<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
Commission File Number: 0-8698
CONCORDE GAMING CORPORATION
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0716683
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3290 LIEN STREET
RAPID CITY, SOUTH DAKOTA 57702
(Address of principal executive offices)
(605) 341-7738
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of July 31, 1999, there were
24,010,402 shares of the issuer's $.01 par value common stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE> 2
INDEX
CONCORDE GAMING CORPORATION
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
-------
<S> <C>
Condensed Consolidated Balance Sheet at June 30, 1999 (unaudited) 1
Condensed Consolidated Statements of Operations for 2
Three Months Ended June 30, 1999 and 1998 and for
Nine months Ended June 30, 1999 and 1998 (unaudited)
Condensed Consolidated Statements of Cash Flows for 3
Nine months Ended June 30, 1999 and 1998 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis 7
or Plan of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE> 3
CONCORDE GAMING CORPORATION
Condensed Consolidated Balance Sheet
June 30, 1999
(unaudited)
<TABLE>
Assets
Current assets:
<S> <C>
Cash $ 1,952,385
Trade receivables 334,543
Inventory 66,443
Prepaid expenses, other 558,321
------------------
Total current assets 2,911,692
Property and equipment, net 12,393,308
Notes receivable, less current maturities 95,000
Investment in unconsolidated subsidiary 55,596
Intangibles, net 1,313,897
Deferred income taxes 285,000
Other 146,929
------------------
$ 17,201,422
==================
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 864,734
Accounts payable 322,770
Accrued payroll and related costs 203,925
Other 653,064
Income taxes payable 0
------------------
Total current liabilities 2,044,493
------------------
Long-term debt, less current maturities 13,724,657
------------------
Stockholders' equity:
Common stock, $.01 par value; authorized 500,000,000 shares,
issued 24,010,402 at June 30, 1999 240,104
Preferred stock, $.01 par value; authorized 10,000,000 shares,
no shares issued and outstanding 0
Additional paid-in capital 3,887,176
Accumulated deficit (2,695,008)
------------------
1,432,272
------------------
$ 17,201,422
==================
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
CONCORDE GAMING CORPORATION
Condensed Consolidated Statements Of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Casino $5,066,660 $1,058,881 $11,820,003 $2,815,213
Food and beverage 615,502 79,141 1,358,697 216,009
Video lottery -- -- -- 53,499
Other 429,531 4,645 1,189,906 15,714
---------- ---------- ----------- -----------
Gross revenues 6,111,693 1,142,667 14,368,606 3,100,435
Less: promotional allowances (743,051) (22,991) (1,767,354) (64,385)
---------- ---------- ----------- -----------
Net revenues 5,368,642 1,119,676 12,601,252 3,036,050
---------- ---------- ----------- -----------
Costs and expenses:
Casino 1,848,561 666,729 4,971,711 1,810,807
Food and beverage 388,497 52,953 1,101,468 139,013
Video lottery -- -- -- 69,498
Management fees, to minority partner, related party 55,000 60,000 190,000 220,000
Business development costs 311 63,418 (29,689) 236,543
Selling, general and administrative 2,058,131 353,692 5,297,656 1,074,929
Depreciation and amortization 316,946 92,068 824,979 259,752
Start-up costs -- 228,688 540,952 513,555
---------- ---------- ----------- -----------
Total costs and expenses 4,667,446 1,517,548 12,897,077 4,324,097
---------- ---------- ----------- -----------
Income (loss) from operations 701,196 (397,872) (295,825) (1,288,047)
---------- ---------- ----------- -----------
Other income (expense):
Interest income 4,251 2,206 21,218 14,444
Equity in earnings of unconsolidated subsidiary 28,486 -- 15,181 --
Other income (35,746) 5,012 34,381 10,026
Interest expense and financing costs:
Related parties (280,834) (43,419) (803,624) (81,862)
Other (236,917) (16,354) (708,734) (65,307)
---------- ---------- ----------- -----------
(520,760) (52,555) (1,441,578) (122,699)
---------- ---------- ----------- -----------
Income (loss) before income taxes and
cumulative effect of accounting change 180,436 (450,427) (1,737,403) (1,410,746)
Federal and state income tax benefit 4,200 (76,800) (215,800) (330,000)
---------- ---------- ----------- -----------
Income (loss) before cumulative effect of accounting change 176,236 (373,627) (1,521,603) (1,080,746)
Cumulative effect of change in accounting principle
related to pre-opening and start-up costs -- -- -- (259,181)
---------- ---------- ----------- -----------
Net income (loss) $ 176,236 $ (373,627) $(1,521,603) $(1,339,927)
========== ========== =========== ===========
Basic and diluted earnings (loss) per share:
Income (loss) before cumulative effect of accounting change $ 0.01 $ (0.02) $ (0.06) $ (0.05)
Cumulative effect of change in accounting principle -- -- -- (0.01)
---------- ---------- ----------- -----------
Net income (loss) $ 0.01 $ (0.02) $ (0.06) $ (0.06)
========== ========== =========== ===========
Weighted-average common shares outstanding 24,010,402 23,673,126 23,870,996 23,673,126
========== ========== =========== ===========
Weighted-average common and
common equivalent shares outstanding 24,617,165 23,673,126 23,870,996 23,673,126
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
CONCORDE GAMING CORPORATION
Condensed Consolidated Statements Of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,521,603) $ (611,783)
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization 824,979 264,344
Deferred income tax -- (78,000)
Other 156,348 95,410
Changes in assets and liabilities:
Receivables (276,953) 21,752
Prepaid expenses and other (485,257) 187,506
Accounts payable and accrued expenses (1,605,105) 178,884
Income taxes payable (57,872) (206,471)
------------ ------------
Net cash used in operating activities (2,965,463) (148,358)
------------ ------------
Cash flows from investing activities:
Principal payments received on long-term receivables -- 51,000
Purchase of property and equipment (519,991) (5,381,882)
Other (424,816) 197,278
------------ ------------
Net cash used in investing activities (944,807) (5,133,604)
------------ ------------
Cash flows from financing activities:
Net change in short-term borrowings:
Related parties (490,500) 2,775,000
Other -- 3,168,505
Proceeds from long-term borrowings:
Related parties 1,775,000 --
Other 10,853,097 --
Principal payments on long-term debt, other (6,981,629) (545,127)
Payments received on stock subscription -- 129,832
Other (8,077) --
------------ ------------
Net cash provided by financing activities 5,147,891 5,528,210
------------ ------------
Net increase (decrease) in cash 1,237,621 246,248
Cash, beginning of period 714,764 1,073,910
------------ ------------
Cash, end of period $ 1,952,385 $ 1,320,158
============ ============
Supplemental disclosures of cash flow information:
Cash payments for:
Interest $ 1,091,638 $ 153,148
============ ============
Income taxes $ -- $ 90,000
============ ============
Supplemental schedule of noncash investing and financing activities:
Interest rolled into long-term debt $ 542,511
============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(unaudited)
(1) Summary of Significant Accounting Policies:
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements
of Concorde Gaming Corporation 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 complete
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 June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending September 30, 1999.
The accompanying condensed consolidated financial statements, and
related notes thereto, should be read in conjunction with the audited
consolidated financial statements of the Company, and notes thereto,
for the year ended September 30, 1998 included in the Company's 1998
Annual Report on Form 10-KSB.
Recently Issued Accounting Standard:
Statement of Financial Accounting Standard No. 131, Disclosures About
Segments of an Enterprise and Related Information was issued in June
1997. This statement establishes additional standards for segment
reporting in the financial statements and is effective for fiscal years
beginning after December 15, 1997. The Company believes the segment
information required to be disclosed under this statement will be more
comprehensive than previously provided, including expanded disclosure
of income statement and balance sheet items for each of its reportable
segments. The Company has not yet completed its analysis of which
operating segments it will report on but intends to be in compliance by
September 30, 1999.
Pre-opening and Start-up Costs:
The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee issued Statement of Position No. 98-5,
Reporting on the Costs of Start-up Activities. This standard provides
guidance on the financial reporting for start-up costs and requires
that such costs be expensed as incurred. The standard is effective for
fiscal years beginning after December 15, 1998. The Company adopted
this standard in the quarter ending September 30, 1998, and accordingly
restated previous quarters to conform to this standard.
Earnings Per Share
In 1998, the Company adopted SFAS No. 128, Earnings per Share. This
statement established standards for computing and presenting earnings
per share and required restatement of all prior-period earnings per
share data presented. Options to purchase (i) 2,200,000 shares of
common stock ranging from $.15 to $.42 per share, (ii) 80,000 shares of
common stock at $1.50 per share, (iii) 2,000,000 shares of common stock
at $1 per share and (iv) 960,000 shares of common stock ranging from
$.75 to $1 per share were outstanding during the three month and nine
month periods ending June 30, 1999, but were not included in the
computation of diluted EPS for the nine months ended June 30, 1999
because the effect is anti-dilutive or the exercise price was greater
than the average
4
<PAGE> 7
market price of the common shares. A reconciliation of income and
shares for basic and diluted earnings per share ("EPS") is as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
----------------------------------------- ----------------------------------------
Per Per
Share Share
Earnings Shares Amount Loss Shares Amount
---------- ---------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings (loss) $ 176,236 24,010,402 $ 0.01 $(373,627) 23,673,126 $(0.02)
Effect of dilutive securities:
Options 606,763 --
Diluted EPS
---------- ---------- -------- --------- ---------- ------
Net earnings (loss) $ 176,236 24,617,165 $ 0.01 $(373,627) 23,673,126 $(0.02)
========== ========== ======== ========= ========== ======
</TABLE>
<TABLE>
<CAPTION>
Nine months Ended Nine months Ended
June 30, 1999 June 30, 1998
----------------------------------------- ------------------------------------------
Per Per
Share Share
Loss Shares Amount Loss Shares Amount
----------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Loss before cumulative effect
of accounting change $(1,521,603) $ (0.06) $(1,080,746) $ (0.05)
Cumulative effect of
Accounting change -- -- (259,181) (0.01)
----------- ---------- --------- ----------- ---------- --------
Net loss $(1,521,603) 23,870,996 $ (0.06) $(1,339,927) 23,673,126 $ (0.06)
Effect of dilutive securities:
Options -- --
Diluted EPS:
Loss before cumulative
effect of
accounting change $(1,521,603) -- $ (0.06) $(1,080,746) -- $ (0.05)
Cumulative effect of
accounting change -- -- (259,181) (0.01)
----------- ---------- --------- ----------- ---------- --------
Net loss $(1,521,603) 23,870,996 $ (0.06) $(1,339,927) 23,673,126 $ (0.06)
=========== ========== ========= =========== ========== ========
</TABLE>
(2) Princesa Financing
In October, 1998, Bayfront Ventures, a Florida general partnership of
which the Company, through a wholly-owned subsidiary, owns an 80%
ownership ("Casino Princesa"), entered into a Loan Agreement and
Security Agreement with a group of lenders, which provided $8,400,000
in financing for an offshore gaming vessel named the Casino Princesa
("Princesa"), related equipment and working capital (the "Vessel
Loan"). The Vessel Loan is secured by a ship mortgage and all related
furniture, furnishings, machinery and equipment (including gaming
equipment) owned by Casino Princesa or Princesa Partners ("Princesa
Partners"), a Florida general partnership of which the Company, through
a wholly-owned subsidiary, owns an 80% ownership interest. Princessa
Partners owns the Princessa and charters the Princessa to Casino
Princessa, which operates the Princessa. In addition, Casino Princesa,
the Company, Goldcoast and certain individuals, including Mr. Brustuen
H. Lien, the majority shareholder, director and chairman of the board
of the Company, guaranteed the Vessel Loan. The Vessel Loan bears
interest at 10.625% with interest only payments through January 1999.
Monthly payments of $130,258, including interest, commenced on February
1999 for sixty consecutive months, with the remaining balance due
January 2004. The Vessel Loan also requires mandatory prepayment of
principal in an amount equal to 12% of the amount of Excess Revenue (as
5
<PAGE> 8
defined below) for each fiscal year, commencing January 2000. Excess
Revenue as defined in the Vessel Loan is the excess of (i) the combined
earnings of Princesa Partners and Casino Princesa before taxes,
depreciation and amortization minus the principal and interest paid on
the Vessel Loan during the fiscal year, over (ii) $4,000,000. The
Vessel Loan contains typical covenants with respect to Princesa
Partners and Casino Princesa, including net worth restrictions, debt
service requirements and limitations on the amount of debt that can be
incurred.
(3) In May, 1999 the Company's wholly-owned subsidiary, Concorde Cripple
Creek, Inc. ("Concorde Cripple Creek"), entered into a loan agreement
with a lender (the "Loan Agreement). The Loan Agreement provides for a
short-term line of credit in an amount not to exceed $150,000, which is
evidenced by a promissory note due and payable on May 15, 2000. The
promissory note bears interest at the prime rate plus three-quarters
percent. As of June 30, 1999, no amount was outstanding under the
short-term line of credit. The Loan Agreement also provides for a term
commitment loan of up to $850,000 (the "Term Loan"). The Term Loan is
evidenced by a promissory note payable in thirty-five (35) monthly
installments of $10,119 commencing on May 31, 1999 with the final
installment due and payable in April, 2002. Advances under the Term
Loan bear interest at the prime rate plus three-quarters percent. As of
June 30, 1999, the Term Loan had an outstanding principal balance of
$839,880. The obligations of Concorde Cripple Creek under the Loan
Agreement are secured by the assets of Concorde Cripple Creek. In
addition, the Company has agreed to guarantee the obligations of
Concorde Cripple Creek under the Loan Agreement.
6
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The statements contained in this report, if not historical, are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties that could cause actual
results to differ materially from the financial results described in such
forward looking statements. These risks and uncertainties include, but are not
limited to, changes in gaming regulations and tax rates in Colorado, Florida,
and other jurisdictions that could impact the Company's operations, changes in
economic conditions, declining popularity of gaming, competition in Colorado and
Florida and other jurisdictions, and the level and rate of growth in the
Company's operations. The success of the Company's business operations is in
turn dependent on factors such as the effectiveness of the Company's marketing
strategies to grow its customer base and improve customer response rates,
general competitive conditions within the gaming industry and general economic
conditions. Further, any forward looking statement or statements speak only as
of the date on which such statement was made, and the Company undertakes no
obligation to update any forward looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. Therefore, forward-looking
statements should not be relied upon as a prediction of actual future results.
INTRODUCTION
Concorde Gaming Corporation (the "Company"), through a wholly-owned
subsidiary, Concorde Cripple Creek, Inc., a Colorado corporation ("Concorde
Cripple Creek"), owns and operates the Golden Gates Casino ("Golden Gates
Casino"), a limited stakes casino in Black Hawk, Colorado. In addition, the
Company through wholly-owned subsidiaries, Concorde Cruises, Inc., a South
Dakota corporation ("Concorde Cruises"), and Conami, Inc., a Florida corporation
("Conami"), owns an 80% interest in two joint ventures, Bayfront Ventures, a
Florida general partnership which conducts business under the name Casino
Princesa ("Casino Princesa"), and Princesa Partners, a Florida general
partnership ("Princesa Partners"), which own and operate an offshore gaming
vessel (the "Princesa") from Bayfront Park, Miami, Florida. Concorde Cruises
owns an 80% interest in Casino Princesa and Conami owns an 80% interest in
Princesa Partners. Princesa Partners owns the Princesa and, pursuant to a
Charter Agreement (the "Charter") dated October 2, 1998, charters the Princesa
to Casino Princesa, which operates the Princesa. The Princesa was completed and
commenced operations in October, 1998.
RESULTS OF OPERATIONS
Three Months ended June 30, 1999 Compared to Three Months ended June 30, 1998
Revenues. Net revenues increased 379.5% to $5,368,642 for the three
months ended June 30, 1999, compared to $1,119,676 for the three months ended
June 30, 1998, primarily as a result of the commencement of operations of the
Princesa in October 1998. The Princesa had revenues of $4,319,716 for the three
months ended June 30, 1999. Golden Gates Casino generated revenues of $1,048,926
for the three months ended June 30, 1999, compared to revenues of $1,119,676 for
the three months ended June 30, 1998. Food and beverage revenues were $615,502
for the three months ended June 30, 1999, compared to $79,141 for the three
months ended June 30, 1998. Other revenues were $429,531 for the three months
ended June 30, 1999, compared to $4,645 for the three months ended June 30,
1998. Gross revenues were reduced for promotional allowances by $743,051,
compared to $22,991 for promotional allowances for the three months ended June
30, 1998. The increases in food and beverage revenues, other revenues and
promotional allowances are attributed to the commencement of operations of the
Princesa.
Costs and Expenses. Total costs and expenses increased 207.6% to
$4,667,446 for the three months ended June 30, 1999, compared to $1,517,548 for
the three months ended June 30, 1998, primarily as a result of the commencement
of operations of the Princesa in October 1998. Operating expenses for Casino
Princesa were $2,864,034 for the three months ended June 30, 1999. Operating
expenses for Golden Gates Casino increased to $881,372 for the three months
ended June 30, 1999, which were comparable to $827,399 in operating expenses
incurred for the three months ended June 30, 1998. Food and beverage expenses
increased to $388,497 for the three months ended June 30, 1999, compared to
$52,953 for the three months ended June 30, 1998, primarily as a result of the
commencement of operations of the Princesa. Business development costs decreased
to $311 for the three months ended June 30, 1999, compared to $63,418 for the
three months
7
<PAGE> 10
ended June 30, 1998, primarily as a result of the commencement of
operations of the Princesa. Selling, general and administrative expenses
increased 481.9% to $2,058,131 for the three months ended June 30, 1999,
compared to $353,692 for the three months ended June 30, 1998, due primarily to
costs associated with Casino Princesa. Depreciation and amortization increased
$244.3% to $316,946 for the three months ended June 30, 1999, compared to
$92,068 for the three months ended June 30, 1998, due primarily to amortization
and depreciation related to the Princesa and the gaming equipment related
thereto. Start-up costs, primarily related to the Princesa, were $0 for the
three months ended June 30, 1999, compared to $228,688 for the three months
ended June 30, 1998.
Other Income and Expense. Interest expense and financing costs to
related parties increased to $280,834 for the three months ended June 30, 1999,
compared to $43,419 for the three months ended June 30, 1998, primarily due to
interest expense related to the $5,000,000 promissory note to BHL Capital
Corporation ("BHL Capital"), a company controlled by Brustuen H. Lien, the
majority shareholder, director and chairman of the board of the Company. Other
interest and financing costs increase to $236,917 for the three months ended
June 30, 1999, compared to $16,354 for the three months ended June 30, 1998,
primarily due to the financing costs related to the Princesa. Prior to the
completion of the Princesa in October 1998, interest costs related to the
Princesa were capitalized as start-up costs rather than expensed.
Federal and State Income Taxes. The Company recorded Federal and State
income tax expense of $4,200 for the three months ended June 30, 1999, compared
to a benefit of 76,800 for the three months ended June 30, 1998. The Company
records an income tax benefit using the estimated effective tax rate for the
fiscal year if the amount of loss incurred is reasonably expected to be offset
by future income or is available for carry back to previous years.
Nine months ended June 30, 1999 Compared to Nine months ended June 30, 1998
Revenues. Net revenues increased 315.1% to $12,601,252 for the nine
months ended June 30, 1999, compared to $3,036,050 for the nine months ended
June 30, 1998, primarily as a result of the commencement of operations of the
Princesa in October 1998. The Casino Princesa had revenues of $9,311,730 for the
nine months ended June 30, 1999. Golden Gates Casino generated revenues of
$3,289,522 for the nine months ended June 30, 1999, which was an increase of
9.6% compared to revenues of $2,974,418 for the nine months ended June 30, 1998.
This increase was primarily attributable to a mild winter. Food and beverage
revenues were $1,358,697 for the nine months ended June 30, 1999, compared to
$216,009 for the nine months ended June 30, 1998. Other revenues were $1,189,905
for the nine months ended June 30, 1999, compared to $15,714 for the nine months
ended June 30, 1998. Gross revenues were reduced for promotional allowances by
$1,767,354, compared to $64,385 for promotional allowances for the nine months
ended June 30, 1998. The increases in food and beverage revenues, other revenues
and promotional allowances are attributed to the commencement of operations for
the Princesa.
Costs and Expenses. Total costs and expenses increased 198.3% to
$12,897,077 for the nine months ended June 30, 1999, compared to $4,324,097 for
the nine months ended June 30, 1998, primarily as a result of the commencement
of operations of the Princesa in October 1998. Operating expenses for Casino
Princesa were $7,458,868 for the nine months ended June 30, 1999. Operating
expenses for Golden Gates Casino increased to $2,764,265 for the nine months
ended June 30, 1999, compared to $2,278,579 for the nine months ended June 30,
1998 due to increased rent expense and gaming taxes resulting from increases in
revenue. Food and beverage expenses increased to $1,101,468 for the nine months
ended June 30, 1999, compared to $138,013 for the nine months ended June 30,
1998, primarily as a result of the commencement of operations of the Princesa.
Management fees, which represent payments made to Goldcoast Entertainment
Cruises, Inc. ("Goldcoast") related to Casino Princesa, decreased to $190,000
for the nine months ended June 30, 1999, compared to $220,000 for the nine
months ended June 30, 1998, primarily as a result of Goldcoast voluntarily
delaying payment to enable Casino Princesa to allocate more cash flow to
accounts payable. Business development costs were $(29,689), due to an adjusting
entry, for the nine months ended June 30, 1999, compared to $236,543 for the
nine months ended June 30, 1998. Selling, general and administrative expenses
increased 392.8% to $5,297,656 for the nine months ended June 30, 1999,
primarily as a result of the commencement of operations of the Princesa,
compared to $1,074,929 for the nine months ended June 30, 1998. Depreciation and
amortization increased 217.6% to $824,979 for the nine months ended June 30,
1999, compared to $259,752 for the nine months ended June 30, 1998, due
primarily to amortization and depreciation related to the
8
<PAGE> 11
Princesa and the gaming equipment related thereto. Start-up costs, primarily
related to the Princesa, increased to $540,952 for the nine months ended June
30, 1999, primarily as a result of the grand opening for the Princesa, compared
to $513,555 for the nine months ended June 30, 1998.
Other Income and Expense. Interest expense and financing costs to
related parties increased to $803,624 for the nine months ended June 30, 1999,
compared to $81,862 for the nine months ended June 30, 1998, primarily due to
interest expense related to the $5,000,000 promissory note to BHL Capital. Other
interest and financing costs increased to $708,734 for the nine months ended
June 30, 1999, compared to $65,307 for the nine months ended June 30, 1998,
primarily due to the financing costs related to the Princesa. Prior to the
completion of the Princesa in October 1998, interest costs related to the
Princesa were capitalized as start-up costs rather than expensed.
Federal and State Income Taxes. The Company recorded a Federal and
State income tax benefit of $215,800 for the nine months ended June 30, 1999,
compared to a benefit of $330,000 for the nine months ended June 30, 1998. The
Company records an income tax benefit using the estimated effective tax rate for
the fiscal year if the amount of loss incurred is reasonably expected to be
offset by future income or is available for carry back to previous years.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1,952,385 at June 30,
1999, compared to $714,764 at September 30, 1998, an increase of $1,237,621,
primarily as a result of the commencement of operations of the Princesa.
During the nine months ended June 30, 1999, the Company used cash flow
from operating activities of $2,965,463 compared to $148,358 during the nine
months ended June 30, 1998.
Investing Activities. Investing activities used cash of $944,807 during
the nine months ended June 30, 1999, compared to $5,133,604 during the nine
months ended June 30, 1998. The Company used $519,991 during the nine months
ended June 30, 1999 for the acquisition of property and equipment, compared to
$5,381,882 during the nine months ended June 30, 1998.
Financing Activities. Financing activities provided cash of $5,147,891
during the nine months ended June 30, 1999, compared to $5,528,210 during the
nine months ended June 30, 1998. Long-term borrowings from related parties
provided $1,775,000 for the nine months ended June 30, 1999, compared to $0 for
the nine months ended June 30, 1998, primarily due to the Company signing the
promissory note for $5,000,000 with BHL Capital, which promissory note replaced
previous borrowing from BHL Capital and Mr. Lien. This promissory note is due on
demand, however, BHL Capital has waived its right to demand payment of this
promissory note until June 30, 2000 pursuant to a letter agreement dated April
28, 1999. Long-term borrowings from other sources provided $10,853,097 during
the nine months ended June 30, 1999, compared to $0 during the nine months ended
June 30, 1998, primarily due to completion of the Vessel Loan and the Term Loan
to Concorde Cripple Creek. Short-term borrowings with related parties were
reduced by $490,500 during the nine months ended June 30, 1999, while short-term
borrowings with related parties provided $2,775,000 during the nine months ended
June 30, 1998. There were no short-term borrowings from other sources for the
nine months ended June 30, 1999, while short-term borrowings from other sources
provided $3,168,505 during the nine months ended June 30, 1998. Principal
payments on long-term debt were $6,981,629 during the nine months ended June 30,
1999, compared to $545,127 during the nine months ended June 30, 1998, which
increase was primarily a result of paying off the Princesa's construction
financing. There were no payments received on stock subscription during the nine
months ended June 30, 1999, compared to $129,832 during the nine months ended
June 30, 1998.
FUTURE OPERATIONS
The Company's ability to meet its working capital requirements is
dependent upon the future operations of the Casino Princesa and Golden Gates
Casino. For the quarter ending June 30, 1999, the net cash provided by operating
activities of the Casino Princesa and Golden Gates Casino was positive. Although
there can be no assurance given, the
9
<PAGE> 12
Company believes that cash flow from the Casino Princesa and the Golden Gates
Casino will be sufficient to meet its current working capital requirements.
As of June 30, 1999, the Company has used the available funds from its
current financing sources. Management does not foresee any capital spending that
will be required during the fiscal year ending September 30, 1999. However,
management believes that should capital spending be required additional
financing may be available.
The Company's business plan includes pursuing selective acquisitions
and strategic alliances. The Company will continue to evaluate opportunities
and, as attractive opportunities develop, the Company will consider
acquisitions. The Company expects to meet additional capital needs relating to
any such acquisitions or alliances with the proceeds from sales or issuance of
equity securities and borrowings. There can be no assurance, however, that the
Company will be successful in raising sufficient additional capital on terms
acceptable to the Company, if at all. The failure to raise and generate
sufficient funds may require the Company to delay or abandon future expansion
which could have a material adverse effect on the future growth of the Company.
YEAR 2000
Like other business organizations, the Company could be adversely
affected if its information technology ("IT") and non-IT systems and those of
other businesses with which the Company interacts do not properly process and
calculate date-related information beginning in the Year 2000 (the "Year 2000
Problem"). Therefore, the Company is taking steps that it believes are
reasonably designed to address any Year 2000 Problems with respect to the IT and
non-IT systems that it uses and to obtain satisfactory assurances that
comparable steps are being taken by material vendors and other business
partners.
IT and Non-IT Systems. The IT systems maintained by the Company consist
primarily of its core accounting software application system and local area
networks ("LANs") in Rapid City, South Dakota, Miami, Florida, and Black Hawk,
Colorado. The design, installation and maintenance of the LAN's are provided by
contracted IT personnel who also manage the basic support and configurations for
the systems.
Non-IT systems include slot machines, embedded circuitry found in
telephone equipment, surveillance, security and alarm systems, copiers, fax
machines, heating and air conditioning systems and other infrastructure systems
that are used by the Company in connection with the operation of its business.
Year 2000 Program. The Company has implemented a Year 2000 program
which includes the following phases: awareness, assessment, testing/validation
and implementation (the "Year 2000 Program"). The Year 2000 Program applies to
all IT and non-IT systems, as well as any providers who service and maintain
these systems.
Awareness Phase. During the awareness phase, which has been completed,
the Company defined the Year 2000 Problem, gained executive level support for
the commitment of resources necessary to perform Year 2000 compliance work, and
developed an overall strategy encompassing all material in-house IT and non-IT
systems and equipment, outsourced systems, customers and vendors.
Assessment Phase. During the assessment phase, which has been
completed, the Company performed an assessment of the size and complexity of the
Year 2000 issue, identified (i) all material hardware, software, networks, other
processing platforms, (ii) established deadlines for Year 2000 Program phases,
(iii) identified those systems considered "mission critical" (i.e., applications
or systems considered vital to the successful continuance of any of the
Company's core business activities), (iv) communicated with vendors and
suppliers to determine their state of readiness relating to Year 2000 Problems
and the Company's exposure to third party Year 2000 issues, and (v) outlined a
contingency plan to be implemented in the event internal or external systems are
not ready for the Year 2000.
The Company has received initial assurances from certain of these third
parties that their ability to perform their obligations to the Company are not
expected to be materially adversely affected by the Year 2000 problem.
Specifically, the
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<PAGE> 13
Company has received assurances from its major supplier of gaming equipment that
such equipment does not have a Year 2000 Problem.
Testing/Validation and Implementation. The testing/validation phase is
currently in process and is expected to be completed by August 31, 1999. As of
June 30, 1999, testing of non-mission critical systems was substantially
complete with the implementation stage also substantially completed. The
objective of the testing is to minimize business risk due to operational
failures. This phase is considered to be the most critical phase of the Year
2000 Program. The Company intends to conduct testing on all mission critical
systems, except for those systems for which it has received vendor
certifications.
According to vendor certifications, the Company believes its core
software applications at all locations are currently Year 2000 compliant. In
addition, management believes that the Company's non-IT systems are Year 2000
compliant based upon vendor certifications and limited validation testing
performed to date.
All costs related to the Company's Year 2000 Problem are expensed as
incurred, provided, however, that the cost of new hardware or software is
capitalized and amortized over its expected useful life. To date, the costs
related to the Year 2000 Problem have been funded from cash flow from
operations. The costs associated with Year 2000 compliance have not been and are
not anticipated to be material to the Company's financial position or results of
operations.
Risks. The major risks posed by the Year 2000 Problem are separated by
operational unit.
o In Black Hawk, Colorado, failure of surveillance equipment would
close table games and slot machines according to Colorado law.
Year 2000 Problems in slot machines should be limited to coin
reporting data, not mechanical failure or inability for the
machine to operate normally to the user. Inaccurate reporting of
data, however, would require the shutdown of the slot machines
under Colorado law. Utility and telecommunications failures would
also impact the Company (for example, a source of power
(electrical or natural gas) are crucial to running surveillance,
heating slot machines for our land based casino in Black Hawk.
o In Miami, failure of surveillance equipment would close table
games and slot machines until internal staff surveillance of games
could be established.
In addition, while the Company has been in close communication with
vendors and other intermediaries, it has no control over the efforts of these
third parties with whom it has material business relationships. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted, or that representations made to the Company by
third parties are in fact accurate. As a result, the failure of a major vendor
or supplier to adequately address their Year 2000 Problem could have a material
adverse effect on the operations of the Company.
Contingency Plan. The Company's contingency plan, designed to handle
the most reasonably likely worst case Year 2000 scenarios, is substantially
complete. Phases of this plan included business impact analysis, Year 2000
business resumption planning and testing. The Year 2000 contingency plan is
intended to provide assurance that the Company's mission critical functions will
continue if one or more systems fail. In developing the plan, the Company has
taken into consideration the impact of external systems, including those of
service providers, financial institutions, business partners and infrastructure
providers such as suppliers of power and telecommunications.
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<PAGE> 14
Key components of the Company's contingency plan include, but are not
limited to, the following:
o A plan for back-up generators at the Company's casino in Black
Hawk, Colorado to power the Company's phone system, mainframe
computer system, other computers and computer networks, security
systems, lights and to provide for other electrical power
capabilities in the event of interruptions in the power supply.
o Back up staff available on and around December 31, 1999 to provide
surveillance on the Princesa in the event surveillance systems
fail.
o Limited vacation for information systems and operations staff for
the months of November and December 1999 and January 2000 and for
all other staff from December 15, 1999 through January 15, 2000.
In addition, manual back-up procedures are being considered in specific areas
such as accounting to ensure continuity of essential business operations.
During the nine months ended June 30, 1999, management continued its
review of the risks associated with the Year 2000 Problem. The Company has not
incurred any additional costs nor discovered any material adverse effects on the
operations of the Company stemming from the Year 2000 Problem. While the Company
continues to believe the Year 2000 issues will not materially affect its
consolidated financial position or results of operations, it remains uncertain
as to what extent, if any, the Company may be impacted.
RISK FACTORS
In addition to the other information contained in this Report, the
Company cautions stockholders and potential investors that the following
important factors, among others, in some cases have affected, and in the future
could affect, the Company's actual results of operations and could cause the
Company's actual results to differ materially from those expressed in any
forward-looking statements made by on or on-behalf of, the Company. The
following information is not intended to limit in any way the characterization
of other statements or information under other captions as cautionary statements
for such purpose:
o The Company has incurred a significant amount of indebtedness and, although
the Company's cash flow from operations is currently sufficient to fund
debt service related thereto, it can give no assurance that its debt
service will continue to be funded.
o Due to the current indebtedness, the Company's ability to obtain additional
financing in the future and the Company's flexibility in reacting to
changes in the industry and economic conditions generally may be limited.
o The Company's success is partially dependent on attracting and retaining
highly qualified management and gaming personnel and an inability to
attract and retain such persons in the future may have an adverse impact on
the results of the Company's future operations.
o The Company's success is partially dependent on its ability to anticipate
changing products and amenities and to efficiently develop and introduce
new products and amenities that will gain customer acceptance. If the
Company is unable to anticipate and introduce such products and amenities,
such inability may have an adverse impact on the results of the Company's
future operations.
o The Company's success is substantially dependent upon the successful
operation of the Princesa. A recent federal court decision has cast doubt
on weather federal laws, which allow for gambling day cruises, preempt
state laws governing the same (see Item 5. Other Information). The effect,
if any, of this court decision on the Company's operations cannot be
determined at this time.
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<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 15, 1999, the Association for Disabled Americans, Inc., The
Coral Springs Advocacy Committee for the Handicapped, Inc., Daniel Ruiz, Jorge
Luis Rodriquez, Ernst Rosenkrantz and Robert Cohen filed a lawsuit against the
Company and Goldcoast in the United States District Court for the Southern
District of Florida alleging violations of the Americans with Disabilities Act
(the "ADA") with respect to the Princesa and the facilities at which the
Princesa docks. The lawsuit seeks injunctive relief including an order requiring
modifications to the Princesa and the docking facilities to comply with the ADA,
and the closure of the Princesa and the docking facilities until such
modifications are complete. Although the Company intends to defend the lawsuit
vigorously, the impact, if any, of the lawsuit on the Company cannot at this
time be determined.
ITEM 5. OTHER INFORMATION
On July 6, 1999, the United States Court of Appeals for the Fourth
District (the "Court") determined that the gambling laws of South Carolina
prohibiting gambling cruises from a port in South Carolina were not preempted by
the 1992 Amendments (the "1992 Amendments") to the Johnson Act (an act that,
among other things, regulates maritime gambling). Prior to this decision, it was
generally believed that the 1992 Amendments preempted state laws governing
gambling on day cruises of the type currently conducted by the Company on the
Princessa. The 1992 Amendments authorize such gambling day cruises, provided
certain requirements are met. The Court did not decide the issue on whether
states must reenact its laws against gambling in order to make it a federal
crime to operate a gambling day cruise. A Florida state court has previously
determined, however, that Florida must reenact its laws to make it a federal
crime to operate a gambling day cruise. The effect, if any, of the Court's
decision on the Company's operations cannot be determined at this time.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
The Exhibits are as set forth in the Exhibit Index.
b. Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
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Signatures:
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONCORDE GAMING CORPORATION
Date: August 13, 1999 By: /s/ Jerry L. Baum
Jerry L. Baum, Chief Executive Officer
and Principal Accounting Officer
<PAGE> 17
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Loan Agreement between Concorde Cripple Creek, Inc. and BNC National Bank of Minnesota
dated May 21, 1999
10.2 Security Agreement between Concorde Cripple Creek, Inc. and BNC National Bank of
Minnesota dated May 21, 1999
10.3 Guaranty Agreement between the Company and BNC National Bank of Minnesota dated May
21, 1999
10.4 Waiver of Interest, Assignment of Lease, and Agreement concerning Assumption of Lease
among Concorde Cripple Creek, Inc., BNC National Bank of Minnesota and Elevation 8000+
10.5 Short-Term Revolving Note to the order of BNC National Bank of Minnesota in the
principal amount of $150,000 dated May 21, 1999
10.6 Term Note to the order of BNC National Bank of Minnesota in the principal amount of
$850,000 dated May 21, 1999
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
BNC NATIONAL BANK OF MINNESOTA
LOAN AGREEMENT
Dated as of May 21, 1999
CONCORDE CRIPPLE CREEK, INC., a Colorado corporation, having its
mailing address and principal place of business at 3290 Lien Street, P.O. Box
505, Rapid City, South Dakota 57709-0505 ( "BORROWER") and BNC NATIONAL BANK OF
MINNESOTA, a national banking association, having an office at 200 Metropolitan
Centre, 333 South Seventh Street, Minneapolis, MN 55402 (herein called the
"BANK"), agree as follows:
1. DEFINITIONS. Capitalized terms in this Agreement have the meanings
defined in the accompanying Definitions Supplement, which the Borrower
acknowledge receiving and which is hereby made a part of this Agreement.
2. LOAN COMMITMENT NUMBER 1: THE SHORT-TERM REVOLVER CREDIT COMMITMENT.
2.1. NATURE AND AMOUNT OF COMMITMENT. Subject to the terms and conditions of
this Agreement, the Bank shall make Advances upon the request of the
Borrower pursuant to a Short-Term Revolver Credit Commitment. The
maximum aggregate principal amount of all Advances outstanding at any
one time under the Short-Term Revolver Credit Commitment shall not
exceed $150,000.00.
2.2. THE SHORT-TERM REVOLVING NOTE. The Obligation of the Borrower to repay
Advances made pursuant to the Short-Term Revolver Credit Commitment
shall be evidenced by a single Short-Term Revolving Note of the
Borrower in the form of Exhibit A hereto to be made payable to the
order of the Bank by the Borrower in the principal amount of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00). The aggregate
principal amount of the indebtedness evidenced by such Short-Term
Revolving Note at any time shall be, however, and the same is to be
determined by, the aggregate principal amount of all Advances made to
the Borrower pursuant to the Short-Term Revolver Credit Commitment less
the aggregate amount of principal repayments received by the Bank upon
the indebtedness evidenced by the Short-Term Revolving Note.
2.3. SHORT-TERM REVOLVING NOTE INTEREST. The outstanding principal
indebtedness evidenced by the Short-Term Revolving Note shall bear
interest (computed upon the actual number of days elapsed in a 360-day
year) at the Reference Rate plus three-quarters percent (3/4 %) per
annum and shall change when, if and to the extent said Reference Rate
changes. All accrued and unpaid interest shall be payable in arrears
upon the last day of each month, commencing May 31, 1999, and
continuing on the last day of each calendar month thereafter and at
maturity (whether by acceleration or otherwise).
2.4. TERMINATION OF SHORT-TERM REVOLVING CREDIT COMMITMENT. The Short-Term
Revolving Credit Commitment shall terminate automatically upon the
earlier of (aa) May 15, 2000, or (bb) the occurrence of a Default or an
Event of Default, and the Bank's obligation to make Advances thereunder
shall terminate without notice on such date.
<PAGE> 2
3. LOAN COMMITMENT NO. 2: TERM LOAN COMMITMENT.
NATURE AND AMOUNT OF TERM LOAN COMMITMENT. Subject to the terms
and conditions of this Agreement, the Bank agrees to a single Advance
upon the request of either of the Borrower to refinance Equipment
pursuant to a Term Loan Commitment.
3.1. THE TERM NOTE. The obligation of Borrower to repay Advances made under
the Term Loan Commitment shall be evidenced by a single note of
Borrower in the form of Exhibit B hereto to be made payable to the
order of the Bank by Borrower in the principal amount of Eight Hundred
Fifty Thousand and 00/100 Dollars ($850,000.00). The principal balance
of the Term Note shall be due and payable in thirty-five (35)
installments of $10,119 on the last day of each calendar month,
commencing May 31, 1999, and one final installment of the remaining
principal amount outstanding on April 30, 2002
3.2. TERM NOTE INTEREST. The outstanding principal indebtedness evidenced by
the Term Note shall bear interest (computed upon the actual number of
days elapsed in a 360-day year) from the date hereof until paid at the
Reference Rate plus three-quarters percent (3/4%) per annum and shall
change when, if and to the extent said Reference Rate changes. All
accrued and unpaid interest shall be payable in arrears upon the last
day of each month, commencing May 31, 1999 and continuing on the last
day of each calendar month thereafter and at maturity (whether by
acceleration or otherwise). Principal amounts remaining unpaid after
the occurrence of a Default or an Event of Default under the Loan
Agreement shall bear interest from and after that date in time until
paid at a rate of two percent (2%) per annum plus the rate otherwise
payable.
3.3. TERMINATION OF TERM LOAN COMMITMENT. The Bank's obligation to make
Advances under this Section 3 shall terminate automatically upon the
earlier of (aa) thirty (30) days after the execution of this Agreement,
or (bb) the occurrence of a Default or an Event of Default.
4. PROCEDURES FOR LOAN REQUESTS/ADVANCES.
4.1. LOAN REQUESTS AND ADVANCES. The Bank may make Advances to Borrower in
any amount and in any manner requested orally or in writing by any
Person authorized to make requests on behalf of the Borrower. All
requests for Advances shall be made in amounts not less than $25,000
unless the Bank decides to accept a loan request for a lesser amount.
The proceeds of loans to be made pursuant to this Agreement shall be
made available to the Borrower at the office of the Bank in immediately
available funds on the date requested provided that the request is made
on a business day prior to 11:00 a.m. This Agreement is subject to the
general policies of the Bank regarding the administration of loan
requests.
5. OVERADVANCES. If at any time the aggregate principal amount of Advances
outstanding under this Agreement or any commitment hereunder shall exceed
any limitation set forth herein, the Borrower shall immediately pay to the
Bank the amount by which said principal amount exceeds the limitation.
6. PAYMENT/PREPAYMENT/APPLICATION/FEE.
6.1. MANNER OF MAKING PAYMENTS. All payments of principal and interest made
by the Borrower in respect of the Obligations shall be made to the Bank
at its offices at 200 Metropolitan Centre, 333 South Seventh Street,
Minneapolis, MN 55402, and in funds there current not later than 11:00
a.m. Minneapolis time on the date such payment is due or as the Bank
may otherwise direct. Any payments received after 11:00 a.m.
Minneapolis time (or after the time the Bank may otherwise direct)
shall be deemed received on the following Business Day.
2
<PAGE> 3
6.2. PREPAYMENT WITHOUT PENALTY. Borrower shall have the privilege of
prepaying any of the Obligations to the Bank without premium or
penalty, in whole or in part, together with accrued interest upon the
amount prepaid. All prepayments applied to principal shall be applied
to installments in the inverse order of maturity.
6.3. APPLICATIONS. The Bank in its discretion may apply any payment received
to any Obligation of the Borrower that is due and payable.
COMMITMENT FEE. Borrower agrees to pay to the Bank on the date
hereof a commitment fee equal to $10,000.
7. SECURITY AGREEMENT. As security for the repayment of the Obligations, the
Borrower shall duly execute and deliver to the Bank a Security Agreement in
a form acceptable to the Bank, granting a first Security Interest to the
Bank in and to the Collateral.
8. GUARANTY. As further security for repayment of the Obligations, each of
the Guarantor shall duly execute and deliver to the Bank an absolute and
unconditional Guaranty of the Obligations in a form acceptable to the Bank.
Such Guaranty shall be in addition to any and all existing Guaranty in favor
of the Bank.
9. GENERAL REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Bank as follows:
9.1. ORGANIZATION, QUALIFICATION AND OWNERSHIP. Borrower is a corporation
duly organized and validly existing under the laws of the State of
Colorado and it (i) has full and adequate corporate power to carry on
its business as now conducted, (ii) is duly licensed or qualified in
all jurisdictions wherein the nature of their activities require such
licensing or qualifying, and (iii) has full right and authority to
enter into and perform this Agreement.
9.2. FINANCIAL REPORTS. Borrower has delivered to the Bank a copy of the
audited financial report of the Borrower dated as of and for the period
ending September 30, 1998 (including a balance sheet and income and
cash flow statements and notes thereto). Borrower has also delivered
unaudited financial statements including a balance sheet and income and
cash flow statements for the periods ending March 31, 1999. Such
financial statements have been prepared in accordance with GAAP on a
basis consistent, except as otherwise noted therein, with that of the
previous fiscal year or period and fairly reflect the financial
position of the Borrower as of the dates thereof, and the results of
its operations for the periods covered thereby. Since the date of the
most recent financial statement, there has been no Material Adverse
Occurrence relating to the condition, financial or otherwise, of the
Borrower. Borrower has disclosed to the Bank in writing any and all
facts known to the Borrower or which the Borrower believes might
materially and adversely affect the business, operations and condition,
financial or otherwise, of the Borrower and the Borrower's ability to
perform their Obligations under the Loan Documents.
9.3. LITIGATION; TAX RETURNS. Except as disclosed to Bank in writing, there
is no litigation or governmental proceeding pending, nor to the
knowledge of the Borrower threatened, against the Borrower for which
there is a reasonable possibility of an adverse determination, that
would result in any Material Adverse Occurrence in the properties,
business or operations of the Borrower. All United States federal,
state and local income tax returns for the Borrower required to be
filed have been filed on a timely basis, and all amounts required to be
paid as shown by said returns have been paid in full. There are no
pending or threatened objections to or controversies in respect of the
United States federal income tax returns of the Borrower for any fiscal
year.
3
<PAGE> 4
9.4. REGULATION U. No part of the proceeds of any Advance hereunder will be
used to purchase or carry any margin stock or to extend credit to
others for such a purpose.
9.5. NO DEFAULT. As of the date of this Agreement, the Borrower is in full
compliance with all of the terms and conditions of this Agreement and
no Default or Event of Default is existing under this Agreement.
9.6. ERISA. To the extent applicable, Borrower is in compliance in all
material respects with ERISA.
9.7. LIENS. The Bank's Security Interests hereunder are first priority
Security Interests in all of the Collateral. There are no Security
Interests, liens or encumbrances on any of the Collateral except such
as are permitted by Subsection 11.4 or Security Interests in favor of
the Bank.
9.8. ENVIRONMENTAL LAW. Borrower has not received any notice to the effect
that their respective operations are not in compliance with any of the
requirements of applicable federal, state and local environmental,
health and safety statutes and regulations or are the subject of any
federal or state investigation evaluating whether any remedial action
is needed to respond to a release of any toxic or hazardous waste or
Hazardous Substance into the environment.
9.9. REAFFIRMATION WITH ADVANCES. Each representation and warranty shall be
deemed to be restated and reaffirmed to the Bank on and as of the date
of each Advance under this Agreement, except that any reference to the
financial statements referred to in this Section shall be deemed to
refer to the financial statements then most recently delivered to the
Bank pursuant to Section 10.
9.10. USE OF PROCEEDS. Borrower will use the proceeds of each Advance and
other extension of credit by the Bank hereunder only for working
capital purposes, except to the extent loans are made for the
refinancing of Equipment in accordance with this Agreement.
9.11. AUTHORIZATION; NO CONFLICT; NO APPROVALS, ETC. The execution and
delivery by Borrower of each of the Loan Documents and the performance
thereof by Borrower, have been duly authorized by all necessary
corporate action (including any necessary stockholder action) on its
part, and do not and will not: (i) contravene any laws, including
without limitation, any Gaming Laws currently in effect, applicable to
or binding on it, the Collateral or their respective businesses; (ii)
violate any provision of its respective charter or bylaws; (iii) result
in a breach of or constitute a default under (with or without the
giving of notice or lapse of time or both) any indenture, mortgage,
deed of trust, lease, loan or any other agreement or instrument to
which Borrower is a party; (iv) require any governmental license,
notice, consent or approval by any federal, state or local governmental
authority; or (v) require the Bank to provide any notice to or obtain
any license or other approval from any federal, state or local
governmental authority under any Gaming Laws.
9.12. LICENSES. Borrower has obtained all licenses, registrations and permits
required under any Gaming Laws for the conduct of its business and the
ownership and operation of the Equipment and the Bank is not required
to provide any notice nor obtain any license, permit or approval under
any Gaming Laws in connection with the execution of any Loan Documents
or the transactions evidenced thereby.
9.13. EQUIPMENT LIST. The Equipment described on Schedule 1 to the Security
Agreement and the current location of the Equipment is true and correct
in all respects.
10. AFFIRMATIVE COVENANTS. Borrower agrees that it will and will cause its
subsidiaries to:
4
<PAGE> 5
10.1. FINANCIAL INFORMATION.
ANNUAL FINANCIAL REPORT. Within one hundred five (105) days
after the end of Borrower's fiscal year provide the Bank with a
complete audited financial report prepared and certified without
qualification by Independent Public Accountants for the Borrower.
If the Borrower shall fail to supply said report timely, the Bank
shall have the right to employ certified public accountants
acceptable to the Bank at the Borrower's expense for said purpose.
10.1.1. MONTHLY FINANCIAL REPORTS/COVENANT COMPLIANCE CERTIFICATE. Within
thirty (30) days after the end of each calendar month commencing
May 31, 1999, provide the Bank with a balance sheet and income
statements of the Borrower for said month and year-to-date,
certified as correct by an officer or the controller of Borrower;
together with a Covenant Compliance Certificate certified as
correct by an officer or the controller of the Borrower.
10.1.2. ANNUAL FINANCIAL REPORT OF GUARANTOR. Within one hundred five
(105) days after the end of Guarantors fiscal year provide the
Bank with a complete audited financial report prepared and
certified without qualification by Independent Public Accountants
for the Guarantor. If the Guarantor shall fail to supply said
report timely, the Bank shall have the right to employ certified
public accountants acceptable to the Bank at the Borrower's
expense for said purpose.
MONTHLY FINANCIAL REPORTS OF GUARANTOR. Within thirty (30)
days after the end of each calendar month commencing May 31, 1999,
provide the Bank with a balance sheet and income statements of the
Guarantor for said month and year-to-date, certified as correct by
an officer or the controller of Guarantor.
SECURITIES REPORTS. As soon as available and in any event
within sixty (60) days after the end of the first three fiscal
quarters of each fiscal year of Guarantor, provide the Bank with
Form 10Q's of Guarantor, and within one hundred five (105) days
after the end of each fiscal year of Guarantor, provide the Bank
with Form 10K of Guarantor.
10.1.3. OTHER INFORMATION. From time to time, at the Bank's request, the
Borrower shall provide the Bank with any and all other material,
reports, information, or figures required by the Bank.
10.2. ACCESS TO RECORDS. Permit the Bank and its representatives access to,
and the right to make copies of, the books, records, and properties
of Borrower at all reasonable times; and permit the Bank and its
representative to discuss the financial matters of the Borrower and
its subsidiaries with all applicable officers and their Independent
Public Accountant (and, by this provision, Borrower authorizes its
Independent Public Accountant to participate in such discussions).
10.3. PAYMENT OF TAXES. Pay when due all taxes, assessments, and other
Liabilities against Borrower and its subsidiaries or its properties
except those which are being contested in good faith and for which an
adequate reserve has been established; Borrower and its subsidiaries
shall make all withholding payments when due.
10.4. NOTIFICATION OF MANAGEMENT CHANGE. Promptly notify the Bank in
writing of any substantial change in the present management of
Borrower.
10.5. ERISA PLAN COMPLIANCE. Pay when due all amounts necessary to fund in
accordance with its terms any Plan.
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10.6. COMPLIANCE WITH LAWS. Comply in all material respects with all laws,
acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its
business operation or Collateral or any part thereof, including,
without limitation, all Gaming Laws; provided, however, that
Borrower may contest any such law, act, rule, regulation or order in
good faith by appropriate proceedings so long as (i) Borrower first
notifies the Bank in writing of such contest, and (ii) such contest
does not, in the Bank's sole discretion, adversely affect the Bank's
right or priority in the Collateral or impair Borrower's ability to
pay the Obligations when due.
NOTIFICATION OF PROCEEDINGS. Promptly notify the Bank in
writing and keep the Bank apprised of any litigation, governmental
or administrative proceeding which (i) involves any gaming license
or approval, (ii) involves an amount in dispute in excess of
$10,000, (iii) relates to the matters which are the subject of this
Agreement, or (iv) if determined adversely to Borrower, would be a
Material Adverse Occurrence.
10.7. BANK ACCOUNTS. Maintain Borrower's business accounts at the Bank.
10.8. MINIMUM CASH COVERAGE. As of each fiscal year end, the Borrower
shall maintain the ratio of (i) EBITDA to (ii) Debt Service plus
taxes of not less than 3.5 to 1.0 for fiscal year end September 30,
1999 and for each fiscal year end thereafter.
10.9. MINIMUM NET INCOME. Earn a minimum Net Income of at least $200,000
in each fiscal year.
10.10. DEBT LEVEL. Maintain the ratio of: (i) Liabilities minus the
outstanding principal amount of Subordinated Debt to (ii) Capital
Base at not greater than the ratio of 1.0 to 1.0 at all times.
10.11. CAPITAL BASE. As of its fiscal year end September 30, 1999, maintain
a Capital Base of at least $1,500,000 and as of each fiscal year end
thereafter, maintain a Capital Base of at least $50,000 greater than
the most recent fiscal year end.
10.12. MORTGAGE. Promptly upon receipt of legal title to parking stalls
located in a condominium parking garage to be constructed pursuant
to that certain Agreement to Subject Property to Condominium Regime
dated October 22, 1997, as amended, by and among Borrower, KMM
Parking LLC, a Colorado limited liability company, and Elevation
8000+, a Colorado limited liability company, execute and deliver to
the Bank a mortgage on such parking stalls in form and substance
satisfactory to the Bank.
10.13. EXCESS AVAILABLE CASH FLOW. No later than 90 days after each fiscal
year end, Borrower shall prepay principal on the Term Note by the
amount that Available Cash Flow exceeds permitted management fees.
11. NEGATIVE COVENANTS. Borrower agrees that it will not:
11.1. CAPITAL EXPENDITURES. Expend or contract to expend more than
$100,000 during any fiscal year for fixed assets, including
Equipment, whether by way of purchase, capital lease or otherwise,
and whether payable currently or in the future.
11.2. RESTRICTION ON INDEBTEDNESS. The Borrower will not create, incur,
assume or have outstanding any indebtedness for borrowed money
(including capitalized leases) except (i) any indebtedness owing to
the Bank, and (ii) any other indebtedness outstanding on the date
hereof, and shown on the Borrower's financial statements delivered
to the Bank prior to the date hereof, provided that such other
indebtedness shall not be renewed, extended or increased.
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11.3. PROHIBITION AGAINST DISTRIBUTIONS. Purchase or redeem any shares of
Borrower or declare or pay any dividends (other than dividends
payable in capital stock) or make any distribution to stockholders of
any assets of Borrower or make any distribution which would result in
an Event of Default.
11.4. NEGATIVE PLEDGES. Create or permit to exist any Security Interest on
the Bank's Collateral, now owned or hereafter acquired except: (i)
those created in the Bank's favor and held by the Bank; or (ii) liens
of current taxes not delinquent or taxes which are being contested in
good faith for which a full cash reserve has been established at the
Bank.
11.5. REORGANIZATION. Effect any material recapitalization; or be a party
to any merger or consolidation; or, except in the normal course of
business, sell, transfer, convey or lease all or any substantial part
of its property;
11.6. NEW BUSINESS. Enter into or invest in, or purchase any new business,
except for investments not to exceed $100,000 per year that are not
otherwise prohibited.
11.7. DEBTS FROM INSIDERS. Permit any amount to be owing to Borrower by all
or any of their respective employees, officers, directors, or
shareholders, or members of their families, as a result of any
borrowings, purchases, investments, travel advances or other
transactions or events in excess of $100,000 in the aggregate.
11.8. CONDITIONAL OBLIGATIONS. Become a guarantor or surety or pledge its
credit or its Collateral on any undertaking of another, except to
Borrower's customers in the ordinary course of business.
11.9. OTHER DEFAULTS. Permit any default to occur under the terms of any
note, loan agreement, lease, Mortgage, contract for deed, security
agreement, or other contractual obligation binding upon Borrower
which would, with the giving of notice or passage of time, permit the
acceleration or otherwise result in the maturity of Liabilities
exceeding $50,000 in the aggregate.
11.10. FISCAL YEARS. Change its fiscal year.
11.11. ERISA VIOLATIONS. Violate any provision of ERISA or of any Plan.
11.12. INCONSISTENT AGREEMENTS. Enter into any agreement containing any
provision which would be violated or breached by Borrower by the
performance by Borrower of their Obligations under any Loan Document.
11.13. MANAGEMENT FEES. Pay management fees in excess of Available Cash Flow
or in any event pay management fees exceeding $37,500 per month
during fiscal year 1999, $28,000 per month during fiscal year 2000,
$31,000 per month during fiscal year 2001 and $34,000 per month
during fiscal year 2002, $31,000 per month during fiscal year 2001
and $34,000 per month during fiscal year 2002.
12. DEFAULT AND REMEDIES. It shall be an Event of Default under this
Agreement if any one of the following shall occur:
12.1 Borrower fails to make any payment required under this Agreement or
any present or future supplements hereto or under any other agreement
between Borrower and the Bank, including the Loan Documents, within
ten (10) days following the date first due, or if payable upon
demand; or
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<PAGE> 8
12.2 Borrower fails to observe or perform any covenant, condition or
agreement in this Agreement, any of the other Loan Documents or in
any other agreement between the Borrower and the Bank when and as
required; or
12.3 Any warranty, representation or statement made or furnished to the
Bank by or on behalf of Borrower or any Guarantor proves to have been
false in a material respect when made or reaffirmed by the Borrower
or Guarantor; or
12.4 Borrower or any Guarantor becomes insolvent or Borrower or any
Guarantor generally fails to pay, or admit in writing its or his
inability to pay, its or his debts as they become due; or
12.5 Borrower or any Guarantor applies for, consents to, or acquiesces in,
the appointment of a trustee, receiver or other custodian for it or
him or for any of its or his property, or makes a general assignment
for the benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian is
appointed for Borrower or for Guarantor or for a substantial part of
Borrower's or any Guarantor's property; or
12.6 Any bankruptcy reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution
or liquidation proceeding is commenced in respect of Borrower or any
Guarantor; or
12.7 Any judgments, writs, warrants of attachment, executions or similar
process (not covered by insurance) in the aggregate amount that
exceeds $50,000 is issued or levied against Borrower, any Guarantor
or any of its or his assets and is not released, vacated or fully
bonded prior to any sale and in any event within thirty (30) days
after its issue or levy; or
12.8 Guarantor attempts to revoke its Guaranty.
Upon the occurrence of any Event of Default, all Obligations shall be and
become immediately due and payable, at the option of the Bank, without any
declaration, notice, presentment, protest, demand or dishonor of any kind
(all of which are hereby waived) and the Borrower' ability to obtain any
additional Advances under this Agreement shall be immediately and
automatically terminated. Upon the occurrence of an Event of Default, the
Bank shall have all the rights and remedies of a secured party under the
Commercial Code, including, without limitation, any and all rights and
remedies provided under the Security Agreement.
13. CONDITIONS PRECEDENT TO LOANS. Without limiting the other conditions of
this Agreement, the obligation of the Bank to make any Advance under this
Agreement is further subject to the condition precedent that the Bank shall
have received on or before the date of the initial Advance to be made
hereunder all of the following:
13.1 The Short-Term Revolving Note, the Term Note, the Security Agreement
and each of the other Loan Documents, each executed and delivered by
the Borrower and any other applicable party;
13.2 UCC searches from the filing offices in all states required by the
Bank which reflect that the Bank holds a first priority Security
Interest and no other Person holds a Security Interest in any
Collateral of Borrower, except for Security Interests permitted by
Subsection 11.4.;
13.3 A Guaranty, in form and substance satisfactory to the Bank,
appropriately completed and duly executed by the Guarantor;
13.4 Corporate resolutions of the Borrower in a form acceptable to the
Bank;
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<PAGE> 9
13.5 A copy of the Borrower's articles of incorporation certified by the
Secretary of State and a copy of the Borrower' by-laws;
13.6 A Certificate of Good Standing for the Borrower issued by its state
of incorporation and by those states requested by the Bank;
13.7 Evidence of insurance for all insurance required by the Loan
Documents;
13.8 An officer's certificate, in form and substance satisfactory to the
Bank, executed by the President of Borrower (the "Officer's
Certificate"); and
13.9 The Assignment of Lease in form and substance satisfactory to the
Bank, assigning the Borrower's lease with Elevation 8000+, a Colorado
limited liability company (the "Landlord"), executed and delivered by
Borrower and Landlord.
14. MISCELLANEOUS.
14.1 The performance or observance of any affirmative or negative covenant
or other provision of this Agreement and any supplement hereto may be
waived by the Bank in a writing signed by the Bank but not otherwise.
No delay on the part of the Bank in the exercise of any remedy, power
or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any remedy, power or right preclude other or
further exercise thereof or the exercise of any other remedy, power
or right. Each of the rights and remedies of the Bank under this
Agreement will be cumulative and not exclusive of any other right or
remedy which the Bank may have hereunder or as allowed by law.
14.2 Any notice, demand or consent authorized by this Agreement to be
given to Borrower or the Bank shall be deemed to be given when
transmitted by telex or telecopier or personally delivered, or three
days after being deposited in the U.S. mail, postage prepaid, or one
day after delivery to Federal Express or other overnight courier
service, in each case addressed to the respective address shown in
the opening paragraph of this Agreement, or at such other address as
may be provided from time to time by either party in writing as the
designated address for notice hereunder.
14.3 This Agreement, including exhibits and schedules and other agreements
referred to herein, is the entire agreement between the parties,
cannot be changed, terminated or amended orally, and shall be deemed
effective as of the date it is accepted by the Bank.
14.4 Borrower agrees to pay and will reimburse the Bank on demand for all
reasonable out-of-pocket expenses incurred by the Bank relating to
this Agreement, including without limitation filing and recording
fees and reasonable attorneys' fees and reasonable legal expenses,
including costs of in- house counsel (whether or not suit is
commenced), whether incurred in the negotiation and preparation of
this Agreement, in the protection and perfection of the Bank's
Security Interest in the Collateral, in the enforcement of any of the
provisions of this Agreement or of the Bank's rights and remedies
hereunder and against the Collateral, in the defense of any claim or
claims made or threatened against the Bank arising out of this
transaction, or otherwise including, without limitation, in each
instance, all reasonable attorneys' fees and legal expenses incurred
in connection with any appeal of a lower court's order or judgment.
14.5 This Agreement and obligations thereunder shall be binding upon
Borrower and the Bank and their respective successors, assigns,
heirs, and personal representatives and shall inure to the benefit
of, the Bank and the successors and assigns of the Bank, except that
Borrower may not assign or transfer their rights hereunder without
the prior written consent of the Bank, and any
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<PAGE> 10
assignment or transfer in violation of this provision shall be null
and void. In connection with the actual or prospective sale by the
Bank of any interest or participation in the Obligations, Borrower
authorizes the Bank to furnish any information in its possession,
however acquired, concerning Borrower or any of their Affiliates to
any Person or entity.
14.6 If any Person shall acquire a participation in Advances made to
Borrower hereunder, Borrower hereby grant to any such Person holding
a participation, and such Person shall have and is hereby given a
continuing Security Interest in any money, securities and other
property of Borrower in the custody or possession of such Participant
as fully as if such Participant had lent directly to the Borrower the
amount of such participation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
BNC NATIONAL BANK OF MINNESOTA
By: /s/ James B. Fink
-----------------------------------
Its: Vice President
CONCORDE CRIPPLE CREEK, INC.
By: /s/ Jerry L. Baum
------------------------------------
Its: President
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<PAGE> 11
DEFINITIONS SUPPLEMENT
TO
BNC NATIONAL BANK OF MINNESOTA
LOAN AGREEMENT
"ADVANCES" shall mean loans made by the Bank to the Borrower hereunder
and all loans evidenced by existing notes of the Borrower made payable to the
Bank.
"AFFILIATE" shall include, with respect to any party, any Person which
directly or indirectly controls, is controlled by, or is under common control
with such party and, in addition, in the case of Borrower, each officer,
director, shareholder, joint venturer or a partner of Borrower.
"AGREEMENT" shall mean this agreement as supplemented, revised and
modified from time to time.
"AVAILABLE CASH FLOW" for any fiscal year shall mean Borrower's EBITDA
minus the sum of the following: capital expenditures permitted under this
Agreement, taxes, interest, and scheduled principal payments.
"CAPITAL BASE" of Borrower at any date shall mean on a consolidated
basis with their subsidiaries the sum of (i) the Tangible Net Worth on such date
plus (ii) the outstanding principal amount of Subordinated Debt on such date.
"BORROWER" shall mean Concorde Cripple Creek, Inc., a Colorado
corporation.
"COLLATERAL" shall have the meaning provided in the Security Agreement.
"COMMERCIAL CODE" shall mean the Uniform Commercial Code as enacted in
the State of Minnesota, as amended from time to time.
"CONTINGENT OBLIGATIONS" shall mean, with respect to any Person, all of
such Person's liabilities and obligations which are based upon one or more
contracts and are contingent upon and will not mature unless and until the
occurrence of some event or circumstance and which are not included within the
definition of Liabilities of such Person.
"COVENANT COMPLIANCE CERTIFICATE" shall mean the Compliance Certificate
in the form of Exhibit C to the Agreement or such other form as the Bank may
require from time to time.
"DEBT SERVICE" shall mean all scheduled payments of principal and
interest on the Liabilities of the Borrower.
"DEFAULT" shall mean any event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default.
"EBITDA" shall mean the Net Income of the Borrower plus interest,
taxes, depreciation and amortization, each as determined in accordance with
GAAP.
"EQUIPMENT" shall have the meaning provided in the Security Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may from time to time be amended, and the rules and regulations
promulgated thereunder by any governmental agency or authority, as from time to
time in effect.
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"EVENT OF DEFAULT" shall have the meaning provided in Section 16 of the
Agreement
"GAAP" shall mean Generally Accepted Accounting Principles consistently
applied and maintained throughout the period indicated and consistent with the
financial statements delivered to Bank pursuant to Section 9.2 of the Agreement.
Whenever any accounting term is used herein which is not otherwise defined, it
shall be interpreted in accordance with GAAP.
"GAMING LAWS" shall mean any federal, state or local laws, rules,
regulations or ordinances applicable to the conduct of either of the Borrower's
gaming businesses, including, without limitation, the ownership and operation of
the Equipment.
"GUARANTOR(S)" shall mean Concorde Gaming Corporation, a Colorado
corporation, and any other Person who enters into a Guaranty of any of the
Obligations.
"GUARANTY(IES)" shall mean that certain Guaranty dated as of the date
hereof from Concorde Gaming Corporation, a Colorado corporation, and any other
agreement whereby a Person guarantees the payment or performance of any of the
Obligations.
"HAZARDOUS SUBSTANCE" shall mean any "hazardous substance," "hazardous
waste," "pollutant," "contaminant" or other similar material as defined by any
United States federal, state, or local law or rule applicable to Borrower or any
of the Collateral.
"INDEPENDENT PUBLIC ACCOUNTANTS" shall mean any firm of independent
certified public accountants which is acceptable to the Bank.
"INVESTMENTS" shall mean, with respect to any Person, all investments
by such Person in any other Persons in the form of loans or guaranties, advances
or capital contributions (excluding commission, travel, relocation, and other
advances to employees, officers, directors or shareholders, or members of their
families, made in the ordinary course of business), purchases or other
acquisitions for consideration of debt or equity or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"LEASE ASSIGNMENT" shall mean a Waiver of Interest, Assignment of Lease
and Agreement Concerning Assumption of Lease by and among Borrower, Bank and
Elevation 8000+, a Colorado limited liability company, in form and substance
satisfactory to the Bank.
"LIABILITIES" of any Person shall mean those items which, in accordance
with GAAP, would appear as Liabilities on a balance sheet.
"LOAN DOCUMENT(S)" shall mean individually or collectively, as the case
may be, the Agreement, the Guaranty, the Short-Term Revolving Note, the Term
Note, the Security Agreement, the Lease Assignment and any and all other
documents executed, delivered or referred to herein, as originally executed and
as amended, revised, supplemented and replaced from time to time.
"MATERIAL ADVERSE OCCURRENCE" shall mean any occurrence of whatever
nature (including, without limitation, any adverse determination in any
litigation, arbitration or governmental investigation or proceeding) which
materially adversely affects the present or prospective financial condition or
operations of either of the Borrower, any of their subsidiaries, and/or a
Guarantor or impair the ability of either of the Borrower and/or a Guarantor to
perform its or their Obligations under this Agreement or any other Loan
Document.
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"NET INCOME" for any period shall mean the Net Income of the Borrower
for such period, determined in accordance with GAAP excluding, however, (1)
extraordinary gains, and (2) gains whether or not extraordinary from sales or
other dispositions of assets other than the sale of Inventory in the ordinary
course of business.
"OBLIGATIONS" shall have the meaning provided in the Security
Agreement.
"PERSON" shall mean any natural person, corporation, firm, partnership,
association, government, governmental agency or any other entity, whether acting
in an individual, fiduciary or other capacity.
"PLAN" shall mean each employee benefit Plan or other class of benefits
covered by Title IV of ERISA, in either case whether now in existence or
hereafter instituted, of Borrower.
"REFERENCE RATE" shall at any time mean at the time any determination
thereof is to be made, the fluctuating per annum rate of interest then most
recently reported in the Wall Street Journal as the "Prime Rate" (the base rate
on corporate loans at the 30 largest U.S. money center commercial banks) and if
reported as a range, the interest rate shall be the mid-point of the range. In
the event that the Wall Street Journal ceases to report the Prime Rate, then
"Prime Rate" shall mean the fluctuating interest rate per annum announced from
time to time by the Bank as its Prime Rate (or, if otherwise denominated, such
Lender's or Bank's reference rate for interest rate calculations on general
commercial loans for short-term borrowings). The Borrower acknowledge that the
Reference Rate may not be the lowest rate made available by Bank to its
customers and that Bank may lend to its customers at rates that are at, above or
below the Reference Rate.
"SECURITY AGREEMENT" shall mean that certain Security Agreement of even
date herewith, and any and all other Security Agreements heretofore or
hereafter, executed by the Borrower, as debtor, in favor of the Bank, as secured
party.
"SECURITY INTEREST" shall mean any lien, pledge, mortgage, encumbrance,
charge or security interest of any kind whatsoever (including, without
limitation, the lien or retained security title of a conditional vendor) whether
arising under a security instrument or as a matter of law, judicial process or
otherwise or the agreement by Borrower to grant any lien, security interest or
pledge, mortgage or encumber any asset.
"SHORT-TERM REVOLVER CREDIT COMMITMENT" shall mean the obligation of
the Bank to make Advances pursuant to Section 2 of the Agreement.
"SHORT-TERM REVOLVING NOTE" shall mean the Short-Term Revolving Note
referred to in Section 2 of the Agreement.
"SUBORDINATED DEBT" shall mean indebtedness of Borrower for borrowed
money which is subordinated to the Obligations in writing on terms satisfactory
to Bank in its sole discretion.
"TANGIBLE NET WORTH" of Borrower and the subsidiaries shall mean on a
consolidated basis, the total of all assets appearing on a balance sheet of
Borrower, prepared in accordance with GAAP, after deducting all proper reserves
(including reserves for depreciation, obsolescence and amortization) minus all
Liabilities of such entities; excluding, however, from the determination of
total assets: (i) goodwill, memberships, trademarks, trade names, service marks,
copyrights, patents, licenses, organization expenses, research and development
expenses and other similar intangibles; (ii) all deferred charges or unamortized
debt discount; (iii) treasury stock; (iv) securities that are not readily
marketable; (v) any write-up in the book value of any assets resulting from a
revaluation thereof subsequent to September 30, 1998; (vi) prepaid expenses;
(vii) notes or receivables due from employees, officers, directors or
shareholders; (viii) notes or receivables due from any Affiliate; (ix) all other
intangible assets in existence
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<PAGE> 14
on the date of this Agreement and determined by Bank, in its absolute
discretion, to be intangible assets; and (x) any asset acquired subsequent to
the date of this Agreement which the Bank determines, in its reasonable
discretion, to be an intangible asset.
"TERM LOAN COMMITMENT" shall mean the obligation of the Bank to make
Advances pursuant to Section 3 of the Agreement.
"TERM NOTE" shall mean the promissory note referred to in Section 3 of
the Agreement.
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EXHIBIT A
$150,000.00 Minneapolis, Minnesota
May 21, 1999
SHORT-TERM REVOLVING NOTE
FOR VALUE RECEIVED, each of the undersigned, hereby jointly and
severally promises to pay to the order of BNC NATIONAL BANK (the "BANK") in the
lawful money of the United States at its offices at 200 Metropolitan Centre,
333 South Seventh Street, Minneapolis, MN 55402, or at such other place as the
Bank may from time-to-time designate:
(i) the principal sum of One Hundred Fifty Thousand and 00/100
($150,000.00) Dollars, or such other principal amount as may
be owing to Bank for the repayment of loans made pursuant to
the Short-Term Revolving Credit Commitment as set forth in
that certain Loan Agreement dated of even date herewith,
between Bank and the undersigned as the same may be amended
from time to time (the "LOAN AGREEMENT"), which sum shall be
due and payable in full on May 15, 2000; plus
(ii) interest on the unpaid principal amount of this Note from
time-to-time outstanding payable in arrears at a rate of
interest equal to the Reference Rate (as defined in the Loan
Agreement) plus three-quarters percent (3/4 %) per annum
(calculated on the basis of the number of days actually
elapsed in a 360-day year) on the last day of each calendar
month commencing with the first month following the date
hereof. Following the occurrence of an Event of Default as
defined in the Loan Agreement, the principal indebtedness
shall bear interest at a floating rate of two percent (2%)
per annum greater than the otherwise applicable rate.
This Note is the "Short-Term Revolving Note" referred to in the Loan
Agreement and is subject to all of the agreements, terms and conditions therein
contained which are incorporated herein by reference. In no event shall
interest hereunder be in excess of the maximum interest rate permitted by law.
This Note has been delivered in the State of Minnesota and shall be
construed and enforced in accordance with the substantive laws of such state.
Each of the undersigned and all guarantors expressly waive any
presentment, demand, protest, notice of protest, and notice of dishonor.
CONCORDE CRIPPLE CREEK, INC.,
a Colorado corporation
By
------------------------------------
Its
--------------------------------
Witness:
- ------------------------------
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<PAGE> 16
EXHIBIT B
$850,000.00 Minneapolis, Minnesota
May 21, 1999
TERM NOTE
FOR VALUE RECEIVED, each of the undersigned hereby jointly and
severally promises to pay to the order of BNC NATIONAL BANK OF MINNESOTA (the
"BANK") in the lawful money of the United States of America at its offices at
200 Metropolitan Centre, 333 South Seventh Street, Minneapolis, Minnesota
55402, or at such other place as the Bank may from time-to-time designate:
(i) the principal sum of Eight Hundred Fifty Thousand and 00/100
($850,000.00) Dollars, which principal amount shall be due
and payable in thirty-five (35) installments of $10,119.05
each on the last day of each calendar month commencing on May
31, 1999 and one final installment of the remaining principal
amount on April 30, 2002; plus
(ii) interest on the unpaid principal amount of this Note from
time to time outstanding from the date hereof at a floating
rate equal to three-quarters percent (3/4%) in excess of the
Reference Rate (as defined in the Loan Agreement) per annum,
calculated on the number of days actually elapsed in a
360-day year, due and payable on the last day of each
calendar month, commencing May 31, 1999, and at maturity
(whether by acceleration or otherwise). Principal amounts
remaining unpaid after the occurrence of an Event of Default
under the Loan Agreement shall bear interest from and after
that date in time until paid at a rate of 2% per annum plus
the rate otherwise payable.
This Note is the "TERM NOTE" within the meaning of that certain Loan
Agreement between the undersigned and the Bank of even date herewith (the "LOAN
AGREEMENT"). All of the terms and conditions set forth in the Agreement are
hereby incorporated by this reference, including without limitation the right
of holder hereto to accelerate all amounts evidenced by the Note upon the
occurrence of an Event of Default within the meaning of the Agreement.
This Note has been delivered in the State of Minnesota and shall be
construed and enforced in accordance with the substantive laws thereof.
The undersigned and all guarantors expressly waive any right of
presentment, demand, protest or notice of protest or notice of dishonor.
CONCORDE CRIPPLE CREEK, INC.,
a Colorado corporation
By
------------------------------------
Its
---------------------------------
Witness:
- -------------------------------
16
<PAGE> 1
EXHIBIT 10.2
SECURITY AGREEMENT
AGREEMENT made this 21st day of May, 1999, between CONCORDE CRIPPLE CREEK,
INC., a Colorado corporation ( the "DEBTOR") and BNC NATIONAL BANK OF MINNESOTA
(herein, with its participants, successors and assigns, called the "Lender"), as
secured party.
All capitalized terms not otherwise defined herein, shall have the meaning
set forth in that certain Loan Agreement of even date herewith by and among the
Debtor and the Lender (the "Loan Agreement").
For good and valuable consideration, each Debtor hereby jointly and
severally agrees for the benefit of the Lender as follows:
1.01 Debtor hereby grants the Lender a security interest (collectively
referred to as the "Security Interests") in the property described below, as
security for the payment and performance of each and every debt, liability and
obligation of every type and description which Debtor may now or at any time
hereafter owe to the Lender (whether such debt, liability or obligation now
exists or is hereafter created or incurred, whether it arises in a transaction
involving the Lender alone or in a transaction involving other creditors of
Debtor, and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several, and including specifically, but not limited to,
all indebtedness of Debtor arising under any loan or credit agreement or
guaranty between Debtor and the Lender, whether now in effect or hereafter
entered into; all such debts, liabilities and obligations are herein
collectively referred to as the "Obligations"). The Security Interests shall
attach to the following property of Debtor, and all products and proceeds
thereof, whether now owned or hereafter acquired (collectively, the
"Collateral"):
INVENTORY: All inventory of Debtor, whether now owned or hereafter
acquired, whether consisting of whole goods, spare parts or components,
supplies or materials, whether acquired, held or furnished for sale, for
lease or under service contracts or for manufacture or processing, and
wherever located.
RECEIVABLES: Each and every right of Debtor to the payment of money,
whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods
or other property, out of a rendering of services, out of a loan, out of
the overpayment of taxes or other liabilities, or any other transaction or
event, whether such right to payment is created, generated or earned by
Debtor or by some other person who subsequently transfers his interest to
Debtor, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together
with all other rights and interests (including all liens and security
interests) which Debtor may at any time have by law or agreement against
any account debtor or other person obligated to make any such payment or
against any property of such account debtor or other person; all including,
but not limited to, all present and future accounts, contract rights,
chattel papers, bonds, notes and other debt instruments, and rights to
payment in the nature of general intangibles.
FINANCIAL ASSETS: All securities, securities entitlements, investment
property, financial assets and certificates of deposit of Debtor, and all
funds of Debtor on deposit with and all property in the possession of the
Secured Party or any other depository institution, each whether now owned
or hereafter acquired.
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<PAGE> 2
EQUIPMENT: All equipment of Debtor, whether now owned or hereafter
acquired, including all present and future gaming equipment, machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and recordkeeping equipment, parts, tools, supplies and all other
goods (except inventory) used or bought for use by Debtor for any business
or enterprise and including specifically (without limitation) the goods
described in any equipment schedule or list herewith or hereafter furnished
to the Lender by Debtor, all accessions thereto, all substitutions and
replacements thereof, and all like or similar property now owned or
hereafter acquired by Debtor.
GENERAL INTANGIBLES: All general intangibles of Debtor whether now owned or
hereafter acquired, including (without limitation) all present and future
patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use Debtor's name, and the
good will of Debtor's business.
Together with all substitutions and replacements for and products and
proceeds of any of the foregoing property, and in the case of all tangible
Collateral, together with (i) all accessories, attachments, parts, equipment,
accessions and repairs now or hereafter attached to or used in connection with
any such goods, and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
1.02 Debtor represents, warrants and agrees that:
(a) Debtor has (or will have at the time it acquires rights in Collateral
hereafter arising) and will maintain so long as the Security Interests may
remain outstanding, absolute title to each item of Collateral and all proceeds
thereof, free and clear of all interests, liens, attachments, encumbrances and
security interests except the Security Interests as provided herein, and except
as the Lender may otherwise agree in writing. Debtor will defend the Collateral
against all claims or demands of all persons (other than the Lender) claiming
the Collateral or any interest therein, Debtor will not sell or otherwise
dispose of the Collateral, without the Lender's prior written consent.
(b) Debtor does business solely under its own name and the trade names (if
any) set forth below (or if none are listed, Debtor warrants that it does not
have any trade names). The sole place of business and chief executive office of
Debtor is located at the address set forth below and all of Debtor's records
relating to its business or the Collateral are kept at that location. Debtor
will not permit any tangible Collateral or any records pertaining to Collateral
to be located in any state or area in which, in the event of such location, a
financing statement covering such Collateral would be required to be, but has
not in fact been, filed in order to perfect the Security Interests. Debtor will
not change its name or the location of its place of business, without prior
written notice to the Lender.
(c) None of the Collateral is or will become a fixture on real estate,
unless a sufficient fixture filing is in effect with respect thereto.
(d) Each right to payment and each instrument, document, chattel paper and
other agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in Debtor's records
pertaining thereto as being obligated to pay such obligation. Debtor will not
agree to modify, amend, subordinate, cancel or terminate the obligation of any
such account debtor or other obligor, without the Lender's prior written
consent.
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<PAGE> 3
(e) Debtor will keep all tangible Collateral in good repair, working order
and condition, normal depreciation excepted, and will, from time to time,
replace any worn, broken or defective parts.
(f) Debtor will promptly pay all taxes and other governmental charges
levied or assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security Interests.
(g) Debtor will keep all Collateral free and clear of all security
interests, liens and encumbrances except the Security Interests provided herein
and except other security interests approved in writing by the Lender.
(h) Debtor will at all reasonable times permit the Lender or its
representatives to examine or inspect any Collateral, or any evidence of
Collateral, wherever located, and Debtor will at any time and from time to time
send requests for verification of accounts or notices of assignment to account
debtors and other obligors.
(i) Debtor will keep accurate and complete records pertaining to the
Collateral and pertaining to Debtor's business and financial condition, prepared
on the basis of generally accepted accounting principles consistently applied;
will submit to the Lender such weekly, monthly and other periodic reports
concerning the Collateral and Debtor's business and financial condition as the
Lender may from time to time request; and will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and copy any or all of
its records at any time during Debtor's business hours.
(j) Debtor will promptly notify the Lender of any loss of or material
damage to any Collateral or of any substantial adverse change, known to Debtor,
in any Collateral or the prospect of payment thereof.
(k) Upon request by the Lender, whether such request is made before or
after the occurrence of an Event of Default, Debtor will promptly deliver to the
Lender in pledge all instruments, documents and chattel papers constituting
Collateral, duly endorsed or assigned by Debtor.
(l) Debtor will at all times keep its business all tangible Collateral
insured against risks of fire (including so-called extended coverage), theft,
and such other risks and in such amounts as the Lender may reasonably request,
with a lender's loss payee endorsement to the Lender to the extent of its
interest.
(m) Debtor will pay or reimburse the Lender on demand for all costs of
collection of any of the Obligations and all other out-of-pocket expenses
(including in each case all reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interests or the
creation, continuance or enforcement of this Agreement or any or all of the
Obligations.
(n) Debtor will use and keep the Collateral, and will require that others
use and keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(o) Debtor represents and warrants that the description, serial number,
and location of each item of the Equipment (if any) covered hereby is accurately
set forth on the equipment list attached as Schedule 1 to this Agreement, and
that each item of such Equipment is currently located in the state of South
Dakota unless another location is noted thereon. Debtor agrees to provide the
Lender with an updated list of each item of Equipment upon request by the
Lender. Debtor agrees to notify the Lender in
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<PAGE> 4
writing before it changes the location of it chief executive office or the place
where it keeps its books and records. The Debtor agrees not to remove any
Equipment from where it is currently located without the Lender's prior written
consent and until all necessary filings have been made and other actions taken
to continue the perfection of the Lender's Security Interest in such new
location. The Lender's Security Interest attaches to all the Collateral wherever
located, and the failure of Debtor to inform the Lender of the location of any
item or items of Collateral shall not impair the Lender's Security Interest
therein.
(p) Debtor from time to time will execute and deliver or endorse any and
all instruments, documents, conveyances, assignments, security agreements,
financing statements and other agreements and writings which the Lender may
reasonably request in order to secure, protect, perfect or enforce the Security
Interests or the rights of the Lender under this Agreement (but any failure to
request or assure that Debtor executes, delivers or endorses any such item shall
not affect or impair the validity, sufficiency or enforceability of this
Agreement and the Security Interests, regardless of whether any such item was or
was not executed, delivered or endorsed in a similar context or on a prior
occasion).
If Debtor at any time fails to perform or observe any of the foregoing
agreements, and if such failure shall continue for a period of ten (10) calendar
days after the Lender gives Debtor written notice thereof (or in the case of the
agreements contained in clauses (g) and (1) above, immediately upon the
occurrence of such failure, without notice or lapse of time), the Lender may,
but need not, perform or observe such agreement on behalf and in the name, place
and stead of Debtor (or, at the Lender's option, in the Lender's name) and may,
but need not, take any and all other actions which the Lender may reasonably
deem necessary to cure or correct such failure (including, without limitation,
the payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments); and Debtor shall thereupon pay to the Lender on demand the
amount of all monies expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by the Lender in connection with or
as a result of the performance or observance of such agreements or the taking of
such action by the Lender, together with interest thereon from the date expended
or incurred at the highest lawful rate then applicable to any of the
Obligations. To facilitate the performance or observance by the Lender of such
agreements to Debtor, Debtor hereby irrevocably appoints the Lender, or the
delegate of the Lender, acting alone, as the attorney-in-fact of Debtor with the
right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file in the name and on behalf of Debtor any and
all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by Debtor under this
Section 1.02.
1.03 With respect to any or all rights to payment constituting Collateral
the Lender may at any time (either before or after the occurrence of an Event of
Default) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. Debtor will join in
giving such notice, if the Lender so requests. At any time after Debtor or the
Lender gives such notice to an account debtor or other obligor, the Lender may,
but need not, in the Lender's name or in Debtor's name, (i) demand, sue for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify,
amend or change the obligations (including collateral obligations) of any such
account debtor or other obligor; and (ii) as agent and attorney-in-fact of
Debtor notify the United States Postal Service to change the address for
delivery of Debtor's mail to any address designated by the Lender and otherwise
intercept, receive, open and dispose of Debtor's mail, applying all Collateral
as permitted under this Agreement or the Loan Agreement and holding all other
mail for Debtor's account or forwarding such mail to Debtor's last known
address.
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<PAGE> 5
1.04 As additional security for the payment and performance of the
Obligations, Debtor hereby assigns to the Lender any and all monies (including,
without limitation, proceeds of insurance and refunds of unearned premiums) due
or to become due under, and all other rights of Debtor with respect to, any and
all policies of insurance now or at any time hereafter covering the Collateral
or any evidence thereof or any business records or valuable papers pertaining
thereto, and Debtor hereby directs the issuer of any such policy to pay all such
monies directly to the Lender, At any time, whether before or after the
occurrence of any Event of Default, the Lender may (but need not), in the
Lender's name or in Debtor's name, execute and deliver proof of claim, receive
all such monies, endorse checks and other instruments representing payment of
such monies, and adjust, litigate, compromise or release any claim against the
issuer of any such policy.
1.05 Upon the occurrence of any Event of Default and at any time
thereafter, the Lender may exercise one or more of the following rights and
remedies: (i) declare all unmatured Obligations to be immediately due and
payable, and the same shall thereupon be immediately due and payable, without
presentment or other notice or demand (but the Lender expressly reserves the
right to demand payment of any Obligation payable on demand, at any time,
whether or not an Event of Default has occurred or is continuing); (ii) exercise
and enforce any and all rights and remedies available upon default to a secured
party under the Uniform Commercial Code, including, without limitation, the
right to take possession of Collateral, or any evidence thereof, proceeding
without judicial process or by judicial process (without a prior hearing or
notice thereof, which Debtor hereby expressly waives) and the right to sell,
lease or otherwise dispose of any or all of the Collateral, and in connection
therewith Debtor will on demand assemble the collateral and make it available to
the Lender at a place to be designated by the Lender which is reasonably
convenient to both parties, and the Lender shall have the right to take
immediate possession of the Collateral and may enter any of the premises of
Debtor or wherever the Collateral is located with or without process of law and
to keep and store the same on said premises until sold (and if said premises be
the property of Debtor, Debtor agrees not to charge the Lender or a purchaser
from the Lender for storage thereof for a period of at least 90 days). If notice
to Debtor of any intended disposition of Collateral or any other intended action
is required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section 1.07) at
least ten (10) calendar days prior to the date of intended disposition or other
action; (iii) without notice or demand offset any indebtedness the Lender or any
of its participants, successors or assigns then owes to Debtor, whether or not
then due, against any Obligation then owed to the Lender or any of its
participants, successors or assigns by Debtor, whether or not then due; and (iv)
exercise or enforce any and all other rights or remedies available by law or
agreement against the Collateral, against Debtor, or against any other person or
property. The proceeds of all sales and collections will be applied first to all
reasonable expenses of retaking, holding, preparing for sale, selling and the
like, including attorneys' fees and legal expenses (whether or not suit is
commenced) including, without limitation, attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or judgment and
second to the payment (in whatever order the Lender elects) of all other
Obligations chargeable to Debtor in connection with the loan transactions with
Lender. Subject to the provisions of the Commercial Code, the Lender will return
any excess to the Debtor and the Debtor shall remain liable to the Lender for
any deficiency.
1.06 This Agreement does not contemplate a sale of accounts, contract
rights or chattel paper, and, as provided by law, Debtor is entitled to any
surplus and shall remain liable for any deficiency. The Lender's duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled in the selection of the bailee or other third person, and the Lender
need not otherwise preserve, protect, insure or care for any Collateral. The
Lender shall not be obligated to preserve any rights Debtor may have against
prior parties, to realize on the Collateral at all or in any particular manner
in order or to apply any cash proceeds of the Collateral in any particular order
of application.
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<PAGE> 6
1.07 This Agreement can be waived, modified, amended, terminated or
discharged, and the Security Interests can be released, only explicitly in a
writing signed by the Lender. A waiver so signed shall be effective only in the
specific instance and for the specific purpose given. Mere delay or failure to
act shall not preclude the exercise or enforcement of any rights or remedies
available to the Lender. All rights and remedies of the Lender shall be
cumulative and may be exercised singularly in any order or sequence, or
concurrently, at the Lender's option, and the exercise or enforcement of any
such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. All notices to be given to Debtor shall be deemed
sufficiently given if delivered or mailed by registered, certified or ordinary
mail, postage prepaid, to Debtor at its address set forth below or at its most
recent address shown on the Lender's records.
1.08 As used herein, the term "Event of Default" shall have the meaning
assigned to such term in the Loan Agreement.
1.09 The Lender and its participants, if any, are not partners or joint
venturers, and the Lender shall not have any liability or responsibility for any
obligation, act or omission of any of its participants.
1.10 This Agreement, and the Security Interests granted hereby, shall be
binding upon Debtor, its successors and assigns, and shall inure to the benefit
of and be enforceable by the Lender and each and all of its participants,
successors and assigns, and shall be effective when executed by Debtor and
delivered to the Lender whether or not this Agreement is executed by the Lender.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the participants, successors or assigns of the Lender.
Except to the extent otherwise required by law, this Agreement and the
transaction evidenced hereby shall be governed by the substantive laws of the
state in which this Agreement is accepted by the Lender. If any provision or
application of this Agreement is held unlawful or unenforceable in any respect,
such illegality or unenforceability shall not affect other provisions or
applications which can be given effect, and this Agreement shall be construed as
if the unlawful or unenforceable provision or application had never been
contained herein or prescribed hereby. All representations and warranties
contained in this Agreement or in any other agreement between Debtor and the
Lender shall survive the execution, delivery and performance of this Agreement
and the creation and payment of the Obligations. Debtor waives notice of the
acceptance of this Agreement by the Lender.
IN WITNESS WHEREOF, this Security Agreement has been duly executed and
delivered by the proper officers thereunto duly authorized on the day and year
first above written.
CONCORDE CRIPPLE CREEK, INC.
By: /s/ Jerry L. Baum
------------------------------------
TRADE NAMES: Its: President
Accepted at Minneapolis, Minnesota
on May 21, 1999
BNC NATIONAL BANK OF MINNESOTA
By: /s/ James B. Fink
-------------------------------
Its: Vice President
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<PAGE> 1
Exhibit 10.3
GUARANTY AGREEMENT
AGREEMENT made as of this 21st day of May, 1999, by the undersigned for
the benefit of BNC NATIONAL BANK OF MINNESOTA (herein, with its participants,
successors and assigns, called "LENDER").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to induce Lender from time to time to make
one or more loans or extend other financial accommodations at the discretion of
the Lender to CONCORDE CRIPPLE CREEK, INC., a Colorado corporation ("BORROWER"),
the undersigned hereby guarantee(s) and agree(s) as follows:
The undersigned hereby absolutely and unconditionally guarantee(s) to
Lender the full and prompt payment when due (whether on demand or at a stated
maturity or earlier by reason of acceleration or otherwise) of any and all
present and future debts, liabilities and obligations owed to Lender by any
Borrower; and the undersigned represent(s), warrant(s) and agree(s) that:
1. The debts, liabilities and obligations guaranteed hereby
(collectively referred to herein as the "Indebtedness") shall include, but shall
not be limited to, debts, liabilities and obligations of any Borrower arising
out of loans, credit transactions, financial accommodations, discounts,
purchases of property or other transactions with any Borrower or for any
Borrower's account or out of any other business transaction, or event, owed to
Lender or owed to others by reason of participation granted to or interests
acquired or created for or sold to them by Lender, in each case whether now
existing or hereafter arising, whether arising directly in a transaction or
event involving Lender or acquired by Lender from another by purchase or
assignment or as collateral security, whether owed by any Borrower as drawer,
maker, endorser, accommodation party, guarantor, principal, surety or as a
member of any partnership, syndicate, association or group or in any other
capacity, whether absolute or contingent, direct or indirect, primary or
secondary, joint, several or joint and several, secured or unsecured, due or not
due, liquidated or unliquidated, arising by agreement or imposed by law or
otherwise.
2. No act or thing need occur to establish the liability of the
undersigned hereunder, and no act or thing, except full payment and discharge of
all Indebtedness, shall in any way exonerate the undersigned or modify, reduce,
limit or release the liability of the undersigned hereunder. This is an
absolute, unconditional and continuing guaranty of payment of the Indebtedness
and shall continue to be in force and be binding upon the undersigned, whether
or not all Indebtedness is paid in full, until this Guaranty is revoked
prospectively as to future transactions, by written notice actually received by
Lender, and such revocation shall not be effective as to Indebtedness existing
or committed for at the time of actual receipt of such notice by Lender, or as
to any renewals, extensions and refinancings thereof. Any adjudication of
bankruptcy or death or disability or incapacity of the undersigned shall not
revoke this guaranty, except upon actual receipt of written notice thereof by
Lender and then only prospectively, as to future transactions, as herein set
forth.
3. If the undersigned shall die, shall be or become insolvent or shall
initiate or have initiated against the undersigned any act, process or
proceeding under the United States Bankruptcy Code or any other bankruptcy,
insolvency or reorganization law or otherwise for the
<PAGE> 2
modification or adjustment of the rights of creditors, then the undersigned will
forthwith pay to Lender, the full amount of all Indebtedness then outstanding,
whether or not any Indebtedness is then due and payable.
4. Until all of the Indebtedness and the obligations of the undersigned
hereunder have been paid in full, the undersigned shall not have and waives any
right or subrogation to any of the rights of Lender against any Borrower, any
other guarantor, maker or endorser, and waives its rights to any reimbursement,
contribution, recourse and indemnity therefrom; waives any right to enforce any
remedy which Lender now has or may hereafter have against any Borrower, and any
other guarantor, maker or endorser; and waives any benefit of, and any other
right to participate in, any collateral security for the Indebtedness or any
guaranty of the Indebtedness now or hereafter held by Lender.
5. If any payment received and applied by Lender to Indebtedness is
thereafter set aside, recovered or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
any Borrower or such other person), the Indebtedness to which such payment was
applied shall, for the purposes of this Guaranty, be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such Indebtedness as fully as if such application had not been
made.
6. Lender shall not be obligated by reason of its acceptance of this
Guaranty to engage in any transactions with or for any Borrower. Whether or not
any existing relationship between the undersigned and any Borrower has been
changed or ended and whether or not this Guaranty has been revoked in accordance
with Paragraph 2, Lender may enter into transactions resulting in the creation
or continuance of Indebtedness and may otherwise agree, consent to, or suffer
the creation or continuance of any Indebtedness, without any consent or approval
by the undersigned and without any prior or subsequent notice to the
undersigned. The liability of the undersigned shall not be affected or impaired
by any of the following acts or things (which Lender is expressly authorized to
do, omit or suffer from time to time, both before and after revocation of this
Guaranty, without consent or approval by or notice to the undersigned): (i) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all Indebtedness; (ii) one or more extensions or renewals of
Indebtedness (whether or not for longer than the original period) or any
modification of the interest rates, maturities or other contractual terms
applicable to any Indebtedness; (iii) any waiver or indulgence granted to any
Borrower, any delay or lack of diligence in the enforcement of Indebtedness, or
any failure to institute proceedings, file a claim, give any required notices or
otherwise protect any Indebtedness; (iv) any full or partial release of,
compromise or settlement with, or agreement not to sue any Borrower or any other
guarantor or other person liable in respect of any Indebtedness; (v) any
release, surrender, cancellation or other discharge of any evidence of
Indebtedness or the acceptance of any instrument in renewal or substitution
therefor; (vi) any failure to obtain collateral security (including rights of
setoff) for Indebtedness, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (vii) any collection, sale, lease or other
disposition of, or any other foreclosure or enforcement of or realization on,
any collateral security; (viii) any assignment, pledge or other transfer of any
Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits
<PAGE> 3
upon Indebtedness. The undersigned waive(s) any and all defenses and discharges
available to a surety, guarantor, or accommodation co-obligor, dependent on its
character as such.
7. The undersigned waive(s) any and all defenses, claims, setoffs, and
discharges of any Borrower, or any other obligor, pertaining to Indebtedness,
except the defense of discharge by payment in full. Without limiting the
generality of the foregoing, the undersigned will not assert against Lender any
defense of waiver, release, discharge in bankruptcy, statute of limitations, res
judicata, statute of frauds, anti-deficiency statute, fraud, incapacity,
minority, usury, illegality or unenforceability which may be available to any
Borrower or any other person liable in respect of any Indebtedness, or any
setoff available against Lender to any Borrower or any such other person,
whether or not on account of a related transaction, and the undersigned
expressly agree(s) that the undersigned shall be and remain liable for any
deficiency remaining after foreclosure of any mortgage or security interest
securing Indebtedness, whether or not the liability of any Borrower or any other
obligor for such deficiency is discharged pursuant to statute or judicial
decision. The liability of the undersigned shall not be affected or impaired by
any voluntary or involuntary liquidation, dissolution, sale or other disposition
of all or substantially all the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
event or proceeding affecting any Borrower or any of its assets. The undersigned
will not assert against Lender any claim, defense or setoff available to the
undersigned against any Borrower.
8. The undersigned waive(s) presentment, demand for payment, notice of
dishonor or nonpayment, and protest of any instrument evidencing Indebtedness.
Lender shall not be required first to resort for payment of the Indebtedness to
any Borrower or other persons, or their properties, or first to enforce, realize
upon or exhaust any collateral security for Indebtedness, before enforcing this
Guaranty.
9. The undersigned will pay or reimburse Lender for all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred by
Lender in connection with the collection of any Indebtedness or the enforcement
of this Guaranty.
10. This Guaranty shall be enforceable against each person signing this
Guaranty, even if only one person signs and regardless of any failure of other
persons to sign this Guaranty or to otherwise guaranty any of the any Borrower's
debts, liabilities or obligations to Lender. All agreements and promises herein
shall be construed to be, and are hereby declared to be, joint and several in
each and every particular with respect to the Guarantor and any other guarantors
of the Indebtedness and shall be fully binding upon and enforceable against any
or all such guarantors. This Guaranty shall be binding upon the undersigned, and
the heirs, successors and assigns of the undersigned and shall inure to the
benefit of Lender and its respective participants, successors and assigns.
Except to the extent otherwise required by law, this Guaranty and the
transaction evidenced hereby shall be governed by the substantive laws of the
State of Minnesota. If any provision or application of this Guaranty is held
unlawful or unenforceable in any respect, such illegality or unenforceability
shall not affect other provisions or applications which can be given effect, and
this Guaranty shall be construed as if the unlawful or unenforceable provision
or application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Guaranty or in any other
agreement between the undersigned and Lender shall survive the execution,
delivery and performance of this Guaranty and the creation and payment of the
Indebtedness. This Guaranty may not be waived, modified, invalidated,
<PAGE> 4
terminated or released or otherwise changed except by a writing signed by
Lender. The Guaranty shall be effective whether or not accepted in writing by
Lender and the undersigned waive(s) notice of the acceptance of this Guaranty by
Lender.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered
by the undersigned on the day and year first above written.
WITNESS: CONCORDE GAMING CORPORATION,
a Colorado corporation
/s/ George J. Nelson By: /s/ Jerry L. Baum
- ------------------------------------ -------------------------------
Its: President
Name: George J. Nelson
Address: 3290 Lien St.
Rapid City, SD
<PAGE> 1
Exhibit 10.4
WAIVER OF INTEREST, ASSIGNMENT OF LEASE,
AND AGREEMENT CONCERNING ASSUMPTION OF LEASE
To induce BNC National Bank of Minnesota ("Bank") to enter into a
credit relationship with Concorde Cripple Creek, Inc., a Colorado corporation
("Tenant") and for other good and valuable consideration, Tenant, Elevation
8000+, a Colorado limited liability company ("Landlord") and Bank hereby agree
as follows:
1. Landlord owns certain real property known as the Golden Gates
Casino and legally described as Lots 9-12, inclusive, Block 39, City of Black
Hawk, County of Gilpin, State of Colorado, on which the Tenant's facility is
located (the "Leased Premises") and entered into a Lease Agreement with Tenant
on July 21, 1997, as amended by that certain First Amendment to Lease dated as
of January 1, 1999, by the terms of which it leased the Leased Premises to the
Tenant. The Lease Agreement as amended shall hereafter be referred to as the
"Lease".
2. The Bank has extended certain loans (the "Loans") to the Tenant
secured by, among other things, personal property of the Tenant located on the
Leased Premises. Landlord acknowledges receipt of notice that the Bank has a
security interest in the personal property of the Tenant located on the Leased
Premises (the "Collateral"). The Landlord does not and shall not have any
interest therein or lien or claim thereon. Without limiting the generality of
the foregoing, the Landlord specifically waives and releases each and all
security interests, liens, claims and charges now or at any time hereafter
available to the Landlord with respect to the Collateral located on the Leased
Premises.
3. As further security for the Loans, Tenant hereby assigns its
interest as Tenant pursuant to the Lease to the Bank, together with all of its
right, title and interest in and to the Leased Premises. Tenant warrants and
represents (a) that is has the right to make and enter into this agreement to
grant such assignment and (b) that it is not in default under the terms and
conditions of the Lease.
4. At any time before the expiration or termination of the Lease or
the termination of Tenant's right to possession of the Leased Premises, the
Bank and the Bank's successors or assignees, or any transferee of the Bank's
rights in the Collateral (including, without limitation, a purchaser of such
personal property upon foreclosure or repossession of the Bank's interest in
the Collateral) (such successors, assignees or transferees shall hereafter be
referred to as the "Subsequent Parties") shall be entitled to occupy and take
fully, unrestricted and sole possession of the Leased Premises and shall
further be entitled to assume all of the benefits and burdens of the Lease, but
only upon express written notice of its intention to do so.
5. Prior to occupancy of the Leased Premises, the Bank or Subsequent
Party shall provide ten (10) days prior written notice of its anticipated
occupancy to Landlord as follows:
<PAGE> 2
c/o Scott Bradley
78436 U.S. Highway 40
P.O. Box 163
Winter Park, Colorado 80482
Telecopier number (970) 726-9522
or such other address as Landlord may from time to time provide the Bank.
6. If the Bank or Subsequent Party assumes possession of the Leased
Premises, it shall, during its time of possession be responsible for compliance
with all of the Lease. If after taking possession of the Leased Premises, but
prior to delivery to the Landlord of written notice of its intention to assume
the Lease, the Bank or Subsequent Party elects to vacate the Leased Premises,
it shall provide Landlord ten (10) days written notice of its intention to do
so, addressed as provided in number 5 above. So long as the Bank or Subsequent
Party has not assumed the Lease, the Bank or Subsequent Party shall not be
liable for any obligations under the Lease arising after it vacates the Leased
Premises.
7. Except for the obligations to pay rent and other obligations
pursuant to the Lease Agreement from the date of its occupancy, the Bank or any
Subsequent Party does not assume, either by this Agreement or actual possession
of the Leased Premises, any past, present or future obligations of Tenant to
Landlord or any other person under the Lease or otherwise. Provided, that the
Bank or any Subsequent Party's occupancy of the Leased Premises shall be
subject to all of the terms and conditions of the Lease, including, without
limitation, use of the Leased Premises.
8. Landlord and Tenant agree that no amendment to the Lease shall be
valid without the written consent of the Bank, which shall not be unreasonably
withheld.
9. Landlord hereby consents to the foregoing Agreement subject to the
express conditions that (a) Tenant will remain liable for the payment of all
rent and other sums and the performance of all obligations as provided in the
Lease; (b) until the Bank or a Subsequent Party takes possession of the Leased
Premises, Landlord shall have no obligation to deliver any notices or perform
any other obligation provided for under the Lease to or for the Bank or a
Subsequent Party, and neither the Bank nor a Subsequent Party shall have any
right to enforce any of Tenant's rights against Landlord; and (c) this
Agreement does not waive any of the rights and remedies of Landlord under the
Lease.
10. Tenant hereby consents to this Agreement, agrees to be bound by
its terms and conditions to the extent that they are applicable to it and
agrees to indemnify and hold Landlord harmless in connection with the
Landlord's compliance with same.
11. This Agreement shall be binding on the successors and assigns of
the parties. This Agreement may be signed in counterparts, and a facsimile
transmission shall be binding in the same manner as an original.
<PAGE> 3
IN WITNESS WHEREOF, this Agreement is signed on the dates set out by
the respective signature of the parties.
LANDLORD:
ELEVATION 8000+, a Colorado limited
liability company
Dated May 21, 1999 By /s/ J. Scott Bradley
--------------------------------
Its Manager
STATE OF )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 21st day of
May, 1999, by ____________________________ the __________________________ of
Elevation 8000+, a Colorado limited liability company, on behalf of said
limited liability company.
-----------------------------------
Notary Public
[Signature page to Waiver of Interest, Assignment of Lease, and Agreement
Concerning Assumption of Lease between BNC National Bank of Minnesota, Concorde
Cripple Creek, Inc. and Elevation 8000+]
<PAGE> 4
IN WITNESS WHEREOF, this Agreement is signed on the dates set out by
the respective signature of the parties.
BANK:
BNC NATIONAL BANK OF MINNESOTA
Dated May 21, 1999 By: /s/ James B. Fink
------------------------------------
Its: Vice President
STATE OF )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 21st day of
May, 1999, by ____________________________ the __________________________ of
BNC National Bank of Minnesota, a national banking association, on behalf of
said national banking association.
-----------------------------------
Notary Public
[Signature page to Waiver of Interest, Assignment of Lease, and Agreement
Concerning Assumption of Lease between BNC National Bank of Minnesota, Concorde
Cripple Creek, Inc. and Elevation 8000+]
<PAGE> 5
IN WITNESS WHEREOF, this Agreement is signed on the dates set out by
the respective signature of the parties.
TENANT:
CONCORDE CRIPPLE CREEK, INC.,
a Colorado corporation
Dated May 21, 1999 By /s/ Jerry L. Baum
-------------------------------------
Its President
STATE OF )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this 21st day of
May, 1999, by ____________________________ the __________________________ of
Concorde Cripple Creek, Inc., a Colorado corporation, on behalf of said
corporation.
-----------------------------------
Notary Public
[Signature page to Waiver of Interest, Assignment of Lease, and Agreement
Concerning Assumption of Lease between BNC National Bank of Minnesota, Concorde
Cripple Creek, Inc. and Elevation 8000+]
<PAGE> 1
EXHIBIT 10.5
$150,000.00 Minneapolis, Minnesota
May 21, 1999
SHORT-TERM REVOLVING NOTE
FOR VALUE RECEIVED, each of the undersigned, hereby jointly and severally
promises to pay to the order of BNC NATIONAL BANK (the "BANK") in the lawful
money of the United States at its offices at 200 Metropolitan Centre, 333 South
Seventh Street, Minneapolis, MN 55402, or at such other place as the Bank may
from time-to-time designate:
(i) the principal sum of One Hundred Fifty Thousand and 00/100
($150,000.00) Dollars, or such other principal amount as may be
owing to Bank for the repayment of loans made pursuant to the
Short-Term Revolving Credit Commitment as set forth in that
certain Loan Agreement dated of even date herewith, between Bank
and the undersigned as the same may be amended from time to time
(the "LOAN AGREEMENT"), which sum shall be due and payable in
full on May 15, 2000; plus
(ii) interest on the unpaid principal amount of this Note from
time-to-time outstanding payable in arrears at a rate of interest
equal to the Reference Rate (as defined in the Loan Agreement)
plus three-quarters percent (3/4 %) per annum (calculated on the
basis of the number of days actually elapsed in a 360-day year)
on the last day of each calendar month commencing with the first
month following the date hereof. Following the occurrence of an
Event of Default as defined in the Loan Agreement, the principal
indebtedness shall bear interest at a floating rate of two
percent (2%) per annum greater than the otherwise applicable
rate.
This Note is the "Short-Term Revolving Note" referred to in the Loan
Agreement and is subject to all of the agreements, terms and conditions therein
contained which are incorporated herein by reference. In no event shall interest
hereunder be in excess of the maximum interest rate permitted by law.
This Note has been delivered in the State of Minnesota and shall be
construed and enforced in accordance with the substantive laws of such state.
Each of the undersigned and all guarantors expressly waive any presentment,
demand, protest, notice of protest, and notice of dishonor.
CONCORDE CRIPPLE CREEK, INC.,
a Colorado corporation
By /s/ Jerry L. Baum
-------------------------------------
Its President
Witness:
/s/ George J. Nelson
- ------------------------------------
<PAGE> 1
EXHIBIT 10.6
$850,000.00 Minneapolis, Minnesota
May 21, 1999
TERM NOTE
FOR VALUE RECEIVED, each of the undersigned hereby jointly and severally
promises to pay to the order of BNC NATIONAL BANK OF MINNESOTA (the "BANK") in
the lawful money of the United States of America at its offices at 200
Metropolitan Centre, 333 South Seventh Street, Minneapolis, Minnesota 55402, or
at such other place as the Bank may from time-to-time designate:
(i) the principal sum of Eight Hundred Fifty Thousand and 00/100
($850,000.00) Dollars, which principal amount shall be due and
payable in thirty-five (35) installments of $10,119.05 each on
the last day of each calendar month commencing on May 31, 1999
and one final installment of the remaining principal amount on
April 30, 2002; plus
(ii) interest on the unpaid principal amount of this Note from time to
time outstanding from the date hereof at a floating rate equal to
three-quarters percent (3/4%) in excess of the Reference Rate (as
defined in the Loan Agreement) per annum, calculated on the
number of days actually elapsed in a 360-day year, due and
payable on the last day of each calendar month, commencing May
31, 1999, and at maturity (whether by acceleration or otherwise).
Principal amounts remaining unpaid after the occurrence of an
Event of Default under the Loan Agreement shall bear interest
from and after that date in time until paid at a rate of 2% per
annum plus the rate otherwise payable.
This Note is the "TERM NOTE" within the meaning of that certain Loan
Agreement between the undersigned and the Bank of even date herewith (the "LOAN
AGREEMENT"). All of the terms and conditions set forth in the Agreement are
hereby incorporated by this reference, including without limitation the right of
holder hereto to accelerate all amounts evidenced by the Note upon the
occurrence of an Event of Default within the meaning of the Agreement.
This Note has been delivered in the State of Minnesota and shall be
construed and enforced in accordance with the substantive laws thereof.
The undersigned and all guarantors expressly waive any right of
presentment, demand, protest or notice of protest or notice of dishonor.
CONCORDE CRIPPLE CREEK, INC.,
a Colorado corporation
By /s/ Jerry L. Baum
-------------------------------------
Its President
Witness:
/s/ George J. Nelson
- -------------------------------------
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