds title in the company, shall be required to
approve the following matters:
(1) The dissolution and winding up of the company,
(2) The sale, exchange, lease, mortgage, pledge, or other transfer
of all or substantially all of the assets of the company other
than in the ordinary course of business,
(3) Merger of the company with another entity, or
(4) An amendment to the Articles of Organization or Operating
Agreement, after notice and opportunity for discussion.
SECTION 8. LIQUIDATION.
A. DISTRIBUTIONS ON LIQUIDATION. Upon dissolution of the company as provided
in Sections 7 and 8, if such dissolution is not followed by the agreement to
continue the company under Section 7, the company shall immediately commence to
wind up its affairs and liquidate. The company assets shall be distributed in
payment of the liabilities of the company and to the members in the following
order:
(a) To creditors by the payment or provision for payment of the
debts and liabilities of the company (other than any loans or
advances that may have been made by any of the members to the
company) and the expenses of liquidation;
(b) To the setting up of any reserves that the members deem
reasonably necessary for any contingent or unforeseen
liabilities or obligations of the company. Such reserves shall
be paid over by the members to a bank or other institutional
escrow agent, to be held for the purpose of disbursing such
reserves in payment of the aforementioned contingencies, and at
the expiration of such period as the members deem advisable, to
distribute the balance in the manner provided in this Section 9
and in the order stated herein;
(c) To the repayment of any loans or advances that may have been
made by any of the members to the company, but if the amount
available for such repayment shall be insufficient, then pro
rata on account thereof; and
(d) To the members in payment of their capital accounts at the date
of distribution.
8
<PAGE> 13
B. COMPLIANCE WITH INTERNAL REVENUE CODE REGULATIONS. In the event the company
is "liquidated" within the meaning of Treas. Reg. 1. 704-1 (b) (2) (ii) (g) ,
distributions shall be made pursuant to this Section 9 (if such liquidation
constitutes a dissolution of the Company) to the Members who have positive
Capital Accounts in compliance with Treas. Reg. 1.704-1(b)(2)(ii)(b)(2) (after
giving effect to all contributions, distributions, and allocations for all
taxable years, including the year during which such liquidation occurs).
C. PROFITS, GAINS AND LOSSES DURING WINDING UP. The members shall continue to
share profits and losses during the winding up of the company's affairs in
accordance with their respective percentage of Units as if they were not
winding up its affairs. Any gain or loss on disposition of company assets in
the process of liquidating and winding up its affairs shall be credited or
debited to the members in accordance with Section 5. Any company assets
distributed in-kind to the members in the liquidation shall be valued and
treated as though the assets were sold and the cash proceeds were distributed.
The difference between the value of each asset distributed in-kind and its tax
basis shall be treated as a gain or loss on sale of the asset and shall be
credited or debited to the members in accordance with the provisions of Section
5.
D. NO RIGHT TO DEMAND DISTRIBUTIONS IN-KIND. No member shall have the right to
demand or receive property other than cash for such member's Units.
SECTION 9. MISCELLANEOUS.
A. INDEMNIFICATION. The company shall indemnify any person who was or is a
party defendant or is threatened to be made a party defendant in any civil,
administrative, or criminal action by reason of the fact that such person is or
was a member, Manager, committee member, employee or agent of the company, and
may defend, save and hold said individual harmless in connection with all
matters performed by said individual in good faith and in a manner reasonably
believed by said person to be in or not opposed to the best interest of the
company.
B. APPLICABLE LAW. This Agreement and the rights and obligations of the
parties hereunder shall be construed and interpreted in accordance with the
laws of the State of Nevada.
C. CAPTIONS. Paragraphs, titles, or captions in no way define, limit, extend or
describe the scope of this Agreement nor the intent of any of its provisions.
D. VALIDITY. If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.
E. BINDING EFFECT. This Agreement shall inure to and bind all members, as well
as their estates, heirs, personal representatives, successors and assigns.
F. INTERPRETATION. As used herein, the masculine includes the feminine and
neuter and the singular includes the plural.
G. COUNTERPARTS. This Agreement or any certificate or amendment pursuant
thereto may be executed in counterparts, all of which taken together shall be
deemed one original agreement, and shall be binding upon all parties hereto
notwithstanding that all parties are not signatory to the same counterpart.
9
<PAGE> 14
H. WAIVER OF NOTICE. Whenever any notice is required to be given pursuant to
the provisions of the Act, the Articles of Organization of the company or this
Agreement, a waiver thereof, in writing, signed by the person or entity
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
I . FISCAL YEAR. The fiscal year of the company shall be from January 1
through December 31 of each year.
J. MANAGER AS ATTORNEY-IN-FACT FOR MEMBERS .
APPOINTMENT. Each of the Members irrevocably constitutes and appoints,
with full power of substitution, the Manager, its true and lawful
attorney-in-fact with full power and authority in its name, place and stead to
execute, certify, acknowledge, deliver, swear to, file and record at the
appropriate public offices:
(a) All certificates and other instruments and any amendment thereof,
which the President deems appropriate to form, qualify or continue the business
of the Company as a limited liability company;
(b) Any other instrument or document which may be required to be filed
by the Company under the laws of any state or which the President deems
advisable to file; and
(c) Any instrument or document, including amendments to this
Agreement, which may be required to effect the continuation of the Company the
admission of a substituted Member, or the dissolution and termination of the
Company (provided such continuation, admission or dissolution and termination
are in accordance with this Agreement), or to reflect any reductions in the
amount of capital of Members.
DURATION. The appointment by each member of the Manager as its
attorney-in-fact is irrevocable and shall be deemed to be a power coupled with
an interest and shall survive the incompetency, Bankruptcy or dissolution of
any person giving such power, except, that in the event of the transfer by a
Member of all or any part of its interest, this power of attorney shall survive
such transfer only until such time, if any, as the transferee shall have been
admitted to the Company as a substituted Member and all required documents and
instruments shall have been duly executed, filed and recorded to effect such
substitution.
SECTION 10. CONSENT TO OPERATING AGREEMENT.
Each member shall receive a copy of this Operating Agreement. The undersigned,
being all the members of Casino Padre Investment Company, LLC, an Nevada
limited liability company, by signing below, hereby evidence their adoption and
ratification of the foregoing Operating Agreement.
[SIGNATURE PAGE FOLLOWS]
10
<PAGE> 15
SIGNATURE PAGE
TO
CASINO PADRE INVESTMENT COMPANY, L. L .C.
OPERATING AGREEMENT
IN WITNESS WHEREOF, the undersigned have each executed, or caused to be
executed, this Agreement.
NAME No. Of Shares Date
- ------------------------------- ------------- ------------
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
11
<PAGE> 16
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
- ------------------------------- ------------- ------------
Signature
- -------------------------------
Print Name
12
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The only subsidiary of sureBET Casinos, Inc. is Casino Padre Investment Company,
LLC, a Nevada limited liability company which does business under that name.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDING MARCH 31, 1999 AND 1998 AND
THE UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED DECEMBER
31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> MAR-31-2000 MAR-31-1999
<PERIOD-START> APR-01-1999 APR-01-1998
<PERIOD-END> DEC-31-1999 MAR-31-1999
<CASH> 83,308 0
<SECURITIES> 0 0
<RECEIVABLES> 36,776 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 120,085 0
<PP&E> 396,017 0
<DEPRECIATION> 12,548 0
<TOTAL-ASSETS> 514,774 0
<CURRENT-LIABILITIES> 268,975 0
<BONDS> 0 0
0 0
0 0
<COMMON> 7,490 1,040
<OTHER-SE> 238,309 (1,040)
<TOTAL-LIABILITY-AND-EQUITY> 514,774 0
<SALES> 163,445 0
<TOTAL-REVENUES> 163,445 0
<CGS> 17,637 0
<TOTAL-COSTS> 17,637 0
<OTHER-EXPENSES> 615,917 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (470,110) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (470,110) 0
<DISCONTINUED> 0 (359,713)
<EXTRAORDINARY> 0 1,561,127
<CHANGES> 0 0
<NET-INCOME> (409,701) 1,201,414
<EPS-BASIC> (0.13) 1.23
<EPS-DILUTED> (0.13) 1.23
</TABLE>
