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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No.
September 30, 1998 0-8698
CONCORDE GAMING CORPORATION
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(Name of small business issuer in its charter)
Colorado 84-0716683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3290 Lien Street, Rapid City, South Dakota 57702
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(Address of principal executive offices)
Issuer's telephone number: (605) 341-7738
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value per share
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
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State issuer's revenues for the most recent fiscal year. $ 4,226,687
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of December 31, 1998 was $2,244,518. This calculation is
based upon the average of the bid ($0.15625) and asked ($0.46875) price of the
voting stock on December 31, 1998.
The number of shares issued of the issuer's $.01 par value common stock
was 23,673,126 as of December 31, 1998.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Concorde Gaming Corporation (the "Company" or the "Registrant"),
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,
and, 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 (the "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 commenced operations in
October, 1998.
Prior to June 1997, the Company was primarily engaged in the operation
of a video lottery route operation in South Dakota and prior to February 1997,
the Company also managed the 4 Bears Casino and Lodge (the "4 Bears Casino") in
North Dakota. The Company was incorporated as a Colorado corporation on
September 1, 1976.
BUSINESS DEVELOPMENTS
CASINO PRINCESA
LEG Agreement. On August 5, 1997, the Company and Leo Equity Group,
Inc. ("LEG"), a Florida corporation, entered into an agreement ("LEG Agreement")
whereby LEG assigned to the Company all of its interest in Casino Princesa,
formed for the purpose of constructing, owning, operating and managing an
offshore gaming vessel from dockage at Bayfront Park in Miami, Florida (the
"Project"). Pursuant to the LEG Agreement, the Company acquired all of LEG's
right, title and interest in Casino Princesa for $650,000 plus payments equal to
2% of Casino Princesa's "gaming win" per operating year for the first three
years of operations (subject to a minimum of $175,000 and a maximum of
$400,000). The Company owns an 80% interest in Casino Princesa and Goldcoast
Entertainment Cruises, Inc., an unaffiliated Florida corporation ("Goldcoast"),
owns the remaining 20%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS--LIQUIDITY AND
CAPITAL RESOURCES."
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Bayfront Joint Venture Agreement. On August 27, 1997, the Company and
Goldcoast entered into a joint venture agreement ("Bayfront Agreement") to
construct and operate an off shore gaming vessel. Pursuant to a Bill of Sale and
Assignment and Assumption Agreement dated as of July 6, 1998 between the Company
and its wholly owned subsidiary, Concorde Cruises, the Company assigned its
interest in Casino Princesa to Concorde Cruises and Concorde Cruises assumed all
liabilities related thereto. Pursuant to the Bayfront Agreement, the Company
contributed $6,405,000 to Casino Princesa for the construction and other
start-up costs of Casino Princesa related to the Project. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS--LIQUIDITY AND CAPITAL RESOURCES."
Use Agreement. On June 25, 1997, Casino Princesa entered into a Use
Agreement ("Use Agreement") with Bayfront Park Management Trust, a limited
agency and instrumentality of the City of Miami, Florida (the "Trust"). The Use
Agreement was amended on August 29, 1997. The Use Agreement grants Casino
Princesa the exclusive right to use the Trust's docking facilities at Bayfront
Park for the purpose of docking vessels, including an offshore gaming vessel.
The initial term ("Use Initial Term") of the Use Agreement, as amended, is for
five years commencing October 1, 1997 with the option to extend for one
additional five year term ("Extension Term"). Casino Princesa has a right of
first refusal to extend the Extension Term for one additional five year term
provided the Trust in its sole discretion has determined to permit the continued
use of the Trust's docking facilities by a gaming vessel and there has been no
event of default under the Use Agreement that was caused by Casino Princesa. The
Use Agreement provides that Casino Princesa shall pay the Trust annual fees
during the Use Initial Term as follows: $400,000 in year one, $450,000 in each
of years 2 and 3, and $475,000 in each of years 4 and 5. The Company is also
required to provide an irrevocable letter of credit on behalf of Casino Princesa
for the benefit of the Trust to secure payment of the annual fees to the Trust
for the next two years throughout the term of the Use Agreement, in an amount
equal to the next two years' annual fees. As of September 30, 1998, the Company
has provided a $925,000 irrevocable letter of credit (the "Letter of Credit") to
the Trust. See "MANAGEMENT'S DISCUSSION AND ANALYSIS--LIQUIDITY AND CAPITAL
RESOURCES."
Vessel Construction Agreement. On August 26, 1997, Casino Princesa
entered into a vessel construction agreement ("Vessel Construction Agreement")
with Keith Marine, Inc. to build the Princesa. On September 30, 1998, Casino
Princesa assigned its interest in and to the Vessel Construction Agreement to
Princesa Partners. The vessel was completed and commenced operations in October,
1998. See "MANAGEMENT'S DISCUSSION AND ANALYSIS--LIQUIDITY AND CAPITAL
RESOURCES."
Princesa Partners Joint Venture Agreement. On October 22, 1998,
Goldcoast and Conami entered into a joint venture agreement (the "Princesa
Agreement") the purpose of which was to own and charter the Princesa to Casino
Princesa. Conami owns an 80% interest in Princesa Partners and Goldcoast owns a
20% interest.
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FINANCING
Permanent Financing. Princesa Partners entered into a Loan and Security
Agreement with a number of lenders (the "Lenders"), to obtain permanent
financing (the "Vessel Loan") for the Princesa. Proceeds of the Vessel Loan were
used to pay in full the loan for construction financing with respect to the
Princesa, to acquire equipment (including gaming equipment) for the Princesa and
for other project costs. The Vessel Loan is secured by a first Preferred Ship
Mortgage (the "Ship Mortgage") dated October 15, 1998. Also, Casino Princesa and
Princesa Partners granted to the Lenders, pursuant to a Security Agreement (the
"Security Agreement") dated as of October 22, 1998, a security interest in all
furniture, furnishings, machinery and equipment (including gaming equipment)
owned by Casino Princesa or Princesa Partners and used in connection with or
located on the Princesa.
Pursuant to the Vessel Loan, Casino Princesa and the Company guaranteed
the obligations of Princesa Partners pursuant to a Guaranty, Subordination
Agreement, Security Agreement and Indemnity dated October 22, 1998 (the
"Bayfront Guaranty") and to a Guaranty dated October 22, 1998, respectively. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS--LIQUIDITY AND CAPITAL RESOURCES."
MANAGEMENT AGREEMENT
TAT Settlement Agreement. On September 27, 1996, Bruce H. Lien Company,
a wholly-owned subsidiary of the Company ("BHL"), and the Three Affiliated
Tribes ("TAT") entered into a settlement agreement (the "Settlement Agreement")
to resolve disputes arising out of the management agreement (the "Management
Agreement") between BHL and TAT, pursuant to which BHL managed the 4 Bears
Casino. Pursuant to the terms of the Settlement Agreement, on February 13, 1997,
TAT paid the Company $8.65 million in consideration for the termination of the
Management Agreement, which resulted in a gain to the Company of $2,819,250
during fiscal 1997. BHL was dissolved during the 1997 fiscal year.
GOLDEN GATES CASINO
North Star Asset Exchange Agreement. Pursuant to the terms of an Asset
Exchange Agreement (the "Agreement") dated June 12, 1997 by and among North Star
Casino Limited Liability Company ("North Star"), the Company and its wholly
owned subsidiaries Midwest Gaming, Inc., Concorde Cripple Creek and Concorde
Gaming of South Dakota, Inc., the Company exchanged substantially all of the
assets related to its video lottery route operations in South Dakota (the "Video
Lottery Assets") for substantially all of North Star's assets used in its
business of owning and operating the Golden Gates Casino (the "Casino Assets").
Additionally, the Company paid North Star approximately $480,000 in cash,
assumed approximately $773,000 in liabilities related to the Casino Assets and
issued 1,743,333 shares of the Company's common stock, $.01 par value ("Common
Stock"). The transfers were completed in July 1997.
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Parking Garage Agreement. Concorde Cripple Creek, Elevation E8000+, LLC
("E8000") and KMM Parking L.L.C., a Colorado limited liability company ("KMM")
entered into an agreement dated October 22, 1997 (the "Parking Garage
Agreement") to subject certain property located in Black Hawk, Colorado to a
condominium regime. Pursuant to the Parking Garage Agreement, the parties
contributed parcels of land adjacent or near the Golden Gates Casino for
construction of a 450 stall parking garage ("Parking Garage"). Under the Parking
Garage Agreement, KMM has until December 31, 1998 to obtain all governmental
approvals to construct the Parking Garage. If KMM is successful in obtaining all
governmental approvals, it will then have 45 days to obtain a loan (the "Loan")
for approximately $10,000,000 to finance construction of the Parking Garage with
the Loan to be repaid solely by KMM. Collateral for the Loan shall initially
include the parties' contributed property, provided, that upon completion of the
Parking Garage, only KMM's ownership interest in the Parking Garage may be used
as collateral. Upon completion of the Parking Garage, the parties will enter
into a condominium declaration whereby each party will receive a proportionate
share of the parking spaces based on each party's contribution of property,
provided however, Concorde Cripple Creek will own a minimum of 34 parking
spaces. In addition, Concorde Cripple Creek will be required to lease E8000's
parking spaces, which will be a minimum of 41 parking spaces. The Parking Garage
Agreement was amended on February 2, 1998, July 6, 1998 and October 19, 1998.
COLORADO OPERATIONS
Colorado law permits limited stakes casino gaming ($5.00 or less per
wager) in three historic mining towns, Black Hawk and Central City, adjacent
towns located approximately 40 miles west of Denver, and Cripple Creek,
approximately 90 miles south of Denver. Black Hawk and Central City form the
primary gaming market in Colorado, and competition within these markets is
intense.
The Golden Gates Casino is located on Main Street in Black Hawk,
Colorado directly across from the Richman Street bridge, which bridge provides
access onto Main Street from U.S. Highway 119. The Golden Gates Casino offers 3
blackjack tables, 1 poker table, and 215 gaming machines on approximately 3,800
square feet of gaming floor space and also features a 50-seat restaurant, a full
service liquor bar and furnishes nightly valet parking for its gaming patrons in
the adjacent parking lot.
The Golden Gates Casino depends primarily upon "day-tripper" visitor
traffic from Denver metropolitan area residents for its customer base. Denver,
and its surrounding communities, have an approximate population of 1.8 million.
Approximately three million people live within a 100-mile radius of the Black
Hawk/Central City area.
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COMPETITION
The primary competition for the Golden Gates Casino is from other
casinos operating in Black Hawk and Central City, of which there were
approximately 30 as of September 30, 1998, and, secondarily, casinos operating
in Cripple Creek of which there were approximately 19 as of September 30, 1998.
The Company believes that the primary competitive factors in the Black
Hawk-Central City market are location, availability and convenience of parking,
number of gaming machines and tables, types and pricing of amenities, name
recognition, and overall atmosphere.
In June 1998, the Lodge Casino at Black Hawk opened across the street
from Golden Gates Casino. In late December of 1998, a new casino, the Isle of
Capri, opened in Black Hawk. In addition, other casino projects are reported to
be in various stages of planning or have commenced construction in Black Hawk.
More experienced, nationally recognized casino operators from other areas of the
country have entered, or announced plans to enter, the Colorado gaming market,
including Harvey's, Isle of Capri Casinos, Anchor Gaming, Fitzgerald's, and
Riviera, many of which have substantially greater financial and marketing
resources than the Company or Concorde Cripple Creek. Because Colorado does not
limit the total number of gaming licenses available for issuance in Colorado and
there are no minimum facility size requirements, the Company expects the number
of gaming facilities to continue to increase.
While it is difficult to assess the development and timing of competing
projects and the likelihood of whether any or all of the announced projects will
eventually be built and at what size, it is reasonably likely that at least some
of the announced projects will be completed and opened to the public. The
Company believes the opening of the Lodge Casino at Black Hawk across the street
from the Golden Gates Casino has increased the number of casino patrons and
increased revenues over prior years results. However, should any of the
announced casino projects open, the increased competition may adversely affect
the Golden Gates Casino's operations.
A decline in the Denver economy, a decline in the Black Hawk gaming
market, or increased competition for Denver metropolitan area residents from
other gaming jurisdictions both inside and outside Colorado, could have a
material adverse effect on the Company's results of operations, financial
position and cash flows.
In addition to competing with other gaming facilities in Colorado as
described above, the Golden Gates Casino competes, to a lesser degree, for
customers with gaming facilities nationwide, including casinos in Nevada and
Atlantic City and casinos operated on Native American lands in various Western
states, including Colorado. Many of these competitors have substantially greater
financial resources and experience in the gaming business. The Golden Gates
Casino also competes with other forms of gaming on both a local and national
level, including state-sponsored lotteries, charitable gaming and pari-mutuel
wagering, among others,
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and competes for entertainment dollars generally with other forms of
entertainment. The recent and continuing expansion of legalized casino gaming to
new jurisdictions throughout the United States may also affect competitive
conditions.
SEASONAL FLUCTUATION AND INCLEMENT WEATHER
Because the Golden Gates Casino is located in the Rocky Mountains,
sudden and severe winter storms impact operations. Access to Black Hawk, which
is located ten miles from Interstate 70, is via a two-lane secondary road. In
bad weather, and in the winter months generally, this access road is difficult
to traverse, reducing the number of patrons traveling to Black Hawk and
negatively affecting the Company's operating results during these periods. In
addition, bad weather can result in a loss of services to the Golden Gates
Casino which also negatively affects the Company's operating results. As a
result, the Golden Gates Casino's business tends to be seasonal, with the
highest level of activity occurring during the summer months.
DIFFICULTY IN ATTRACTING AND RETAINING QUALIFIED EMPLOYEES
The operation of the Golden Gates Casino requires qualified managers
and skilled employees with gaming industry experience and qualifications
necessary to obtain the requisite licenses. The Company believes that a shortage
of skilled labor which exists in the gaming industry will make it increasingly
difficult and expensive to attract and retain qualified employees. Increasing
competition in the Black Hawk market for qualified employees may lead to higher
costs in order to retain and attract qualified employees. While the Company
believes that the Golden Gates Casino will be able to attract and retain
qualified employees, there can be no assurance that the Golden Gates Casino will
be able to do so. If the Golden Gates Casino is not able to attract and retain
qualified employees or if labor costs increase in connection therewith, there
could be an adverse impact on the Company's results of operation.
LEGISLATIVE ISSUES
In August 1996, President Clinton signed a bill creating the National
Gambling Impact and Policy Commission to conduct a comprehensive study of all
matters relating to the economic and social impact of gaming in the United
States. The legislation provides that the commission must issue a report to the
President and to Congress containing its findings and conclusions, together with
recommendations for legislation and administrative actions. There can be no
assurance that federal or state initiatives or legislation will not be passed in
the future that could adversely impact the business of the Golden Gates Casino.
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COLORADO GAMING REGULATIONS
Under Colorado law and regulations (the "Colorado Regulations"), the
ownership and operation of casino facilities, including matters such as hours of
operation and the square footage of a casino that can be used for gaming
activities, are subject to regulation by the Colorado Division of Gaming, which
is supervised by the five-member Colorado Limited Gaming Control Commission (the
"Gaming Commission").
The Gaming Commission requires various licenses, findings of
suitability, registrations, permits and approvals to be held by the Company and
its subsidiaries. The Gaming Commission may, among other things, limit,
condition, suspend or revoke a license to operate for any cause deemed
reasonable. Substantial fines or forfeiture of assets may be levied against
Concorde Cripple Creek and the persons involved for violations of gaming laws or
regulations In addition, the actions of persons associated with Concorde Cripple
Creek and its management employees, over which Concorde Cripple Creek may have
little or no control, could jeopardize any licenses held by Concorde Cripple
Creek in Colorado. The suspension or revocation of any of Concorde Cripple
Creek's licenses or the levy on Concorde Cripple Creek of substantial fines or
forfeiture of assets would have a material adverse effect on the Company.
To date, Concorde Cripple Creek has obtained all governmental licenses,
findings of suitability, registrations, permits and approvals necessary for the
operation of the Golden Gates Casino. However, gaming licenses and related
approvals are deemed to be privileges under Colorado law, and no assurances can
be given that any new licenses, permits and approvals that may be required in
the future will be given or that existing licenses, permits or approvals will
not be revoked or not renewed. The current retail gaming license for Golden
Gates Casino expires in July 1999. Renewal is subject to, among other things,
continued satisfaction of suitability requirements. There can be no assurance
that the Company can successfully renew its licenses in a timely manner or at
all.
Under the Colorado Regulations, no person can have an "interest" in
more than three gaming retailer/operator licenses. Concorde Cripple Creek
currently has one license. Accordingly, any expansion opportunities that the
Company or Concorde Cripple Creek may have in Colorado may be limited.
Under Colorado Regulations, the definition of an "interest" in a gaming
license excludes ownership of less than 5% of the "publicly traded" company such
as the Company. To enable the Company to comply with the Colorado Regulations
and secure and maintain the business and other regulatory approvals necessary
for operating a gaming-related business in Colorado, the Company's Articles of
Incorporation provide that the Company may not issue voting securities except in
compliance with the rules of any gaming authority, that all transfers of voting
securities of the Company must be in compliance with applicable gaming authority
rules and that if any gaming authority issues an order disqualifying a person
from owning voting securities,
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the Company may redeem the securities of the disqualified holder unless the
voting securities are transferred to a person found by the Gaming Commission to
be suitable within 60 days from the date of the finding of unsuitability.
Any person or group of related persons that acquire beneficial
ownership of between 5% and 9.99% of the Company's voting securities must report
the acquisition to the Gaming Commission within ten days of acquiring such
interest and may be required to provide additional information to the Gaming
Commission and be found suitable. Any person or group of related persons that
acquire beneficial ownership of 10% (or, with respect to institutional
investors, 15%) or more of the Company's voting securities must apply to the
Gaming Commission within 45 days after acquiring such interest and submit to
investigation for suitability by the Gaming Commission. Certain qualifying
institutional investors, at the Gaming Commission's discretion, may acquire up
to 15% ownership before a finding of suitability is required if such investors
provide certain information to the Gaming Commission regarding investment intent
and other matters. In order to be found suitable, a stockholder must be a person
of good moral character, honesty, integrity, and, in general terms, must be free
from previous criminal or unsavory convictions or similar acts. The Gaming
Commission may require substantial information in connection with a suitability
investigation, including personal background and financial information, source
of funding information, and a sworn statement that such person or entity is not
holding the stock for any other party, and may require fingerprints.
The Company may not make a public offering of its securities without
notifying the Gaming Commission. The notification must occur within 10 business
days after the initial filing of a registration statement with the Securities
and Exchange Commission or, if the offering will not be registered with the
Securities and Exchange Commission, 10 days prior to the public use or
distribution of any offering document. The notification procedures apply to any
offering by the Company where the proceeds will be used or intended for use in
(i) in constructing gaming facilities in Colorado; (ii) financing the operation
of Colorado gaming facilities; (iii) acquiring any direct or indirect interest
in Colorado gaming facilities; or (iv) in retiring or extending obligations
incurred for any of the above purposes. The notification must disclose, among
other things, a description of the securities to be offered, the proposed terms
of the offering, its anticipated gross and net proceeds, and the use of the
proceeds.
LIQUOR REGULATION
The sale of alcoholic beverages is subject to licensing, control and
regulation by certain Colorado state and local agencies (the "Liquor Agencies").
Subject to certain exceptions, all persons who directly or indirectly own 5% or
more of Concorde Cripple Creek must file applications with and are subject to
investigation by the Liquor Agencies. The Liquor Agencies also may investigate
persons who, directly or indirectly, loan money to liquor licensees. All liquor
licenses are subject to renewal, are revocable and are not transferable. The
Liquor Agencies have broad powers to limit, condition, suspend or revoke any
liquor license. Any
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disciplinary action could, and any failure to renew or other revocation of any
of Concorde Cripple Creek's liquor licenses would, have a material adverse
effect upon the operations of the Company and Concorde Cripple Creek.
TAXATION
Concorde Cripple Creek's operations are subject to taxes imposed upon
gaming operators by the Gaming Commission and the municipality of Black Hawk.
Taxes currently levied on Concorde Cripple Creek's operations include taxes,
payable monthly, on adjusted gross proceeds ("AGP" is defined by Colorado law as
amount wagered minus the total amount paid out in prizes) and annual gaming
device fees. Such taxes and fees are subject to revision from time to time. In
the past, such taxes were computed on an annual period beginning on October 1,
of each calendar year. However, effective July 1, 1998, the annual period shall
commence on July 1 and end on June 30. The annual tax rates in effect for the 12
months beginning July 1, 1998 are 2% of the first $2.0 million of AGP, 4% from
$2.0 million to $4.0 million, 14% from $4.0 million to $5.0 million, 18% from
$5.0 million to $10.0 million, and 20% of amounts in excess of $10.0 million of
AGP. Under the Colorado Constitution, the Gaming Commission is authorized to
increase the gaming tax rate to as much as 40% of AGP.
In addition, a "device fee" is required for each gaming device (i.e.
each gaming machine and gaming table). The State of Colorado currently imposes
an annual fee of $75 per device and the City of Black Hawk currently imposes an
annual fee of $750 per device. Black Hawk also imposes liquor licensing fees,
transportation fees and other fees that are imposed per device. Significant
increases in the applicable fees, or the imposition of new taxes or fees, could
have an adverse effect on the Company, and there can be no assurance that such
fees will not be increased or additional taxes or fees be imposed, which could
have an adverse impact on the Company's operations.
FLORIDA OPERATIONS
Casino Princesa is one of the newest day cruise operators in the United
States. Casino Princesa currently employs approximately 200 people and operates
the new state-of-the-art gaming vessel, the Princesa. Casino Princesa operates
so-called "cruises to nowhere" where passengers board the Princesa and travel
into international waters before gaming activities can commence. Each cruise to
nowhere is approximately four and one-half hours in length, including the travel
time to and from international waters. The Princesa departs from docks in
Bayfront Park, adjacent to Bayside Marketplace in Biscayne Bay, Miami, Florida.
The Princesa was completed in early October 1998 and is a United States
registered vessel operating under a Certificate of Inspection from the United
States Coast Guard. The Princesa is approximately 100 gross registered tons in
size, 200 feet in length and 40 feet in width, and has four decks, three of
which are enclosed. It has a capacity for 600 passengers in
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addition to the crew. The Princesa features over 10,000 square feet of gaming
area with approximately 450 gaming positions, including approximately 230 slot
and video gaming machines and 32 table games including blackjack, craps,
roulette, stud poker, pai gow, mini baccarat and other games. Other amenities
include fine dining, dancing and entertainment and cocktail lounges. The
Princesa was designed specifically for the offshore gaming industry and includes
an internal stabilization system for passenger comfort.
COMPETITION
Casino Princesa competes primarily with two other cruise to nowhere
operators within the Miami market and, in Southern Florida, with numerous other
day-cruise vessels and pari-mutuel facilities, race tracks and Jai-Alai
frontons. Casino Princesa competes principally on the basis of location, range
and pricing of amenities, gaming mix, and overall atmosphere. Casino Princesa
also faces substantial competition with Native American casinos located in
Southern Florida. Casino Princesa must adjust its passenger fares to remain
competitive. The current prices for the cruises range from $12.00 to $29.00
depending on the day of the week, the time of day, and other factors. Casino
Princesa also offers various special fares and complimentary fare programs for
its rated casino patrons. The Princesa may be used for convention meetings,
continuing education programs, weddings and various other group gatherings.
In addition, the Company competes with a variety of other non-gaming
vacation activities in the area where it operates its vessel. These include, but
are not limited to, short-term cruises, resort attractions, various sporting
activities and numerous other recreations activities.
SEASONAL FLUCTUATIONS AND INCLEMENT WEATHER
Revenues from the Princesa are adversely affected by inclement weather.
Inclement weather has a direct effect on the number of cruises conducted and on
passenger counts. In addition, passenger counts are historically lower
immediately before and immediately after inclement weather conditions. The
cruise to nowhere industry in Florida is also subject to seasonal fluctuations
with the highest levels of activities occurring during the months of January
through April.
SALES AND MARKETING
Casino Princesa focuses its sales and marketing efforts within a
twenty-mile radius of Miami. Casino Princesa must attract passengers from both
the local population and the tourist population to survive the seasonal
fluctuations that are known to occur in the Florida tourist industry. Casino
Princesa focuses its efforts on local markets and on tourists visiting the local
markets on vacation and markets its cruises through general advertising, direct
mailings, travel agents and it's own sales force.
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REGULATORY
The Princesa's operation as a United States registered cruise to
nowhere vessel was made possible by 1992 legislation that, for the first time,
allowed U.S. registered vessels to carry gambling equipment to and from U.S.
ports for use in international waters.
Under Florida law no gambling may occur while the ship is in Florida's
waters, and gambling activities on the Princesa are conducted solely in
international waters.
In the past three years, various legislation has been proposed in
Florida that would have adversely impacted the cruise to nowhere industry. To
date, no such legislation has become law. There can be no assurance that further
legislation will not be introduced and become law in the future that could
adversely affect the business of Casino Princesa.
EMPLOYEES
As of December 1998, the Company, and its subsidiaries, employed
approximately 85 people, none of whom are covered by a collective bargaining
agreement. The Company believes that it has satisfactory employee relations.
ADDITIONAL INFORMATION
Compliance with federal, state and local law regarding the discharge of
materials into the environment or otherwise relating to the protection of the
environment has not had, and is not expected by the Company to have, any adverse
effect upon capital expenditures, earnings or the competitive position of the
Company. The Company is not presently a party to any litigation or
administrative proceeding with respect to its compliance with such environmental
standards.
Certain areas within the Black Hawk/Central City region have been
designated superfund sites by the Environmental Protection Agency as a result of
contamination from historic mining activities in the area. The Company does not
believe the real estate owned or leased by Concorde Cripple Creek in Black Hawk
has any environmental contamination or other environmental issues associated
with the real estate.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases approximately 4,500 square feet of office space
located in Rapid City, South Dakota under a lease that expires September 30,
1999 from BHL Capital Corporation ("BHL Capital"), a corporation controlled by
Brustuen "Bruce" H. Lien, the majority shareholder, director and chairman of the
board of the Company. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
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Casino Princesa leases dock space with respect to the Princesa from the
Trust. The lease is for five years commencing October 1997 with one option to
renew the lease for five years. Casino Princesa has the first right of refusal
to extend the lease for an additional five years if the Trust decides to
continue the use of the docks for gaming vessels. See "CERTAIN RECENT
DEVELOPMENTS --USE AGREEMENT."
Effective July 21, 1997, Concorde Cripple Creek and E8000 entered into
a lease for the Golden Gates Casino ("Casino Lease"). The Casino Lease is for an
initial term (the "Initial Term") of five years and Concorde Cripple Creek has
two 5-year options to renew. The base rent is $15,000 per month during the first
year of the Initial Term and increases to $16,000 per month during the second
year and $17,000 per month for the remainder of the Initial Term. In addition to
the base rent, Concorde Cripple Creek is required to pay E8000 additional rent
("Percentage Rent") equal to a percentage of the Golden Gates Casino's adjusted
net gaming revenue ("ANGR"). The Percentage Rent shall be payable monthly based
on annual ANGR as follows: 2% of the first $2,000,000 ANGR; plus 4% of the
second $2,000,000 ANGR; plus 6% of the third $2,000,000 ANGR; plus 8% of the
ANGR in excess of $6,000,000. During the third, fourth and fifth years of the
Initial Term, Concorde Cripple Creek has the option to purchase the Golden Gates
Casino and E8000's 50% interest in two adjacent properties (which includes the
Parking Lot) for the following respective exercise prices: $5,800,000;
$5,974,000; and $6,153,220.
Concorde Cripple Creek owns an undivided 50% interest in two parcels of
land near, or adjacent to, the Golden Gates Casino. The first property is an
undeveloped small lot ("Vacant Lot") located behind the Golden Gates Casino. The
second property is a 50-space parking lot ("Parking Lot") located adjacent to
the Golden Gates Casino on Main Street. As of September 30, 1998, the Parking
Lot was subject to a mortgage with a principal balance of $296,802 and monthly
payments of $5,220, including interest equal to prime plus 2%. The mortgage was
paid in full on December 31, 1998 with the proceeds of a loan from a third-party
lender secured by certain contract rights of Concorde Cripple Creek.
Concorde Cripple Creek and E8000 have entered into a parking lot lease
("Parking Lot Lease") whereby Concorde Cripple Creek agreed to lease from E8000
its 50% interest in the Parking Lot adjacent to the Golden Gates Casino.
Concorde Cripple Creek owns the other 50% interest in the Parking Lot. The
Parking Lot Lease has an initial term of five (5) years and Concorde Cripple
Creek has two 5-year options to renew. The lease rate is $6,200 per month during
the initial term; $6,510 per month during the first option term and $6,835 per
month during the second option term.
The Company believes that the above facilities and equipment are well
maintained and in good operating condition and will satisfy its current needs.
14
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On September 21, 1998, the Company held an annual meeting of
shareholders. At such meeting, the shareholders of the Company elected three
directors: Mr. Brustuen "Bruce" H. Lien, Mrs. Deanna B. Lien and Mr. Jerry L.
Baum. No director's term as a director continued after the meeting. The votes
cast with respect to each director were as follows:
<TABLE>
<CAPTION>
Shares Voted
By Proxy
-------------
<S> <C> <C>
Mr. Brustuen "Bruce" H. Lien FOR 18,684,759
AGAINST 109,000
ABSTAIN 0
Mrs. Deanna B. Lien FOR 18,684,759
AGAINST 109,000
ABSTAIN 0
Mr. Jerry L. Baum FOR 18,686,259
AGAINST 107,500
ABSTAIN 0
</TABLE>
At the meeting, the shareholders also ratified the board of directors
selection of KPMG Peat Marwick LLP as the independent auditors of the Company by
a vote of 18,788,759 shares "for" and 2,500 shares "against" with no
abstentions. As set forth in the proxy regarding the meeting, the board of
directors reserved the right to reconsider its selection of KPMG Peat Marwick
LLP as the Company's independent auditors, and on August 25, 1998 reconsidered
its selection and selected McGladrey & Pullen LLP as the Company's independent
auditors for the 1998 fiscal year. Accordingly, McGladrey & Pullen LLP will
serve as the Company's independent auditors for the 1998 fiscal year. See
"CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE."
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the Common Stock. The
following market information is based upon the bid and asked price of the stock
as reported by the OTC Bulletin Board. Such quotations reflect interdealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
<S> <C> <C>
Fiscal Year ended September 30, 1998
First Quarter $ 0.125 $ 0.0625
Second Quarter 0.0975 0.0625
Third Quarter 0.09375 0.0625
Fourth Quarter 0.125 0.09375
Fiscal Year ended September 30, 1997
First Quarter 0.20 0.0625
Second Quarter 0.25 0.0625
Third Quarter 0.25 0.125
Fourth Quarter 0.1875 0.125
</TABLE>
As of December 15, 1998, there were approximately 300 holders of record
of Common Stock.
DIVIDENDS
The Board of Directors of the Company currently anticipates that it
will retain all available funds for use in the operation of the business and
does not anticipate paying any dividends in the foreseeable future.
16
<PAGE> 17
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
financial statements and notes thereto filed herewith.
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
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
The Company changed its core operations during the past two years,
which changes had a significant impact on the results of operations during
Fiscal 1998 and 1997, accordingly, these fiscal years are not fully comparable.
The Management Agreement between BHL and TAT relating to the 4 Bears Casino was
terminated upon the closing of the Settlement Agreement effective February 13,
1997. In addition, in June 1997 the Company transferred its Video Lottery Assets
to North Star and subsequently acquired the Golden Gates Casino in July 1997. As
a result of these transactions, the Golden Gates Casino was the Company's
primary source of revenues for the year ended September 30, 1998 ("Fiscal
1998"). The Company, through Concorde Cripple Creek, operated Golden Gates
Casino for less than 3 months during the year ended September 30, 1997 ("Fiscal
1997").
During Fiscal 1998, the Company concentrated its efforts on the
construction of the Princesa and the development of the offshore gaming
operation in Miami, Florida. During the fourth quarter of Fiscal 1998, the
Company changed its accounting method for pre-opening and start-up costs. The
Company now charges these costs against income as incurred, rather than
capitalizing these costs and amortizing such costs upon commencement of
operations. Adopting this new accounting method reduced Fiscal 1998 income
(loss) before cumulative effect of
17
<PAGE> 18
accounting change by $1,372,804. The cumulative effect of this accounting
change, recorded as a charge to Fiscal 1998 net income (loss), was $259,181. If
the new method of accounting had been in effect in Fiscal 1997, the $259,181
would have been reflected as additional expense in Fiscal 1997.
RESULTS OF OPERATIONS
Year Ended September 30, 1998 Compared to Year Ended September 30, 1997
Revenues. Net revenues decreased 36.7% to $4,226,687 for Fiscal 1998,
compared to $6,675,772 for Fiscal 1997, primarily as a result of the transfer of
the Video Lottery Assets in June 1997. Video lottery revenues decreased 99.1% to
$53,499 for Fiscal 1998, compared to $5,705,609 for Fiscal 1997. The decrease in
video lottery revenues was partially offset by casino revenues from the Golden
Gates Casino of $3,948,035 for Fiscal 1998, compared to $666,103 for Fiscal
1997, an increase of 492.7%. There were no revenues from the Management
Agreement for Fiscal 1998 as compared to $208,371 for Fiscal 1997.
Costs and Expenses. Total costs and expenses decreased 18.4% to
$6,418,298 for Fiscal 1998, compared to $7,865,803 for Fiscal 1997, primarily
due to the transfer of the Video Lottery Assets in June 1997. Video lottery
expenses decreased 98.7% to $69,498 for Fiscal 1998, compared to $5,367,533 for
Fiscal 1997. Expenses related to the Golden Gates Casino increased 489.6% to
$2,541,533 for Fiscal 1998, compared to $431,078 for Fiscal 1997. Management
fees paid to Goldcoast related to Casino Princesa were $260,000 for Fiscal 1998,
compared to $0 for Fiscal 1997 due to entering into the Bayfront Agreement late
in Fiscal 1997. Business development costs decreased 10.6% to $175,169 for
Fiscal 1998, compared to $195,857 for Fiscal 1997. Selling, general and
administrative expenses increased 69.4% to $1,438,195 for Fiscal 1998, compared
to $849,027 for Fiscal 1997, due primarily to expenses associated with Golden
Gates Casino. Depreciation and amortization decreased 31.9% to $346,800 for
Fiscal 1998, compared to $508,944 for Fiscal 1997, primarily as a result of the
transfer of the Video Lottery Assets. Pre-opening and start-up costs, primarily
related to Casino Princesa, were $1,391,170 for Fiscal 1998, due to the adoption
of a new accounting method for such costs in Fiscal 1998. In Fiscal 1997, the
Company incurred charges of $376,897 for impairment of long-lived assets.
Other Income and Expense. Interest expense and financing costs to
related parties, net of capitalized interest, increased to $127,726 for Fiscal
1998, compared to $27,699 for Fiscal 1997. Other interest expense and financing
costs, net of capitalized interest, decreased to $196,313 for Fiscal 1998,
compared to $256,042 for Fiscal 1997. The overall increase in interest expense
and financing costs for Fiscal 1998 compared to Fiscal 1997 was due primarily to
loan fees associated with the construction financing for the Princesa and fees
associated with the letter of credit for Casino Princesa. The Company
capitalized $460,555 of interest in Fiscal 1998 related to the construction of
the Princesa. No interest was capitalized in Fiscal 1997. The proceeds
18
<PAGE> 19
from the Settlement Agreement resulted in a $2,819,750 gain on termination of
the Management Agreement in Fiscal 1997.
Federal and State Income Taxes. The Company recorded a Federal and
State income tax benefit of $285,000 for Fiscal 1998, compared to income tax
expense of $619,000 for Fiscal 1997. 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. The income tax benefit for Fiscal 1998 was
reduced by a valuation allowance of $684,000 for future income benefits
associated with pre-opening and start-up costs. The realization of this future
benefit is contingent upon the future profitability of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $714,764 at September 30,
1998, compared to $1,073,910 at September 30, 1997, a decrease of $359,146. The
Company had restricted cash of $288,894 at September 30, 1997 in accordance with
an agreement with one of the Company's lenders, which agreement terminated in
March 1998.
During Fiscal 1998, the Company used cash flows from operating
activities of $813,555, compared to $1,439,127 in Fiscal 1997.
Investing Activities. Investing activities used cash of $7,519,612 in
Fiscal 1998 compared to providing cash of $6,368,057 in Fiscal 1997. The Company
used $7,711,619 in Fiscal 1998 for the acquisition of property and equipment
(primarily for the construction of the Princesa), compared with $856,690 in
Fiscal 1997. Proceeds from principal payments received on long-term receivables
of $5,766,985 in Fiscal 1997 were primarily related to the termination of the
Management Agreement. Fiscal 1997 also reflects an additional $2,851,061 of
proceeds from the termination of the Management Agreement. No funds from the
termination of the Management Agreement were received in Fiscal 1998.
Financing Activities. Financing activities provided cash of $7,974,021
in Fiscal 1998, compared to cash used in financing activities of $3,975,592 in
Fiscal 1997. Long-term borrowings from related parties provided $3,225,000 in
Fiscal 1998, compared to $0 in Fiscal 1997. Long-term borrowings from other
sources provided $4,706,025 in Fiscal 1998, compared to $20,201 in Fiscal 1997.
Short-term borrowings provided $490,500 in Fiscal 1998, while short-term
borrowings were reduced by $595,000 in Fiscal 1997. Principal payments on
long-term debt used cash of $577,336 in Fiscal 1998, compared to $3,480,119 in
Fiscal 1997. Payments received on a stock subscription provided $129,832 in
Fiscal 1998, compared to $79,326 in Fiscal 1997. This increase is a result of
the sale of the promissory note recorded as a stock subscription for $110,000 to
BHL Capital. The sales price of this promissory note was
19
<PAGE> 20
approximately $8,000 less than the remaining balance and as a result, additional
paid-in capital was reduced by this amount.
Obligations to Casino Princesa. The Bayfront Agreement requires a
minimum capital contribution of $6,405,000 (the "Capital Contribution") from the
Company. At September 30, 1998, the Company had contributed approximately
$4,813,600 to Casino Princesa, and subsequent to September 30, 1998, the Company
contributed the remaining amount of the minimum capital contribution.
Bank Financing. In June 1996, the Company, and one of its subsidiaries
entered into a loan agreement with a bank, which provided for a revolving note
and term notes. The revolving note provided for advances to the Company of up to
$500,000, with interest paid monthly at a rate equal to the bank's prime rate
plus 2%. The revolving note was paid in full in February 1997 and expired in
June 1997. The term note in the principal amount of $800,000 required monthly
payments of $22,222 commencing July 31, 1996, plus interest at a rate equal to
the bank's prime rate plus 2%. The term note was paid in full in March 1998 and
restricted cash of $288,894 required to be maintained with the lender was
released to the Company.
In accordance with the Use Agreement in November, 1997, the Company
provided the Trust with a letter of credit in the principal amount of $900,000
to secure payment of the annual fees for the second and third years of the Use
Agreement. In September 1998, the $900,000 letter of credit expired and was
replaced with a letter of credit in the principal amount of $925,000 to secure
payment of the annual fees for the third and fourth years of the Use Agreement.
The $900,000 letter of credit was and the $925,000 letter of credit is secured
by the personal guaranty of Mr. Lien and a mortgage on certain real estate owned
by BHL Capital. The Company is required to pay BHL Capital a fee of $350 per day
for so long as the real estate is collateral for the letter of credit. See
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"
In March 1998 Casino Princesa obtained a line of credit for $5.0
million (the "Construction Line of Credit") to fund the remaining construction
costs of the Princesa. The Construction Line of Credit bears interest at an
adjustable rate equal to 3.75% per annum above the prime rate, as published in
the Wall Street Journal (12% at September 30, 1998). The Construction Line of
Credit was secured by, among other things, a First Preferred Ship Mortgage on
the Princesa and the guaranties of Mr. Lien, Mrs. Lien, the Company, Goldcoast
and certain other individuals. The Construction Line of Credit was paid in full
upon the closing of the Vessel Loan.
In October, 1998, Princesa Partners entered into a Loan Agreement and
Security Agreement with a group of lenders, which provided $8,400,000 in
financing for the Princesa, related equipment and working capital. The Vessel
Loan is secured by a ship mortgage and all related furniture, furnishings,
machinery and equipment (including gaming equipment) owned by
20
<PAGE> 21
Casino Princesa or Princesa Partners. In addition, Casino Princesa, the Company,
Goldcoast and certain individuals, including Mr. Lien, 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, commence
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 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.
RELATED PARTY FINANCING
The Company has relied upon loans from Mr. Brustuen "Bruce" H. Lien and
BHL Capital in order to obtain the necessary capital to develop the offshore
gaming project in Miami and to complete the Princesa. In addition, Mr. Lien has
been required to provide personal guarantees in order for the Company to obtain
such financing, including the Vessel Loan.
From November 1997 through March 1998, the Company borrowed $1,440,000
from Mr. Lien and BHL Capital in order to meet its obligations under the
Bayfront Agreement and for working capital. The amounts were borrowed pursuant
to promissory notes that were due on demand and bear interest at 18% per annum.
In March 1998, the Company borrowed an additional $500,000 from Mr.
Lien to repay a bank term note that was due in June 1998 and for working
capital. This loan is evidenced by a promissory note which is due in March 1999
and bears interest at 12% per annum. The note requires monthly payments of
$8,500. In conjunction with this loan, the Company was required to pledge all of
the Golden Gates Casino's assets to a third party lender of Mr. Lien's.
In April 1998, BHL Capital agreed to provide the Company with a line of
credit in the amount of $3,000,000 (the "Project Line of Credit"), which was
used by the Company to fund its commitment to Casino Princesa for the
development of the offshore gaming project in Miami. Advances under the Project
Line of Credit bear interest at a rate of 18% per annum. At September 30, 1998,
$1,835,000 had been borrowed under the Project Line of Credit, and subsequent to
September 30, 1998, the Company had borrowed the entire $3,000,000 available
under the Project Line of Credit.
Also in April 1998, Mr. Lien signed a commitment letter whereby he
agreed to provide additional working capital to the Company in an amount not to
exceed $500,000 (the "Working Capital Line of Credit"), the terms of any
borrowings under the Working Capital Line of Credit
21
<PAGE> 22
would be negotiated in the event these funds were required by the Company.
Subsequent to September 30, 1998, BHL Capital and the Company signed a
promissory note in conjunction with this commitment letter. The promissory note
allows for advances up to $500,000, is due on demand, and bears interest at 18%.
In consideration of the Project Line of Credit, the Working Capital
Line of Credit and the guaranty by Mr. Lien under the Construction Line of
Credit the Company granted Mr. Lien an option (the "Option") to purchase all or
a portion of the Company's interest in Casino Princesa, pursuant to an option
agreement dated April 1998.
The Option was subsequently cancelled by the parties in November 1998.
In November 1998, the Company and BHL Capital signed a promissory note
for advances up to $5,000,000 (the "Promissory Note") which superceded and
replaced the borrowings from Mr. Lien and BHL Capital for $1,440,000, the
Project Line of Credit and the Working Capital Line of Credit. The Promissory
Note is due on demand with interest paid monthly at the rate of 18% per annum.
BHL Capital has waived its right to demand payment of the Promissory Note until
October 1, 1999. As a result of this waiver, all borrowings at September 30,
1998 that were subsequently superceded and replaced with the Promissory Note
were reclassified as long-term. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS"
FUTURE OPERATIONS
The Company's ability to meet its working capital requirements is
dependent upon the future operations of the Casino Princesa, which commenced
operations in October 1998. The Company believes that cash flow from the Casino
Princesa and the Golden Gates Casino combined with its existing financing
arrangements will be sufficient to meet its current working capital
requirements.
YEAR 2000
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the "Year 2000
Problem." If this situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
The Company has commenced a comprehensive review, including testing, of
its, and its subsidiaries', computer and other systems (including systems that
use embedded technology that may be subject to the Year 2000 Problem) deemed to
be date sensitive to assess its exposure to the Year 200 Problem. The Company is
in the process of modifying or replacing those systems that are not Year 2000
compliant. Based upon the findings of the comprehensive review to date,
management believes that the Company's systems are compliant or will be
compliant by mid-
22
<PAGE> 23
1999. However, if modifications are not made or not completed within an adequate
time frame, the Year 2000 Problem could have a material adverse effect on the
operations of the Company.
In addition, the Company has commenced communications with its major
vendors and suppliers to determine their state of readiness relative to the Year
2000 Problem and the Company's exposure to third party Year 2000 issues.
Specifically, the Company has received assurance from its major supplier of
gaming equipment that such equipment does not have a Year 2000 Problem. However,
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.
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. The Company intends to continue to examine the potential impact of
the Year 2000 issues and will develop a contingency plan relative to the Year
2000 issues, if it believes one is necessary.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements of the Company required by Regulation S-B are
attached to this Report. Reference is made to Item 13 below for an index to the
financial statements and financial statement schedules.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Effective August 25, 1998, the Company dismissed KPMG Peat Marwick LLP
("KPMG") as its independent accountant. During the past two fiscal years, KPMG's
report on the Company's financial statements contained no adverse opinion or
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. The Company's decision was approved by
the Board of Directors on August 25, 1998. During the past two fiscal years and
for each subsequent interim period and through August 25, 1998, the Company
experienced no disagreement with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of KPMG, would have had a
connection with its report.
23
<PAGE> 24
Effective August 25, 1998, the Company engaged McGladrey & Pullen LLP
as the Company's independent accountant. During the last two fiscal years and
each subsequent interim period, the Company did not consult with McGladrey &
Pullen LLP on any matter.
24
<PAGE> 25
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors and executive officers of the Company and their ages are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Brustuen "Bruce" H. Lien(1)(2)(3) 71 Chairman of the Board of Directors
Jerry L. Baum(2) 49 President, Chief Executive Officer, Chief Operating Officer
and Director
Deanna B. Lien(1)(2)(3) 55 Director
David L. Crabb 40 Chief Financial Officer and Treasurer
George J. Nelson 37 Vice President, Corporate Counsel and Secretary
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Executive Committee.
(3) Member of the Stock Option Committee.
At each annual meeting of shareholders, each director is elected to
hold office for a one year term expiring at the next succeeding annual meeting
or until their successor is duly elected and qualified. Two of the directors,
Brustuen "Bruce" H. Lien and Deanna B. Lien are husband and wife. None of the
other directors or officers of the Company bears any family relationship to any
other director or officer. Each executive officer of the Company is elected for
a term of one year and serves until a successor is elected and qualified.
Brustuen "Bruce" H. Lien. Chairman of the Board of Directors since
August 10, 1990. Mr. Lien previously served as Chief Executive Officer and
President of the Company. Mr. Lien is also a principal and director of BHL
Capital, a private investment company, and of Pete Lien & Sons, Inc., a private
company that is a regional leader in the construction materials industry in the
upper Midwest.
Jerry L. Baum. Chief Executive Officer since March 1997, President
since June 1995 and Chief Operating Officer since April 1995. Mr. Baum was
elected a director in November 1995. From October 1, 1993 to February 1995, Mr.
Baum served as Project Director of the 4 Bears Casino. Mr. Baum was Manager of
Operations from March through October 1993 at the Royal River Casino, an Indian
casino owned by the Flandreau Santee Sioux Tribe. Previously,
25
<PAGE> 26
Mr. Baum was Director of Criminal Investigation for the State of South Dakota
from February 1987 to 1991.
Deanna B. Lien. Director since August 10, 1990. Ms. Lien previously
served as Vice President and Treasurer of the Company. Ms. Lien is also a
principal and director of Diggers Auto Salvage, Inc., a private company.
David L. Crabb. Chief Financial Officer since May 1993 and Treasurer
since August 1993. From March 1986 through May 1993, Mr. Crabb was a CPA for
Northwestern Engineering Company and Hills Materials Company. Prior to that, Mr.
Crabb worked for McGladrey & Pullen from September 1980 to March 1986.
George J. Nelson. Vice President and Corporate Counsel since September
1993 and Secretary since September 1995. From March 1990 to August 1993, Mr.
Nelson was the General Manager of First Gold Hotel and Casino in Deadwood, South
Dakota. Mr. Nelson was a Deputy States Attorney from November 1986 to March 1990
in Rapid City.
SECTION 16(a BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's officers and directors, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and to furnish the Company with copies.
Based on its review of the copies of the Section 16(a) forms received
by it, or written representations from certain reporting persons, the Company
believes that, during the last fiscal year, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION.
CASH COMPENSATION
The following table sets forth certain information concerning
compensation paid by the Company to the Chief Executive Officer and any
executive officer whose total annual salary and bonus exceeded $100,000 for the
last fiscal year.
26
<PAGE> 27
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION
COMPENSATION AWARDS ($)
------------------------- ---------- -----
Securities
Underlying
Options/SARs
Name and (#)
Principal Position Year Salary ($) Bonus ($) Options (#)
- ------------------ ---- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Brustuen "Bruce" H. 1998 -0- -0- -0- -0-
Lien(1) 1997 -0- -0- -0- -0-
Chairman of the Board 1996 -0- -0- -0- -0-
Jerry L. Baum(2) 1998 120,000 -0- 100,000 -0-
Chief Executive Officer 1997 120,000 -0- 400,000 -0-
1996 120,000 -0- 300,000 -0-
</TABLE>
- --------------
(1) Chief Executive Officer from April 1995 through March 1997.
(2) Chief Executive Officer since March 1997 and President since June 1995.
The foregoing compensation tables do not include certain fringe
benefits made available on a nondiscriminatory basis to all company employees
such as group health insurance, dental insurance, long-term disability
insurance, vacation and sick leave. In addition, some benefits which are made
available only to certain of the Company's officers, such as the use of a
Company vehicle, are not described, as the monetary value of such benefits is
less than 10 percent of each of the named executive officer's annual salary and
bonus.
27
<PAGE> 28
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted
Underlying Options to Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Share) Expiration Date
---- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Jerry L. Baum 100,000 22.7% $0.25 September 30, 2008
</TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Jerry L. Baum 456,104/543,896 $0/$0
</TABLE>
(1) Based on the bid price of the Common Stock on September 30, 1998.
COMPENSATION PURSUANT TO PLANS
The Company has adopted a Performance Stock Option Plan (the "Plan"),
approved by the Shareholders, for the benefit of certain employees, officers and
directors of the Company. The Stock Option Committee of the Board of Directors
selects the optionees and determines the terms and conditions of the stock
options granted pursuant to the Plan. Options to purchase 440,000 shares of
Common Stock were granted pursuant to the Plan during Fiscal 1998. As of
September 30, 1998, options to purchase 2,200,000 shares of Common Stock were
outstanding pursuant to the Plan, 921,612 of which were vested at September 30,
1998.
28
<PAGE> 29
COMPENSATION OF DIRECTORS
The Company does not compensate its directors for their services as
directors or pursuant to any other arrangements. The Company reimburses its
directors for expenses incurred related to their services as directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of outstanding shares of Common Stock as of December 31, 1998 by (i)
each person who is known by the Company to own beneficially 5% or more of the
outstanding shares of Common Stock; (ii) the Company's directors; (iii) all
named executive officers; and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Name Owned(1) Class
---- -------- -----
<S> <C> <C>
Brustuen "Bruce" H. Lien...................... 18,487,500(2)(4) 72.0%
3290 Lien Street
Rapid City, SD 57702
Deanna B. Lien(2)............................. 18,487,500(3)(4) 72.0%
3290 Lien Street
Rapid City, SD 57702
University of Wyoming Foundation.............. 1,900,000 8.0%
P. O. Box 3963
Laramie, WY 82071
Jerry L. Baum................................. 456,104(5) 1.9%
3290 Lien Street
Rapid City, SD 57702
All executive officers and directors as a
group (5 persons)............................. 19,334,279(4)(6) 72.9%
</TABLE>
- ---------------
29
<PAGE> 30
(1) Shares are considered beneficially owned, for purposes of this table, if
held by the person indicated, if such person, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise has or
shares the power to vote, to direct the voting of and/or to dispose of or to
direct the disposition of, such securities, or if the person has the right to
acquire beneficial ownership within sixty days, unless otherwise indicated.
(2) This number includes the shares of Common Stock which are beneficially
owned, or which may be deemed to be beneficially owned, by Brustuen "Bruce" H.
Lien. For purposes of this table, the same shares may be deemed to be
beneficially owned by Mr. Lien's wife, Deanna B. Lien.
(3) For purposes of this table, Deanna B. Lien is deemed to be the beneficial
owner of the shares of Common Stock which may be deemed to be beneficially owned
by her husband, Brustuen "Bruce" H. Lien.
(4) This number includes 2,000,000 shares of Common Stock which may be acquired
pursuant to a currently exercisable warrant.
(5) This number represents 456,104 shares of Common Stock which may be acquired
pursuant to currently exercisable stock options.
(6) This number includes 843,612 shares of Common Stock which may be acquired
pursuant to currently exercisable stock options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1998 and 1997, Mr. Lien and BHL Capital loaned money to the
Company under various promissory notes. These amounts loaned varied from month
to month and carried an interest rate ranging from prime rate plus 2% to 18% per
annum. The Company incurred interest expense, including interest that was
capitalized, relating to these notes payable of $394,278 and $27,699, for Fiscal
1998 and Fiscal 1997, respectively.
In March 1998, the Company borrowed an additional $500,000 from Mr.
Lien to repay a bank term note that was due in June 1998 and for working
capital. This loan is evidenced by a promissory note which is due in March 1999
and bears interest at 12%. The note requires monthly payments of $8,500. In
conjunction with this loan, the Company was required to pledge all of the Golden
Gates Casino's assets to a third party lender of Mr. Lien's.
Mr. Lien has pledged assets and/or personally guaranteed loans in order
for the Company to obtain financing which otherwise may not have been available
to the Company, as follows:
(a) Personal guarantee of a $800,000 note payable to a bank,
dated June 1996, for video lottery machines. The balance on the note at
September 30, 1998 and September 30, 1997 was $0 and $466,667,
respectively.
(b) Personal guarantee of a $100,000 conditional line of
credit to a bank, dated May 1997. The conditional line of credit
expired in May 1998.
30
<PAGE> 31
(c) Personal guarantee of a $900,000 letter of credit dated
November 13, 1997 relating to the Use Agreement. This letter of credit
expired September 30, 1998.
(d) Personal guarantee of a $925,000 letter of credit dated
September 28, 1998 for relating to the Use Agreement.
(e) Personal guarantee of the Construction Line of Credit. The
balance on the Construction Line of Credit at September 30, 1998 was
$4,616,336 and the Construction Line of Credit was paid in full on
October 22, 1998.
In consideration for previous pledges and guarantees, on January 26,
1994 the Company issued a warrant to Mr. Lien for 2,000,000 shares of Common
Stock at an exercise price of $1.00 per share. This warrant expires in January
2004. In addition, the Company entered into an indemnification agreement with
Mr. Lien whereby the Company agreed to indemnify Mr. Lien from all losses,
claims, damages and expenses relating to any guarantees and/or pledges of
collateral made by Mr. Lien on behalf of the Company.
The Company leases approximately 4,500 square feet of office space
located in Rapid City, South Dakota from BHL Capital pursuant to a lease that
expires September 30, 1999. The monthly lease payment, including real estate
taxes and utilities, is $2,597.
The Company sold a promissory note from a third-party to BHL Capital
for $110,000 on December 23, 1997. The sales price was approximately $8,000 less
than the remaining balance of the promissory note.
The Company also leases an airplane, on an as needed basis, from BHL
Capital. The Company incurred lease payments related to the airplane of $2,146
and $26,678 during Fiscal 1998 and Fiscal 1997, respectively.
31
<PAGE> 32
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
The following documents of the Company are filed as part of this
Report:
<TABLE>
<CAPTION>
Financial Statements Page
----
<S> <C>
Independent Auditors' Report for the Year Ended September 30, 1998..........................F-1
Independent Auditors' Report for the Year Ended September 30, 1997...........................F-2
Consolidated Balance Sheets at September 30, 1998 and 1997...................................F-3
Consolidated Statements of Operations for the
Years Ended September 30, 1998 and 1997....................................................F-5
Consolidated Statements of Stockholders' Equity for
the Years Ended September 30, 1998 and 1997................................................F-6
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1998 and 1997....................................................F-7
Notes to Consolidated Financial Statements...................................................F-8
</TABLE>
(a) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Articles of Incorporation.(1)
3.2 Third Amended and Restated Bylaws.(1)
4 Form of Common Stock Certificate.(2)
10.2 1992 Performance Stock Option Plan.(3)
10.3 Settlement Agreement dated September 30, 1994 between the
Registrant, Bruce H. Lien Company, Brustuen "Bruce" H. Lien and
Four Bears Investment Limited Liability Company.(4)
10.4 Development Agreement among the Company, Concorde Gaming of
Missouri, Inc. and the City of Lexington, Missouri dated
September 26, 1995.(1)
10.5 Indemnification Agreement between the Company and Bruce H.
Lien.(1)
10.6 Promissory Note in the amount of $690,000 dated September 30,
1996 issued by the Company to BHL Capital Corporation.(5)
32
<PAGE> 33
10.7 Settlement Agreement between The Three Affiliated Tribes of the
Fort Berthold Reservation and Bruce H. Lien Company dated
September 27, 1996.(4)
10.8 Loan Agreement between the Company and BNC National Bank of
Minnesota dated June 20, 1996 (5)
10.9 Term Note in the amount of $800,000 dated June 20, 1996 issued
by BNC National Bank to the Company (5)
10.10 Short-Term Revolving Note in the amount of $500,000 dated June
20, 1996 issued by BNC National Bank to the Company. (5)
10.11 Amendment No 1 to Settlement Agreement dated January 7, 1997
between BHL and FBILLC.(5)
10.12 Lease between Elevation 8000+ and Concorde Cripple Creek, Inc.
dated July 21, 1997.(6)
10.13 Agreement dated August 5, 1997, by and between Leo Equity Group,
Inc. and Concorde Gaming Corporation.(6)
10.14 Use Agreement dated June 25, 1997, by and between Casino
Princesa and Bayfront Park Management Trust.(6)
10.15 Joint Venture Agreement dated August 27, 1997, by and between
Concorde Gaming Corporation and Goldcoast Entertainment Cruises,
Inc.(6)
10.16 Vessel Construction Agreement dated August 26, 1997, by and
between Keith Marine, Inc. and Casino Princesa.(6)
10.17 Waiver Agreement dated March 20, 1998, by and between Goldcoast
Entertainment Cruises, Inc. and Concorde Gaming Corporation.(6)
10.18 Option Agreement dated April 20, 1998 between Concorde Gaming
Corporation and Bruce H. Lien.(6)
10.19 Promissory Note in the aggregate principal amount of $3,000,000
executed by Concorde Gaming Corporation and BHL Capital
Corporation.(6)
10.20 Loan Agreement between Princesa Partners and the lenders named
therein dated as of October 22, 1998.(+)
33
<PAGE> 34
10.21 Servicing and Intercreditor Agreement between Princesa Partners,
The National City Bank of Evansville, as servicer, and the
lenders set forth therein dated as of October 22, 1998.(+)
10.22 Security Agreement between Princesa Partners, Casino Princesa
and the lenders named therein dated as of October 22, 1998.(+)
10.23 Guaranty, Subordination Agreement, Security Agreement and
Indemnity by Casino Princesa for the benefit of the lenders
named therein, dated as of October 22, 1998.(+)
10.24 First Preferred Ship Mortgage by Princesa Partners in favor of
The National City Bank of Evansville, individually and as agent
for certain lenders, dated as of October 15, 1998.(+)
10.25 Guaranty by the Company for the benefit of the lenders named
therein dated as of October 22, 1998.(+)
10.26 Princesa Partners Joint Venture Agreement between Goldcoast
Entertainment Cruises, Inc. and Conami, Inc. dated as of October
22, 1998.(+)
10.27 Promissory Note to the order of BHL Capital Corporation in the
principal amount of $5,000,000 dated November 13, 1998.(+)
16 Letter re Change in Certifying Accountant.(7)
21 Subsidiaries of the Registrant.(+)
23.1 Consent of 1998 Independent Auditors.(+)
23.2 Consent of 1997 Independent Auditors.(+)
27 Financial Data Schedule.(+)
(+) Filed herewith
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1995 and incorporated herein by this reference.
(2) Previously filed with the Securities and Exchange Commission on May 6, 1991,
as an Exhibit to the Annual Report on Form 10-K of the Company for the fiscal
year ended September 30, 1990 and incorporated herein by this reference.
34
<PAGE> 35
(3) Previously filed with the Securities and Exchange Commission by the Company
on September 24, 1992 as Exhibit 10 to the Registration Statement on Form S-8,
file number 33-52388 and incorporated herein by this reference.
(4) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Current Report on Form 8-K dated September 27, 1996 and
incorporated herein by this reference.
(5) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Annual Report on Form 10-KSB for the year ended September
30, 1996 and incorporated herein by this reference.
(6) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Annual Report on Form 10-KSB for the year ended September
30, 1997 and incorporated herein by this reference.
(7) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Current Report on Form 8-K dated August 25, 1996 and
incorporated herein by this reference.
(b) Reports on Form 8-K:
1. The Company filed a Current Report on Form 8-K dated
August 25, 1998 under Item 4, filed on September 1,
1998.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CONCORDE GAMING CORPORATION
January 11, 1999 By /s/ Jerry L. Baum
------------------------------
Jerry L. Baum, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Brustuen "Bruce" H. Lien Chairman of the Board January 11, 1999
- ------------------------------------ of Directors
Brustuen "Bruce" H. Lien
/s/ Jerry L. Baum President, Chief Executive January 11, 1999
- ------------------------------------ Officer and Director
Jerry L. Baum
/s/ Deanna B. Lien Director January 11, 1999
- ------------------------------------
Deanna B. Lien
/s/ David L. Crabb Chief Financial Officer, January 11, 1999
- ------------------------------------ Principal Accounting
David L. Crabb Officer and Treasurer
</TABLE>
36
<PAGE> 37
[McGladrey & Pullen, LLP Letterhead]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
CONCORDE GAMING CORPORATION
Rapid City, South Dakota
We have audited the accompanying consolidated balance sheet of CONCORDE GAMING
CORPORATION AND SUBSIDIARIES as of September 30, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CONCORDE
GAMING CORPORATION AND SUBSIDIARIES as of September 30, 1998, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As described in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for pre-opening and start-up costs in 1998.
/s/ McGladrey & Pullen, LLP
Rapid City, South Dakota
November 13, 1998
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Concorde Gaming Corporation:
We have audited the accompanying consolidated balance sheet of Concorde
Gaming Corporation and subsidiaries as of September 30, 1997, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Concorde Gaming Corporation and subsidiaries as of September 30, 1997, and
the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 21, 1997
F-2
<PAGE> 39
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ---------------------------------------------------------- --------------------- -------------
<S> <C> <C>
Current assets
Cash $ 714,764 $ 1,073,910
Restricted cash - 288,894
Trade receivables 19,575 33,175
Inventory 39,304 29,470
Property held for sale 167,510 195,216
Prepaid expenses, other 100,203 559,939
--------------------- -------------
TOTAL CURRENT ASSETS 1,041,356 2,180,604
--------------------- -------------
Investments and long-term receivables
Notes receivable from related party (note 4) 95,000 95,000
Investment in unconsolidated affiliate (note 5) 113,825 200,413
Deferred income taxes (note 9) 285,000 66,000
Other 146,730 1,250
--------------------- -------------
640,555 362,663
--------------------- -------------
Property and equipment
Land 1,097,080 1,097,080
Vessel construction in progress 8,098,943 706,250
Gaming equipment, fixtures and furniture 3,506,871 1,348,712
Vehicles 58,274 58,274
Leasehold improvements 186,108 -
--------------------- -------------
12,947,276 3,210,316
Less accumulated depreciation and amortization (279,670) (83,412)
--------------------- -------------
12,667,606 3,126,904
--------------------- -------------
Intangibles
Dock rights 319,504 355,000
Other, principally goodwill, net 569,090 711,359
Casino development and financing costs, net - 170,410
--------------------- -------------
888,594 1,236,769
--------------------- -------------
$ 15,238,111 $ 6,906,940
===================== =============
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 40
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- ---------------------------------------------------------- --------------------- -------------
<S> <C> <C>
Current liabilities
Notes payable to related party (note 6) $ 490,500 $ -
Current maturities of long-term debt (note 7) 597,540 570,085
Accounts payable 356,294 109,836
Accrued expenses
Payroll and payroll taxes 129,971 100,363
Accrued interest 400,550 2,285
Other 432,193 198,380
Income taxes payable 57,872 206,471
--------------------- -------------
TOTAL CURRENT LIABILITIES 2,464,920 1,187,420
--------------------- -------------
Long-term debt, less current maturities (note 7 and 15) 6,629,618 476,638
--------------------- -------------
Note payable to related party (note 6) 3,225,000 -
--------------------- -------------
Commitments and contingencies (notes 12 and 13)
Stockholders' equity
Common stock, par value $.01 per share, authorized
500,000,000 shares; issued and outstanding 23,673,126
at September 30, 1998 and 1997 236,731 236,731
Preferred stock, par value $.01 per share, authorized
10,000,000 shares; no shares issued and out-
standing at September 30, 1998 and 1997 - -
Additional paid-in capital 3,855,246 3,858,732
Retained earnings (accumulated deficit) (1,173,404) 1,280,737
--------------------- -------------
2,918,573 5,376,200
Less stock subscription in the form of a note and
related accrued interest receivable (note 8) - (133,318)
--------------------- -------------
2,918,573 5,242,882
--------------------- -------------
$ 15,238,111 $ 6,906,940
==================== =============
</TABLE>
F-4
<PAGE> 41
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------- --------------- --------------
<S> <C> <C>
Revenues
Casino $ 3,948,035 $ 666,103
Food and beverage 301,271 105,354
Video lottery 53,499 5,705,609
Management Agreement (note 2) - 208,371
Other 18,322 4,175
--------------- --------------
GROSS REVENUES 4,321,127 6,689,612
Less: promotional allowance 94,440 13,840
--------------- --------------
NET REVENUES 4,226,687 6,675,772
--------------- --------------
Costs and expenses:
Casino 2,541,533 431,078
Food and beverage 195,933 61,864
Video lottery 69,498 5,367,533
Other operating expense - 74,603
Management fees, to minority partner, related party 260,000 -
Business development costs 175,169 195,857
Selling, general and administrative 1,438,195 849,027
Depreciation and amortization 346,800 508,944
Pre-opening and start-up costs (note 1) 1,391,170 -
Impairment of long-lived assets (note 1) - 376,897
--------------- --------------
6,418,298 7,865,803
--------------- --------------
LOSS FROM OPERATIONS (2,191,611) (1,190,031)
Other income (expense):
Interest income 19,482 133,382
Gain/(loss) on sale of equipment (2,852) 19,750
Gain on termination of management agreement - 2,819,750
Other income 19,060 40,289
Interest expense and financing costs:
Related parties (127,726) (27,699)
Other (196,313) (256,042)
Equity in earnings of unconsolidated affiliate (note 5) - 9,800
--------------- --------------
(288,349) 2,739,230
--------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,479,960) 1,549,199
Federal and state income taxes (benefit) (note 9) (285,000) 619,000
--------------- --------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (2,194,960) 930,199
Cumulative effect of change in accounting principle related to
pre-opening and start-up costs (notes 1 and 9) (259,181) -
--------------- --------------
NET INCOME (LOSS) $ (2,454,141) $ 930,199
=============== ==============
Basic and diluted earnings (loss) per share (note 1):
Income (loss) before cumulative effect of accounting change $ (0.09) $ 0.04
Cumulative effect of change in accounting principle (0.01) -
--------------- --------------
Net income (loss) $ (0.10) $ 0.04
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 42
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Stock
subscription
in the form
of a note
Retained and related
Additional earnings accrued
Number Common paid-in (accumulated interest Treasury
of shares stock capital deficit) receivable stock Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance September 30, 1996 26,755,193 $ 267,552 $ 3,907,547 $ 350,538 $ (183,877) $ (317,602) $ 4,024,158
Net income -- -- -- 930,199 -- -- 930,199
Cancellation of 4,825,400 shares
of common stock related to
liquidation of subsidiary
into parent (4,825,400) (48,254) (269,348) -- -- 317,602 --
Issuance of 1,743,333 shares of
common stock relating to
asset exchange agreement 1,743,333 17,433 191,767 -- -- -- 209,200
Interest earned on note
receivable (note 8) -- -- 28,766 -- 509 -- 29,275
Principal payments received
on note receivable (note 8) -- -- -- -- 50,050 -- 50,050
---------- --------- ----------- ----------- ---------- ---------- -----------
Balance September 30, 1997 23,673,126 236,731 3,858,732 1,280,737 (133,318) -- 5,242,882
Net loss -- -- -- (2,454,141) -- -- (2,454,141)
Sale of note receivable -- -- (7,975) -- 117,975 -- 110,000
Interest earned on note
receivable (note 8) -- -- 4,489 -- 1,343 -- 5,832
Principal payments received
on note receivable (note 8) -- -- -- -- 14,000 -- 14,000
---------- --------- ----------- ----------- ---------- ---------- -----------
Balance September 30, 1998 23,673,126 $ 236,731 $ 3,855,246 $(1,173,404) $ -- $ -- $ 2,918,573
========== ========= =========== =========== ========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 43
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,454,141) $ 930,199
Adjustments to reconcile net income (loss) to net cash flows
(used in) operating activities:
Depreciation and amortization 346,800 508,944
Deferred income taxes (219,000) (112,600)
Provision for doubtful accounts 3,113 -
Equity in earnings of unconsolidated affiliate - (9,800)
Gain on termination of management agreement - (2,819,750)
(Gain) loss on disposal of property and equipment, real estate 2,852 (19,750)
Write-off of casino development costs and long-lived assets 259,181 376,897
Change in assets and liabilities:
Decrease in receivables - trade, property held for sale 38,193 274,282
Decrease (increase) in prepaid expenses and inventory 449,902 (409,574)
Increase (decrease) in accounts payable and accrued expenses 908,144 (242,780)
Increase (decrease) in income taxes payable (148,599) 79,871
Increase in other - 4,934
----------------- ---------------
NET CASH (USED IN) OPERATING ACTIVITIES (813,555) (1,439,127)
----------------- ---------------
Cash flows from investing activities:
Advances on long-term receivables - (121,035)
Principal payments received on long-term receivables - 5,766,985
Proceeds from termination of management agreement - 2,851,061
Purchase of property and equipment (7,711,619) (856,690)
Purchase of intangibles (19,047) (454,306)
Proceeds from sale of property and equipment, real estate 300 102,314
Payments for casino development costs - (177,626)
Payments related to asset exchange with North Star Casino, LLC - (480,254)
Distributions from unconsolidated affiliate 67,340 -
Decrease (increase) in restricted cash 288,894 (288,894)
Decrease (increase) in other assets (145,480) 26,502
----------------- ---------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (7,519,612) 6,368,057
----------------- ---------------
Cash flows from financing activities:
Net change in short-term borrowings, related parties 490,500 (595,000)
Proceeds from long-term borrowings:
Related parties 3,225,000 -
Other 4,706,025 20,201
Principal payments on long-term borrowings, other (577,336) (3,480,119)
Payments received on stock subscription in the form of a note
and related accrued interest receivable 129,832 79,326
----------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 7,974,021 (3,975,592)
----------------- ---------------
NET INCREASE (DECREASE) IN CASH (359,146) 953,338
Cash:
Beginning 1,073,910 120,572
----------------- ---------------
Ending $ 714,764 $ 1,073,910
================= ===============
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest, net of capitalized interest 1998 $29,589; 1997 none $ 256,123 $ 409,602
Income taxes 82,599 545,000
Supplemental Schedule of Noncash Investing and Financing Activities
Acquisition of property and equipment by incurring long-term debt $ 2,051,746 $ -
Cancellation of treasury stock - 317,602
Note receivable received for sale of Video Lottery Casino assets - 51,000
Fair value of common stock issued to North Star Casino, LLC - 209,200
Property and equipment transferred to property held for resale - 195,216
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE> 44
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations:
Concorde Gaming Corporation and its subsidiaries (the "Company") is a
diversified gaming company that seeks to capitalize on its experience as an
operator of casinos and gaming machines. Concorde currently owns and operates
the Golden Gates Casino in Black Hawk, Colorado and commenced operations of an
offshore gaming vessel from Miami, Florida in October 1998.
The Company, through its subsidiary Bruce H. Lien Company ("BHL"), previously
owned and operated video lottery route operations in South Dakota and developed
and managed the 4 Bears Casino and Lodge ("4 Bears Casino") for the Three
Affiliated Tribes ("TAT") on Indian land in North Dakota in accordance with a
management agreement (the "Management Agreement"). In February 1997 the Company
received a $8.65 million payment from TAT under a buyout settlement agreement
(the "Settlement Agreement") in exchange for termination of the Management
Agreement and dismissal of outstanding disputes with TAT. The video lottery
operations were exchanged in June 1997 in conjunction with the acquisition of
the Golden Gates Casino.
Principles of Consolidation:
The consolidated financial statements include the accounts of Concorde Gaming
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Subsidiaries at
September 30, 1998 include Concorde Cripple Creek, Inc. ("Concorde Cripple
Creek") (100% owned), Concorde Gaming of Missouri, Inc. (100%), Concorde
Cruises, Inc. (100%) and Conami, Inc. (100%). Through subsidiaries, the Company
owns an 80% interest in Bayfront Ventures and Princesa Partners, joint ventures
that own and operate the offshore gaming vessel in Miami, Florida. During fiscal
1998 the 100% owned subsidiary Midwest Gaming, Inc. ceased operations and was
dissolved.
Use of Estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
Significant Accounting Policies:
Cash and Cash Equivalents:
Cash and cash equivalents include cash on hand, demand deposits, and short-term
investments with maturities of three months or less.
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(Continued)
Restricted Cash:
Restricted cash at September 30, 1997 was held at a bank in accordance with an
agreement with one of the Company's lenders. This restriction on cash was
released during the year ended September 30, 1998.
Inventory:
Inventory consists primarily of food, beverage and promotional items.
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.
F-8
<PAGE> 45
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Property and equipment:
Property and equipment are recorded at cost. Assets are depreciated over their
estimated useful lives or amortized over their lease terms using the
straight-line or accelerated methods. Estimated useful lives for furniture,
gaming equipment, and vehicles are 5 to 7 years, for leasehold improvements the
life of the underlying lease, for vessels and improvements 10 to 25 years, and
for buildings and improvements 39 years.
The Company's policy is to capitalize interest incurred on debt during the
course of qualifying construction projects. Such costs are amortized over the
related asset's estimated useful life. Capitalized interest totaled $460,555 and
none for the years ended September 30, 1998 and 1997, respectively.
Pre-opening and start-up costs:
The American Institute of Certified Public Accountants' Accounting Standards
Executive Committee issued SOP 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. In
accordance with this standard the Company changed its method of accounting for
start-up costs and organizational costs in 1998. Previously, start-up activities
and organization costs were capitalized and amortized over 5 years. The effect
of this change for 1998 resulted in an increase in loss from operations of
$1,372,804 ($(.06) per common share). The cummulative effect of this change on
prior years of $259,181 ($(.01) per common share), has been included in 1998
operations. There was no tax effect as a result of this change.
F-9
<PAGE> 46
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(Continued)
Intangible Assets and Property Held for Sale:
Intangible assets, primarily goodwill (excess of purchase price over net assets
acquired) are amortized over estimated useful lifes of 10 to 15 years using the
straight-line method. Intangible assets are evaluated for recoverability under
the requirements of SFAS No. 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of whenever impairment
indicators are present. The Company adopted SFAS No. 121 in the year ended
September 30, 1997, and recorded charges to income for the impairment of
$270,897 and $106,000, respectively, for casino development costs and property
and equipment that have been classified as property held for sale.
Revenue Recognition:
The Company recognizes gaming revenues as the net win from gaming operations,
which is the difference between gaming wins and losses.
Promotional allowances consist primarily of food and beverage items furnished
without charge to customers. The retail value of such items is included in the
respective revenue classification and is then deducted as promotional
allowances.
Income Taxes:
The Company provides for income taxes under SFAS No. 109 Accounting for Income
Taxes. Deferred tax assets and liabilities are recognized for the future tax
effects attributable to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
amounts. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
Earnings Per Share:
In 1998, the Company adopted the provisions of SFAS No. 128, Earnings per Share
which requires the reporting of basic earnings per share and diluted earnings
per share. Basic earnings per share is computed by dividing net earnings for the
period by the weighted average common shares outstanding for the period. Diluted
earnings per share amounts assume the conversion, exercise or issuance of all
potential common stock instruments unless the effect is to reduce the loss or
increase the income per common share. The provisions of SFAS No. 128 have been
applied to all periods presented in the accompanying financial statements. A
reconciliation of net income (loss) for basic and diluted earnings per share is
as follows:
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(Continued)
Earnings Per Share (Continued):
F-10
<PAGE> 47
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30, 1998
Loss Shares Loss
(numerator) (denominator) Per Share
-------------------------------------------------------
<S> <C> <C> <C>
Basic EPS
---------
Net loss before cumulative effect
of accounting change $ (2,194,960) $ (0.09)
Cumulative effect of accounting change (259,181) (0.01)
-------------- --------------
Net loss $ (2,454,141) 23,673,126 $ (0.10)
============== ==============
Effect of dilutive securities
Options
Diluted EPS
--------------
Loss before cumulative effect
of accounting change $ (2,194,960) $ (0.09)
Cumulative effect of accounting change (259,181) (0.01)
-------------- -------------- --------------
Net loss plus assumed conversion of options $ (2,454,141) 23,673,126 $ (0.10)
============== ============== ==============
</TABLE>
Options to purchase 2,200,000 shares of common stock ranging from $.15 to $.42
per share, 80,000 shares of common stock at $1.50 per share, 2,000,000 shares of
common stock at $1 per share and 960,000 shares of common stock ranging from
$.075 to $1 per share were outstanding during the year but were not included in
the computation of diluted EPS because the effect is anti-dilutive or the
exercise price was greater than the average market price of the common shares.
<TABLE>
<CAPTION>
Year Ended September 30, 1997
Income Shares Net Income
(numerator) (denominator) Per Share
----------------------------------------------------
<S> <C> <C> <C>
Basic EPS
---------
Net income available to common stockholders $ 930,199 22,101,739 $ 0.04
============== ==============
Effect of dilutive securities
Options 125,365
Diluted EPS
-----------
Net income available to common stockholders
-------------- -------------- --------------
plus assumed conversion of options $ 930,199 22,227,104 $ 0.04
============== ============== ==============
</TABLE>
Reclassifications:
Certain amounts in the September 30, 1997 financial statements have been
reclassified to conform to the presentation used at September 30, 1998.
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(Continued)
Recently Issued Accounting Standard:
F-11
<PAGE> 48
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
SFAS 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.
Note 2. Management Agreement and Settlement Agreement
BHL had an agreement with the TAT for the management of the 4 Bears Casino
located on the Fort Berthold Indian Reservation near New Town, North Dakota. The
Management Agreement governed the relationship between the Company and the Tribe
with respect to the construction, renovation, financing, and management of the
casino, lodge, restaurant, and bingo hall.
On September 27, 1996, the Company and TAT entered into the Settlement Agreement
to resolve disputes that arose out of the Management Agreement. On February 13,
1997, TAT paid the Company $8.65 million in accordance with the Settlement
Agreement and in consideration for the termination of the Management Agreement.
At the time of payment, the Company had $5,830,250 of notes receivable and
unamortized intangibles related to the Management Agreement, resulting in a gain
from the termination of the Management Agreement of $2,819,750 which has been
recorded as other income in the 1997 statement of operations.
Note 3. Acquisitions
North Star Asset Exchange Agreement:
In June 1997, Concorde Cripple Creek completed the exchange of substantially all
of the assets related to its video lottery route operations in South Dakota (the
"Video Lottery Assets"), pursuant to the terms of an Asset Exchange Agreement
(the "Exchange Agreement") dated June 12, 1997 by and among the Company, its
subsidiaries, and North Star Casino Limited Liability Company ("North Star").
Effective July 21, 1997, the Company completed the acquisition of substantially
all of North Star's assets used in its business of owning and operating the
Golden Gates Casino in Black Hawk, Colorado (the "Casino Assets"). A condition
to the Company acquiring the Casino Assets was the licensing of the Company by
the Colorado Gaming Commission (the "Commission") on or before September 1,
1997. The Commission licensed a wholly owned subsidiary of the Company on July
21, 1997. This acquisition was accounted for as a purchase and the operating
results of the Casino Assets have been included in the Company's consolidated
financial statements since the date of acquisition.
F-12
<PAGE> 49
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 3. Acquisitions (Continued)
North Star Asset Exchange Agreement (Continued):
In addition to the transfer of Video Lottery Assets, the Company paid
approximately $480,000 in cash, assumed approximately $773,000 in liabilities
and issued 1,743,333 shares of the Company's common stock. The exchange was
accounted for using fair market value and resulted in $616,850 of goodwill that
is being amortized using the straight-line method over 15 years.
The Company's primary source of revenue and net income are currently dependent
upon the results obtained from the Casino Assets. Unaudited profroma
consolidated financial operations for the year ended September 30, 1997 as
though the Casino Assets had been acquired as of October 1, 1996, are as
follows:
<TABLE>
<CAPTION>
1997
-------------------
<S> <C>
Revenues $ 9,483,384
Net income 952,761
Net income per common share 0.04
</TABLE>
Bayfront Ventures and Princesa Partners:
In August 1997, the Company acquired an 80% interest in Bayfront Ventures, a
Florida joint venture. The acquisition was accounted for as a purchase and the
operating results of the business have been included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price of this business was an initial payment of $650,000 and future
consideration equal to 2% of Bayfront Venture's gaming win per operating year
for each of the first three operating years. The future payments will be a
minimum of $175,000 but not greater than $400,000. Once the actual payment is
determined for each of the first three operating years, the amount will be
recorded as goodwill and amortized using the straight-line method over the
remaining term of the dock lease. The $650,000 initial purchase price includes
$355,000 of intangible dock lease rights and is being amortized over the term of
the dock lease (10 years). The joint venture also has entered into an agreement
to lease dock space requiring annual payments ranging from $400,000 to $475,000.
The Company has an 80% interest in Princesa Partners, a Florida joint venture
created in 1998 to own the gaming vessel (the Princesa) and certain equipment
and improvements. All assets and liabilities related to the Princesa were
transferred from Bayfront Ventures to Princesa Partners. Bayfront Ventures has
entered into a lease for hire agreement with Princesa Partners whereby Bayfront
Ventures will lease the Princesa and related equipment and improvements.
Note 4. Notes Receivable from Related Party
Notes receivable from related party consist of:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Non-interest bearing note receivable,
quarterly payments based on future
distributions to minority partner in
Bayfront Ventures $ 95,000 $ 95,000
Less current maturities -- --
-------------- --------------
$ 95,000 $ $95,000
============== ==============
</TABLE>
F-13
<PAGE> 50
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 5. Investment in Unconsolidated Affiliate
The Company owns a 38.5% interest in Bayou Gaming, Inc. ("Bayou"), which
operates a video poker route in Louisiana. At September 30, 1998 the Company's
investment exceeded its underlying equity by $48,110 and is being amortized over
a remaining term of two years. Prior to November 1996 the Company accounted for
its investment using the equity method of accounting under which its
proportionate share of the earnings of the subsidiary are included in the
consolidated financial statements.
In November 1996, each parish (county) in Louisiana gave voters the opportunity
to decide if video poker would continue to be allowed to operate within each
parish. If the voters decided to disallow video poker operations within the
parish, all existing video poker establishments could operate until June 30,
1999. A significant portion of Bayou's routes are located in parishes that voted
to cease the video poker operations as of June 30, 1999. As a result, the
Company discontinued recording its share of any equity in earnings generated by
Bayou effective November 1996. Management anticipates Bayou's operations will
generate sufficient cash flows prior to the termination of video poker in these
parishes to recover its investment of $113,825 at September 30, 1998.
Note 6. Notes Payables to Related Parties
Notes payable consists of:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
Z<S> <C> <C>
Unsecured note payable to the Company's majority stockholder, monthly
payments of $8,500 plus interest at prime plus 3.5%,
due March 1999 $ 440,500 $ --
Unsecured note payable to the Company's majority shareholder
with interest at 18%, due on demand 50,000 --
-------------- --------------
Short-term notes payable to related parties $ 490,500 $ --
============== ==============
</TABLE>
Note 6. Notes Payables to Related Parties (Continued)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Various unsecured notes payable to a company controlled by the Company's
majority stockholder with interest at 18%, due on
demand. (A) $ 3,225,000 $ --
Less current maturities -- --
-------------- --------------
Long-term notes payable to related parties $ 3,225,000 $ --
============== ==============
</TABLE>
(A) In November 1998, these notes payable to a company controlled by
the Company's majority stockholder were refinanced with one note
payable to a company controlled by the Company's majority
stockholder for advances up to $5.0 million. The interest rate
remains at 18% and the note is due on demand, however, the
majority stockholder has waived his rights to demand payment on
the $5.0 million note until after October 1, 1999. Therefore,
these notes have been classified as long-term at September 30,
1998.
F-14
<PAGE> 51
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 7. Long-term Debt
Long-term debt consists of:
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Mortgage payable to third party in monthly installments
of $5,220 including interest at prime plus 2%,
due April 2005, secured by real estate. $ 296,802 $ 326,554
Mortgage payable to third party in monthly installments
of $329 including interest at 9.25%, due May 2001,
secured by real estate. 39,329 39,625
11.5% note payable to a vendor in monthly installments
of $6,206 including interest, due September 1999,
secured by slot machines. 69,693 132,500
9% note payable to a bank in monthly installments of
$419 including interest, due June 2002, secured by
a vehicle. 15,970 19,396
Note payable to a bank, interest paid monthly at prime
plus 3.75%, due September 1998, secured by first
preferred ship mortgage, guaranteed by majority
stockholder (A). 4,616,336 --
Note 7. Long-term Debt (Continued)
Accounts payable, property and equipment related,
subsequent to September 30, 1998 refinanced with
long-term debt. See Note 15 (A). 2,051,746 --
10% note payable to a third party in monthly installments
of $1,694 including interest, due October 2001,
secured by equipment. 52,473 --
Other notes, due in various monthly installments to March
2006, at various rates from 6.5% to 7.15%, secured in
part by property and equipment. 84,809 61,978
Note payable to a bank paid off during the year ended
September 30, 1998. -- 466,670
---------------- ----------------
7,227,158 1,046,723
Less current maturities (597,540) (570,085)
================ ================
$ 6,629,618 $ 476,638
================ ================
</TABLE>
The prime interest rates at September 30, 1998 and 1997 were 8.25% and 8.5%,
respectively.
(A) In October 1998, this note payable and accounts payable, property and
equipment related, were refinanced with long-term financing, see Note 15.
Therefore, the obligations have been classified as long-term at September 30,
1998.
F-15
<PAGE> 52
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The future aggregate annual maturities of long-term debt at September 30, 1998
after giving effect to the refinancing described above are as follows:
<TABLE>
<CAPTION>
Fiscal year ending:
<S> <C>
1999 $ 597,540
2000 830,864
2001 960,579
2002 991,417
2003 1,095,639
Thereafter 2,751,119
------------------
$ 7,227,158
==================
</TABLE>
Note 8. Stock Subscription in the Form of a Note and Related Accrued Interest
Receivable
The stock subscription in the form of a note and related accrued interest
receivable was due from an unrelated corporation. The note was assigned to the
Company by its majority stockholder as consideration for the purchase of Company
common stock. Due to the length to maturity of the note and full collection
being dependent upon the future success of the maker,
F-16
<PAGE> 53
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 8. Stock Subscription in the Form of a Note and Related Accrued Interest
Receivable (Continued)
which could not be assured, the note and related accrued interest receivable
have been reflected as a stock subscription receivable and interest on the note
is credited to additional paid-in capital as it is earned.
During the year ended September 30, 1998, this note was sold to a company
controlled by the majority stockholder for an amount approximately $8,000 less
than the remaining principal balance. As a result, Additional Paid-In Capital
was reduced by this amount.
Note 9. Income Taxes
The income tax provision (benefit) for the years ended September 30, 1998 and
1997 is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Current, Federal and State $ (66,000) 655,000
Deferred (219,000) (36,000)
----------- ------------
$ (285,000) 619,000
=========== ============
</TABLE>
The income tax provision (benefit) differs from the amount of income tax
determined by applying the statutory tax rate to pretax income including
cumulative effect of change in accounting principle due to the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Computed "expected" tax expense (benefit) $ (931,300) 526,730
Valuation allowance 684,000 --
Permanent differences, net 28,339 49,100
State income taxes, net of federal effect -- 1,980
Other (66,039) 41,190
----------- -----------
$ (285,000) 619,000
=========== ===========
</TABLE>
Note 9. Income Taxes (Continued)
Net deferred tax asset (liabilities) are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Intangibles $ -- 30,000
Start-up costs 684,000 --
Net operating loss carryback 324,000 --
Reserves not currently deductible 26,000 36,000
----------- -----------
1,034,000 66,000
Valuation allowance (684,000) --
----------- -----------
350,000 66,000
Deferred tax liabilities:
Property and equipment 65,000 --
----------- -----------
Net $ 285,000 66,000
=========== ===========
</TABLE>
F-17
<PAGE> 54
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
For the year ended September 30, 1998, there is no income tax benefit related to
the cumulative effect of the change in accounting principles related to
pre-opening and start up costs because of the recorded valuation allowance
associated with the deferred tax asset.
Note 10. Stock Option Plan and Stock Warrants Issued as Compensation
The Company has reserved 2,200,000 shares of its common stock for issuance under
the 1992 Performance Stock Option Plan (the "Plan"). The Plan allows for the
issuance of incentive stock options and nonqualified stock options to certain
officers, directors, and employees of the Company. Incentive stock options may
be granted at prices not less than fair market value on the date of grant, while
nonqualified stock options may be granted at prices less than fair market value
on the date of grant. At September 30, 1998, 2,200,000 incentive stock options
were issued and outstanding under the Plan. The options were granted at exercise
prices ranging from $0.15 to $0.42 per share and vest ratably over a five-year
period. Options for the purchase of 921,612 shares were vested at September 30,
1998. No options under the Plan have been exercised. Options for the purchase of
314,030 shares, issued in fiscal year 1994, were cancelled and reissued in
January 1997. The exercise price per share was decreased from $1.00 to $0.15.
F-18
<PAGE> 55
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 10. Stock Option Plan and Stock Warrants Issued as Compensation
(Continued)
Summarized information for all options is as follows for the years
ended September 30:
<TABLE>
<CAPTION>
1998 1997
----------------------------- ----------------------------
Weighted Weighted
Average Average
Exercise Exercise
Outstanding Options Price Options Price
--------------- ----------- ------------- ----------
<S> <C> <C> <C> <C>
Beginning of year 1,860,000 $ 0.25 1,110,000 $ 0.32 (A)
Granted 440,000 $ 0.25 800,000 $ 0.15
Exercised 0 0
Cancelled (100,000) $ 0.28 (50,000) $ 0.41
--------------- -------------
End of year 2,200,000 $ 0.25 1,860,000 $ 0.25
=============== =============
Exercisable at end of year 921,612 $ 0.24 593,612 $ 0.23
=============== =============
Options available for grant 0 340,000
=============== =============
</TABLE>
(A) Reflects the modification of the exercise price on options for 314,030
shares in fiscal 1997.
The following table summarizes information about the options outstanding at
September 30, 1997:
<TABLE>
<CAPTION>
Exercise Prices Outstanding Life Price Exercisable Price
------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
$ 0.15 - $ 0.25 1,504,030 8.5 $ 0.18 614,030 $ 0.15
$ 0.40 - $ 0.42 695,970 7.3 $ 0.40 307,582 $ 0.41
------------ --------------
2,200,000 7.9 $ 0.25 921,612 $ 0.24
============ ==============
</TABLE>
In June 1995, the Company issued a warrant for the purchase of 80,000 shares of
the Company's common stock at an exercise price of $1.50 per share to a
financial advisor for services rendered. The warrant is exercisable through
February 1, 1999.
In January 1994, the Company granted its majority stockholder a warrant to
purchase 2,000,000 shares of the Company's common stock at $1 per share through
January 2004. The warrant was issued as consideration for the stockholder's
financial accommodations and guarantees of over $9,000,000 in Company debt.
In December 1993, December 1994 and November 1995, the Company granted warrants
to purchase 960,000 common shares in conjunction with the terms of a note
payable to an individual. The warrants have exercise prices ranging from $0.75
to $1.00 per common share and expire between December 1998 and November 2000.
F-19
<PAGE> 56
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 10. Stock Option Plan and Stock Warrants Issued as Compensation
(Continued)
The Company has adopted the disclosures-only provision of SFAS No. 123,
Accounting for Stock-Based Compensation. The Company applies APB Opinion No. 25
and related interpretations in accounting for its stock options. Under APB 25,
no compensation cost has been recognized in the financial statements for the
Stock Option Plan. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model. Had compensation cost for
the stock option grants been determined based on the fair value at the date of
grant for awards consistent with the provisions of SFAS 123, the Company's net
income per common and common equivalent share would have been decreased to the
pro forma amounts below for the years ended September 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income (loss) - as reported $ (2,454,141) $ 930,199
Net income (loss) - pro forma $ (2,484,089) $ 887,648
Basic earnings per share - as reported $ (0.10) $ 0.04
Basic earnings per share - pro forma $ (0.10) $ 0.04
Diluted earnings per share - pro forma $ (0.10) $ 0.04
Diluted earnings per share - pro forma $ (0.10) $ 0.04
</TABLE>
The fair value of each option granted in fiscal year 1998 and 1997 was estimated
using the following assumptions for the Black-Scholes option-pricing model: (i)
no dividends, (ii) expected volatility for both years of 30%, (iii) risk free
interest rates averaging 5.25% for 1998 and 6% for 1997, and (iv) the expected
average life of 5 years for both years. The weighted average fair value of the
options granted in 1998 and 1997 were $0.07 and $0.04, respectively. Because the
SFAS 123 method of accounting has not been applied to options granted prior to
October 31, 1995, the resulting pro forma net income may not be representative
of that to be expected in future years.
Note 11. Related Party Transactions
Rent expense to a company controlled by the Company's majority stockholder
totaled $31,172 and $34,350 for 1998 and 1997, respectively, for an office space
lease that expires September 30, 1999.
The Company also leases an airplane from a company controlled by the Company's
majority stockholder. The lease payments are based on the Company's actual usage
and totaled $2,146 and $26,678 during 1998 and 1997, respectively.
Interest expense including capitalized interest relating to notes payable to the
majority stockholder and a company controlled by the majority stockholder was
$394,278 and $27,699 for the years 1998 and 1997, respectively.
F-20
<PAGE> 57
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 12. Commitments
Use Agreement:
In June 1997, Bayfront Ventures entered into a Use Agreement ("Use Agreement")
with Bayfront Park Management Trust, a limited agency and instrumentality of the
City of Miami, Florida (the "Trust"). The Use Agreement grants Bayfront Ventures
the exclusive right to use the Trust's docking facilities at Bayfront Park for
the purpose of docking vessels, including an offshore gaming vessel.
The initial term of the Use Agreement is for five years commencing September 1,
1997 with the option to extend for one additional five year term ("Extension
Term"). The Use Agreement was amended in August 1997, to extend the commencement
date of the Use Agreement from September 1, 1997 to October 1, 1997.
Bayfront shall have a right of first refusal to extend the Extension Term, if
exercised, for one additional five year term provided the Trust in its sole
discretion has determined to permit the continued used of the Trust's docking
facilities by a gaming vessel and there has been no event of default under the
Use Agreement caused by Bayfront Ventures. The Use Agreement provides that
Bayfront Ventures shall pay the Trust annual fees as follows: $400,000 in year
one, $450,000 in years 2 and 3, and $475,000 in year 4 and 5. In addition, as of
September 30, 1998, Bayfront Ventures has provided a $925,000 irrevocable letter
of credit for the benefit of the Trust to secure the payment of the annual fees
for the third and fourth years of the Use Agreement. The letter of credit is
secured by the personal guarantee of the majority stockholder and a mortgage on
certain real estate owned by a company controlled by the majority stockholder.
The Company is required to pay a fee of $350/day for so long as the real estate
is collateral for the letter of credit. In 1998 $114,000 was included in
interest and financing costs. Bayfront Ventures is required to provide a letter
of credit throughout the term of the Use Agreement, in an amount equal to the
next two years' annual fees.
Leases:
The Company has several noncancelable operating leases, primarily for dock and
casino property, that expire over the next five years. These leases generally
contain renewal options for periods ranging one to ten years and require the
Company to pay all executory costs such as maintenance and insurance. Rental
expense for operating leases during the years ended September 30, 1998 and 1997
was $447,302 and $153,404, respectively.
F-21
<PAGE> 58
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 12. Commitments (Continued)
The future aggregate minimum lease payments as of September 30, 1998 are as
follows:
<TABLE>
<CAPTION>
Fiscal year ending:
<S> <C>
1999 $ 890,000
2000 830,000
2001 840,000
2002 735,000
2003 26,000
----------------
$ 3,321,000
================
</TABLE>
The casino lease also requires the Company to pay additional rent based on a
percentage of adjusted net gaming revenue of Golden Gates Casino as set forth in
the casino lease agreement which was approximately $110,000 and $12,000 for
September 30, 1998 and 1997, respectively. Base rental payments under the
agreement are included in the minimum lease payments above.
Retirement Plan:
The Company has a defined contribution 401(k) profit sharing plan covering
substantially all employees. Employer contributions under the Plan are
discretionary and vest ratably over a six-year period. Employer contributions
totaled $12,816 and $17,295 during the years ended September 30, 1998 and 1997,
respectively.
Note 13. Contingencies
The Internal Revenue Service ("IRS") has audited the income tax returns for
fiscal years 1995 and 1994. The IRS has proposed adjustments relating to the
contract termination costs related to third party financing for the Management
Agreement deducted by the Company in the 1994 return. The IRS proposes that
these costs be amortized over the life of the Management Agreement, rather than
expensed in 1994. The deficiency notice issued shows tax liabilities of
approximately $74,700 for 1994 and $379,200 for 1995, before interest. No
penalties are presently being assessed and the IRS has not computed any interest
due, since fiscal years 1996 through 1998 have tax payments that would be
applied to these deficiencies.
Management believes the expensing of the contract termination costs in fiscal
1994 is proper and has requested an appeal conference to further review the
facts in this matter. In the event that the Company's appeal is not successful,
the amortization of the contract termination costs would result in tax
overpayments in fiscal years 1996 and 1997, which would result in reducing the
deficiencies for 1994 and 1995 to approximately $67,000 of tax and approximately
$62,000 of interest. Management believes that adequate provision for income
taxes and interest has been made in the financial statements.
F-22
<PAGE> 59
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 13. Contingencies (Continued)
In October 1997, the Company entered into a parking garage agreement for the
purpose of constructing a parking garage adjacent to Golden Gates Casino. This
agreement requires the Company to contribute land with a book value of
$1,097,080 to a third party. The Company has no additional commitments relating
to the construction of the parking garage. Contribution of this land is
contingent upon performance of contractual obligations by the third party as set
forth in the parking garage agreement.
In March 1998, the Company entered into a $500,000 promissory note with the
majority stockholder. The Company was required to pledge all assets of the
Golden Gates Casino to a lender of the majority stockholder for borrowings the
majority stockholder has with the lender for $500,000.
Note 14. Disclosures About Fair Market Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate that
value:
The carrying amount of cash equivalents approximates fair value because of the
short maturity of those instruments.
The carrying amounts of trade accounts receivable, accounts payable and accrued
liabilities approximate fair value because of the short maturity of those
instruments.
Management estimates that the notes receivable and notes payable approximate
fair value as they generally include variable interest rates and/or because of
the short term nature of the notes receivable and payable.
Note 15. Subsequent Events
In October 1998, the construction of the vessel to be used in the offshore
gaming operation in Miami, Florida was completed. The "Princesa" commenced
operations on October 10, 1998. Operating under the name of Casino Princesa, the
Company expects to offer 2 cruises daily Monday through Thursday, and 3 cruises
on Friday, Saturday and Sunday. Casino Princesa offers over 230 slot machines
and 32 table games on the 200-foot mega yacht.
In October 1998, Princesa Partners entered into a loan agreement (the "Permanent
Financing") with a group of lenders, which provides $8,400,000 of financing for
the Princesa, payment on related property and equipment accounts payable and
working capital. The Permanent Financing is secured by a First Preferred Ship
Mortgage on the Princesa, and all related furniture, fixtures and equipment, and
the guarantees of Bayfront Ventures, the majority stockholder, the Company, the
minority partner and other individuals. The Permanent Financing bears interest
at 10.625% with interest only payments through January 1999. Monthly payments of
$130,258 including interest commence February 1999 for 60 months, when the
remaining principal balance is due.
Note 15. Subsequent Events (Continued)
The Permanent Financing also calls for the mandatory prepayment of principal in
an amount equal to 12% of the amount of Excess Revenues (as defined below) for
each fiscal year, commencing January 2000.
Excess Revenues as defined in the loan agreement is the excess of (i) the
combined earnings before taxes, depreciation and amortization of Princesa
Partners and Bayfront Ventures (the "Entities") minus the principal and interest
paid on the Permanent Financing during the fiscal year, over (ii) $4,000,000.
The Entities are required to maintain a tangible net worth of $3,000,000 plus
10% of the Entities net income as of the end of each fiscal quarter through
December 2000. In addition, the Permanent Financing requires the Entities to
maintain a debt service coverage ratio of no less than 1.5 to 1.0 and has
additional limits on the amount of indebtedness the Entities can incur.
In November 1998, the Company refinanced various notes payable to a company
controlled by the Company's majority shareholder. The balance at September 30,
1998 on these notes was $3,225,000. A new promissory note was entered into for
advances up to $5.0 million with interest at 18%. The note is unsecured and is
due on demand. The right to demand payment on this note has been waived until
after October 1, 1999. Therefore, the $3,225,000 balance as of September 30,
1998 has been classified as long-term at September 30, 1998.
F-23
<PAGE> 60
CONCORDE GAMING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In April 1998, the Company entered into an agreement (the "Option Agreement")
with majority shareholder, whereby he has agreed to provide the Company with a
line of credit in the amount of $3,000,000, which was used for costs related to
the offshore gaming project in Miami. In consideration for this line of credit
and other agreements, the Company granted the majority shareholder an option
(the "Option") to purchase all or a portion of the Company's interest in
Bayfront Ventures. In November 1998, the Company and its majority stockholder
cancelled the Option Agreement and the Option.
F-24
<PAGE> 61
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
3.1 Amended and Restated Articles of Incorporation.(1)
3.2 Third Amended and Restated Bylaws.(1)
4 Form of Common Stock Certificate.(2)
10.2 1992 Performance Stock Option Plan.(3)
10.3 Settlement Agreement dated September 30, 1994 between the
Registrant, Bruce H. Lien Company, Brustuen "Bruce" H. Lien and
Four Bears Investment Limited Liability Company.(4)
10.4 Development Agreement among the Company, Concorde Gaming of
Missouri, Inc. and the City of Lexington, Missouri dated
September 26, 1995.(1)
10.5 Indemnification Agreement between the Company and Bruce H.
Lien.(1)
10.6 Promissory Note in the amount of $690,000 dated September 30,
1996 issued by the Company to BHL Capital Corporation.(5)
10.7 Settlement Agreement between The Three Affiliated Tribes of the
Fort Berthold Reservation and Bruce H. Lien Company dated
September 27, 1996.(4)
10.8 Loan Agreement between the Company and BNC National Bank of
Minnesota dated June 20, 1996 (5)
10.9 Term Note in the amount of $800,000 dated June 20, 1996 issued
by BNC National Bank to the Company (5)
10.10 Short-Term Revolving Note in the amount of $500,000 dated June
20, 1996 issued by BNC National Bank to the Company. (5)
10.11 Amendment No 1 to Settlement Agreement dated January 7, 1997
between BHL and FBILLC.(5)
10.12 Lease between Elevation 8000+ and Concorde Cripple Creek, Inc.
dated July 21, 1997.(6)
<PAGE> 62
10.13 Agreement dated August 5, 1997, by and between Leo Equity Group,
Inc. and Concorde Gaming Corporation.(6)
10.14 Use Agreement dated June 25, 1997, by and between Casino
Princesa and Bayfront Park Management Trust.(6)
10.15 Joint Venture Agreement dated August 27, 1997, by and between
Concorde Gaming Corporation and Goldcoast Entertainment Cruises,
Inc.(6)
10.16 Vessel Construction Agreement dated August 26, 1997, by and
between Keith Marine, Inc. and Casino Princesa.(6)
10.17 Waiver Agreement dated March 20, 1998, by and between Goldcoast
Entertainment Cruises, Inc. and Concorde Gaming Corporation.(6)
10.18 Option Agreement dated April 20, 1998 between Concorde Gaming
Corporation and Bruce H. Lien.(6)
10.19 Promissory Note in the aggregate principal amount of $3,000,000
executed by Concorde Gaming Corporation and BHL Capital
Corporation.(6)
10.20 Loan Agreement between Princesa Partners and the lenders named
therein dated as of October 22, 1998.(+)
10.21 Servicing and Intercreditor Agreement between Princesa Partners,
The National City Bank of Evansville, as servicer, and the
lenders set forth therein dated as of October 22, 1998.(+)
10.22 Security Agreement between Princesa Partners, Casino Princesa
and the lenders named therein dated as of October 22, 1998.(+)
10.23 Guaranty, Subordination Agreement, Security Agreement and
Indemnity by Casino Princesa for the benefit of the lenders
named therein, dated as of October 22, 1998.(+)
10.24 First Preferred Ship Mortgage by Princesa Partners in favor of
The National City Bank of Evansville, individually and as agent
for certain lenders, dated as of October 15, 1998.(+)
10.25 Guaranty by the Company for the benefit of the lenders named
therein dated as of October 22, 1998.(+)
10.26 Princesa Partners Joint Venture Agreement between Goldcoast
Entertainment Cruises, Inc. and Conami, Inc. dated as of October
22, 1998.(+)
<PAGE> 63
10.27 Promissory Note to the order of BHL Capital Corporation in the
principal amount of $5,000,000 dated November 13, 1998.(+)
16 Letter re Change in Certifying Accountant.(7)
21 Subsidiaries of the Registrant.(+)
23.1 Consent of 1998 Independent Auditors.(+)
23.2 Consent of 1997 Independent Auditors.(+)
27 Financial Data Schedule.(+)
(+) Filed herewith
(1) Previously filed with the Securities and Exchange Commission as an exhibit
to the Company's Annual Report on Form 10-KSB for the year ended September 30,
1995 and incorporated herein by this reference.
(2) Previously filed with the Securities and Exchange Commission on May 6, 1991,
as an Exhibit to the Annual Report on Form 10-K of the Company for the fiscal
year ended September 30, 1990 and incorporated herein by this reference.
(3) Previously filed with the Securities and Exchange Commission by the Company
on September 24, 1992 as Exhibit 10 to the Registration Statement on Form S-8,
file number 33-52388 and incorporated herein by this reference.
(4) Previously filed with the Securities
and Exchange Commission by the Company as an exhibit to its Current Report on
Form 8-K dated September 27, 1996 and incorporated herein by this reference.
(5) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Annual Report on Form 10-KSB for the year ended September
30, 1996 and incorporated herein by this reference.
(6) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Annual Report on Form 10-KSB for the year ended September
30, 1997 and incorporated herein by this reference.
(7) Previously filed with the Securities and Exchange Commission by the Company
as an exhibit to its Current Report on Form 8-K dated August 25, 1996 and
incorporated herein by this reference.
<PAGE> 1
EXHIBIT 10.20
================================================================================
LOAN AGREEMENT
among
PRINCESA PARTNERS
and
each of the Lenders set forth on Exhibit A
Dated as of October 22, 1998
================================================================================
<PAGE> 2
LOAN AGREEMENT
This LOAN AGREEMENT (this "Agreement"), dated as of October 22, 1998,
among PRINCESA PARTNERS, a Florida general partnership (the "Borrower"), and
each of the lenders that has executed this Agreement (collectively, and together
with permitted assignees, the "Lenders"), with capitalized undefined terms in
the Recitals being used with the meanings assigned thereto in Section 1.1.
Recitals
A. The Borrower has requested the Lenders to make a Loan in the
aggregate principal amount of $8,400,000 to finance the Project costs and for
working capital of Bayfront.
B. Each of the Lenders has agreed severally but not jointly to fund
a Loan advance in the principal amount designated for such Lender in Exhibit A
hereto, each of which Loan advances will be evidenced by a Note, on the terms
and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
terms and conditions set forth below, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Specific Definitions. As used herein, the following terms
shall have the following meanings; additionally capitalized terms not defined
herein and defined in the Depository Agreement shall have the same meanings
herein as therein:
"Bayfront" means Bayfront Ventures, a Florida general partnership.
"Bayfront Agreement" means the Agreement of even date herewith given by
Bayfront for the benefit of the Lenders, whereby Bayfront (i) guarantees
payment and performance of the Borrower's obligations to the Lenders, (ii)
subordinates its rights under the Charter to the Lenders' rights under the
Mortgage and the Security Agreement , and (iii) grants a security interest
to the Lenders in the Equipment and in certain revenues to be derived from
the Gaming Enterprise.
"Business Day" means any day, other than a Saturday, a Sunday, or a
legal holiday on which national banks in the State of Florida are not
required to be open for business.
"Charter" means the agreement between the Borrower, as owner, and
Bayfront, as charterer, dated October 10, 1998, whereby the Borrower has
let the Vessel to Bayfront.
"Closing Date" has the meaning assigned to such term in Section 2.1.
<PAGE> 3
"Collateral" has the meaning assigned to such term in the Security
Agreement.
"Conversion Date" means February 1, 1999.
"Debt Service" means the aggregate principal (whether at maturity, a
mandatory prepayment, pursuant to sinking fund redemption requirements or
otherwise) and interest payments on Indebtedness, for the period of time
for which calculated; provided, that with respect to Indebtedness bearing
interest at a variable or floating interest rate, Debt Service shall be
calculated by assuming that the interest rate borne by such Indebtedness is
equal to the maximum pre-default rate of interest permitted to be borne by
the terms of the agreements and promissory notes governing such
Indebtedness.
"Debt Service Coverage Ratio" means, with respect to any period of four
consecutive fiscal quarters, the ratio of (i) Net Facility Revenues for
such period to (ii) Debt Service for the 12-month period commencing on the
first day following the end of such period on all Indebtedness.
"Default" means an event which, with the giving of notice or lapse of
time (regardless of whether such notice or lapse of time is required under
Section 7.1 or under some other provision of this Agreement, or otherwise),
or both, would constitute an Event of Default.
"Default Rate" means the annual interest rate equal to the sum of the
interest rate that would otherwise apply plus four percent (4.0%).
"Equipment" has the meaning assigned to such term in the Security
Agreement.
"Event of Default" has the meaning assigned to such term in Section 7.1
hereof.
"Facilities" means the Vessel and any dock and adjacent properties in
which the Borrower or Bayfront has an interest under the Use Agreement.
"GAAP" means generally accepted accounting principles.
"Gaming Enterprise" means Bayfront's gaming and entertainment business
conducted aboard the Vessel.
"Gross Facility Revenues" means all receipts at any time from the
operation of the Facilities, including receipts from gaming, from food,
beverage and other concessions, from entertainment and recreational
facilities, from the lease or sublease of equipment or space, and from any
other activities carried on within such Facilities;
-2-
<PAGE> 4
and all receipts of the net proceeds of hazard insurance, including
business interruption insurance, obtained or due with respect to the
Facilities.
"Guaranties" means the Guaranties executed by each of the Guarantors,
each substantially in the form of Exhibit D, modified, however, in the case
of the Guaranty executed on behalf of Concorde Gaming Corporation, to
reflect the fact that Concorde Gaming Corporation is a corporate entity.
"Guarantors" means Bruce Lien, Michael Hlavsa, David Grossman and
Concorde Gaming Corporation.
"Indebtedness" means (i) all indebtedness, whether or not represented
by bonds, debentures, notes or other securities, for the repayment of money
borrowed, (ii) all deferred indebtedness for the payment of the purchase
price of property or assets purchased, other than ordinary trade
indebtedness incurred in the ordinary course of business to purchase
current assets or for current expenses which is payable and in fact paid in
accordance with ordinary trade terms, (iii) all guaranties, endorsements,
assumptions and other contingent obligations in respect of, or to purchase
or otherwise to acquire, indebtedness of others, (iv) all indebtedness
secured by any mortgage, pledge or lien existing on property owned, subject
to such mortgage, pledge or lien, whether or not the indebtedness secured
thereby shall have been assumed, and (v) all installment purchase
contracts, loans secured by purchase money security interests and
lease-purchase agreements or capital leases, in each case computed in
accordance with GAAP.
"Lien" means any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
whether arising by agreement or operation of law.
"Loan" has the meaning assigned to such term in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Mortgage, the Servicing Agreement and all amendments,
supplements and replacements thereof and thereto and promissory notes and
agreements executed and delivered by the Borrower in renewal, substitution
or restatement thereof.
"Loan Rate" means the annual interest rate determined pursuant to
Section 2.2(b).
"Maturity Date" means January 1, 2004.
"Mortgage" means the first preferred ship mortgage between the Borrower
and the Servicer, as the same may from time to time be amended or
supplemented in accordance with the terms thereof.
-3-
<PAGE> 5
"Net Facility Revenues" for any period means the Gross Facility
Revenues less the Operating Expenses for such period.
"Note" means a promissory note of the Borrower issued pursuant to
Section 2.2 and substantially in the form of Exhibit C.
"Operating Expenses" means the current expenses of operation,
maintenance and repair of the Facilities. Operating Expenses shall include,
without limitation, prizes, wages, the cost of materials and supplies used
for current operation and maintenance, advertising and marketing expenses,
insurance premiums, charges for the accumulation of appropriate reserves
for current expenses that are not recurrent monthly but may reasonably be
expected to be incurred in accordance with GAAP, and payments permitted
under Section 6.17.Operating Expenses shall not include any management fee
or allowance for depreciation or amortization or renewals or replacements
of capital assets. Up to $2,000,000 of pre-opening expenses incurred prior
to or within one year following the Closing Date may be excluded in
determining Operating Expenses. Pre-opening expenses include expenses of
initial advertising, staffing and staff training, special promotions, and
other similar one-time expenditures.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, firm, association, joint stock company,
trust, unincorporated organization, government or Indian tribe, or any
agency, instrumentality or political subdivision thereof, or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Plans" means the specifications and contract drawings for the
construction and furnishing of the Vessel, prepared for the Borrower by
DeJong & Lebet, Inc., naval architects.
"Project Costs" include the amounts required to pay the indebtedness to
BNC Financial Corporation that has been assumed by the Borrower in full, to
pay for all equipment and fixtures appertaining to the Vessel, to pay all
fees and transaction costs, including fees required to be paid pursuant to
Section 8.3, all as more fully set forth in the Total Project Cost
Statement.
"Resolutions" means the duly adopted resolutions of the Borrower, in
form and substance reasonably acceptable to the Servicer.
"Security Agreement" means the Security Agreement of even date herewith
given by the Borrower for the benefit of the Lenders.
"Servicer" means The National City Bank of Evansville, in its capacity
as servicer, and its permitted successors and assigns pursuant to the
provisions of the Servicing Agreement.
-4-
<PAGE> 6
"Servicing Agreement" means the Servicing and Intercreditor Agreement
of even date herewith among the Servicer, the Borrower and the Lenders, as
the same may be amended or supplemented in accordance with the terms
thereof and hereof.
"Total Project Cost Statement" means the statement required by Section
5.1(o).
"Use Agreement" means the Use Agreement dated June 25, 1997 between
Bayfront Park Management Trust and Bayfront.
"Vessel" means the diesel-powered vessel having overall dimensions of
200 feet by 40 feet, constructed, outfitted and tested in accordance with
the Plans, as more fully described in Exhibit B.
Section 1.2 Certain Other Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP.
Section 1.3 "Combined" Financial Tests. Sections 2.4, 6.12, 6.13 and
6.14 refer to "combined" earnings, Debt Service Coverage Ratio, and Tangible Net
Worth. In each case, the "combined" figure shall be determined by adding the
figures determined for the Borrower and Bayfront, based on financial statements
delivered pursuant to Section 6.15, after eliminating inter-company items.
ARTICLE II
The Loan
Section 2.1 The Loan. Subject to the terms and conditions stated
herein, on the date that all of the conditions set forth in Section 5.1 shall
have been satisfied (the "Closing Date"), each Lender shall advance to the
Borrower the full principal amount of the Note designated for such Lender on
Exhibit A hereto, for an aggregate principal amount to be advanced by all of the
Lenders to the Borrower hereunder of $8,400,000 (the "Loan").
Section 2.2 The Notes; Principal and Interest.
(a) Each Lender's portion of the Loan shall be evidenced by and
repayable with interest in accordance with a Note of the Borrower, payable
to the order of such Lender in the form attached hereto as Exhibit C, dated
the Closing Date, in the original principal amount equal to the principal
amount advanced by such Lender under Section 2.1, providing for monthly
payments of interest only prior to the Conversion Date and for monthly
installments of principal and interest payable on and after the Conversion
Date in the amount determined pursuant to paragraph (d) of this Section
2.2.The aggregate original principal amount of all the Notes shall be
$8,400,000.
-5-
<PAGE> 7
(b) Interest shall accrue on the unpaid principal balance of each
Note outstanding from time to time (computed on the basis of twelve 30-day
months in a year) from the Closing Date until such Note shall have been
paid in full at a rate of 10 5/8% per year.
(c) Prior to the Conversion Date, interest accrued on the principal
balance of each Note during each month shall be due and payable by the
Borrower on the first day of the next succeeding month, commencing on the
first day of the month following the Closing Date and continuing on the
first day of each month thereafter to but excluding the Conversion Date.
Accrued and unpaid interest on each Note shall also be payable upon
prepayment in full of such Note and upon maturity of such Note.
(d) Commencing on the Conversion Date and continuing on the first day
of each month thereafter to and including the Maturity Date, the principal
of each Note shall be due and payable in consecutive monthly installments,
with each such monthly installment in an amount equal to such Note's
Proportionate Share of the amount specified for such month on the
amortization schedule set forth in Exhibit E hereto. For purposes hereof,
"Proportionate Share" with respect to any Note means a ratio, the numerator
of which equals the original principal amount of such Note and the
denominator of which equals the aggregate original principal amount of all
Notes, including such Note. The entire principal of each Note remaining
unpaid, and all accrued and unpaid interest thereon, shall be due and
payable in full on the Maturity Date.
(e) In the event any payment of the principal of or interest on the
Notes is not paid when stated to be due (other than upon acceleration), the
Borrower shall pay a late charge equal to four percent (4.0%) of such late
payment, but in no event shall such late charge exceed the maximum amount
permitted by applicable law, to defray the costs of the Lenders incident to
collecting such payment. This late charge shall not be deemed to excuse a
late payment or be deemed a waiver of any other rights the Lenders may
have, including the right to declare the entire principal balance of the
Notes and accrued interest thereon immediately due and payable.
(f) Notwithstanding anything herein to the contrary, upon the
occurrence of any Event of Default, and continuing until all Events of
Default shall have been cured to the satisfaction of the Lenders, the
unpaid principal balance of each Note from time to time outstanding shall
accrue interest at the Default Rate and all interest accrued at the Default
Rate shall be due and payable on demand of the Lenders.
Section 2.3 Optional Prepayments; Prepayment Premiums. The Borrower
shall have the right, upon no less than 15 days' prior written notice to the
Lenders, to prepay the principal balance of the Loan, in whole or in part,
without premium or penalty, except as may be hereinafter required; provided that
(i) any prepayment shall be made on the first day
-6-
<PAGE> 8
of a calendar month; (ii) any prepayment shall be in a principal amount of no
less than $250,000 and shall be applied to the prepayment of Notes ratably in
proportion to the principal amount of each; (iii) any prepayment of the entire
remaining principal balance of the Notes shall include a payment of all interest
accrued on the Notes; and (iv) in no event shall any partial prepayment reduce
or postpone any scheduled installment of principal and interest due on any Note.
Notwithstanding anything to the contrary set forth herein, the Borrower shall
have no right to prepay, and the Lenders shall have no obligation to accept any
tendered prepayment of all or any part of the principal of the Notes prior to
September 1, 1999, or on or after September 1, 1999 unless any such tendered
prepayment is accompanied by payment of a "prepayment premium" in an amount
equal to the percentage of the principal amount to be prepaid which percentage
is as set forth below opposite the period during which such prepayment is
tendered:
<TABLE>
<CAPTION>
"Prepayment Premium"
Period Percentage
------ --------------------
<S> <C>
September 1, 1999 through and including August 31, 2000 1.5%
September 1, 2000 through and including August 31, 2001 1.0%
September 1, 2001 through and including August 31, 2002 .5%
</TABLE>
Section 2.4 Mandatory Prepayment. The Borrower shall prepay the
principal balance of the Notes in an amount equal to 12% of the amount of Excess
Revenues in any fiscal year of the Borrower, with such prepayment applied first
to the prepayment of Notes ratably in proportion to the principal amount of
each, and each such prepayment shall be applied to principal installments due on
each such Note in inverse order of maturity. For any such one-year period,
"Excess Revenues" means the excess of (i) the Borrower's and Bayfront's combined
earnings before taxes, depreciation and amortization minus the principal and
interest paid with respect to the Notes during such period, over (ii)
$4,000,000. The Borrower shall not be required to pay any prepayment premium in
connection with any mandatory prepayment pursuant to this Section. Any
prepayment required with respect to a one-year period shall be payable on or
before the immediately following January 15th.
Section 2.5 Payments. All payments and prepayments by the Borrower of
principal of and interest on the Notes, and all fees, costs and expenses payable
by the Borrower under this Agreement or any other Loan Document, shall be paid
on the date due to the Servicer by wire transfer of immediately available funds,
in accordance with wire transfer instructions provided by the Servicer to the
Borrower from time to time. If any payment or prepayment of principal of, or
interest on, the Notes or any fee payable hereunder becomes due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day, and if so made shall be considered timely, and such extension of
time shall be included in the computation of interest.
Section 2.6 Application of Payments. All payments made hereunder shall
be applied to any "prepayment premium" then due pursuant to Section 2.3 hereof,
to any late payment charge then due pursuant to Section 2.2(e) hereof, to
interest accrued on the Notes,
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<PAGE> 9
to the principal balance of the Notes and, if the Lenders have advanced any sums
under the terms of any Loan Documents, to repayment of the funds so advanced,
even though the same have become part of the principal balance of the Notes,
together with interest thereon at the Loan Rate, in such order as the Lenders,
at their option, may elect.
Section 2.7 Use of Proceeds. The proceeds of the Notes shall be applied
to pay Project Costs and to make a loan to Bayfront in an amount not exceeding
$1,500,000 for working capital purposes.
ARTICLE III
Security
Section 3.1 Mortgage and Security Agreement. As security for the
payment and performance of all obligations of the Borrower to the Lenders under
the Notes, this Agreement and the other Loan Documents, the Borrower shall
execute and deliver to the Lenders the Mortgage and the Security Agreement,
granting to the Lenders a security interest in the Vessel and the Equipment and
the other Collateral.
Section 3.2 Charter Hire. As additional security for the payment and
performance of all obligations of the Borrower to the Lenders under the Notes,
this Agreement and the other Loan Documents, the Borrower hereby grants to the
Lenders a security interest in its rights under the Charter.
ARTICLE IV
Representations and Warranties
The Borrower represents and warrants to Lenders that:
Section 4.1 Organization, Powers, Etc. (a) The Borrower is a general
partnership validly organized and in good standing under the laws of Florida;
(b) the Borrower has full power and authority to own its properties and to carry
on its business as presently conducted and as proposed to be conducted at the
Facilities; and (c) the Borrower has the power to execute, deliver and perform
the Loan Documents.
Section 4.2 Authorization of Borrowing, Etc. The execution, delivery
and performance of the Loan Documents and the borrowings hereunder have been
duly authorized by all requisite action of the Borrower and will not violate any
order of any court or other agency of government having jurisdiction over the
Borrower, the partnership agreement of the Borrower, any provision of any
indenture, agreement or other instrument to which the Borrower is a party or by
which it or any of its properties is bound, or, to the Borrower's knowledge
after due inquiry, any provision of law. The Loan Documents to which the
Borrower is a party constitute the legal, valid and binding obligations of the
Borrower, enforceable against it in accordance with their respective terms
(subject to limitations as to enforceability which might result from bankruptcy,
insolvency or other similar laws affecting creditors' rights generally).
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<PAGE> 10
Section 4.3 Litigation. There is no action, suit or proceeding at law
or in equity or by or before any governmental instrumentality or other agency
now pending or threatened against or affecting the Borrower which, if adversely
determined, would have a material adverse effect on the Borrower or its business
or financial condition or its ability to carry out its obligations under the
Loan Documents.
Section 4.4 Agreements. The Borrower is not a party to any material
agreement or instrument except as set forth in Schedule 4.4.The Borrower is not
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any material agreement or
instrument to which it is a party.
Section 4.5 Compliance With Law. To the best of the Borrower's
knowledge after due inquiry, no consent, approval or authorization of, or
registration, declaration or filing with, any governmental authority is required
on the part of the Borrower in connection with the execution and delivery of the
Loan Documents or the performance of or compliance with the terms, provisions or
conditions thereof, or, if so required, such consent, approval or authorization,
or registration, declaration or filing, has been requested and/or obtained. To
the best of the Borrower's knowledge after due inquiry, the Borrower is not in
violation of or subject to any contingent liability on account of any statute,
law, rule, ordinance, order, writ, injunction or decree.
Section 4.6 Financial Statements. The Borrower has not presented any
financial statements to the Lenders. There has been no material adverse change
in the condition, financial or otherwise, of the Borrower since the date of its
formation.
Section 4.7 Loan Not for Purpose of Margin Stock. The Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning, of Regulation U issued by the Board
of Governors of the Federal Reserve System), and no proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 4.8 Loan Not to Acquire a Security. No proceeds of the Loan
will be used to acquire any security in any transaction which is subject to
Sections 13 and 14 of the Securities Exchange Act of 1934.
Section 4.9 Licenses and Permits. Except as set forth in Schedule 4.9,
The Borrower possesses adequate licenses, certificates, permits, franchises,
patents, copyrights, trademarks and trade names, or rights thereto, to conduct
its business to be conducted on or at the Facilities substantially as presently
proposed to be conducted.
Section 4.10 Intended Use of Facilities. The intended and/or current
use of the Vessel (and, to the Borrower's knowledge after due inquiry, the docks
at Bayfront Park)
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<PAGE> 11
for the purpose and in the manner contemplated by this Agreement or any other
document related hereto are permitted by all presently applicable governmental
use requirements.
Section 4.11 No Usury. The transaction evidenced by this Agreement does
not violate any applicable law pertaining to usury or the payment of interest on
loans.
ARTICLE V
Conditions Precedent
Section 5.1 Documentary Conditions Precedent. This Agreement shall
become effective upon its execution and delivery by all of the parties hereto,
and the Lenders shall be obliged to make their respective advances pursuant to
Section 2.1 hereof when the Lenders shall have received each of the following in
form and substance satisfactory to them:
(a) the Notes, the Security Agreement, the Mortgage, the Guaranties
and the Servicing Agreement, duly executed by the appropriate parties
thereto;
(b) a copy of the Resolutions, accompanied by a duly certified
statement to the Lenders by the Borrower's general partner, to the effect
that the Resolutions have been duly adopted and are in full force and
effect;
(c) certificates as to the incumbency and signature of each of the
persons authorized to execute and deliver the Loan Documents on behalf of
the Borrower and as to the Borrower's partnership agreement;
(d) one or more financing statements, as requested by the Lenders,
duly executed by the Borrower;
(e) a signed copy of a favorable opinion of counsel for the Borrower,
Bayfront and Concorde Gaming Corporation as to such matters incident to the
transaction herein contemplated as the Lenders may reasonably require;
(f) proof satisfactory to the Lenders that the liens granted under
the Security Agreement and the Mortgage constitute first priority,
perfected liens upon the Vessel and the Collateral;
(g) copies of lien searches dated no more than 10 days prior to the
Closing Date demonstrating that no financing statements or other statements
or notices of Liens have been filed with or any state or municipal offices
for the purpose of validating or perfecting any Lien covering any portion
of the Vessel, the Equipment, or any real or personal property of the
Borrower which may be used or useful in connection with the Gaming
Enterprise, other than Liens permitted by Section 6.7;
(h) evidence of the insurance coverage required by Section 6.2
hereof;
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<PAGE> 12
(i) evidence of payment of all placement fees incurred in connection
with the Loan and all of the Lenders' and Servicer's costs and expenses
through the Closing Date reimbursable by the Borrower pursuant to Section
8.3;
(j) the Bayfront Agreement, duly executed by Bayfront;
(k) a copy of the resolutions adopted by Bayfront, accompanied by a
duly certified statement to the Lenders by a general partner of Bayfront,
to the effect that such resolutions have been duly adopted and are in full
force and effect;
(l) certificates as to the incumbency and signature of each of the
persons authorized to execute and deliver the Bayfront Agreement and any
other instrument to which Bayfront may be a party on behalf of Bayfront,
and as to Bayfront's partnership agreement;
(m) evidence satisfactory to the Servicer that (i) the Vessel shall
have been completed in accordance with the Plans; (ii) an official number
shall have been assigned to the Vessel; (iii) a General Index or Abstract
of Title shall have been issued showing the Borrower as owner and only BNC
Financial Corporation as holder of a first preferred ship mortgage; (iv)
BNC Financial Corporation shall have delivered for recording an instrument
terminating the lien of its first preferred ship mortgage; (v) the Mortgage
shall have been delivered for recording; and (vi) the U.S. Coast Guard
shall have issued a Certificate of Documentation permitting the Vessel to
be operated in the coastwise registry;
(n) a pay-off letter from BNC Financial Corporation ("BNC"),
specifying the amount required to pay the Borrower's obligations to BNC in
full;
(o) a statement, acceptable to the Servicer, incorporating and
setting forth all Project Costs incurred or to be incurred in constructing
and furnishing the Facilities in accordance with the Plans sworn to by the
Borrower to be a true, complete and accurate account of all Project Costs
actually incurred and a reasonably accurate estimate of all Project Costs
to be incurred in the future (the "Total Project Cost Statement");
(p) a statement by the Borrower that all building permits and such
other licenses and permits as may be required to operate the Vessel have
been obtained, or will be obtained as and when required, with copies
attached of any such licenses and permits as have then been obtained; and
(q) such other documents, instruments, approvals, opinions or items
as the Servicer may reasonably request.
Section 5.2 Further Conditions Precedent. The obligation of the Lenders
to make their respective advances pursuant to Section 2.1 hereof shall be
subject to the further
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<PAGE> 13
condition precedent that no "Default" or "Event of Default" under the Loan
Agreement or any other Loan Document shall have occurred and be continuing.
ARTICLE VI
Covenants
The Borrower covenants and agrees that from the date hereof until
payment in full of the principal of and interest on the Loan, unless the Lenders
shall otherwise consent in writing, the Borrower will:
Section 6.1 Existence; Business; Operations. (a) Do or cause to be done
all things necessary to preserve and keep in full force and effect its
existence; (b) preserve all of the rights, privileges and franchises necessary
or desirable in the normal conduct of its business of owning and chartering the
Vessel; and (c) not liquidate, merge, dissolve, suspend business operations or
sell any significant assets.
Section 6.2 Insurance. At all times, keep and maintain, or cause
Bayfront to keep and maintain, the Facilities, including, without limitation,
the Vessel and the Equipment, insured against such risks and in such amounts,
with such deductible provisions, as are customary in connection with the
operation of facilities of comparable type and size, and the Borrower shall
carry and maintain or cause to be carried and maintained at least the following
insurance with respect to the Borrower and the Facilities:
(a) With respect to the Vessel, hull and machinery insurance on a
named perils basis, covering the Vessel and contents against all such usual
marine risks as are provided in the American Institute Hull Clauses (most
recent amendment), including collision liability, in an amount not less
than the full replacement cost of the Vessel, and including a stipulated
value/agreed amount endorsement;
(b) With respect to the Vessel, protection and indemnity insurance as
per Form SP23, covering liability to customers, crew, and third parties,
including fixed or floating object coverage, coverage for clearance of
wreck, and "dram shop" or liquor liability coverage, with a combined single
limit of not less than $15,000,000.
(c) With respect to the Vessel, war risk hull and machinery
insurance, in a an amount not less than the full replacement cost of the
Vessel;
(d) if not covered by the protection and indemnity insurance
described in subsection (b), general liability insurance with a combined
single limit of not less than $2,000,000, and including covering perils
associated with the use of the dock and other Facilities located ashore and
public officials liability insurance for employment-related practice
claims;
(e) comprehensive automobile liability insurance with a combined
single limit not less than $5,000,000 including coverage for hired and
non-owned vehicles;
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<PAGE> 14
provided, however, that no such insurance shall be required until or unless
Bayfront or the Borrower owns, leases or otherwise has the right to operate
one or more vehicles;
(f) worker's compensation insurance with a longshoreman's and harbor
worker's endorsement; and
(g) business interruption insurance covering actual losses in gross
operating earnings of Bayfront resulting directly from necessary
interruption of business caused by risks of direct physical loss of real or
personal property including the Vessel and other Facilities, subject to
policy exclusions, less charges and expenses which do not necessarily
continue during the interruption of business, for such length of time as
may be required with the exercise of due diligence and dispatch to rebuild,
repair or replace such properties as have been damaged or destroyed, but
not less than 90 days, with limits equal to at least 100% of the quarterly
debt service requirement hereunder.
Each of the foregoing insurance policies shall (i) be issued or written by a
financially responsible insurer (or insurers) reasonably satisfactory to the
Lenders, (ii) be in such form and with such provisions as are generally
considered standard provisions for the type of insurance involved and (iii)
prohibit cancellation or modification by the insurer without at least thirty
days' prior written notice to the Servicer and the Borrower or Bayfront. Without
limiting the generality of the foregoing, all the foregoing insurance policies
shall name the Servicer, as agent for the Lenders, and the Borrower or Bayfront
as parties insured thereunder as appropriate and as the respective interests of
each of such parties may appear.
If the policies required under subparagraphs (b), (d) and (e) do not
themselves provide coverage in the amounts required hereby, the Borrower or
Bayfront may obtain the required coverage through umbrella or other excess
liability policies reasonably satisfactory to the Servicer.
The Borrower will deliver or cause Bayfront to deliver to the Servicer on
or before the Closing Date certificates evidencing all required insurance, and
no later than November 30, 1998, copies of policies reasonably satisfactory to
the Servicer evidencing the insurance which is required under subparagraphs (a)
through (d) and (g), and the Borrower shall promptly furnish or cause Bayfront
to furnish to the Servicer copies of all renewal notices and all receipts of
paid premiums received by it. At least 30 days prior to the expiration date of a
required policy, the Borrower shall deliver or cause Bayfront to deliver to the
Servicer a copy of a renewal policy or certificate in a form reasonably
satisfactory to the Servicer.
If the Vessel is sold at a foreclosure sale or if the Servicer shall
acquire title to the Vessel, the Servicer shall have all of the right, title and
interest of the Borrower or Bayfront, as the case may be, in and to any
insurance policies required under subparagraphs (a) through
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<PAGE> 15
(d) and (g) hereof and the unearned premiums thereon and in and to the proceeds
resulting from any damage to the Vessel prior to such sale or acquisition.
If the Vessel or any part thereof shall be damaged or destroyed by fire or
other casualty, the Borrower will promptly give or cause Bayfront to give
written notice thereof to the insurance carrier and the Servicer and will not
adjust any damage or loss unless the Servicer shall have joined in such
adjustment; provided, however, that if the Servicer does not promptly join with
the Borrower in such adjustment, or if the Servicer fails diligently to pursue
such adjustment, the Borrower may adjust such damage or loss. If there has been
no adjustment of any such damage or loss within four months from the date of
occurrence thereof (other than due to inaction by the Servicer), or if an Event
of Default shall exist at the end of such four-month period or at any time
thereafter, the Servicer may alone, make proof of loss, adjust and compromise
any claim under the policies and appear in and prosecute any action arising from
such policies. In connection therewith, the Borrower does hereby irrevocably
authorize, empower and appoint the Servicer as attorney-in-fact for the Borrower
(which appointment is coupled with an interest) to do any and all of the
foregoing in the name and on behalf of the Borrower on or after the occurrence
of the above-described events.
All sums paid under any insurance policy required in subparagraphs (a)
through (d) and (g) shall be paid solely and exclusively to the Servicer. If the
amount of such proceeds is less than 10% of the current appraised value of the
Vessel and appurtenant equipment, the Servicer will return such proceeds to the
Borrower for payment of the restoration, repair, replacement or rebuilding of
the Vessel. If the amount of such proceeds is 10% or more of such appraised
value, the Servicer shall at its option apply the same, whether or not its
security is impaired (after first deducting therefrom the Servicer's expenses
incurred in collecting the same including but not limited reasonable attorneys'
fees) to the reduction of the principal of the Loan or to the payment of the
restoration, repair, replacement or rebuilding of the Vessel that is damaged or
destroyed, in such manner as the Servicer may determine. Any application of
insurance proceeds shall not extend or postpone the due dates of the monthly
installments payable under the Notes or change the amount of such installments.
The Borrower shall promptly reimburse the Servicer upon demand for all of
the Servicer's expenses incurred in connection with the collection of the
insurance proceeds (unless deducted from insurance proceeds as provided above),
including but not limited to reasonable attorneys' fees, and all such expenses,
together with interest from the date of disbursement at the rate then in effect
under the Notes (unless collection of interest from the Borrower at such rate
would be contrary to applicable law, in which event such amounts shall bear
interest at the highest rate which may be collected from the Borrower under
applicable law), shall be additional amounts secured by the Security Agreement
and the Mortgage.
Section 6.3 Payments of Indebtedness, Taxes and Claims; Compliance with
Laws. (a) Pay all of its Indebtedness and all other indebtedness and obligations
promptly
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<PAGE> 16
when due; (b) pay and discharge or cause to be paid and discharged promptly all
lawful taxes, assessments, and governmental charges or levies imposed upon it or
upon its income and profits, or upon any of its property, before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies or otherwise which, if unpaid, might become a lien or charge upon any
of such properties; provided, however, that the Borrower shall not be required
to pay and discharge or to cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall have
set aside on its books adequate reserves with respect to any such tax,
assessment, charge, claim or levy; and (c) comply in all material respects with
all applicable laws, rules, regulations and orders, including without limitation
all governmental use requirements that may apply to the Borrower, its business
and operations, and the Facilities.
Section 6.4 Inspections and Audits. At all reasonable times, permit a
representative of the Lenders (to be designated from time to time by the
Super-Majority Interest, as defined in the Servicing Agreement) to inspect the
operations aboard the Vessel and at the other Facilities and to discuss such
operations with the Borrower's personnel, and to inspect the books and records
related to the Facilities and to make extracts therefrom; provided, however,
that (i) so long as no Default or Event of Default is then continuing, any such
inspection shall be upon 48 hours' prior notice, and (ii) all information
obtained by any such Lender's representatives during the course of such
inspection shall be maintained by such Lender's representatives on a
confidential basis, except for disclosures of such information to any Lender and
the Servicer, provided that such Lender's representatives may make disclosure of
any such information (a) to federal, state and municipal governmental or
regulatory authorities upon their request, (b) in the course of any court
proceeding involving the Borrower, (c) pursuant to subpoena or court proceeding
or (d) as otherwise required by law. The Lenders shall use reasonable efforts to
protect the confidential information within their respective organizations and
will advise any and all persons to whom it shall be reasonably necessary to
expose confidential information of the contents of this confidentiality
provision. Notwithstanding anything herein to the contrary, the Lenders may and
the Borrower shall, upon request of any Lender, disclose confidential
information to any prospective or subsequent purchaser of a Note who agrees to
be bound by a substantially similar confidentiality obligation. If a Lender
discloses confidential information as permitted in the preceding sentence, it
will promptly so notify the Borrower. At any time and from time to time (but not
more often than once in any calendar month), the Borrower will furnish such
information reports regarding the Collateral to the Servicer for delivery to the
Lenders as the Servicer, on behalf of any Lender, and its representatives may
reasonably request. The Lenders shall have the authority, at any time, to
require the Borrower to place upon the Borrower's books and records relating to
the Collateral and other rights to payment covered by the security interest
created in this Security Agreement hereby a notation stating that any such
Collateral and other rights of payment are subject to a security interest in
favor of the Lenders.
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<PAGE> 17
Section 6.5 Notice of Litigation. Give prompt written notice to the
Lenders of the commencement of any action, suit or proceeding before any court
or arbitrator or any governmental department, board, agency or other
instrumentality affecting the Borrower or any property of the Borrower in which
an adverse determination or result could have a material adverse effect on the
business, operations, property or condition (financial or otherwise) of the
Borrower or on the ability of the Borrower to perform its obligations under this
Agreement or the other Loan Documents, as the case may be, stating the nature
and status of such action, suit or proceeding.
Section 6.6 No Defaults. Not permit any material breach, default or
event of default to occur under any note, loan agreement, indenture, lease,
mortgage, contract for deed, security agreement or other material contractual
obligation binding upon the Borrower which is not cured within the applicable
cure provisions thereof.
Section 6.7 Lien Searches; Liens. Promptly deliver to the Servicer any
and all lien searches as the Servicer may reasonably request from time to time
in connection with any proposed sale of any participation(s) in the Loan. The
Borrower shall not create, or permit to exist, any Lien on any portion of the
Vessel or any Collateral, other than (i) the Liens created hereby or by the
Security Agreement or Mortgage; and (ii) purchase money security interests in
and financing leases of equipment used on the Vessel, created from time to time,
securing only indebtedness incurred for the purchase or lease thereof having an
aggregate initial or stated amount not to exceed $500,000 at any time.
Section 6.8 Further Assurances. From time to time, execute and deliver
or endorse any and all instruments, documents, conveyances, assignments and
other agreements and writings which the Lenders may reasonably request in order
to protect or perfect the Loan Documents or the rights of the Lenders, or any of
them, under this Agreement and the other Loan Documents.
Section 6.9 ERISA. Comply in all material respects with the Employee
Retirement Income Security Act of 1974 to the extent applicable.
Section 6.10 Notice of Events of Default. Furnish to the Lenders as
soon as possible and in any event within five calendar days after the Borrower
has obtained actual knowledge of the occurrence of a Default or an Event of
Default which is continuing on the date of such statement, a statement signed by
the Borrower setting forth details of such Default or Event of Default and the
action which the Borrower has taken, is taking or proposes to take to correct
the same.
Section 6.11 Permits and Licenses. Obtain and maintain all necessary
state, federal, local and private clearances, authorizations, permits and
licenses with respect to the present and future business operations of and at
the Facilities.
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Section 6.12 Indebtedness Limitation. Not incur, and not permit the
incurrence of, any Indebtedness on a par with the Loan unless the combined Debt
Service Coverage Ratio for the most recently ended period of four consecutive
fiscal quarters of the Borrower and Bayfront is greater than 2.25 to 1.
Section 6.13 Debt Service Coverage Ratio. For the period of four
consecutive fiscal quarters ended June 30, 1999 and for each period thereafter,
achieve a combined Debt Service Coverage Ratio of no less than 1.5 to 1.0.
Section 6.14 Tangible Net Worth. At all times through and including
December 30, 2000, maintain a combined Tangible Net Worth as of the end of each
fiscal quarter equal to the sum of $3,000,000 plus 10% of the combined after tax
net income of the Borrower and Bayfront. For purposes hereof, combined "Tangible
Net Worth" for such purposes means: at any date of determination the difference
between (a) the total assets appearing on the balance sheet of a Person
(prepared in accordance with GAAP after deducting adequate reserves in each case
where, in accordance with GAAP, a reserve is proper); and (b) the total
liabilities appearing on such balance sheet. The determination of total assets
shall exclude: (i) goodwill, organizational expenses, research and development
expenses, trademarks, trade names, copyrights, patents, patent applications,
licenses and rights in any thereof, covenants not to compete, training costs and
other similar intangibles; (ii) all deferred charges or unamortized debt
discount and expense other than deferred income taxes; (iii) securities which
are not readily marketable; (iv) unless reflected in the audited financial
statements of the Person, any write-up in the book value of any assets resulting
from a reevaluation thereof; (v) amounts due to the Person from officers,
directors, shareholders, employees or affiliates; and (vi) any asset acquired
subsequent to the date of this Agreement which the Lenders, in their reasonable
discretion, determine to be an intangible asset.
Section 6.15 Financial Statements; Compliance Certificate.
(a) As soon as practicable, but in any event within forty-five (45)
days after the end of each fiscal quarter, the Borrower shall deliver to
the Servicer a copy of the financial statements of the Borrower and
Bayfront for such quarter, consisting of the balance sheets of the Borrower
and Bayfront as at the end of such quarter and the related statements of
income of the Borrower and Bayfront for such quarter and year-to-date
period then ended, all prepared in accordance with GAAP for interim
financial statements, but without footnotes and statements of cash flows
and subject to year-end audit adjustments, and accompanied by a certificate
of the chief financial officer of the Borrower in substantially the form
attached as Exhibit F hereto setting forth the computations as to the
Borrower's compliance with its covenants set forth in Sections 6.13 and
6.14 hereof.
(b) As soon as practicable, but in any event within 120 days after
the end of each fiscal year of the Borrower and Bayfront, commencing with
the fiscal year
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ending September 30, 1999, the Borrower shall deliver to the Servicer
copies of the annual financial statements of the Borrower and Bayfront,
consisting of the balance sheets of the Borrower and Bayfront as at the end
of such year and the related statements of income of the Borrower and
Bayfront for such year, all prepared in accordance with GAAP, and
accompanied by (A) the audit report of a certified public accountant
reasonably acceptable to the Lenders, containing an unqualified opinion
thereon, and a copy of such accountant's management letters to the Borrower
and Bayfront, and (B) a certificate of the chief financial officer of the
Borrower in substantially the form attached hereto as Exhibit F setting
forth the computations as to the Borrower's compliance with its covenants
set forth in Sections 6.13 and 6.14 hereof.
Section 6.16 Maintenance of Property. The Borrower will maintain its
property in good working order and condition, reasonable wear and tear excepted,
and, in accordance with reasonably prudent business practices, make all needful
and proper repairs, replacements, additions and improvements thereto.
Section 6.17 Management Fees. The Borrower will not, and will not
permit Bayfront to, incur any obligation to pay any management fee or payment in
lieu of a management fee to any affiliated Person.
ARTICLE VII
Events of Default
Section 7.1 Events of Default; Remedies. Upon the occurrence of any of
the following events (each an "Event of Default"):
(a) any representation or warranty made herein, in any other Loan
Document, in any financial statement furnished pursuant to or in connection
with this Agreement, or in any report, certificate or other instrument
furnished by the Borrower or any authorized officer or employee thereof in
connection with this Agreement shall prove to have been false or misleading
in any material respect when made; or
(b) default in the payment of the principal of or interest on the
Loan and the continuance of such default for a period of 3 days after the
due date; or
(c) the Borrower shall fail to duly perform or observe in any
material respect any of the other terms, conditions, covenants or
agreements required to be performed or observed by the Borrower hereunder
(other than any such term, condition or agreement otherwise specifically
dealt with in the other paragraphs of this Section 7.1), and such failure
shall continue for a period of fifteen (15) calendar days after notice
thereof to the Borrower; or
(d) an Event of Default shall occur under and as defined in the
Mortgage, Security Agreement, any other Loan Document, the Bayfront
Agreement or any
-18-
<PAGE> 20
Guaranty or, if no such "Events of Default" are defined in any such
document, the Borrower, Bayfront or a Guarantor shall be in material breach
or default of any obligation, agreement or covenant of such Person under
such document and shall fail to cure such breach or default within the
period or periods of grace, if any, applicable thereto; or
(e) default in the payment of any other indebtedness of the Borrower
or Bayfront that is in an amount greater than $50,000 for a single item of
Indebtedness or in an amount greater than $200,000 of Indebtedness in the
aggregate, or default in the performance of any other obligation incurred
in connection with any such Indebtedness of the Borrower or Bayfront, if
the effect of such default is to accelerate the maturity of such
Indebtedness or to permit the holder thereof to cause such Indebtedness to
be accelerated; provided that no Event of Default shall occur hereunder as
a result of any such default with respect to any Indebtedness of the
Borrower or Bayfront if (i) the Borrower or Bayfront in good faith contests
its liability for such Indebtedness, the amount thereof or its obligation
for the performance of such obligation and (ii) acceleration of such
Indebtedness would not impair the Lenders' interests as holders of the
Notes or the Borrower's ability to make all payments on the Notes when and
as due; or
(f) the Borrower, Bayfront or Bruce Lien shall voluntarily or
involuntarily (i) apply for or consent to the appointment of a receiver,
trustee or liquidator of it or any of its properties or assets, (ii) admit
in writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) file a voluntary or
have filed an involuntary petition in bankruptcy (and, if involuntary, such
filing shall not be dismissed within 30 days from the date of filing), or a
petition or an answer seeking reorganization or an arrangement with
creditors to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an
answer admitting the material allegations of a petition filed against it in
any proceeding under any such law, or (v) take any action for the purpose
of effecting any of the foregoing; or
(g) the Borrower or Bayfront shall incur, permit the incurrence of,
create or permit to exist any Lien on Gross Facility Revenues or any
Indebtedness secured by Gross Facility Revenues not expressly permitted by
the terms hereof; or
(h) Concorde Gaming Corporation shall no longer own, directly or
through subsidiaries, at least a majority interest in both the Borrower and
Bayfront;
then, the Lenders, by notice to the Borrower, may declare the outstanding
principal of the Loan, the accrued interest thereon computed at the Default
Rate, and all other obligations of the Borrower to the Lenders under the Loan
Documents, to be forthwith due and payable, whereupon the Loan, all accrued
interest thereon and all such obligations shall immediately become due and
payable, in each case without presentment, demand, protest or notice, all of
-19-
<PAGE> 21
which the Borrower hereby expressly waives. In addition, the Lenders may
exercise any other right or remedy available to them, or any one of them, at law
or in equity, including enforcing any and all rights and exercising any remedies
under any of the Loan Documents or applicable law.
ARTICLE VIII
Miscellaneous
Section 8.1 No Waiver. No failure on the part of the Lenders to
exercise and no delay in exercising any right, power or privilege under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided in the Loan Documents are cumulative and not
exclusive of any remedies provided by law.
Section 8.2 Notices. Notices permitted or required to be given
hereunder shall be in writing and shall be deemed sufficient if given by
registered or certified mail, postage prepaid, return receipt requested,
addressed to the respective addresses of the parties or at such other addresses
as the respective parties may designate by like notice from time to time.
Notices so given shall be effective upon the earlier of (a) receipt by the party
to which notice is given, or (b) on the fifth (5th) business day following the
date such notice was deposited in the United States mail. Any notice to the
Lenders and any request for a consent of the Lenders required by this Agreement
shall be sent to the Servicer and addressed to:
The National City Bank of Evansville
21 S.E. Third Street
Evansville, IN 47708
Attention: Stuart G. Harrington
Executive Vice President
with a copy to:
Dain Rauscher
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402-4422
Attention: Ali P. Alizadeh
Managing Director, Fixed Income
-20-
<PAGE> 22
Notices to the Borrower shall be addressed to:
Princesa Partners
c/o Goldcoast Entertainment Cruises, Inc.
100 South Biscayne Blvd., Suite 850
Miami, FL 33131
Attention: Michael Hlavsa
with a copy to:
Concorde Gaming Corporation
3290 Lien Street
Rapid City, SD
Attention: George Nelson
Vice President
Section 8.3 Expenses; Taxes; Attorneys' Fees; Etc. The Borrower will
pay reasonable out-of-pocket expenses (including filing fees and attorneys'
fees) incurred directly by or on behalf of the Lenders in connection with the
preparation of the Loan Documents, the Guaranties, the Bayfront Agreement, and
related instruments, or review of the Loan Documents, the Guaranties, the
Bayfront Agreement, and related instruments, prior to the Closing Date or after
the occurrence of an Event of Default. The Borrower agrees to pay or cause to be
paid and to save the Lenders and the Servicer harmless against liability for the
payment of all reasonable fees and expenses, including out-of-pocket expenses,
incurred by the Lenders after the Closing Date, including but not limited to
attorneys' fees (but excluding any allocated fees of in-house counsel of any
Lender) and expenses of counsel and other expenses of the Lenders and the
Servicer incurred from time to time, in connection with the Lenders' enforcement
or preservation of rights under the Loan Documents, the Guaranties, the Bayfront
Agreement, and related instruments. The Borrower agrees to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter payable in connection with the Loan Documents, or any other
documents, instruments or transactions pursuant to or in connection herewith or
therewith, and the Borrower agrees to save the Lenders and the Servicer harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions. All such expenses, taxes or attorneys' fees
shall be payable on demand of the Servicer or the Lenders.
Section 8.4 Indemnification by Borrower.
(a) The Borrower agrees to indemnify and hold harmless the Lenders,
the Servicer and each of their officers, agents and employees, for, from
and against any and all losses, claims, damages or liability to which any
Lender, the Servicer, or any of their officers, agents or employees, may
become subject under any law in connection with the carrying out of the
transactions contemplated by this Agreement,
-21-
<PAGE> 23
any other Loan Document, any Guaranty or the Bayfront Agreement, or the
conduct of any activity at the Facilities (other than as a result of the
negligence or willful misconduct of any such Person), and to reimburse each
Lender, the Servicer, and each of their officers, agents and employees, for
any reasonable out-of-pocket legal and other fees and expenses (including
attorneys' fees) incurred by such Lender, the Servicer, and each of their
officers, agents and employees, in connection with investigating any such
losses, claims, damages or liabilities or in connection with defending any
actions relating thereto. The Lenders and the Servicer agree, at the
request and reasonable expense of the Borrower, to cooperate in the making
of any investigation in defense of any such claim and promptly to assert
any or all of the rights and privileges and defenses which may be available
to the Lenders or the Servicer. The provisions of this Section shall
survive the payment of the Notes and the Loan.
(b) Without limiting the generality of the foregoing, the Borrower
shall bear all loss, out-of-pocket expense (including reasonable attorneys'
fees) and damage in connection with, and agrees to indemnify and hold
harmless each Lender, the Servicer, and their officers, agents and
employees, for, from and against all claims, demands and judgments made or
recovered against such Lender, the Servicer, or any of their officers,
agents or employees, because of bodily injuries, including death at any
time resulting therefrom, or because of damages to property, from any cause
whatsoever, arising out of or in connection with the construction,
furnishing or operation of the Facilities, if due to any act of omission or
commission, including negligence, of the Borrower, Bayfront or any
contractor or its, his or their officers, employees or agents. The
Borrower's liability hereunder shall not be limited to the extent of
insurance carried by or provided by the Borrower or Bayfront or subject to
any exclusions from coverage in any insurance policy. No indemnity payment
shall be required hereunder to any Person if the claim, demand or judgment
resulted primarily from the negligence or willful misconduct of such
Person. The obligations of the Borrower under this Section shall survive
the repayment of the Notes and the Loan.
Section 8.5 Time of Essence. Time is of the essence in the performance
of this Agreement and the other Loan Documents.
Section 8.6 Entire Agreement. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower and
the Lenders with respect to the subject matter hereof and thereof. This
Agreement supersedes all prior agreements and understandings relating to the
subject matter hereof.
Section 8.7 Amendments, Etc. No amendment, modification or waiver of
any provision of the Loan Documents and no consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by such Persons constituting Lenders as is required by the
terms of the Servicing Agreement, and then such
-22-
<PAGE> 24
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
Section 8.8 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign its rights or
obligations hereunder without the prior written consent of the Lenders, and a
Lender may assign its rights and obligations under this Agreement and the other
Loan Documents only in accordance with the provisions of the Servicing
Agreement.
Section 8.9 Marshaling; Payments Set Aside. The Lenders shall be under
no obligation to marshal any assets in favor of the Borrower or any other Person
or against or in payment of the Loan or other debt or obligation of the Borrower
to any Lender. To the extent that the Borrower makes a payment or payments to
the Lenders or any Lender exercises its rights of setoff, and such payment or
payments or the proceeds of such setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other Person under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
Section 8.10 Article and Section Titles. The Article and Section titles
contained in this Agreement shall be without substantive meaning or content of
any kind whatsoever and shall not govern the interpretation of any of the
provisions of this Agreement.
Section 8.11 Reliance By Lenders. All covenants, agreements,
representations and warranties made herein and in any Loan Document by the
Borrower shall, notwithstanding any investigation by any Lender, be deemed to be
material to and to have been relied upon by the Lenders and shall survive the
execution and delivery of this Agreement.
Section 8.12 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 8.13 Inconsistency. In the event that any of the terms and
provisions of this Agreement are inconsistent with any of the terms and
provisions of the Notes or other Loan Documents, the terms and provisions of
this Agreement shall govern.
Section 8.14 Construction. Whenever possible, each provision of the
Loan Documents and any other statement, instrument or transaction contemplated
hereby or thereby or relating hereto or thereto shall be interpreted in such
manner as to be effective and
-23-
<PAGE> 25
valid under such applicable law, but, if any provision of the Loan Documents or
any other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of the Loan Documents or any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
thereto. The parties shall endeavor in good-faith negotiations to replace any
invalid, illegal or unenforceable provisions with a valid provision the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provision.
Section 8.15 Governing Law, Jurisdiction, Etc. The Borrower hereby
agrees with and for the benefit of the Lenders, the Servicer, and their
successors and assigns, and hereby agrees that the Loan Documents shall be
governed by and construed in accordance with the internal laws of the State of
Indiana, except to the extent different provisions are provided for in this
section.
Section 8.16 Consent to Jurisdiction. The Borrower irrevocably (i)
agrees that any suit, action or other legal proceeding arising out of or
relating to this Agreement may be brought in a court of record in the county in
the State of Indiana where the principal office of the Servicer is located or in
the Courts of the United States located in such State, (ii) consents to the
jurisdiction of each such court in any suit, action or proceeding, (iii) waives
any objection which it may have to the laying of venue of any such suit, action
or proceeding in any such courts and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum, and (iv) agrees that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
SECTION 8.17 WAIVER OF JURY TRIAL. THE BORROWER HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF, BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER RELATED
LOAN DOCUMENT TO WHICH THE BORROWER IS A PARTY.
-24-
<PAGE> 26
Section 8.18 Servicing Agreement. The Servicer, the Borrower and the
Lenders have entered into the Servicing Agreement whereby the Lenders have
employed the Servicer to receive and distribute all payments required to be made
by the Borrower with respect to the Notes and the Loan Documents, to give
notices and other communications to and obtain consents from the Lenders on the
terms set forth therein and to exercise, at the written direction of and on
behalf of the Lenders, the rights and remedies of the Lenders under this
Agreement and the other Loan Documents upon the occurrence of an Event of
Default. The Borrower shall be entitled to rely upon the provisions hereof and
of the Servicing Agreement for the purpose of making payments, giving notices
and other communications and obtaining consents of the Lenders. The Servicer
shall be a third-party beneficiary of this Agreement.
Section 8.18 Lenders' Obligations and Liabilities Several and Not
Joint. Each of the Lenders is severally (but not jointly) obligated to perform
only its own obligations hereunder, if any, and no Lender shall be liable or
responsible for the actions or inactions of any other Lender.
-25-
<PAGE> 27
IN WITNESS WHEREOF, the Borrower and the Lenders have caused this Loan
Agreement to be executed as of the date first above written.
<TABLE>
<S> <C>
PRINCESA PARTNERS UNITED COMMUNITY BANK OF NORTH DAKOTA
By CONAMI, INC., Its General Partner By
---------------------------------
Its
------------------------------
By /s/ Jerry L. Baum
------------------------------
Its President THE NATIONAL CITY BANK OF EVANSVILLE
And by GOLDCOAST ENTERTAINMENT
CRUISES, INC., Its General Partner By /s/ Stewart G. Herrington
---------------------------------
Its Executive Vice President
By /s/ Michael A. Hlavsa FIRST NATIONAL BANK
------------------------------
Its President
By /s/ Brent Frank
---------------------------------
Its Executive Vice President
UNITED PRAIRIE BANK - SLAYTON
THE NATIONAL CITY BANK OF
EVANSVILLE, as Lender and as Servicer By /s/ Skip Larson
---------------------------------
Its President
By /s/ Stewart G. Herrington
------------------------------
Its Executive Vice President PEOPLES NATIONAL BANK OF KEWANEE
By /s/ Charles Eastman
---------------------------------
LINN COUNTY STATE BANK Its President
By /s/ Serge L. Sisler STATE BANK OF FARGO
------------------------------
Its President
By
---------------------------------
Its
------------------------------
</TABLE>
Signature Page to Loan Agreement
<PAGE> 28
List of Exhibits and Schedule
<TABLE>
<S> <C>
Exhibit A Lenders
Exhibit B Description of Vessel
Exhibit C Form of Note
Exhibit D [intentionally omitted]
Exhibit E Amortization Schedule
Exhibit F Compliance Certificate
</TABLE>
<PAGE> 29
EXHIBIT A
Lenders
Lenders to the Loan Agreement dated as of October 15, 1998 with
Princesa Partners as Borrower:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
LOAN
LENDER AMOUNT
- ----------------------------------------------------------------------------
<S> <C>
The National City Bank of Evansville $3,600,000.00
- ----------------------------------------------------------------------------
Linn County State Bank $250,000.00
- ----------------------------------------------------------------------------
First National Bank $3,600,000.00
- ----------------------------------------------------------------------------
United Prairie Bank - Slayton $150,000.00
- ----------------------------------------------------------------------------
Peoples National Bank of Kewanee $800,000.00
- ----------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 30
EXHIBIT B
VESSEL DESCRIPTION
The Princesa consists of four decks, three of which are enclosed. With
approximately 10,000 square feet of gaming area, the vessel can provide up to
450 gaming positions. Located on the main deck is a casino area, the Coral Bar,
a cashier's cage, and restrooms. On the second deck, the vessel offers another
casino area, the Flamingo Bar, a cashier cage, and restrooms. The third deck has
a dining area, entertainment lounge and an Ocean Terrace deck. An open air
observation area is located on the fourth deck. Other vessel characteristics
include the following:
<TABLE>
<S> <C>
Length Overall 200'-0"
Beam (max) 41'-0
Beam (molded) 13'-6"
Depth (min) (molded) 13'-6"
Draft 9'-0"
Passengers 600
Crew 150
Gross tonnage Under 100
Fuel Oil Capacity Approx. 10,000 Gal.
Potable Water Capacity Approx. 5,000 Gal.
Black Water Capacity Approx. 5,000 Gal.
Propulsion Two Caterpillar model 3412
diesel engines
Stand by Generator Caterpillar model 3304
Heating and Cooling Two Carrier Transicold 120-ton
water-cooled liquid chillers
</TABLE>
B-1
<PAGE> 31
EXHIBIT C
Form of Notes
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED, SOLD OR ASSIGNED EXCEPT AS PERMITTED BY SECTION 3.1
OF THE SERVICING AND INTERCREDITOR AGREEMENT OF EVEN DATE HEREWITH AMONG THE
NATIONAL CITY BANK OF EVANSVILLE, AS SERVICER, THE UNDERSIGNED MAKER OF THIS
NOTE AND THE LENDERS (AS DEFINED HEREIN).
PROMISSORY NOTE
$
---------- ---------------------
For value received, PRINCESA PARTNERS (hereinafter called "Maker"), a
Florida general partnership, promises to pay to the order of
_________________________________ (hereinafter, together with any subsequent
holder hereof, called "Lender"), or assigns, at the main office of The National
City Bank of Evansville, in Evansville, Indiana (in its capacity as servicer,
the "Servicer"), or at such other place as Lender may from time to time
designate in writing, the principal sum of __________________________ United
States Dollars (U.S. $_____________), or so much thereof as remains unpaid from
time to time (hereinafter called "Principal Balance"), with interest on the
Principal Balance at the rate per annum hereinafter specified, all in accordance
with the terms hereinafter set forth.
From and after the date hereof, until the date on which this Note is
paid in full, Maker shall pay interest on the Principal Balance at an annual
rate of 10.625%. All interest hereunder shall be computed on the basis of twelve
30-day months in a year. However, in no event shall the Loan Rate at any time
exceed the maximum rate permitted by applicable law at such time if any such
maximum rate is established by applicable law.
Interest accruing on the Principal Balance during each calendar month
shall be due and payable on the first day of the next succeeding month,
commencing on the first day of the month following the date of this Note and
continuing on the first day of each and every month thereafter through and
including January 1, 1999. Commencing on February 1, 1999, and continuing on the
first day of each month thereafter through and including January 1, 2004 (the
"Maturity Date"), the Principal Balance and interest thereon shall be paid
together in sixty (60) consecutive monthly installments with the amount of each
such installment equal to the amount determined pursuant to Section 2.2 of the
Loan Agreement of even date herewith (the "Loan Agreement"), among Maker, Lender
and certain other lenders identified therein (collectively, including Lender,
the "Lenders"). The entire remaining Principal Balance and all accrued interest
thereon shall be paid in full on the Maturity Date.
C-1
<PAGE> 32
Maker and Lender agree that no payment of interest or other
consideration made or agreed to be made by Maker to Lender pursuant to this
Note, the Security Agreement (as that term is hereinafter defined), the Loan
Agreement, or any other instrument referring to or securing this Note shall, at
any time, be deemed to have been computed at an interest rate in excess of the
maximum rate of interest permissible by law, if any. In the event such payments
of interest or other consideration provided for in this Note, the Security
Agreement, the Loan Agreement or any other instrument referring to or securing
this Note shall result in payment of an effective rate of interest which, for
any period of time, is in excess of the limit of the usury law or any other law
applicable to the loan evidenced hereby, all sums in excess of those lawfully
collectible as interest for the period in question shall, without further
agreement of the Maker, be applied to the Principal Balance, with the same force
and effect as though the Maker had specifically designated, and Lender had
agreed to accept, such extra payments as a principal payment, without premium or
penalty, and Lender will give notice of such application within a reasonable
time after effecting the same. If principal hereof has been fully paid, any such
excess amount shall be refunded to Maker. This provision shall control over
every other obligation of Maker and Lender hereunder, under the Loan Agreement
and under any instrument which secures this Note.
This Note is issued pursuant to and is a "Note" as defined in the Loan
Agreement. This Note is subject to all of the terms and provisions of the Loan
Agreement, including without limitation terms providing for the payment of
interest at a Default Rate and late payment charges. This Note may be prepaid at
the option of Maker, and is subject to mandatory prepayment and acceleration of
the Principal Balance upon the occurrence of certain events as specified in the
Loan Agreement, all in accordance with the terms and conditions of the Loan
Agreement.
The payment and performance of this Note are secured by a Security
Agreement and a First Preferred Ship Mortgage (collectively, the "Security
Instruments") of even date herewith given by Maker to the Lenders. The
obligations of the Servicer, as servicer with respect to the Notes, are set
forth in, and the respective rights of the Lenders with respect to the Loan
Agreement, and the Security Agreement are governed by the terms of, a Servicing
and Intercreditor Agreement of even date herewith among the Servicer,, Maker and
the Lenders (the "Servicing Agreement").
Each maker, co-maker, endorser, surety and guarantor hereby guaranties
payment of this Note, and waives demand for payment, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
intention to accelerate maturity, notice of acceleration of maturity, notice of
intent to foreclose on any collateral securing this Note, all other notices as
to this Note, diligence in collection as to each and every payment due
hereunder, and all other requirements necessary to charge or hold such person or
entity to any obligation hereunder to the extent permitted by applicable law,
and agrees that without any notice Lender may take (when and if given by any
person) additional security herefor or may release any or all security herefor,
or alone, or together with any present or future owner or owners of any property
covered by the Security Instruments, may from time to time extend, renew, or
otherwise modify the date or dates or amount or amounts
C-2
<PAGE> 33
of payment above recited, or Lender may from time to time release from the
Security Instruments any part or parts of the property and interests subject to
the Security Instruments, with or without consideration, and that, in any such
case, each maker, co-maker, endorser, surety and guarantor shall continue to be
bound hereby and to be liable to pay the unpaid balance of the indebtedness
evidenced hereby, as so additionally secured, extended, renewed or modified, and
notwithstanding any such release; and further agrees to pay all reasonable costs
and expenses of collection, including court costs and reasonable attorneys' fees
(prior to trial, at trial and on appeal) incurred in collecting the indebtedness
secured hereby, or in exercising or defending, or obtaining the right to
exercise, the rights of Lender hereunder, under the Loan Agreement, or under the
Security Agreement, , whether suit be brought or not, and in foreclosure, in
bankruptcy, insolvency, arrangement, reorganization and other debtor-relief
proceedings, in probate, in other court proceedings, or otherwise, whether or
not Lender prevails therein, and all costs and expenses incurred by Lender in
protecting or preserving the property and interests which are subject to the
Security Instruments or the Depository Agreement.
Lender may transfer this Note to Accredited Investors as defined in and
pursuant to the terms of the Servicing Agreement, which transfer shall be
together with Lender's rights and obligations under the Loan Agreement, the
Security Instruments, and the Servicing Agreement.
This Note has been delivered in the State of Indiana and is made with
reference to and shall be construed in accordance with and governed by the
internal law of the State of Indiana, including but not limited to such law for
the purpose of determining the maximum rate of interest, if any, which may be
lawfully received hereunder by the holder hereof. This instrument shall be
construed in accordance with its intent and with the fair meaning of its
provisions, and without regard to any presumption or other rule requiring
construction against the party which caused the same to be drafted.
C-3
<PAGE> 34
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and
delivered as of the day and year first above set forth.
PRINCESA PARTNERS
By CONAMI, INC., Its General Partner
By
-----------------------------------
Its President
and
By GOLDCOAST ENTERTAINMENT CRUISES, INC.,
Its General Partner
By
-----------------------------------
Its President
C-4
<PAGE> 35
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
PRINCIPAL $ 8,400,000.00
INTEREST RATE 10.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 130,257.79
BALLOON PAYMENT $ 4,000,372.28 DUE JANUARY 2004
NOTE:
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL PERIOD END OF PERIOD
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NOV-98 0.00 22,312.50 22,312.50 8,400,000.00 8,400,000.00
DEC-98 0.00 74,375.00 74,375.00 8,400,000.00 8,400,000.00
JAN-99 55,882.79 74,375.00 130,257.79 8,400,000.00 8,344,117.21
FEB-99 56,377.58 73,880.20 130,257.79 8,344,117.21 8,287,739.63
MAR-99 56,876.76 73,381.03 130,257.79 8,287,739.63 8,230,862.87
APR-99 57,380.36 72,877.43 130,257.79 8,230,862.87 8,173,482.51
MAY-99 57,888.41 72,369.38 130,257.79 8,173,482.51 8,115,594.10
JUN-99 58,400.97 71,856.82 130,257.79 8,115,594.10 8,057,193.13
JUL-99 58,918.06 71,339.73 130,257.79 8,057,193.13 7,998,275.08
AUG-99 59,439.73 70,818.06 130,257.79 7,998,275.08 7,938,835.35
SEP-99 59,966.02 70,291.77 130,257.79 7,938,835.35 7,878,869.33
OCT-99 60,496.97 69,760.82 130,257.79 7,878,869.33 7,818,372.37
NOV-99 61,032.62 69,225.17 130,257.79 7,818,372.37 7,757,339.75
DEC-99 61,573.01 68,684.78 130,257.79 7,757,339.75 7,695,766.74
JAN-00 62,118.19 68,139.60 130,257.79 7,695,766.74 7,633,648.56
FEB-00 62,668.19 67,589.60 130,257.79 7,633,648.56 7,570,980.36
MAR-00 63,223.07 67,034.72 130,257.79 7,570,980.36 7,507,757.30
APR-00 63,782.85 66,474.93 130,257.79 7,507,757.30 7,443,974.44
MAY-00 64,347.60 65,910.19 130,257.79 7,443,974.44 7,379,626.85
JUN-00 64,917.34 65,340.45 130,257.79 7,379,626.85 7,314,709.50
JUL-00 65,492.13 64,765.66 130,257.79 7,314,709.50 7,249,217.37
AUG-00 66,072.01 64,185.78 130,257.79 7,249,217.37 7,183,145.36
SEP-00 66,657.02 63,600.77 130,257.79 7,183,145.36 7,116,488.34
OCT-00 67,247.21 63,010.57 130,257.79 7,116,488.34 7,049,241.13
NOV-00 67,842.63 62,415.16 130,257.79 7,049,241.13 6,981,398.50
DEC-00 68,443.32 61,814.47 130,257.79 6,981,398.50 6,912,955.17
JAN-01 69,049.33 61,208.46 130,257.79 6,912,955.17 6,843,905.84
FEB-01 69,660.71 60,597.08 130,257.79 6,843,905.84 6,774,245.14
MAR-01 70,277.49 59,980.30 130,257.79 6,774,245.14 6,703,967.65
APR-01 70,899.74 59,358.05 130,257.79 6,703,967.65 6,633,067.90
MAY-01 71,527.50 58,730.29 130,257.79 6,633,067.90 6,561,540.40
JUN-01 72,160.82 58,096.97 130,257.79 6,561,540.40 6,489,379.59
JUL-01 72,799.74 57,458.05 130,257.79 6,489,379.59 6,416,579.85
AUG-01 73,444.32 56,813.47 130,257.79 6,416,579.85 6,343,135.53
SEP-01 74,094.61 56,163.18 130,257.79 6,343,135.53 6,269,040.92
OCT-01 74,750.65 55,507.13 130,257.79 6,269,040.92 6,194,290.26
NOV-01 75,412.51 54,845.28 130,257.79 6,194,290.26 6,118,877.76
DEC-01 76,080.22 54,177.56 130,257.79 6,118,877.76 6,042,797.53
JAN-02 76,753.85 53,503.94 130,257.79 6,042,797.53 5,966,043.68
FEB-02 77,433.44 52,824.35 130,257.79 5,966,043.68 5,888,610.24
MAR-02 78,119.05 52,138.74 130,257.79 5,888,610.24 5,810,491.18
APR-02 78,810.73 51,447.06 130,257.79 5,810,491.18 5,731,680.45
MAY-02 79,508.53 50,749.25 130,257.79 5,731,680.45 5,652,171.92
JUN-02 80,212.52 50,045.27 130,257.79 5,652,171.92 5,571,959.40
JUL-02 80,922.73 49,335.06 130,257.79 5,571,959.40 5,491,036.67
AUG-02 81,639.23 48,618.55 130,257.79 5,491,036.67 5,409,397.44
SEP-02 82,362.08 47,895.71 130,257.79 5,409,397.44 5,327,035.36
OCT-02 83,091.33 47,166.46 130,257.79 5,327,035.36 5,243,944.03
NOV-02 83,827.03 46,430.75 130,257.79 5,243,944.03 5,160,116.99
DEC-02 84,569.25 45,688.54 130,257.79 5,160,116.99 5,075,547.74
JAN-03 85,318.04 44,939.75 130,257.79 5,075,547.74 4,990,229.70
FEB-03 86,073.46 44,184.33 130,257.79 4,990,229.70 4,904,156.24
MAR-03 86,835.57 43,422.22 130,257.79 4,904,156.24 4,817,320.67
APR-03 87,604.43 42,653.36 130,257.79 4,817,320.67 4,729,716.24
MAY-03 88,380.09 41,877.70 130,257.79 4,729,716.24 4,641,336.15
JUN-03 89,162.62 41,095.16 130,257.79 4,641,336.15 4,552,173.52
JUL-03 89,952.09 40,305.70 130,257.79 4,552,173.52 4,462,221.44
AUG-03 90,748.54 39,509.25 130,257.79 4,462,221.44 4,371,472.90
SEP-03 91,552.04 38,705.75 130,257.79 4,371,472.90 4,279,920.86
OCT-03 92,362.66 37,895.13 130,257.79 4,279,920.86 4,187,558.21
NOV-03 93,180.45 37,077.34 130,257.79 4,187,558.21 4,094,377.76
DEC-03 94,005.49 36,252.30 130,257.79 4,094,377.76 4,000,372.27
JAN-04 4,000,372.28 35,419.96 4,035,792.24 4,000,372.27 (0.00)
---------------------------------------------
TOTALS 8,400,000.00 3,547,947.02 11,947,947.02
=============================================
</TABLE>
<PAGE> 36
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
NATIONAL CITY BANK OF EVANSVILLE
PRINCIPAL $ 3,600,000.00
NET RATE TO LENDER 10.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 55,824.77
BALLOON PAYMENT $ 55,824.77 DUE JANUARY 2004
NOTES:
SERVICING FEE REFLECTS 0.25% ON THE PRINCIPAL BALANCE HELD BY OTHER LENDERS. NO
SERVICING FEE CHARGED ON THE NCB $3.6MM.
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
PLUS NET PAYMENT BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL P&I SERVICING FEE RECEIVED PERIOD END OF PERIOD
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOV-98 0.00 9,562.50 9,562.50 300.00 9,862.50 3,600,000.00 3,600,000.00
DEC-98 0.00 31,875.00 31,875.00 1,000.00 32,875.00 3,600,000.00 3,600,000.00
JAN-99 23,949.77 31,875.00 55,824.77 1,000.00 56,824.77 3,600,000.00 3,576,050.23
FEB-99 24,161.82 31,662.94 55,824.77 993.35 56,818.11 3,576,050.23 3,551,888.41
MAR-99 24,375.75 31,449.01 55,824.77 966.64 56,811.40 3,551,888.41 3,527,512.66
APR-99 24,591.58 31,233.18 55,824.77 979.86 56,804.63 3,527,512.66 3,502,921.08
MAY-99 24,809.32 31,015.45 55,824.77 973.03 56,797.80 3,502,921.08 3,478,111.76
JUN-99 25,028.99 30,795.78 55,824.77 966.14 56,790.91 3,478,111.76 3,453,082.77
JUL-99 25,250.60 30,574.17 55,824.77 959.19 56,783.96 3,453,082.77 3,427,832.18
AUG-99 25,474.17 30,350.60 55,824.77 952.18 56,776.94 3,427,832.18 3,402,358.01
SEP-99 25,699.72 30,125.04 55,824.77 945.10 56,769.87 3,402,358.01 3,376,658.29
OCT-99 25,927.27 29,897.50 55,824.77 937.96 56,762.73 3,376,658.29 3,350,731.01
NOV-99 26,156.84 29,667.93 55,824.77 930.76 56,755.52 3,350,731.01 3,324,574.18
DEC-99 26,388.43 29,436.33 55,824.77 923.49 56,748.26 3,324,574.18 3,298,185.75
JAN-00 26,622.08 29,202.69 55,824.77 916.16 56,740.93 3,298,185.75 3,271,563.67
FEB-00 26,857.80 28,966.97 55,824.77 908.77 56,733.53 3,271,563.67 3,244,705.87
MAR-00 27,095.60 28,729.17 55,824.77 901.31 56,726.07 3,244,705.87 3,217,610.27
APR-00 27,335.51 28,489.26 55,824.77 893.78 56,718.55 3,217,610.27 3,190,274.76
MAY-00 27,577.54 28,247.22 55,824.77 886.19 56,710.95 3,190,274.76 3,162,697.22
JUN-00 27,821.72 28,003.05 55,824.77 878.53 56,703.29 3,162,697.22 3,134,875.50
JUL-00 28,068.06 27,756.71 55,824.77 870.80 56,695.57 3,134,875.50 3,106,807.45
AUG-00 28,316.58 27,508.19 55,824.77 863.00 56,687.77 3,106,807.45 3,078,490.87
SEP-00 28,567.30 27,257.47 55,824.77 855.14 56,679.90 3,078,490.87 3,049,923.58
OCT-00 28,820.23 27,004.53 55,824.77 847.20 56,671.97 3,049,923.58 3,021,103.34
NOV-00 29,075.41 26,749.35 55,824.77 839.20 56,663.96 3,021,103.34 2,992,027.93
DEC-00 29,332.85 26,491.91 55,824.77 831.12 56,655.89 2,992,027.93 2,962,695.07
JAN-01 29,592.57 26,232.20 55,824.77 822.97 56,647.74 2,962,695.07 2,933,102.50
FEB-01 29,854.59 25,970.18 55,824.77 814.75 56,639.52 2,933,102.50 2,903,247.92
MAR-01 30,118.93 25,705.84 55,824.77 806.46 56,631.22 2,903,247.92 2,873,128.99
APR-01 30,385.60 25,439.16 55,824.77 798.09 56,622.86 2,873,128.99 2,842,743.39
MAY-01 30,654.64 25,170.12 55,824.77 789.65 56,614.42 2,842,743.39 2,812,088.74
JUN-01 30,926.06 24,898.70 55,824.77 781.14 56,605.90 2,812,088.74 2,781,162.68
JUL-01 31,199.89 24,624.88 55,824.77 772.55 56,595.47 2,781,162.68 2,749,962.79
AUG-01 31,476.14 24,348.63 55,824.77 763.88 56,588.64 2,749,962.79 2,718,486.66
SEP-01 31,754.83 24,069.93 55,824.77 755.14 56,579.90 2,718,486.66 2,686,731.82
OCT-01 32,035.99 23,788.77 55,824.77 746.31 56,571.08 2,686,731.82 2,654,695.83
NOV-01 32,319.65 23,505.12 55,824.77 737.42 56,562.18 2,654,695.83 2,622,376.18
DEC-01 32,605.81 23,218.96 55,824.77 728.44 56,553.20 2,622,376.18 2,589,770.37
JAN-02 32,894.51 22,930.26 55,824.77 719.38 56,544.15 2,589,770.37 2,556,875.86
FEB-02 33,185.76 22,639.01 55,824.77 710.24 56,535.01 2,556,875.86 2,523,690.10
MAR-02 33,479.59 22,345.17 55,824.77 701.03 56,525.79 2,523,690.10 2,490,210.51
APR-02 33,776.03 22,048.74 55,824.77 691.73 56,516.49 2,490,210.51 2,456,434.48
MAY-02 34,075.09 21,749.68 55,824.77 682.34 56,507.11 2,456,434.48 2,422,359.39
JUN-02 34,376.79 21,447.97 55,824.77 672.88 56,497.64 2,422,359.39 2,387,982.60
JUL-02 34,681.17 21,143.60 55,824.77 663.33 56,488.09 2,387,982.60 2,353,301.43
AUG-02 34,988.24 20,836.52 55,824.77 653.69 56,478.46 2,353,301.43 2,318,313.19
SEP-02 35,298.03 20,526.73 55,824.77 643.98 56,468.74 2,318,313.19 2,283,015.15
OCT-02 35,610.57 20,214.20 55,824.77 634.17 56,458.94 2,283,015.15 2,247,404.58
NOV-02 35,925.87 19,898.89 55,824.77 624.28 56,449.05 2,247,404.58 2,211,478.71
DEC-02 36,243.97 19,580.80 55,824.77 614.30 56,439.07 2,211,478.71 2,175,234.75
JAN-03 36,564.88 19,259.89 55,824.77 604.23 56,429.00 2,175,234.75 2,138,669.87
FEB-03 36,888.63 18,936.14 55,824.77 594.07 56,418.84 2,138,669.87 2,101,781.24
MAR-03 37,215.24 18,609.52 55,824.77 583.83 56,408.59 2,101,781.24 2,064,566.00
APR-03 37,544.75 18,280.01 55,824.77 573.49 56,398.26 2,064,566.00 2,027,021.24
MAY-03 37,877.18 17,947.58 55,824.77 563.06 56,387.83 2,027,021.24 1,989,144.06
JUN-03 38,212.55 17,612.21 55,824.77 552.54 56,377.31 1,989,144.06 1,950,931.51
JUL-03 38,550.89 17,273.87 55,824.77 541.93 56,366.69 1,950,931.51 1,912,380.62
AUG-03 38,892.23 16,932.54 55,824.77 531.22 56,355.98 1,912,380.62 1,873,488.39
SEP-03 39,236.59 16,588.18 55,824.77 520.41 56,345.18 1,873,488.39 1,834,251.80
OCT-03 39,584.00 16,240.77 55,824.77 509.51 56,334.28 1,834,251.80 1,794,667.80
NOV-03 39,934.48 15,890.29 55,824.77 498.52 56,323.29 1,794,667.80 1,754,733.32
DEC-03 40,288.07 15,536.70 55,824.77 487.43 56,312.19 1,754,733.32 1,714,445.26
JAN-04 1,714,445.26 15,179.98 1,729,625.25 476.23 1,730,101.48 1,714,445.26 (0.00)
-----------------------------------------------------------------------------
TOTALS 3,600,000.00 1,520,548.72 5,120,548.73 47,703.49 5,168,250.38
=============================================================================
</TABLE>
<PAGE> 37
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
FIRST NATIONAL BANK
PRINCIPAL $ 3,600,000.00
GROSS RATE FROM BORROW 10.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 55,824.77
BALLOON PAYMENT $ 1,729,625.25 DUE JANUARY 2004
NOTE:
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
LESS NET PAYMENT BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL SERVICING FEE RECEIVED PERIOD END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOV-98 0.00 9,562.50 9,562.50 (225.00) 9,337.50 3,600,000.00 3,600,000.00
DEC-98 0.00 31,875.00 31,875.00 (750.00) 31,125.00 3,600,000.00 3,600,000.00
JAN-99 23,949.77 31,875.00 55,824.77 (750.00) 55,074.77 3,600,000.00 3,576,050.23
FEB-99 24,161.82 31,662.94 55,824.77 (745.01) 55,079.76 3,576,050.23 3,551,888.41
MAR-99 24,375.75 31,449.01 55,824.77 (739.98) 55,084.79 3,551,888.41 3,527,512.66
APR-99 24,591.58 31,233.18 55,824.77 (734.90) 55,089.87 3,527,512.66 3,502,921.08
MAY-99 24,809.32 31,015.45 55,824.77 (729.78) 55,094.99 3,502,921.08 3,478,111.76
JUN-99 25,028.99 30,795.78 55,824.77 (724.61) 55,100.16 3,478,111.76 3,453,082.77
JUL-99 25,250.60 30,574.17 55,824.77 (719.39) 55,105.37 3,453,082.77 3,427,832.18
AUG-99 25,474.17 30,350.60 55,824.77 (714.13) 55,110.63 3,427,832.18 3,402,358.01
SEP-99 25,699.72 30,125.04 55,824.77 (708.82) 55,115.94 3,402,358.01 3,376,658.29
OCT-99 25,927.27 29,897.50 55,824.77 (703.47) 55,121.30 3,376,658.29 3,350,731.01
NOV-99 26,156.84 29,667.93 55,824.77 (698.07) 55,126.70 3,350,731.01 3,324,574.18
DEC-99 26,388.43 29,436.33 55,824.77 (692.62) 55,132.15 3,324,574.18 3,298,185.75
JAN-00 26,622.08 29,202.69 55,824.77 (687.12) 55,137.64 3,298,185.75 3,271,563.67
FEB-00 26,857.80 28,966.97 55,824.77 (681.58) 55,143.19 3,271,563.67 3,244,705.87
MAR-00 27,095.60 28,729.17 55,824.77 (675.98) 55,148.79 3,244,705.87 3,217,610.27
APR-00 27,335.51 28,489.26 55,824.77 (670.34) 55,154.43 3,217,610.27 3,190,274.76
MAY-00 27,577.54 28,247.22 55,824.77 (664.64) 55,160.13 3,190,274.76 3,162,697.22
JUN-00 27,821.72 28,003.05 55,824.77 (658.90) 55,165.87 3,162,697.22 3,134,875.50
JUL-00 28,068.06 27,756.71 55,824.77 (653.10) 55,171.67 3,134,875.50 3,106,807.45
AUG-00 28,316.58 27,508.19 55,824.77 (647.25) 55,177.51 3,106,807.45 3,078,490.87
SEP-00 28,567.30 27,257.47 55,824.77 (641.35) 55,183.41 3,078,490.87 3,049,923.58
OCT-00 28,820.23 27,004.53 55,824.77 (635.40) 55,189.37 3,049,923.58 3,021,103.34
NOV-00 29,075.41 26,749.35 55,824.77 (629.40) 55,195.37 3,021,103.34 2,992,027.93
DEC-00 29,332.85 26,491.91 55,824.77 (623.34) 55,201.43 2,992,027.93 2,962,695.07
JAN-01 29,592.57 26,232.20 55,824.77 (617.23) 55,207.54 2,962,695.07 2,933,102.50
FEB-01 29,854.59 25,970.18 55,824.77 (611.06) 55,213.70 2,933,102.50 2,903,247.92
MAR-01 30,118.93 25,705.84 55,824.77 (604.84) 55,219.92 2,903,247.92 2,873,128.99
APR-01 30,385.60 25,439.16 55,824.77 (598.57) 55,226.20 2,873,128.99 2,842,743.39
MAY-01 30,654.64 25,170.12 55,824.77 (592.24) 55,232.53 2,842,743.39 2,812,088.74
JUN-01 30,926.06 24,898.70 55,824.77 (585.85) 55,238.91 2,812,088.74 2,781,162.68
JUL-01 31,199.89 24,624.88 55,824.77 (579.41) 55,245.36 2,781,162.68 2,749,962.79
AUG-01 31,476.14 24,348.63 55,824.77 (572.91) 55,251.86 2,749,962.79 2,718,486.66
SEP-01 31,754.83 24,069.93 55,824.77 (566.35) 55,258.41 2,718,486.66 2,686,731.82
OCT-01 32,035.99 23,788.77 55,824.77 (559.74) 55,265.03 2,686,731.82 2,654,695.83
NOV-01 32,319.65 23,505.12 55,824.77 (553.06) 55,271.70 2,654,695.83 2,622,376.18
DEC-01 32,605.81 23,218.96 55,824.77 (546.33) 55,278.44 2,622,376.18 2,589,770.37
JAN-02 32,894.51 22,930.26 55,824.77 (539.54) 55,285.23 2,589,770.37 2,556,875.86
FEB-02 33,185.76 22,639.01 55,824.77 (532.68) 55,292.08 2,556,875.86 2,523,690.10
MAR-02 33,479.59 22,345.17 55,824.77 (525.77) 55,299.00 2,523,690.10 2,490,210.51
APR-02 33,776.03 22,048.74 55,824.77 (518.79) 55,305.97 2,490,210.51 2,456,434.48
MAY-02 34,075.09 21,749.68 55,824.77 (511.76) 55,313.01 2,456,434.48 2,422,359.39
JUN-02 34,376.79 21,447.97 55,824.77 (504.66) 55,320.11 2,422,359.39 2,387,982.60
JUL-02 34,681.17 21,143.60 55,824.77 (497.50) 55,327.27 2,387,982.60 2,353,301.43
AUG-02 34,988.24 20,836.52 55,824.77 (490.27) 55,334.50 2,353,301.43 2,318,313.19
SEP-02 35,298.03 20,526.73 55,824.77 (482.98) 55,341.78 2,318,313.19 2,283,015.15
OCT-02 35,610.57 20,214.20 55,824.77 (475.63) 55,349.14 2,283,015.15 2,247,404.58
NOV-02 35,925.87 19,898.89 55,824.77 (468.21) 55,356.56 2,247,404.58 2,211,478.71
DEC-02 36,243.97 19,580.80 55,824.77 (460.72) 55,364.04 2,211,478.71 2,175,234.75
JAN-03 36,564.88 19,259.89 55,824.77 (453.17) 55,371.59 2,175,234.75 2,138,669.87
FEB-03 36,888.63 18,936.14 55,824.77 (445.56) 55,379.21 2,138,669.87 2,101,781.24
MAR-03 37,215.24 18,609.52 55,824.77 (437.87) 55,386.90 2,101,781.24 2,064,566.00
APR-03 37,544.75 18,280.01 55,824.77 (430.12) 55,394.65 2,064,566.00 2,027,021.24
MAY-03 37,877.18 17,947.58 55,824.77 (422.30) 55,402.47 2,027,021.24 1,989,144.06
JUN-03 38,212.55 17,612.21 55,824.77 (414.41) 55,410.36 1,989,144.06 1,950,931.51
JUL-03 38,550.89 17,273.87 55,824.77 (406.44) 55,418.32 1,950,931.51 1,912,380.62
AUG-03 38,892.23 16,932.54 55,824.77 (398.41) 55,426.35 1,912,380.62 1,873,488.39
SEP-03 39,236.59 16,588.18 55,824.77 (390.31) 55,434.46 1,873,488.39 1,834,251.80
OCT-03 39,584.00 16,240.77 55,824.77 (382.14) 55,442.63 1,834,251.80 1,794,667.80
NOV-03 39,934.48 15,890.29 55,824.77 (373.89) 55,450.88 1,794,667.80 1,754,733.32
DEC-03 40,288.07 15,536.70 55,824.77 (365.57) 55,459.20 1,754,733.32 1,714,445.26
JAN-04 1,714,445.26 15,179.98 1,729,625.25 (357.18) 1,729,268.07 1,714,445.26 (0.00)
-------------------------------------------------------------------------------
TOTALS 3,600,000.00 1,520,548.72 5,120,548.73 (35,777.62) 5,084,771.11
===============================================================================
</TABLE>
<PAGE> 38
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
PEOPLES NATIONAL BANK KEWANEE
PRINCIPAL $ 800,000.00
GROSS RATE FROM BORROW 0.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 12,405.50
BALLOON PAYMENT $ 384,361.16 DUE JANUARY 2004
NOTE:
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
LESS NET PAYMENT BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL SERVICING FEE RECEIVED PERIOD END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOV-98 0.00 2,125.00 2,125.00 (50.00) 2,075.00 800,000.00 800,000.00
DEC-98 0.00 7,083.33 7,083.33 (166.67) 6,916.67 800,000.00 800,000.00
JAN-99 5,322.17 7,083.33 12,405.50 (166.67) 12,238.84 800,000.00 794,677.83
FEB-99 5,369.29 7,036.21 12,405.50 (165.56) 12,239.95 794,677.83 789,308.54
MAR-99 5,416.83 6,988.67 12,405.50 (164.44) 12,241.06 789,308.54 783,891.70
APR-99 5,464.80 6,940.71 12,405.50 (163.31) 12,242.19 783,891.70 778,426.91
MAY-99 5,513.18 6,892.32 12,405.50 (162.17) 12,243.33 778,426.91 772,913.72
JUN-99 5,562.00 6,843.51 12,405.50 (161.02) 12,244.48 772,913.72 767,351.73
JUL-99 5,611.24 6,794.26 12,405.50 (159.86) 12,245.64 767,351.73 761,740.48
AUG-99 5,660.93 6,744.58 12,405.50 (158.70) 12,246.81 761,740.48 756,079.56
SEP-99 5,711.05 6,694.45 12,405.50 (157.52) 12,247.99 756,079.56 750,368.51
OCT-99 5,761.62 6,643.89 12,405.50 (156.33) 12,249.18 750,368.51 744,606.89
NOV-99 5,812.63 6,592.87 12,405.50 (155.13) 12,250.38 744,606.89 738,794.26
DEC-99 5,864.10 6,541.41 12,405.50 (153.92) 12,251.59 738,794.26 732,930.17
JAN-00 5,916.02 6,489.49 12,405.50 (152.69) 12,252.81 732,930.17 727,014.15
FEB-00 5,968.40 6,437.10 12,405.50 (151.46) 12,254.04 727,014.15 721,045.75
MAR-00 6,021.24 6,384.26 12,405.50 (150.22) 12,255.29 721,045.75 715,024.50
APR-00 6,074.56 6,330.95 12,405.50 (148.96) 12,256.54 715,024.50 708,949.95
MAY-00 6,128.34 6,277.16 12,405.50 (147.70) 12,257.81 708,949.95 702,821.60
JUN-00 6,182.60 6,222.90 12,405.50 (146.42) 12,259.08 702,821.60 696,639.00
JUL-00 6,237.35 6,168.16 12,405.50 (145.13) 12,260.37 696,639.00 690,401.65
AUG-00 6,292.57 6,112.93 12,405.50 (143.83) 12,261.67 690,401.65 684,109.08
SEP-00 6,348.29 6,057.22 12,405.50 (142.52) 12,262.98 684,109.08 677,760.79
OCT-00 6,404.50 6,001.01 12,405.50 (141.20) 12,264.30 677,760.79 671,356.30
NOV-00 6,461.20 5,944.30 12,405.50 (139.87) 12,265.64 671,356.30 664,895.09
DEC-00 6,518.41 5,887.09 12,405.50 (138.52) 12,266.98 664,895.09 658,376.68
JAN-01 6,576.13 5,829.38 12,405.50 (137.16) 12,268.34 658,376.68 651,800.56
FEB-01 6,634.35 5,771.15 12,405.50 (135.79) 12,269.71 651,800.56 645,166.20
MAR-01 6,693.09 5,712.41 12,405.50 (134.41) 12,271.09 645,166.20 638,473.11
APR-01 6,752.36 5,653.15 12,405.50 (133.02) 12,272.49 638,473.11 631,720.75
MAY-01 6,812.14 5,593.36 12,405.50 (131.61) 12,273.90 631,720.75 624,908.61
JUN-01 6,872.46 5,533.04 12,405.50 (130.19) 12,275.31 624,908.61 618,036.15
JUL-01 6,933.31 5,472.20 12,405.50 (128.76) 12,276.75 618,036.15 611,102.84
AUG-01 6,994.70 5,410.81 12,405.50 (127.31) 12,278.19 611,102.84 604,108.15
SEP-01 7,056.63 5,348.87 12,405.50 (125.86) 12,279.65 604,108.15 597,051.52
OCT-01 7,119.11 5,286.39 12,405.50 (124.39) 12,281.12 597,051.52 589,932.41
NOV-01 7,182.14 5,223.36 12,405.50 (122.90) 12,282.60 589,932.41 582,750.26
DEC-01 7,245.74 5,159.77 12,405.50 (121.41) 12,284.10 582,750.26 575,504.53
JAN-02 7,309.89 5,095.61 12,405.50 (119.90) 12,285.61 575,504.53 568,194.64
FEB-02 7,374.61 5,030.89 12,405.50 (118.37) 12,287.13 568,194.64 560,820.02
MAR-02 7,439.91 4,965.59 12,405.50 (116.84) 12,288.67 560,820.02 553,380.11
APR-02 7,505.78 4,899.72 12,405.50 (115.29) 12,290.22 553,380.11 545,874.33
MAY-02 7,572.24 4,833.26 12,405.50 (113.72) 12,291.78 545,874.33 538,302.09
JUN-02 7,639.29 4,766.22 12,405.50 (112.15) 12,293.36 538,302.09 530,662.80
JUL-02 7,706.93 4,698.58 12,405.50 (110.55) 12,294.95 530,662.80 522,955.87
AUG-02 7,775.17 4,630.34 12,405.50 (108.95) 12,296.55 522,955.87 515,180.71
SEP-02 7,844.01 4,561.50 12,405.50 (107.33) 12,298.17 515,180.71 507,336.70
OCT-02 7,913.46 4,492.04 12,405.50 (105.70) 12,299.81 507,336.70 499,423.24
NOV-02 7,983.53 4,421.98 12,405.50 (104.05) 12,301.46 499,423.24 491,439.71
DEC-02 8,054.21 4,351.29 12,405.50 (102.38) 12,303.12 491,439.71 483,385.50
JAN-03 8,125.53 4,279.98 12,405.50 (100.71) 12,304.80 483,385.50 475,259.97
FEB-03 8,197.47 4,208.03 12,405.50 (99.01) 12,306.49 475,259.97 467,062.50
MAR-03 8,270.05 4,135.45 12,405.50 (97.30) 12,308.20 467,062.50 458,792.44
APR-03 8,343.28 4,062.22 12,405.50 (95.58) 12,309.92 458,792.44 450,449.17
MAY-03 8,417.15 3,988.35 12,405.50 (93.84) 12,311.66 450,449.17 442,032.01
JUN-03 8,491.68 3,913.83 12,405.50 (92.09) 12,313.41 442,032.01 433,540.34
JUL-03 8,566.87 3,838.64 12,405.50 (90.32) 12,315.18 433,540.34 424,973.47
AUG-03 8,642.72 3,762.79 12,405.50 (88.54) 12,316.97 424,973.47 416,330.75
SEP-03 8,719.24 3,686.26 12,405.50 (86.74) 12,318.77 416,330.75 407,611.51
OCT-03 8,796.44 3,609.06 12,405.50 (84.92) 12,320.58 407,611.51 398,815.07
NOV-03 8,874.33 3,531.18 12,405.50 (83.09) 12,322.42 398,815.07 389,940.74
DEC-03 8,952.90 3,452.60 12,405.50 (81.24) 12,324.27 389,940.74 380,987.84
JAN-04 380,987.83 3,373.33 384,361.16 (79.37) 384,281.79 380,987.84 0.00
-------------------------------------------------------------------------------
TOTALS 800,000.00 337,899.72 1,137,899.71 (7,950.58) 1,129,949.13
===============================================================================
</TABLE>
<PAGE> 39
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
LINN COUNTY STATE BANK
PRINCIPAL $ 250,000.00
GROSS RATE FROM BORROW 10.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 3,876.72
BALLOON PAYMENT $ 120,112.86 DUE JANUARY 2004
NOTE:
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
LESS NET PAYMENT BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL SERVICING FEE RECEIVED PERIOD END OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOV-98 0.00 664.06 664.06 (15.63) 648.44 250,000.00 250,000.00
DEC-98 0.00 2,213.54 2,213.54 (52.08) 2,161.46 250,000.00 250,000.00
JAN-99 1,663.18 2,213.54 3,876.72 (52.08) 3,824.64 250,000.00 248,336.82
FEB-99 1,677.90 2,198.82 3,876.72 (51.74) 3,824.98 248,336.82 246,658.92
MAR-99 1,692.76 2,183.96 3,876.72 (51.39) 3,825.33 246,658.92 244,966.16
APR-99 1,707.75 2,168.97 3,876.72 (51.03) 3,825.69 244,966.16 243,258.41
MAY-99 1,722.87 2,153.85 3,876.72 (50.68) 3,826.04 243,258.41 241,535.54
JUN-99 1,738.12 2,138.60 3,876.72 (50.32) 3,826.40 241,535.54 239,797.41
JUL-99 1,753.51 2,123.21 3,876.72 (49.96) 3,826.76 239,797.41 238,043.90
AUG-99 1,769.04 2,107.68 3,876.72 (49.59) 3,827.13 238,043.90 236,274.86
SEP-99 1,784.70 2,092.02 3,876.72 (49.22) 3,827.50 236,274.86 234,490.16
OCT-99 1,800.50 2,076.21 3,876.72 (48.85) 3,827.87 234,490.16 232,689.65
NOV-99 1,816.45 2,060.27 3,876.72 (48.48) 3,828.24 232,689.65 230,873.21
DEC-99 1,832.53 2,044.19 3,876.72 (48.10) 3,828.62 230,873.21 229,040.68
JAN-00 1,848.76 2,027.96 3,876.72 (47.72) 3,829.00 229,040.68 227,191.92
FEB-00 1,865.12 2,011.60 3,876.72 (47.33) 3,829.39 227,191.92 225,326.80
MAR-00 1,881.64 1,995.08 3,876.72 (46.94) 3,829.78 225,326.80 223,445.16
APR-00 1,898.30 1,978.42 3,876.72 (46.55) 3,830.17 223,445.16 221,546.86
MAY-00 1,915.11 1,961.61 3,876.72 (46.16) 3,830.56 221,546.86 219,631.75
JUN-00 1,932.06 1,944.66 3,876.72 (45.76) 3,830.96 219,631.75 217,699.69
JUL-00 1,949.17 1,927.55 3,876.72 (45.35) 3,831.37 217,699.69 215,750.52
AUG-00 1,966.43 1,910.29 3,876.72 (44.95) 3,831.77 215,750.52 213,784.09
SEP-00 1,983.84 1,892.88 3,876.72 (44.54) 3,832.18 213,784.09 211,800.25
OCT-00 2,001.41 1,875.31 3,876.72 (44.13) 3,832.59 211,800.25 209,798.84
NOV-00 2,019.13 1,857.59 3,876.72 (43.71) 3,833.01 209,798.84 207,779.72
DEC-00 2,037.00 1,839.72 3,876.72 (43.29) 3,833.43 207,779.72 205,742.71
JAN-01 2,055.04 1,821.68 3,876.72 (42.86) 3,833.86 205,742.71 203,687.67
FEB-01 2,073.24 1,803.48 3,876.72 (42.43) 3,834.28 203,687.67 201,614.44
MAR-01 2,091.59 1,785.13 3,876.72 (42.00) 3,834.72 201,614.44 199,522.85
APR-01 2,110.11 1,766.61 3,876.72 (41.57) 3,835.15 199,522.85 197,412.74
MAY-01 2,128.79 1,747.93 3,876.72 (41.13) 3,835.59 197,412.74 195,283.94
JUN-01 2,147.64 1,729.08 3,876.72 (40.68) 3,836.04 195,283.94 193,136.30
JUL-01 2,166.66 1,710.06 3,876.72 (40.24) 3,836.48 193,136.30 190,969.64
AUG-01 2,185.84 1,690.88 3,876.72 (39.79) 3,836.93 190,969.64 188,783.80
SEP-01 2,205.20 1,671.52 3,876.72 (39.33) 3,837.39 188,783.80 186,578.60
OCT-01 2,224.72 1,652.00 3,876.72 (38.87) 3,837.85 186,578.60 184,353.88
NOV-01 2,244.42 1,632.30 3,876.72 (38.41) 3,838.31 184,353.88 182,109.46
DEC-01 2,264.29 1,612.43 3,876.72 (37.94) 3,838.78 182,109.46 179,845.16
JAN-02 2,284.34 1,592.38 3,876.72 (37.47) 3,839.25 179,845.16 177,560.82
FEB-02 2,304.57 1,572.15 3,876.72 (36.99) 3,839.73 177,560.82 175,256.26
MAR-02 2,324.97 1,551.75 3,876.72 (36.51) 3,840.21 175,256.26 172,931.29
APR-02 2,345.56 1,531.16 3,876.72 (36.03) 3,840.69 172,931.29 170,585.73
MAY-02 2,366.33 1,510.39 3,876.72 (35.54) 3,841.18 170,585.73 168,219.40
JUN-02 2,387.28 1,489.44 3,876.72 (35.05) 3,841.67 168,219.40 165,832.13
JUL-02 2,408.41 1,468.31 3,876.72 (34.55) 3,842.17 165,832.13 163,423.71
AUG-02 2,429.74 1,446.98 3,876.72 (34.05) 3,842.67 163,423.71 160,993.97
SEP-02 2,451.25 1,425.47 3,876.72 (33.54) 3,843.18 160,993.97 158,542.72
OCT-02 2,472.96 1,403.76 3,876.72 (33.03) 3,843.69 158,542.72 156,069.76
NOV-02 2,494.85 1,381.87 3,876.72 (32.51) 3,844.21 156,069.76 153,574.91
DEC-02 2,516.94 1,359.78 3,876.72 (31.99) 3,844.73 153,574.91 151,057.97
JAN-03 2,539.23 1,337.49 3,876.72 (31.47) 3,845.25 151,057.97 148,518.74
FEB-03 2,561.71 1,315.01 3,876.72 (30.94) 3,845.78 148,518.74 145,957.03
MAR-03 2,584.39 1,292.33 3,876.72 (30.41) 3,846.31 145,957.03 143,372.64
APR-03 2,607.27 1,269.45 3,876.72 (29.87) 3,846.85 143,372.64 140,765.36
MAY-03 2,630.36 1,246.36 3,876.72 (29.33) 3,847.39 140,765.36 138,135.00
JUN-03 2,653.65 1,223.07 3,876.72 (28.78) 3,847.94 138,135.00 135,481.35
JUL-03 2,677.15 1,199.57 3,876.72 (28.23) 3,848.49 135,481.35 132,804.21
AUG-03 2,700.85 1,175.87 3,876.72 (27.67) 3,849.05 132,804.21 130,103.36
SEP-03 2,724.76 1,151.96 3,876.72 (27.10) 3,849.62 130,103.36 127,378.60
OCT-03 2,748.89 1,127.83 3,876.72 (26.54) 3,850.18 127,378.60 124,629.71
NOV-03 2,773.23 1,103.49 3,876.72 (25.96) 3,850.76 124,629.71 121,856.48
DEC-03 2,797.78 1,078.94 3,876.72 (25.39) 3,851.33 121,856.48 119,058.70
JAN-04 119,058.69 1,054.17 120,112.86 (24.80) 120,088.06 119,058.70 0.00
-----------------------------------------------------------------------------
TOTALS 250,000.00 105,593.66 355,593.66 (2,484.56) 353,109.10
=============================================================================
</TABLE>
<PAGE> 40
BAYFRONT VENTURES
PROJECTED AMORTIZATION SCHEDULE
UNITED PRAIRIE BANK - SLAYTON
PRINCIPAL $ 150,000.00
GROSS RATE FROM BORROW 10.625%
TERM 8 YR AMORTIZATION
MONTHLY PAYMENT $ 2,326.03
BALLOON PAYMENT $ 72,067.72 DUE JANUARY 2004
NOTE:
ACTUAL PRINCIPAL & INTEREST PAYMENTS WILL BE BASED ON SIMPLE INTEREST AS
PAYMENTS ARE RECEIVED.
<TABLE>
<CAPTION>
PAYMENTS PRINCIPAL BALANCE
LESS NET PAYMENT BEGINNING OF
DATE PRINCIPAL INTEREST TOTAL SERVICING FEE RECEIVED PERIOD END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOV-98 0.00 398.44 398.44 (9.38) 389.06 150,000.00 150,000.00
DEC-98 0.00 1,328.13 1,328.13 (31.25) 1,296.88 150,000.00 150,000.00
JAN-99 997.91 1,328.13 2,326.03 (31.25) 2,294.78 150,000.00 149,002.09
FEB-99 1,006.74 1,319.29 2,326.03 (31.04) 2,294.99 149,002.09 147,995.35
MAR-99 1,015.66 1,310.38 2,326.03 (30.83) 2,295.20 147,995.35 146,979.69
APR-99 1,024.65 1,301.38 2,326.03 (30.62) 2,295.41 146,979.69 145,955.04
MAY-99 1,033.72 1,292.31 2,326.03 (30.41) 2,295.62 145,955.04 144,921.32
JUN-99 1,042.87 1,283.16 2,326.03 (30.19) 2,295.84 144,921.32 143,878.45
JUL-99 1,052.11 1,273.92 2,326.03 (29.97) 2,296.06 143,878.45 142,826.34
AUG-99 1,061.42 1,264.61 2,326.03 (29.76) 2,296.28 142,826.34 141,764.92
SEP-99 1,070.82 1,255.21 2,326.03 (29.53) 2,296.50 141,764.92 140,694.10
OCT-99 1,080.30 1,245.73 2,326.03 (29.31) 2,296.72 140,694.10 139,613.79
NOV-99 1,089.87 1,236.16 2,326.03 (29.09) 2,296.95 139,613.79 138,523.92
DEC-99 1,099.52 1,226.51 2,326.03 (28.86) 2,297.17 138,523.92 137,424.41
JAN-00 1,109.25 1,216.78 2,326.03 (28.63) 2,297.40 137,424.41 136,315.15
FEB-00 1,119.07 1,206.96 2,326.03 (28.40) 2,297.63 136,315.15 135,196.08
MAR-00 1,128.98 1,197.05 2,326.03 (28.17) 2,297.87 135,196.08 134,067.09
APR-00 1,138.98 1,187.05 2,326.03 (27.93) 2,298.10 134,067.09 132,928.12
MAY-00 1,149.06 1,176.97 2,326.03 (27.69) 2,298.34 132,928.12 131,779.05
JUN-00 1,159.24 1,166.79 2,326.03 (27.45) 2,298.58 131,779.05 130,619.81
JUL-00 1,169.50 1,156.53 2,326.03 (27.21) 2,298.82 130,619.81 129,450.31
AUG-00 1,179.86 1,146.17 2,326.03 (26.97) 2,299.06 129,450.31 128,270.45
SEP-00 1,190.30 1,135.73 2,326.03 (26.72) 2,299.31 128,270.45 127,080.15
OCT-00 1,200.84 1,125.19 2,326.03 (26.48) 2,299.56 127,080.15 125,879.31
NOV-00 1,211.48 1,114.56 2,326.03 (26.22) 2,299.81 125,879.31 124,667.83
DEC-00 1,222.20 1,103.83 2,326.03 (25.97) 2,300.06 124,667.83 123,445.63
JAN-01 1,233.02 1,093.01 2,326.03 (25.72) 2,300.31 123,445.63 122,212.60
FEB-01 1,243.94 1,082.09 2,326.03 (25.46) 2,300.57 122,212.60 120,968.66
MAR-01 1,254.96 1,071.08 2,326.03 (25.20) 2,300.83 120,968.66 119,713.71
APR-01 1,266.07 1,059.97 2,326.03 (24.94) 2,301.09 119,713.71 118,447.64
MAY-01 1,277.28 1,048.76 2,326.03 (24.68) 2,301.36 118,447.64 117,170.36
JUN-01 1,288.59 1,037.45 2,326.03 (24.41) 2,301.62 117,170.36 115,881.78
JUL-01 1,300.00 1,026.04 2,326.03 (24.14) 2,301.89 115,881.78 114,581.78
AUG-01 1,311.51 1,014.53 2,326.03 (23.87) 2,302.16 114,581.78 113,270.28
SEP-01 1,323.12 1,002.91 2,326.03 (23.60) 2,302.43 113,270.28 111,947.16
OCT-01 1,334.83 991.20 2,326.03 (23.32) 2,302.71 111,947.16 110,612.33
NOV-01 1,346.65 979.38 2,326.03 (23.04) 2,302.99 110,612.33 109,265.67
DEC-01 1,358.58 967.46 2,326.03 (22.76) 2,303.27 109,265.67 107,907.10
JAN-02 1,370.60 955.43 2,326.03 (22.48) 2,303.55 107,907.10 106,536.49
FEB-02 1,382.74 943.29 2,326.03 (22.20) 2,303.84 106,536.49 105,153.75
MAR-02 1,394.98 931.05 2,326.03 (21.91) 2,304.12 105,153.75 103,758.77
APR-02 1,407.33 918.70 2,326.03 (21.62) 2,304.42 103,758.77 102,351.44
MAY-02 1,419.80 906.24 2,326.03 (21.32) 2,304.71 102,351.44 100,931.64
JUN-02 1,432.37 893.67 2,326.03 (21.03) 2,305.00 100,931.64 99,499.28
JUL-02 1,445.05 880.98 2,326.03 (20.73) 2,305.30 99,499.28 98,054.23
AUG-02 1,457.84 868.19 2,326.03 (20.43) 2,305.60 98,054.23 96,596.38
SEP-02 1,470.75 855.28 2,326.03 (20.12) 2,305.91 96,596.38 95,125.63
OCT-02 1,483.77 842.26 2,326.03 (19.82) 2,306.21 95,125.63 93,641.86
NOV-02 1,496.91 829.12 2,326.03 (19.51) 2,306.52 93,641.86 92,144.95
DEC-02 1,510.17 815.87 2,326.03 (19.20) 2,306.84 92,144.95 90,634.78
JAN-03 1,523.54 802.50 2,326.03 (18.88) 2,307.15 90,634.78 89,111.24
FEB-03 1,537.03 789.01 2,326.03 (18.56) 2,307.47 89,111.24 87,574.22
MAR-03 1,550.64 775.40 2,326.03 (18.24) 2,307.79 87,574.22 86,023.58
APR-03 1,564.36 761.67 2,326.03 (17.92) 2,308.11 86,023.58 84,459.22
MAY-03 1,578.22 747.82 2,326.03 (17.60) 2,308.44 84,459.22 82,881.00
JUN-03 1,592.19 733.84 2,326.03 (17.27) 2,308.77 82,881.00 81,288.81
JUL-03 1,606.29 719.74 2,326.03 (16.94) 2,309.10 81,288.81 79,682.53
AUG-03 1,620.51 705.52 2,326.03 (16.60) 2,309.43 79,682.53 78,062.02
SEP-03 1,634.86 691.17 2,326.03 (16.26) 2,309.77 78,062.02 76,427.16
OCT-03 1,649.33 676.70 2,326.03 (15.92) 2,310.11 76,427.16 74,777.83
NOV-03 1,663.94 662.10 2,326.03 (15.58) 2,310.45 74,777.83 73,113.89
DEC-03 1,678.67 647.36 2,326.03 (15.23) 2,310.80 73,113.89 71,435.22
JAN-04 71,435.22 632.50 72,067.72 (14.88) 72,052.84 71,435.22 (0.00)
-----------------------------------------------------------------------------
TOTALS 150,000.00 63,356.20 213,356.20 (1,490.73) 211,865.47
=============================================================================
</TABLE>
<PAGE> 41
Compliance Certificate
Dated _____________________
I, the ____________________of Princesa Partners, a Florida partnership
(the "Borrower"), do hereby provide this Compliance Certificate in connection
with that certain Loan Agreement dated September ______, 1998, by and among the
Borrower and certain lenders (the "Loan Agreement").
I certify that as of the date hereof:
1. Attached hereto are the financial statements of the Borrower and
Bayfront for the month/year ended __________, ____, which were prepared in
accordance with generally accepted accounting principles [for quarterly
certificate, add: "for interim financial statements, but without footnotes and
statements of cash flows and subject to year-end audit adjustments"] and fairly
state the financial condition of the Borrower and Bayfront as of the date
thereof and the net income [for annual certificate, add: "and cash flows"] of
the Borrower and Bayfront for the periods shown thereon.
2. The Borrower is in compliance with each of the covenants contained
in Article VI of the Loan Agreement.
3. Each of the representations and warranties contained in Article IV
of the Loan Agreement is true and correct as of the date hereof.
4. No event has occurred and is continuing which constitutes an Event
of Default or a Default under the Loan Agreement, [ ] except such events as are
described on the Schedule attached hereto.
5. The Borrower [ ] is [ ] is not in compliance with its Debt Service
Coverage Ratio covenant, as set forth in Section 6.13 of the Loan Agreement, and
computed as follows:
6. The Borrower [ ] is [ ] is not in compliance with its Tangible Net
Worth covenant, as set forth in Section 6.14 of the Loan Agreement, and computed
as follows:
------------------------------
F-1
<PAGE> 1
EXHIBIT 10.21
================================================================================
SERVICING AND INTERCREDITOR AGREEMENT
by and among
THE NATIONAL CITY BANK OF EVANSVILLE,
as Servicer,
PRINCESA PARTNERS,
as Borrower
and
each of the Lenders set forth on the signature page hereto
FOR A LOAN
to
PRINCESA PARTNERS
Dated as of October 22, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(This Table of Contents is not a part of this Servicing and Intercreditor
Agreement and is for convenience of reference only.)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions.............................................................................................1
ARTICLE II Relationship of Parties................................................................................4
Section 2.1 Pari Passu Interests.........................................................................4
Section 2.2 Disgorgement.................................................................................4
Section 2.3 Services Fee.................................................................................4
ARTICLE III Loan Documents........................................................................................4
Section 3.1 Lenders' Representations.....................................................................4
Section 3.2 Lenders' Consent.............................................................................5
ARTICLE IV Administration.........................................................................................7
Section 4.1 Appointment and Authorization................................................................7
Section 4.2 Note Holders.................................................................................8
Section 4.3 Consultation with Counsel....................................................................8
Section 4.4 Loan Documents...............................................................................8
Section 4.5 Servicer, Lenders and Their Affiliates.......................................................8
Section 4.6 Action by Servicer...........................................................................8
Section 4.7 Credit Analysis..............................................................................9
Section 4.8 Notices of Event of Default, Etc.............................................................9
Section 4.9 Indemnification..............................................................................9
Section 4.10 Disbursement, Collections and Servicing of Loan............................................10
Section 4.11 Advice to Lenders..........................................................................11
Section 4.12 Merger of Servicer.........................................................................11
Section 4.13 Successor Servicer.........................................................................11
Section 4.14 Servicer's Right to Retain Fee; Offset.....................................................11
Section 4.15 Communications and Meetings with Lenders...................................................12
Section 4.16 Mutilated, Lost, Stolen, Destroyed or Undelivered Notes....................................13
ARTICLE V Miscellaneous..........................................................................................13
Section 5.1 Amendments..................................................................................13
Section 5.2 Jurisdiction................................................................................13
</TABLE>
<PAGE> 3
SERVICING AND INTERCREDITOR AGREEMENT
This Servicing and Intercreditor Agreement (hereinafter
referred to as this "Agreement") is made and entered into as of the 22nd day of
October, 1998, by and among PRINCESA PARTNERS (the "Borrower"), THE NATIONAL
CITY BANK OF EVANSVILLE (the "Servicer"), and each of the lenders set forth on
the signature page hereto (collectively, the "Lenders" and each a "Lender").
Recitals
A. The Borrower has requested that the Lenders lend to
Borrower $8,400,000 for the purposes described and defined in a certain Loan
Agreement of even date herewith among the Borrower and the Lenders (the "Loan
Agreement").
B. The Lenders have agreed to lend to the Borrower the
aggregate principal amount of $8,400,000 pursuant to certain Notes (as defined
in the Loan Agreement), subject to the conditions set forth in the Loan
Agreement.
C. The Lenders desire to employ the Servicer to receive and
distribute to the Lenders all payments required to be made by the Borrower with
respect to the Loan, to give notices and provide other information from the
Borrower to, and obtain consents from, the Lenders and to exercise, on behalf of
the Lenders, the rights and remedies of the Lenders under the Loan Agreement and
related documents upon the occurrence of an Event of Default.
NOW, THEREFORE, in consideration of the foregoing Recitals and
the terms and conditions set forth below, the parties hereto agree as follows:
ARTICLE I
Definitions
"Accredited Investor" has the meaning assigned to such term by
Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
"Bayfront" means Bayfront Ventures, a Florida general
partnership.
"Bayfront Agreement" has the meaning assigned to such term in
Section 1.1 of the Loan Agreement.
"Collateral" has the meaning assigned to such term in the
Security Agreement.
"Collections" means all monies or other property hereafter
received by the Servicer on account of the Loan including all payments
and other sums realized from:
(i) any Security (including insurance proceeds in respect
thereof);
<PAGE> 4
(ii) the Borrower to the Lenders;
(iii) any Guarantor or Bayfront;
(iv) the exercise of any remedies or foreclosure by
the Servicer or the Lenders of any lien, security interest,
claim or right of setoff with respect to the Security or any
deposit balance or other property of the Borrower; and
(v) Enforcement Procedures.
"Enforcement Procedures" means any action taken by the
Servicer or a Lender upon an Event of Default.
"Event of Default" has the meaning assigned to such term in
Section 1.1 of the Loan Agreement.
"Extraordinary Expenses" means all reasonable out-of-pocket
costs, expenses (including without limitation court costs, attorneys'
fees and legal expenses, including costs, fees and expenses of appeal,
whether or not any of the foregoing costs and expenses are reimbursable
by the Borrower, so long as the Borrower has not paid or reimbursed the
Servicer therefor), taxes, assessments, insurance premiums, any charges
required by the Loan Documents to be paid, or expenses which are
necessary or desirable to protect or preserve any Collateral, and any
and all other out-of-pocket expenses which are incurred by the Servicer
including the fees and costs of any professionals hired by the Servicer
(and not promptly paid or reimbursed by the Borrower) at any time or
from time to time hereafter, in connection with:
(i) the collection or enforcement of the Loan;
(ii) the preservation of the Security;
(iii) the collection or enforcement of liabilities owed by
the Borrower to any Lenders;
(iv) the sale, disposition or other realization upon
or the recovery of possession of any Security;
(v) any Enforcement Procedures; or
(vi) the filing and prosecution of a complaint with
respect to any of the above matters or the defense of any
claim, actual or threatened, by the Borrower, a receiver or
trustee in bankruptcy for, or other representative of, the
Borrower or third party, for, on account of, or with respect
to the Loan or the Loan Documents, whether to cover damages
for business interference, for liabilities or debts of the
Borrower, for alleged preferences or fraudulent
-2-
<PAGE> 5
conveyances or transfers received or alleged to have been
received from any Person as a result of the Loan or in
connection with any Collections, or otherwise.
"Gross Facility Revenues" has the meaning assigned to such
term in Section 1.1 of the Loan Agreement.
"Guarantor" has the meaning assigned to such term in Section
1.1 of the Loan Agreement.
"Guaranty" has the meaning assigned to such term in Section
1.1 of the Loan Agreement.
"Loan" has the meaning assigned to such term in Section 1.1 of
the Loan Agreement.
"Loan Agreement" means the Loan Agreement of even date
herewith, by and among the Borrower and the Lenders, as the same may
from time to time be amended or supplemented in accordance with the
terms hereof and thereof.
"Loan Documents" means this Agreement, the Notes, the
Mortgage, the Security Agreement, the Loan Agreement, the Bayfront
Agreement, the Guaranties and all amendments, supplements and
replacements thereof and thereto and promissory notes and agreements
executed and delivered by the Borrower in renewal, substitution or
restatement thereof, each as delivered or to be delivered to the
Servicer pursuant to the terms of the Loan Agreement.
"Mortgage" has the meaning ascribed to such term in Section
1.1 of the Loan Agreement.
"Notes" has the meaning assigned to such term in the Loan
Agreement.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, firm, association, joint
stock company, trust, unincorporated organization, government, or any
agency, instrumentality or political subdivision thereof, or any other
entity, whether acting in an individual, fiduciary or other capacity.
"Security" means the Vessel, the Collateral and the Gross
Facility Revenues.
"Security Agreement" means the Security Agreement of even date
herewith given by the Borrower for the benefit of the Lenders.
"Servicer" means The National City Bank of Evansville, its
permitted successors and assigns pursuant to the provisions of this
Agreement.
-3-
<PAGE> 6
"Super-Majority Interest" means those Lenders who in the
aggregate hold at least 66% of the total outstanding principal amount
of the Loan.
"Vessel" has the meaning assigned to such term in the Loan
Agreement.
ARTICLE II
Relationship of Parties
Section 2.1 Pari Passu Interests. The respective interests of
each Lender in and to the Loan, the Security and the Collections shall be pari
passu and no Lender shall have any priority over the other. Each Lender agrees
that if it shall, by exercising any right of setoff or counterclaim or
otherwise, receive payment of all or any portion of the aggregate amount of
principal and interest due with respect to the Loan, or fees, costs or expenses
in connection therewith, such Lender shall pay the same over to the Servicer,
for distribution by the Servicer among the Lenders as Collections in accordance
with this Agreement.
Section 2.2 Disgorgement. If the Servicer is required to
refund to the Borrower, trustee in bankruptcy, a receiver or any other Person
(on account of a preference or otherwise) any amount in connection with this
Agreement, then each Lender shall pay to the Servicer its pro rata share of the
refund.
Section 2.3 Services Fee. For its services hereunder, the
Servicer shall be entitled to a fee at the rate of 1/4 of 1 percent (.25%), per
annum of the principal amount of the Loan outstanding from time to time, such
fee to be payable by the Lenders to the Servicer only from Collections.
ARTICLE III
Loan Documents
Section 3.1 Lenders' Representations. Each Lender
acknowledges, agrees and represents as follows:
(a) The Servicer shall hold and administer the Collections and
other Security in its name for the benefit of the Lenders.
(b) Such Lender has received and made a complete examination
of copies of all Loan Documents it requires and approves of the form
and content of the same.
(c) Such Lender has been provided with or granted access to
all of the financial and other information that it has requested or
believes to be necessary to enable it to make an independent and
informed judgment with respect to the Security and the Borrower and the
desirability of lending money to the Borrower.
-4-
<PAGE> 7
(d) Such Lender has, without reliance on the Servicer, Dain
Rauscher Incorporated or their officers, employees or agents, and based
upon such documents and information as such Lender has deemed
appropriate, made its own credit analysis and decision to enter into
the Loan Agreement.
(e) Such Lender's execution and delivery of this Agreement and
the other Loan Documents and making of its Loan to the Borrower do not
constitute a violation of any agreement, law, statute, regulation,
decree or decision (including any legal lending limits) which is
binding on such Lender.
(f) Such Lender is an Accredited Investor.
(g) Such Lender is making its portion of the Loan for its own
account and not with a view to the distribution thereof.
(h) Such Lender understands that the Notes and the interests
in the Loan might be deemed securities, and such Lender agrees that it
will not transfer, assign or participate any interest in its Note or in
any portion of the Loan in violation of any law, including the
Securities Act of 1933, as amended.
(i) The Servicer, Dain Rauscher Incorporated and their
officers, employees or agents make no warranty or representation, and
shall not be responsible for any statement, warranty or representation
made, in connection with the Security or any document in connection
with the Loan. Without limiting the generality of the foregoing, each
Lender acknowledges that neither the Servicer nor Dain Rauscher
Incorporated has made any guaranty of repayment, it being understood
that the Lenders shall look only to the Collections and to the Security
for repayment of the Loan.
Section 3.2 Lenders' Consent.
(a) Consents Required. Unless otherwise provided in this
Agreement or the other Loan Documents, the Servicer may only take
action with respect to the Loan Documents and the Security with the
consent of a Super-Majority Interest. No Lender shall be entitled to
exercise any rights and remedies with respect to any Event of Default,
to accelerate the Note or Notes held by such Lender or enter into any
agreement to forbear from exercising any rights and remedies with
respect to any Event of Default except with the approval of Lenders
holding a Super-Majority Interest. In addition, Lenders holding a
Super-Majority Interest may require that such rights and remedies be
exercised or that the Lenders agree to forbear from exercising such
rights and remedies upon the occurrence of an Event of Default. Upon
the occurrence of an Event of Default and the election by the
Super-Majority Interest to pursue or to forbear from rights and
remedies, the Lenders who in the aggregate hold at least 50% in
aggregate outstanding principal amount of the Loan shall have the
-5-
<PAGE> 8
right, by an instrument or concurrent instruments in writing delivered
to the Servicer, to direct the method of conducting all remedial
proceedings or any forbearance to be taken by the Lenders, including,
without limitation, whether all or any portion of the Security should
be acquired or realized upon and whether any such acquisition should be
made by a transfer in lieu of foreclosure or by purchase at foreclosure
sale or otherwise. All workout agreements, modification agreements,
bankruptcy plans, and other plans or actions taken with respect to a
default, shall likewise be subject to approval by the Lenders holding
at least 50% in aggregate outstanding principal amount of the Loan. At
the request of such Lenders, the Servicer shall prepare and file all
necessary plans, objections, lawsuits, arbitration proceedings, and
other proceedings in connection with any such default. The Lenders
holding at least 50% in aggregate outstanding principal amount of the
Loan shall also have the right to approve budgets of costs to be
incurred in connection with the default, including, without limitation,
attorneys' fees and other costs and expenses proposed to be incurred by
the Servicer, and the Servicer shall conduct any actions within the
budgets submitted and so approved or amendments thereto approved by the
Lenders holding at least 50% in aggregate outstanding principal amount
of the Loan, provided that such directions shall not be otherwise than
in accordance with the law and the provisions of the Loan Documents.
(b) Corrective Actions. The Servicer may, at any time without
the consent of the Lenders, subject to the conditions and restrictions
set forth in the Loan Documents, enter into supplements of the Loan
Documents for any one or more of the following purposes:
(i) to correct or amplify the description of any
property subject to the lien of the Loan Documents;
(ii) to grant to the Servicer one or more additional
properties as security for the Loan; or
(iii) to cure any ambiguity, or to cure, correct or
supplement any defective or inconsistent provision contained
therein.
(c) No Obligation to Advance Funds. Nothing herein shall be
construed as requiring the Servicer to advance its own funds to prevent
or cure an Event of Default or effectuate an Enforcement Procedure.
(d) No Obligation to Take Action. Except for action expressly
required to be taken by the Servicer hereunder and under the other Loan
Documents, the Servicer shall be entitled to refrain from taking any
action hereunder unless it shall be indemnified to its satisfaction by
the Lenders from any and all liability and expense it may incur by
reason of taking such action. Wherever in the Loan Documents
-6-
<PAGE> 9
provision is made for indemnity by the Lenders, if the Lender or
Lenders providing such indemnity has an aggregate net worth or net
asset value of at least $50,000,000, as set forth in its most recent
audited financial statements or as otherwise satisfactorily
demonstrated to the Servicer, the Servicer shall not require any
indemnity bond or other security for such indemnity. Such indemnity
shall be only for those actions or inaction taken or not taken at the
actual direction of the Lenders holding the designated proportion of
principal of the Loan, as required hereunder. In any case where more
than one Lender is providing indemnity, such indemnity shall be several
and not joint and, as to each Lender, such indemnity obligation shall
not exceed its percentage interest of the outstanding principal amount
of the Loan. If provided indemnity, the Servicer shall (i) be required
to provide the indemnifying Lenders written notice of any claim which
may be covered by the indemnification and, upon request of any
indemnifying Lender, to provide to such Lender copies of all documents
received by the Servicer in connection therewith; (ii) at the
indemnifying Lenders' request, tender to such Lenders control of the
defense (and settlement) of any such claim and cooperate with the
indemnifying Lenders in such defense; and (iii) have no claim for
indemnification for any settlement of any claim unless written notice
of such settlement has been first furnished to the indemnifying Lenders
and such Lenders shall have consented, in writing, to such settlement.
(e) Unanimous Consent Required. Unanimous consent shall be
required from all the Lenders to deprive any Lender of the benefit of
the lien of the Loan Documents upon any of the Security.
ARTICLE IV
Administration
The following provisions shall govern the relationship of the
Servicer with the Lenders:
Section 4.1 Appointment and Authorization. Each Lender
appoints and authorizes the Servicer to take such action as agent on its behalf
and to exercise such respective powers under the Loan Documents as are delegated
to the Servicer by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto. In connection therewith, the Servicer or the
Depository shall be named as loss payee and additional insured, on behalf of the
Lenders, on all insurance policies required to be obtained by the Borrower
pursuant to the Loan Agreement, and the Servicer shall be entitled to receive
from the Borrower evidence of all such insurance. Neither the Servicer nor any
of its directors, officers or employees, shall be liable for any action taken or
omitted to be taken under or in connection with the Loan Documents, except for
such Person's own negligence or willful misconduct. The Servicer shall act as an
independent contractor in performing its obligations as Servicer hereunder, and
nothing herein contained shall be deemed to create a fiduciary relationship
among or between the Servicer, the Borrower or the Lenders.
-7-
<PAGE> 10
Section 4.2 Note Holders. The Servicer may treat the payee of
any Note as the holder of the obligations evidenced thereby until written notice
of transfer shall have been filed with it, signed by such payee and in the form
attached hereto as Exhibit A.
Section 4.3 Consultation with Counsel. The Servicer may
consult as to matters of law with legal counsel selected by it and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
Section 4.4 Loan Documents. The Servicer shall not be under
the duty to examine or pass upon the validity, effectiveness, genuineness or
value of any of the Loan Documents or any other instrument or document furnished
pursuant thereto, and the Servicer shall be entitled to assume that the same are
valid, effective and genuine and what they purport to be.
Section 4.5 Servicer, Lenders and Their Affiliates. With
respect to any portion of the Loan to the Borrower made by the Servicer or its
affiliates, such parties shall have the same rights and powers under the Loan
Documents as any other Lenders and may exercise the same consistent with the
terms thereof. The Servicer, any Lender and their respective affiliates may
accept deposits from, lend money to, issue letters of credit for the account of
and generally engage in any kind of business with the Borrower or any of its
affiliates as if it were not the Servicer or a Lender, as the case may be.
Section 4.6 Action by Servicer. Except as may otherwise be
expressly stated in the Loan Documents, the Servicer shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, or with respect to taking or refraining
from taking any action or actions which it may be able to take under or in
respect of, the Loan Documents. Except as otherwise provided in the Loan
Documents, the Servicer shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instruction of the Super-Majority Interest and indemnification pursuant to
Section 3.2(d), and such instructions shall be binding upon all the Lenders;
provided, however, that the Servicer shall not be required to take any action
which exposes the Servicer to personal liability or which is contrary to the
Loan Documents or applicable law. The Servicer shall incur no liability under or
in respect of any of the Loan Documents by acting upon any notice, consent,
warranty or other paper or instrument reasonably believed by it to be genuine or
authentic or to be signed by the proper party or parties and to be consistent
with the terms of this Agreement.
Section 4.7 Credit Analysis. Each Lender has made, and shall
continue to make, its own independent investigation or evaluation of the
operations, business, property and condition, financial and otherwise, of the
Borrower in connection with entering into this Agreement and the Loan Agreement
and has made its own appraisal of the creditworthiness of the Borrower. Except
as required by Section 4.8 hereof or as otherwise explicitly provided herein,
the Servicer has no duty or responsibility, either initially or on a continuing
-8-
<PAGE> 11
basis, to provide any Lender with any credit or other information with respect
to such operations, business, property, condition or creditworthiness, whether
such information comes into its possession on or before the first Event of
Default or at any time thereafter.
Section 4.8 Notices of Event of Default, Etc. In the event
that any Lender shall have acquired actual knowledge of any Event of Default,
other than as a result of its receipt of financial statements delivered to it in
accordance with the Loan Agreement, such Lender shall promptly give notice
thereof to the Servicer. The Servicer shall, promptly upon receipt of any such
notice, provide a copy thereof to the other Lenders. Upon receipt from any
Lender of a request that the Servicer give notice to the Borrower of the
occurrence of an Event of Default, the Servicer shall promptly forward such
request to the other Lenders, shall facilitate communication between the Lenders
by any necessary and expedient means, and shall take such action and assert such
rights under this Agreement and the other Loan Documents as the Lenders holding
such portion of the Loan as may be required hereunder shall direct in writing.
Section 4.9 Indemnification. Subject to Section 3.2(d) hereof,
each Lender agrees to indemnify the Servicer, as Servicer (to the extent not
reimbursed by the Borrower; provided that nothing in this provision shall be
deemed to increase, decrease or in any way affect the Borrower's liability for
reimbursement of costs and expenses of the Servicer or any Lender), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on or incurred by the Servicer in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Servicer under the Loan Documents, provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Servicer's negligence or willful misconduct; provided further that no
Lender shall be liable for any portion of such liabilities in respect of its
Note until the occurrence of an Event of Default. Each Lender's liability
hereunder shall equal its proportionate share of the aggregate amount of the
Servicer's liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements, with such Lender's
proportionate share based on the principal amount that such Lender's Note or
Notes bear to the aggregate principal amount of all Notes held by all Lenders
who are obligated to contribute to such indemnification. No payment by any
Lender under this Section 4.9 shall relieve the Borrower of any of its
obligations under the Loan Documents.
Section 4.10 Disbursement, Collections and Servicing of Loan.
(a) On the Closing Date specified in the Loan Agreement, each
Lender shall transfer its portion of the Loan to the Servicer in accordance with
the Servicer's written instructions. The transfer of each Lender's portion of
the Loan to the Servicer shall constitute a loan by such Lender to the Borrower,
and interest on the amount transferred shall start to accrue at the agreed rate
on the date of such transfer. The Servicer shall disburse the
-9-
<PAGE> 12
amounts transferred to it to the Borrower when all of the conditions precedent
specified in Section 5.1 and 5.2 of the Loan Agreement have been met; provided,
however, that Lenders holding a Super-Majority Interest may authorize the waiver
of any one or more of the conditions precedent specified in Section 5.1.
(b) On or before three Business Days prior to the first day of
each month, the Servicer shall notify the Borrower of the amount to be paid to
the Servicer on the first day of the following month with respect to the Notes
and shall collect such amount from the Borrower. Upon the occurrence of an Event
of Default, at the direction of the Super-Majority Interest, the Servicer shall
collect from the Borrower any and all Collections and shall exercise for the
benefit of the Lenders all rights and interests with respect to the Loan, the
Loan Documents and the Security. Subject to Section 4.14, the Servicer shall
hold all Collections at any time received by the Servicer for the Lenders, and
the Servicer shall promptly account for and pay each Lender, by wire transfer,
such Lender's ratable portion of any and all such Collections based on (i) with
respect to regular monthly payments made prior to the acceleration of the
principal of the Loan, the ratio that the total amount of principal, interest
and late payment charges then due and owing to such Lender under its Note bears
to the aggregate amount of principal, interest and late payment charges then due
and owing to all Lenders under the Notes; (ii) with respect to principal
prepayments (whether voluntary or mandatory) prior to the acceleration of the
principal of the Loan, the ratio that the outstanding principal balance of such
Lender's Note bears to the aggregate outstanding principal balance of all the
Notes; and (iii) after acceleration of the principal of the Loan, the ratio that
the outstanding principal balance of such Lender's Note plus interest and late
charges thereon bears to the aggregate outstanding principal balance of all the
Notes plus interest and late charges thereon. Until remitted to the Lenders, the
Servicer will hold all Collections as agent for the Lenders.
Section 4.11 Advice to Lenders. The Servicer shall forward to
the Lenders copies of all notices, financial reports and other communications
received under the Loan Documents from the Borrower by it as Servicer,
excluding, however, any notices, reports and communications which by the terms
hereof are to be furnished by the Borrower directly to the Lenders.
Section 4.12 Merger of Servicer. Any corporation or
association into which the Servicer may be converted or merged, or with which it
may be consolidated, or to which it may sell or transfer its trust business and
assets as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, ipso facto, shall be and become successor Servicer
hereunder and vested with all the powers, discretions, immunities, privileges
and all other matters as was its predecessor, without the execution or filing of
any instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
-10-
<PAGE> 13
Section 4.13 Successor Servicer. The Servicer may resign at
any time by giving written notice of its intention to do so to the Lenders and
the Borrower. The Super-Majority Interest may remove the Servicer at any time
with or without just cause by giving the Servicer and the Borrower written
notice of such removal. Upon any such notice of resignation or removal, the
Super-Majority Interest shall have the right to appoint a successor Servicer. If
no successor Servicer shall have been so appointed and shall have accepted such
appointment within 30 days after the giving of notice of the retiring Servicer's
resignation or removal, then the retiring Servicer may, on behalf of the
Lenders, appoint a successor Servicer that shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and that
has a combined capital and surplus of at least $100,000,000. Any such
resignation or removal of the retiring Servicer shall be effective only upon the
appointment of and acceptance of appointment by a successor Servicer. Upon such
acceptance of appointment as the successor Servicer, such successor Servicer
shall thereupon succeed to and become vested with all rights, powers, privileges
and duties of the retiring Servicer, and the retiring Servicer shall thereafter
be discharged from its duties and obligations under this Agreement and the other
Loan Documents. After the retiring Servicer's resignation or removal hereunder
as the Servicer, the provisions of this Article IV shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was acting as the
Servicer under this Agreement and any other Loan Document.
Section 4.14 Servicer's Right to Retain Fee; Offset.
Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, the Servicer may withhold from each Lender's share of Collections,
such Lender's pro rata share (based on the ratio that the outstanding principal
balance of such Lender's Note bears to the outstanding principal balance of all
the Notes) of the servicing fee then due and payable under Section 2.3. The
Servicer may also, in its sole discretion, with written notice to the Lenders,
offset from the Lenders' share of Collections any Extraordinary Expenses
incurred by the Servicer; provided that (i) to the extent any of the foregoing
fees and expenses shall not properly be reimbursable by the Borrower, or from
any of its property or proceeds thereof, in accordance with the terms of the
Loan Agreement and the other Loan Documents, then any amount so offset shall be
deemed to have been received by the Lender against whom the offset was made for
purposes of determining the Borrower's liability to such Lender, and (ii) to the
extent any of the foregoing fees and expenses are reimbursable by the Borrower,
or from its property or proceeds thereof, the Servicer will notify the Borrower
of the amount thereof at least five days prior to setting off such amount from
the Lenders' share of Collections.
Section 4.15 Communications and Meetings with Lenders.
(a) All communications from the Servicer to the Lenders
requesting the Lenders' determination, consent, approval or disapproval
(i) shall be given in the form of a written notice to the Lenders, (ii)
shall be accompanied by a description of the matter or thing as to
which such determination, consent, approval or disapproval is requested
and shall advise the Lenders where such matter or thing may be
inspected
-11-
<PAGE> 14
or shall otherwise adequately describe the matter or issue to be
resolved, (iii) shall include to the extent not previously provided all
written materials (to the extent necessary to make an informed
decision) and a description of all oral information (to the extent
necessary to make an informed decision) provided to the Servicer in
respect of the matter or issue to be resolved, and (iv) shall include
the course of action or determination recommended by the Servicer in
respect thereof, if any. Each Lender shall respond within fifteen (15)
business days after such written notice is given by the Servicer and,
if such reply is not so given, the Lender shall be deemed to have
approved such matter.
(b) A meeting of Lenders may be called by the Servicer at any
time and from time to time pursuant to the provisions of this Section
4.15(b), to take any action authorized to be taken by or on behalf of
the Lenders under any provision of this Agreement or the Loan
Documents, which meeting shall be held in Evansville, Indiana. Notice
of such meeting, setting forth the time, place and generally the
subject thereof, shall be mailed to each Lender by first class mail,
postage prepaid, not fewer than fifteen (15) nor more than ninety (90)
days prior to the date of such meeting, at such Lender's address as it
appears in the Servicer's records on the fifteenth (15th) day preceding
such mailing, which fifteenth (15th) day preceding the mailing shall be
the record date for the meeting. If at any time the Lenders holding at
least 25% in aggregate principal amount of the Notes then outstanding
shall have requested the Servicer to call a meeting of the Lenders, by
written request setting forth the purpose of the meeting, and the
Servicer shall not have mailed notice of the meeting within twenty (20)
days after receipt of the request, then the requesting Lenders, or any
of them, may determine the time and place of the meeting and may call
the meeting to take action authorized by this Agreement by mailing
notice of such meeting as provided above. Any meeting of the Lenders
shall be valid without notice as to any Lender present by person or
proxy or who shall have waived notice of such meeting before the
meeting. Any Lender shall be entitled to participate by telephone in
any meeting authorized in this Section.
Section 4.16 Mutilated, Lost, Stolen, Destroyed or
Undelivered Notes. If any Note is mutilated, lost, stolen or destroyed, the
Borrower may execute and the Servicer may authenticate a new Note of the same
denomination so long as any such mutilated Note shall first be surrendered to
the Servicer, and, in the case of any lost, stolen or destroyed Note, there
shall first be furnished to the Borrower and the Servicer reasonable evidence of
such loss, theft or destruction, together with an indemnity reasonably
satisfactory to them. If the Note has matured or been prepaid, instead of
issuing a duplicate Note, the Servicer may with the consent of the Borrower pay
the Note without requiring surrender of the Note and make such requirements as
the Servicer deems fit for its protection, including a lost instrument bond. The
Servicer may charge the holder of the Note its reasonable fees and expenses in
this connection.
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<PAGE> 15
ARTICLE V
Miscellaneous
Section 5.1 Amendments. This Agreement can be amended or
modified only by a writing signed by the parties hereto.
Section 5.2 Jurisdiction. The provisions of the Loan
Agreement regarding governing law, jurisdiction, choice of forum and enforcement
of remedies are incorporated into this Agreement by reference.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
PRINCESA PARTNERS THE NATIONAL CITY BANK OF
EVANSVILLE, as Servicer
By CONAMI, INC., Its General Partner
By /s/ Stewart G. Herrington
By /s/ Jerry L. Baum -----------------------------------
--------------------------------- Its Executive Vice President
Its President
and
By GOLDCOAST ENTERTAINMENT
CRUISES, INC., Its General Partner
By /s/ Michael A. Hlavsa
---------------------------------
Its President
Signature Page to Servicing and Intercreditor Agreement
<PAGE> 17
LENDERS:
THE NATIONAL CITY BANK OF FIRST NATIONAL BANK
EVANSVILLE
By /s/ Brent Frank
By /s/ Stewart G. Herrington -----------------------------------
--------------------------------- Its Executive Vice President
Its Executive Vice President
UNITED PRAIRIE BANK - SLAYTON
LINN COUNTY STATE BANK
By /s/ Skip Larson
By /s/ Serge L. Sisler -----------------------------------
--------------------------------- Its Executive Vice President
Its President
UNITED COMMUNITY BANK OF PEOPLES NATIONAL BANK OF
NORTH DAKOTA KEWANEE
By By /s/ Charles Eastman
--------------------------------- -----------------------------------
Its Its President
------------------------------
STATE BANK OF FARGO
By
-----------------------------------
Its
--------------------------------
Signature Page to Servicing and Intercreditor Agreement
<PAGE> 18
Exhibit A
to Servicing and Intercreditor Agreement
NOTICE OF TRANSFER
TO: _____________________________________, or its successors and assigns (the
"Servicer") under that certain Servicing and Intercreditor Agreement dated
October, 15 1998 (the "Servicing Agreement") between the Servicer,
_________________________, and PRINCESA PARTNERS (the "Borrower").
The undersigned is the payee, or a successor in interest to the named
payee (the "Transferring Payee"), of a certain Note dated as of October 15, 1998
in the initial principal amount of $____________ from the Borrower (the "Note")
evidencing a portion of the loan funded pursuant to a certain Loan Agreement
dated as of the same date.
In accordance with and subject to all terms and conditions of the
Servicing Agreement, the undersigned hereby notifies the Servicer that the
undersigned has endorsed or otherwise transferred all its right title and
interest in and to the Note and all Loan Documents (as defined in the Servicing
Agreement) to the following party (the "Transferee"):
_______________________________________________________
NAME OF TRANSFEREE
Dated: __________________ ______________________________
(Name of Transferring Payee)
By ___________________________
(Authorized Signator)
Its __________________________
ACCEPTANCE OF LOAN DOCUMENT TERMS
The undersigned as the above-referenced Transferee hereby acknowledges
that it has acquired the Note, subject to all terms and conditions of the Loan
Documents, and that the Transferee shall comply with the terms of the Servicing
Agreement to the same extent as though the Transferee were an original "Lender"
under the Servicing Agreement. As of this date, the undersigned reaffirms,
acknowledges, agrees to and represents, as applicable, to the matters set forth
in Section 3 of the Servicing Agreement.
Set forth below is the true and correct name and address of the
Transferee to which all payments and correspondence concerning the Note may be
sent or delivered, along with a person authorized to act on behalf of the
Transferee with respect to the Note;
____________________________________________________
ADDRESS
____________________________________________________
RESPONSIBLE OFFICER
____________________________________________________
EIN
Dated: __________________
______________________________
(Name of Transferee)
By ___________________________
(Authorized Signator)
Its _______________________
<PAGE> 1
EXHIBIT 10.22
SECURITY AGREEMENT
This Security Agreement (this "Security Agreement") is made
and given as of this 22nd day of October, 1998, by PRINCESA PARTNERS, a Florida
general partnership (the "Borrower") and BAYFRONT VENTURES, a Florida general
partnership ("Bayfront")in favor of each lender listed on Exhibit A hereto
(collectively, the "Lenders" and each a "Lender").
Recitals
A. The Lenders and the Borrower have entered into a Loan
Agreement of even date herewith (the "Loan Agreement"), pursuant to which the
Lenders collectively will lend to the Borrower $8,400,000 (the "Loan") to
finance the Project more specifically defined in the Loan Agreement. The Loan
is evidenced by notes defined and described in the Loan Agreement
(collectively, the "Notes"). The National City Bank of Evansville is acting as
Servicer (the "Servicer") for the Lenders pursuant to the Servicing and
Intercreditor Agreement of even date herewith among the Borrower, the Lenders
and the Servicer (the "Servicing Agreement"). All capitalized terms used
herein, unless otherwise defined shall have the meaning ascribed to such terms
in the Loan Agreement.
B. The Borrower and Bayfront are and will be the owners of
certain furniture, fixtures and equipment more fully described in Exhibit B
attached hereto (collectively, the "Equipment"), free and clear of any liens or
security interests, except such liens as are permitted by the Loan Agreement.
C. The Equipment will be used in connection with the Project.
D. As security for the repayment of the Loan, the Lenders
have required that the Borrower and Bayfront execute and deliver to the Lenders
this Security Agreement, granting a security interest to the Lenders in, among
other things, the Equipment.
E. The Notes, the Loan Agreement, this Security Agreement and
any other instruments or documents given as security for the Loan are referred
to herein as the "Loan Documents".
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged by the Borrower, it is agreed as follows:
1. Grant of Security Interest. As security for the payment
and performance of the Notes and all other liabilities, obligations and
indebtedness of the Borrower to the Lenders, or any of them, due or to become
due, direct or indirect, absolute or contingent, joint or several, howsoever
created, arising or evidenced, now or hereafter at any time created, arising or
evidenced under or pursuant to the Loan Documents (hereinafter collectively
referred to as the "Obligations"), the Borrower and Bayfront do hereby
transfer,
<PAGE> 2
assign and grant to the Lenders a security interest in all of their rights,
title and interest in and to the following (hereinafter collectively referred
to as the "Collateral"), whether now owned or hereafter acquired or arising:
(a) The Equipment; and
(b) All improvements, accessions, appurtenances,
substitutions and replacements to the Equipment, and all insurance
proceeds and condemnation awards payable therefrom or with respect
thereto, together with all proceeds and products thereof and all
rights thereto.
2. The Borrower and Bayfront represent, warrant, covenant and
agree:
(a) Organization. The Borrower and Bayfront are general
partnerships, duly organized and existing pursuant to their respective
partnership agreements, and the Borrower and Bayfront have full power
and authority to execute, deliver and perform the Loan Documents and
to own property and conduct business as presently conducted and as
proposed to be conducted.
(b) Authorization, Etc. The execution, delivery and
performance of this Security Agreement have been duly authorized by
all necessary action on the part of the Borrower and Bayfront and will
not (i) require any consent or approval of any entity which has not
been obtained; (ii) to their knowledge after due inquiry, violate any
provision of law, or (iii) violate any order of any court or other
agency of government having jurisdiction over the Borrower or
Bayfront, the partnership agreement of the Borrower, the partnership
agreement of Bayfront, or any provision of any indenture, agreement or
other instrument to which the Borrower or Bayfront is a party or by
which they or any of their properties are bound. This Security
Agreement constitutes the legal, valid and binding obligation of the
Borrower and Bayfront, enforceable against them in accordance with its
terms (subject to limitations as to enforceability which might result
from bankruptcy, insolvency or other similar laws affecting creditors'
rights generally).
(c) Performance by Borrower. Without the Lenders' prior
written consent, neither the Borrower nor Bayfront shall:
(i) sell, transfer or assign, or offer to sell, transfer
or assign, all or any part of the Collateral or permit all or
any part of the Collateral to be sold, transferred or
assigned;
(ii) remove or consent to the removal of any of the
Equipment from the Project, except as necessary for repair of
such Equipment, in the ordinary course of business;
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<PAGE> 3
unless any such Equipment sold, transferred, assigned or removed is
promptly replaced with Equipment of at least equal value and utility,
and the security interest granted pursuant to this Security Agreement
attaches as a valid first priority security interest in such
replacement Equipment.
(d) Title to Collateral. The Borrower or Bayfront, as the
case may be, has good marketable title to all of the Collateral and
none of the Collateral is subject to any lien or security interest
except for the security interest created by this Security Agreement
and purchase money security interests in and financing leases of
equipment used in the Facilities (as defined in the Loan Agreement),
created from time to time, securing only indebtedness incurred for the
purchase or lease thereof having an aggregate initial or stated amount
not to exceed $500,000 at any time (the "Permitted Liens"). The
Borrower and Bayfront, other than as disclosed, have not granted, and
will not grant or permit to exist, any lien or security interests in
all or a portion of the Collateral except Permitted Liens. The
Borrower and Bayfront shall defend the Collateral against all claims
and demands of all and any other persons at any time claiming any
interest therein adverse to any Lender except for persons claiming
Permitted Liens.
(e) Actions and Proceedings. To the best of the Borrower's or
Bayfront's knowledge, there is no action, suit or proceeding at law or
in equity or by or before any governmental instrumentality or other
agency now pending or threatened against or affecting the Borrower or
Bayfront which, if adversely determined, would have a material adverse
effect on the Borrower's or Bayfront's interest in the Collateral or
would adversely affect the rights of the Borrower or Bayfront to
pledge and assign all or a part of the Collateral or the rights and
security afforded the Lenders hereunder.
(f) Insurance. The Borrower or Bayfront, as the case may be,
agrees it will keep the Equipment insured at all times in accordance
with the requirements set forth in Section 6.2 of the Loan Agreement.
(g) Costs of Collection. In the event of any action or
proceeding to collect or realize upon the Collateral or to enforce any
of the Lenders' rights hereunder, the Borrower shall pay all of the
Lenders' reasonable costs and expenses, including without limitation
attorneys' fees and legal expenses incurred by the Lenders, in
connection with or arising out of such collection or enforcement.
(h) Equipment to Remain Personal Property. The Borrower and
Bayfront agree that, regardless of the manner of affixation, the
Equipment shall remain personal property and shall not become part of
the vessel Princesa, aboard which it is to be used, or any leasehold
interest in real estate comprising the Project or a fixture.
-3-
<PAGE> 4
3. Events of Default. It shall be an Event of Default under
this Security Agreement upon the happening of any of the following:
(a) an "Event of Default" shall occur and be continuing under
the Loan Agreement; or
(b) failure to comply with or perform in any material respect
any of the terms, conditions or covenants of this Security Agreement.
4. Remedies. Upon an Event of Default, the Lenders may
declare all Obligations immediately due and payable, and may, at their option,
without notice, exercise any one or more of the following rights or remedies:
(a) either in person or by agent, with or without bringing
any action or proceeding, or by a receiver to be appointed by a court,
enforce and exercise all of the powers, rights and privileges of the
Borrower or Bayfront, as the case may be, in respect of rights of
payment constituting Collateral and all of the powers, rights and
privileges reserved or granted to the Lenders under this Security
Agreement; and
(b) may without demand, advertisement or notice of any kind
(except such notice as may be required under the applicable Uniform
Commercial Code (the "Code")) all of which are, to the extent
permitted by law, hereby expressly waived, lease or dispose of the
Collateral by public or private sale; and
(c) exercise any of the remedies available to a secured party
under the Code; and
(d) proceed to protect and enforce this Security Agreement by
suits or proceedings or otherwise, for the enforcement of any other
legal or equity available to the Lenders; and
(e) take possession of the Collateral.
In the event that any notice is required to be given under
the Code such requirements for reasonable notice shall be satisfied by giving
at least ten (10) days' notice prior to the event or thing giving rise to the
requirement of notice. Upon an Event of Default, the Borrower and Bayfront
shall make the Collateral available to the Lenders at their direction.
5. Further Assurances. The Borrower shall execute and deliver
to the Lenders, promptly and at the Borrower's expense, such other documents
and assurances and take such further action as the Lenders may reasonably
request in order to effectively carry out the intent and purpose of this
Security Agreement and to establish and protect the rights, interests and
remedies of the Lenders hereunder. This shall include, without limitation,
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<PAGE> 5
providing Code financing statements and evidence of tax filings and payments.
The Borrower and Bayfront agree that the Lenders are authorized, at their
option, to file a carbon, photographic or other reproduction of this Security
Agreement as a financing statement, and such shall be sufficient as a financing
statement under the Code, and to file financing statements or amendments
thereto without the signature of the Borrower or Bayfront and, if a signature
is required by law, then the Borrower or Bayfront, as the case may be, appoints
each Lender as the Borrower's attorney-in-fact solely for the purpose of
executing any such financing statements.
6. Cumulative Remedies. All of the Borrower's and Bayfront's
rights and remedies herein are cumulative and in addition to any rights or
remedies available at law or in equity including the Code, and may be exercised
concurrently or separately. The Borrower shall pay all reasonable costs,
expenses, losses and legal costs (including attorneys' fees) incurred by the
Lenders as a result of enforcing any terms or conditions of this Security
Agreement.
7. No Liability Imposed on Lenders. The Lenders shall not be
obligated to perform or discharge, nor do they hereby undertake to perform or
discharge any obligation, duty or liability, nor shall this Security Agreement
operate to place responsibility for the control, care, management or repair of
the Equipment upon the Lenders, nor shall it operate to make the Lenders
responsible for any dangerous or defective condition of the Equipment.
8. Indemnification. The Borrower and Bayfront shall and do
hereby agree to indemnify against and to hold the Lenders, their respective
officers, agents and employees, harmless of and from any and all liability,
loss or damage which any one or more of them may or might incur under or by
reason of this Security Agreement and of and from any and all claims and
demands whatsoever which may be asserted against any one or more of them by
reason of any alleged obligations or undertakings on their part to perform or
discharge any of the terms, covenants or agreements, excepting the gross
negligence or willful misconduct of any Lender, its officers, agents and
employees. Should any Lender incur any such liability, should any Lender be
required to defend against any such claims or demands or should a judgment be
entered against any Lender, the amount thereof, including costs, expenses, and
reasonable attorneys' fees, which upon payment by Lender shall bear interest
thereon at the highest Default Rate (as defined in the Loan Agreement) which
would be applicable to any Note upon the occurrence of an Event of Default
under the Loan Agreement, shall be secured hereby, and shall be added to the
Obligations and the Borrower shall reimburse the applicable Lender for the same
immediately upon demand.
9. Attorney in Fact. Upon the occurrence of any Event of
Default and at any time during the continuance thereof, the Borrower hereby
irrevocably appoints the Servicer and its successors and assigns as its agent
and attorney-in-fact, which appointment shall be irrevocable during the term of
this Agreement, and which appointment is coupled
-5-
<PAGE> 6
with an interest, to exercise any rights or remedies hereunder with respect to
the Collateral or to endorse any checks which constitute part of the
Collateral.
10. Expenses of Lenders. All reasonable expenses in
protecting, storing, warehousing, insuring, handling and shipping of the
Collateral, all costs of keeping the Collateral free of liens, encumbrances and
security interests (other than the security interests created by this
Agreement) and the removing of the same and all excise, property, sales and use
taxes imposed by state, federal or local authority on any of the Collateral or
with respect to the sale thereof, shall be borne and paid for by the Borrower
or Bayfront, as the case may be, and if the Borrower fails promptly to pay any
amounts thereof when due, the Lenders may, at their option, but shall not be
required to, pay the same, and upon payment, the same shall constitute
Obligations and shall bear interest at the highest interest rate specified in
the Notes and shall be secured by the security interests granted hereunder.
11. Continuing Rights. The rights and powers of the Lenders
or receiver hereunder shall continue and remain in full force and effect until
all Obligations are paid in full.
12. Books and Records. The Lenders shall have the same rights
to inspect, and the same duties with regards to confidentiality of, the
Borrower's books and records with respect to the Collateral, as are provided in
the Loan Agreement. The Lenders shall have the authority, at any time, to
require the Borrower to place upon the Borrower's books and records relating to
the Collateral and other rights to payment covered by the security interest
created in this Security Agreement hereby a notation stating that any such
Collateral and other rights of payment are subject to a security interest in
favor of the Lenders.
13. Principal Place of Business. The location of the
principal places of business of the Borrower and Bayfront are set forth on the
signature page and will not be changed without thirty (30) days' prior written
notice to the Lenders. The Borrower and Bayfront represent that their
respective books and records concerning their respective accounts and chattel
paper are located at such address.
14. Name of Borrower. The Borrower's true name is as set
forth in the preamble hereto. The Borrower has not used any other name within
the past five (5) years. The Borrower agrees that it will not change its name
without thirty (30) days' written notice to the Lenders.
15. Successors and Assigns. This Security Agreement and each
and every covenant, agreement and provision hereof shall be binding upon the
Borrower and its successors and assigns and shall inure to the benefit of the
Lenders and their respective successors and assigns.
16. Severability. It is the intent of this Security Agreement
to confer to the Lenders the rights and benefits hereunder to the full extent
allowable by law including all
-6-
<PAGE> 7
rights available under the Code. The unenforceability or invalidity of any
provisions hereof shall not render any other provision or provisions herein
contained unenforceable or invalid. Any provisions found to be unenforceable
shall be severable from this Security Agreement.
17. Notices. Notices permitted or required to be given
hereunder shall be deemed sufficient if given in the manner specified in the
Loan Agreement.
18. Captions and Headings. The captions and headings of the
various sections of this Security Agreement are for convenience only and are
not to be construed as confining or limiting in any way the scope or intent of
the provisions hereof. Whenever the context requires or permits, the singular
shall include the plural, the plural shall include the singular and the
masculine, feminine and neuter shall be freely interchangeable.
19. Governing Law; Jurisdiction, Etc. The provisions of the
Loan Agreement regarding governing law, jurisdiction, choice of forum and
enforcement of remedies are incorporated into this Security Agreement by
reference.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Borrower and Bayfront have caused
this Security Agreement to be executed as of the date first above written.
PRINCESA PARTNERS
By CONAMI, INC., Its General Partner
By /s/ Jerry L. Baum
-----------------------------------
Its President
Address of Principal Place of Business:
Princesa Partners
100 South Biscayne Blvd., Suite 850
Miami, FL 33131
Tax Identification No. 91-1927972
----------
BAYFRONT VENTURES
By CONCORDE CRUISES, INC., Its
General Partner
By /s/ Jerry L. Baum
-----------------------------------
Its President
Address of Principal Place of Business:
100 South Biscayne Boulevard, Suite 850
Miami, FL 33131
Tax Identification No. 65-0721278
----------
Signature Page to Security Agreement
<PAGE> 9
EXHIBIT A
------------------------------------------
LENDERS
------------------------------------------
The National City Bank of Evansville
------------------------------------------
Linn County State Bank
------------------------------------------
First National Bank
------------------------------------------
United Prairie Bank - Slayton
------------------------------------------
Peoples National Bank of Kewanee
------------------------------------------
A-1
<PAGE> 10
Description of Furniture, Fixtures and Equipment
The "Equipment" consists of all furniture, furnishings,
machinery and equipment of the Borrower or Bayfront, whether now or hereafter
existing or owned, that is now or hereafter used, usable or intended to be used
in connection with, or located or intended to be located in, on or at, the
gaming vessel Princesa (as defined in the other Loan Documents), and shall
include, without limitation, all present and future slot, "keno" and other
gaming machines, equipment and devices, and all machinery, equipment, supplies,
furniture and furnishings used for or in connection with coin and money
changing, counting or storage, kitchen, dining room and food service
facilities, cleaning and maintenance, security and surveillance, office,
bookkeeping and back room facilities, and internal and external communications,
and all furniture, furnishings, equipment and supplies.
<PAGE> 1
EXHIBIT 10.23
GUARANTY, SUBORDINATION AGREEMENT, SECURITY AGREEMENT
AND INDEMNITY
This Agreement is made as of the 22nd day of October 1998, by
BAYFRONT VENTURES, a Florida general partnership, for the benefit of each Lender
listed on Exhibit A hereto (collectively the "Lenders" and each a "Lender").
Princesa Partners, a Florida general partnership (the
"Borrower"), and the Lenders have entered into a Loan Agreement of even date
herewith (together with all amendments, modifications and restatements of such
Agreement, the "Credit Agreement") setting forth the terms on which the Lenders
will make certain advances to the Borrower, the proceeds of which will be used
by the Borrower to refinance the Vessel and Equipment and to make an operating
capital loan to Bayfront.
As a condition to making their advances under the Credit
Agreement, the Lenders have required the execution and delivery of this
Agreement.
Bayfront is chartering the Vessel and Equipment for use in its
Gaming Enterprise, and requires an operating capital loan from the Borrower to
supplement the working capital of its Gaming Enterprise, and accordingly expects
to receive direct economic benefits from the advances under the Credit
Agreement.
ACCORDINGLY, Bayfront, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby agrees as follows:
1. All terms defined in the Credit Agreement that are not
otherwise defined herein shall have the meanings given them in the Credit
Agreement.
GUARANTY
2. Bayfront hereby absolutely and unconditionally guarantees
to the Lenders the full and prompt payment when due, whether at maturity or
earlier by reason of acceleration or otherwise, of (i) the Notes, including all
interest thereon, and any extensions or renewals thereof and substitutions
therefor; and (ii) each and every other sum now or hereafter owing to the
Lenders under the Credit Agreement or any other Loan Documents or under any
other promissory notes or agreements hereafter entered into by the Borrower (all
of said sums being hereinafter called the "Indebtedness").
3. Bayfront will pay all reasonable costs, expenses and
attorneys' fees paid or incurred by the Lenders in endeavoring to collect the
Indebtedness and in enforcing this Agreement.
4. No act or thing need occur to establish the liability of
Bayfront hereunder, and with the exception of full payment, no act or thing
(including, but not limited
<PAGE> 2
to, a discharge in bankruptcy of the Indebtedness, and/or the running of the
statute of limitations) relating to the Indebtedness which but for this
provision could act as a release of the liabilities of Bayfront hereunder, shall
in any way exonerate Bayfront, or affect, impair, reduce or release this
Agreement and the liability of Bayfront hereunder; and this shall be a
continuing, absolute and unconditional guaranty and shall be in force and be
binding upon Bayfront until the Indebtedness is fully paid.
5. The liability of Bayfront hereunder shall not be affected
or impaired in any way by any of the following acts or things (which the Lenders
are hereby expressly authorized to do, omit or suffer from time to time without
notice to or consent of anyone): (i) any acceptance of collateral security,
guarantors, accommodation parties or sureties for any or all Indebtedness; (ii)
any extensions or renewal of any Indebtedness (whether or not for longer than
the original period) or any modification of the interest rate, maturity or other
terms of any Indebtedness; (iii) any waiver or indulgence granted to the
Borrower, any delay or lack of diligence in the enforcement of any Notes or any
other Indebtedness; (iv) any full or partial release of, compromise or
settlement with, or agreement not to sue, the Borrower or any other guarantor or
other person liable on any Indebtedness; (v) any release, surrender,
cancellation or other discharge of any Indebtedness or the acceptance of any
instrument in renewal or substitution for any instrument evidencing
Indebtedness; (vi) any failure to obtain collateral security (including rights
of setoff) for any 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 for any
of the Indebtedness; (vii) any modification, alteration, substitution, exchange,
surrender, cancellation, termination, release or other change, impairment,
limitation, loss or discharge of any collateral security for any of the
Indebtedness; (viii) any assignment, sale, pledge or other transfer of any of
the Indebtedness; or (ix) any manner, order or method of application of any
payments or credits on any Indebtedness. Bayfront waives any and all defenses
and discharges available to a surety, guarantor, or accommodation co-obligor,
dependent on its character as such.
6. Bayfront waives any and all defenses, claims, setoffs and
discharges of the Borrower, or any other obligor, pertaining to the
Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, Bayfront will not assert against the
Lenders any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute, fraud,
ultra vires acts, usury, illegality or unenforceability which may be available
to the Borrower in respect of the Indebtedness, or any setoff available against
the Lenders to the Borrower, whether or not on account of a related transaction,
and Bayfront expressly agrees that it shall be and remain liable for any
deficiency remaining after foreclosure of any security interest securing any
Indebtedness, notwithstanding provisions of law that may prevent the Lenders
from enforcing such deficiency against the Borrower. The liability of Bayfront
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,
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<PAGE> 3
arrangement, composition or readjustment of, or other similar event or
proceeding affecting, the Borrower or any of the Borrower's assets. Bayfront
will not assert against the Lenders any claim, defense or setoff available to
Bayfront against the Borrower.
7. Bayfront also hereby waives: (i) presentment, demand for
payment, notice of dishonor or nonpayment, and protest of the Indebtedness; (ii)
notice of the acceptance hereof by the Lenders and of the creation and existence
of all Indebtedness; and (iii) notice of any amendment to or modification of any
of the terms and provisions of any Loan Documents. The Lenders shall not be
required to first resort for payment of the Indebtedness to the Borrower or any
other persons or corporations, their properties or estates, or to any
collateral, property, liens or other rights or remedies whatsoever.
8. Whenever, at any time or from time to time, Bayfront shall
make any payment to the Lenders hereunder, Bayfront shall notify the Lenders in
writing that such payment is made under this Agreement for such purpose. If any
payment applied by the Lenders to the Indebtedness is thereafter set aside,
recovered, rescinded or required to be returned for any reason (including,
without limitation, the bankruptcy, insolvency or reorganization of the Borrower
or any other obligor), the Indebtedness to which such payment was applied shall
for the purposes of this Agreement be deemed to have continued in existence,
notwithstanding such application, and this Agreement shall be enforceable as to
such Indebtedness as fully as if such application had never been made.
9. No payment by Bayfront pursuant to any provision hereof
shall entitle Bayfront, by subrogation to the rights of the Lenders or
otherwise, to any payment by the Borrower or out of the property of the Borrower
until all of the Indebtedness (including interest) and all reasonable costs,
expenses and attorneys' fees paid or incurred by the Lenders in endeavoring to
collect the Indebtedness and enforcing this Agreement have been fully paid.
Bayfront will not exercise or enforce any right of contribution, reimbursement,
recourse or subrogation available to Bayfront as to any Indebtedness, or against
any person liable therefor, or as to any collateral security therefor, unless
and until all such Indebtedness shall have been fully paid and discharged.
SUBORDINATION AGREEMENT
10. Bayfront hereby agrees that (regardless of any priority
otherwise available to the undersigned by law or by agreement) any lien,
security interest or other interest (including any interest under the Charter)
which Bayfront may now hold or may at any time hereafter acquire in the Vessel
or any or all of the personal property of the Borrower (the "Property") in which
the Lenders have a lien or security interest under the Mortgage or Security
Agreement is, shall be and shall remain fully subordinate for all purposes to
the lien or security interest of the Lenders under the Mortgage and the Security
Agreement.
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11. Bayfront will not exercise any collection rights with
respect to the Property, will not take possession of, sell or dispose of, or
otherwise deal with, the Property, and will not exercise or enforce any right or
remedy which may be available to Bayfront with respect to the Property upon
default, without prior written consent the Servicer.
12. During the continuance of any Event of Default The
Lenders may exercise collection rights, may take possession of, sell or dispose
of, and otherwise deal with, the Property, and may exercise and enforce any
right or remedy available to the Lenders with respect to the Property, whether
available prior to or after occurrence of any default, all without prior notice
to or consent by anyone. The Lenders may apply the proceeds of collateral to any
indebtedness secured by Lenders' above described lien or security interest, in
any order of application.
13. Neither Bayfront nor the Lenders (i) have made any
representation or warranty concerning the Property or the validity, perfection
or (except as to the subordination accomplished hereby) priority of any security
interest therein, or (ii) shall have any duty to preserve, protect, care for,
insure, take possession of, collect, dispose of or otherwise realize upon any of
the Property.
14. Bayfront warrants that any purchaser or transferee of or
successor to, any interest of Bayfront in any or all of the Property will be
given detailed written notice of the subordination accomplished hereby, prior to
the time of purchase, transfer or succession.
SECURITY AGREEMENT
15. To secure the payment of the Obligations (as defined in
the Security Agreement), Bayfront does hereby grant, assign, pledge and confirm
unto the Lenders, a continuing security interest in, a lien upon, and a right of
set off against, and assigns, transfers, pledges and sets over to the Lenders,
all of Bayfront's right, title to and interest in and to the following property,
whether now owned or existing or hereafter acquired or arising, wherever
located:
(a) All utility and service agreements, leases (including, but
not limited to, the Charter and the Use Agreement), permits and licenses,
contracts, operating agreements, employment agreements, equipment leases, and
all other agreements, including amendments, renewals and modifications thereof,
and to which Bayfront is now, or hereafter becomes, a party, relating to the
development, management, operation, access or use of the Facilities and the
conduct of the Gaming Enterprise;
(b) All licenses, permits, approvals or other authorizations
(federal, state and local) used or useful in connection with or in any way
relating to the Facilities;
(c) All Gross Facility Revenues; and
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<PAGE> 5
(d) All substitutions for, and replacements of, products and
proceeds of the conversion, voluntary or involuntary, into cash or liquidated
claims of any of the foregoing, including all proceeds of insurance,
indemnities, performance or redemption bonds, judgments, awards of damages and
settlements hereafter made as a result or in lieu of damage to any collateral.
16. Bayfront agrees that it will, upon demand by the Servicer
at any time during the continuance of any Event of Default, at its own expense,
cause all Gross Facility Revenues to be physically delivered from the Facilities
to a bank designated by the Servicer on each Business Day, and will take such
action with respect thereto as the Servicer may reasonably request; provided
that so much of the Gross Facility Revenues as are determined by Bayfront to be
reasonably necessary for the daily cash-on-hand requirements of the Facilities
need not be physically delivered to such bank. Gross Facility Revenues delivered
to a bank pursuant to this paragraph shall be held in such bank for the purpose
of perfecting the Lenders' security interest therein, and may be applied to the
payment of Obligations in the same manner as any funds obtained by the Servicer
upon sale of collateral under the Security Agreement. In the event that Bayfront
receives any payment that should have been deposited as provided pursuant to
this Agreement, Bayfront agrees that it will hold such payment in trust for the
benefit of the Lenders, shall not commingle such payment with any funds or other
property of Bayfront and shall immediately transfer such payment in accordance
with the Servicer's instructions.
REPRESENTATIONS AND WARRANTIES
17. Bayfront represents and warrants to Lenders that:
(a)(1) Bayfront is a general partnership validly organized and
in good standing under the laws of Florida; (2) Bayfront has full power and
authority to own its properties and to carry on its business as presently
conducted and as proposed to be conducted at the Facilities; and (3) Bayfront
has the power to execute, deliver and perform this Agreement and the Security
Agreement.
(b) The execution, delivery and performance of this Agreement
has been duly authorized by all requisite action of Bayfront and will not
violate any provision of law presently in effect, any order of any court or
other agency of government having jurisdiction over Bayfront, the partnership
agreement of Bayfront, or any provision of any indenture, agreement or other
instrument to which Bayfront is a party or by which it or any of its properties
is bound. This Agreement constitutes the legal, valid and binding obligation of
Bayfront, enforceable against it in accordance with its terms (subject to
limitations as to enforceability which might result from bankruptcy, insolvency
or other similar laws affecting creditors' rights generally).
(c) There is no action, suit or proceeding at law or in equity
or by or before any governmental instrumentality or other agency now pending or
threatened against or
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<PAGE> 6
affecting Bayfront which, if adversely determined, would have a material adverse
effect on Bayfront or its business or financial condition or its ability to
carry out its obligations under this Agreement.
(d) Bayfront is not a party to any material agreement or
instrument except as set forth in Schedule 17(d). Bayfront is not in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any material agreement or instrument to which it is a
party.
(e) No consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority is required on the part
of Bayfront in connection with the execution and delivery of this Agreement or
the performance of or compliance with the terms, provisions or conditions
hereof, or, if so required, such consent, approval or authorization, or
registration, declaration or filing, has been requested and/or obtained. To the
knowledge of Bayfront, Bayfront is not in violation of or subject to any
contingent liability on account of any statute, law, rule, ordinance, order,
writ, injunction or decree.
(f) Bayfront's financial statements that have been presented
to the Lenders fairly present the financial position of Bayfront as of the dates
thereof. There has been no material adverse change in the condition, financial
or otherwise, of Bayfront since the date of the most recent financial statements
presented to the Lenders.
(g) Except as set forth in Schedule 17(g), Bayfront possesses
adequate licenses, certificates, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct its business to be
conducted on or at the Facilities substantially as presently proposed to be
conducted.
(h) To the knowledge of Bayfront after due inquiry, the
Facilities and the intended and/or current use thereof for the purpose and in
the manner contemplated by this Agreement or any other document related hereto
are permitted by all presently applicable governmental use requirements.
18. Bayfront represents and warrants to the Lenders that
Bayfront (A) is not insolvent as of the date hereof, and shall not become
insolvent as a result of the execution and delivery of this Agreement, (B) is
not engaged in business or a transaction, or about to engage in business or a
transaction, for which its property is an unreasonably small capital, and (C)
does not intend to incur, or believe that it will incur, debts that would be
beyond its ability to pay as such debts mature.
COVENANTS
19. Bayfront covenants and agrees that from the date hereof
until payment in full of the principal of and interest on the Loan, unless the
Lenders shall otherwise consent in writing, Bayfront will:
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<PAGE> 7
(a)(1) Do or cause to be done all things necessary to preserve
and keep in full force and effect its existence; (2) preserve all of the rights,
privileges and franchises necessary or desirable in the normal conduct of its
Gaming Enterprise; (3) not liquidate, merge, dissolve, suspend business
operations or sell any significant assets: and (4) not make any material change
to the nature of the Gaming Enterprise as contemplated on the date hereof, as
previously disclosed to the Lenders in writing.
(b) At all times, assure that the Facilities and Bayfront's
Gaming Enterprise are insured as required by the terms of the Credit Agreement.
(c)(1) Pay all of its Indebtedness and all other indebtedness
and obligations promptly when due; (2) pay and discharge or cause to be paid and
discharged promptly all lawful taxes, assessments, and governmental charges or
levies imposed upon it or upon its income and profits, or upon any of its
property, before the same shall become in default, as well as all lawful claims
for labor, materials and supplies or otherwise which, if unpaid, might become a
lien or charge upon any of such properties; provided, however, that Bayfront
shall not be required to pay and discharge or to cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings and Bayfront shall
have set aside on its books adequate reserves with respect to any such tax,
assessment, charge, claim or levy; and (3) comply in all material respects with
all applicable laws, rules, regulations and orders, including without limitation
all governmental use requirements that may apply to Bayfront, its business and
operations, and the Facilities.
(d) At all reasonable times, permit a representative of the
Lenders (to be designated from time to time by the Super-Majority Interest, as
defined in the Servicing Agreement) to inspect the operations aboard the Vessel
and at the other Facilities and to discuss such operations with Bayfront's
personnel, and to inspect the books and records related to the Facilities and to
make extracts therefrom; provided, however, that (i) so long as no Default or
Event of Default is then continuing, any such inspection shall be upon 48 hours'
prior notice, and (ii) all information obtained by any such Lender's
representatives during the course of such inspection shall be maintained by such
Lender's representatives on a confidential basis, except for disclosures of such
information to any Lender and the Servicer, provided that such Lender's
representatives may make disclosure of any such information (a) to federal,
state and municipal governmental or regulatory authorities upon their request,
(b) in the course of any court proceeding involving Bayfront, (c) pursuant to
subpoena or court proceeding or (d) as otherwise required by law. The Lenders
shall use reasonable efforts to protect the confidential information within
their respective organizations and will advise any and all persons to whom it
shall be reasonably necessary to expose confidential information of the contents
of this confidentiality provision. Notwithstanding anything herein to the
contrary, the Lenders may and Bayfront shall, upon request of any Lender,
disclose confidential information to any prospective or subsequent purchaser of
a Note who agrees to be bound by a substantially similar confidentiality
obligation. If a Lender discloses confidential information as permitted in the
preceding
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sentence, it will promptly so notify Bayfront. At any time and from time to
time, Bayfront will furnish such information reports regarding the Collateral to
the Servicer for delivery to the Lenders as the Servicer, on behalf of any
Lender, and its representatives may reasonably request. The Lenders shall have
the authority, at any time, to require Bayfront to place upon Bayfront's books
and records relating to the Collateral and other rights to payment covered by
the security interest created in this Agreement hereby a notation stating that
any such Collateral and other rights of payment are subject to a security
interest in favor of the Lenders.
(e) Give prompt written notice to the Lenders of the
commencement of any action, suit or proceeding before any court or arbitrator or
any governmental department, board, agency or other instrumentality affecting
Bayfront or any property of Bayfront in which an adverse determination or result
could have a material adverse effect on the business, operations, property or
condition (financial or otherwise) of Bayfront or on the ability of Bayfront to
perform its obligations under this Agreement or the other Loan Documents, as the
case may be, stating the nature and status of such action, suit or proceeding.
(f) Not permit any material breach, default or event of
default to occur under any note, loan agreement, indenture, lease, mortgage,
contract for deed, security agreement or other material contractual obligation
binding upon Bayfront which is not cured within the applicable cure provisions
thereof.
(g) Promptly deliver to the Servicer any and all lien searches
as the Servicer may reasonably request from time to time in connection with any
proposed sale of any participation(s) in the Loan. Bayfront shall not create, or
permit to exist, any Lien on its interest in any portion of the Facilities,
including without limitation any Collateral, other than (i) the Liens created
hereby or by the Security Agreement or Mortgage; and (ii) purchase money
security interests in and financing leases of equipment used in the Facilities,
created from time to time, securing only indebtedness incurred for the purchase
or lease thereof having an aggregate initial or stated amount not to exceed
$500,000 at any time.
(h) From time to time, execute and deliver or endorse any and
all instruments, documents, conveyances, assignments and other agreements and
writings which the Lenders may reasonably request in order to protect or perfect
the rights of the Lenders, or any of them, under this Agreement and the Security
Agreement.
(i) Comply in all material respects with the Employee
Retirement Income Security Act of 1974 to the extent applicable.
(j) Furnish to the Lenders as soon as possible and in any
event within five calendar days after Bayfront has obtained actual knowledge of
the occurrence of a Default or an Event of Default which is continuing on the
date of such statement, a statement signed by Bayfront setting forth details of
such Default or Event of Default and the action which Bayfront has taken, is
taking or proposes to take to correct the same.
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(k) Obtain and maintain all necessary state, federal, local
and private clearances, authorizations, permits and licenses with respect to the
present and future business operations of and at the Facilities.
(l) Not incur, and not permit the incurrence of, any
Indebtedness on a par with the Loan unless the combined Debt Service Coverage
Ratio for the most recently ended period of four consecutive fiscal quarters of
Bayfront and Borrower is greater than 2.25 to 1.
(m) For the period of four consecutive fiscal quarters ended
June 30, 1999 and for each period thereafter, achieve a combined Debt Service
Coverage Ratio of no less than 1.5 to 1.0.
(n) At all times through and including December 30, 2000,
maintain a combined Tangible Net Worth as of the end of each fiscal quarter
equal to the sum of $3,000,000 plus 10% of the combined after tax net income of
Bayfront and Borrower. For purposes hereof, combined "Tangible Net Worth" for
such purposes means: at any date of determination the difference between (a) the
total assets appearing on the balance sheet of a Person (prepared in accordance
with GAAP after deducting adequate reserves in each case where, in accordance
with GAAP, a reserve is proper); and (b) the total liabilities appearing on such
balance sheet. The determination of total assets shall exclude: (i) goodwill,
organizational expenses, research and development expenses, trademarks, trade
names, copyrights, patents, patent applications, licenses and rights in any
thereof, covenants not to compete, training costs and other similar intangibles;
(ii) all deferred charges or unamortized debt discount and expense other than
deferred income taxes; (iii) securities which are not readily marketable; (iv)
unless reflected in the audited financial statements of the Person, any write-up
in the book value of any assets resulting from a reevaluation thereof; (v)
amounts due to the Person from officers, directors, shareholders, employees or
affiliates; and (vi) any asset acquired subsequent to the date of this Agreement
which the Lenders, in their reasonable discretion, determine to be an intangible
asset.
(o) As soon as practicable, but in any event within forty-five
(45) days after the end of each fiscal quarter commencing with the fiscal year
ending September 30, 1999, Bayfront shall deliver to the Servicer a copy of the
financial statements of Bayfront for such quarter, consisting of the balance
sheets of Bayfront as at the end of such quarter and the related statements of
income of Bayfront for such quarter and year-to-date period then ended, all
prepared in such a manner as to present substantially the same information as
would be presented in financial statements prepared in accordance with GAAP.
(p) As soon as practicable, but in any event within 120 days
after the end of each fiscal year of Bayfront, commencing with the fiscal year
ending September 30, 1999, Bayfront shall deliver to the Servicer copies of the
annual financial statements of Bayfront, consisting of the balance sheets of
Bayfront and Bayfront as at the end of such year and the related statements of
income of Bayfront for such year, all prepared in accordance with GAAP, and
accompanied by the audit report of a certified public accountant reasonably
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acceptable to the Lenders, containing an unqualified opinion thereon, and a copy
of such accountant's management letters to Bayfront.
(q) Bayfront will maintain its property in good working order
and condition, reasonable wear and tear excepted, and, in accordance with
reasonably prudent business practices, make all needful and proper repairs,
replacements, additions and improvements thereto.
(r) Bayfront will not, incur any obligation to pay any
management fee or payment in lieu of a management fee to any affiliated Person.
INDEMNIFICATION BY BAYFRONT
20. (a) Bayfront agrees to indemnify and hold harmless the
Lenders, the Servicer and each of their officers, agents and employees, for,
from and against any and all losses, claims, damages or liability to which any
Lender, the Servicer, or any of their officers, agents or employees, may become
subject under any law in connection with the carrying out of the transactions
contemplated by this Agreement, any Loan Document or any Guaranty, or the
conduct of any activity at the Facilities (other than as a result of the
negligence or willful misconduct of any such Person), and to reimburse each
Lender, the Servicer, and each of their officers, agents and employees, for any
reasonable out-of-pocket legal and other fees and expenses (including attorneys'
fees) incurred by such Lender, the Servicer, and each of their officers, agents
and employees, in connection with investigating any such losses, claims, damages
or liabilities or in connection with defending any actions relating thereto. The
Lenders and the Servicer agree, at the request and reasonable expense of the
Bayfront, to cooperate in the making of any investigation in defense of any such
claim and promptly to assert any or all of the rights and privileges and
defenses which may be available to the Lenders or the Servicer. The provisions
of this Section shall survive the payment of the Notes and the Loan.
(b) Without limiting the generality of the foregoing, Bayfront
shall bear all loss, expense (including reasonable attorneys' fees) and damage
in connection with, and agrees to indemnify and hold harmless each Lender, the
Servicer, and their officers, agents and employees, for, from and against all
claims, demands and judgments made or recovered against such Lender, the
Servicer, or any of their officers, agents or employees, because of bodily
injuries, including death at any time resulting therefrom, or because of damages
to property, from any cause whatsoever, arising out of or in connection with the
construction, furnishing or operation of the Facilities, if due to any act of
omission or commission, including negligence, of Bayfront or any contractor or
its, his or their officers, employees or agents. Bayfront's liability hereunder
shall not be limited to the extent of insurance carried by or provided by the
Bayfront or subject to any exclusions from coverage in any insurance policy. No
indemnity payment shall be required hereunder to any Person if the claim, demand
or judgment resulted primarily from the negligence or willful misconduct of such
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Person. The obligations of the Bayfront under this Section shall survive the
repayment of the Notes and the Loan.
MISCELLANEOUS
20. This Agreement shall constitute a continuing and
irrevocable Agreement, and the Lenders may continue, without notice to or
consent by Bayfront, to make loans and extend other credit or financial
accommodation to or for the account of the Borrower in reliance upon this
Agreement until written notice of revocation of this Agreement shall have been
received by the Lenders from Bayfront. Any such notice of revocation shall not
affect this Agreement in relation to any Indebtedness then existing or created
thereafter pursuant to any previous commitment of the Lenders to the Borrower,
or any extensions or renewals of any such Indebtedness, and as to all such
Indebtedness and extensions or renewals thereof, this Agreement shall continue
effective until the same have been fully paid with interest.
21. No failure on the part of the Lenders to exercise and no
delay in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided in this Agreement are cumulative and not exclusive of any
remedies provided by law.
22. Notices permitted or required to be given hereunder shall
be in writing and shall be deemed sufficient if given by registered or certified
mail, postage prepaid, return receipt requested, addressed to the respective
addresses of the parties or at such other addresses as the respective parties
may designate by like notice from time to time. Notices so given shall be
effective upon the earlier of (a) receipt by the party to which notice is given,
or (b) on the fifth (5th) business day following the date such notice was
deposited in the United States mail. Any notice to the Lenders and any request
for a consent of the Lenders required by this Agreement shall be sent to the
Servicer and addressed to:
The National City Bank of Evansville
21 S.E. Third Street
Evansville, IN 47708
Attention: Stuart G. Harrington
Executive Vice President
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with a copy to:
Dain Rauscher
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402-4422
Attention: Ali P. Alizadeh
Managing Director, Fixed Income
Notices to the Bayfront shall be addressed to:
Bayfront Ventures
100 South Biscayne Blvd., Suite 850
Miami, FL 33131
Attention: Michael Hlavsa
with a copy to:
Concorde Gaming Corporation
3290 Lien Street
Rapid City, SD
Attention: George Nelson
23. Bayfront shall be jointly and severally liable with the
Borrower for any payments required by Section 8.3 (relating to expenses, taxes
and attorneys' fees) or 8.4 (relating to certain indemnities provided by the
Borrower) of the Loan Agreement.
24. Time is of the essence in the performance of this
Agreement and the Loan Documents.
25. This Agreement embodies the entire agreement and
understanding between Bayfront and the Lenders with respect to the subject
matter hereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.
26. No amendment, modification or waiver of any provision of
this Agreement and no consent to any departure by Bayfront therefrom shall in
any event be effective unless the same shall be in writing and signed by such
percentage of the Lenders as is required by the terms of the Servicing
Agreement, and then such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
27. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that Bayfront may not
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<PAGE> 13
assign its rights or obligations hereunder without the prior written consent of
the Lenders.
28. To the extent that Bayfront makes a payment or payments
to the Lenders or any Lender exercises its rights of setoff, and such payment or
payments or the proceeds of such setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other Person under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
29. All covenants, agreements, representations and warranties
made herein by Bayfront shall, notwithstanding any investigation by any Lender,
be deemed to be material to and to have been relied upon by the Lenders and
shall survive the execution and delivery of this Agreement.
30. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
31. Whenever possible, each provision of this Agreement and
any other statement, instrument or transaction contemplated hereby or relating
hereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement or any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be held to be prohibited or invalid under such applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or any other statement, instrument or
transaction contemplated hereby or relating hereto. The parties shall endeavor
in good-faith negotiations to replace any invalid, illegal or unenforceable
provisions with a valid provision the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provision.
32. Bayfront hereby agrees with and for the benefit of the
Lenders, the Servicer, and their successors and assigns, and hereby agrees that
this Agreement shall be governed by and construed in accordance with the
internal laws of the State of Indiana, except to the extent different provisions
are provided for in this section.
33. Bayfront irrevocably (i) agrees that any suit, action or
other legal proceeding arising out of or relating to this Agreement may be
brought in a court of record in the State of Indiana or in the Courts of the
United States located in such State, (ii) consents to the jurisdiction of each
such court in any suit, action or proceeding, (iii) waives any objection which
it may have to the laying of venue of any such suit, action or proceeding in any
such courts and any claim that any such suit, action or proceeding has been
brought in an inconvenient forum, and (iv) agrees that a final judgment in any
such suit, action or
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<PAGE> 14
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
34. BAYFRONT HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED ON OR
PERTAINING TO THIS AGREEMENT OR ANY OTHER RELATED LOAN DOCUMENT TO WHICH
BAYFRONT IS A PARTY.
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<PAGE> 15
IN WITNESS WHEREOF, Bayfront has executed this Agreement as of
the day and year first above written.
BAYFRONT VENTURES
By CONCORDE CRUISES, INC., Its
General Partner
By /s/ Jerry L. Baum
-------------------------------------
Its President
And by GOLDCOAST ENTERTAINMENT
CRUISES, INC., Its General Partner
By /s/ Michael A. Hlavsa
-------------------------------------
Its President
Signature Page to Guaranty, Subordination Agreement,
Security Agreement and Indemnity
<PAGE> 1
EXHIBIT 10.24
FIRST PREFERRED SHIP MORTGAGE
This First Preferred Ship Mortgage is made as of October 15, 1998 by
Princesa Partners, a Florida general partnership having its principal office at
100 S. Biscayne Boulevard, Suite 850, Miami, Florida (the "Mortgagor") in favor
of The National City Bank of Evansville, having its principal office at 227 Main
Street, Evansville, Illinois, individually and as agent for certain Lenders (the
"Mortgagee").
RECITALS
FIRST: The Mortgagor is the sole owner of the whole (100%) of the vessel
Princesa, official number 1073261, which is documented under and
pursuant to the laws of the United States of America.
SECOND: By the terms of a Servicing and Intercreditor Agreement of even date
herewith, the Mortgagee is acting as agent for certain "Lenders" that
have agreed to make loans to the Mortgagor in an aggregate amount of
up to $8,400,000 pursuant to the Loan Agreement among Mortgagee and
such Lenders of even date herewith (as amended, modified, supplemented
or restated from time to time the "Loan Agreement"). The loans are
evidenced by the Notes issued pursuant to the Loan Agreement in the
aggregate principal amount of $8,400,000. "). Capitalized terms not
otherwise defined herein shall have the meanings provided in the Loan
Agreement, as hereinafter defined.
THIRD: The Mortgagor has duly authorized and directed the execution of this
Mortgage as a first preferred ship mortgage under the Ship Mortgage
Act, 1920, as amended and recodified, 46 U.S.C. Section 31321 et. seq.
(the "Ship Mortgage Act") on the said vessel.
NOW, THEREFORE, in order to secure the due and punctual payment of all
indebtedness evidenced by the Notes (including without limitation interest
thereon) and all other sums that may become payable and performance of all
covenants and agreements under the Loan Agreement and any other Loan Document
and all other sums advanced by the Mortgagee hereunder (collectively, the
"Secured Obligations"), and in consideration of the premises and in order to
induce the Mortgagee to make or maintain the advances evidenced by the Notes and
in consideration of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged:
THE MORTGAGOR hereby grants, bargains, sells, conveys, transfers,
assigns, releases, pledges, grants a security interest in, sets over,
hypothecates and mortgages unto the Mortgagee, its successors and assigns, the
whole (100%) of the vessel described on Schedule A attached hereto together with
all of its engines, boilers, machinery, covers, masts, bowsprits, boats, spars,
anchors, cables, chains, rigging, tackle, capstans, fittings, tools, pumps and
pumping equipment, gear, apparel, furniture, equipment, spare parts, supplies,
accessions and accessories and all other appurtenances thereunto appertaining
and belonging,
<PAGE> 2
whether now owned or hereafter acquired, whether on board or not and also any
and all additions, improvements and replacements hereafter made in, for or to
the Vessel, or any part thereof, or in or to its equipment and appurtenances
aforesaid, and all earnings, hire, freight or other monies obtained through the
use and operation thereof and all proceeds of the foregoing (all of the
foregoing referred to herein as the `Vessel");
TO HAVE AND TO HOLD the Vessel unto the use and benefit of Mortgagee,
its successors and assigns, and to their own use and benefit forever;
PROVIDED, HOWEVER, that if Mortgagor shall pay or cause to be paid in
full to Mortgagee all outstanding and unpaid Secured Obligations, and if the
Lenders shall have no obligation to advance additional funds to Mortgagor under
the Loan Agreement, then upon payment by the Mortgagor of any recording or other
fees attendant to filing the satisfaction of this Mortgage with the United
States Coast Guard and thenceforth this Mortgage and everything herein contained
shall cease and be null and void; otherwise this Mortgage shall be and remain in
full force and effect; and
FURTHER PROVIDED, HOWEVER, that the Vessel is mortgaged to the
Mortgagee subject to the following further representations, warranties,
covenants, agreements, conditions and provisions of this Mortgage.
ARTICLE I
REPRESENTATIONS AND WARRANTIES
The Mortgagor hereby represents, warrants, covenants and agrees as
follows:
1.1 Mortgage is Legal, Valid and Bonding. This Mortgage constitutes a
legal, valid and binding obligation of Mortgagor and, upon the filing hereof
with the United States Coast Guard National Vessel Documentation Center creates
a first preferred ship mortgage in the Vessel which is enforceable against
Mortgagor in accordance with its terms.
1.2 Title to Vessel. The Mortgagor is the sole, true and lawful owner
and is lawfully possessed of the Vessel, and the Mortgagor owns all right, title
and interest in and to the Vessel free and clear of all complaints in rem,
libels, liens (maritime or otherwise), charges, claims, security interests,
mortgages or other encumbrances of any kind or nature except in favor of
Mortgagee.
1.3 Citizen of United States. Mortgagor is a citizen of the United
States within the meaning of the Shipping Act, 1916, as amended, for the purpose
of operating the Vessel in coastwise trade and is entitled to own and operate
the Vessel under its marine documents.
2
<PAGE> 3
ARTICLE II
COVENANTS
Mortgagor covenants and agrees as follows:
2.1 Covenants in Loan Agreement. Mortgagor will fully perform all
covenants, agreements, obligations and conditions required of Mortgagor in the
Loan Agreement.
2.2 Maintain Citizenship and Documentation of Vessel. The Mortgagor
will at all times maintain the Vessel, so long as it shall be subject to the
lien hereof as a vessel of the United States and shall maintain the
documentation of the Vessel under the laws of the United States, and will
maintain the same hailing port for the Vessel as set forth in its original
documentation papers unless a change of said port is authorized by the
Mortgagee. Mortgagor shall continue to be a citizen of the United States
entitled to own and operate the Vessel in the U.S. coast-wise trade under its
marine documents, which Mortgagor shall maintain in full force and effect.
2.3 Title to Vessel. Except to the limited extent permitted under
Section 2.11 of this Mortgage, Mortgagor shall continue to own and possess the
whole of the Vessel free from all complaints in rem, libels, liens (maritime or
otherwise), charges, claims, security interests, mortgages, pledges or other
encumbrances of any kind or nature except in favor of Mortgagee. The Mortgagor
hereby does and will forever warrant and defend the title and possession of the
Vessel, and each part thereof, for the benefit of the Mortgagee, against any and
all claims and demands whatsoever.
2.4 Preservation of Mortgage Lien. The Mortgagor will comply with and
satisfy all provisions of law, including without limitation the Ship Mortgage
Act, and will take any and all such other action as may be required from time to
time in order to establish and maintain this Mortgage as a valid and perfected
first preferred ship mortgage under the Ship Mortgage Act on the Vessel in
accordance with the terms hereof.
2.5 Transfer of Vessel. The Mortgagor shall not sell or transfer the
Vessel, or place or permit the Vessel to be placed under any foreign
registration or flag or change the hailing port of the Vessel, or do or suffer
or permit anything to be done, including placing the Vessel under charter, which
can or might adversely affect the registration or documentation of the Vessel
under the laws or regulations of the United States, without the prior written
consent of the Mortgagee.
2.6 Taxes. The Mortgagor will from time to time pay or discharge or
cause to be paid or discharged, as they become due and payable, all taxes,
assessments, and governmental charges levied or assessed or imposed upon the
Vessel.
2.7 Seizure of Vessel. If the Vessel shall at any time, while subject
to the lien hereof, be libeled, seized, detained, levied or attached under
process or color of legal authority for any cause whatsoever, the Mortgagor will
forthwith notify the Mortgagee in
3
<PAGE> 4
writing and, without expense to the Mortgagee, within ten (10) days from the
time of such libel, seizure, detention, levy or attachment, either shall cause
the Vessel to be released by filing an undertaking or stipulation or otherwise
as may be lawfully permitted or shall furnish the Mortgagee additional security
of a value acceptable to the Mortgagee. If the Mortgagor shall fail or neglect
to furnish additional security to the Mortgagee or otherwise to release the
Vessel from libel, seizure, detention, levy or attachment, the Mortgagee may
(but need not) furnish security to release the Vessel, and if, as a result of
such libel, seizure or attachment, the Vessel shall be sold at a marshal's sale
or otherwise under legal process, any insurance money, excess proceeds and other
sums recoverable with respect to the Vessel shall be paid to the Mortgagee and
shall be applied against the Secured Obligations.
2.8 Insurance. The Mortgagor will obtain and maintain insurance with
respect to the Vessel as required by the Loan Agreement.
2.9 Operation and Maintenance of Vessel. The Mortgagor will operate or
take all actions necessary to cause the Vessel to be operated in full compliance
with (a) each applicable law, treaty, convention, order, rule or regulation of
the United States, any state or any other jurisdiction (foreign or otherwise)
wherein operated or any department or agency thereof, including without
limitation the Federal Maritime Commission, the U.S. Maritime Administration,
the United States Department of Transportation, the United States Coast Guard,
the Bureau of Customs, the United States Department of the Treasury and the
Federal Communications Commission. The Mortgagor will not remove the Vessel from
the limits of the United States except in the ordinary course of Mortgagor's
gaming cruises to no-where and subsequent return to the limits of the United
States. The Mortgagor will at all times and at its own cost and expense maintain
and preserve the Vessel in good condition, working order and repair, ordinary
wear and tear excepted, and will cause the Vessel to be kept fully equipped and
such equipment to be kept in good condition, working order and repair, ordinary
wear and tear excepted; provided, however, that Mortgagor shall make no
structural changes or alterations in the Vessel in excess of $25,000 without the
prior written consent of Mortgagee in each instance.
2.10 Creation of Liens. Neither the Mortgagor nor any other Person
(including without limitation any master or charterer of the Vessel) has or
shall have any right, power or authority to create, incur or permit to be placed
or imposed upon the Vessel, or any part thereof, or any of its cargo, freights,
profits or hire, any lien whatsoever other than (a) the lien of this Mortgage or
other liens in favor of Mortgagee or permitted under the Loan Agreement, (b)
liens for damages arising out of tort, (c) liens for crew's wages, (d) liens for
general average or salvage (including contract salvage), or (e) maritime and
other liens for repair, services, and supplies to the Vessel arising in the
ordinary course of business; provided, however, that any permitted lien for
repairs, services or supplies under Subsection (e) above shall be subject and
subordinate to the lien of this Mortgage and further provided, however, that the
Mortgagor shall, no later than 20 days after they become due, pay, satisfy or
discharge any and all claims which, if unpaid, might constitute or become liens
or charges upon the Vessel, and any liens or charges which may be levied against
or imposed upon the Vessel.
4
<PAGE> 5
2.11 Requisition of Title to Vessel. In the event that title or
ownership of the Vessel shall be requisitioned, purchased or taken by any
government of any country or any agent thereof, the lien of this Mortgage shall
be deemed to attach to the claim for compensation and the compensation, purchase
price, reimbursement or award shall be payable to the Mortgagee. The Mortgagor
shall promptly execute and deliver such documents, if any, and shall promptly do
and perform such acts, if any, as in the opinion of the Mortgagee may be
necessary or useful to facilitate or expedite the collection by the Mortgagee of
such compensation, purchase price, reimbursement or award.
2.12 Notice of Loss or Adverse Claim. In the event of (a) the actual
total loss of the Vessel (b) any requisition of the use of or title to, or
seizure or forfeiture of, the Vessel by any governmental authority or any other
party, or the attachment, levying upon, filing of an action in rem against,
detention, sequestration or taking into custody of the Vessel in connection with
any proceeding, (c) any marshal's or other sale of the Vessel, or (d) any
casualty, accident or damage to the Vessel involving an amount in excess of
$25,000, Mortgagor shall forthwith give notice by letter and telecopy to the
Mortgagee.
2.13 Copies of Mortgage and Notice. Mortgagor shall carry, or cause to
be carried, a certified copy of this Mortgage and of any amendments and
supplements hereto, or assignments hereof, with the Vessel's documents and on
board the Vessel with the ship's papers and will exhibit the same or cause the
same to be exhibited, on demand, to any Person having business with the Vessel
and to any representative of the Mortgagee. Unless otherwise approved by the
Mortgagee, a notice reading as follows, printed in plain type of such size that
it shall cover a space not less than six inches wide by nine inches high,
protected from exposure to the elements, shall be kept prominently displayed in
the wheelhouse and in the Captain's cabin on the Vessel:
Notice of Mortgage
This Vessel is covered by a First Preferred Ship Mortgage from
PRINCESA PARTNERS, the Mortgagor to The National City Bank of
Evansville, the Mortgagee."
2.14 Further Action. From time to time Mortgagor shall, and the
Mortgagee may on behalf of Mortgagor, execute and deliver such other and further
instruments and assurances and take such other actions as in the opinion of
Mortgagee's counsel may reasonably be required to subject the Vessel more
effectually to the lien hereof and to the payment of the Secured Obligations and
for operation of the Vessel as herein provided, and (in case of an Event of
Default) to effectuate sales as provided in Article III hereof
ARTICLE III
DEFAULT
3.1 Events of Default. The occurrence of any of the following events
shall constitute an event of default (an "Event of Default):
5
<PAGE> 6
(a) An Event of Default as defined therein shall occur under the Loan
Agreement;
(b) The Mortgagor shall fail to perform any covenant herein contained.
3.2 Remedies. If an Event of Default shall have occurred and be
continuing, then the Mortgagee may, in every case and concurrently or
separately:
(a) Exercise any or all remedies available to Mortgagee under the Loan
Agreement, including without limitation acceleration of payment of all Secured
Obligations and termination of any obligation to advance additional monies to
Mortgagee;
(b) Exercise all the rights and remedies provided (i) under this
Mortgage; (ii) in foreclosure and otherwise given to mortgagees by the
provisions of the Ship Mortgage Act and acts amendatory thereof and
supplementary thereto; and (iii) to a secured party when a debtor is in default
under a security agreement by the Indiana Uniform Commercial Code;
(c) Exercise any other right or remedy provided by law or agreement,
including without limitation the right to recover deficiency or other judgment
for any amount due under the Loan Agreement or hereunder;
(d) Take and enter into possession of the Vessel, at any time,
wherever the same may be, without legal process and without being responsible
for loss or damage, and the Mortgagor or other person in possession forthwith
upon demand of the Mortgagee shall surrender to the Mortgagee possession of the
Vessel and the Mortgagee may, without being responsible for loss or damage,
hold, lay up, lease, charter, operate or otherwise use the Vessel for such time
and upon such terms as it may deem to be for its best advantage, accounting only
for the net profits, if any, arising from such use of the Vessel and charging
upon all receipts from the use of the Vessel or from any sale thereof or from
the exercise of any of the powers conferred by subparagraph (e) next following,
all costs, expenses, charges, damages or losses by reason of such use and with
the right to dock the Vessel free of charge at the Facilities (or elsewhere at
Mortgagor's expense);
(e) Demand, collect, receive, compromise and sue for, so far as may be
permitted by law, in the name of the Mortgagor, all earnings, revenues, income
and profits of the Vessel, all amounts due from insurers under any insurance
thereon as payments of losses or as return premiums or otherwise, all salvage
awards and recoveries, all recoveries in general average or otherwise, and all
other sums due or to become due in respect of the Vessel, or in respect of any
insurance thereon, from any person whomsoever, and to make, give and execute in
the name of the Mortgagor acquittances, receipts, releases or other discharges
for the same, and to endorse and accept in the name of the Mortgagor all
instruments in writing with respect to the foregoing, and the Mortgagor does
hereby irrevocably appoint the Mortgagee the true and lawful attorneys-in-fact
of the Mortgagor, upon the happening of an Event of Default, to do all said
acts; and
(f) Take and enter into possession of the Vessel at any time, wherever
the same may be, without legal process and, if it seems desirable to the
Mortgagee and without being
6
<PAGE> 7
responsible for loss or damage, sell the Vessel upon such terms and conditions
as the Mortgagee may determine, free from any claim of or by the Mortgagor, at a
public sale or sales after advertisement or at a private sale or sales after
notice to the Mortgagor, at any place as the Mortgagee may specify and in such
commercially reasonable manner as the Mortgagee may deem advisable.
In any suit to enforce its rights, powers or remedies, the Mortgagee
shall be entitled as a matter of right (i) to the appointment of a receiver or
receivers of the Vessel and the earnings thereof with full rights and powers to
use and operate the Vessel, and (ii) to a decree ordering and directing the sale
and disposition of the Vessel. The Mortgagee may become the purchaser at the
said sale, and the Mortgagee shall have the right to credit on the purchase
price any and all sums of money due to the Mortgagee hereunder.
Each and every right and remedy, herein given shall be cumulative and
in addition to every other remedy given hereunder or otherwise existing. The
exercise of any right or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right or remedy. No
waiver, delay or omission by the Mortgagee in the exercise of any right or
remedy accruing upon any Event of Default shall impair at such right or remedy
or be construed to be a waiver of any such Event of Default or to be any
acquiescence therein.
3.3 Application of Moneys. The proceeds of any judicial or other sale
of the Vessel and the net earnings from any management, charter, lease,
operation or other use of the Vessel, under any of the powers specified in
Section 3.2, together with the proceeds of any insurance, claim for damages, or
judgment and any other moneys received from or for the account of the Mortgagor
pursuant hereto or otherwise shall be applied as follows:
First: To the payment of all expenses and charges including the
expenses of any sale, the expenses of any retaking, attorneys' fees hereunder,
court costs, and any other expenses or advances made or incurred by the
Mortgagee in the protection of its rights or the pursuance of its remedies
hereunder or caused by Mortgagor's default hereunder or under the Loan
Agreement, including advances made under Section 3.4 hereof, with interest at
the Default Rate and, if and to the extent so determined by the Mortgagee, to
the payment of, or to provide adequate indemnity against, liens claiming
priority over or equality with this Mortgage.
Second: To the payment of the Secured Obligations, including accrued
interest to the date of such payment, in any order the Mortgagee may ------
determine.
Third: To the payment of any surplus thereafter remaining to the
Mortgagor or to whomsoever shall be entitled thereto, subject to set-off in
favor of Mortgagee for any other indebtedness of Mortgagor.
In the event that the proceeds are not sufficient to pay the amounts
specified in paragraphs "First" and "Second" above, the Mortgagee shall be
entitled to collect any deficiency from the Mortgagor or any other person
legally liable therefor.
7
<PAGE> 8
3.4 Advances and Entry by Mortgagee. If the Mortgagor shall default in
the performance or observance of any of the covenants in this Mortgage, the
Mortgagee may, in its discretion, do any act or make any expenditures Mortgagee
deems necessary or appropriate to remedy such default or protect Mortgagee's
rights, including, without limitation of the foregoing, the obtaining of
insurance, the payment and discharge of taxes and liens, entry upon the Vessel
to make repairs (and for that purpose docking and maintaining the Vessel) and
defending suits. The Mortgagor shall reimburse the Mortgagee on demand, with
interest at the Default Rate for any and all reasonable expenditures so made or
incurred and for any and all damages or losses sustained by Mortgagee because of
Mortgagor's defaults. Until the Mortgagor has so reimbursed the Mortgagee for
such expenditures, advances and expenses, the amount thereof shall be a debt due
from the Mortgagor to the Mortgagee, and payment thereof shall be secured by the
lien of this Mortgage.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. All notices provided for herein shall be deemed to have
been given (unless otherwise required by the specific provision hereof in
respect of any matter) when delivered in the manner permitted in the Loan
Agreement.
4.2 Other Security. This Mortgage is given to secure the Secured
Obligations in addition to other security and/or guaranties that may now or
hereafter secure the Secured Obligations. The Mortgagee shall have no duty to
exercise its rights or remedies under either this Mortgage or any other security
or guaranty in any particular order, and the Mortgagor waives any right to
require any marshalling of assets.
4.3 Invalidity of Any Provision. If any provisions hereof shall be
held invalid or unenforceable according to law, the remaining provisions hereof
shall not be affected thereby and shall continue in full force and effect.
4.4 Successors and Assigns. All the covenants, stipulations, promises
and agreements contained in this Mortgage shall bind and inure to the benefit of
the Mortgagor and the Mortgagee and their respective successors and assigns;
provided, however, that nothing in this Section shall be deemed to permit any
sale or transfer of the Vessel otherwise prohibited hereunder.
4.5 No Waiver. No provision of this Mortgage or any other document and
none of the actions or omissions to act by the Mortgagee contemplated thereby
shall be deemed to or shall constitute a waiver by the Mortgagee of the
preferred status of this Mortgage or of any of the benefits, privileges or
provisions given by the Ship Mortgage Act.
4.6 Governing Law. This Mortgage shall be construed in accordance with
the laws of the State of Indiana and the general maritime law; provided,
however, that the parties shall be entitled to all rights conferred by any
applicable federal statute, rule or regulation.
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<PAGE> 9
Mortgagor hereby submits to the personal jurisdiction of the federal and state
courts located in the State of Indiana in respect of all matters relating to
this Mortgage.
4.7 Amount and Maturity Date of Mortgage. The total amount of this
Mortgage is $8,400,000 plus interest and performance of Mortgage covenants, the
discharge amount is the same as the total amount and the maturity date of the
Notes is January 1, 2004.
9
<PAGE> 10
IN WITNESS WHEREOF the Mortgagor has caused this instrument to be
executed in its name by as duly authorized officer as of the date above written.
In Presence of--
PRINCESA PARTNERS
By CONAMI, INC., Its General Partner
By /s/ Jerry L. Baum
------------------------
Its President
State of Florida )
)ss.
County of Miami-Dade )
The foregoing instrument was acknowledged before me this 15th day of October
1998, by Jerald L. Baum the President of CONAMI, INC., a Florida corporation, a
general partner of PRINCESA PARTNERS, a Florida general partnership, on behalf
of the partnership.
/s/ Bibiana F. Leiro
- -------------------------
Notary Public
[S E A L]
<PAGE> 1
EXHIBIT 10.25
GUARANTY
This Guaranty is made as of the 22nd day of October 1998, by
CONCORDE GAMING CORPORATION, a Colorado corporation, for the benefit of each
Lender listed on Exhibit A hereto (collectively the "Lenders" and each a
"Lender").
Princesa Partners, a Florida general partnership (the
"Borrower"), and the Lenders have entered into a Loan Agreement of even date
herewith (together with all amendments, modifications and restatements of such
Agreement, the "Credit Agreement") setting forth the terms on which the Lenders
will make certain advances to the Borrower, the proceeds of which will be used
by the Borrower to refinance the Vessel and Equipment and to make an operating
capital loan to Bayfront Ventures, a Florida general partnership ("Bayfront"),
for use in its Gaming Enterprise.
As a condition to making their advances under the Credit
Agreement, the Lenders have required the execution and delivery of this
Guaranty.
The Guarantor indirectly owns an 80% interest in the Borrower
and an 80% interest in Bayfront, and accordingly expects to receive direct
economic benefits from the advances under the Credit Agreement.
ACCORDINGLY, the Guarantor, in consideration of the premises
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, hereby agrees as follows:
1. All terms defined in the Credit Agreement that are not
otherwise defined herein shall have the meanings given them in the Credit
Agreement.
2. The Guarantor hereby absolutely and unconditionally
guarantees to the Lenders the full and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of (i) the Notes,
including all interest thereon, and any extensions or renewals thereof and
substitutions therefor; and (ii) each and every other sum now or hereafter owing
to the Lenders under the Credit Agreement or any other Loan Documents or under
any other promissory notes or agreements hereafter entered into by the Borrower
(all of said sums being hereinafter called the "Indebtedness").
3. The Guarantor will pay all reasonable costs, expenses and
attorneys' fees paid or incurred by the Lenders in endeavoring to collect the
Indebtedness and in enforcing this Guaranty.
4. No act or thing need occur to establish the liability of
the Guarantor hereunder, and with the exception of full payment, no act or thing
(including, but not limited to, a discharge in bankruptcy of the Indebtedness,
and/or the running of the statute of limitations) relating to the Indebtedness
which but for this provision could act as a release of the liabilities of the
Guarantor hereunder, shall in any way exonerate the Guarantor, or affect,
<PAGE> 2
impair, reduce or release this Guaranty and the liability of the Guarantor
hereunder; and this shall be a continuing, absolute and unconditional guaranty
and shall be in force and be binding upon the Guarantor until the Indebtedness
is fully paid.
5. The liability of the Guarantor hereunder shall not be
affected or impaired in any way by any of the following acts or things (which
the Lenders are hereby expressly authorized to do, omit or suffer from time to
time without notice to or consent of anyone): (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all
Indebtedness; (ii) any extensions or renewal of any Indebtedness (whether or not
for longer than the original period) or any modification of the interest rate,
maturity or other terms of any Indebtedness; (iii) any waiver or indulgence
granted to the Borrower, any delay or lack of diligence in the enforcement of
any Notes or any other Indebtedness; (iv) any full or partial release of,
compromise or settlement with, or agreement not to sue, the Borrower or any
other guarantor or other person liable on any Indebtedness; (v) any release,
surrender, cancellation or other discharge of any Indebtedness or the acceptance
of any instrument in renewal or substitution for any instrument evidencing
Indebtedness; (vi) any failure to obtain collateral security (including rights
of setoff) for any 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 for any
of the Indebtedness; (vii) any modification, alteration, substitution, exchange,
surrender, cancellation, termination, release or other change, impairment,
limitation, loss or discharge of any collateral security for any of the
Indebtedness; (viii) any assignment, sale, pledge or other transfer of any of
the Indebtedness; or (ix) any manner, order or method of application of any
payments or credits on any Indebtedness. The Guarantor waives any and all
defenses and discharges available to a surety, guarantor, or accommodation
co-obligor, dependent on its character as such.
6. The Guarantor waives any and all defenses, claims, setoffs
and discharges of the Borrower, or any other obligor, pertaining to the
Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, the Guarantor will not assert against
the Lenders any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute, fraud,
ultra vires acts, usury, illegality or unenforceability which may be available
to the Borrower in respect of the Indebtedness, or any setoff available against
the Lenders to the Borrower, whether or not on account of a related transaction,
and the Guarantor expressly agrees that it shall be and remain liable for any
deficiency remaining after foreclosure of any security interest securing any
Indebtedness, notwithstanding provisions of law that may prevent the Lenders
from enforcing such deficiency against the Borrower. The liability of the
Guarantor 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, the Borrower or any of the Borrower's assets. The
Guarantor will not
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<PAGE> 3
assert against the Lenders any claim, defense or setoff available to the
Guarantor against the Borrower.
7. The Guarantor also hereby waives: (i) presentment, demand
for payment, notice of dishonor or nonpayment, and protest of the Indebtedness;
(ii) notice of the acceptance hereof by the Lenders and of the creation and
existence of all Indebtedness; and (iii) notice of any amendment to or
modification of any of the terms and provisions of any Loan Documents. The
Lenders shall not be required to first resort for payment of the Indebtedness to
the Borrower or any other persons or corporations, their properties or estates,
or to any collateral, property, liens or other rights or remedies whatsoever.
8. Whenever, at any time or from time to time, the Guarantor
shall make any payment to the Lenders hereunder, the Guarantor shall notify the
Lenders in writing that such payment is made under this Guaranty for such
purpose. If any payment applied by the Lenders to the Indebtedness is thereafter
set aside, recovered, rescinded or required to be returned for any reason
(including, without limitation, the bankruptcy, insolvency or reorganization of
the Borrower or any other obligor), 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 never
been made.
9. No payment by the Guarantor pursuant to any provision
hereof shall entitle the Guarantor, by subrogation to the rights of the Lenders
or otherwise, to any payment by the Borrower or out of the property of the
Borrower until all of the Indebtedness (including interest) and all reasonable
costs, expenses and attorneys' fees paid or incurred by the Lenders in
endeavoring to collect the Indebtedness and enforcing this Guaranty have been
fully paid. The Guarantor will not exercise or enforce any right of
contribution, reimbursement, recourse or subrogation available to the Guarantor
as to any Indebtedness, or against any person liable therefor, or as to any
collateral security therefor, unless and until all such Indebtedness shall have
been fully paid and discharged.
10. This Guaranty shall constitute a continuing and
irrevocable Guaranty, and the Lenders may continue, without notice to or consent
by the Guarantor, to make loans and extend other credit or financial
accommodation to or for the account of the Borrower in reliance upon this
Guaranty until written notice of revocation of this Guaranty shall have been
received by the Lenders from the Guarantor. Any such notice of revocation shall
not affect this Guaranty in relation to any Indebtedness then existing or
created thereafter pursuant to any previous commitment of the Lenders to the
Borrower, or any extensions or renewals of any such Indebtedness, and as to all
such Indebtedness and extensions or renewals thereof, this Guaranty shall
continue effective until the same have been fully paid with interest.
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<PAGE> 4
11. This Guaranty shall be binding upon the successors and
assigns of the Guarantor, and shall inure to the benefit of the successors and
assigns of the Lenders.
12. The Guarantor irrevocably (i) agrees that any suit, action
or other legal proceeding arising out of or relating to this Guaranty may be
brought in a court of record in the State of Indiana or in the Courts of the
United States located in such State, (ii) consents to the jurisdiction of each
such court in any suit, action or proceeding, (iii) waives any objection which
it may have to the laying of venue of any such suit, action or proceeding in any
such courts and any claim that any such suit, action or proceeding has been
brought in an inconvenient forum, and (iv) agrees that a final judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
13. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED ON
OR PERTAINING TO THIS GUARANTY OR ANY OTHER RELATED LOAN DOCUMENT TO WHICH THE
GUARANTOR IS A PARTY.
14. The Guarantor hereby covenants with and for the benefit of
the Lender that the Guarantor will provide copies of its 10K and 10Q reports to
the Servicer within five business days of their filing with the SEC.
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<PAGE> 5
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the day and year first above written. CONCORDE GAMING CORPORATION
By /s/ Jerry L. Baum
----------------------------------
Its President
Signature Page to Concorde Gaming Corporation Guaranty
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<PAGE> 1
EXHIBIT 10.26
PRINCESA PARTNERS
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered
into as of this ____ day of October, 1998 by and between Goldcoast Entertainment
Cruises, Inc., a Florida corporation ("Goldcoast") and Conami, Inc., a Florida
corporation ("Conami").
RECITALS
A. Goldcoast and Conami propose to form a joint venture to engage in
the business of owning and leasing (or chartering for hire) the Princesa, a 200'
by 40' gaming vessel docked in Miami, Florida. Such business is described with
more specificity in Section 1.2 of this Agreement. Goldcoast and Conami further
propose that the joint venture take the form of a general partnership.
B. Goldcoast has agreed to contribute its management services to the
partnership. Conami has agreed to contribute certain tangible and intangible
property to the partnership. The partnership will use such contributions to
engage in the business described in Section 1.2 of this Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, and the mutual promises contained herein, the
parties hereto agree as follows:
ARTICLE I
FORMATION, PURPOSES, DURATION
Section 1.1. FORMATION AND NAME.
1.1.1. Formation. The parties hereto (jointly the "Venturers" and
individually a "Venturer") hereby enter into a definitive joint venture
agreement to memorialize the limited purposes and scope of the joint venture
(the "Joint Venture" or the "Venture") set forth in this Agreement. The Joint
Venture shall be governed by the Florida Revised Uniform Partnership Act (the
"Act"), as from time to time amended, except as expressly provided herein to the
contrary.
1.1.2. Name. The name of the Joint Venture shall be "Princesa Partners"
and the business of the Joint Venture shall be conducted solely under such name
or in the name of the "Princesa", or any other name unanimously selected by the
Management Committee.
1.1.3 Statement of Partnership. The parties hereto acknowledge that a
Partnership Registration Statement, pursuant to the provisions of Section
620.8105 of the Act, has been executed and recorded with the Secretary of State
of the State of Florida, and the parties agree to execute and acknowledge a
fictitious name affidavit and cause the same to be published and filed in
accordance with the Act.
<PAGE> 2
1.1.4 Title to Venture Assets. Title to all Venture property, whether
real or personal, shall be taken and held only in the name of the Venture or in
such other name, as may be required under applicable law.
Section 1.2. PURPOSES AND SCOPE OF THE JOINT VENTURE.
1.2.1 Purposes. The purposes of the Joint Venture are (a) to construct,
invest in, acquire, own, hold, lease, sublease, sell, dispose of, hire out, or
otherwise deal with the Princesa, a 200' by 40' gaming vessel built by Keith
Marine, Inc. (official number 1073261) and delivered to the Joint Venture on
October 6, 1998, and (b) for the purpose of engaging in all activities and
transactions that are necessary or advisable in furtherance of that purpose.
1.2.2 Scope of Venturers' Authority and Powers. The Venture shall have
such powers as are necessary or appropriate to carry out the purposes of the
Venture and for the protection and benefit of the Venture, including without
limitation, the following powers, directly or through subsidiaries:
(a) to form, own, manage and dissolve one or more subsidiaries;
(b) to borrow money for any business, object or purpose of the Venture
from time to time, without limit as to amount; to issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures, and any other kinds of
negotiable and nonnegotiable instruments and evidences of indebtedness, whether
or not in connection with borrowing money, and to secure the payment thereof
(and of the interest thereon) by the creation of any interest in the property or
rights of the Venture, or in any property owned by others when the Venture has
the right so to do, whether owned by or subject to such right of the Venture at
the time such indebtedness is incurred or thereafter;
(c) to purchase, borrow, acquire, hold, exchange, sell, distribute,
assign, transfer, lend, mortgage, pledge, hypothecate, convert, redeem, escrow
or reissue instruments evidencing its indebtedness;
(d) to make such investments as the Managing Committee deems advisable
and approves;
(e) to have and maintain one or more offices within or without the
State of Florida, and in connection therewith to rent, lease or purchase office
or manufacturing space, facilities and equipment, to engage and pay personnel
and do such other acts and things and incur such other expenses on its behalf as
may be necessary or advisable in connection with the maintenance of such offices
or manufacturing space or the conduct of the Venture;
(f) to open, maintain and close bank accounts, and to draw checks and
other orders for the payment of money;
(g) to employ and dismiss from employment any and all employees, agents
or independent contractors;
(h) to sue and to defend suits, to prosecute, settle
or compromise claims against others, to compromise, settle or accept judgments
or claims against the Venture and to execute all documents and make any
representations, admissions and waivers in connection therewith;
(i) to enter into, make and perform all such contracts, agreements and
other undertakings, including indemnity agreements, as may be necessary or
advisable or incident to carrying out the foregoing purposes; and
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(j) to take such other actions as the Managing Committee may deem
necessary or advisable in connection with the foregoing, including the retention
of agents, independent contractors, attorneys, accountants and other experts
selected by the Managing Committee on behalf of and at the expense of the
Venture, and in connection with the preparation and filing of all Venture tax
returns.
Without limiting the foregoing, the Venture may carry out its
objectives and accomplish its purposes as principal or agent, directly or
indirectly through one or more of its subsidiaries or Affiliates, alone or with
associates, or as a member or as a participant in any firm, association, trust,
partnership or other entity. Although the Venture may engage in any or all of
the above activities, the Venture need not engage in any one or more of them.
Except as otherwise expressly and specifically provided in this
Agreement, neither Venturer shall have any authority to bind or act for, or
assume any obligations or responsibility on behalf of, the other Venturer or the
Joint Venture. Neither the Joint Venture nor either Venturer shall be
responsible or liable for any indebtedness or obligation of the other Venturer
or otherwise relating to the Princesa incurred or arising either before or after
the execution of this Agreement, except as to those joint responsibilities,
liabilities, indebtedness, or obligations incurred after the date hereof
pursuant to and as limited by the terms of this Agreement. This Agreement shall
not be deemed to create a general partnership between the Venturers with respect
to any activities whatsoever other than activities within the scope and business
purposes of the Joint Venture specified in Subsection 1.2.1.
Section 1.3 PRINCIPAL PLACE OF BUSINESS.
The principal place of business of the Joint Venture shall be
located at 100 S. Biscayne Blvd., Suite 850, Miami, Florida 33131, or at such
other location as may be approved by the Management Committee from time to time.
Section 1.4. TERM.
The term of the Joint Venture shall commence as of the date
set forth above, and shall continue, unless sooner terminated in accordance with
other provisions of this Agreement, for so long as the Joint Venture holds any
interest in or has any obligations relating to the Princesa, or until the
Venturers agree to its termination; provided, however, that the Joint Venture
shall, if not sooner terminated, terminate on December 1, 2015, unless otherwise
extended by mutual written agreement of both Venturers; and provided further,
that neither Venturer shall have the right and each Venturer hereby agrees not
to withdraw from the Joint Venture nor to dissolve, terminate or liquidate, or
to petition a court for the dissolution, termination or liquidation of the Joint
Venture, except as provided in this Agreement, and neither Venturer at any time
shall have the right to petition or to take any action to subject the Princesa
or any part thereof or the Joint Venture assets or any part thereof to the
authority of any court of bankruptcy, insolvency, receivership or similar
proceeding.
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ARTICLE II
CAPITAL CONTRIBUTIONS,
FINANCING AND DISTRIBUTION
Section 2.1 JOINT VENTURE INTERESTS AND CAPITAL ACCOUNTS.
2.1.1. Percentage Interests. The Venturers shall have the following
undivided percentage interests in the Joint Venture (individually a "Percentage
Interest" and jointly "Percentage Interests").
<TABLE>
<S> <C>
Conami 80%
Goldcoast 20%
---
100%
</TABLE>
2.1.2 Adjustments. Unless otherwise agreed by both Venturers, no
adjustment to the Percentage Interest of either Venturer shall be made as a
result of a transfer of a Venturer's Percentage Interest or a portion thereof
pursuant to Articles VI or VII hereof.
2.1.3 Capital Accounts. A separate capital account ("Capital Account")
shall be maintained for each Venturer in accordance with federal income tax
accounting principles under Treasury Regulation section 1.704-1(b). The Capital
Account of each Venturer shall be:
(a) increased by (i) the amount of any cash and the fair market value
of any property contributed to the Venture by such Venturer (net of
liabilities secured by such contributed property that the Venture is
considered to assume or to which it is subject under section 752 of the
Internal Revenue Code of 1986, as amended and in effect from time to
time, and applicable regulations thereunder (the "Code")); and (ii),
its distributive share of Venture income and gain (or items thereof),
including income and gain exempt from tax and gain determined for book
purposes, but excluding income and gain described in Treasury
Regulations section 1.704-1(b)(4)(i); and
(b) decreased by (i) the amount of money and the fair market value of
property distributed to the Venturer by the Venture (net of liabilities
secured by such distributed property that the Venturer is considered to
assume or to which it is subject under Code section 752); (ii) such
Venturer's distributive share of Venture loss or deduction (or items
thereof), including loss and deduction determined for book purposes,
but excluding loss or deduction described in Treasury Regulation
section 1.704-1(b)(4)(i) and expenditures described in clause (iii);
and (iii), such Venturer's distributive share of expenditures which are
neither deductible nor properly capitalized.
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<PAGE> 5
Section 2.2 CAPITAL CONTRIBUTIONS BY CONAMI AND GOLDCOAST.
Conami's and Goldcoast's capital contribution accounts shall be zero.
Any future capital contributions of the Venturers shall be contributed in cash
and/or property. Other contributions from the Venturers are in the form of
guarantees on obligations assumed by the Joint Venture.
Section 2.3 ADDITIONAL FUNDING.
2.3.1 General. It is anticipated that the Joint Venture may require
funds. The Venturers agree that in no event shall any capital contributions be
required to be made by either Venturer to the Venture, but that such funds shall
be sought through outside financing, which may include leasing. In the event
that third party financing is not available at reasonable terms, the Venturers
shall have the opportunity to provide financing to the Joint Venture (the
"Financing Venturer).
2.3.2 Notice by Manager. In the event that the Management Committee
unanimously determines that it is necessary for the Venture to borrow additional
funds for the Venture's continued operations pursuant to this Section 2.3, the
Manager, when Approved by the Management Committee (as such phrase is defined
herein), shall give notice to each Venturer in the manner provided in Section
10.2. Such notice shall specify in reasonable detail the amount and purpose of
any such additional funds and a proposed method of obtaining such additional
funds.
2.3.3 Repayment of Financing Venturer Loan(s). In the event a Financing
Venturer makes a loan to the Joint Venture ("Venturer Loan"), the terms of the
Venturer Loan shall be negotiated by the Management Committee.
Section 2.4 NO INTEREST ON CAPITAL.
Interest earned on Joint Venture funds shall inure solely to the
benefit of the Joint Venture, and except as specifically provided in Section 2.3
with respect to the payment of interest on a Venturer Loan, no interest shall be
paid upon any contributions or advances to the capital of the Joint Venture nor
upon any undistributed or reinvested income or profits of the Joint Venture.
Section 2.5 DISTRIBUTIONS TO VENTURERS FROM JOINT VENTURE.
(a) Distributions and capital withdrawals of cash shall be made in
accordance with the terms and conditions of any and all loan documents entered
into by the Joint Venture first and then in accordance with the provisions in
Articles VI and VII; and
(b) Subject to subsection (a) above, the Venture shall distribute such
cash or other property of the Venture as may be approved by the Management
Committee from time to time, to the Venturers in shares equal to their
respective interests in the Venture.
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Section 2.6 PROCEEDS FROM SALE OR FINANCING AND PROFITS ON SALE.
Proceeds from any sale, mortgage, hypothecation (other than
the loan proceeds from the Dain Rauscher Incorporated debt placement dated
October 20, 1998), assignment, condemnation or other transfer or disposition of
the Princesa, or any part thereof or interest therein, shall be paid to the
Venturers in their respective Percentage Interests in the Joint Venture, as
stated in Section 2.1.1. after the payment of (i) $6,405,000 to Conami less any
distributions paid Conami or Concorde Cruises, Inc., (ii) the payment of any
Financing Venturer Loans, if any, and (iii) the repayment of any unpaid initial
advances to Goldcoast prior to commencement of operations. The remainder of such
proceeds, if any, shall be distributed to the Venturers based on their
respective Percentage Interests, as provided in Section 2.1.1.
Section 2.7 ALLOCATIONS OF PROFITS AND LOSSES TO VENTURERS.
Venture Losses and Venture Profits for any year shall be allocated in
accordance with their percentage interests in the Joint Venture.
Section 2.8 TAX ALLOCATIONS CODE SECTION 704(c)
In accordance with Code Section 704(c) and the regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Venture by a Venturer shall, solely for tax purposes, be
allocated among the Venturers so as to take account of any variation between the
adjusted basis of such property to the Venture for federal income tax purposes
and its fair market value at the time of contribution. In the event the value of
any of the real and personal property acquired by the Venture and any
improvements thereto (collectively, the "Venture Property") is adjusted on the
Venture's books to reflect the fair market value pursuant to Section 2.9 of this
Agreement, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such property for federal income tax purposes and its value on the
Venture's books in the same manner under Section 704(c) of the I.R.S. Code.
Section 2.9 WITHDRAWALS OF CAPITAL.
Except as otherwise provided herein, no portion of the capital of the
Joint Venture may be withdrawn at any time without the unanimous Approval of the
Management Committee. Upon termination of the Joint Venture, the Venturers'
capital shall be distributed pursuant to Section 7.5 hereof.
Section 2.10 REVALUATION OF VENTURE PROPERTY
Upon (1) the admission of any Venturer to the Venture, (2) the
liquidation of a Venturer's interest in the Venture, (3) the making of any full
or partial withdrawals by a Venturer which changes the Venture's relative
Venture interest (other than a de minimis amount) in the Venture as determined
by reference to the relative balances in the Venturers' Capital Accounts and (4)
immediately before liquidation of the Venture, all the Venture Property shall be
revalued at its fair market value, and the Venturers' Capital Accounts shall be
adjusted to reflect the manner in
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which the unrealized income, gain, loss or deduction inherent in such property
(that has not been previously reflected in adjustments to the Venturers' Capital
Accounts) would be allocated among the Venturers if the Venture Property were
sold at its fair market value on the valuation date.
Section 2.11 TAX MATTERS PARTNER
Conami shall be the "tax matters partner" of the Partnership as defined
in Section 6231 of the I.R.S. Code.
ARTICLE III
MANAGEMENT
Section 3.1 MANAGEMENT OF THE VENTURE.
3.1.1 Management Committee. The overall management and control of the
business and affairs of the Joint Venture shall be vested in a management
committee ("Management Committee"). Except where herein expressly provided to
the contrary, all decisions with respect to the management and control of the
Joint Venture that are "Approved by the Management Committee" shall be binding
on the Joint Venture and each of the Venturers. The Management Committee of the
Joint Venture shall be composed of two representatives from Conami and one
representative from Goldcoast. Each Venturer shall designate in writing from
time to time its respective representatives on the Management Committee and an
alternate for each. Each such representative shall be fully authorized to
provide any consent or approval which may be required hereunder of the
Management Committee. When the phrases "Approved by the Management Committee" or
"Approval of the Management Committee" are used in this Agreement, such phrases
shall mean approval in writing by the Venturers acting through their
representatives on the Management Committee who shall have been designated
pursuant to this Subsection 3.1.1.
3.1.2 The Manager. The Joint Venture shall have a manager (the
"Manager"), who shall be designated pursuant to Section 3.2 hereof. The Manager
shall be responsible for the implementation of the decisions of the Management
Committee and for conducting the ordinary and usual business and affairs of the
Joint Venture as more fully set forth in Section 3.2 hereof. The Management
Committee shall require that the Manager shall at all times conform to policies
and programs established by the Management Committee and that the scope of the
Manager's authority shall be limited to said policies and programs. The acts of
the Manager shall bind the Venturers and the Joint Venture when within the scope
of the Manager's authority. The Manager shall at all times be subject to the
direction of the Management Committee, and the Management Committee shall
require that the Manager shall keep the Management Committee informed as to all
matters of concern to the Joint Venture.
3.1.3 Major Decisions. No act shall be taken, sum expended, decision
made or obligation incurred by the Joint Venture, the Management Committee, the
Manager or either Venturer with respect to a matter within the scope of any of
the major decisions enumerated
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below (the "Major Decisions"), unless and until the same has been Approved by
the Management Committee or expressly delegated by the Management Committee in
writing. The Major Decisions itemized under (a) through (d) below shall require
the unanimous approval of the Management Committee. All other Major Decisions
shall require majority approval. The Major Decisions shall include:
(a) acquisition of any land or other real property or interest therein;
(b) financing or refinancing of the Joint Venture or any assets of the
Joint Venture, including, without limitation, the financing of the acquisition
of the Princesa, the construction of the Princesa, interim and long-term
financing or refinancing of the Princesa, and financing operations of the Joint
Venture;
(c) subject to the provisions of Section 6.4 below, sale or other
transfer of, or mortgaging or the placing or suffering of any other encumbrance
on or affecting the Princesa or any part or parts thereof;
(d) construction of any improvements or the making of any capital
improvements, alterations or changes in, to or of the Princesa or any part
thereof, except for such matters as may be expressly delegated to the Manager by
the Management Committee; and approval of all construction and architectural
contracts and all architectural plans, specifications and drawings prior to the
construction, addition to and/or alteration of the Princesa or any portion
thereof, and any modifications of such contracts, plans, specifications and
drawings, except for such matters as may be expressly delegated in writing to
the Manager by the Management Committee;
(e) selecting or varying depreciation and accounting methods and making
other decisions with respect to treatment of various transactions for state or
federal income tax purposes or other financial purposes not otherwise
specifically provided for herein, provided that such methods and decisions shall
be consistent with the other provisions of this Agreement;
(f) varying or changing any portion of the insurance program Approved
by the Management Committee;
(g) determining the amount of distributions to be made to the Venturers
as computed in Section 2.6, notwithstanding payments required by Sections 2.4
and 3.4 hereof;
(h) approving the Princesa Plan and all Budgets pursuant to Section 3.3
hereof;
(i) making any expenditure or incurring any obligation, other than
payments for governmental agencies, by or on behalf of the Joint Venture
involving a sum in excess of $5,000 or involving a sum of $5,000 or less than
$5,000 where the same relates to a component part of work, the combined cost of
which in any one fiscal year exceeds $5,000 , except for expenditures made and
obligations incurred pursuant to and specifically set forth in a Budget
theretofore Approved by the Management Committee;
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(j) making any expenditure or incurring any obligation which when added
to any other expenditure for the fiscal year of the Joint Venture exceeds the
Budget or any line item specified in the Budget;
(k) retention of counsel for the Joint Venture or institution of any
legal action, except for such action as the Management Committee may in writing
expressly authorize the Manager to institute; or
(l) any other decision or action which by any provision of this
Agreement is required to be Approved by the Management Committee or which
materially affects the Joint Venture or the assets or operations thereof.
Section 3.2 APPOINTMENT AND REPLACEMENT OF MANAGER; DUTIES AND FEES OF
MANAGER.
3.2.1 Appointment of Manager. Goldcoast is hereby appointed as the
Manager of the Joint Venture. The Manager shall not be compensated or receive
any management fee for performing its duties.
3.2.2 Termination of Manager. The Manager may be terminated by a
majority vote of the Management Committee. In the event of termination of
Manager, the parties agree to, in good faith, discuss future payments which will
include the following considerations in an effort to negotiate a buyout of the
Manager's Joint Venture Interest:
(a) value of Joint Venture assets and equity therein, if any;
(b) net present value of future operating cash flows for the remaining
term of this joint venture using a discount rate tied to the prime
rate, plus; and
(c) the management services that were to be provided by the Manager to
the Joint Venture and how it relates to the Manager acquiring its Joint
Venture Interest.
3.2.3 Duties of Manager. The Manager, at the expense of and on behalf
of the Joint Venture, shall implement or cause to be implemented all decisions
Approved by the Management Committee and delegated to the Manager in writing by
the Management Committee and shall conduct or cause to be conducted the ordinary
and usual business and affairs of the Joint Venture in accordance with and as
limited by this Agreement.
3.2.4 Prior Authorization. Any provision hereof to the contrary
notwithstanding, except for expenditures made and obligations incurred
previously Approved by the Management Committee or in direct pursuance to a
Budget Approved by the Management Committee, or otherwise not required to be
Approved by the Management Committee, the Manager shall not have any authority
to make any expenditure or incur any obligation on behalf of the Joint Venture.
The Manager shall not expend more than what the Manager in good faith believes
to be the fair and reasonable market value at the time and place of contracting
for any goods purchased or services engaged on behalf of the Joint Venture.
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3.2.5 Rights Not Assignable. The rights and obligations of the Manager
under this Agreement shall not be assignable voluntarily or by operation of law
by the Manager.
Section 3.3 BUSINESS PLAN AND BUDGETS.
(a) As soon as practically possible following the date of this
Agreement, the Manager shall prepare a Business Plan and submit it to the
Management Committee for approval. The Business Plan shall be the overall plan
for development, construction, completion, financing, leasing and operation of
the Princesa, including, but not limited to, the following:
(i) A site plan as well as a statement of the conditions and
restrictions applicable thereto.
(ii) A plan for responding to all conditions required by the
City of Miami or other governmental authorities to charter or lease the
Princesa, including, but not limited to, all permits and approvals.
(iii) All cost estimates for development and operating
expenses, including an operating budget and pro forma income
projections, which cost estimates shall include estimates of required
Princesa funding.
(vi) The final terms of the charter agreement with Bayfront
Ventures.
(v) A comprehensive insurance program for the Venture and the
Princesa.
(vi) The final terms of the architectural services contract
for the Princesa.
(vii) Feasibility studies and such other reports, studies,
investigations, and recommendations as are requested by the Management
Committee, or as are, in the judgment of the Manager, necessary or
advisable in order to provide the Venturers with adequate and timely
information with respect to leasing of the Princesa.
(b) Not less often than one time each fiscal year, the Manager shall
prepare and submit to the Management Committee for its consideration a budget
("Budget") setting forth the estimated receipts and expenditures (capital,
operating, and other) of the Joint Venture for the period covered by the Budget.
The Management Committee shall review and adjust the Budget on a quarterly
basis. When approved by the Management Committee, the Manager shall implement
the Budget and shall be authorized, subject to the provisions of Section 3.1.3,
without the need for further Approval by the Management Committee, to make the
expenditures and incur the obligations provided for in the Budget.
Section 3.4 COMPENSATION OF VENTURERS.
No payment will be made by the Joint Venture to either Venturer for the
services of such Venturer or any member, shareholder, director or employee of
such Venturer.
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Section 3.5 CONTRACTS WITH RELATED PARTIES.
The Manager shall not knowingly enter into any agreement or other
arrangement for the furnishing to or by the Venture of goods or services with
any individual, corporation, partnership, joint venture, association, firm,
joint stock company, trust, unincorporated association or other entity
(hereinafter in this Section referred to as a "Person") related to or affiliated
with the Manager or either Venturer unless such agreement or arrangement has
been Approved by the Management Committee after the nature of the relationship
or affiliation has been disclosed. By way of definition of the phrase "related
to or affiliated with," for the purposes of this Section 3.5, the following
Persons shall be deemed to be "related to or affiliated with" the Manager or a
Venturer:
(a) Any Owning Person, which shall mean a Person owning directly or
indirectly more than five percent (5%) of the issued and outstanding stock of,
or more than a five percent (5%) beneficial interest in the Manager or either
Venturer;
(b) Any Owned Person, which shall mean a Person more than five percent
(5%) of the issued and outstanding stock of which, or more than a five percent
(5%) beneficial interest in which, is owned directly or indirectly by the
Manager or either Venturer;
(c) Any Affiliated Person, which shall mean (i) a Person owning more
than five percent (5%) of the issued and outstanding stock of which, or more
than a five percent (5%) beneficial interest in which, is owned by an Owning
Person or an Owned Person, and (ii) a Person which owns more than five percent
(5%) of the issued and outstanding stock of, or more than a five percent (5%)
beneficial interest in, any Owning Person or any Owned Person; and
(d) Any agent, officer, director, employee, or partner (or any member
of the family of any agent, officer, director, employee or partner) of the
Manager, either Venturer, any Owning Person, any Owned Person or any Affiliated
Person.
Section 3.6 TIME DEVOTED TO JOINT VENTURE.
The Venturers shall each devote such time to the Joint Venture as is
reasonably necessary to carry out the provisions of this Agreement.
Section 3.7 OTHER BUSINESS ACTIVITIES; DISCLOSURE, WAIVER.
Each of the Venturers understands that the other Venturer or its
affiliates may be interested, directly or indirectly, in various other
businesses and undertakings not included in the Joint Venture. The Venturers
hereby agree that the creation of the Joint Venture and the assumption by each
of the Venturers of their duties hereunder shall be without prejudice to their
rights (or the rights of their affiliates) to have such other interests and
activities and to receive and enjoy profits or compensation therefrom, and each
Venturer waives any rights he or it might otherwise have to share or participate
in such other interests or activities of the other Venturer or their affiliates,
provided such other interests do not negatively and materially affect the
Venture. The Venturers may engage in or possess an interest in any other
business venture of any nature or
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description independently or with others and neither the Joint Venture nor the
other Venturer shall have any right by virtue of this Agreement in and to such
venture or the income or profits derived therefrom if it negatively and
materially affects the Venture. Each Venturer shall give notice to the other
Venturer of its interest, or the interest of any of its affiliates, in any other
business or undertaking which proposes to enter into any business transactions
with the Joint Venture.
Section 3.8 SCOPE OF AUTHORITY; INDEMNIFICATION.
Neither of the Venturers shall, without the consent of the other
Venturer, take any action on behalf of or in the name of the Joint Venture, or
enter into any commitment or obligation binding upon the Joint Venture, except
for (a) actions expressly provided for in this Agreement, (b) actions by the
Manager within the scope of its authority granted hereunder, and (c) actions
authorized by the Venturers in the manner set forth herein. Each Venturer shall
indemnify and hold harmless the other Venturer and its affiliates, directors and
officers from and against any and all claims, demands, losses, damages,
liabilities, lawsuits and other proceedings, judgments and awards, and costs and
expenses (including but not limited to reasonable attorneys' fees) arising
directly or indirectly, in whole or in part, out of any breach of the foregoing
provisions by such Venturer or its affiliates, officers, agents or employees.
ARTICLE IV
ACCOUNTING
Section 4.1 BOOKS AND RECORDS.
4.1.1 General. At all times during the term hereof, the Manager, at the
Joint Venture's expense, shall cause accurate books and records of account to be
maintained in which shall be entered all matters relating to the Joint Venture,
including all income, expenditures, assets, and liabilities thereof.
4.1.2 Accrual Basis. Such books and records of account shall be
maintained on the accrual basis and shall be adequate to provide either Venturer
with all financial information as may be needed by either Venturer or any
affiliate of either Venturer for purposes of satisfying the financial reporting
obligations of either Venturer or its respective affiliate or affiliates.
4.1.3 Information to Venturers. Each Venturer shall be entitled to any
additional information necessary for the Venturer to adjust its financial basis
statement to a tax basis as the Venturer's individual needs may dictate.
Section 4.2 LOCATION AND RIGHTS OF INSPECTION.
The Joint Venture's books and records of account shall be kept and
maintained at all times at the place or places Approved by the Management
Committee. Each Venturer and its authorized representatives shall have the right
to inspect, examine and copy the books, records, files, securities and other
documents of the Joint Venture at all reasonable times.
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Section 4.3 FISCAL YEAR.
The fiscal year of the Joint Venture shall end on September 30 of each
year.
Section 4.4 FINANCIAL STATEMENTS.
The Manager shall prepare a financial statement which will include a
balance sheet, income statement and statement of Net Cash Flow of the Joint
Venture as of the last day of each month of each fiscal year. Financial
statements shall be prepared in accordance with generally accepted accounting
principles. Such statements shall be certified by an officer of the Manager.
Copies shall be furnished to the Management Committee and to each of the
Venturers within fifteen (15) days after the end of each month. Annual financial
statements of the Joint Venture and income (unaudited) shall be furnished to the
Management Committee and to each of the Venturers within sixty (60) days after
the close of the fiscal year, to the extent feasible.
Section 4.5 AUDIT.
In conjunction with Conami's annual audit, the Joint Venture shall
allow, and provide assistance to, Conami's independent auditors to audit the
Joint Venture. The independent auditors shall at the end of each fiscal year (a)
audit the records and accounts of the Joint Venture, (b) render their opinion on
the financial statements of the Joint Venture as of the end of each fiscal, and
(c) render their opinion on the annual Net Cash Flow computations made by the
Manager for the Joint Venture and as to whether distributions thereof are in
accordance with Section 2.6 of this Agreement.
Section 4.6 BANK ACCOUNTS.
Funds of the Joint Venture shall be deposited in an account or accounts
of a type, in form and name and in a bank or banks Approved by the Management
Committee. Withdrawals from bank accounts shall be made by parties Approved by
the Management Committee.
Section 4.7 OTHER ACCOUNTING DECISIONS.
All accounting decisions for the Joint Venture (other than those
specifically provided for in other Sections of this Agreement) shall be approved
by the Management Committee.
ARTICLE V
INCOME TAX RETURNS,
TAX ACCOUNTING, TAX ELECTIONS
Section 5.1 PREPARATION OF TAX RETURNS.
Federal, state and local income tax returns of the Joint Venture shall
be prepared by qualified certified public accountants. Copies of all tax returns
of the Joint Venture shall be furnished for review and approval by each of the
Venturers and the Management Committee at least thirty (30) days prior to the
statutory date for filing, including extensions thereof, if any. If
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the Management Committee shall fail to approve any such return, an application
for extension of time to file shall be timely filed by the Manager.
Section 5.2 ALLOCATIONS TO VENTURERS.
5.2.1 Method of Allocation. The proportionate part of each item of
income, gain, loss, deduction or credit earned, realized or available by or to
the Joint Venture shall be allocated to the Venturers in accordance with the
Percentage Interests of each Venturer.
5.2.2 754 Election. The Joint Venture shall, if requested by either
Venturer, make the election under Section 754 of the Internal Revenue Code.
Section 5.3 TAX DECISIONS NOT SPECIFIED.
Tax decisions and elections for the Joint Venture not provided for
herein must be approved by the Management Committee.
Section 5.4 NOTICE OF TAX AUDIT.
Prompt notice shall be given to the Venturers upon receipt of advice
that the Internal Revenue Service intends to examine Joint Venture income tax
returns for any year.
ARTICLE VI
SALE, TRANSFER OR MORTGAGE
Section 6.1 GENERAL.
6.1.1 Required Consents. Except as expressly permitted herein, neither
Venturer shall sell, assign, transfer, mortgage, charge or otherwise encumber,
or suffer any third party to sell, assign, transfer, mortgage, charge or
otherwise encumber, or contract to do or permit any of the foregoing, whether
voluntarily or by operation of law (herein sometimes collectively called a
"transfer"), any part or all of its Joint Venture interest without the written
consent of the other Venturer and any attempt to do so shall be void. The giving
of such consent in any one or more instances shall not limit or waive the need
for such consent in any other or subsequent instances.
6.1.2 Indirect Transfers. In order to effectuate the purpose of this
Section 6.1, each Venturer agrees that to the extent its interest in the Joint
Venture is at any time held by any Person which is a partnership, corporation,
trust or other entity, such Venturer will seek to transfer its interest in the
Joint Venture only through a direct transfer of such interest therein in the
manner contemplated in this Article VI, and that no transfer or other
disposition of any stock or partnership or other beneficial interest in any such
entity which holds an interest in the Joint Venture will be effected, directly
or indirectly, unless Approved by the Management Committee.
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Section 6.2 PERMITTED TRANSFERS BY THE VENTURERS.
6.2.1 Transfers by Conami. Notwithstanding the provisions of Subsection
6.1, Conami may without the consent of the other Venturer from time to time, and
at any time transfer, its interest in the Joint Venture to its parent
corporation, Concorde Gaming Corporation, to subsidiary of Conami, or to a
subsidiary of such subsidiary, or from such subsidiary or sub-subsidiary back to
Conami or to such subsidiary.
6.2.2 Transfers by Goldcoast. Notwithstanding the provisions of
Subsection 6.1, Goldcoast may, without the consent of the other Venturer, from
time to time transfer its interest in the Joint Venture to a subsidiary of
Goldcoast or to a subsidiary of such subsidiary, or from such subsidiary or
sub-subsidiary back to Goldcoast or to such subsidiary.
Section 6.3 TERMINATION OF OBLIGATIONS.
As of the effective date of any transfer not prohibited hereunder by a
Venturer of its entire interest in the Venture, such Venturer's rights and
obligations hereunder shall terminate except as to items accrued as of such date
and except as to any indemnity obligations of such Venturer attributable to acts
or events occurring prior to such date. Thereupon, except as limited by the
preceding sentence, this Agreement shall terminate as to the transferring
Venturer but shall remain in effect as to the other Venturer. In the event of a
transfer of its or his entire Joint Venture interest by a Venturer to the other
Venturer, the Venturer to whom such interest is transferred shall indemnify,
defend and hold harmless the Venturer so transferring its or his Joint Venture
interest from and against any and all claims, demands, losses, liabilities,
expenses, actions, lawsuits, and other proceedings, judgments, awards, and costs
and expenses (including but not limited to reasonable attorneys' fees) incurred
in or rising directly or indirectly, in whole or in part, out of operation of
the business of the Joint Venture, excluding only those liabilities, if any,
accruing prior to the date of such transfer.
Section 6.4 AGREEMENTS WITH TRANSFEREES.
In the event that pursuant to the provisions of this Article VI, any
Venturer (the "Transferor") shall transfer its Joint Venture interest to any
person or entity other than the other Venturer ("Transferee"), no such transfer
shall be made or shall be effective to make such Transferee a Venturer or
entitle such Transferee to any benefits or rights hereunder until the proposed
Transferee agrees in writing to assume and be bound by all the obligations of
the Transferor and be subject to all the restrictions to which the Transferor is
subject under the terms of this Agreement and any further agreement with respect
to the Princesa contemplated by this Agreement to which the Transferor is then
subject or is then required to be a party. In the event a Venturer's Joint
Venture interest is transferred by operation of law and the Venturer's
Transferee fails to sign such a writing within ninety (90) days of the date it
is determined such transfer has been made, such failure shall entitle either
Venturer (i) to treat such failure as a default under this Agreement, or (ii) if
the Venturer elects not to treat such failure to sign as a default hereunder,
nonetheless to invoke the appraisal or the dissolution procedures as set forth
in Section 7.4 hereof and in such event, such transferee shall be treated in the
same manner as a "Defaulter" under Section 7.4.
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Section 6.5 RESTRAINING ORDER.
In the event that either Venturer shall at any time transfer or attempt
to transfer its Joint Venture interest in violation of the provisions of this
Agreement and any rights hereby granted, then the other Venturer shall, in
addition to all rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such transfer and the offending
Venturer shall not plead in defense thereto that there would be an adequate
remedy at law; it being hereby expressly acknowledged and agreed that damages at
law will be an inadequate remedy for a breach or threatened breach of the
violation of the provisions concerning transfer set forth in this Agreement.
Section 6.6 NO TERMINATION.
Notwithstanding any provision to the contrary in this Article VI,
neither Venturer shall transfer all or any part of its interest in the Joint
Venture to any party other than the other Venturer, whether or not such transfer
would otherwise be permitted hereunder, if such transfer would result in a
termination of the Joint Venture under the Code. At the request of the other
Venturer and as a condition of the consummation of any transfer of all or any
part of a Venturer's interest to any party other than the other Venturer, the
Venturer proposing to transfer all or any part of its interest shall at its cost
provide an unqualified opinion of counsel, which must be reasonably satisfactory
to the other Venturer, that such transfer would not result in such a termination
and the Venturer proposing to transfer all or any part of its interest to any
party other than the other Venturer shall indemnify and hold harmless the other
Venturer from and against any and all loss, cost, liability or expense
(including but not limited to reasonable attorneys' fees) which such other
Venturer may suffer if such transfer would, either by itself or together with
any other prior transfers of an interest in the Venture of which the
transferring Venturer has knowledge at the time of such transfer, cause such a
termination.
Section 6.7 TAKE-ALONG RIGHT/RIGHT OF FIRST NEGOTIATION
Conami shall agree not to sell its interest in the Joint Venture,
unless the proposed purchaser also agrees to purchase Goldcoast's interest in
the Joint Venture upon the same terms and conditions. Goldcoast shall have the
right to sell such interest to any purchaser who has agreed to acquire Conami's
interest in the Joint Venture, provided such a sale is upon the same terms and
conditions as received by Conami. Each Venturer shall grant the other a right of
first negotiation on its interest in the Joint Venture, exerciseable within five
(5) business of receiving written notice of the Venturer's offer to sell. For
purposes of this agreement, a right of first negotiations shall mean that the
Venturer desiring to sell shall first offer its interest to the other Venturer;
if after ten (10) business days satisfactory terms are not agreed upon, the
Venturer desiring to sell shall have the right for an agreed upon period of time
to sell to third parties on terms no less favorable to the seller than those
offered to the other Venturer.
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Section 6.8 TRANSFER RESTRICTIONS
6.8.1 Venturers' Transfers. Except as expressly provided for herein,
neither Venturer shall assign its rights or obligations under this Agreement
without the approval of the other Venturer, which approval may be withheld for
any reason or no reason at all.
6.8.2 Right of First Refusal
6.8.2.1 If at any time Venturer shall desire to accept a Qualified
Written Offer (hereinafter defined) to purchase all or any part of Venturer's
right, title and interest and to the Joint Venture (the "Venturer's Interest"),
then the Venturer ("Selling Venturer") shall first offer to sell all of such
Selling Venturer's Interest to the other Venturer pursuant to a written offer.
6.8.2.2 A Qualified Written Offer means a written offer that, at a
minimum, (i) provides for at least fifty percent (50%) of the purchase price to
be paid in cash at closing, (ii) provides for a closing no later than one
hundred twenty (120) days after the date of such offer, and (iii) is expressly
made subject to the rights of the other Venturer under this Agreement.
6.8.2.3 The Offer shall include (a) a copy of the Qualified Offer, (b)
the name and address of the person or entity desiring to purchase the Selling
Venturer's Interest (the "Proposed Transferee") (and if the Proposed Transferee
is an entity, the principals and parents of the Proposed Transferee) and (c) and
offer to sell the Selling Venturer's Interest to the other Venturer on the same
terms and conditions, including price, as those on which the Selling Venturer
proposes to sell its Interest to the Proposed Transferee. For purposes of this
Section, the date on which Selling Venturer delivers the Offer shall be deemed
the "Offer Date".
6.8.2.4 The Venturer shall have the option, exercisable by written
notice given to the Selling Venturer within forty five (45) days of the Offer
Date, to purchase all, but not less than all, of the Selling Venturer's Interest
upon the terms and conditions set forth in the Offer.
6.8.2.5 In the event that Venturer does not elect to purchase all of
the Selling Venturer's Interest, then all, but not less than all, of the Selling
Venturer's Interest may be sold by the Selling Venturer at any time within one
hundred twenty (120) days after the Offer date to the Proposed Transferee, upon
terms and conditions no more favorable to the Proposed Transferee than those
specified in the Offer. If the Selling Venturer's Interest is not sold to the
Proposed Transferee within such one hundred twenty (120) day period, the Selling
Venturer's Interest shall again be subject to the restrictions set forth in this
Agreement.
6.8.2.6 It shall be a condition precedent to the sale of the Selling
Venturer's Interest to the Proposed Transferee that the Proposed Transferee
execute and deliver to the Venturer an agreement acknowledging that the Selling
Venturer's Interest transferred to the Proposed Transferee is and shall be
subject to the terms and conditions of this Agreement and agreeing to be bound
by this agreement.
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ARTICLE VII
DEFAULT AND DISSOLUTION
Section 7.1 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an event
of default ("Event of Default") hereunder on the part of the Venturer with
respect to whom such event occurs ("Defaulter") if within forty-five (45) days
following notice of such default from the other Venturer (thirty (30) days if
the default is due solely to the nonpayment of monies), the Defaulter fails to
pay such monies, or in the case of non-monetary defaults, fails to commence
substantial efforts to cure such default or thereafter fails within a reasonable
time to prosecute to completion with diligence and continuity the curing of such
default:
(a) the violation by a Venturer of any of the restrictions set
forth in Article VI of this Agreement upon the right of a
Venturer to transfer its Joint Venture interest;
(b) institution by a Venturer of proceedings of any nature under
any laws of the United States or of any state, whether now
existing or subsequently enacted or amended, for the relief of
debtors wherein such Venturer is seeking relief as debtor;
(c) a general assignment by a Venturer for the benefit of
creditors;
(d) the institution by a Venturer of a case or other proceeding
under any section or chapter of the federal Bankruptcy Act as
now existing or hereafter amended or becoming effective;
(e) the institution against a Venturer of a case or other
proceeding under any section or chapter of the federal
Bankruptcy Act as now existing or hereafter amended or
becoming effective, which proceeding is not dismissed, stayed
or discharged within a period of sixty (60) days after the
filing thereof or if stayed, which stay is thereafter lifted
without a contemporaneous discharge or dismissal of such
proceeding;
(f) a proposed plan of arrangement or other action by a Venturer's
creditors taken as a result of a general meeting of the
creditors of such Venturer;
(g) the appointment of a receiver, custodian, trustee or like
officer, to take possession of assets having a value in excess
of $100,000 of a Venturer if the pendency of said receivership
would reasonably tend to have a materially adverse effect upon
the performance by said Venturer of its obligations under this
Agreement; which receivership remains undischarged for a
period of thirty (30) days from the date of its imposition;
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(h) admission by a Venturer in writing of his or its inability to
pay his or its debts as they mature;
(i) attachment, execution or other judicial seizure of all or any
substantial part of a Venturer's assets or of a Venturer's
Joint Venture interest, or any part thereof, such attachment,
execution or seizure being with respect to an amount not less
than $100,000 and remaining undismissed or undischarged for a
period of fifteen (15) days after the levy thereof, if the
occurrence of such attachment, execution or other judicial
seizure would reasonably tend to have a materially adverse
effect upon the performance by said Venturer of its
obligations under this Agreement; provided, however, that said
attachment, execution or seizure shall not constitute an Event
of Default hereunder if said Venturer posts a bond sufficient
to fully satisfy the amount of such claim or judgment within
fifteen (15) days after the levy thereof and the Venturer's
assets are thereby released from the lien of such attachment;
(j) default in performance of or failure to comply with any other
agreements, obligations or undertakings of a Venturer herein
contained; and
(k) any other matter specifically deemed an Event of Default
hereunder.
Section 7.2 CAUSES OF DISSOLUTION.
The Joint Venture shall be dissolved only in the event that:
(a) an Event of Default has occurred as provided in Section 7.1 and the
non-defaulting Venturer elects to dissolve the Joint Venture as provided in
Section 7.2 hereof;
(b) the Venturers mutually agree to terminate the Joint Venture;
(c) the Joint Venture ceases to maintain any interest in the Princesa;
(d) one or both of the Venturers elect to dissolve or terminate the
Joint Venture pursuant to any provision of this Agreement permitting such
election to be made; or
(e) the Joint Venture by its terms, as set forth in this Agreement, is
terminated.
Section 7.3 ELECTION OF NON-DEFAULTING VENTURER.
7.3.1 Purchase of Defaulter's Interest. Upon the occurrence of an Event
of Default by either Venturer ("Defaulter"), the other Venturer (a
"non-Defaulter") shall have the right to acquire the Joint Venture interest of
the Defaulter for cash, except as provided in Subsection 7.3.2 hereof, at a
price determined pursuant to the appraisal procedure set forth in Article VIII,
subject to adjustment as set forth in Subsection 6.6.2. In furtherance of such
right, the non-Defaulter may notify the Defaulter at any time following an Event
of Default of its election to institute the appraisal procedure set forth in
Article VIII. Within fifteen (15) days of
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receipt of notice of determination of the net fair market value of the
Defaulter's Joint Venture interest, the non-Defaulter may notify the Defaulter
of its election to purchase the interest of the Defaulter.
7.3.2 Election to Dissolve. If the non-Defaulter does not elect to
acquire the entire interest of the Defaulter as set forth in Subsection 7.3.1,
the non-Defaulter may elect (i) to dissolve and terminate the Joint Venture
pursuant to Section 7.2 of this Agreement by written notice to the Defaulter or
(ii) to pursue any other right or remedy available to it at law or in equity.
The right of the non-Defaulter to institute the procedures for purchase of the
Defaulter's Joint Venture interest as set forth in this Section 7.3 shall
continue until such non-Defaulter elects to exercise its right to terminate the
Joint Venture as provided in this Subsection 7.3.2.
Section 7.4 PROCEDURE IN DISSOLUTION AND LIQUIDATION.
7.4.1 Winding Up. Upon dissolution of the Joint Venture pursuant to
Section 7.2 hereof, the Joint Venture shall immediately commence to wind up its
affairs and the Venturers shall proceed with reasonable promptness to liquidate
the business of the Joint Venture.
7.4.2 Management Rights During Winding Up. During the period of the
winding up of the affairs of the Joint Venture, the rights and obligations of
the Venturers set forth herein with respect to the management of the Joint
Venture shall continue. For purposes of winding up, the Management Committee
shall continue to act as such and shall make all decisions relating to the
conduct of any business or operations during the winding up period and to the
sale or other disposition of Joint Venture assets; provided that if the
termination of the Venture results from an Event of Default, the defaulting
Venturer shall have no further right to participate in the management or affairs
of the Venture or to attend Management Committee meetings or vote on decisions
by the Management Committee, but shall nonetheless be bound by all decisions
made by the non-Defaulter. Each Venturer hereby waives any claims it may have
against the non-Defaulter that may arise out of the management by the
non-Defaulter of the Joint Venture, so long as such non-Defaulter acts in good
faith.
7.4.3 Work in Progress. If the Joint Venture is dissolved for any
reason while there is work in progress on the development or construction of the
Princesa, winding up of the affairs and termination of the business of the Joint
Venture may include completion of the work in progress to the extent of
development or construction on the Princesa as the Management Committee may
determine to be necessary to bring the matters under construction to a state of
completion convenient to permit a sale of the Joint Venture's interest in such
work, giving due regard to the interests of the Venturers.
7.4.4 Distributions in Liquidation. The assets of the Joint Venture
shall be applied or distributed in liquidation in the following order of
priority; provided, however, that if a Venturer shall have a negative balance in
its Capital Account, such Venturer shall immediately, and prior to any
distributions made pursuant to this Subsection 7.3.5, pay to the Joint Venture
in cash for distribution as provided in this Subsection 7.4.5 an amount equal to
the negative balance in said Venturer's Capital Account:
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(a) In payment of debts and obligations of the Joint Venture owed
to third parties, which shall include either Venturer as the
holder of any secured loan;
(b) In payment of debts and obligations of the Joint Venture to
either Venturer;
(c) In payment of Conami's Capital Contribution reduced by
distributions paid,
(d) To the Venturers in payment of any positive balances remaining
in their Capital Accounts .
7.4.5 Non-Cash Assets. Every reasonable effort shall be made to dispose
of the assets of the Joint Venture so that the distribution may be made to the
Venturers in cash. If at the time of the termination of the Joint Venture, the
Joint Venture owns any assets in the form of work in progress, notes, deeds of
trust or other non-cash assets, such assets, if any, shall be distributed in
kind to the Venturers, in lieu of cash, proportionately to their right to
receive the assets of the Joint Venture on an equitable basis reflecting the net
fair market value of the assets so distributed, which net fair market value
shall be determined by appraisal in accord with Section 8.3.
Section 7.5 DISPOSITION OF DOCUMENTS AND RECORDS.
All documents and records of the Joint Venture including, without
limitation, all financial records, vouchers, canceled checks and bank
statements, shall be delivered to Conami upon termination of the Joint Venture.
Unless otherwise Approved by the other Venturer, Conami shall retain such
documents and records for a period of not less than seven (7) years and shall
make such documents and records available during normal business hours to the
other Venturer for inspection and copying at the other Venturer's cost and
expense. In the event either Venturer ("Withdrawing Venturer") for any reason
ceases as provided herein to be a Venturer at any time prior to termination of
the Joint Venture, and the Joint Venture is continued without the Withdrawing
Venturer, the other Venturer ("Surviving Venturer") agrees that said documents
and records of the Joint Venture up to the date of the termination of the
Withdrawing Venturer's interest shall be maintained by the Surviving Venturer,
its successors and assigns, for a period of not less than seven (7) years
thereafter; provided, however that if there is an audit or threat of audit, such
documents and records shall be retained until the audit is completed and any tax
liability finally determined. Said documents and records shall be available for
inspection, examination and copying by the Withdrawing Venturer upon reasonable
notice in the same manner as provided in Section 4.2 during said seven-year
period.
ARTICLE VIII
APPRAISAL
Section 8.1 GENERAL.
Whenever this Agreement provides for the valuation of an interest in
the Joint Venture to be purchased or sold, the value of such interest in the
Joint Venture shall be determined as
21
<PAGE> 22
follows. The parties shall first attempt to agree upon the "net fair market
value" of the Joint Venture and of the interests in the Joint Venture to be
purchased or sold. The "net fair market value" of the Joint Venture shall mean
the cash price which a sophisticated purchaser would pay on the effective date
of the appraisal for all tangible assets of the Joint Venture in excess of the
financing then encumbering the Joint Venture assets, such valuation to be made
on the assumption that such assets are subject to any agreements, including,
without limitation, leases, management and service agreements then in effect,
except this Agreement. A sophisticated purchaser shall be one who would take
into account the nature, extent, maturity date, and other terms of the
liabilities of the Joint Venture, whether fixed or contingent, including the
favorable or unfavorable nature of any financing then encumbering the Princesa
or other Joint Venture assets, and the prospects that the income from the Joint
Venture assets would be sufficient to satisfy such liabilities when due,
excluding any liability under any financing already taken into account. The "net
fair market value" of a Joint Venture interest shall mean the value of the
interest to be sold or purchased, based on the net fair market value of the
Joint Venture, and subject to the terms and provisions of this Agreement.
Section 8.2 APPRAISAL PROCEDURE.
In the event the Venturers are unable to mutually agree upon the net
fair market value of the Joint Venture and of the Joint Venture interests to be
sold or purchased within thirty (30) days of the date the appraisal procedure of
this Article XIII is instituted as provided in this Agreement, the Venturers
shall then attempt to agree upon the appointment of three disinterested
appraisers who shall be marine appraisers/surveyors. If the Venturers are unable
to agree upon the selection of three appraisers within seventy-five (75) days of
the date the appraisal procedure is instituted as provided in this Agreement,
then a petition may be made by either Venturer to the presiding judge of the
Superior Court for the City of Miami, Florida, County of Dade, for such
selection. Each Venturer shall have the right to submit the names of three (3)
appraisers so qualified and the judge shall select the three (3) appraisers from
the names so submitted. Each appraiser so selected shall furnish the Venturers
and the certified public accountants for the Venture with a written appraisal
within ninety (90) days of his selection, setting forth his determination of the
net fair market value of all real estate and other tangible assets owned by the
Venture as of the date of the application to the Superior Court. Such appraisal
shall assume that the Princesa shall be the highest and best use of the
Property, and the appraisal shall not include any value for any intangible
assets of the Venture, such as good will. The average of the two closest
valuations of such appraisers shall be treated as the net fair market value of
the Venture and the determination shall be final and binding on the Venturers.
The cost of the appraisal shall be an expense of the Venture, except that if the
appraisal is instituted pursuant to Section 6.5 or 7.2, the cost shall be at the
expense of the dead or disabled Venturer or Defaulter, as applicable.
Section 8.3 APPRAISAL OF NON-CASH ASSETS.
The procedures set forth in Sections 8.1 and 8.2 for determining the
net fair market value of the Venture shall be followed in determining the net
fair market value of non-cash assets of the Venture as described in Subsection
7.4.5; provided, however, that all references to the net fair
22
<PAGE> 23
market value of the Venture shall be deemed to be references to the net fair
market value of such non-cash assets.
ARTICLE IX
ARBITRATION
Section 9.1 INITIATION.
In such cases where this Agreement provides for the determination of
any matter by arbitration, the same shall be settled and finally determined by
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association, or its successor in Dade County, Florida. Any
arbitration pursuant to this Agreement shall be conducted by three arbitrators.
The judgment upon the award rendered in any such arbitration shall be final and
binding upon the parties and may be entered in any court having jurisdiction
thereof.
Section 9.2 COSTS.
All fees and expenses of the arbitrators and all other expenses of the
arbitration, except for attorneys' fees, shall be shared equally by the
Venturers. Each Venturer shall bear its own attorneys' fees.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 COMPLETE AGREEMENT; AMENDMENT.
This Agreement constitutes the entire agreement between the parties and
supersedes all agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof, and neither party hereto shall be bound by nor charged with any oral or
written agreements, representations, warranties, statements, promises or
understandings not specifically set forth in this Agreement or the exhibits
hereto. This Agreement may not be amended, altered or modified except by a
writing signed by both the Venturers.
Section 10.2 NOTICES.
10.2.1 Addresses. All notices under this Agreement shall be in writing
and shall be delivered by personal service, or by certified or registered mail,
postage prepaid, return receipt requested, to the Venturers at the addresses
herein set forth and to the Joint Venture at its principal place of business.
The addresses for notices are as follows:
Conami, Inc. Goldcoast Entertainment Cruises, Inc.
c/o Jerry L. Baum C/o David Grossman
23
<PAGE> 24
3290 Lien Street 156 Dockside Circle
Rapid City, South Dakota 57702 Weston, Florida 33327
10.2.2 Effective Date. All notices, demands and requests shall be
effective upon being deposited in the United States mail. However, the time
period in which a response to any such notice, demand or request must be given
shall commence to run from the date of receipt on the return receipt of the
notice, demand or request by the addressee thereof. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no
notice was given as provided in Subsection 10.2.3 shall be deemed to be receipt
of the notice, demand or request sent.
10.2.3 Changes. By giving to the other parties at least thirty (30)
days' written notice thereof, the parties hereto and their respective permitted
successors and assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses for
notices and each shall have the right to specify as its or his address for
notices any other address within the United States of America.
Section 10.3 ATTORNEYS' FEES.
Should any litigation be commenced between the parties hereto or their
representatives or should any party institute any proceeding in a bankruptcy or
similar court which has jurisdiction over any other party hereto or any or all
of his or its property or assets concerning any provision of this Agreement or
the rights and duties of any person or entity in relation thereto, the party or
parties prevailing in such litigation shall be entitled, in addition to such
other relief as may be granted, to a reasonable sum as and for his or its or
their attorneys' fees and court costs in such litigation which shall be
determined by the court in such litigation or in a separate action brought for
that purpose.
Section 10.4 VALIDITY.
In the event that any provision of this Agreement shall be held to be
invalid or unenforceable, the same shall not affect in any respect whatsoever
the validity or enforceability of the remainder of this Agreement.
Section 10.5 SURVIVAL OF RIGHTS.
Except as provided herein to the contrary, this Agreement shall be
binding upon and inure to the benefit of the parties signatory hereto, their
respective heirs, executors, legal representatives and permitted successors and
assigns.
Section 10.6 GOVERNING LAW.
This Agreement has been negotiated, executed and delivered in the State
of Florida and all questions with respect to this Agreement and the rights and
liabilities of the parties hereto shall be governed by the laws of that state.
24
<PAGE> 25
Section 10.7 WAIVER.
No consent or waiver, express or implied, by a Venturer to or of any
breach or default by the other Venturer in the performance by such other
Venturer of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other Venturer of the same or any other obligations of such other Venturer
hereunder. Failure on the part of a Venturer to complain of any act or failure
to act of the other Venturer or to declare the other Venturer in default,
irrespective of how long such failure continues, shall not constitute a waiver
by such Venturer of its rights hereunder. The giving of consent by a Venturer in
any one instance shall not limit or waive the necessity to obtain such
Venturer's consent in any future instance.
Section 10.8 REMEDIES IN EQUITY.
The rights and remedies of either of the Venturers hereunder shall not
be mutually exclusive, i.e., the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof. Each of
the Venturers confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agree that, in the event of a
breach or threatened breach of any provision hereof, the respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to, nor
shall it, limit or affect any rights at law or by statute or otherwise of any
party aggrieved as against the other for a breach or threatened breach of any
provision hereof, it being the intention by this Section to make clear the
agreement of the Venturers that the respective rights and obligations of the
Venturers hereunder shall be enforceable in equity as well as at law or
otherwise.
Section 10.9 TERMINOLOGY.
All personal pronouns used in this Agreement, whether used in the
masculine, feminine, or neuter gender, shall include all other genders; and the
singular shall include the plural and vice versa. Titles of Articles, Sections
and Subsections are for convenience only, and neither limit nor amplify the
provisions of this Agreement itself. The use herein of the word "including,"
when following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation," or "but not limited to," or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that could reasonably fall within
the broadest possible scope of such general statement, term or matter.
Section 10.10 COUNTERPARTS.
This Joint Venture Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
25
<PAGE> 26
Section 10.11 SURVIVAL OF INDEMNITY OBLIGATIONS.
Any and all indemnity obligations of either party hereto shall survive
any termination of the Joint Venture.
Section 10.12 FEES AND COMMISSIONS.
Each Venturer hereby represents and warrants that as of the date of
this Agreement there are no known claims for brokerage or other commissions or
finder's or other similar fees in connection with the transactions covered by
this Agreement insofar as such claims shall be based on actions, arrangements or
agreements taken or made by or on its behalf, and each Venturer hereby agrees to
indemnify and hold harmless the other Venturer from and against any liabilities,
costs, damages, and expenses from any party making any such claims through such
Venturer.
Section 10.13 FURTHER ASSURANCES.
Each party hereto agrees to do all acts and things and to make, execute
and deliver such written instruments, as shall from time to time be reasonably
required to carry out the terms and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above set forth.
CONAMI, INC., a Florida corporation
By /s/ Jerry L. Baum
-------------------------------
Its President
GOLDCOAST ENTERTAINMENT CRUISES, INC.,
a Florida corporation
By /s/ Michael A. Hlavsa
-------------------------------
Its President
26
<PAGE> 1
EXHIBIT 10.27
PROMISSORY NOTE
U.S. $5,000,000.00 Rapid City, South Dakota
November 13, 1998
FOR VALUE RECEIVED, CONCORDE GAMING CORPORATION ("MAKER"), a Colorado
corporation with its principal place of business at 3290 Lien Street, Rapid
City, South Dakota, promises to pay to the order of BHL CAPITAL CORPORATION
("HOLDER"), a South Dakota corporation with its principal place of business at
3290 Lien Street, Rapid City, South Dakota 57702, due upon demand, in
immediately available funds the sum of Five Million and No/100 Dollars
($5,000,000.00) or, if less, the aggregate unpaid principal amount of all
Advances (as hereinafter defined) made by HOLDER to the MAKER, together with any
unpaid accrued interest on the outstanding amount. Interest shall be paid
monthly on the outstanding amount at the rate of eighteen percent (18%) due on
the last day of each month. If monthly interest payments are not paid, any
unpaid accrued interest shall be rolled into the principal balance, effective
the last day of each month.
As of the date of this Promissory Note, Four Million Ten Thousand and
No/100 Dollars ($4,010,000.00) has been advanced. This Promissory Note shall
supercede and replace the following promissory notes between MAKER and HOLDER:
1) $500,000 note, dated October 6, 1998; 2) $500,000 note, dated November 11,
1997; 3) $550,000 note, dated February 2, 1998; 4) $50,000 note dated February
17, 1998, 5) $290,000 note dated December 23, 1997 and 6), $3,000,000 note,
dated May 6, 1998, such promissory notes having been duly cancelled by the
parties.
This Promissory Note, among other things, provides for the making of
Advances (the "Advances") by the HOLDER to the MAKER from time to time in an
aggregate amount not to exceed $5,000,000, the indebtedness of MAKER resulting
from each such Advance being evidenced by this Promissory Note. Advances shall
include any advance of principal and/or any unpaid accrued interest that is
rolled into the principal balance.
The MAKER may prepay this Promissory Note in whole or in part at any
time without penalty. The validity, construction and enforceability of, and the
rights and obligations of the MAKER and HOLDER under this Promissory Note shall
be governed by, construed and enforced in accordance with the laws of the State
of South Dakota.
In the event of default hereunder the undersigned agrees that HOLDER
shall have all rights reserved herein, including all expenses of collection. In
the event that this Promissory Note is placed in the hands of attorneys for
collection after default, the MAKER agrees to pay in addition to the principal
and interest, all attorney's fees and collection costs (including attorney's
fees and collection costs incurred in realizing upon any collateral securing
this Note) incurred in collecting any amounts due under this Promissory Note.
<PAGE> 2
The MAKER waives demand, presentment, notice of non-payment, protest,
notice of protest and notice of dishonor.
The makers, endorsers, sureties and guarantors hereof hereby severally
waive presentment for payments, notice of non-payment, protest and notice of
protest. The payment schedule may be extended at the option of HOLDER of this
note.
The MAKER hereby agrees to pay all costs for any collections
necessary.
CONCORDE GAMING CORPORATION
(MAKER)
By: Jerry L. Baum
Its: Chief Executive Officer
Signature: /s/ Jerry L. Baum
------------------------------
BHL CAPITAL CORPORATION
(HOLDER)
By: Bruce H. Lien
Its: President
Signature: /s/ Bruce H. Lien
------------------------------
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CONCORDE GAMING CORPORATI8ON
Concorde Cripple Creek, Inc.
Concorde Cruises, Inc.
Conami, Inc.
Bayfront Ventures, a Florida general partnership, 80% ownership interest
Princesa Partners, a Florida general partnership, 80% ownership interest
Concorde Gaming of Missouri, Inc.
The following subsidiaries were dissolved during fiscal 1998:
Midwest Gaming, Inc.
<PAGE> 1
EXHIBIT 23.1
[MCGLADREY & PULLEN, L.L.P. LETTERHEAD]
CONSENT OF MCGLADREY & PULLEN, LLP
We hereby consent to the incorporation in the Registration Statement on Form S-8
of our report, dated November 13, 1998, relating to the consolidated financial
statements of Concorde Gaming Corporation and Subsidiaries, included in the
Annual Report on Form 10-KSB for the year ended September 30, 1998.
/s/ MCGLADREY & PULLEN, LLP
Rapid City, South Dakota
January 8, 1999
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Concorde Gaming Corporation:
We consent to incorporation by reference in the registration statement (No.
33-52388) on Form S-8 of Concorde Gaming Corporation of our report dated
November 21, 1997, relating to the consolidated balance sheet of Concorde
Gaming Corporation and subsidiaries as of September 30, 1997, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended September 30, 1997, which report appears in
the September 30, 1998, annual report on Form 10-KSB of Concorde Gaming
Corporation.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 714,764
<SECURITIES> 0
<RECEIVABLES> 19,575
<ALLOWANCES> 0
<INVENTORY> 39,304
<CURRENT-ASSETS> 1,041,356
<PP&E> 12,947,276
<DEPRECIATION> 279,670
<TOTAL-ASSETS> 15,238,111
<CURRENT-LIABILITIES> 2,464,920
<BONDS> 0
0
0
<COMMON> 236,731
<OTHER-SE> 2,681,842
<TOTAL-LIABILITY-AND-EQUITY> 15,238,111
<SALES> 301,271
<TOTAL-REVENUES> 4,226,687
<CGS> 195,933
<TOTAL-COSTS> 6,418,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324,039
<INCOME-PRETAX> (2,479,960)
<INCOME-TAX> (285,000)
<INCOME-CONTINUING> (2,194,950)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (259,181)
<NET-INCOME> (2,454,141)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
