SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ______________ to ________________
Commission File Number 1-7831
ELSINORE CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88 0117544
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
202 FREMONT STREET, LAS VEGAS, NEVADA 89101
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (Including Area Code): 702/385-4011
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past ninety (90) days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
TITLE OF STOCK NUMBER OF SHARES
CLASS DATE OUTSTANDING
Common November 14, 1997 4,929,313
<PAGE>
Elsinore Corporation and Subsidiaries
Form 10-Q
For the Quarter Ended September 30, 1997
INDEX
PART I. FINANCIAL INFORMATION: PAGE
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at 3-4
September 30, 1997 (Reorganized Company)
(Unaudited) and December 31, 1996
(Predecessor Company)
Condensed Consolidated Statements of Operations 5
for the Three Months Ended September 30, 1997
(Reorganized Company) and Three Months Ended
September 30, 1996 (Predecessor Company)
Condensed Consolidated Statements of Operations 6-7
for the Seven Months Ended September 30, 1997
(Reorganized Company); Two Months Ended February 28,
1997 (Predecessor Company) and Nine Months Ended
September 30, 1996 (Predecessor Company);
Combined Reorganized and Predecessor Company
for the Nine Months Ended September 30, 1997
(Unaudited)
Condensed Consolidated Statements of Cash Flows for 8-10
the Seven Months Ended September 30, 1997
(Reorganized Company); Two Months Ended February 28,
1997 (Predecessor Company) and Nine Months Ended
September 30, 1996 (Predecessor Company); Combined
Reorganized and Predecessor Company for the Nine
Months Ended September 30, 1997 (Unaudited)
Notes to Condensed Consolidated Financial Statements 11-15
Item 2. Management's Discussion and Analysis of 15-24
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25-30
SIGNATURES 31
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
September 30, December 31,
1997 1996
------------------- --------------------
(Unaudited)
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents 6,130 7,208
Accounts receivable, less allowance for
doubtful accounts of $237 and $347,
respectively 416 815
Inventories 279 354
Prepaid expenses 2,118 1,177
------------------- --------------------
Total current assets 8,943 9,554
------------------- --------------------
Cash and cash equivalents, restricted 914 4,445
Property and equipment, net 37,617 25,485
Investment in Fremont Street Experience LLC 2,400
Reorganization value in excess of amounts allocable to 372 -
identifiable assets
Other assets 762 743
------------------- --------------------
Total assets 48,608 42,627
=================== ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
September 30, 1997 and December 31, 1996
(Dollars in Thousands)
Reorganized Predecessor
Company Company
September 30,1997 December 31,
1996
------------------ --------------------
(Unaudited)
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
<S> <C> <C>
Accounts payable 695 1065
Accrued interest 401 2,137
Accrued expenses 4,628 6,176
Current portion of long-term debt 1,070 50
------------------ --------------------
Total current liabilities 6,794 9,428
------------------ --------------------
Estimated liabilities subject to Chapter 11
proceedings - 73,909
Long-term debt, less current portion 37,446 -
------------------ --------------------
Total liabilities 44,240 83,337
------------------ --------------------
Commitments and contingencies
Shareholders' equity (deficit):
Predecessor company,
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 15,891,793 shares - 16
Reorganized company,
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 4,929,313 shares 5 -
Additional paid-in capital 4,995 69,602
Accumulated deficit (632) (110,328)
------------------ --------------------
Total shareholders' equity (deficit) 4,368 (40,710)
------------------ --------------------
Total liabilities and shareholders'
equity (deficit) 48,608 42,627
================= ====================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reorganized Predecessor
------------------------ --------------------------
Three Months Three Months
Ended Ended
September 30 September 30
1997 1996
------------------------ --------------------------
Revenues, net:
<S> <C> <C>
Casino 8,741 10,536
Hotel 2,110 2,591
Food and beverage 2,280 2,977
Other 892 172
Promotional allowances (1,136) (1,463)
------------------------ --------------------------
Total revenues, net 12,887 14,813
Costs and expenses:
Casino 3,395 4,437
Hotel 2,172 2,255
Food and beverage 1,437 1,813
Taxes and licenses 1,325 1,612
Selling, general and
administrative 2,509 2,559
Rents 1,034 1,010
Depreciation and
amortization 551 943
Interest 1,269 811
------------------------ --------------------------
Total costs and
expenses 13,692 15,440
------------------------ --------------------------
Loss before
reorganization items (805) (627)
--
Reorganization items 0 977
------------------------ --------------------------
Loss before
income taxes (805) (1,604)
Income taxes 15 0
------------------------ --------------------------
Net loss (820) (1,604)
======================== ==========================
Loss Per Share:
Loss per common
share ($0.17) $0.10
======================== ==========================
Weighted average number of common shares
outstanding 4,929,313 15,891,793
======================== ==========================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Combined
Reorganized
and
Reorganized Predecessor
Company Predecessor Company Company
------------------- ------------------- ------------------- --------------------
Period from Period from Period from Nine
March 1 January 1 to January 1 Months
to February 28 to Ended
September 30,1997 1997 September 30,1996 September 30,1997
------------------- ------------------- ------------------- --------------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 21,341 6,922 32,401 28,263
Hotel 5,380 1,736 8,319 7,116
Food and beverage 5,445 1,745 9,566 7,190
Other 1,408 153 473 1,561
Promotional allowances (2,351) (760) (4,944) (3,111)
------------------- ------------------- ------------------- --------------------
Total revenues, net 31,223 9,796 45,815 41,019
Costs and expenses:
Casino 8,135 2,710 13,563 10,845
Hotel 5,021 1,410 6,141 6,431
Food and beverage 3,488 1,105 5,273 4,593
Taxes and licenses 3,213 980 5,104 4,193
Selling, general and
administrative 5,341 1,807 7,332 7,148
Rents 2,394 673 3,044 3,067
Depreciation and
amortization 1,271 529 2,837 1,800
Interest 2,947 772 1,326 3,719
------------------- ------------------- ------------------- --------------------
Total costs and
expenses 31,810 9,986 44,620 41,796
------------------- ------------------- ------------------- --------------------
Income (loss) before
reorganization items,
extraordinary gain
on elimination of
debt and income taxes (587) (190) 1,195 (777)
====================
Reorganization items - - 2,115
Extraordinary gain on
elimination of debt - 35,977 -
Income taxes 45 - -
------------------- ------------------- -------------------
Net income (loss) (632) 35,787 (920)
Retained earnings (deficit) at
beginning of period
(110,328) (108,772)
Fresh start adjustments 74,541 -
------------------- ------------------- -------------------
Retained earnings
(deficit) at end of period
(632) - (109,692)
==================== =================== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations (continued)
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reorganized
Company Predecessor Company
------------------ ------------------ ------------------
Period from Period from Period from
March 1 January 1 to January 1 to
to February 28 September 30,1996
September 30,1997 1997
------------------ ------------------ ------------------
Income (Loss) Per Share:
Income (loss) before
extraordinary gain on
<S> <C> <C> <C>
elimination of debt ($.13) $(0.06) $0.04
Extraordinary gain on
elimination of debt $2.26 -
------------------ ------------------ ------------------
Net income (loss) ($.13) $2.20 $0.04
------------------ ------------------ ------------------
Weighted average number of common
shares outstanding
4,929,313 15,891,793 15,891,793
================== ================== ==================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized and
Predecessor
Reorganized Company
Company Predecessor Company
-------------------------------------------------------------------------
Period from Period from Period from Nine
March 1 January 1 to January 1 to Months
to February 28 September 30,1996 Ended
September 30, 1997 1997 September 30,1997
-------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income (loss) (632) $35,787 ($920) 35,155
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Extraordinary gain on elimination of debt
- (35,977) - (35,977)
Depreciation and
amortization 1,271 529 2,837 1,800
Loss on sale of equipment 3 - - 3
Accretion of discount on
long-term debt - - 98 -
Write-off of casino development costs
- - 1,348 -
Change in other assets and
liabilities, net (5,158) 1,328 27 (3,830)
-------------------------------------------------------------------------
Net cash provided by (used
in) operating activities (4,516) 1,667 3,390 (2,849)
-------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (2,650) (141) (592) (2,791)
-------------------------------------------------------------------------
Proceeds from sale
of equipment 95 - - 95
-------------------------------------------------------------------------
Net cash used in investing
activities (2,555) (141) (592) (2,696)
-------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of debt (456) (12) (41) (468)
Incurrence of debt 691 - - 691
Proceeds from issuance of
common stock and
subscription rights - 713 - 713
-------------------------------------------------------------------------
Net cash provided by (used
in) financing activities 235 701 (41) 936
-------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Statements of Cash Flows (continued)
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized and
Predecessor
Reorganized Company
Company Predecessor Company
---------------------------------------------------------------------------
Period from Period from Period from Nine
March 1 January 1 to January 1 to Months
to February 28 September 30,1996 Ended
September 30 1997 September 30,1997
1997
---------------------------------------------------------------------------
Net increase (decrease) in
<S> <C> <C> <C> <C>
cash and cash equivalents (6,836) 2,227 2,757 (4,609)
---------------------------------------------------------------------------
Cash and cash equivalents at
beginning of period,
including restricted cash 13,880 11,653 3,572 11,653
---------------------------------------------------------------------------
Cash and cash equivalents at
end of period, including
restricted cash $7,044 $13,880 $6,329 $7,044
===========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Elsinore Corporation and Subsidiaries
Condensed Statements of Cash Flows (continued)
(Dollars in Thousands)
(Unaudited)
Combined
Reorganized and
Reorganized Predecessor
Company Predecessor Company Company
------------------ ------------------- ------------------ ------------------
Period from
Period from Period from January 1 to Nine Months
March 1 to January 1 to September 30, ended September
September 30, February 28, 1997 30, 1997
1997 1997
------------------ ------------------- ------------------ ------------------
Supplemental disclosure of non-cash investing and financing activities: Fresh
start adjustments which result in increase (decrease) to the following:
<S> <C> <C> <C> <C>
Property and equipment,net - 13,130 - 13,130
Leasehold acquisitions
costs, net - (1,907) - (1,907)
Reorganization value in
excess of amounts allocable to
identifiable assets
- 387 - 387
Investment in Fremont Street
- (2,400) - (2,400)
Accounts payable - 344 - 344
Accrued interest - (525) - (525)
Estimated liabilities subject to Chapter
11 proceedings
- (72,552) - (72,552)
Long-term debt, less current maturities
- 36,756 - 36,756
Common stock, Predecessor Company
- (16) - (16)
Common Stock, Reorganized Company
- 5 - 5
Additional paid in capital - (65,320) - (65,320)
Accumulated deficit - 110,518 - 110,518
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
1. Chapter 11 Reorganization
On October 31, 1995, Elsinore Corporation filed a voluntary petition to
reorganize under Chapter 11 of the Federal Bankruptcy Code and
continued to operate as a debtor in possession (Elsinore Corporation,
D.I.P.) ("Predecessor Company"). On August 12, 1996, the Plan of
Reorganization filed by the Predecessor Company (the "Plan") was
confirmed and became effective following the close of business on
February 28, 1997 (the "Effective Date"). Upon effectiveness of the
Plan, Elsinore Corporation (the "Reorganized Company" or the "Company")
adopted fresh start reporting in accordance with Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified
Public Accountants. As a result of fresh start reporting, the material
adjustments made by the Company were the revaluation of property and
equipment, write-off of the investment in Fremont Street Experience,
the revaluation of mortgage notes and other liabilities, including the
related gain on forgiveness of indebtedness, and write-off of the
accumulated deficit, additional paid-in-capital and common stock of the
Predecessor. Accordingly, the Company's post-reorganization balance
sheet and statement of operations have not been prepared on a
consistent basis with such pre-reorganization financial statements. For
accounting purposes, the inception date of the Reorganized Company is
deemed to be March 1, 1997.
The Company has prepared the accompanying financial statements without
audit, pursuant to rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
necessary to present fairly the Company's financial position as of
September 30, 1997 and the results of operations and cash flows for the
two months ended February 28, 1997 for the Predecessor Company, seven
months ended September 30, 1997 for the Reorganized Company, and the
three months and nine months ended September 30, 1996 for the
Predecessor Company.
2. Per Share Data
The Company will adopt the provision of Statement of Financial
Accounting Standards No. 128, Earnings Per Share (Statement 128) in the
fourth quarter of 1997. Basic and diluted EPS are equal to the amount
presented on the Income Statement.
Earnings per share for the three months ended September 30, 1997 and
1996 are based upon the weighted average number of shares of common
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
stock outstanding as there were no common stock equivalents outstanding
during the period.
<PAGE>
<TABLE>
<CAPTION>
3. Shareholder's Equity
Common Stock
------------------- -------------
Total
Additional Accumulated Shareholders'
Outstanding Paid-In-Capital Earnings Equity
Shares Amount (Deficit) (Deficit)
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
<S> <C> <C> <C> <C> <C>
December 31, 1996 15,891,793 $16 $69,602 $(110,328) $(40,710)
Stock Subscription
Rights Offering 713 713
Income(loss)before reorganization
items and extraordinary gain on
elimination of debt
(190) (190)
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
February 28, 1997 15,891,793 16 70,315 (110,518) (40,187)
Gain on Forgiveness
(Debt Discharge) 35,977 35,977
Fresh Start
Adjustments (15,891,793) (16) (70,315) 74,541 4,210
=================== ============= ================ ==================== =====================
Balance,
After Fresh Start
Adjustments - - - - -
Issuance of Stock 1,000,000 1 4,995 - 4,996
Issuance of Stock 3,929,313 4 - - 4
------------------- ------------- ---------------- -------------------- ---------------------
Balance,
March 1, 1997 4,929,313 5 4,995 - 5,000
------------------- ------------- ---------------- -------------------- ---------------------
Net Income (Loss) (632) (632)
------------------- ------------- ---------------- -------------------- ---------------------
------------------- ------------- ---------------- -------------------- ---------------------
Balance,September30,1997 4,929,313 $5 $4,995 ($632) $4,368
=================== ============= ================ ==================== =====================
</TABLE>
There were no changes in other shareholders' equity for the nine months
ended September 30, 1996.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
4. Commitments and Contingencies
WARN Act Litigation
The Company is a defendant in two consolidated lawsuits pending in the
federal court for the District of New Jersey, alleging violation by the
Company and certain of its subsidiaries and affiliates of the Worker
Adjustment and Retraining Notification Act (WARN Act) and breach of
contract.
The plaintiffs filed three proof of claims in both the Company's, as
well as Four Queens, Inc.'s, bankruptcy proceedings. Two of the proof
of claims, one for the union employees and one for the non-union
employees, totaled $14,000,000 and allege liability under the WARN
Act for failure to properly notify employees in advance of cessation of
operations of Elsinore Shore Associates. The third proof of claim,
in the amount of $800,000, was based upon retroactive wage agreements
executed by Elsinore Shore Associates promising to pay its employees
deferred compensation if the employees remained with Elsinore Shore
Associates during its reorganization. The proof of claims were filed
as priority claims, not general unsecured claims.
Based upon the Order for Verdict Upon Liability Issues issued by the
presiding judge in New Jersey, as well as the Bankruptcy Code, the
Bondholders' Committee filed an objection to the WARN Act proofs of
claims. The Bankruptcy Court tentatively approved the objection and
disallowed the claims pending entry of the final order from the New
Jersey court. No final appealable order has been entered as of yet by
the Bankruptcy Court.
On October 22, 1997, the New Jersey court entered its Findings of
Fact and Conclusions of Law and Judgment Upon Liability Issues, which
affirmed its prior holding denying WARN Act liability. The New Jersey
court's judgment can now be brought to the Bankruptcy Court to request
a final order denying the WARN Act proofs of claims. However, the
plaintiffs' counsel has indicated that the plaintiffs intend to appeal
the New Jersey court's decision, and their time to file such an appeal
has not yet expired. If they appeal, it is likely that the Bankruptcy
Court would defer its final decision on the WARN Act proofs of claims
pending the outcome of the appeal.
A second objection was filed on behalf of the Bondholders' Committee to
the $800,000 proof of claim regarding the retroactive wage benefits.
Because the New Jersey court had found the Company to be liable on
these obligations together with Elsinore Shore Associates, the
objection filed by the Bondholders' Committee did not dispute the
allowability of the
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
proof of claim to participate with the other unsecured creditors in the
Company's bankruptcy proceedings. However, the Bondholders' Committee
objected to the claim of priority status in the Company's proceedings.
The Bondholders' Committee objected to the claim in its entirety in the
Four Queens, Inc.'s proceeding. The Bankruptcy Court granted the
objections and ruled that the proof of claim for retroactive wage
benefits would be an allowed unsecured claim against the Company to be
treated in Class 10 of the Plan with final determination of the actual
amount of the claim to be made by the New Jersey District Court. The
plaintiffs thereafter filed a motion for reconsideration regarding the
Bankruptcy Court's order, which motion was ultimately denied. The final
order was entered by the court in July 1997, and the plaintiffs have
appealed the order to the Ninth Circuit Bankruptcy Appellate Panel.
In summary, management believes that any claims listed above, if
allowed, would be included in the Class 10 Unsecured Creditor's pool,
which is capped at $1.4 million, and, therefore, will not have a
material financial affect on the Company.
At September 30, 1997, the Company and its subsidiaries were
parties to various other claims and lawsuits arising in the normal
course of business. Management is of the opinion that all pending legal
matters are either covered by insurance or, if not insured, will not
have a material effect on the financial position of the Company.
5. Proposed Merger
The Company has entered into an Agreement and Plan of Merger ("Merger
Agreement")with R&E Gaming Corp. ("Gaming") and Elsinore Acquisition
Sub, Inc. ("EAS"), entities controlled by Mr. Allen Paulson. Pursuant
to the Merger Agreement, the Company would merge with EAS and, as a
result, would become a wholly-owned subsidiary of Gaming and the
Company's shareholders (other than those who exercise dissenter's
rights under Nevada law) would receive, for each share of the Company's
common stock owned by them, cash in the amount of $3.16 plus an amount
equal to the daily accrual on $3.16 at 9.43% compounded annually,
accruing from June 1, 1997 to the date immediately preceding
consummation of the merger with EAS. Following completion of the
transaction, the Company will be wholly-owned by Gaming and Company
shareholders prior to the merger will no longer own any equity interest
in the Company.
Separately, Morgens, Waterfall, Vintiadis & Company, Inc., on behalf of
investment accounts which own approximately 94% of the outstanding
Elsinore shares, has granted Gaming an option to purchase its shares at
the same price that all shareholders would receive in the merger and
has agreed to vote in favor of the merger.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1997
Consummation of the merger with EAS is subject to a number of
conditions, including (i)approval by the holders of the Company's
shares at a stockholders' meeting, (ii) the receipt of all necessary
approvals by the Nevada Gaming Authorities, and (iii)consummation of
Gaming's proposed acquisition of Riviera Holdings Corporation which has
been announced. There can be no assurance that the conditions to the
merger will be met or that the merger will be consummated.
6. Finley Lease
Under a 20-year lease, which was scheduled to expire on December 31,
1997, the Company leases from The Finley Company ("Finley")
approximately 7,000 square feet of the Four Queens Casino premises
affecting the northeast corner of that property. Pursuant to a least
amendment,which was signed in September and made retroactive to May 14,
1997, rents were increased to a minimum monthly rental (triple net) of
$50,400, with periodic adjustments tied to Consumer Price Index
increases, a security deposit for one year's rental payments was posted
to guaranty payment of the monthly rentals and the lease term was
extended to October 31, 2024.
7. Reclassification
Certain reclassifications have been made to prior period financial
statements to make them comparable to the current period presentation.
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operation
This discussion and analysis should be read in conjunction with the consolidated
financial statements and notes thereto set forth elsewhere herein.
The following table sets forth certain operating information for the Company for
the three months ended September 30, 1997 and 1996 and nine months ended
September 30, 1997 and 1996. Revenues and promotional allowances are shown as a
percentage of net revenues. Departmental costs are shown as a percentage of
departmental revenues.
All other percentages are based on net revenues.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
-------------------------------- ---------------------------------------
(000's) % (000's) %
---------------- ----------- ------------------- ----------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 8,741 67.8% 10,536 71.1%
Hotel 2,110 16.4% 2,591 17.5%
Food & beverage 2,280 17.7% 2,977 20.1%
Other 892 6.9% 172 1.2%
----------------- ------------ ------------------- ----------------
Gross revenue 14,023 108.8% 16,276 110.0%
Less promotional allowances (1,136) (8.8%) (1,463) (10.0%)
----------------- ------------ ------------------- ----------------
Revenues, net 12,887 100.0% 14,813 100.0%
----------------- ------------ ------------------- ----------------
Costs and expenses:
Casino 3,395 38.8% 4,437 42.1%
Hotel 2,172 102.9% 2,255 87.0%
Food and beverage 1,437 63.1% 1,813 60.9%
Taxes and licenses 1,325 10.3% 1,612 10.9%
Selling, general and
administrative 2,509 19.6% 2,559 17.3%
Rents 1,034 8.0% 1,010 6.8%
----------------- ------------ ------------------- ----------------
Total costs and expenses 11,872 92.1% 13,686 92.4%
----------------- ------------ ------------------- ----------------
Earnings before interest, taxes,
depreciation and amortization
(EBIDTA) 1,015 7.9% 1,127 7.6%
----------------- ------------ ------------------- ----------------
Depreciation and amortization 551 4.3% 943 6.4%
Interest 1,269 9.8% 811 5.5%
----------------- ------------ ------------------- ----------------
Income (loss) before
reorganizational items
and income taxes (805) (6.2%) (627) 4.2%
----------------- ------------ ------------------- ----------------
Reorganizational items - - - -
Income taxes 15 .1% 977 6.6%
================= ============ =================== ================
Net income (loss) (820) (6.3%) (1,604) (10.8%)
================= ============ =================== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
-------------------------------- ---------------------------------------
(000's) % (000's) %
---------------- ----------- ------------------- ----------------
Revenues, net:
<S> <C> <C> <C> <C>
Casino 28,263 68.9% 32,401 70.7%
Hotel 7,116 17.3% 8,319 18.2%
Food & beverage 7,190 17.5% 9,566 20.9%
Other 1,561 3.8% 473 1.0%
----------------- ------------ ------------------- ----------------
Gross revenue 44,130 107.5% 50,759 110.8%
Less promotional allowances (3,111) 7.5% (4,944) (10.8%)
----------------- ------------ ------------------- ----------------
Revenues, net 41,019 100.0 45,815 100.0%
----------------- ------------ ------------------- ----------------
Costs and expenses:
Casino 10,845 38.4% 13,563 41.9%
Hotel 6,431 90.4% 6,141 73.8%
Food and beverage 4,593 63.9% 5,273 55.1%
Taxes and licenses 4,193 10.2% 5,104 11.1%
Selling, general and
administrative 7,148 17.5% 7,332 16.0%
Rents 3,067 7.5% 3,044 6.6%
----------------- ------------ ------------------- ----------------
Total costs and expenses 36,277 88.5% 40,457 88.3%
----------------- ------------ ------------------- ----------------
Earnings before interest, taxes,
depreciation and amortization
(EBIDTA) 4,742 11.5% 5,358 11.7%
----------------- ------------ ------------------- ----------------
Depreciation and amortization 1,800 4.4% 2,837 6.2%
Interest 3,719 9.1% 1,326 2.9%
----------------- ------------ ------------------- ----------------
Income (loss) before
reorganizational items and
income taxes (777) (1.9%) 1,195 2.6%
----------------- ------------ ------------------- ----------------
Reorganizational items 0 2,115 4.6%
Income taxes 45 .1% - -
----------------- ------------ ------------------- ----------------
Net income (loss) (822) (2.0%) (920) (2.0%)
================= ============ =================== ================
</TABLE>
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
REVENUES
Net revenues decreased by approximately $1,926,000 or 13%, from $14,813,000 for
the three months ended September 30, 1996 to $12,887,000 for the three months
ended September 30, 1997 due to competition and the general softness in the Las
Vegas market which has affected most if not all the hotel/casinos in the
downtown area.
Casino revenues decreased by approximately $1,795,000, or 17%, from $10,536,000
during the 1996 interim period to $8,741,000 during the interim 1997 period due
primarily to $639,000, or 25.8% decrease in table games revenues and a
$1,949,000, or 24.3% decrease in slot revenue. Management has eliminated certain
unprofitable marketing programs which generated significant volume in the third
quarter of 1996. During the third quarter of 1997, table games drop decreased
$6,570,000 or 36.7%. However, the win percentage increased by 1.2% as a result
of more stringent controls over the dice games and a change in customer mix from
comp credit players to cash paying vacationers. Slot coin-in decreased
$32,909,000, or 23%, due to the competition from aggressive marketing programs
to $1.00 slot players, competitive pressures from the opening of new properties,
and construction disruptions.
Hotel revenues decreased by approximately $481,000, or 18.6% from $2,591,000
during the 1996 period to $2,110,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $175,498 resulting from the
elimination of the unprofitable table games marketing programs. The majority of
the complimentary rooms were replaced with cash paying customers at lower room
rates.
Food and beverage revenues decreased approximately $697,000, or 23.4%, from
$2,977,000 during the 1996 period to $2,280,000 during the 1997 period due to a
decrease in complimentary revenues of $316,000 resulting from the elimination of
the unprofitable table games marketing programs and the closure of two
unprofitable food outlets which were replaced by profitable leased fast food
franchises. Lease revenues from these locations are included in other revenues
along with the other shop leases and concessions.
Other revenues increased by approximately $720,000, or 418.6%, from $172,000
during the 1996 period to $892,000 during the 1997 period, due primarily to an
increase in interest income resulting from increased cash balances, additional
rental income as a result of new tenant leases (including two leased food
outlets described above), reduction in outstanding chip liability recognized in
the third quarter and payments received under a settlement agreement with the
Twenty-Nine Palms Band of Mission Indians.
Promotional allowances decreased by approximately $327,000, or 22%, from
$1,483,000 during the 1996 period to $1,136,000 during the 1997 period due to a
decrease in complimentary rooms, and complimentary food and beverage resulting
from the elimination of the unprofitable table games marketing programs.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments (including taxes and
licenses) decreased by approximately $1,788,000, or 17.7%, from $10,117,000 for
the three months ended September 30, 1996 to $8,329,000 for the three months
ended September 30, 1997.
Casino expense decreased by approximately $1,042,000 or 23.5%, from $4,437,000
during the 1996 period to $3,395,000 during the 1997 period due to a decrease in
payroll and the cost of complimentary rooms, food and beverage. Casino expenses
as a percentage of revenues remained constant at approximately 40% as management
has redirected the Company's marketing efforts from table games to slots.
Hotel expense decreased by approximately $83,000, or 3.6%, from $2,255,000
during the 1996 period to $2,172,000 during the 1997 period. This resulted from
a change in policy on the housekeeping duties for the hotel rooms.
Food and beverage costs and expenses decreased by approximately $376,000, or
20.7%, from $1,813,000 during the 1996 period to $1,437,000 during the 1997
period resulting from a corresponding decrease in revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately $50,000,
or 1.9%, from $2,559,000 for the three months ended September 30, 1996 to
$2,509,000 for the three months ended September 30, 1997 due to less operating
costs. As a percentage of total net revenues, selling, general and
administrative expenses was 19.6%.
EBITDA
EBITDA decreased by approximately $112,000, or 9.9% from $1,127,000 during the
three months ended September 30, 1996 to $1,015,000 during the three months
ended September 30, 1997. The decrease was due to lower revenues which were
partially offset by management's elimination of unprofitable marketing expenses.
OTHER EXPENSES
Depreciation and amortization decreased by approximately 392,000, or 41.6%, from
$943,000 during the 1996 period to $551,000 during the 1997 period due to
revaluation of property and equipment as a result of Fresh Start Accounting.
Interest expense increased by approximately $458,000, from $811,000 during the
three months ended September 30, 1996 to $1,269,000 for the three months ended
September 30, 1997, due to the restatement of notes and restructured debt as of
August 12, 1996, the date of Plan confirmation. Interest had been stayed while
the Company was under the protection of the Bankruptcy court.
INCOME TAXES
Income taxes totaled $15,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, the Company's net loss decreased by
approximately $784,000, from a loss of $1,604,000 during the three months ended
September 30, 1996 to a loss of $820,000 during the three months ended September
30, 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
REVENUES
Net revenues decreased by approximately $4,800,000 or 10.5%, from $45,819,000
for the nine months ended September 30, 1996 to $41,019,000 for the nine months
ended September 30, 1997.
Casino revenues decreased by approximately $4,138,000, or 12.8%, from
$32,401,000 during the 1996 period to $28,263,000 during the 1997 period due
primarily to a $1,895,000, or 23.9% decrease in table games revenues and a
$1,995,168, or 8.7% decrease in net slot revenue. Management has eliminated
certain unprofitable marketing programs which generated significant volume in
the first nine months of 1996. During the first nine months of 1997, table games
drop decreased $23,011,000 or 43.9%, and slot coin-in decreased $91,239,000, or
21.0%. The decrease in table game volume was partially offset by a 1.8% increase
in win percent.
Hotel revenues decreased by approximately $1,203,000, or 14.5%, from $8,319,000
during the 1996 period to $7,116,000 during the 1997 period due primarily to a
decrease in complimentary room revenues of $1,056,000 resulting from the
elimination of the unprofitable table games marketing programs. The majority of
the complimentary rooms were replaced with cash paying customers at lower room
rates.
Food and beverage revenues decreased approximately $2,376,000, or 24.8%, from
$9,566,000 during the 1996 period to $7,190,000 during the 1997 period due to a
decrease in complimentary revenues of $1,429,000 resulting from the elimination
of the unprofitable table games marketing programs and the closure of two
unprofitable food outlets which were replaced by profitable leased fast food
franchises.
Other revenues increased by approximately $1,088,000, or 230%, from $473,000
during the 1996 period to $1,561,000 during the 1997 period, due primarily to
payments totaling $561,000 received under the settlement agreement reached with
the Twenty-Nine Palms Band of Mission Indians. In addition, the Company received
a refund from prior year's health and welfare insurance premiums, an increase in
interest income due to increased cash balances, and additional rental income as
a result of new tenant leases.
Promotional allowances decreased by approximately $1,833,000, or 37.1%, from
$4,944,000 during the 1996 period to $3,111,000 during the 1997 period due to a
decrease in complimentary rooms, food and beverage resulting from the
elimination of the unprofitable table games marketing programs.
DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS
Total direct costs and expenses of operating departments (including taxes and
licenses) decreased by approximately $4,019,000, or 13.4%, from $30,081,000 for
the nine months ended September 30, 1996 to $26,062,000 for the nine months
ended September 30, 1997.
Casino expense decreased by approximately $2,718,000, or 20.1%, from $13,563,000
during the 1996 period to $10,845,000 during the 1997 period due to a decrease
in payroll and complimentary expenses. Casino expenses as a percentage of
revenues decreased from 41.9% to 38.4% due to management's redirection of the
Company's marketing efforts from table games to slots.
Hotel expense increased by approximately $290,000, or 4.7%, from $6,141,000
during the 1996 period to $6,431,000 during the 1997 period, and costs as a
percentage of revenues increased from 73.8% to 90.4%, due to the reduction in
cost of comps transferred to the Casino department.
Food and beverage costs and expenses decreased by approximately $680,000, or
12.9%, from $5,273,000 during the 1996 period to $4,593,000 during the 1997
period resulting from a corresponding decrease in revenues.
OTHER OPERATING EXPENSES
Selling, general and administrative expenses decreased by approximately
$184,000, or 2.5%, from $7,332,000 for the nine months ended September 30, 1996
to $7,148,000 for the nine months ended September 30, 1997 primarily due to
reduced energy and maintenance costs. As a percentage of total net revenues,
selling, general and administrative expenses increased from 16.0% during the
1996 period to 17.5% during the 1997 period due to lower revenues over which
fixed costs are incurred.
EBITDA
EBITDA decreased by approximately $616,000, or 11.5%, from $5,358,000 during the
nine months ended September 30, 1996 to $4,742,000 during the nine months ended
September 30, 1997. Management's redirection of the Company's marketing efforts
from table games to slots was responsible for keeping the operation competitive
while revenues were generally down in the Fremont Street market. The reductions
in payroll and complimentaries in table games, allowed the Company to
concentrate its efforts in marketing and advertising slots.
OTHER EXPENSES
Depreciation and amortization decreased by approximately $1,037,000, or 36.6%,
from $2,837,000 during the 1996 period to $1,800,000 during the 1997 period due
to revaluation of property and equipment as a result of Fresh Start Accounting.
Interest expense increased by approximately $2,393,000, or 180.5%, from
$1,326,000 during the nine months ended September 30, 1996 to $3,719,000 for the
nine months ended September 30, 1997, due to the restatement of notes as a
result of the bankruptcy reorganization plan. These notes began accruing
interest as of August 12, 1996, the date of Plan confirmation.
Reorganization items totaling $2,115,000 in 1996 consisted primarily of accrued
professional fees incurred by the Company as a result of the reorganization
under Chapter 11 of the Bankruptcy Code. During the 1997 period, there were no
reorganization items.
INCOME TAXES
Income taxes totaled $45,000 for estimated federal income tax payments resulting
from the alternative minimum tax.
NET INCOME (LOSS)
As a result of the factors discussed above, net loss decreased by approximately
$94,000, from a loss of $916,000 during the nine months ended September 30, 1996
to a loss of $822,000 during the nine months ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents (including restricted amounts of
$914,000)of approximately $7.0 million at September 30, 1997, as compared with
$11.7 million at December 31, 1996 (including Restricted Cash of $4.4 million),
a decrease of $4,609,000 from December 31, 1996. Significant debt service on the
Company's restated 1993 Mortgage Notes ("New Second Mortgage Notes") and other
debt issued pursuant to the Plan is paid in August and February and should be
considered in evaluating cash increases or decreases in the second and fourth
quarters. Pursuant to the Subscription Rights Agreement provided for in the Plan
of Reorganization, $5,000,000 in cash was received by the Company following the
close of business on February 28, 1997.
For the first nine months of 1997, the Company's net cash (used) by operating
activities was $(2,849,000) compared to $3,390,000 provided by operating
activities in the first nine months of 1996 due primarily to the payment of
accrued interest on the New Second Mortgage Notes which had accrued since August
12, 1996. EBITDA for the first nine months of 1997 and 1996 was $3.7 million and
$4.2 million, respectively. Management believes that sufficient cash flow will
be available to cover the Company's debt service for the next 12 months and
enable investment in remaining budgeted capital expenditures of approximately
$4.2 million for 1997, including an arrangement to finance slot machine
purchases of $1.4 million in 1997, of which $500,000 has been used as of
September 30, 1997 and the balance was used in October, 1997.
Scheduled interest payments on the New Second Mortgage Notes and other
indebtedness are $4.3 million in 1997 declining to $3.9 million in 2001. Cash
flow from operations is not expected to be sufficient to pay 100% of the $30
million principal of the New Second Mortgage Notes at maturity on August 20,
2001. Accordingly, the ability of the Company to repay the New Second Mortgage
Notes at maturity will be dependent upon its ability to refinance the New Second
Mortgage Notes. There can be no assurance that the Company will be able to
refinance the principal amount of the New Second Mortgage Notes at maturity. The
New Second Mortgage Notes are redeemable at the option of the Company at 100% at
any time without premium.
The New Second Mortgage Note Indenture provides for mandatory redemption by the
Company upon the order of the Nevada Gaming Authorities. The indenture also
provides that, in certain circumstances, the Company must offer to repurchase
the New Second Mortgage Notes upon the occurrence of a change of control or
certain other events at 101%. The Company is also required to offer to purchase
all of its restated 1994 First Mortgage Notes, the principal amount of which is
approximately $3.9 million, at 101% upon any "Change of Control," as defined in
the agreement governing those notes. (See the "Proposed Merger" discussion in
Note 5 to the Company's consolidated financial statements included herein
regarding the anticipated change in control of the Company.) In the event of
such mandatory redemption or repurchase prior to maturity, the Company would be
unable to pay the principal amount of the New Second Mortgage Notes without a
refinancing.
Management considers it important to the competitive position of the Four Queens
Hotel & Casino that expenditures be made to upgrade the property. Management has
budgeted approximately $7 million for capital expenditures in 1997. The Company
expects to finance such capital expenditures from cash on hand, cash flow and
slot lease financing. Uses of cash during the nine month period included capital
expenditures of $2,791,000. Based upon current operating results and cash on
hand, the Company has sufficient operating capital to fund its operation and
capital expenditures for the next 12 months.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those anticipated in such forward-looking
statements. Readers should not place undue reliance on forward-looking
statements, which reflect management's view only as of the date of this filing.
The Company undertakes no obligation to revise publicly these forward-looking
statements to reflect subsequent events or circumstances.
<PAGE>
Elsinore Corporation and Subsidiaries
Other Information
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
See Note 4 to Financial Statements in Part I, Item 1 of this
report, which is incorporated herein by reference.
Item 5. Other Information:
See Note 5 to Financial Statements in Part I, Item 1 of this report,
which is incorporated herein by reference.
See Note 6 to Financial Statements in Part I, Item 1
of this report, which is incorporated herein by
reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2.1* First Amended Plan of Reorganization [2.1](5)
2.2* Order Confirming First Amended Plan of Reorganization [2.2](5)
2.3* Bankruptcy Court Order Approving Plan Documentation [2.3](6)
3.1* Amended and Restated Articles of Incorporation
of Elsinore Corporation [3.1](7)
3.2* Amended and Restated Bylaws of Elsinore Corporation [3.2](7)
10.1* Sublease, dated May 26, 1964, by and between A.W. Ham, Jr. and
Four Queens, Inc. [10.1](1)
10.2* Amendment of Sublease, dated June 15, 1964, by and between A.W.
Ham, Jr. and Four Queens, Inc. [10.2](1)
10.3* Amendment of Sublease, dated February 25, 1965, by and between
A.W. Ham Jr. and Four Queens, Inc. [10.3](1)
10.4* Amendment of Sublease, dated January 29, 1973, by and between
A.W. Ham, Jr. and Four Queens, Inc. [10.4](1)
10.5* Supplemental Lease, dated January 29, 1973, by and between
A.W. Ham, Jr. and Four Queens, Inc. [10.5](1)
10.6* Lease Agreement, dated April 25, 1972, by and between Bank of
Nevada and Leon H. Rockwell, Jr., as Trustees of Four Queens,
Inc. [10.6](1)
10.7* Lease, dated January 1, 1978, between Finley Company and
Elsinore Corporation [10.7](1)
10.8* Ground Lease, dated October 25, 1983, between Julia E. Albers,
Otto J. Westlake, Guardian, and Four Queens, Inc. [10.8](1)
10.9* Ground Lease, dated October 25, 1983, between Katherine M.
Purkiss and Four Queens, Inc. [10.9](1)
10.10* Ground Lease, dated October 25, 1983, between Otto J. Westlake
and Four Queens, Inc. [10.10](2)
10.11* Indenture of Lease, dated March 28, 1984, by and between the
City of Las Vegas and Four Queens, Inc. [10.11](1)
10.12* Lease Indenture, dated May 1, 1970, by and between Thomas L.
Carroll, et al. and Four Queens, Inc. [10.12](1)
10.13* Memorandum of Lease, dated January 26, 1973, between President
and Board of Trustees of Santa Clara College and
Four Queens, Inc. [10.13](1)
10.14* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Frank L. Burrell, Jr. [10.14](7)
10.15* Indemnification Agreement, dated August 8, 1996, by and between
Elsinore Corporation and Howard Carlson [10.15](7)
10.16* Indemnification Agreement, dated August 8,
1996, by and between Elsinore Corporation
and Robert A. McKerroll [10.16](7)
10.17* Indemnification Agreement, dated August 8,
1996, by and between Elsinore Corporation
and Thomas E. Martin [10.17](7)
10,18* Agreement, dated April 29, 1992, by and
among Four Queens, Inc., Jeanne Hood, Edward
M. Fasulo and Richard A. LeVasseur
[10.28](1)
10.19* Settlement Agreement, dated March 29, 1996,
by and between Palm Springs East Limited
Partnership and the 29 Palms Band of Mission
Indians [10.19](7)
10.20* Loan Agreement, dated November 12, 1993, by
and between The Jamestown S'Klallam Tribe
and JKT Gaming, Inc. [10.31](3)
10.21* First Amendment to Loan Agreement, dated
January 28, 1994, by and between The
Jamestown S'Klallam Tribe and JKT Gaming,
Inc. [10.32](3)
10.22* Form of 13 1/2% Second Mortgage Note Due 2001 [10.22](7)
10.23* Amended and Restated Indenture, dated as of
March 3, 1997, by and among Elsinore
Corporation, the Guarantors named therein
and First Trust National Association, as
Trustee [10.23](7)
10.24* Pledge Agreement, dated as of October 8,
1993, from Elsinore Corporation and ELSUB
Management Corporation to First Trust
National Association [10.7](2)
10.25* Amendment of 1993 Pledge Agreement, dated March 3, 1997 [10.25](7)
10.26* Deed of Trust, Assignment of Rents and Security Agreement, dated as of
October 8, 1993, by and among Four Queens, Inc., Land Title of Nevada,
Inc. and First Trust National Association [10.8](2)
10.27* Modification of Subordinated Deed of Trust, dated March 3, 1997, by and
between Four Queens, Inc. and First Trust National Association [10.27](7)
10.28* Agreement, dated May 14, 1997, by Elsinore
Corporation to file with the Securities and
Exchange Commission copies of instruments
defining the rights of holders of 11.5%
First Mortgage Notes Due 2000 [10.28](7)
10.29* Assignment of Operating Agreements, dated as of October 8, 1993,
by Palm Springs East Limited Partnership to First Trust National
Association [10.9](2)
10.30* Assignment of Operating Agreement, dated as of October 8, 1993, by
Olympia Gaming Corporation to First Trust National Association
[10.10](2)
10.31 Common Stock Registration Rights Agreement,
dated as of February 28, 1997, among Elsinore
Corporation and the Holders of Registrable
Shares referred to therein (incorporated by
reference herein and filed as (i) Exhibit
10.31 to Elsinore Corporation's Quarterly
Report on Form 10-Q for the three months ended
March 31, 1997 and (ii) Exhibit B to Schedule
13D, dated March 10, 1997, by Morgens
Waterfall Income Partners, L.P.; Restart
Partners, L.P.; Restart Partners II, L.P.;
Restart Partners III, L.P.; Restart Partners
IV, L.P.; Restart Partners V, L.P.; The Common
Fund for Non-Profit Organizations; MWV
Employee Retirement Plan Group Trust; Betje
Partners; Phoenix Partners, L.P.; Morgens,
Waterfall, Vintiadis & Company, Inc.; MW
Capital, L.L.C.; Prime Group, L.P.; Prime
Group II, L.P.; Prime Group III, L.P.; Prime
Group IV, L.P.; Prime Group V, L.P.; Prime,
Inc.; MW Management, L.L.C.; John C. "Bruce"
Waterfall; and Edwin H. Morgens, with respect
to the New Common Stock)
10.32* Description of Compensation Plan or Arrangement for Elsinore Corporation
Directors and Executive Officers [10.32](8)
10.33 First Amendment to Lease by and among Finley Company,
Elsinore Corporation and Four Queens, Inc. effective May 14, 1997
10.34 Agreement and Plan of Merger by and among R & E Gaming Corp.,
Elsinore Acquisition Sub, Inc. and Elsinore Corporation dated
September 15, 1997
10.35 Amended Lease Schedule No. 1 to Master Lease Agreement by and
between IGT North America, Inc. and Four Queens, Inc., dated
November 28, 1994, and PDS Financial Corporation-Nevada, as
assignee of Lessor's interest.
10.36 Master Lease Agreement by and between PDS Financial
Corporation-Nevada and Four Queens, Inc. dated May 1, 1997.
10.37 Amendment to Master Lease Agreement by and between PDS Financial
Corporation-Nevada and Four Queens, Inc. dated August 1, 1997
10.38 Warrants to Purchase 1,125,000 Shares of Common Stock of
Elsinore Corporation Issued to Riviera Gaming
Management Corp.-Elsinore
10.39 Assignment by Richard A. LeVasseur to Four Queens, Inc.
dated July 14, 1992
10.40 First Supplemental Amended and Restated
Indenture by and among the Company, the
guarantors named therein and First Trust National
Association, as trustee dated as of September 18,
1997
10.41 Form of Management Agreement among the Company,Four Queens, Inc.
and Riviera Gaming Management Corp.- Elsinore, as approved by
the Bankruptcy Court
15.1 KPMG Peat Marwick LLP Independent Auditor's Review Report
27.1 Financial Data Schedule
99.1* Voluntary Petition for Bankruptcy Pursuant
to Chapter 11 of the Bankruptcy Code dated
October 31, 1995 [99.2](4)
99.2* Olympia Gaming Corporation Voluntary Petition for Bankruptcy
Pursuant to Chapter 11 of the Bankruptcy Code dated October 31,
1995 [99](4)
(a) Reports on Form 8-K:
During the third quarter of 1997, Elsinore
Corporation filed no reports on Form 8-K.
*Previously filed with the Securities and Exchange Commission as an exhibit to
the document shown below under the Exhibit Number indicated in brackets and
incorporated herein by reference and made a part hereof:
(1) Annual Report on Form 10-K for the year ended December 31, 1992
(2) Current Report on Form 8-K dated October 19, 1993
(3) Annual Report on Form 10-K for the year ended December 31, 1993
(4) Current Report on Form 8-K dated November 7, 1995
(5) Current Report on Form 8-K dated August 8, 1996
(6) Current Report on Form 8-K dated March 14, 1997
(7) Quarterly Report on Form 10-Q for the three months ended March 31, 1997
(8) Quarterly Report on Form 10-Q for the six months ended June 30, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto authorized.
ELSINORE CORPORATION
(Registrant)
By: /s/ Jeffrey T. Leeds
JEFFREY T. LEEDS, President
and Chief Executive Officer
By: /s/ S. Barton Jacka
S. BARTON JACKA, Secretary
and Treasurer and Principal
Accounting Officer
Dated: November 14, 1997
<PAGE>
FIRST AMENDMENT TO LEASE
THE STATE OF NEVADA '
KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF CLARK '
This First Amendment to Lease (this "First Amendment") is made to be
effective the 14th day of May, 1997 (the "Effective Date"), by and among FINLEY
COMPANY, a Delaware corporation ("Lessor"), ELSINORE CORPORATION, a Nevada
corporation ("Lessee") and FOUR QUEENS, INC., a Nevada corporation ("Assignee").
RECITALS:
A. By Lease (the "Lease") effective January 1, 1978, Finley Company, a
Nevada corporation, as Lessor, leased to Lessee, and Lessee leased from the
Lessor, Lots Eleven (11) and Twelve (12) in Block Nineteen (19) of Clark's Las
Vegas Townsite, in Las Vegas, Clark County, Nevada, together with certain
improvements then located thereon, as more particularly described therein and
referred to therein as "Said Land," and a Short Form Lease dated as of January
1, 1978, was recorded in Book 850, Instrument 809864 of the Official Records of
Clark County, Nevada, to give notice of the Lease.
B. By Deed dated December 30, 1986, recorded in Book 870223, Instrument
00568 of the Official Records of Clark County, Nevada, Finley Company, a Nevada
corporation, conveyed the property covered by the Lease to New Finley Company, a
Delaware corporation, and assigned all of the right, title and interest of the
Lessor under the Lease to New Finley Company. By Certificate of Amendment of
Certificate of Incorporation dated January 6, 1987, the name of New Finley
Company was changed to Finley Company. Finley Company, a Delaware corporation,
is the owner of the property covered by the Lease and is the Lessor under the
Lease.
C. By Assignment of Leases dated May 22, 1987, recorded as in Book
870527, Instrument 0939 of the Official Records of Clark County, Nevada, Lessee
assigned the Lease, among other leases, to Assignee, and Assignee assumed and
agreed to keep, perform and fulfill all of the terms, conditions and obligations
of the Lessee under the Lease. Pursuant to paragraph 5.b of the Lease, Lessee
remains liable for the obligations of the Lessee under the Lease as if there had
been no assignment to Assignee.
D. Lessee and Assignee filed petitions pursuant to Chapter 11 of the
U.S. Bankruptcy Code on October 31, 1995. The obligations under the Lease were
assumed by Lessee and Assignee and the Joint Plan of Reorganization of Lessee
and Assignee became effective on February 28, 1997.
E. The term of the Lease expires on December 31, 1997, and Lessor,
Lessee and Assignee desire to amend the Lease to renew and extend the term of
the Lease for an additional period expiring October 31, 2024, and to set forth
certain agreements and understandings of the parties with respect to the Lease
as herein set forth.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties as hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor, Lessee and Assignee hereby agree as follows:
1. Except as otherwise defined herein, all capitalized terms herein
shall have the meanings ascribed to such terms as provided in the Lease.
2. The term of the Lease as provided in paragraph 1 of the Lease is
hereby renewed and extended for a period terminating October 31, 2024, subject
to the provisions of the Lease, as amended hereby, for earlier termination.
3. Paragraph 2.a of the Lease is hereby amended as follows:
(a) Commencing with the Effective Date hereof, the monthly rent as
provided in paragraph 2.a of the Lease for the period from May
14, 1997, through December 31, 1997, shall be the sum of Fifty
Thousand Four Hundred and No/100 Dollars ($50,400.00).
(b) The monthly rent for each lease year as provided in paragraph
2.a(2), that is, the period from January 1 through December 31
of each calendar year, and for the period of the last lease
year from January 1, 2024, through October 31, 2024, shall be
the greater of the following (i) or (ii):
(i) Fifty Thousand Four Hundred and No/100 Dollars
($50,400.00), or
(ii) The monthly rent for December of the immediately
preceding lease year multiplied by a fraction the
denominator of which is the Index Number of the
Consumer Price Index for the second November before
the lease year for which the monthly rent is being
calculated and the numerator of which is the Index
Number of the Consumer Price Index for the November
of the lease year immediately preceding the lease
year for which the rent is being calculated.
The "Consumer Price Index," as that term is used herein, means
the Consumer Price Index for Urban Wage Earners and Clerical
Workers (U.S. City Average All Items) of the Bureau of Labor
Statistics of the U.S. Department of Labor (for which 1982-84
= 100).
4. Paragraph 2.b of the Lease is hereby amended to provide that the
monthly rent after December 31, 1997, shall never be less than Fifty Thousand
Four Hundred and No/100 Dollars ($50,400.00) per month.
5. Paragraph 3.a of the Lease is hereby amended to provide that the
taxes as described therein for the fiscal year July 1, 2024, through June 30,
2025, shall be shall be prorated between Lessor and Lessee as of October 31,
2024, but if Lessee shall have erected new improvements on Said Land and Lessor
requires Lessee to remove the same pursuant to paragraph 8 of the Lease, then
Lessor shall bear only that part of such taxes for the tax period following
October 31, 2024, as are attributable to the unimproved value of Said Land.
6. Paragraph 3.d(2) of the Lease is hereby amended to provide that the
minimum amount of insurance coverage as provided therein shall be increased (if
the following computations results in an increase) on January 1 of each of 1998,
2003, 2008, 2013, 2018 and 2023 by multiplying Twenty-Six Million and No/100
Dollars ($26,000,000.00) by a fraction, the numerator of which is the Index
Number of the Consumer Price Index for the November next preceding such
computation and the demoninator of which is the Index Number of the Consumer
Price Index for November 1997, provided in no event shall such Twenty-Six
Million and No/100 Dollars ($26,000,000.00) figure stated herein be reduced.
7. Paragraph 6 of the Lease is hereby amended to read in its entirety
as follows:
a. Said Land shall be used only for the purposes of operation
as a casino, gaming house, or similar uses, and for no other use
without the prior written consent of Lessor. Any such use of Said Land
shall be conducted in strict accordance with all applicable laws,
ordinances, rules and regulations of all governmental entities or
agencies having jurisdiction over Said Land and the use thereof,
including without limitation, the Nevada Gaming Commission, the State
Gaming Control Board, or any other agency or subdivision thereof, or
any other governmental entity or agency within or without the State of
Nevada with authority to regulate gaming (each a "Gaming Authority").
Lessee shall, at its sole cost and expense, obtain and maintain all
licenses, permits, approvals, and other authorizations required for
such use.
b. It is acknowledged that Assignee currently holds a
non-restricted gaming license issued by the State of Nevada. Due to
Assignee's status as a gaming licensee in Nevada, Lessor may be
required to file an application to be found suitable as a landlord to
Assignee. If at any time during the term of this Lease, either (A)
Lessor (i) is found unsuitable as a landlord for purposes of Assignee's
gaming license by any Gaming Authority, or (ii) withdraws any
application for approval of Lessor as a landlord to Assignee for
purposes of Assignee's gaming license for any reason other than upon a
determination by the applicable Gaming Authority that such approval is
not required, or (iii) fails to provide any information or otherwise
fails to comply with the requirements of a Gaming Authority required
for approval of Lessor as a landlord to Assignee for purposes of
Assignee's gaming license; and such finding or failure results in the
termination, denial or failure to issue or renew Assignee's gaming
license, or (B) any Gaming Authority commences any suit or proceeding
against Assignee or terminates, denies or fails to issue or renew
Assignee's gaming license as the result of any of the circumstances
described in (A) above, then Lessee and Assignee shall, as their sole
and exclusive remedy (Lessee and Assignee hereby expressly waiving any
other remedies to which Lessee or Assignee may otherwise be entitled),
terminate this Lease by written notice to Lessor.
c. It is expressly agreed that Lessor, and its employees,
officers, directors and shareholders, shall not be liable financially
or otherwise to Lessee for any failure or refusal of a Gaming Authority
to issue or renew Assignee's gaming license, whether as the result of
any of the circumstances described in (A) of subparagraph 6.b above or
any other reason.
d. It is further expressly understood and agreed that Lessee's
and Assignee's right to terminate this Lease under the provisions of
this paragraph 6 is limited to the express provisions of this paragraph
6, and specifically and not by way of limitation, in the event of the
failure of Assignee to obtain or retain a gaming license or otherwise
is unable to conduct gaming operations on said Land for any reason
other than any of the circumstances in (A) in subparagraph 6.b above,
this Lease shall, nevertheless continue in full force and effect
according to the terms hereof; provided that in such event, Said Land
may thereafter be used for any lawful purpose, but Lessee and Assignee
shall not use or allow the use of Said Land for any purpose that
constitutes a nuisance.
8. The parties acknowledge and agree that the leases in effect at the
original commencement of the Lease as described in paragraph 5.a of the Lease
have terminated or expired, and that there are no leases, subleases or other
agreements for the use and occupancy of any part of Said Land other than the
Lease. Notwithstanding the foregoing acknowledgement, the terms and provisions
of said paragraph 5.a shall continue in full force and effect.
9. Paragraph 5.b of the Lease is hereby amended to change the
definition of "affiliate" to mean a corporation included in an "affiliated
group" as that term is defined in Section 1504(a) of the Internal Revenue Code
as presently in effect and of which Lessee is the common parent corporation.
Paragraph 5.b of the Lease is hereby further amended to provide that for
purposes of Paragraph 5.b, any merger, consolidation, dissolution, or
liquidation of Lessee or Assignee, or any change in ownership of twenty percent
(20%) or more of the stock or ownership interests in Lessee or Assignee from the
ownership as exist as of the date of this First Amendment shall constitute an
assignment for the purpose of the Lease. Notwithstanding anything contained
herein to the contrary, the foregoing sentence shall not apply to a merger of
Lessee with, or other transfer of stock in Lessee to, or the acquisition of an
ownership interest in Lessee by, an entity owned or controlled by Riviera
Holdings Corporation, a Nevada corporation, or Mr. Allen E. Paulson (currently
residing in Rancho Santa Fe, California), or an "affiliate" in an "affiliated
group" of which an entity owned or controlled by Riviera Holdings Corporation or
Mr. Allen E. Paulson is the common parent of Lessee.
10. The parties acknowledge that Lessor granted an Airspace Easement to
the City of Las Vegas recorded in Book 940613, Instrument 05223 of the Official
Records of Clark County, Nevada; that Lessee and Assignee have approved such
Easement; and that the Lease is subject to the terms and provisions thereof in
addition to those matters described in paragraph 5.c of the Lease.
11. The parties further acknowledge that the "present improvements"
located on Said Land at the commencement of the initial term of the Lease have
been removed and "new improvements" have been constructed on Said Land by Lessee
as provided in paragraphs 7.a, 7.b and 8 of the Lease. The parties agree that no
material alterations or additions to the improvements on Said Land as of the
date of this First Amendment shall be made without the prior written consent of
Lessor as provided in paragraph 7.b(4) of the Lease, and that any new
improvements constructed on Said Land after the date of this First Amendment
shall comply with the provisions of paragraph 7.b of the Lease, unless Lessor
expressly otherwise consents in writing. Notwithstanding the foregoing, Lessor
agrees that Lessee may make such interior, non-structural alterations,
renovations, or other improvements to the improvements located on Said Land,
without the prior consent of Lessor and without complying with the provisions of
paragraph 7.b(3) of the Lease.
12. The parties further acknowledge and agree that the alley formerly
adjacent to the south lines of Lots Eleven (11) and Twelve (12) in Block
Nineteen (19) of Clark's Las Vegas Townsite has been closed and vacated as
contemplated in paragraph 10 of the Lease, and title to one-half (1/2) of said
alley adjacent to south of said Lots is owned by Lessor. The parties expressly
confirm, acknowledge and agree that the rights and title to said former alley
are owned by Lessor, free and clear of any interest of Lessee and/or Assignee;
provided, the portion of said former alley adjacent to said Lots 11 and 12 are
subject to the Lease and all references in the Lease, as amended hereby, to
"Said Land" shall include said portion of said former alley.
13. Paragraphs 11.d, 11.h and 14 of the Lease are hereby amended to
delete therefrom all references to "Hyatt Corporation" and the reference to its
Guaranty.
14. Paragraph 11.h of the Lease is hereby further amended to provide
that at the request of Lessor, Lessee or Assignee, a Memorandum of this First
Amendment, in the form attached hereto as Exhibit A, shall be placed of record
to give notice of this First Amendment.
15. The parties further confirm, acknowledge and agree that the
addresses of the parties for purposes of paragraph 12 of the Lease are as
follows:
Lessor: Finley Company
-------
P.O. Box 986
Reno, Nevada 89504
Lessee: Elsinore Corporation
202 Freemont Street
Las Vegas, Nevada 89101
Assignee: Four Queens, Inc.
202 Freemont Street
Las Vegas, Nevada 89101
16. The parties each state that it has not agreed with anyone for a fee
or commission for entering into this First Amendment, and that the provisions of
paragraph 13 of the Lease shall apply and be effective with respect to any claim
to a fee or commission with respect to this First Amendment.
17. Lessee and Assignee each hereby expressly confirms and agrees that
it is and shall remain liable for the performance of all of the obligations of
the Lessee under the Lease, as amended hereby.
18. Concurrently with the execution of this First Amendment by Lessee
and Assignee, Lessee and Assignee have delivered to Lessor the sum of
$604,800.00, the receipt of which is hereby acknowledged by Lessor, as a
security deposit to secure performance of Lessee's and Assignee's obligations
under the Lease, as amended hereby (the "Security Deposit"). Lessor may, from
time to time, without prejudice to any other remedy, use such Security Deposit
to the extent necessary to make good any arrearage of rental or other amounts
due hereunder and to reimburse Lessor for any other damage, injury, expense or
liability caused to Lessor by any breach of this Lease. Following any such
application of the Security Deposit, Lessee shall pay to Lessor on demand the
amount so applied in order to restore the Security Deposit to its original
amount. In addition, Lessee and Assignee shall deliver to Lessor on or before
January 15 of each calendar year during the extended term of the Lease a sum in
cash or other immediately available funds increasing the amount of the Security
Deposit to an amount equal to twelve (12) times the monthly rent in effect for
such calendar year; it being agreed that at all times the amount of the Security
Deposit shall equal the monthly rent for twelve (12) months.
If either Lessee or Assignee is in default under the terms of the
Lease, as amended hereby, Lessor may use the Security Deposit, or any portion of
it, to cure the default or to compensate Lessor for all damage sustained by
Lessor resulting from such default. If neither Lessee nor Assignee is in default
at the expiration or termination of the Lease, as amended hereby, Lessor shall
return the Security Deposit (or an accounting thereof) to Lessee within thirty
(30) days after surrender of Said Land by Lessee and Assignee, less lawful
deductions for damages and other sums due under the Lease, as amended hereby.
Lessor's obligations with respect to the Security Deposit are as expressly
provided herein, and in no event shall be deemed to be those of a trustee.
Lessor may maintain the Security Deposit separate and apart from Lessor's
general funds or may co-mingle the Security Deposit with Lessor's general and
other funds. Lessor shall not be required to pay Lessee interest on the Security
Deposit.
Lessor agrees that Lessee or Assignee may at any time deliver to Lessor
an unconditional, irrevocable and transferrable letter of credit (the "Letter of
Credit") in accordance with the terms and conditions set forth below to be held
by Lessor in the place of the cash Security Deposit to secure performance of
Lessee's and Assignee's obligations under the Lease, as amended hereby. The
Letter of Credit (i) shall be in the form attached hereto as Exhibit B, or as
otherwise approved by Lessor, (ii) shall be in an amount equal to the amount of
the Security Deposit as provided above, (iii) shall be issued by a United States
"money center" bank or other United States bank as may be approved by Lessor, in
its reasonable discretion (the "Issuer"), and (iv) shall have an expiration date
of not less than one (1) year after the issue date of the Letter of Credit. In
the event of a default by Lessee or Assignee under the Lease, as amended hereby,
Lessor shall be entitled to draw the full amount of the Letter of Credit and
hold and apply the proceeds thereof as the Security Deposit under the Lease, as
amended hereby.
No later than forty-five (45) days before the expiration date of the
Letter of Credit, as the same may be extended by amendment as hereinafter
provided, or any replacement letter of credit as herein provided, Lessee and/or
Assignee shall deliver to Lessor either (i) an amendment to the then current
Letter of Credit extending the expiration date for an additional period of at
least one (1) year and increasing the amount of the Letter of Credit to an
amount equal to twelve (12) times the monthly rent then in effect, or (ii) a
replacement letter of credit in the same form as the Letter of Credit issued by
the Issuer or a United States "money center" bank or another United States bank
having a deposit base equal to or greater than the deposit base of the Issuer.
If a replacement letter of credit is so delivered to Lessor, such replacement
letter of credit shall be deemed to be the "Letter of Credit" under this First
Amendment, and all references to the "Letter of Credit" herein shall be deemed
to mean and refer to such replacement letter of credit. If neither an amendment
to the Letter of Credit nor a replacement letter of credit is delivered to
Lessor by Lessee or Assignee at least 45 days before the expiration date of the
then current Letter of Credit, Lessor shall be entitled, without notice to
Lessee or Assignee (such failure not being itself an event of default under the
Lease), to draw the full amount of the Letter of Credit and hold and apply the
proceeds thereof as the Security Deposit hereunder. If neither Lessee nor
Assignee is in default at the expiration or termination of the Lease, as amended
hereby, Lessor shall return the Letter of Credit to Lessee.
It is expressly understood that neither the Security Deposit or the
Letter of Credit shall be considered an advance payment of rental or a measure
of Lessor's damages in case of default by Lessee or Assignee. If Lessor
transfers its interest in the Leased Premises during the Lease Term, Lessor may
assign the Letter of Credit or the Security Deposit, as applicable, to the
transferee and, thereafter, Lessor shall have no further liability for the
return of the Letter of Credit or the Security Deposit, as applicable.
19. The individuals executing this First Amendment on behalf of Lessor,
Lessee and Assignee, respectively, represents and warrants that he has full
authority to execute this First Amendment for and on behalf of Lessee, and upon
the execution hereof, this First Amendment shall be a valid and binding
obligation of the corporation on behalf of which he has executed this First
Amendment. Lessee and Assignee each acknowledge that Lessor has relied on all
written information furnished by Lessee, Assignee and/or their respective
representatives to Lessor in connection with this First Amendment. Certificates
of authority of Lessor, Lessee and Assignee are attached hereto as Exhibit C,
Exhibit D and Exhibit E, respectively.
20. This First Amendment has been executed in multiple originals by the
parties. The parties agree, however, that this First Amendment and the Exhibits
hereto may be transmitted among them by facsimile machine. The parties intend
that faxed signatures constitute original signatures, and that a faxed copy of
this First Amendment and/or any Exhibit hereto containing the signatures
(original or faxed) of all the parties is binding upon the parties.
Notwithstanding the foregoing, the parties agree that originals of this First
Amendment and all Exhibits hereto containing the original signatures of all
parties shall be provided to the parties as promptly as reasonably possible
after the receipt of copies containing faxed signatures.
EXECUTED to be effective the date first above written.
LESSOR:
FINLEY COMPANY
By: ___________________________
Tim Finley, Vice President
LESSEE:
ELSINORE CORPORATION
By: ___________________________
Jeffrey T. Leeds, President
ASSIGNEE:
FOUR QUEENS, INC.
By: ___________________________
William L. Westerman,
President
<PAGE>
EXHIBIT A
(TO FIRST AMENDMENT TO LEASE)
MEMORANDUM OF FIRST AMENDMENT TO LEASE
THE STATE OF NEVADA '
' KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF CLARK '
This is a Memorandum of First Amendment to Lease effective May 14,
1997, by and among FINLEY COMPANY, a Delaware corporation ("Lessor"), ELSINORE
CORPORATION, a Nevada corporation ("Lessee") and FOUR QUEENS, INC., a Nevada
corporation ("Assignee"), executed with respect to that certain Lease (the
"Lease") effective January 1, 1978, Finley Company, a Nevada corporation, as
Lessor, and Elsinore Corporation, as Lessee, covering Lots Eleven (11) and
Twelve (12) in Block Nineteen (19) of Clark's Las Vegas Townsite, in Las Vegas,
Clark County, Nevada, together with certain improvements then located thereon
(the "Property"), as more particularly described therein, to-wit:
1. A Short Form Lease dated as of January 1, 1978, is recorded in Book
850, Instrument 809864 of the Official Records of Clark County, Nevada, to give
notice of the Lease.
2. The parties do hereby give notice that the Lease has been amended,
renewed and extended on certain terms and conditions by a First Amendment to
Lease effective May 14, 1997, for a term ending October 31, 2024, subject to
earlier termination; all as set forth therein.
3. The parties agree that in the event of the termination of the Lease
in accordance with its terms, as amended, Lessee and Assignee shall have no
right, title or interest in and to the Property. The parties expressly agree
that upon the termination of the Lease, Lessor may execute and record in the
Official Records of Clark County, Nevada, a notice of the termination of the
Lease, the recording of which notice shall constitute conclusive evidence of the
termination of the Lease.
4. This Memorandum does not alter, amend or modify the Lease, as
amended, but is executed solely for the purpose of giving notice of the
existence of the First Amendment and the terms and conditions therein, which
First Amendment is incorporated herein by reference for all purposes to the same
extent and with the same effect as if set forth herein in full.
EXECUTED this 9th day of September, 1997.
LESSOR:
FINLEY COMPANY
By: ___________________________
Tim Finley, Vice President
LESSEE:
ELSINORE CORPORATION
By: ___________________________
Jeffrey T. Leeds, President
ASSIGNEE:
FOUR QUEENS, INC.
By: ___________________________
William L. Westerman,
President
THE STATE OF TEXAS '
COUNTY OF TRAVIS '
This instrument was acknowledged before me on this the 9th day of
September, 1997, by TIM FINLEY, a Vice President and Secretary of FINLEY
COMPANY, a Delaware corporation, on behalf of said corporation.
Karen M. Holmes
NOTARY PUBLIC, State of Texas
Print Name: _____________________
<PAGE>
THE STATE OF NEW YORK '
COUNTY OF NEW YORK '
On this day personally appeared before me, a Notary Public in and for
the above State and County, JEFFREY T. LEEDS, President of ELSINORE CORPORATION,
a Nevada corporation, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the above instrument for the uses and purposes therein mentioned and as the act
and deed of said corporation.
GIVEN UNDER MY HAND and SEAL OF OFFICE, this 27th day of August, 1997.
Joann McNiff
NOTARY PUBLIC in and for
New York County, New York
Print Name: _____________________
THE STATE OF NEVADA '
COUNTY OF CLARK '
On this day personally appeared before me, a Notary Public in and for
the above State and County, WILLIAM L. WESTERMAN, President of FOUR QUEENS,
INC., a Nevada corporation, known to me to be the person and officer whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the above instrument for the uses and purposes therein mentioned and as
the act and deed of said corporation.
GIVEN UNDER MY HAND and SEAL OF OFFICE, this 27th day of August, 1997.
Cynthia A. Fremont
NOTARY PUBLIC in and for
Clark County, Nevada
Print Name: _____________________
AFTER RECORDING, RETURN TO: R. Alan Haywood
Graves, Dougherty, Hearon & Moody
P.O. Box 98
Austin, Texas 78767
<PAGE>
EXHIBIT B
(TO FIRST AMENDMENT TO LEASE)
IRREVOCABLE LETTER OF CREDIT NO. ________________________
ISSUING BANK: ___________________________ BANK
ISSUE DATE: AUGUST ______, 1997 EXPIRY DATE: AUGUST _____, 1998
LETTER OF CREDIT NO.: ___________ PLACE: ____________________
AMOUNT: USD 604,800.00
SIX HUNDRED FOUR THOUSAND EIGHT HUNDRED AND NO/100
BENEFICIARY: FINLEY COMPANY APPLICANT: __________________
P.O. BOX 986 __________________
RENO, NEVADA 89504 __________________
__________________________ BANK ("GUARANTY") HEREBY ISSUES ITS IRREVOCABLE
LETTER OF CREDIT NO. ______ IN FAVOR OF FINLEY COMPANY, AS BENEFICIARY, FOR THE
ACCOUNT OF THE ABOVE-NAMED APPLICANT, FOR DRAWINGS UP TO THE AGGREGATE AMOUNT
OF USD 604,800.00.
THIS LETTER OF CREDIT IS AVAILABLE FOR PAYMENT BY PRESENTATION OF
BENEFICIARY'S DRAFTS AT SIGHT DRAWN ON GUARANTY BEARING THE CLAUSE: "DRAWN UNDER
_____________________ BANK IRREVOCABLE LETTER OF CREDIT NO. _____________." THIS
LETTER OF CREDIT IS IRREVOCABLE AND IS ISSUED, PRESENTABLE, AND PAYABLE AT
GUARANTY'S OFFICE STATED ABOVE AND EXPIRES WITH GUARANTY'S CLOSE OF BUSINESS ON
AUGUST ____, 1998.
WE UNDERTAKE TO PROMPTLY HONOR BENEFICIARY'S SIGHT DRAFTS ON US,
BEARING THE CLAUSE DESCRIBED ABOVE, FOR ALL OR ANY PART OF THIS CREDIT IF
PRESENTED AT GUARANTY'S OFFICE SPECIFIED ABOVE, ON OR BEFORE THE EXPIRY DATE OR
ANY EXTENDED EXPIRY DATE.
EXCEPT AS EXPRESSLY STATED HEREIN, THIS UNDERTAKING IS NOT SUBJECT
TO ANY AGREEMENT, CONDITION, OR QUALIFICATION. THE OBLIGATION OF GUARANTY
UNDER THIS LETTER OF CREDIT IS THE INDIVIDUAL OBLIGATION OF GUARANTY AND IS IN
NO WAY CONTINGENT UPON REIMBURSEMENT WITH RESPECT THERETO.
THIS CREDIT IS TRANSFERABLE.
THIS LETTER OF CREDIT IS SUBJECT TO, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEVADA AND, TO THE EXTENT NOT IN CONFLICT WITH THE TERMS HEREOF, THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, 1993 REVISION,
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 ("UCP 500"); AND, IN THE
EVENT OF ANY CONFLICT BETWEEN UCP 500 AND THE LAWS OF THE STATE OF NEVADA, THE
LAWS OF THE STATE OF NEVADA WILL CONTROL. IF THIS CREDIT EXPIRES DURING AN
INTERRUPTION OF BUSINESS DESCRIBED IN ARTICLE 17 OF UCP 500, GUARANTY HEREBY
SPECIFICALLY AGREES TO EFFECT PAYMENT IF THIS CREDIT IS DRAWN AGAINST WITHIN
THIRTY DAYS AFTER GUARANTY'S RESUMPTION OF BUSINESS.
____________________ BANK
By: ________________________
Name: ______________________
Title: _____________________
<PAGE>
EXHIBIT C
(TO FIRST AMENDMENT TO LEASE)
Certificate of Corporate Resolution Granting
Authorization to Lease
We, Jeffrey T. Leeds, President and S. Barton Jacka, Secretary
of ELSINORE CORPORATION, a Nevada corporation (the "Corporation"), certify
the following facts:
<PAGE>
1. The Corporation is organized and operating under the laws of
the State of Nevada, and is in good standing. No proceedings
for forfeiture of the certificate of incorporation or for
voluntary or involuntary dissolution of the Corporation are
pending.
2. Neither the articles of incorporation nor bylaws of the
Corporation limit the power of the Board of Directors to pass
the resolution below.
3. The Secretary keeps the records and minutes of the proceedings
of the Board of Directors of the Corporation, and the
resolution below is an accurate reproduction of the one
legally adopted in Board of Directors proceedings. It has not
been altered, amended, rescinded, or repealed, and it is now
in effect.
4. The following resolution has been duly adopted by the Board of
Directors:
RESOLVED, that the Corporation enter into that certain First
Amendment to Lease (the "First Amendment") dated effective May
14, 1997, between Finley Company, a Delaware corporation, as
Lessor, the Corporation, as Lessee, and Four Queens, Inc., a
Nevada corporation, as Assignee, amending, renewing and
extending the term of that certain Lease effective January 1,
1978, between Finley Company, a Nevada corporation, as Lessor,
and Lessee with respect to Lots Eleven (11) and Twelve (12) in
Block Nineteen (19) of Clark's Las Vegas Townsite, and the
north one-half (1/2) of the vacated alley adjacent to the
south lot lines of said Lots, in Las Vegas, Clark County,
Nevada, together with certain improvements located thereon, as
more particularly described therein, and that Jeffrey T.
Leeds, as the President of the Corporation, is hereby
authorized and instructed to execute and deliver the Lease,
for and on behalf of and in the name of the Corporation as the
Lessee, and to execute and deliver such other documents and to
take all such other actions as said President of the
Corporation may determine to be necessary or appropriate to
enter into the Lease and to effectuate the terms of the First
Amendment and to cause the Corporation to perform the
obligations and duties of the Lessee thereunder.
EXECUTED this the 27th day of August, 1997.
----------------------------------------
Name: Jeffrey T. Leeds
Title: President
----------------------------------------
Name: S. Barton Jacka
Title: Secretary
THE STATE OF NEW YORK '
COUNTY OF NEW YORK '
On this day personally appeared before me, a Notary Public in and for
the above State and County, JEFFREY T. LEEDS, President of ELSINORE CORPORATION,
a Nevada corporation, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the above instrument for the uses and purposes therein mentioned and as the act
and deed of said corporation.
GIVEN UNDER MY HAND and SEAL OF OFFICE, this 27th day of August, 1997.
Joann McNiff
NOTARY PUBLIC in and for
New York County, New York
Print Name: _____________________
THE STATE OF NEVADA '
COUNTY OF CLARK '
On this day personally appeared before me, a Notary Public in and for
the above State and County, S. BARTON JACKA, Secretary of ELSINORE CORPORATION,
a Nevada corporation, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the above instrument for the uses and purposes therein mentioned and as the act
and deed of said corporation.
GIVEN UNDER MY HAND and SEAL OF OFFICE, this 27th day of August, 1997.
Cynthia A. Fremont
NOTARY PUBLIC in and for
Clark County, Nevada
Print Name: _____________________
<PAGE>
EXHIBIT D
(TO FIRST AMENDMENT TO LEASE)
Certificate of Corporate Resolution Granting
Authorization to Lease
I, WILLIAM L. WESTERMAN, President and Secretary of FOUR QUEENS,
INC., a Nevada corporation (the "Corporation"), certify the following facts:
<PAGE>
1. The Corporation is organized and operating under the laws of
the State of Nevada, and is in good standing. No proceedings
for forfeiture of the certificate of incorporation or for
voluntary or involuntary dissolution of the Corporation are
pending.
2. Neither the articles of incorporation nor bylaws of the
Corporation limit the power of the Board of Directors to pass
the resolution below.
3. The Secretary keeps the records and minutes of the proceedings
of the Board of Directors of the Corporation, and the
resolution below is an accurate reproduction of the one
legally adopted in Board of Directors proceedings. It has not
been altered, amended, rescinded, or repealed, and it is now
in effect.
4. The following resolution has been duly adopted by the Board of
Directors:
RESOLVED, that the Corporation enter into that certain First
Amendment to Lease (the "First Amendment") dated effective May
14, 1997, between Finley Company, a Delaware corporation, as
Lessor, Elsinore Corporation, as Lessee, and the Corporation,
as Assignee, amending, renewing and extending the term of that
certain Lease effective January 1, 1978, between Finley
Company, a Nevada corporation, as Lessor, and Lessee with
respect to Lots Eleven (11) and Twelve (12) in Block Nineteen
(19) of Clark's Las Vegas Townsite, and the north one-half
(1/2) of the vacated alley adjacent to the south lot lines of
said Lots, in Las Vegas, Clark County, Nevada, together with
certain improvements located thereon, as more particularly
described therein, and that William L. Westerman, as the
President of the Corporation, is hereby authorized and
instructed to execute and deliver the Lease, for and on behalf
of and in the name of the Corporation as the Assignee, and to
execute and deliver such other documents and to take all such
other actions as said President of the Corporation may
determine to be necessary or appropriate to enter into the
Lease and to effectuate the terms of the First Amendment and
to cause the Corporation to perform the obligations and duties
of the Lessee thereunder.
EXECUTED this the 27th day of August, 1997.
----------------------------------------
Name: William L. Westerman
Titles: President and Secretary
THE STATE OF NEVADA '
COUNTY OF CLARK '
On this day personally appeared before me, a Notary Public in and for
the above State and County, WILLIAM L. WESTERMAN, President and Secretary of
FOUR QUEENS, INC., a Nevada corporation, known to me to be the person and
officers whose name is subscribed to the foregoing instrument, and acknowledged
to me that he executed the above instrument for the uses and purposes therein
mentioned and as the act and deed of said corporation.
GIVEN UNDER MY HAND and SEAL OF OFFICE, this 27th day of August, 1997.
Cynthia A. Fremont
NOTARY PUBLIC in and for
Clark County, Nevada
Print Name: _____________________
<PAGE>
EXHIBIT E
(TO FIRST AMENDMENT OF LEASE)
Certificate of Corporate Resolution Granting
Authorization to Lease
We, Mark Finley, President, and Tim Finley, Vice President and
Secretary, of FINLEY COMPANY, a Delaware corporation (the "Corporation"),
certify the following facts:
<PAGE>
1. The Corporation is organized and operating under the laws of the
State of Delaware, is authorized to do business in Nevada, and is in
good standing. No proceedings for forfeiture of the certificate of
incorporation or for voluntary or involuntary dissolution of the
Corporation are pending.
2. Neither the articles of incorporation nor bylaws of the Corporation
limit the power of the Board of Directors to pass the resolution below.
3. The Secretary keeps the records and minutes of the proceedings of
the Board of Directors of the Corporation, and the resolution below is
an accurate reproduction of the one legally adopted in Board of
Directors proceedings. It has not been altered, amended, rescinded, or
repealed, and it is now in effect.
4. The following resolution has been duly adopted by the Board of
Directors:
RESOLVED, that the Corporation enter into that certain First Amendment
to Lease (the "First Amendment") dated effective May 14, 1997, between
the Corporation, as Lessor, Elsinore Corporation, as Lessee, and Four
Queens, Inc., a Nevada corporation, as Assignee, amending, renewing and
extending the term of that certain Lease effective January 1, 1978,
between Finley Company, a Nevada corporation, as Lessor, and Lessee
with respect to Lots Eleven (11) and Twelve (12) in Block Nineteen (19)
of Clark's Las Vegas Townsite, and the north one-half (1/2) of the
vacated alley adjacent to the south lot lines of said Lots, in Las
Vegas, Clark County, Nevada, together with certain improvements located
thereon, as more particularly described therein, and that Tim Finley,
as the Vice President of the Corporation, is hereby authorized and
instructed to execute for and on behalf of and in the name of the
Corporation the Lease, and to execute and deliver such other documents
and to take all such other actions as said Vice President of the
Corporation may determine to be necessary or appropriate to enter into
the Lease and to effectuate the terms of the Lease and cause the
Corporation as to perform its obligations and duties as the Lessor
thereunder.
EXECUTED this the 9th day of September, 1997.
------------------------------
Mark Finley, President
------------------------------
Tim Finley, Vice President and
Secretary
THE STATE OF TEXAS '
COUNTY OF TRAVIS '
This instrument was acknowledged before me on this the 9th day of
September, 1997, by MARK FINLEY, as President of FINLEY COMPANY, a Delaware
corporation, on behalf of said corporation.
Karen M. Holmes
NOTARY PUBLIC, State of Texas
Print Name: _____________________
THE STATE OF TEXAS '
COUNTY OF TRAVIS '
This instrument was acknowledged before me on this the 9th day of
September, 1997, by TIM FINLEY, a Vice President and Secretary of FINLEY
COMPANY, a Delaware corporation, on behalf of said corporation.
Karen M. Holmes
NOTARY PUBLIC, State of Texas
Print Name: _____________________
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
R&E GAMING CORP.,
ELSINORE ACQUISITION SUB, INC.
and
ELSINORE CORPORATION
Dated as of September 15, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 15,
1997 (the "Agreement"), by and among R&E Gaming Corp., a Delaware corporation
("Gaming"), Elsinore Acquisition Sub, Inc., a Nevada corporation and a wholly
owned subsidiary of Gaming ("EAS"), and Elsinore Corporation, a Nevada
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Gaming, EAS and
the Company have each approved the transactions contemplated by the terms and
conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, upon the terms and subject to
the conditions of this Agreement, (i) EAS would be merged with and into the
Company (the "Elsinore Merger") and (ii) each share of common stock, par value
$.001 per share, of the Company (the "Common Stock"), issued and outstanding
immediately prior to the Effective Time (as defined herein) (the "Shares")
would, except as otherwise expressly provided herein, be converted into the
right to receive the Merger Consideration (as defined herein);
WHEREAS, Gaming and EAS are unwilling to enter into this
Agreement unless Gaming, contemporaneously with the execution and delivery of
this Agreement, enters into an Option and Voting Agreement (the "Elsinore Option
Agreement") with Morgens, Waterfall, Vintiadis & Company, Inc., on behalf of
certain investment accounts (the "Option Seller"), providing for, among other
things, (i) the grant by the Option Seller to Gaming of an option and, under
certain circumstances set forth in the Elsinore Option Agreement, the obligation
of Gaming to purchase all of the Shares owned by the Option Seller and (ii) the
agreement by the Option Seller to cause the Shares owned by it to be present for
quorum purposes at any meeting of the stockholders of the Company (the "Company
Stockholders") called to vote upon the Elsinore Merger, and to vote for the
transactions contemplated by this Agreement and against any Alternative
Transaction (as defined in Section 4.8(b) hereof) and any other action which may
be adverse to the transactions contemplated in this Agreement; and the Board of
Directors of the Company (the "Board") has approved the execution and delivery
of the Elsinore Option Agreement which is being executed contemporaneously with
the execution hereof;
WHEREAS, on or prior to the date hereof Gaming has entered
into an Agreement and Plan of Merger (the "Riviera Merger Agreement"), by and
among Gaming, Riviera Acquisition Sub, Inc., a Nevada corporation and a wholly
owned subsidiary of Gaming ("RAS"), and Riviera Holdings Corporation, a Nevada
corporation ("Riviera"), which provides for, among other things, the merger of
RAS with and into Riviera (the "Riviera Merger"); and
WHEREAS, the Board has determined that the Elsinore Merger and
the consideration to be received by the holders of the Shares are fair to, and
in the best interests of, the Company and the Company Stockholders.
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<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual representations, warranties and covenants contained herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Elsinore Merger. At the Effective Time and
upon the terms and subject to the conditions of this Agreement, and in
accordance with the applicable provisions of Nevada law, EAS shall be merged
with and into the Company, whereupon the separate existence of EAS shall cease
and the Company shall continue as the surviving corporation of the Elsinore
Merger (the "Surviving Corporation"), and shall be a wholly owned subsidiary of
Gaming.
Section 1.2 Effective Time; Closing. Unless this Agreement
shall have been terminated pursuant to Section 6.1 hereof, as soon as
practicable after the satisfaction or (if permissible) waiver of the conditions
set forth in Article V of this Agreement, the Company will file articles of
merger with the Secretary of State of the State of Nevada in accordance with the
provisions of Section 92A.005 et seq. of the Nevada Revised Statutes (the
"Nevada Merger Law") and make all other filings or recordings required by law in
connection with the Elsinore Merger. The Elsinore Merger shall become effective
at such time (the "Effective Time") as the articles of merger are filed with the
Secretary of State of the State of Nevada in accordance with the provisions of
Chapter 92A of the Nevada Revised Statutes, or such later date as set forth in
such filing, but in no event later than April 1, 1998, unless extended as
provided in Section 6.1(c) hereof. Prior to such filing, but no later than 30
days after the satisfaction or (if permissible) waiver of the conditions set
forth in Article V of this Agreement, a closing (the "Closing") shall be held at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue,
Los Angeles, California 90071, or such other place as the parties to this
Agreement shall agree, for the purpose of confirming the satisfaction or waiver
of the conditions set forth in this Agreement. The date on which the Closing
occurs shall be referred to herein as the "Closing Date."
Section 1.3 Effects of the Elsinore Merger. The Elsinore
Merger shall have the effects set forth in the Nevada Merger Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all of the property, rights,
privileges, powers and franchises of a public as well as of a private nature,
and the title to any real estate vested by deed or otherwise in the Company and
EAS shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and EAS shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.4 Articles of Incorporation and Bylaws. (a) The
Articles of Incorporation of EAS in effect immediately prior to the Effective
Time, attached hereto as Exhibit A,
2
<PAGE>
shall be the Articles of Incorporation of the Surviving Corporation (the
"Surviving Corporation Articles of Incorporation"), until amended in accordance
with Nevada law, except that Article I thereof shall be amended to read in its
entirety as follows: "The name of the corporation shall be Elsinore
Corporation."
(b) The Bylaws of EAS in effect at the Effective Time shall,
attached hereto as Exhibit B, shall be the Bylaws of the Surviving Corporation
(the "Surviving Corporation Bylaws"), until amended in accordance with Nevada
law and the Surviving Corporation Articles of Incorporation.
Section 1.5 Directors. The directors of the Company at the
Effective Time, and, subject to the requirements of Gaming Laws (as defined
herein), any additional individuals designated by Gaming at or prior to the
Effective Time, shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Surviving Corporation Articles of
Incorporation and the Surviving Corporation Bylaws and until his or her
successor is duly elected and qualified.
Section 1.6 Officers. The officers of the Company at the
Effective Time, and, subject to the requirements of Gaming Laws, any additional
individuals designated by Gaming at or prior to the Effective Time, shall be the
initial officers of the Surviving Corporation from and after the Effective Time,
each to hold office in accordance with the Surviving Corporation Articles of
Incorporation and the Surviving Corporation Bylaws and until his or her
successor is duly appointed and qualified.
Section 1.7 Consideration for the Merger. At the Effective
Time, by virtue of the Elsinore Merger and without any action on the part of
Gaming, EAS, the Company or the holder of any of the following securities:
(a) Each Share (other than (i) Shares to be cancelled pursuant
to Section 1.7(c) hereof, (ii) the Dissenting Shares (as defined below) and
(iii) as specified in Section 1.9 hereof) shall be converted into and represent
the right to receive the Merger Consideration (as defined herein). From and
after the Effective Time, all Shares shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any of the Shares (a "Certificate") shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration payable to the holder thereof, without interest, upon surrender of
such Certificate in the manner provided in Section 1.8 hereof. As used herein,
"Merger Consideration" means the amount of $3.16 in cash per Share, plus an
amount of additional consideration (the "Additional Consideration") equal to the
daily portion of the accrual on $3.16 at 9.43% compounded annually, accruing
from June 1, 1997 to the date immediately preceding the Effective Time;
provided, that the Merger Consideration paid to the Option Seller shall be
reduced by the amount of Additional Consideration paid to the Option Seller
pursuant to Section 1.2(b) of the Elsinore Option Agreement. It being understood
that, assuming consummation of the Elsinore Merger, the proviso in the preceding
sentence shall have the effect of causing the consideration per Share to be
received hereunder and under the
3
<PAGE>
Elsinore Option Agreement by the Option Seller from Gaming on account of the
Shares owned by the Option Seller to be equal to the consideration per Share
received by the Company Stockholders (other than the Option Seller) hereunder on
account of the Shares owned by Company Stockholders (other than the Option
Seller). Each of Gaming and EAS represents and warrants that the Merger
Consideration to be received hereunder by the Option Seller for each Share owned
by the Option Seller and any other consideration paid by Gaming or EAS to the
Option Seller for such Shares (but excluding consideration paid under the
Elsinore Option Agreement) shall be equal to the Merger Consideration received
by the other holders of Shares.
(b) Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding shares of Common Stock held by a person (a
"Dissenting Stockholder") who objects to the Merger and complies with all the
provisions of Nevada law concerning the right of holders of Common Stock to
dissent from the Merger and obtain payment of the fair value of such Dissenting
Stockholder's shares of Common Stock ("Dissenting Shares") shall not be
converted as described in Section 1.7(a) hereof but shall become the right to
receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the laws of the State of Nevada. If, after the Effective
Time, such Dissenting Stockholder withdraws his demand for payment or fails to
perfect or otherwise loses his dissenters' rights, in any case pursuant to the
Nevada Merger Law, his shares of Common Stock shall be deemed to be converted as
of the Effective Time into the right to receive the Merger Consideration,
without interest. The Company shall give Gaming and EAS (i) prompt notice of any
demands for payment pursuant to dissenters' rights with respect to shares of
Common Stock received by the Company and (ii) the opportunity to participate in
and direct all negotiations and proceedings with respect to any such demands.
The Company shall not, without the prior written consent of Gaming and EAS, make
any payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
(c) Each Share owned by Gaming, EAS or their stockholders or
affiliates (the "Paulson Shares"), or which is held in the treasury of the
Company or any of its subsidiaries, shall be cancelled and retired and shall
cease to exist, and no payment of any consideration shall be made with respect
thereto.
(d) Each share of capital stock of EAS issued and outstanding
immediately prior to the Effective Time shall be converted into and shall become
one validly issued, fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation.
Section 1.8 Exchange of Shares. (a) At or prior to the
Effective Time, Gaming shall designate a bank or trust company reasonably
acceptable to the Company to serve as exchange agent (the "Exchange Agent") for
the Shares. As soon as reasonably practicable after the Effective Time, Gaming
shall deposit, or shall cause to be deposited, with the Exchange Agent for the
benefit of the holders of Certificates, cash or immediately available funds in
United States dollars in an amount that equals the aggregate Merger
Consideration. Such funds (the "Payment Fund") shall be invested by the Exchange
Agent as directed by Gaming in obligations of or obligations guaranteed by the
United States of America, in commercial paper
4
<PAGE>
obligations rated A-1 or P-1 or better by Moody's Investor Services, Inc. or
Standard & Poor's Corporation, respectively, or in certificates of deposit, bank
repurchase agreements, or bankers acceptances of commercial banks with capital
exceeding $500 million; provided, however, that in the event that the Payment
Fund shall realize a loss on such investment, Gaming shall promptly thereafter
deposit in the Payment Fund cash in an amount sufficient to enable the Payment
Fund to satisfy all remaining obligations originally contemplated to be paid out
of the Payment Fund.
(b) Promptly after the Effective Time, the Surviving
Corporation shall instruct the Exchange Agent to mail to each record holder of
outstanding Certificates as of the Effective Time, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash that such holder has the right to receive
under this Article I, and such Certificate shall forthwith be cancelled. If
payment (or any portion thereof) is to be made to a person other than the person
in whose name the Certificate surrendered is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay to the Exchange Agent any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered or such person shall establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 1.8, each
Certificate (other than Certificates representing (i) Shares to be cancelled
pursuant to Section 1.7(c) hereof, (ii) the Dissenting Shares and (iii) Shares
specified in Section 1.9 hereof) shall represent, for all purposes, the right to
receive the Merger Consideration multiplied by the number of Shares previously
evidenced by such Certificate, without any interest thereon.
(c) All cash paid upon the surrender of the Certificates in
accordance with the terms of this Article I shall be deemed to have been paid in
full satisfaction of all rights pertaining to the Shares theretofore represented
by such Certificates, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article I, except as
otherwise provided by Nevada law.
(d) At any time following the date six months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any funds (including any interest received with
respect thereto) that have been made available to the Exchange Agent and that
have not been disbursed to holders of Certificates and, thereafter, such holders
shall be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) only as general creditors thereof with
respect to the Merger
5
<PAGE>
Consideration payable upon surrender of their Certificates. Notwithstanding the
foregoing, neither the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a Certificate for the Merger Consideration delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.9 Company Plans.
(a) At the Effective Time, each Share held in trust for the
benefit of participants in the Four Queens' Employees' Retirement/Savings Plan
and Trust, as in effect on the date hereof (the "Company Plan"), shall be
cancelled, and the Surviving Corporation shall pay into the trust with respect
to each such cancelled Share an amount in cash equal to the product of (i) the
number of such Shares held in trust, and (ii) the Merger Consideration per
Share.
(b) At the Effective Time, the warrants issued by the Company
to Riviera shall be cancelled and Riviera shall receive an amount equal to
$2,441,250.
Section 1.10 Stockholders' Meeting. The Company, acting
through the Board, shall, in accordance with applicable law, the Company
Articles of Incorporation and the Restated and Amended Bylaws of the Company
(the "Company Bylaws"), as soon as practicable following the date hereof:
(a) duly call, give notice of, convene and hold an annual or
special meeting of the Company Stockholders (the "Stockholders' Meeting") for
the purpose of approving and adopting this Agreement and the transactions
contemplated hereby;
(b) subject to the fiduciary duties of the Board under
applicable law, recommend that the Company Stockholders vote in favor of
approving and adopting this Agreement and the transactions contemplated hereby;
and
(c) subject to the fiduciary duties of the Board under
applicable law, use its reasonable best efforts to obtain the necessary
approvals by the Company Stockholders of this Agreement and the transactions
contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Gaming as follows:
Section 2.1 Organization and Qualification; Subsidiaries. (a)
Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now
6
<PAGE>
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not, individually or in
the aggregate, have a Company Material Adverse Effect (as defined herein). When
used in this Agreement, the term "Company Material Adverse Effect" means any
change or effect (i) that would be materially adverse to the business, results
of operations, conditions (financial or otherwise) or prospects of the Company
and its subsidiaries, taken as a whole, or (ii) that would impair the ability of
the Company to consummate the transactions contemplated hereby.
(b) Each of the Company and its subsidiaries is duly qualified
or licensed (excluding gaming and liquor licenses, which are covered by Section
2.5 hereof) and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, and to perform
all of its obligations under any contract under which the Company or any of its
subsidiaries (a) has or may acquire any rights, (b) has or may become subject to
any obligation or liability or (c) is or may, or any of the assets used or owned
by it are or may, become bound, except where the failure to be so duly qualified
or licensed and in good standing or to effect such performance would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(c) The Company has heretofore furnished or made available to
Gaming complete and correct copies of the Company Articles of Incorporation and
the Company Bylaws and the equivalent organizational documents of each of its
subsidiaries, each as amended to the date hereof. The Company Articles of
Incorporation, the Company Bylaws and equivalent organizational documents are in
full force and effect. The Company is not in violation of any of the provisions
of the Company Articles of Incorporation or the Company Bylaws, and no
subsidiary of the Company is in violation of any of the provisions of such
subsidiary's equivalent organizational documents. The organizational documents
of the subsidiaries of the Company do not contain any provision limiting or
otherwise restricting the ability of the Company to control such subsidiaries.
(d) The Company has heretofore furnished or made available to
Gaming a complete and correct list of the subsidiaries of the Company, which
list sets forth the amount of capital stock of or other equity interests in such
subsidiaries owned by the Company, directly or indirectly.
Section 2.2 Capitalization of the Company and its
Subsidiaries. The authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock of which, as of July 31, 1997, 4,929,313
Shares were issued and outstanding. All outstanding shares of capital stock of
the Company have been validly issued, and are fully paid, nonassessable and free
of preemptive rights. Except as set forth on Schedule 2.2 hereof, as of July 31,
1997, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options, subscriptions, warrants, convertible securities, calls or
other rights to acquire from the Company, and no obligation of the Company to
issue, deliver
7
<PAGE>
or sell any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, performance shares, interests in the ownership or earnings
of the Company or other similar rights issued by the Company (collectively,
"Company Securities"). Except as set forth on Schedule 2.2 hereto, there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. Except as set forth on
Schedule 2.2 hereto, each of the outstanding shares of capital stock of each of
the Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and is directly or indirectly owned by the Company, free and clear
of all security interests, liens, claims, pledges, charges, voting agreements or
other encumbrances of any nature whatsoever (collectively, "Liens"). Except as
set forth on Schedule 2.2 hereto, there are no existing options, calls or
commitments of any character relating to the issued or unissued capital stock or
other equity securities of any subsidiary of the Company.
Section 2.3 Power and Authority. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the Company Stockholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to approval of this Agreement by the Company Stockholders. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding obligation of Gaming and EAS,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, or other similar laws affecting
or relating to the enforcement of creditors' rights generally (collectively, the
"Bankruptcy Exceptions") and subject to general principles of equity.
Section 2.4 Approval of Options. The Company has taken all
action necessary to authorize and approve the grant of options to acquire Shares
pursuant to the Elsinore Option Agreement and the sale of such Shares upon the
exercise of such options.
Section 2.5 Compliance. (a) Except as set forth in Schedule
2.5(a), since February 28, 1997, the Company, its subsidiaries and affiliates
and their respective officers or directors or, to the best knowledge of the
Company, their respective agents or employees (if any), have been and are in
compliance with all applicable laws and regulations of foreign, Federal, state
and local governmental authorities applicable to the businesses conducted by any
of the Company and its subsidiaries (including without limitation any federal,
state, local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
governing or relating to the current or contemplated casino, liquor related
activities and gaming activities and operations, including, without limitation,
the Nevada Gaming Control Act, as amended (the "Nevada Act"), and the Indian
Gaming Regulatory Act (the "Indian Gaming Act") and the rules and regulations
promulgated thereunder, or applicable to the properties owned or leased and used
by the Company or its
8
<PAGE>
subsidiaries (collectively, "Gaming Laws")), and neither the Company, nor, to
the best knowledge of the Company, any of its subsidiaries or affiliates, is
aware of any claim of violation, or of any actual violation, of any such laws
and regulations, by the Company or any of its subsidiaries, except where such
failure or violation (whether actual or claimed) would not have a Company
Material Adverse Effect. None of the Company or its subsidiaries, any employee,
officer, director or stockholder or, to the best knowledge of the Company or
affiliate, thereof, has received any written claim, demand, notice, complaint,
court order or administrative order from any governmental authority since
February 28, 1997, asserting that a license of it or them, as applicable, under
any Gaming Laws should be revoked or suspended.
(b) Except as set forth in Schedule 2.5(b), since February 28,
1997, each of the Company and its subsidiaries has and currently possesses, and
is current on all fees with regard to, all franchises, certificates, licenses,
permits and other authorizations from any governmental authorities and all
patents, trademarks, service marks, trade names, copyrights, licenses and other
rights that are necessary to each of the Company and its subsidiaries for the
present ownership, maintenance and operation of its business, properties and
assets (including, without limitation, all gaming and liquor licenses), except
where the failure to possess such franchises, certificates, licenses, permits,
and other authorizations, patents, trademarks, service marks, trade names,
copyrights, licenses and other rights (other than those required to be obtained
by the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB"), the City of Las Vegas ("Las Vegas") and the
National Indian Gaming Commission (the "Indian Gaming Commission") (the Gaming
Commission, the Control Board, the CCB, Las Vegas and the Indian Gaming
Commission are collectively referred to as the "Gaming Authorities"), including
approvals under the Gaming Laws) would not have a Company Material Adverse
Effect; and none of the Company and its subsidiaries is in violation of any
thereof, except where such violation would not have a Company Material Adverse
Effect.
(c) Since February 28, 1997, neither the Company nor any of
its subsidiaries is in violation of, or has violated (with or without notice or
lapse of time), any applicable provisions of (i) any laws, rules, statutes,
orders, ordinances or regulations, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or
obligations to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties are bound or affected, which, individually or in the aggregate, would
have a Company Material Adverse Effect.
(d) Except as set forth in Schedule 2.5(d), since February 28,
1997: (i) the Company and each of its subsidiaries is, and has been, in full
compliance with all of the terms and requirements of each award, decision,
injunction, judgment, order, ruling, subpoena, or verdict (each, an "Order")
entered, issued, made, or rendered by any court, administrative agency, or other
governmental entity, officer or authority or by any arbitrator to which it, or
any of the assets owned or used by it, is or has been subject, and (ii) no event
has occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a
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violation of or failure to comply with any term or requirement of any Order to
which the Company or its subsidiaries, or any of the assets owned or used by the
Company or its subsidiaries, is subject except where such non-compliance,
violation or failure to comply would not have a Company Material Adverse Effect.
(e) Neither the Company nor any of its subsidiaries has
received, at any time since February 28, 1997, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which the Company or its subsidiaries, or any of the assets owned or used by the
Company or its subsidiaries, is or has been subject and which would have a
Company Material Adverse Effect.
(f) No investigation or review by any government entity,
officer or authority with respect to the Company or its subsidiaries is pending
or, to the knowledge of the Company, threatened, nor, to the knowledge of the
Company, has any government entity, officer or authority indicated an intention
to conduct the same, other than, in each case, those which would not have a
Company Material Adverse Effect.
Section 2.6 Non-Contravention; Required Filings and Consents.
(a) Except as set forth in Schedule 2.6 hereto and as contemplated by Section
2.6(b), the execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby (including, without
limitation, the Elsinore Option Agreement and the Elsinore Merger) do not and
will not (i) contravene or conflict with the Company Articles of Incorporation
or the Company Bylaws or the equivalent organizational documents of any of its
subsidiaries or any resolution adopted by the Board or the Company Stockholders
or the board of directors or stockholders of any of the Company's subsidiaries,
(ii) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company, any of its subsidiaries or any of their respective
properties, (iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any governmental entity, official or
authority right to revoke, withdraw, suspend, cancel, terminate or modify, any
authorization that is held by the Company or any of its subsidiaries, or that
otherwise relates to the business of, or any of the assets owned by, the Company
or any of its subsidiaries, (iv) conflict with, or result in the breach or
termination of any provision of or constitute a default (with or without the
giving of notice or the lapse of time or both) under, or give rise to any right
of termination, cancellation, or loss of any benefit to which the Company or any
of its subsidiaries is entitled under any provision of any agreement, contract,
license or other instrument binding upon the Company, any of its subsidiaries or
any of their respective properties, or allow the acceleration of the performance
of, any obligation of the Company or any of its subsidiaries under any
indenture, mortgage, deed of trust, lease, license, contract, instrument or
other agreement to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective assets
or properties is subject or bound, or (v) result in the creation or imposition
of any Lien on any asset of the Company or any of its subsidiaries, except in
the case of clauses (i), (ii), (iii) and (iv) for any such contraventions,
conflicts, violations, breaches, terminations,
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defaults, cancellations, losses, accelerations and Liens which would not,
individually or in the aggregate, have a Company Material Adverse Effect or be
reasonably expected to prevent the consummation by the Company of the
transactions contemplated by this Agreement.
(b) The execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated hereby
(including, without limitation, the Elsinore Option Agreement, the Escrow
Agreement and the Elsinore Merger) by the Company require no action by or in
respect of, or filing with, any governmental entity, official or authority
(either domestic or foreign) other than (i) the filing of articles of merger in
accordance with the Nevada Merger Law, (ii) compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) compliance with any applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), and state securities, takeover and
Blue Sky laws, (iv) obtaining all necessary gaming approvals, including those
required by the Gaming Authorities, including approvals under the Gaming Laws,
and (v) such additional actions or filings which, if not taken or made, would
not, individually or in the aggregate, have a Company Material Adverse Effect or
be reasonably expected to prevent the consummation by the Company of the
transactions contemplated by this Agreement.
Section 2.7 SEC Reports. (a) The Company has filed all
required forms, reports and documents with the Securities and Exchange
Commission (the "SEC") since February 28, 1997. The Company has made available
to Gaming, in the form filed with the SEC, the Company's (i) Quarterly Reports
on Form 10-Q filed by the Company with the SEC since February 28, 1997 and (ii)
all Current Reports on Form 8-K and registration statements filed by the Company
with the SEC since February 28, 1997 (collectively and as amended as required,
the "SEC Reports"). As of their respective dates, the SEC Reports complied in
all material respects with all applicable requirements of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), and the Exchange Act, each as in effect on the dates such SEC
Reports were filed. As of their respective dates, none of the SEC Reports,
including, without limitation, any financial statements or schedules included
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No subsidiary of the Company is required, as of the date hereof,
to file any form, report, or other document with the SEC under Section 12 of the
Exchange Act. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the SEC
Reports fairly present in all material respects, in conformity with GAAP (as
defined in Section 7.12 of this Agreement) applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations and cash flows for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements). The Company has heretofore made available or
promptly will make available to Gaming a complete and correct copy of any
amendments or modifications, which are required to be filed with the SEC but
have not yet been filed with the SEC, to the SEC Reports.
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(b) Except as set forth in Schedule 2.7(b) hereto, the Company
and its subsidiaries have no liabilities of any nature (whether accrued,
absolute, contingent or otherwise), except for (i) liabilities set forth in the
audited balance sheet of the Company dated March 31, 1997 or on the notes
thereto, contained in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997, (ii) liabilities incurred in the ordinary
course of business consistent with past practice since March 31, 1997 and (iii)
liabilities which would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 2.8 Absence of Certain Changes. Except as set forth in
Schedule 2.8 hereto, since February 28, 1997, the Company and its subsidiaries
have conducted their respective businesses only in the ordinary course, and
there has not been (i) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock, (ii) any incurrence,
assumption or guarantees by the Company or any of its subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business,
(iii) any making of any loan, advance or capital contributions to, or
investments in, any other person, (iv) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (v) (x) any granting by the
Company or any of its subsidiaries to any officer of the Company or any of its
subsidiaries of any increase in compensation, except in the ordinary course of
business (including in connection with promotions) consistent with past practice
or as was required under employment agreements in effect as of the date of the
most recent audited financial statements included in the SEC Reports filed and
publicly available prior to the date of this Agreement, (y) any granting by the
Company or any of its subsidiaries to any such officer of any increase in
severance or termination pay, except as part of a standard employment package to
any person promoted or hired, or as was required under employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the SEC Reports filed or (z) except termination
arrangements in the ordinary course of business consistent with past practice
with employees other than any executive officer of the Company, any entry by the
Company or any of its subsidiaries into any employment, severance or termination
agreement with any such officer, (vi) any damage, destruction or loss (other
than a decline of revenue or net income), whether or not covered by insurance,
that would be expected to have a Company Material Adverse Effect, (vii) any
transaction or commitment made, or any contract or agreement entered into, by
the Company or any of its subsidiaries relating to any of their assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its subsidiaries or any contract or
other right, in either case, material to the Company and its subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course of
business and those contemplated by this Agreement, (viii) any change in
accounting methods, principles or practices by the Company materially affecting
its assets, liabilities or business, except insofar as may have been required by
a change in generally accepted accounting principles or (ix) any other change
(other than a decline of revenue or net income) which would have a Company
Material Adverse Effect.
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Section 2.9 Proxy Statement. The proxy or information
statement or similar materials distributed to the Company's Stockholders in
connection with the Elsinore Merger, including any amendments or supplements
thereto (the "Proxy Statement"), shall not, at the time filed with the SEC, at
the time mailed to the Company Stockholders, at the time of the Stockholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
provided by Gaming specifically for use in the Proxy Statement. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act.
Section 2.10 No Brokers. The Company has not employed any
broker, finder or financial advisor or incurred any liability for any brokerage
fees, commissions, finders' or financial advisory fees in connection with the
transactions contemplated hereby.
Section 2.11 Absence of Litigation. Except as disclosed in
Schedule 2.11 hereto, since February 28, 1997, there has not been any action,
suit, claim, investigation or proceeding pending against, or to the knowledge of
the Company, threatened against, the Company or any of its subsidiaries or any
of their respective properties or the Board before any court or arbitrator or
any administrative, regulatory or governmental body, or any agency or official
which, individually or in the aggregate, would have a Company Material Adverse
Effect. Except as disclosed in Schedule 2.11 hereto, since February 28, 1997,
there has not been any action, suit, claim, investigation or proceeding pending
against, or to the knowledge of the Company, threatened against, the Company or
any of its subsidiaries or any of their respective properties or the Board
before any court or arbitrator or any administrative, regulatory or governmental
body, or any agency or official which (i) challenges or seeks to prevent,
enjoin, alter or delay the Elsinore Merger or any of the other transactions
contemplated hereby or (ii) alleges any criminal action or inaction. Except as
disclosed in Schedule 2.11 hereto, since February 28, 1997, neither the Company
nor any of its subsidiaries nor any of their respective properties has been
subject to any order, writ, judgment, injunction, decree, determination or award
having, or which would have a Company Material Adverse Effect or which would
prevent or delay the consummation of the transactions contemplated hereby.
Section 2.12 Taxes. Except as set forth in Schedule 2.12
hereto, (a) the Company and its subsidiaries have filed, been included in or
sent, all material returns, material declarations and reports and information
returns and statements required to be filed or sent by or relating to any of
them relating to any Taxes (as defined herein) with respect to any material
income, properties or operations of the Company or any of its subsidiaries
(collectively, "Returns"); (b) as of the time of filing, the Returns correctly
reflected in all material respects the facts regarding the income, business,
assets, operations, activities and status of the Company and its subsidiaries
and any other material information required to be shown therein; (c) the Company
and its subsidiaries have timely paid or made provision for all material Taxes
that have been shown as due and payable on the Returns that have been filed; (d)
the Company and its
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subsidiaries have made or will make provision for all material Taxes payable for
any periods that end before the Effective Time for which no Returns have yet
been filed and for any periods that begin before the Effective Time and end
after the Effective Time to the extent such Taxes are attributable to the
portion of any such period ending at the Effective Time; (e) the charges,
accruals and reserves for Taxes reflected on the books of the Company and its
subsidiaries are adequate under generally accepted accounting principles to
cover the Tax liabilities accruing or payable by the Company and its
subsidiaries; (f) neither the Company nor any of its subsidiaries is delinquent
in the payment of any material Taxes or has requested any extension of time
within which to file or send any material Return (other than extensions granted
to the Company for the filing of its Returns as set forth in Schedule 2.12),
which Return has not since been filed or sent; (g) no material deficiency for
any Taxes has been proposed, asserted or assessed in writing against the Company
or any of its subsidiaries other than those Taxes being contested in good faith
by appropriate proceedings and set forth in Schedule 2.12 (which shall set forth
the nature of the proceeding, the type of return, the deficiencies proposed,
asserted or assessed and the amount thereof, and the taxable year in question);
(h) neither the Company nor any of its subsidiaries has granted any extension of
the limitation period applicable to any material Tax claims other than those
Taxes being contested in good faith by appropriate proceedings; and (i) neither
the Company nor any of its subsidiaries is subject to liability for Taxes of any
person (other than the Company or its subsidiaries).
For purposes of this Agreement, "Tax" or "Taxes" means all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto, imposed by any Tax
Authority (as defined herein). "Tax Authority" means the Internal Revenue
Service and any other domestic or foreign governmental authority responsible for
the administration of any Taxes.
Section 2.13 Employee Benefits. (a) Schedule 2.13(a) hereto
contains a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or termination
pay, hospitalization or other medical, dental, life, disability or other
insurance, supplemental unemployment benefits, profit-sharing, pension, savings
or retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any employee or terminated employee of the Company
or any ERISA Affiliate (the "Plans"). Schedule 2.13(a) hereto identifies each of
the Plans that is an "employee benefit plan," as that term is defined in section
3(3) of ERISA (the "ERISA Plans"). Neither the Company nor any ERISA Affiliate
has ever maintained, administered, contributed to or had any contingent
liability with respect to any employee pension benefit plan subject to Title IV
of ERISA or Section 412 of the Code (as defined herein), other than the
multiemployer plans (as defined in Section 3(37)(A) of ERISA) which are
identified on Schedule 2.13(a) hereto.
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(b) With respect to each Plan, the Company has heretofore
delivered or made available to Gaming true and complete copies of each of the
following documents (to the extent applicable):
(i) a copy thereof;
(ii) a copy of the most recent annual report
and actuarial report, if required under ERISA, and the most recent report
prepared with respect thereto in accordance with Statement of Financial
Accounting Standards No. 87, Employer's Accounting for Pensions;
(iii) a copy of the most recent actuarial
report prepared with respect thereto in accordance with Statement of Financial
Accounting Standards No. 106, Employer's Accounting for Non-Pension
Postretirement Benefits;
(iv) a copy of the most recent Summary Plan
Description;
(v) if the Plan is funded through a trust or
any third party
funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
(vi) the most recent determination letter
received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) Neither the Company nor any ERISA Affiliate has incurred
any liability under Title IV of ERISA, including any "withdrawal liability"
(within the meaning of Section 4201 of ERISA) with respect to any benefit plan,
and, to the knowledge of the Company, no condition exists that presents a
material risk to the Company or any ERISA Affiliate of incurring a material
liability under such Title.
(d) Neither the Company nor any ERISA Affiliate, nor, to the
knowledge of the Company, any ERISA Plan, any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection with
which the Company or any ERISA Affiliate, any ERISA Plan, any such trust, or any
trustee or administrator thereof, or any party dealing with any ERISA Plan or
any such trust would be subject to either a civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a Tax imposed pursuant to section 4975 or 4976
of the Code, except for such penalties and Taxes which would not, individually
or in the aggregate, have a Company Material Adverse Effect.
(e) All contributions required to be made with respect to any
ERISA Plan (whether pursuant to the terms of any ERISA Plan or otherwise) on or
prior to the Effective Time have been timely made.
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(f) To the knowledge of the Company, each Plan has been
operated and administered in all material respects in accordance with its terms
and applicable law, including but not limited to ERISA and the Code except where
such noncompliance would not be expected to have a Company Material Adverse
Effect.
(g) Each ERISA Plan intended to be "qualified" within the
meaning of section 401(a) of the Code has been drafted with the intention to be
so qualified and has received a favorable determination letter from the Internal
Revenue Service on or before the date hereof.
(h) To the Company's knowledge, except as reasonably estimated
and as set forth in Schedule 2.13(h), no amounts payable under the Plans as a
result of the consummation of the transactions contemplated by this Agreement
will fail to be deductible for federal income tax purposes by application of
section 280G of the Code.
(i) Except as set forth on Schedule 2.13(i) hereto, no Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any ERISA Affiliate beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law or (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in section 3(2) of ERISA).
(j) Except as provided in Schedule 2.13(j) hereto, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment, or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
(k) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(l) The Company has reserved the right to amend or terminate
any Plan which is a welfare benefit plan, as that term is defined in section
3(l) of ERISA.
Section 2.14 Intellectual Property. Except as disclosed in the
SEC Reports filed prior to the date of this Agreement or as set forth in
Schedule 2.14 hereto, the Company and each of its subsidiaries owns, or is
licensed or has the right to use (in each case, free and clear of any Liens),
all Intellectual Property (as defined below) used in or necessary for the
conduct of its business substantially as currently conducted, to the knowledge
of the Company, the use of any Intellectual Property by the Company and its
subsidiaries does not infringe on or otherwise violate the rights of any person;
and, to the knowledge of the Company, no person is challenging, infringing on or
otherwise violating any right of the Company or any of its subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company and
its subsidiaries, except in each case for such infringements or failures to own
or be licensed
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as would not, individually or in the aggregate, have a Company Material Adverse
Effect. For purposes of this Agreement, "Intellectual Property" shall mean
trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and any registration in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings and
other works, whether copyrightable or not in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; and any similar intellectual property or
proprietary rights.
Section 2.15 Material Contracts. Except as set forth in
Schedule 2.15 hereto, there are no (i) agreements of the Company or any of its
subsidiaries containing an unexpired covenant not to compete or similar
restriction applying to the Company or any of its subsidiaries, (ii) interest
rate, currency or commodity hedging, swap or similar derivative transactions to
which the Company or any of its subsidiaries is a party nor (iii) other
contracts or amendments thereto that would be required to be filed and have not
been filed as an exhibit to a Form 10-K filed by the Company with the SEC as of
the date of this Agreement (collectively, the "Material Contracts"). Assuming
each Material Contract constitutes a valid and binding obligation of each other
party thereto, each Material Contract is a valid and binding obligation of the
Company or a subsidiary of the Company, as the case may be. To the Company's
knowledge, each Material Contract is a valid and binding obligation of each
other party thereto, and each such Material Contract is in full force and effect
and is enforceable by the Company or its subsidiaries in accordance with its
terms, except as enforcement may be limited by the Bankruptcy Exceptions and
subject to the general principles of equity. There are no existing defaults (or
circumstances or events that, with the giving of notice or lapse of time or both
would become defaults) of the Company or any of its subsidiaries (or, to the
knowledge of the Company, any other party thereto) under any of the Material
Contracts except for defaults that would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 2.16 Insurance. The Company and its subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, including fire and other risks insured against by extended
coverage, as is consistent with industry practice for companies (i) engaged in
similar businesses and (ii) of at least similar size, to that of the Company and
its subsidiaries, and the Company and each of its subsidiaries have maintained
in full force and effect public liability insurance, insurance against claims
for personal injury or death or property damage occurring in connection with any
of the activities of the Company or its subsidiaries or any of any properties
owned, occupied or controlled by the Company or its subsidiaries, in such amount
as reasonably deemed necessary by the Company or its subsidiaries. Schedule 2.16
hereto sets forth a complete and correct list of all material insurance policies
(including a brief
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summary of the nature and terms thereof and any amounts paid or payable to the
Company or any of its subsidiaries thereunder) providing coverage in favor of
the Company or any of its subsidiaries or any of their respective properties.
Each such policy is in full force and effect, no notice of termination,
cancellation or reservation of rights has been received with respect to any such
policy, there is no default with respect to any provision contained in any such
policy, and there has not been any failure to give any notice or present any
claim under any such policy in a timely fashion or in the manner or detail
required by any such policy, except for any such failures to be in full force
and effect, any such terminations, cancellations, reservations or defaults, or
any such failures to give notice or present claims which, individually or in the
aggregate, would have a Company Material Adverse Effect.
Section 2.17 Labor Matters. (a) Except as set forth in
Schedule 2.17(a) hereto, neither the Company nor any of its subsidiaries is a
party to any collective bargaining or other labor union contract applicable to
persons employed by the Company or any of its subsidiaries, no collective
bargaining agreement is being negotiated by the Company or any of its
subsidiaries and the Company has no knowledge of any material activities or
proceedings (i) involving any unorganized employees of the Company or its
subsidiaries seeking to certify a collective bargaining unit or (ii) of any
labor union to organize any of the employees of the Company or its subsidiaries.
There is no labor dispute, strike or work stoppage against the Company or any of
its subsidiaries pending or, to the Company's knowledge, threatened which may
interfere with the respective business activities of the Company or any of its
subsidiaries, except where such dispute, strike or work stoppage would not have
a Company Material Adverse Effect.
(b) Except as set forth in Schedule 2.17(b) hereto, the
Company and each of its subsidiaries have paid in full, or fully accrued for in
their financial statements, all wages, salaries, commissions, bonuses, severance
payments, vacation payments, holiday pay, sick pay, pay in lieu of compensatory
time and other compensation due or to become due to all current and former
employees of the Company and each Subsidiary for all services performed by any
of them on or prior to the date hereof. The Company and its subsidiaries are in
compliance with all applicable federal, state, local and foreign laws, rules and
regulations relating to the employment of labor, including without limitation,
laws, rules and regulations relating to payment of wages, employment and
employment practices, terms and conditions of employment, hours, immigration,
discrimination, child labor, occupational health and safety, collective
bargaining and the payment and withholding of Taxes and other sums required by
governmental authorities.
Section 2.18 Real Property. Schedule 2.18 hereto identifies
all real property owned, leased or used by the Company or its subsidiaries in
the conduct of its business. Except as set forth in Schedule 2.18, the Company
and each of its subsidiaries have good and marketable title to all of their
properties and assets, free and clear of all Liens, except for those disclosed
in the financial statements and except Liens for taxes not yet due and payable
and such Liens or other imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate, would not have a
Company Material Adverse Effect; and all leases pursuant to which
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the Company or any of its subsidiaries lease from others real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the knowledge of the Company, under any
of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material default
and in respect of which the Company or such subsidiary has not taken adequate
steps to prevent such a default from occurring) except where the lack of such
good standing, validity and effectiveness, or the existence of such default or
event, would not have a Company Material Adverse Effect.
Section 2.19 Bankruptcy. The plan of reorganization of the
Company, which became effective on February 28, 1997, has been confirmed by the
appropriate court, and the confirmation order issued by such court (the
"Confirmation Order") has been entered. All motions for rehearing or
reconsideration of the Confirmation Order have been denied or withdrawn. The
time allowed for appeals of the Confirmation Order has expired without any
appeal having been taken or, if the confirmation order has been appealed, no
stay is in effect. The Company has not defaulted and has fully complied with the
Confirmation Order.
Section 2.20 Environmental Matters. (a) Except as set forth on
Schedule 2.20 (i) the Company and its subsidiaries are in compliance with all
Environmental Laws (as defined herein), except where the failure to be in
compliance would not have a Company Material Adverse Effect, and (ii) to the
best knowledge of the Company, there are not, with respect to the Company or any
of its subsidiaries, any past violations of Environmental Laws, releases of any
material into the environment, actions, activities, circumstances, conditions,
events, incidents, contractual obligations or other legal requirements that may
give rise to any liability, cost or expense under any Environmental Laws, which
liabilities, costs or expenses, either individually or in the aggregate, would
have a Company Material Adverse Effect.
(b) As used in this Section 2.20, the term "Environmental
Laws" means the applicable common law and all applicable Federal, state, local
and foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of, or
exposure to, chemicals, pollutants, contaminants, asbestos-containing materials
or industrial, toxic or hazardous substances or wastes into the environment, as
well as all applicable authorizations or codes, decrees, injunctions, judgments,
licenses, orders, permits or regulations in effect thereunder.
Section 2.21 Representations Complete.
None of the representations or warranties made by the Company herein or in any
Schedule or Exhibit hereto contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
any material fact required or necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GAMING AND EAS
Each of Gaming and EAS represents and warrants to the Company
as follows:
Section 3.1 Organization; Power and Authority. Each of Gaming
and EAS is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not, individually or in the
aggregate, have a Gaming Material Adverse Effect (as defined herein). When used
in this Agreement, the term "Gaming Material Adverse Effect" means any change or
effect (i) that would be materially adverse to the business, results of
operations, conditions (financial or otherwise) or prospects of Gaming and EAS
and their subsidiaries, taken as a whole, or (ii) that would impair the ability
of Gaming and EAS to consummate the transactions contemplated hereby. Each of
Gaming and EAS has the requisite corporate power and authority to execute and
deliver this Agreement and consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of each of Gaming and EAS and by the
sole stockholder of each of Gaming and EAS, and no other corporate proceedings
on the part of Gaming or EAS are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Gaming and EAS and, assuming this
Agreement constitutes a valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of each of Gaming and EAS,
enforceable against each of Gaming and EAS in accordance with its terms, except
as such enforcement may be limited by the Bankruptcy Exceptions and subject to
the general principles of equity.
Section 3.2 Non-Contravention; Required Filings and Consents.
(a) Except as set forth on Schedule 3.2(a) hereto, the execution, delivery and
performance by each of Gaming and EAS of this Agreement and the consummation of
the transactions contemplated hereby (including, without limitation, the
Elsinore Option Agreement, the Escrow Agreement and the Elsinore Merger) do not
and will not: (i) contravene or conflict with the Certificate of Incorporation
or Bylaws of Gaming or the equivalent organizational documents of EAS, or any
resolution adopted by the board of directors or stockholders of Gaming or EAS,
(ii) assuming that all consents, authorizations and approvals contemplated by
subsection (b) below have been obtained and all filings described therein have
been made, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Gaming or to EAS or any of their respective properties,
(iii) contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any governmental entity, official or authority right to
revoke, withdraw, suspend, cancel, terminate or modify, any authorization that
is held by Gaming or EAS or that otherwise relates
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to the business of, or any of the assets owned by Gaming or EAS, (iv) conflict
with, or result in the breach or termination of any provision of or constitute a
default (with or without the giving of notice or the lapse of time or both)
under, or give rise to any right of termination, cancellation, or loss of any
benefit to which either Gaming or EAS is entitled under any provision of any
agreement, contract, license or other instrument binding upon either Gaming or
EAS, or allow the acceleration of the performance of, any obligation of either
Gaming or EAS under any other agreement to which Gaming or EAS is a party or by
which Gaming or EAS is subject or bound, or (v) result in the creation or
imposition of any Lien on any asset of Gaming or EAS, except in the case of
clauses (ii), (iii) and (iv) for any such contraventions, conflicts, violations,
breaches, terminations, defaults, cancellations, losses, accelerations and Liens
which would not individually or in the aggregate have a Gaming Material Adverse
Effect or be reasonably expected to prevent the consummation by Gaming or by EAS
of the transactions contemplated by this Agreement.
(b) The execution, delivery and performance by Gaming and by
EAS of this Agreement and the consummation of the transactions contemplated
hereby (including the Elsinore Option Agreement, the Escrow Agreement and the
Elsinore Merger) by Gaming and by EAS require no action by or in respect of, or
filing with, any governmental entity, official or authority (either domestic or
foreign), other than: (i) the filing of Articles of Merger in accordance with
the Nevada Merger Law; (ii) compliance with any applicable requirements of the
HSR Act; (iii) compliance with any applicable requirements of the Exchange Act
and state securities, takeover and Blue Sky laws; (iv) obtaining all necessary
gaming approvals, including those required by the Gaming Authorities, including,
without limitation, approvals under the Gaming Laws, if any; and (v) such
additional actions or filings which, if not taken or made, would not
individually or in the aggregate have a Gaming Material Adverse Effect or be
reasonably expected to prevent the consummation by Gaming or by EAS of the
transactions contemplated by this Agreement.
Section 3.3 Absence of Litigation. Since February 28, 1997,
there has not been any action, suit, claim, investigation or proceeding pending
against, or to the knowledge of Gaming or EAS, threatened against, Gaming or EAS
or any of their subsidiaries or any of their respective properties, or their
respective boards of directors, before any court or arbitrator or any
administrative, regulatory or governmental body, or any agency or official
which, individually or in the aggregate, would have a Gaming Material Adverse
Effect. Since February 28, 1997, neither Gaming nor EAS nor any of their
subsidiaries nor any of their respective properties has been subject to any
order, writ, judgment, injunction, decree, determination or award having, or
which would have, a Gaming Material Adverse Effect or which would prevent or
delay the consummation of the transactions contemplated hereby.
Section 3.4 Proxy Statement. None of the information provided
by Gaming specifically for use in the Proxy Statement shall, at the time filed
with the SEC, at the time mailed to the Company Stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required
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to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Section 3.5 No Prior Activities. Since the date of its
incorporation, neither Gaming nor EAS has engaged in any activities other than
in connection with or as contemplated by this Agreement, the Riviera Merger or
in connection with arranging any financing required to consummate the
transactions contemplated hereby.
Section 3.6 No Brokers. Except for Jefferies & Co., Inc.
(whose fee will be paid by Gaming), neither Gaming nor EAS has employed any
broker or finder, nor has it incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
Section 3.7 Capitalization of Gaming. On the Closing Date and
at the Effective Time, Gaming will have cash or immediately available funds in
an amount not less than the sum of (i) the aggregate amount of Merger
Consideration to be paid hereunder, (ii) the aggregate amount to be paid at the
Effective Time pursuant to Section 1.9 hereof and (iii) an amount equal to $3.16
multiplied by the number of Dissenting Shares.
Section 3.8 Representations Complete. None of the
representations or warranties made by either Gaming or EAS herein or in any
Exhibit hereto contains or will contain at the Effective Time any untrue
statement of a material fact, or omits or will omit at the Effective Time any
material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they are made, not misleading.
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business of the Company. Except as
otherwise expressly provided in this Agreement, during the period from the date
hereof to the Effective Time, the Company and its subsidiaries will each conduct
their respective operations according to its ordinary course of business, and
the Company and its subsidiaries will each use its reasonable best efforts to
preserve intact its business organization, to keep available the services of its
officers and employees and to maintain existing relationships with licensors,
licensees, suppliers, contractors, distributors, and others having business
relationships with it. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, or as set forth in
Schedule 4.1 hereto, prior to the Effective Time, neither the Company nor any of
its subsidiaries will, without the prior written consent of Gaming:
(a) amend its Articles of Incorporation or Bylaws or other
comparable organizational documents;
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(b) authorize for issuance, issue, pledge, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) or otherwise encumber, any capital stock of any class or any other
securities or equity equivalents (including, without limitation, stock
appreciation rights), except as required by the Company Plan, warrants or other
securities listed on Schedule 2.2, as such are in effect as of the date hereof,
or amend any of the terms of any such securities or agreements outstanding as of
the date hereof;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of its capital
stock, or, redeem, repurchase or otherwise acquire any of its securities or any
securities of its subsidiaries;
(d) (i) except as set forth in Schedule 4.1(d)(i) hereto or in
the ordinary course of business, create or incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse the
obligations of any other person, (ii) make any loans, advances or capital
contributions to, or investments in, any other person, (iii) pledge or otherwise
encumber any shares of capital stock of the Company or any of its subsidiaries,
or (iv) mortgage or pledge any of its assets, tangible or intangible, or create
or suffer to exist any Lien thereupon;
(e) enter into any transaction, other than in the ordinary
course of business, or make any investment, except for expenditures and
transactions in an aggregate amount not to exceed by more than $350,000 the
aggregate amount of expenditures and transactions set forth in the capital
expenditures plan provided to Gaming by the Company on September 5, 1997.
(f) enter into, adopt or (except as may be required by law or
by the terms of any such arrangement) amend or terminate any bonus,
profit-sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
agreement, trust, plan, fund or other arrangement for the benefit or welfare of
any director, officer or employee, or increase in any manner the compensation or
benefits of any director, officer or employee, or grant any benefit or
termination or severance pay to any director, officer or employee not required
by any plan or arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock options) or by law;
(g) acquire, sell, lease or dispose of, or encumber any assets
outside the ordinary course of business or any assets which in the aggregate are
material to the Company and its subsidiaries, taken as a whole, or enter into
any contract, agreement, commitment or transaction outside the ordinary course
of business;
(h) change any of the accounting principles or practices used
by the Company, except as may be required as a result of a change in law, SEC
guidelines or GAAP;
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(i) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof; (ii) authorize any new
capital expenditure or expenditures, except for expenditures and transactions in
an aggregate amount not to exceed by more than $350,000 the aggregate amount of
expenditures and transactions set forth in the capital expenditures plan
provided to Gaming by the Company on September 5, 1997, (iii) settle any
litigation for amounts in excess of $100,000 individually or $500,000 in the
aggregate; or (iv) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(j) make any Tax election or settle or compromise any Tax
liability, other than in the ordinary course of business;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities set forth in Schedule 2.8 hereto or reflected or reserved
against in the financial statements (or the notes thereto) of the Company and
its subsidiaries or incurred in the ordinary course of business consistent with
past practice;
(l) terminate, modify, amend or waive compliance with any
provision of any Material Contract or fail to take any action necessary to
preserve the benefits of any such Material Contract to the Company or any of its
subsidiaries;
(m) fail to comply with any laws, ordinances or other
governmental regulations applicable to the Company or any of its subsidiaries,
including, but not limited to, the Gaming Laws and any regulations promulgated
thereunder, that may have a Company Material Adverse Effect; or
(n) take, or agree in writing or otherwise to take, any of the
actions described in this Section 4.1.
Section 4.2 Proxy Statement. (a) The Company shall, as
promptly as practicable following the date hereof, prepare and file the Proxy
Statement with the SEC under the Exchange Act. Gaming and EAS shall use their
respective best efforts to cooperate with the Company in the preparation of the
Proxy Statement. As soon as practicable following completion of review of the
Proxy Statement by the SEC, the Company shall mail the Proxy Statement to its
stockholders who are entitled to vote at the Stockholders' Meeting. Subject to
the fiduciary obligations of the Board under applicable law, the Proxy Statement
shall contain the recommendation of the Board that the Company Stockholders
approve this Agreement and the transactions contemplated hereby.
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(b) The Company shall use its reasonable best efforts to
promptly obtain and furnish the information required to be included in the Proxy
Statement and to respond promptly to any comments from, or requests made by the
SEC with respect to the Proxy Statement. The Company shall promptly notify
Gaming of the receipt of comments from, or any requests by, the SEC with respect
to the Proxy Statement, and shall promptly supply Gaming with copies of all
correspondence between the Company (or its representatives) and the SEC (or its
staff) relating thereto. The Company agrees to correct any information provided
by it for use in the Proxy Statement which shall have become, or is, false or
misleading; provided, however, that the Company shall first use its reasonable
best efforts to consult with Gaming about the form and substance of each such
correction.
Section 4.3 Access to Information. (a) Subject to applicable
law and the agreements set forth in Section 4.3(b), between the date hereof and
the Effective Time, the Company will give Gaming and its counsel, financial
advisors, auditors and other authorized representatives reasonable access
(during regular business hours upon reasonable notice) to all employees, offices
and other facilities and to all books and records of the Company and its
subsidiaries, will permit Gaming and its counsel, financial advisors, auditors
and other authorized representatives to make such inspections Gaming may
reasonably require, and will cause the Company's officers and those of its
subsidiaries to furnish Gaming or its representatives with such financial and
operating data and other information with respect to the business and properties
of the Company and any of its subsidiaries as Gaming may from time to time
reasonably request. No investigation pursuant to this Section 4.3 shall affect
any representations or warranties of the Company herein or the conditions to the
obligations of Gaming or EAS hereunder.
(b) The parties hereto each agree that the provisions of the
Confidentiality Agreement, dated as of May 5, 1997 and attached hereto as
Exhibit C (the "Confidentiality Agreement"), between the Company and Mr. Allen
E. Paulson shall apply to and be binding on Gaming and EAS, and that the terms
of the Confidentiality Agreement are incorporated herein by reference.
Section 4.4 Reasonable Best Efforts. Subject to the terms and
conditions contained herein, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
all applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the parties hereto shall cooperate with one another (i) in the
preparation and filing of any required filings under the HSR Act, the Gaming
Laws and the other laws referred to in Sections 2.5 and 3.2 hereof, (ii) in
determining whether action by or in respect of, or filing with, any governmental
body, agency, official or authority is required, proper or advisable, or any
actions, consents, waivers or approvals are required to be obtained from parties
to any contracts in connection with the transactions contemplated by this
Agreement, (iii) in seeking to obtain any such actions, consents and waivers and
in making any such filings, and (iv) in seeking to lift any order, decree or
ruling restraining, enjoining or otherwise prohibiting the
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Elsinore Merger. If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party hereto shall take all such necessary
action.
Section 4.5 Public Announcements. Each of the parties hereto
agrees that it will not issue any press release or otherwise make any public
statement with respect to this Agreement or the transactions contemplated hereby
without the prior consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that such disclosure can be
made without obtaining such prior consent if (i) the disclosure is required by
law, and (ii) the party making such disclosure has first used its reasonable
best efforts to consult with the other party about the form and substance of
such disclosure.
Section 4.6 Indemnification; Insurance. (a) From and after the
Effective Time, the Surviving Corporation shall indemnify and hold harmless each
person who is, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of the Company or
any of its subsidiaries (collectively, the "Indemnified Parties" and
individually, an "Indemnified Party") against all losses, liabilities, expenses
(including attorneys' fees), claims or damages in connection with any claim,
suit, action, proceeding or investigation based in whole or in part upon the
fact that such Indemnified Party is or was a director, officer or employee of
the Company or any of its subsidiaries and arising out of acts or omissions
occurring prior to and including the Effective Time (including but not limited
to the transactions contemplated by this Agreement) to the fullest extent
permitted by Nevada law, for a period of not less than six years following the
Effective Time; provided, that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims.
(b) The provisions of the Surviving Corporation Articles of
Incorporation with respect to indemnification and exculpation shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time are or were current or former directors
or officers of the Company in respect of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law.
(c) Prior to the Closing Date, the Company shall obtain a tail
insurance policy (the "Company D & O Liability Insurance Tail") covering the
directors and officers for acts or failures to act prior to the Effective Time,
and having substantially the same coverage and deductibles as the Company's
directors' and officers' liability insurance policy as in effect on July 1,
1997.
(d) From and after the Effective Time, no Indemnified Party
shall be liable to Gaming, EAS or the Surviving Corporation (or anyone claiming
rights through any of them, including Allen E. Paulson) for breach of any of the
representations, warranties, covenants or
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agreements contained in this Agreement. It is the express understanding of the
parties that the sole remedy of Gaming and EAS under this Agreement (or anyone
claiming rights under this Agreement through Gaming or EAS) in the event of a
breach or alleged breach by the Company of its representations, warranties,
covenants or agreements), shall be to refuse to consummate the Elsinore Merger,
subject, however, to Gaming's rights under Article VI hereof.
(e) This Section 4.6 is intended to benefit the Indemnified
Parties and their respective heirs, executors and personal representatives, and
shall be binding on the successors and assigns of the Company and the Surviving
Corporation.
Section 4.7 Notification of Certain Matters. The Company shall
give prompt notice to Gaming and EAS, and Gaming and EAS shall give prompt
notice to the Company, upon becoming aware of: (i) the occurrence or
non-occurrence, of any event the occurrence, or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate, and (ii) any failure of the Company or Gaming and EAS, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, that the delivery of any
notice pursuant to this Section 4.7 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 4.8 No Solicitation. (a) The Company and its
subsidiaries and affiliates will not, and the Company and its subsidiaries and
affiliates will use their reasonable best efforts to ensure that their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making of, any offer
or proposal which constitutes or is reasonably likely to lead to any Alternative
Transaction (as defined below) with respect to the Company or any of its
subsidiaries or an inquiry with respect thereto, or, (ii) in the event of an
unsolicited Alternative Transaction for the Company or any of its subsidiaries,
engage in negotiations or discussions with, or provide any information or data
to any person relating to any Alternative Transaction, subject to the Board's
good faith determination, after consulting with outside legal counsel to the
Company, that the failure to engage in such negotiations or discussions or
provide such information would likely result in a breach of the Board's
fiduciary duties under applicable law if such Alternative Transaction would
provide the Company Stockholders with a purchase price per Share that is higher
(the amount of such excess in the purchase price per Share is hereinafter
referred to as the "Spread") than the Merger Consideration to be received by the
Company Stockholders. The Company shall notify Gaming and EAS orally and in
writing of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions thereof and the identity of the person
making such), within twenty four hours of the receipt thereof. The Company
shall, and shall cause its subsidiaries and affiliates, and their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other agents to, immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any parties conducted heretofore with
respect to any Alternative Transaction relating to the Company or any of its
subsidiaries. Notwithstanding anything to the contrary, nothing contained in
this Section 4.8 shall prohibit the Company or the
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Board from communicating to the Company Stockholders a position as required by
Rules 14d-9 and 14a-2 promulgated under the Exchange Act.
(b) As used in this Agreement, "Alternative Transaction" shall
mean any tender or exchange offer for the Common Stock or for the equivalent
securities of any of the Company's subsidiaries, any proposal for a merger,
consolidation or other business combination involving any such person, any
proposal or offer to acquire in any manner a ten percent or more equity interest
in, or ten percent or more of the business or assets of, such person, any
proposal or offer with respect to any recapitalization or restructuring with
respect to such person or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to such person or any
subsidiary of such person; provided, however, that, as used in this Agreement,
the term "Alternative Transaction" shall not apply to any transaction of the
type described in this subsection (b) involving Gaming, EAS or their affiliates.
Section 4.9 Compliance with Gaming Laws. None of Gaming, EAS
or their officers, directors or shareholder will attempt to influence, direct or
cause the direction of the management or policies of the Company pending receipt
of all required approvals of the Gaming Authorities, pursuant to the Gaming
Laws, for the transactions contemplated by this Agreement and the Elsinore
Option Agreement.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1 Conditions to each Party's Obligation to Effect
the Elsinore Merger. The respective obligation of each party to effect the
Elsinore Merger is subject to the satisfaction or waiver on or prior to the
Effective Time of the following conditions:
(a) Any waiting period applicable to the consummation of the
Elsinore Merger under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) At the Stockholders' Meeting, this Agreement shall have
been approved and adopted by the affirmative vote of the holders of not less
than a majority of the Shares, excluding the Paulson Shares.
(c) There shall not have been any statute, rule, regulation,
judgment, order or injunction promulgated, entered, enforced, enacted or issued
applicable to the Elsinore Merger by any governmental entity which, directly or
indirectly, (i) prohibits the consummation of the Elsinore Merger or the
transactions contemplated by the Elsinore Option Agreement, (ii) prohibits or
materially limits the ownership or operation by the Company, or any of its
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respective subsidiaries of a material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or seeks to compel the Company
or Gaming or EAS to dispose of or hold separate any material portion of the
business or assets of the Company or Gaming or EAS and its subsidiaries, taken
as a whole, as a result of the Elsinore Merger or any of the other transactions
contemplated by this Agreement, or (iii) prohibits Gaming or EAS from
effectively controlling in any material respect the business or operations of
the Company, taken as a whole; provided, that the parties hereto shall have used
their reasonable best efforts to cause any such statute, rule, regulation,
judgment, order or injunction to be repealed, vacated or lifted.
(d) The Riviera Merger shall have become effective.
(e) Other than the filing of the articles of merger in
accordance with the Nevada Merger Law, all licenses, permits, registrations,
authorizations, consents, waivers, orders or other approvals required to be
obtained, and all filings, notices or declarations required to be made, prior to
the Effective Time, by Gaming, EAS, Mr. Allen E. Paulson, the Company or any of
its subsidiaries in order to consummate the Riviera Merger and the transactions
contemplated by this Agreement, and in order to permit the Company and its
subsidiaries to conduct their respective businesses in the jurisdictions
regulated by the Gaming Authorities after the Effective Time in the same manner
as conducted by the Company and its subsidiaries immediately prior to the
Effective Time shall have been obtained or made.
Section 5.2 Conditions to Obligations of Gaming and EAS to
Effect the Elsinore Merger. The obligations of Gaming and EAS to effect the
Elsinore Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following additional conditions:
(a) The Company shall have performed in all material respects
all of its obligations under this Agreement required to be performed by it at or
prior to the Closing Date and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all respects as of the
date of this Agreement and at and as of the Closing Date as if made at and as of
such time, except (i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address matters as of a
particular date shall remain true and correct as of such particular date.
(b) Neither the consummation nor the performance of any of the
transactions contemplated in this Agreement will, directly or indirectly (with
or without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Gaming or EAS or any affiliate of
Gaming or EAS to suffer any material adverse consequence under, (a) any
applicable legal requirement or Order or (b) any legal requirement or Order that
has been published, introduced, or otherwise proposed by or before any
governmental entity.
(c) The Option Seller shall have entered into the Elsinore
Option Agreement concurrent with the execution of this Agreement, and the
Elsinore Option Agreement shall be in full force and effect and the Option
Seller shall have complied in all respects with the terms thereof;
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(d) Mr. Allen E. Paulson shall not have become deceased or
Disabled (as defined herein). As used herein, "Disabled" means Mr. Allen E.
Paulson's incapacity due to physical or mental illness, injury or disease, which
incapacity renders him unable to perform the requisite duties of the chief
executive officer of Gaming for a consecutive period of 90 days or more. Any
question as to the existence, extent or potentiality of Mr. Allen E. Paulson's
disability upon which Gaming and the Option Seller cannot agree shall be
determined by a qualified, independent physician selected by the Company and
approved by Gaming and the disputing Option Sellers (whose approval shall not be
unreasonably withheld or delayed). The determination of such physician shall be
final and conclusive for all purposes of this Agreement.
(e) Gaming shall have received such documents as Gaming or EAS
may reasonably request for the purpose of (i) evidencing the accuracy at any
time on or prior to the Closing Date of any of the Company's representations and
warranties, (ii) evidencing the performance by the Company of, or the compliance
by the Company with, any covenant or obligation required to be performed or
complied with by the Company, (iii) evidencing the satisfaction of any condition
referred to in Sections 5.1 and 5.2 hereof or (iv) otherwise facilitating the
consummation or performance of any of the transactions contemplated hereby.
(f) The cost to the Company (net of any amounts paid by third
parties) of the Company D&O Liability Insurance Tail obtained pursuant to
Section 4.6(c) hereof shall not exceed the aggregate of $150,000.
Section 5.3 Conditions to Obligations of the Company to Effect
the Elsinore Merger. The obligations of the Company to effect the Elsinore
Merger shall be subject to the satisfaction at or prior to the Effective Time of
the following additional conditions:
(a) Gaming and EAS shall have performed in all material
respects all of its obligations under this Agreement required to be performed by
it at or prior to the Effective Time and the representations and warranties of
Gaming and EAS contained in this Agreement shall be true and correct in all
respects as of the date of this Agreement and at and as of the Effective Time as
if made at and as of such time, except (i) for changes specifically permitted by
this Agreement and (ii) that those representations and warranties which address
matters as of a particular date shall remain true and correct as of such
particular date.
(b) At the Closing Date, Gaming shall have in cash or
immediately available funds, an amount equal to the sum of (i) the aggregate
amount of Merger Consideration to be paid hereunder, (ii) the aggregate amount
to be paid at the Effective Time pursuant to Section 1.9 hereof and (iii) an
amount equal to $3.16 multiplied by the number of Dissenting Shares.
(c) The Company shall have received such documents as the
Company may reasonably request for the purpose of (i) evidencing the accuracy of
any of Gaming's and EAS' representations and warranties, (ii) evidencing the
performance by Gaming and EAS of, or the compliance by Gaming and EAS with, any
covenant or obligation required to be performed or
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<PAGE>
complied with by Gaming and EAS, (iv) evidencing the satisfaction of any
condition referred to in Sections 5.1 and 5.3 hereof or (v) otherwise
facilitating the consummation or performance of any of the transactions
contemplated hereby.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.1 Termination. This Agreement may be terminated and
the Elsinore Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the Company Stockholders:
(a) by mutual written consent of Gaming and EAS, on the one
hand, and the Company, on the other hand;
(b) by Gaming and EAS, on the one hand, or the Company, on the
other hand, if any court or governmental authority of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Elsinore Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
provided, that Gaming and the Company shall have used their reasonable best
efforts to have such injunction lifted;
(c) by Gaming and EAS, on the one hand, or the Company, on the
other hand, at any time after April 1, 1998, (the "Termination Date") if the
Elsinore Merger shall not have occurred by such date; provided, that if the
Elsinore Merger has not occurred solely by virtue of the fact that the required
approvals of one or more of the Gaming Authorities have not been obtained and
the Gaming Authorities have not informed Mr. Allen E. Paulson, Gaming or the
Company that a review of the applications for such approvals is scheduled by the
appropriate Gaming Authorities for a later date, then the Termination Date shall
be extended until such approvals have been granted or denied, except that under
no circumstances shall such extension continue after June 1, 1998; and,
provided, further, that the right to terminate this Agreement under this
subparagraph (c) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the principal cause of the failure
of the Elsinore Merger to have occurred by such date;
(d) by Gaming and EAS if (i) there shall have been a breach of
any representation or warranty of the Company contained herein which would have
a Company Material Adverse Effect or prevent the consummation of the Elsinore
Merger or the transactions contemplated hereby, which shall not have been cured
on or prior to ten business days following notice from Gaming of such breach,
(ii) there shall have been a breach of any covenant or agreement of the Company
contained herein which would have a Company Material Adverse Effect or prevent
the consummation of the Elsinore Merger or the transactions contemplated hereby,
which shall not have been cured on or prior to ten business days following
notice of
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such breach, (iii) the Board shall have withdrawn or modified, in a manner
materially adverse to Gaming, its approval or recommendation of this Agreement,
the Elsinore Merger or the transactions contemplated hereby or shall have
recommended, or the Company shall have entered into an agreement providing for,
an Alternative Transaction, or the Board shall have resolved to do any of the
foregoing, (iv) the Stockholders Meeting shall have been held and the vote
described in Section 5.1(b) shall not have been obtained, (v) Mr. Allen E.
Paulson shall have become deceased or Disabled or (vi) the Riviera Merger
Agreement shall have been terminated; or
(e) by the Company if (i) there shall have been a breach of
any representation or warranty of Gaming contained herein which would have a
Gaming Material Adverse Effect or prevent the consummation of the Elsinore
Merger or the transactions contemplated hereby, which shall not have been cured
on or prior to ten business days following notice from the Company of such
breach, (ii) there shall have been a breach of any covenant or agreement of
Gaming contained herein which would have a Gaming Material Adverse Effect or
prevent the consummation of the Elsinore Merger or the transactions contemplated
hereby, which shall not have been cured on or prior to ten business days
following notice of such breach, (iii) the Board determines, in good faith after
consulting with outside legal counsel to the Company, that it is required, in
the exercise of its fiduciary duties under applicable law, to enter into a
definitive agreement with respect to an Alternative Transaction or (iv) the
Stockholders Meeting shall have been held and the vote described in Section
5.1(b) shall not have been obtained.
(f) by the Company if the Closing has not occurred within 30
days after receipt of required approvals of the Gaming Authorities; provided,
however, that all of the conditions to Gaming's obligation to effect the
Elsinore Merger contained in Sections 5.1 and 5.2 hereof shall have been
satisfied or waived by Gaming.
Section 6.2 Effect of Termination; Termination Fee. (a) In the
event of the termination and abandonment of this Agreement pursuant to Section
6.1, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto, other than pursuant to the provisions
set forth in Section 6.2(b), Section 6.2(c) and Section 6.3 hereof.
(b) In the event this Agreement is terminated pursuant to
Sections 6.1(d)(iii), 6.1(d)(iv), 6.1(e)(iii) or 6.1(e)(iv) hereof, the Company
shall pay to Gaming immediately upon the closing of an Alternative Transaction
an aggregate amount equal to three percent of the consideration for the equity
of the Company which is received by the Company or its stockholders in the
Alternative Transaction valued at the higher of the value of the consideration
on the date of (i) the execution of the definitive agreement with respect to an
Alternative Transaction and (ii) the closing of the Alternative Transaction (the
"Termination Fee").
(c) In the event (A) this Agreement is terminated (except
pursuant to a NonPayment Termination Event (as defined herein)) or (B) the
Elsinore Merger does not occur in accordance with the terms of this Agreement on
or before April 2, 1998 (or if the Termination
32
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Date is extended as provided in Section 6.1(c) hereof, June 2, 1998) for any
reason other than the occurrence of a Non-Payment Termination Event, then the
Company shall be entitled to receive from Gaming and/or EAS, no later than five
business days from the date of such termination, on behalf of the Company
Stockholders other than the Option Seller (i) an amount equal to $178,776, plus
interest in an amount equal to 9.43% per annum on $893,878.68 from June 1, 1997,
through the date immediately preceding the execution date hereof, and (ii) an
amount equal to $230.94 multiplied by the number of days in the period beginning
on the execution date hereof and ending on the date immediately preceding the
earlier to occur of (x) the termination of this Agreement (except pursuant to a
Non-Payment Termination Event) or (y) the Termination Date, as extended pursuant
to Section 6.1(c) hereof, if applicable; provided, that the Company shall be
entitled to receive the payment described in this Section 6.2(c) if the Option
Seller is entitled to retain the payments made to it pursuant to Section 1.2(b)
of the Elsinore Option Agreement, and, further, provided, that the Company shall
not be entitled to such compensation if this Agreement is not consummated as a
result of a breach by the Company. For purposes of this Agreement, a
"Non-Payment Termination Event" shall mean the termination of this Agreement
pursuant to Sections 6.1(a), 6.1(b), 6.1(c) (because of the failure to satisfy
Sections 5.1(a), 5.1(c), 5.1(d), 5.2(c), or 5.2(f)), 6.1(d), 6.1(e)(iii) or
6.1(e)(iv) hereof. In addition, in the event that this Agreement is terminated
pursuant to Section 6.1(c) because of the failure of Gaming, RAS or Mr. Allen E.
Paulson to obtain the required approvals of the Gaming Authorities, then such
event shall constitute a Non-Payment Termination Event unless Mr. Allen E.
Paulson is in breach of his representation and covenant contained in Section
6.2(d) hereof.
(d) The ability of Gaming and EAS to terminate their
obligations without triggering the right of the Company to receive the
consideration described in Section 6.2(c) hereof is predicated upon the accuracy
of the following representation and performance by Mr. Allen E. Paulson of the
following agreement: (A) Mr. Allen E. Paulson has represented that prior to the
execution of this Agreement, he has discussed in detail with his Nevada counsel
his background and knows of no reason why he should not be able to obtain all
necessary Gaming Authorities approvals prior to April 1, 1998; and (B) Mr. Allen
E. Paulson has agreed that he will pursue vigorously and will give complete and
prompt attention requests of Gaming Authorities for information and will do
nothing which might delay receipt of all necessary Gaming Authorities approvals.
Section 6.3 Fees and Expenses. Except as set forth herein,
each party shall bear its own expenses and costs in connection with this
Agreement and the transactions contemplated hereby. In the event this Agreement
is terminated pursuant to Sections 6.1(d), 6.1(e)(iii) or 6.1(e)(iv) hereof, and
as a condition to such termination, the Company shall, immediately upon (i) the
execution of a definitive agreement with respect to an Alternative Transaction,
or (ii) the approval or recommendation by the Board, directly or indirectly, of
such an Alternative Transaction, reimburse Gaming, EAS and Mr. Allen E. Paulson
the documented out-of-pocket expenses (the "Expenses") of Gaming, EAS and Mr.
Allen E. Paulson, incurred from April 15, 1997, in connection with (i) the
transactions contemplated by this Agreement.
33
<PAGE>
ARTICLE VII
MISCELLANEOUS
Section 7.1 Survival. Subject to the following sentence, the
representations, warranties, covenants and agreements contained herein shall not
survive beyond the Effective Time. The covenants and agreements contained herein
which by their terms contemplate performance after the Effective Time (including
by the Surviving Corporation after the Elsinore Merger) shall survive the
Effective Time. In addition, Sections 6.2 and 6.3 hereof shall survive
termination of this Agreement. The representation and warranty made in Section
2.4 hereof shall survive indefinitely.
Section 7.2 Entire Agreement; Assignment. This Agreement
(including the Schedules and Exhibits hereto) (i) shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof,
and supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and (ii) shall
not be assigned by operation of law or otherwise and any purported assignment
shall be null and void, except that Gaming and EAS may assign this Agreement to
any of their affiliates without the prior written consent of the Company;
provided, that (i) no such assignment shall relieve Gaming and EAS of their
obligations hereunder if such assignee does not perform such obligations, and
(ii) such assignment will not result in any delay in (x) the consummation of the
transactions contemplated hereby by more than one month as determined by the
Company's counsel or (y) the ability to satisfy the condition contained in
Section 5.1(e) hereof by more than one month as determined by the Company's
counsel.
Section 7.3 Amendment. This Agreement may be amended by action
taken by the Company, Gaming and EAS at any time before or after adoption of the
Elsinore Merger by the Company Stockholders but, after any such approval, no
amendment shall be made which decreases the Merger Consideration or changes the
form thereof or which adversely affects the rights of the Company Stockholders
hereunder without the approval of the Company Stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 7.4 Extension or Waiver. At any time prior to the
Effective Time, the Company, on the one hand, and Gaming, on the other hand, may
(i) extend the time for the performance of any of the obligations or other acts
of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document, certificate
or writing delivered pursuant hereto, or (iii), subject to applicable law, waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
34
<PAGE>
Section 7.5 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
overnight courier with receipt requested, by facsimile transmission (with
receipt confirmed by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), to the other party as follows:
if to Gaming:
P.O. Box 9660
Rancho Santa Fe, CA 92067
Fax: (619) 756-3194
Attention: Mr. Allen E. Paulson
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Fax: (213) 687-5600
Attention: Brian J. McCarthy, Esq.
if to the Company:
202 Fremont Street
Las Vegas, Nevada 89101
Fax: (702) 387-5120
Attention: Mr. Jeffrey T. Leeds
with a copy to:
Gordon & Silver, Ltd.
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Fax: (702) 369-2666
Attention: Gerald M. Gordon, Esq.
35
<PAGE>
- and -
Kummer Kaempfer Bonner & Renshaw
3800 Howard Hughes Parkway
7th Floor
Las Vegas, NV 89109
Fax: (702) 796-7181
Attention: Martha J. Ashcraft, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the other party in writing in the manner set forth
above.
Section 7.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Nevada,
without regard to the principles of conflicts of law thereof. Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to
jurisdiction of the courts of the State of Nevada and of the United States of
America located in the State of Nevada for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby.
Section 7.7 Parties in Interest. This Agreement
shall be binding upon and shall inure solely to the benefit of each party hereto
and its successors and permitted assigns, and, except as set forth in Section
4.6, nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement, provided, that the Option
Seller is an intended beneficiary of the representation and warranty contained
in Section 2.4 hereof.
Section 7.8 Subsequent Actions. If, at any time
after the Effective Time, the Surviving Corporation shall consider or be advised
that any deeds, bills of sale, assignments, assurances or any other actions or
things are necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company or EAS acquired or
to be acquired by the Surviving Corporation as a result of or in connection with
the Elsinore Merger, or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company or EAS, all such deeds, bills
of sale, assignments, assumption agreements and assurances, and to take and do,
in the name and on behalf of each of such corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets of the Surviving Corporation or otherwise to carry out this
Agreement.
Section 7.9 Remedies. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
36
<PAGE>
Section 7.10 Severability. The provisions of this
Agreement shall be deemed severable, and the invalidity or unenforceability of
any provision shall not affect the validity and enforceability of the other
provisions hereof. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or unenforce-
able, (a) a suitable and equitable provision shall be substituted therefor in
order to carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid and unenforceable provision and (b) the remainder of
this Agreement and the application of such provision to other persons, entities
or circumstances shall not be affected by such invalidity or unenforceability.
Section 7.11 Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 7.12 Certain Definitions. For purposes of
this Agreement, the term:
(a) "affiliate" of a person means a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "GAAP" means United States generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession in the United States as in
effect on the date hereof.
(d) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of any person
means any corporation, partnership, joint venture or other legal entity of which
such person (either alone or through or together with any other subsidiary),
owns, directly or indirectly, fifty percent or more of the stock or other equity
interests, the holder of which is generally entitled to vote for the election of
the board of directors or other governing body of such corporation, partnership,
joint venture or other legal entity.
37
<PAGE>
Section 7.13 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed by its duly authorized officers as of the
date first above written.
R&E GAMING CORP.
By:
Name:
Title:
ELSINORE ACQUISITION SUB, INC.
By:
Name:
Title:
ELSINORE CORPORATION
By:
Name:
Title:
39
<PAGE>
Exhibit A
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
ELSINORE ACQUISITION SUB, INC.
Pursuant to ss. 78.385 of the Neveda Revised Statutes (the
"NRS"), the undersigned, being at least two-thirds of the Board of Directors of
Elsinore Acquisition Sub, Inc., a Nevada corporation (the "Corporation"), does
hereby declare and state as follows:
1. That the Articles of Incorporation of the Corporation
were duly filed with the Nevada Secretary of State on
July 1, 1997.
2. That this amendment was approved by unanimous written
consent of the holders of all of the outstanding
shares of capital stock of the Corporation.
3. That the Articles of Incorporation of the Corporation
are hereby amended in their entirety, as follows:
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ELSINORE ACQUISITION SUB, INC.
ARTICLE 1
NAME
The name of the Corporation is Elsinore Acquisition Sub, Inc.
<PAGE>
ARTICLE 2
INITIAL RESIDENT AGENT AND REGISTERED OFFICE
The name of the initial resident agent of the Corporation is
The Corporation Trust Company of Nevada, a corporate resident of the State of
Nevada, whose business address is One East First Street, Reno, Nevada 89501.
ARTICLE 3
CAPITAL STOCK
Section 3.1. Authorized Shares. The aggregate number of shares
of capital stock that the Corporation shall have the authority to issue is 1,000
shares of common stock with a par value of $.001 per share (the "Common Stock").
Section 3.2. Assessment of Shares. The capital stock of the
Corporation, after the amount of the subscription price has been paid, shall not
be subject to pay the debts of the Corporation, and no capital stock issued as
fully paid up shall ever be assessable or assessed.
Section 3.3. Denial of Preemptive Rights. No stockholder of
the Corporation shall have any preemptive or other right, by reason of his
status as a stockholder, to acquire any unissued shares, treasury shares, or
securities convertible into shares of the capital stock of the Corporation. This
denial of preemptive rights shall, and is intended to, negate any rights which
would otherwise be given to stockholders pursuant to NRS ss.ss. 78.265, 78.267
or any successor statute.
ARTICLE 4
DIRECTORS
Section 4.1. Style of Governing Board. The
members of the governing board of the Corporation shall be styled Directors.
Section 4.2. Initial Board of Directors.
The initial Board of Directors shall consist of one member.
2
<PAGE>
Section 4.3. Names and Addresses. The name and address of the
person who is to serve as Director until the first annual meeting of the
stockholders, or until his successor shall have been elected and qualified, is
as follows:
Name Address
Allen E. Paulson c/o Skadden, Arps, Slate,
Meagher & Flom LLP
300 S. Grand Avenue
Los Angeles, CA 90071
Attention: Brian J. McCarthy
Section 4.4. Increase or Decrease of Directors.
The number of Directors of the Corporation may be increased or decreased from
time to time as shall be provided in the bylaws of the Corporation.
ARTICLE 5
LIABILITY OF DIRECTORS AND OFFICERS
Section 5.1 Limitation of Person Liability. No director of
officer of the Corporation shall be liable to the Corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer.
This provision shall not eliminate or limit the liability of a director or
officer of the Corporation for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or the payment of distributions
in violation of NRS ss. 78.300. If the NRS are hereafter amended or interpreted
to eliminate or limit further the personal liability of directors or officers,
then the liability of directors or officers shall be eliminated or limited to
the full extent then so permitted.
Section 5.2 Payment of Expenses. In addition to any other
rights of indemnification permitted by the law of the State of Nevada as may be
provided for by the Corporation, in its bylaws or by agreement, the reasonable
expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding, involving alleged acts or omissions of such officer
or director in his or her capacity as an officer or director of the Corporation,
must be paid, by the Corporation or through insurance purchased and maintained
by the Corporation or through other financial arrangements made by the
Corporation, as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if
3
<PAGE>
it is ultimately determined by a court of competent jurisdiction that he or she
is not entitled to be indemnified by the Corporation.
Section 5.3 Repeal And Conflicts. Any repeal or modification
of this Section 5 approved by the stockholders of the Corporation shall be
prospective only. In the event of any conflict between this Article 5 and any
other Article of the Corporation's Articles of Incorporation, the terms and
provisions of this Article 5 shall control.
ARTICLE 6
COMPLIANCE WITH GAMING CONTROL ACT
All of the directors of the Corporation shall be subject to,
and the composition of the Board of Directors of the Corporation shall be in
compliance with, the requirements and qualifications imposed by the Nevada
Gaming Control Act (Nevada Revised Statutes ss. 463.010 et seq., as amended from
time to time), or any successor provision of Nevada law, and the regulations
promulgated thereunder, and the rules and regulations of any governmental agency
responsible for the licensing and regulation of gaming operations, including
without limitation, the Nevada State Gaming Control Board, the Nevada State
Gaming commission and the Clark County Liquor and Gaming Licensing Board.
4
<PAGE>
ARTICLE 7
MISCELLANEOUS
The corporation shall not be governed by the provisions of
Nevada Revised Statutes Sections 78.378 to 78.3793, inclusive, or Sections
78.411 to 78.444, inclusive.
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
5
<PAGE>
IN WITNESS WHEREOF, I have executed these Amended and Restated Articles
of Incorporation of the Corporation as of September , 1997.
-------------------------
Allen E. Paulson
President, Secretary & Treasurer
<PAGE>
[insert jurat]
<PAGE>
Exhibit B
BYLAWS
OF
ELSINORE ACQUISITION SUB, INC.
ARTICLE I
IDENTIFICATION
Section 1.1 Name. The name of the corporation is Elsinore
Acquisition Sub, Inc.
Section 1.2 Registered Office and Resident Agent. The address
of the registered office of the corporation is One East First Street, Reno
Nevada 89501; and the name of the resident agent at this address is The
Corporation Trust Company of Nevada.
Section 1.3 Fiscal Year. The fiscal year of the corporation
shall begin on the 1st day of January in each year and end on the 31st day of
December next following.
ARTICLE II
STOCK
Section 2.1 Issuance of Shares. Shares of stock may be issued
for labor, services, personal property, real estate or leases thereof or for
money from time to time by the Board of Directors. Treasury shares may be
disposed of by the corporation for such consideration as aforesaid from time to
time by the Board of Directors.
Section 2.2 Payment of Shares. The consideration for the
issuance of shares may be paid, in whole or in part, in money, in other
property, as aforesaid, or in labor or services actually performed for the
corporation. When payment of the consideration for which shares are to be issued
shall have been received by the corporation such shares shall be deemed to be
fully paid and non-assessable. Future services shall not constitute payment or
part payment for shares of the corporation. In the absence of fraud in the
transaction, the judgment of the
<PAGE>
Board of Directors as to the value of the consideration received for shares
shall be conclusive. No certificate shall be issued for any share until the
share is fully paid.
Section 2.3 Certificates Representing Shares. Each holder of
the shares of stock of the corporation shall be entitled to a certificate signed
by the President or a Vice President and the Secretary or an Assistant Secretary
of the corporation, certifying the number of shares owned by him in the
corporation.
Section 2.4 Transfer of Stock. The corporation shall register a
transfer of a stock certificate presented to it for transfer if;
(a) Endorsement. The certificate is properly endorsed by the
registered holder or by his duly authorized attorney;
(b) Witnessing. The endorsement or endorsements are
witnessed by one witness unless this requirement is waived by the Secretary of
the corporation;
(c) Adverse Claims. The corporation has no notice of any
adverse claims or has discharged any duty to inquire into any such claims;
(d) Collection of Taxes. There has been compliance
with any
applicable law relating to the collection of taxes.
ARTICLE III
THE STOCKHOLDERS
Section 3.1 Place of Meetings. Meetings of the stockholders of
the corporation may be held at its registered office in the State of Nevada or
at any other place within or without the State of Nevada as may be designated in
the notice thereof.
Section 3.2 Annual Meetings. Unless the stockholders shall
have executed and delivered a written consent electing at least one-fourth of
the directors annually, the annual meeting of the stockholders shall be held
each year at the principal office of the corporation at the hour of 10:00
o'clock A.M. on the anniversary date of the incorporation of this corporation,
if this day shall fall on a
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normal business day, and if not, then on the first following normal business
day. Failure to hold the annual meeting at the designated time shall not work a
forfeiture or dissolution of the corporation.
Section 3.3 Special Meetings. Special meetings of the
stockholders may be called by the President, the Board of Directors, or by the
Secretary at the written request (stating the purpose or purposes for which the
meeting is called) of the holders of not less than one-tenth of all the shares
entitled to vote at the meeting.
Section 3.4 Notice of Meetings; Waiver. Written notice stating
the place, day, and hour of the meeting and, in case of a special meeting the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or persons calling the meeting, to each registered
holder entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail addressed to the
registered holder at his address as it appears on the stock transfer books of
the corporation, with postage on it prepaid. Waiver by a stockholder in writing
of notice of a stockholders' meeting shall constitute a waiver of notice of the
meeting, whether executed and/or delivered before or after such meeting.
Section 3.5 Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of the
stockholders. The stockholders present at a duly organized meeting may continue
to do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. The act of a majority of the shares
entitled to vote at a meeting at which a quorum is present shall be the act of
the stockholders, unless a greater number is required by applicable law.
Section 3.6 Proxies. A stockholder may vote either in person
or by proxy executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after six months from the date of its
creation, unless otherwise provided in the proxy.
Section 3.7 Action Without A Meeting. Any action that may be
taken at a meeting of the stockholders, or of a committee, may be taken without
a meeting if a consent in writing, setting forth the actions taken, shall be
signed by the stockholders, or the members of the committee, holding at least a
majority of the
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voting power, unless a greater proportion of voting power is required for such
an action at a meeting, as the case may be.
ARTICLE IV
THE BOARD OF DIRECTORS
Section 4.1 Number and Qualifications. The business and
affairs of the corporation shall be managed by a Board of one (1) or more
Directors. The number of directors may be increased or decreased from time to
time and at any time by the stockholders, or Board of Directors.
Section 4.2 Election. Members of the initial Board of
Directors shall hold office until the first annual meeting of stockholders and
until their successors shall have been elected and qualified. At the first
annual meeting of stockholders and at each annual meeting thereafter, the
stockholders shall elect directors to hold office until the next succeeding
annual meeting. Each director shall hold office for the term for which he is
elected and until his successor shall be elected and qualified. Notwithstanding
anything herein to the contrary, any director may be removed from office at any
time by the vote or written consent of stockholders representing not less than
two-thirds of the issued and outstanding stock entitled to vote.
Section 4.3 Vacancies. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of the majority of the remaining
directors, though less than a quorum of the Board of Directors, and by the
affirmative vote of the majority of the stockholders entitled to vote for the
election of directors. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, subject to removal as
aforesaid.
Section 4.4 Place of Meeting. The Board of Directors, annual,
regular or special, may be held either within or without the State of Nevada.
Section 4.5 Annual Meetings. Immediately after the annual
meeting of the stockholders, the Board of Directors may meet each year for the
purpose of organization, election of officers, and consideration of any other
business that may properly be brought before the meeting. No notice of any kind
to either old or new members of the Board of Directors for this annual meeting
shall be necessary.
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Section 4.6 Other Meetings. Other meetings of the Board of
Directors may he held upon notice by letter, telegram, facsimile, cable, or
radiogram, delivered for transmission not later than during the third day
immediately preceding the day for the meeting, or by telephone, or radiophone
received not later than during the second day preceding the day for the meeting,
upon the call of the President or Secretary of the corporation at any place
within or without the State of Nevada. Notice of any meeting of the Board of
Directors may be waived in writing signed by the person or persons entitled to
the notice, whether before or after the time of the meeting. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice or waiver of notice of the meeting.
Section 4.7 Quorum. A majority of the number of directors
holding office shall constitute a quorum for the transaction of business. The
act of the majority of the directors present at a meeting at which a quorum has
been achieved shall be the act of the Board of Directors unless the act of a
greater number is required by applicable law.
Section 4.8 Action Without A Meeting. Any action that may be
taken at a meeting of the directors, or of a committee, may be taken without a
meeting if a consent in writing, setting forth the actions taken, shall be
signed by all of the directors, or all of the members of the committee, as the
case may be.
ARTICLE V
THE OFFICERS
Section 5.1 Officers. The officers of the corporation shall
consist of a President, Secretary and Treasurer, and may also include a Chairman
of the Board, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers, or such other officers or assistant officers or agents as may be
provided herein, or otherwise deemed necessary, from time to time by the Board
of Directors. Officers need not be directors of the corporation. Each officer so
elected shall hold office until his successor is elected and qualified, but
shall be subject to removal at any time by the vote or written consent of a
majority of the directors. No person shall be prohibited from concurrently
holding more than one office or from being the sole officer of the corporation.
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Section 5.2 Vacancies. Whenever any vacancies shall occur in
any office by death, resignation, increase in the number of offices of the
corporation, or otherwise; the same shall be filled by the Board of Directors,
and the officer so elected shall hold office until his successor is elected and
qualified, subject to removal as aforesaid.
Section 5.3 The Chairman of the Board of Directors. The
Chairman of the Board of Directors shall preside at all meetings of the
directors, discharge all duties incumbent upon the presiding officer, and
perform such other duties as the Board of Directors may prescribe.
Section 5.4 The President. The President shall have active
executive management of the operations of the corporation, subject, however, to
the control of the Board of Directors. He shall preside at all meetings of
stockholders, discharge all the duties incumbent upon a presiding officer, and
perform such other duties as these Bylaws provide or the Board of Directors may
prescribe. The President shall have full authority to execute powers in behalf
of the corporation, to vote stock owned by it in any other corporation, and to
execute powers of attorney appointing other corporations, partnerships, or
individuals the agent of the corporation.
Section 5.5 The Vice President. The Vice President shall
perform all duties incumbent upon the President during the absence or disability
of the President, and shall perform such other duties as these Bylaws provide or
the Board of Directors may prescribe.
Section 5.6 The Secretary. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall keep a
true and complete record of the proceedings of these meetings. He shall be
custodian of the records of the corporation. He shall attend to the giving of
all notices and shall perform such other duties as these Bylaws may provide or
the Board of Directors may prescribe.
Section 5.7 The Treasurer. The Treasurer shall keep correct
and complete records of account, showing accurately at all times the financial
condition of the corporation. He shall be the legal custodian of all moneys,
notes, securities, and other valuables that may from time to time come into the
possession of the corporation. He shall immediately deposit all funds of the
corporation coming into his hands in some reliable bank or other depositary to
be designated by the Board of Directors, and shall keep this bank account in the
name of the corporation. He shall furnish at meetings of the Board of Directors,
or whenever requested, a
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statement of the financial condition of the corporation, and shall perform such
other duties as these Bylaws may provide or the Board of Directors may
prescribe. The Treasurer may be required to furnish bond in such amount as shall
be determined by the Board of Directors.
Section 5.8 Transfer of Authority. In case of the absence of
any officer of the corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board of Directors may transfer the powers or
duties of that officer to any other officer or to any director or employee of
the corporation, provided a majority of the full Board of Directors concurs.
ARTICLE VI
NEGOTIABLE INSTRUMENTS, DEEDS, AND CONTRACTS
Section 6.1 Negotiable Instruments, Deeds, and Contracts. All
checks, drafts, notes bonds, bills of exchange, and orders for the payment of
money of the corporation; all deeds, mortgages, and other written contracts and
agreements to which the corporation shall be a party; and all assignments or
endorsements of stock certificates, registered bonds, or other securities owed
by the corporation shall, unless otherwise required by law, or otherwise
authorized by the Board of Directors as hereinafter set forth, be signed by the
President or by anyone of the following officers: Vice President, Secretary, or
Treasurer. The Board of Directors may designate one or more persons, officers or
employees of the corporation, who may, in the name of the corporation and in
lieu of, or in addition to, those persons hereinabove named, sign such
instruments; and may authorize the use of facsimile signatures of any of such
persons. Any shares of stock issued by any other corporation and owned or
controlled by the corporation may be voted at any stockholders' meeting of the
other corporation by the President of the corporation, if he be present; or, in
his absence, by the Secretary of the corporation and, in the event both the
President and Secretary shall be absent, then by such person as the President of
the corporation shall, by duly executed proxy, designate to represent the
corporation at such stockholders meeting.
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ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification of Agents of the Corporation: Purchase
of Liability Insurance.
(a) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative, expect an action by or in the right of the corporation, by
reason of the fact that he or she is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, limited liability company, trust, or other enterprise, against
expenses, including attorney fees, judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him or her in connection with
the action, suit, or proceeding, if he or she acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent does
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and that, with respect to any criminal
action or proceeding, he or she had reasonable cause to believe that his or her
conduct was unlawful.
(b) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, limited liability company, trust, or
other enterprise, against expenses, including amounts paid in settlement and
attorney fees, actually and reasonably incurred by him or her in connection with
the defense or settlement of the action or suit, if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation. However, indemnification shall
not be made for any claim, issue, or matter
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as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
(c) To the extent that a director, officer, employee,
or agent
of the corporation has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in subsection (a) or (b), or in
defense of any claim, issue, or matter therein, he or she shall be indemnified
by the corporation against expenses, including attorney fees, actually and
reasonably incurred by him or her in connection with the defense.
(d) Any indemnification under subsection (a) or (b),
unless
ordered by a court or advanced pursuant to subsection (e), shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances. The determination shall be made: (i) by the stockholders; (ii) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to the action, suit, or proceeding; or (iii) if a majority
vote of a quorum consisting of directors who were not parties to the action,
suit or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
(e) The expenses of officers and directors incurred in
defending a civil or criminal action, suit, or proceeding shall be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit, or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation. The provisions of this subsection (e) do not affect any
rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.
(f) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this ARTICLE VII (i) does not
exclude any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the Articles of Incorporation, the
Bylaws, or any agreement, vote of stockholders or disinterested directors or
otherwise, for either an
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action in his or her official capacity or an action in another capacity while
holding his or her office, except that indemnification, unless ordered by a
court pursuant to subsection (b) or for the advancement of expenses made
pursuant to subsection (e), shall not be made to or on behalf of any director or
officer if a final adjudication establishes that his or her acts or omissions
involved intentional misconduct, fraud, or a knowing violation of the law and
were material to the cause of action and (ii) continues for a person who has
ceased to be a director, officer, employee, or agent and inures to the benefit
of the heirs, executors, and administrators of such a person.
(g) The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director, officer, employee, or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, limited liability company,
trust, or other enterprise, for any liability asserted against him or her and
liability and expenses incurred by him or her in his or her capacity as a
director, officer, employee, or agent, or arising out of his or her status as
such, whether or not the corporation has the authority to indemnify him or her
against such liability and expenses. The other financial arrangements made by
the corporation may include any now or hereafter permitted by applicable law.
(h) In the event that the laws of the State of Nevada
shall
hereafter permit or authorize indemnification by the corporation of the
directors, officers, employees, or agents of the corporation for any reason or
purpose or in any manner not otherwise provided for in this ARTICLE VII, then
such directors, officers, employees, and agents shall be entitled to such
indemnification by making written demand therefor upon the corporation, it being
the intention of this ARTICLE VII at all times to provide the must comprehensive
indemnification coverage to the corporation's directors, officers, employees,
and agents as may now or hereafter be permitted by the laws of the State of
Nevada.
(i) The foregoing indemnification provisions shall
inure to the
benefit of all present and future directors, officers, employees, and agents of
the corporation and all persons now or hereafter serving at the request of the
corporation as directors, officers, employees, or agents of another corporation,
partnership, joint venture, limited liability company, trust, or other
enterprise and their heirs, executors, and administrators, and shall be
applicable to all acts or omissions to act of any such persons, whether such
acts or omissions to act are alleged to have or actually occurred prior to or
subsequent to the adoption of this ARTICLE VII.
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(j) Any insurance or other financial arrangement made
on
behalf of a person pursuant to this Section may be provided by the corporation
or any other person approved by the Board of Directors, even if all or part of
the other person's stock or other securities is owned by the corporation. In the
absence of fraud:
(1) the decision of the Board of Directors as to the propriety of the terms and
conditions of any insurance or other financial arrangement made pursuant to this
Section and the choice of the person to provide the insurance or other financial
arrangement is conclusive; and
(2) the insurance or other financial arrangement:
(i) is not void or voidable; and
(ii) does not subject any director approving it
to personal liability for his action,
even if a director approving the insurance or other financial
arrangement is a beneficiary of the insurance or other financial arrangement.
Section 7.2 Vested Rights. Neither the amendment nor repeal of
this ARTICLE VII, nor the adoption of any provision of the Articles of
Incorporation or the Bylaws or of any statute inconsistent with this ARTICLE
VII, shall adversely affect any right or protection of a director, officer,
employee, or agent of the corporation existing at the time of such amendment,
repeal, or adoption of such inconsistent provision.
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ARTICLE VIII
AMENDMENTS
Section 8.1 The power to alter, amend or repeal these Bylaws,
or adopt new Bylaws, is vested in the Board of Directors, but the affirmative
vote of a majority of the Board of Directors holding office shall be necessary
to effect any such action.
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I hereby certify that the foregoing Bylaws are a true and correct copy
of the Bylaws of the corporation as adopted as of September , 1997.
Allen E. Paulson, Secretary
<PAGE>
Exhibit C
CONFIDENTIALITY AGREEMENT
May 5, 1997
Mr. Allen Paulson
c/o Jefferies & Company, Inc.
Attention: M. Brent Stevens
Managing Director, Corporate Finance
11100 Santa Monica Boulevard, Tenth Floor
Los Angeles, CA 90025
Re: Elsinore Corporation
Gentlemen:
We understand that you are considering a possible negotiated
acquisition transaction (the "Transaction") with Elsinore Corporation. In
connection with the foregoing, Elsinore Corporation or its subsidiaries (the
"Company") may furnish to you, either orally, in writing, or by inspection,
certain information, material and documents (collectively, "Proprietary
Information") regarding the Company and its business, assets, financial
condition, operations and prospects, which may be helpful in evaluating the
Transaction. As a condition to our furnishing you with Proprietary Information,
you hereby agree as follows:
1. All Proprietary Information heretofore or hereafter
furnished to you by the Company shall be deemed confidential and shall be kept
in strict confidence under appropriate safeguards. The term Proprietary
Information, as used herein, does not include any information which (i) as shown
by written records, was lawfully in your possession prior to any disclosure by
the Company, provided that the source of such information was, to the best of
your knowledge, not bound by confidentiality obligations in respect thereof, or
(ii) is generally available to the public other than as a result of disclosure
by your employees, you agents, your representatives or others acting on your
behalf.
2. Except as otherwise provided herein or without the
Company's prior written consent, you will not, directly or indirectly: (i)
disclose or reveal any
<PAGE>
Mr. Allen Paulson
May 5, 1997
Page 2
Proprietary Information to any persons, firms or entities except to a limited
group of your attorneys or professional advisors, including Jefferies & Company,
Inc., who are actively and directly participating in the evaluation of the
Transaction (collectively, the "Representatives"), each of whom shall be
informed by you of the confidential nature of the Proprietary Information and
provided with a copy of this letter agreement and agree in writing to observe
the same terms and conditions set forth herein as if specifically named a party
hereto; (ii) use the Proprietary Information for any purpose other than in
connection with the Transaction; and (iii) except as may be required by law or
judicial process or as requested by any governmental, regulatory or
self-regulatory organization, disclose to any person or entity the terms,
conditions or other facts with respect to the Transaction (including the
existence and status thereof) or that Proprietary Information has been made
available to you. In any event, you shall be responsible for any disclosure of
the Proprietary Information by your Representatives other than pursuant to the
terms and subject to the conditions of this letter agreement.
3. Upon written notice from the Company, you will deliver
promptly to the Company all written or tangible material containing or
reflecting any Information contained in the Proprietary Information (whether
prepared by the Company or otherwise), without retaining any copies, summaries,
analyses or extracts thereof. All documents, memoranda, notes and other writings
whatsoever prepared by you or your representatives based on the information
contained in the Proprietary Information shall be destroyed, and such
destruction shall be certified in writing to the Company by you or your
representatives supervising such destruction.
4. Notwithstanding any provisions of this letter agreement to
the contrary, in the event that you are requested or required in a judicial,
administrative or governmental proceeding to disclose any Proprietary
Information, you will provide the Company with prompt notice of such request so
that the Company may, at its sole cost and expense, seek an appropriate
protective order or waive your compliance with the confidentiality provisions of
this letter agreement. If as a result of any such request or requirement, you
are, in the opinion of your counsel, compelled to disclose Proprietary
Information to any tribunal or else stand liable for contempt or other censure
or penalty, you may disclose such Proprietary Information to such tribunal
without liability hereunder provided that you comply with the notice provisions
of this Section 4.
<PAGE>
Mr. Allen Paulson
May 5, 1997
Page 3
5. Except as may be specifically provided hereafter in a
definitive written agreement providing for the Transaction (a "Transaction
Agreement"), the Company shall not be deemed to make or have made any
representation or warranty, express or implied, as to the accuracy or
completeness of any Proprietary Information which the Company furnishes to you,
and the Company shall have no liability to you or any of your Representatives
resulting from the use of any Proprietary Information by you or your
representatives.
6. Until the earliest of (i) the execution by you of a
Transaction Agreement or (ii) two years from the date of this letter agreement,
you agree not to initiate or maintain contact (except for those contacts made in
the ordinary course of business) with any officer, director or employee or agent
of the Company or its subsidiaries regarding its business, operations, prospects
or finances, except with the express written permission of the Company. You
further agree that for a period of one year from the date hereof you will not
hire any of the employees of the Company or its subsidiaries with whom you had
contact during the period of your investigation of the Company unless such
employee is terminated by the Company.
7. You hereby acknowledge that you are aware (and that your
Representatives who are apprised of this matter have been advised) that the
United States securities laws prohibit you, the Representatives and any person
or entity who has received material non-public information about the Company
from purchasing or selling securities of the Company.
8. Without prejudice to any rights and remedies otherwise
available to the Company, the Company shall be entitled to equitable relief by
way of injunction if you breach any provision of this letter agreement. No
failure or delay by the Company or the representatives in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder. If any
party employs legal counsel to enforce any of the provisions of this letter
agreement or if any action at law or equity is instituted in connection with or
arising from this letter agreement, by any party against the other(s), the
prevailing party(ies) shall be entitled to receive its/their costs, expenses and
attorneys' fees.
<PAGE>
Mr. Allen Paulson
May 5, 1997
Page 4
9. You also understand and agree that no contract or agreement
providing for a transaction with the Company shall be deemed to exist between
you and the Company unless and until a Transaction Agreement has been executed
and delivered, and you hereby waive, in advance, any claims (including, without
limitation, breach of contract) in connection with a possible transaction with
the Company unless and until you shall have entered into a Transaction
Agreement. You also agree that unless and until a Transaction Agreement between
the Company and you has been executed and delivered, the Company has no legal
obligation of any kind whatsoever with respect to any such transaction by virtue
of this letter agreement or any other written or oral expression with respect to
such transaction except, in the case of this letter agreement, for the matters
specifically agreed to herein. For purposes of this paragraph, the term
"Transaction Agreement" does not include an executed letter of intent or any
other preliminary written agreement, nor does it include any written or verbal
acceptance of an offer or bid on your part.
10. This letter agreement shall be binding upon your
successors and assigns and shall inure to the benefit of, and be enforceable by,
the Company's successors and assigns.
11. The provisions of this letter agreement shall be severable
in the event that any of the provisions hereof are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
12. This letter agreement shall be construed (both as to
validity and performance) and enforced in accordance with, and governed by, the
laws of the State of Nevada applying to agreements made and to be performed
wholly within such jurisdiction.
13. This letter agreement contains the entire agreement
between you and the Company concerning the confidentiality of the Proprietary
Information. This letter agreement may be waived, amended or modified only by an
instrument in writing signed by the party against which such waiver, amendment
or modification is sought to be enforced, and such written instrument shall set
forth specifically the provisions of this letter agreement that are to be so
waived, amended or modified.
<PAGE>
Mr. Allen Paulson
May 5, 1997
Page 5
14. This letter agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same instrument.
Please indicate your agreement with the foregoing by executing
the accompanying copy of this letter agreement and returning it, whereupon it
shall constitute a binding agreement between us as of the date first above
written.
Very truly yours,
ELSINORE CORPORATION
Jeffrey T. Leeds
President
Agreed to and accepted:
- ------------------------
Allen E. Paulson
<PAGE>
SCHEDULE 2.2
Capitalization of the Company and its Subsidiaries
1. The Riviera Warrants.
2. Pursuant to the First Amended Plan of Reorganization of the Company
filed May 28, 1996 in the United States Bankruptcy Court for the
District of Nevada ("Plan"), certain creditors of the Company shall be
issued 70,687 shares of common stock.
3. The Company presently has outstanding 4,929,313 shares of common
stock.
2
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SCHEDULE 2.5(a)
Compliance
1. The New Jersey Casino Service Industry License held by Four Queens,
Inc. is currently in effect, however, it will expire on September 30,
1997.
2. Olympia Gaming Corporation has not renewed its gaming license
issued by the State of Washington.
<PAGE>
SCHEDULE 2.5(b)
Intellectual Property;
Licenses
1. The New Jersey Casino Service Industry License held by Four Queens,
Inc. is currently in effect, however, it will expire on September 30, 1997.
2. Olympia Gaming Corporation has not renewed its gaming license
issued by the State of Washington.
3. See Schedule 2.14 for list of patent and trademark filings.
4
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SCHEDULE 2.5(d)
Compliance with Orders
None
<PAGE>
Schedule 2.6
Non-contravention; Required Filings and Consents
1. The Amended and Restated Note Agreement dated as of
March 3, 1997 for $3,855,739.39 First Mortgage Notes Due 2000 of Elsinore
Corporation Guaranteed by Eagle Gaming, Inc.; Elsub Management Corporation; Four
Queens, Inc.; Elsinore Tahoe, Inc.; Four Queens Experience Corporation; Olympia
Gaming Corporation; Palm Springs East Limited Partnership; and Pinnacle Gaming
Corporation (formerly ELSUB II, Inc.) contains a provision allowing the Holder
of Notes to accelerate the indebtedness due in the event of a change in control
and conditions mergers, sales or consolidations of the Company and its
subsidiaries.
2. The Amended and Restated Indenture dated as of March 3,
1997 between the Company, the Guarantors (as set forth therein) and First Trust
National Association contains a provision whereby in the event of a change in
control, the Holders of the Securities shall have the right to require the
Company to repurchase the notes and which conditions mergers, sales or
consolidations of the Company and its subsidiaries.
3. In the event of a merger or consolidation, the holder of
the Riviera Warrants is entitled to payment of the amount by which the price per
share to be paid for the Company's common stock in the merger or consolidation
exceeds the exercise price of the Warrants.
6
<PAGE>
Schedule 2.7(b)
SEC Reports; Liabilities
None.
<PAGE>
Schedule 2.8
Changes
Indebtedness Incurred by the Company
The Company guaranteed a lease by and between PDS Financial Corporation - Nevada
and Four Queens, Inc. pursuant to that certain $505,206.30 Security Equipment
Lease Financing dated May 1, 1997, as amended, for certain equipment described
therein. (See Schedule 2.15).
Indebtedness Extended by the Company
The Company loaned approximately $40,000 to the Company's employees during the
interim period when the Company changed 401(k) plans so that the employees would
not be penalized during the interim period. The loans were issued to five
employees to assist the employees with the purchase of their primary residences.
Additionally, two employees took service distributions in 1997 as permitted
under the 401(k) plans. The Company was reimbursed by Merrill Lynch, the Plan
Administrator and Trustee in August,
1997.
Employment/Severance/Termination Agreements
1. Termination Fee Agreement dated as of May 5, 1997 by
and between the Company and Cynthia A. Fremont.
2. Termination Fee Agreement dated as of May 5, 1997 by
and between Four Queens, Inc., a Nevada corporation and Gina L. Contner.
3. Termination Fee Agreement dated as of May 5, 1997 by
and between the Four Queens, Inc., a Nevada corporation and Raquel Rodriguez.
4. Termination Fee Agreement dated as of May 5, 1997 by
and between the Four Queens, Inc., a Nevada corporation and Philip W. Madow.
5. Loan-Out of Services Agreement dated as of August 12,
1996, by and between Four Queens, Inc. and Riviera Gaming Management Elsinore,
Inc., as Manager, pursuant to which the Manager agreed to lend the services
three of the Manager's employees (Martin Gross, Gina Contner and Racquel
Rodriguez) to assist with the management of the Four Queens Hotel & Casino and
Four Queens agreed to reimburse the Manager for the services provided.
Changed Accounting Methods
The Company changed its accounting method after the Plan of Reorganization was
confirmed to reflect "fresh start" reporting, whereby the reorganization value
is allocated to the Company's assets following the methodology prescribed in
APBO No. 16.
Corporate Status
The Company filed Articles of Dissolution with the Nevada Secretary of State in
order to dissolve two of the Company's subsidiaries: Elsinore-Missouri Gaming,
Inc., a Nevada corporation and Mojave Gaming, Inc., a Nevada corporation.
Issuance of Securities
The Riviera Warrants.
Leases
First Amendment to Lease, made effective as of May 14, 1997, between the
Company, Finley Company, and Four Queens, Inc.
<PAGE>
SCHEDULE 2.11
Litigation
Case No. A338909 - Raymond Corona v. Elsinore Corporation and Four Queens, Inc.
This matter was stayed by the bankruptcy proceeding. No proof of claim was
filed.
Case No. C119073 - In the Matter of Proceedings to Compel Custodian of Records
to appear as witnesses in the State of Arizona. A subpoena was served on Ed
Fasulo in June, 1992 on behalf of Four Queens requesting all documents relating
to Stephen P. Mirretti for a grand jury investigation.
Case No. A370692 - Maliki S. Elshaied v. Four Queens, Inc. A former employee
filed a petition for judicial review. Four Queens' labor counsel filed a notice
of intent to participate on June 17, 1997.
Case No. A366865 - Celia Amaya v. Four Queens, Inc. The complaint, which was
filed on November 22, 1996, alleges plaintiff was hit by a vehicle and pieces
of a falling wall when a valet hit a wall and rail. Damages in excess of
$10,000 were requested in the complaint. The Company has asserted that the
claim arose post-petition but pre-effective date and that the plaintiff should
have filed an administrative claim.
Case No. A348749 - William Williams III v. Four Queens, Inc. This matter was
stayed by the bankruptcy proceeding. The amount of the claim (which is
classified as a Class 10 claim) will be liquidated in the state court.
Case No. A348176 - Kozloski v. Four Queens, Inc. This matter was stayed by the
bankruptcy proceeding. The amount of the claim (which is classified as a Class
10 claim) will be liquidated in the state court.
Case No. CV-S-92-00662 - Hansen-Moor v. Elsinore. The complaint alleges
RICO violations.
Case Nos. CV-S-94-01126 and CV-S-94-01137 - Poulos v. Ceasar's World, Inc., et
al., and Ahern v. Ceasar's World, Inc., et al. filed against various casino and
gaming companies alleging RICO violations. This matter was stayed by the
bankruptcy. No proof of claim was filed.
Case Nos. 89-2413 and 89-2143 Finkler v. Elsinore Share Associates and Hotel
Employees and Restaurant Employees International Union Local 54 v. Elsinore
Share Associates. These complaints allege WARN Act violations as well as other
claims for damages.
<PAGE>
SCHEDULE 2.12
Taxes
1. The Company and its subsidiaries have received an extension to
September 15, 1997 on the filing of its Elsinore Corporation and Subsidiaries
Federal Income Tax Return.
2. The Company is in receipt of a letter dated May 29, 1997, from
George W. Stevens, Director, Department of Finance and Business Services, City
of Las Vegas, Nevada addressed to Four Queens Hotel & Casino claiming an
underpayment of room taxes to the City for the period of January 1, 1995 through
March 31, 1997 in the amount of $60,160.59. The Company is contending that this
claim is barred by the Company's bankruptcy filing on October 31, 1995.
10
<PAGE>
Schedule 2.13(a)
Employee Benefits
Employee Benefit Programs
1. Four Queens
Medical Insurance (with Dental and Vision), Group No. 190100;
Account No. 190101; H.P.N. Co. No. 10300; Group No. 62531
Prescriptions - P.C.I. No. 19019
Administered by Silver State Medical Administrators
2. Four Queens
Life/Accidental Death and Dismemberment, Policy No. GLUC-11G7
Administered by Mutual of Omaha
3. Four Queens Employees' 401(k) Retirement/Savings Plan and Trust
Administered by Merrill Lynch
4. Four Queens, Inc. Premium Only Plan
Administered by Four Queens, Inc.
Union Contract Trusts
The Company contributes to the following Union Contract Trusts:
1. Construction Industry and Carpenters Joint Pension Trust for Southern
Nevada
2. Carpenters' Joint Apprenticeship Committee Fund
3. Southern Nevada Operating Engineers Apprenticeship and Training Trust
Fund (not due until 9/98)
4. International Brotherhood of Painters and Allied Trades Union and
Industry Pension Fund No. 159, AFL-CIO
The Four Queens contributes to the following Union Contract Trust:
1. Central Pension Fund of the International Union of Operating Engineers
and Participating Employees
2. Hotel Employees and Restaurant Employees International Union Welfare
Fund
Termination/Severance Agreements
See Schedule 2.8.
<PAGE>
Schedule 2.13(h)
Payments Non-Deductible
None
12
<PAGE>
Schedule 2.13(i)
Benefits Beyond Termination
Name Pay Period Ending 7/29/97 Payments to be Made Severance Ends
R. Howe $4,139.42 6 9/19/97
B. McGinty $2,000.00 7 10/7/97
G. Lee $1,383.80 6 9/22/97
S. Barnes $2,030.29 12 12/11/97
W. English $1,195.28 6 9/18/97
L. Tanner $1,096.00 4 8/22/97
Y. Robles $918.40 7 11/4/97
H. Robles $918.40 7 11/4/97
D. Hewitt $1,038.46 1 8/12/97
In some cases, the last payment is not for the full amount; the payment will be
for the amount owing (i.e., a former-employee could be owed for 40 hours or for
20 hours).
<PAGE>
Schedule 2.13(j)
Severance or Unemployment Compensation;
Acceleration of Vesting
None
14
<PAGE>
Schedule 2.14
Intellectual Property
1. Patent file - Multiple Action Blackjack Patent, No. 5,154,429
2. Patent file - Multiple Action Blackjack Patent, No. 5,257,789
3. Trademark file - Reel Winners Club Reg. No. 1,305,392
4. Trademark file - Two Reeler & Design Reg. No. 1,465,030
5. Trademark file - For the Games People Play Reg. No. 1,705,535
6. Trademark file - For the Games People Play Reg. No. 1,705,662
7. Trademark file - Club 55 Reg. No. 1,710,860
8. Trademark file - Multiple Action Reg. No. 1,738,726
9. Trademark file - Triple Play Reg. No. 1,908,004
10. Trademark file - Trifecta Serial No. 74/322,375
11. Trademark file - Multiple Action Logo Reg. No. 1,842,109
12. Trademark file - Four Queens Reg. No. 1,851,742
13. Trademark file - Four Queens Logo Reg. No. 1,875,617
14. Trademark file - 4 Queens Reg. No. 1,851,743
15. Trademark file - 4 Queens Logo Reg. No. 1,854,918
16. Trademark file - Doubleheader Logo Serial No. 74/527,959
17. Nevada State Trademark file - For the Games People Play Hotel Services
18. Nevada State Trademark file - For the Games People Play Casino Services
19. Canadian Patent File - Gaming Table Reg. No. 73408
20. Canadian Trademark File - Four Queens No. 847,726
21. Canadian Trademark File - Multiple Action Serial No. 725,077
22. Australian Patent File - Multiple Action Serial No. 649,368
23.Australian Patent File - Multiple Action Blackjack Logo Serial No. 649,369
<PAGE>
Schedule 2.15
Material Contracts
1. Master Lease Agreement (the "Lease Agreement") dated May 1, 1997
as amended August 1, 1997 by and between PDS Financial Corporation - Nevada, a
Nevada corporation ("PDS") and Four Queens, Inc., a Nevada corporation ("Four
Queens") provides that Four Queens shall not assign the agreement without the
prior written consent of PDS; provided, however, that PDS shall consent to an
assignment to Allen Paulson or an entity controlled by Allen Paulson. Lease
Agreement P. 14.2. The Lease Agreement wa guaranteed by the Company.
2. Agreement dated April 28, 1992 by and between Four Queens, Inc., a
Nevada corporation ("Four Queens"), Jeanne Hood, Edward M. Fasulo and Richard A.
LeVasseur whereby Four Queens agreed to pay monthly to Hood, Fasulo and
LeVasseur 20% of the royalties, fees, money and revenue collected from the
licensing of Multiple Action Blackjack.
3. License Agreement dated March 27, 1992 by and between Four Queens,
Inc., a Nevada corporation as assignee of Richard A. LeVasseur and C.A.R.D.,
Inc., a Nevada corporation.
4. License Agreement dated March 27, 1997 by and between Four Queens
Hotel & Casino as assignee of Richard A. LeVasseur and C.A.R.D., Inc., a Nevada
corporation.
5. Both the Amended and Restated Articles of Organization of Fremont
Street Experience Limited Liability Company, a Nevada limited liability company
filed with the Secretary of State on November 27, 1995 and the Amended and
Restated Operating Agreement of the Fremont Street Experience Limited Liability
Company, a Nevada limited liability company dated June 6, 1995 provides that a
person may be a substituted member if two-thirds of the then outstanding
Members' Voting Units approve of the transfer of title of the entire hotel or
casino business.
6. The Riviera Warrants.
7. The Plan provided for the Company to enter into a management
agreement, substantially in the form of Exhibit "10" to the supplement to the
Plan (the "Management Agreement"), with the management group designated by the
Bondholders Committee (as defined in the Plan). Since the effective date of the
Plan, Riviera Gaming Management Corp.-Elsinore has been managing the FourQueens
Hotel and Casino substantially in accordance with the terms and conditions set
forth in the Management Agreement. No written management agreement has been
executed by the parties.
8. First Amendment to Lease, made effective as of May 14, 1997,
between the Company, Finley Company, and Four Queens, Inc.
16
<PAGE>
Schedule 2.16
Insurance Policies
Insurance Coverage January 19, 1997 to January 19, 1998:
Agent: Layne & Associates
4045 South Spencer Street
4th Floor
Las Vegas, Nevada 89119
1. Property Coverage
Fireman's Fund Insurance Company
Policy No. 68 DKF 80352563
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
BLANKET LIMIT: $97,920,000 (Including all Real and Personal Property,
Business Interruption, Data Processing, Equipment and
Media, Extra Expense)
SUBLIMITS: $50,000,000 Flood
$50,000,000 Earthquake
$10,700,000 Business Interruption
$1,000,000 Extra Expense
$100,000 EDP Media
$100,000 Accounts Receivable
$1,000,000 Off Premises Power
$500,000 Valuable Papers
DEDUCTIBLES: $25,000 All Perils, Except
$50,000 Flood
$50,000 Earthquake
24 Hours - Business Interruption
$25,000 Extra Expense
$25,000 EDP; Accounts Receivable; Valuable Papers
FORM OF COVERAGE: All Risk of Direct Physical Loss
VALUATION: Replacement Cost & Agreed Amount
LOCATIONS INSURED: Hotel/Casino, Parking Garage, Main Street Storage
2. Boiler & Machinery
(Included within Property Policy)
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
CATASTROPHIC LIMIT: $97,920,000
SUBLIMITS: $250,000 Expediting Expense
$250,000 Water Damage Limit
$250,000 Consequential Damage
$250,000 Ammonia Contamination
$250,000 Spoilage
DEDUCTIBLE: $25,000 Per Loss, with 24 Hour Indirect Loss
and Business Interruption
VALUATION: Agreed Amount for Direct Damage Loss Actual Loss Sustained
for Business Interruption Losses/Extra Expense
3. General Liability Coverage
Lexington Insurance Company
Policy No. 2810057
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
PER OCCURRENCE: $1,000,000
GENERAL AGGREGATE: $2,000,000
MEDICAL PAYMENTS: Excluded
EMPLOYEE BENEFITS: $1,000,000 Each Claim and Aggregate
for all Claims, subject to a $1,000 Deductible Each Claim
LIQUOR LIABILITY: $1,000,000 Each Occurrence and Aggregate
EMPLOYER'S STOP-GAP
LIABILITY: $1,000,000 Aggregate
INNKEEPER'S LIABILITY: $20,000 Per Guest
$50,000 Aggregate
SAFETY DEPOSIT BOX
LEGAL LIABILITY: $50,000 Per Guest
$500,000 Aggregate
SELF-INSURED
RETENTION LIMIT: $25,000 Per Occurrence
$250,000 Annual Aggregate
(Defense & Expenses within SIR)
4. Automobile Coverage
Northland Insurance Company
Policy No. NG 000 180
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
COMBINED BODILY INJURY &
PROPERTY DAMAGE; INCLUDE
NON-OWNED & HIRED: $1,000,000 Each Occurrence
UNINSURED/UNDERINSURED
MOTORISTS: $1,000,000
MEDICAL PAYMENTS: $5,000
COLLISION COVERAGE: Included, w/ $500 deductible on all autos except 1967 Chevy.
COMPREHENSIVE
COVERAGE: Included, w/ $500 deductible on all autos except 1967 Chevy.
HIRED & NON-OWNED
AUTOMOBILE PHYSICAL
DAMAGE: $50,000 Limit any one vehicle, subject to a $500 Deductible
GARAGEKEEPERS
LEGAL LIABILITY: $1,000,000 subject to:
$2,500 Comprehensive Deductible
$2,500 Collision Deductible
5. Crime Coverage
Fidelity & Deposit Company of Maryland
Policy No. CCP 002 67 08
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
EMPLOYEE DISHONESTY: $1,000,000
MONEY & SECURITIES
INSIDE & OUTSIDE: $1,000,000
FORGERY & ALTERATIONS: $1,000,000
DEDUCTIBLES: $10,000 Each Occurrence
COVERAGE INCLUDES: Investment Committee Members of the Welfare and Pension Plan
6. Umbrella Liability
Royal Indemnity Company, TIG Insurance, Fireman's Fund
INSURED: Elsinore Corporation, a Nevada corporation; Four Queens, Inc.,
a Nevada corporation d/b/a Four Queens Hotel and Casino.
LIMIT: $50,000,000
RETENTION: $10,000
FIRST LAYER: $10,000,000 in excess of the primary insurance
Royal Insurance Company
Policy No. P HN 202080
SECOND LAYER: $10 Million to $20 Million
TIG Insurance Company
Policy No. XLX 926 2624
THIRD LAYER: $20 Million in excess to $30 Million
Fireman's Fund Insurance Company
Policy No. XXK 000 6793 4802
7. Erisa Compliance Liability
Fidelity Deposit Insurance Company
Policy No. CCP 0033751
EMPLOYEE DISHONESTY: $250,000; no deductible
8. Excess Worker's Compensation Coverage
Frontier Insurance Company
Policy No. FSO 1155
WORKERS COMP: Statutory
EMPLOYER'S LIABILITY: $1,000,000
RETENTION: $275,000 per claim
ESTIMATED PAYROLL: $24,670,979
<PAGE>
Schedule 2.17(a)
Labor Matters
Contracts in Effect
Labor Agreement between United Brotherhood of Carpenters and Joiners of America,
Local Union No. 1780, Southern California/Nevada Regional Council of Carpenters
and Four Queens Hotel and Casino for the period January 15, 1997 through January
14, 2000.
Labor Agreement between Four Queens, Inc. d/b/a Four Queens Hotel and Casino and
International Union of Operating Engineers Local No. 501, AFL-CIO for the period
April 1, 1997 through March 31, 2002.
A Collective Bargaining Agreement between the Four Queens Hotel & Casino and the
Local Joint Executive Board of Las Vegas for and on behalf of Culinary Workers
Union, Local No. 226 and Bartenders Union, Local No. 165 for the period
September 1, 1997 through May 31, 1997, at which time the parties agreed to
negotiate wages and health and welfare contributions to conform with other
entity/union contracts.
Contracts Under Negotiation
The Four Queens Hotel and Casino is negotiating a labor agreement with the
International Brotherhood of Painters & Allied Trades, Local Union No. 159,
AFL-CIO for the period September 1, 1997 through August 31, 2002.
Negotiations are being conducted for a new contract with the Professional,
Clerical and Miscellaneous Employees, Teamsters Local Union No. 995. The term
of the present contract extended from April 2, 1983 through April 1, 1987, and
continues thereafter unless either party notifies the other on the anniversary
of the effective date.
18
<PAGE>
Schedule 2.17(b)
Payment of Benefits
None
<PAGE>
SCHEDULE 2.18
Real Property
Real Property Owned
See attached Fourth Amendment to Preliminary Title Report dated as of
July 6, 1997, prepared by Nevada Title Company.
Real Property Leased
1. See attached Fourth Amendment to Preliminary Title Report dated
as of July 6, 1997, prepared by Nevada Title Company.
2. Standard Industrial/Commercial Single-Tenant Lease (the "Warehouse
Lease") dated May 1, 1993 by and between The Berg Family Partnership and Four
Queens Hotel/Casino for real property to be used as a warehouse having APN
020-080-003-025 and located at 809 N. Main Street, Las Vegas, Nevada for a five
(5) year term with three options to renew commencing May 1, 1993 and ending
April 30, 1998. The Warehouse Lease requires the Landlord's consent for an
assignment of the Warehouse Lease, including a change in the control of the
Tenant.
<PAGE>
SCHEDULE 2.20
Environmental Matters
None.
<PAGE>
SCHEDULE 3.2(a)
Non-Contravention; Required Filings and Consents
Mr. Allen E. Paulson ("Mr. Paulson") is the owner of all of the issued
and outstanding capital stock of Gaming. Mr. Paulson is also the beneficial
owner of approximately 25% of all of the issued and outstanding capital stock of
Full House Resorts, Inc., a Delaware corporation ("FHR") and is the Chairman
of the Board of FHR. Prior to the execution of this Agreement, Mr. Paulson had
proposed that FHR participate in the transactions contemplated by this Agree-
ment. However, Mr. Paulson has been advised by FHR that it does not plan to
do so.
FHR has entered into a joint venture Master Agreement, dated December
29, 1995 (the "JV Agreement"), with GTECH/Dreamport Company ("GTECH"), to, among
other things, present certain business opportunities to each other. This
obligation was terminated pursuant to a letter, dated January 27, 1997, from
GTECH to FHR, amending the JV Agreement, a copy of which was provided to the
Company.
<PAGE>
AMENDED LEASE SCHEDULE NO. 1
TO MASTER LEASE AGREEMENT
This Amended Lease Schedule No. 1 ("Amended Lease Schedule") is made
this ______ day of March, 1997 and is a part of the Master Lease Agreement
("Lease") between IGT NORTH AMERICA, INC., a Nevada corporation ("Lessor") and
FOUR QUEENS, INC., a Nevada corporation ("Lessee") dated November 28, 1994, and
PDS FINANCIAL CORPORATION-NEVADA, a Nevada corporation, as assignee of Lessor's
interest under the Lease, and shall replace that certain Lease Schedule No. 1
attached to the Lease and dated November 28, 1994 (the "Lease Schedule").
1. Description of Equipment: The Equipment listed on Attachment "A" to
this Amended Lease Schedule shall constitute the Equipment leased under the
Lease and made subject to the provisions of the Lease.
2. This Amended Lease Schedule shall be effective as of the date first
written above.
3. Term: The original Term shall be remain as set forth in the Lease
Schedule (the "Original Term"). At the end of the Original Term, if there is
then no uncured event of default under the Lease or this Amended Lease Schedule,
upon 120 days advance written notice to Lessor, at Lessee's option the Original
Term shall be extended to November 1, 1998.
4. The Basic Rent due each month during the Original Term for the
Equipment described herein is as follows:
a. Payments under this Amended Lease Schedule in the
amount of $43,758.17 shall be due and payable on
March 1, 1997 and on the first day of each month
thereafter through and including November 1, 1997.
b. Lessee has elected to purchase the Equipment pursuant
to that certain Amendment No. 1 to Master Lease
Agreement dated of even date herewith and Lessee may
pay the purchase price in a single payment of
$297,000.00 due and payable on December 1, 1997, or
at Lessee's option and upon 30 days advance written
notice, in 12 equal monthly installments commencing
on December 31, 1997 and on the last day of each
month thereafter through and including November 30,
1998 each in the amount of $26,457.61.
c. In addition to the monthly Basic Rent due as set
forth above, Lessee shall pay PDS an amount equal to
all taxes which may be imposed by any Federal, State
or local authority from time to time.
5. All of the provisions of the above-mentioned Lease, as amended from
time to time, are incorporated by reference herein as if set forth fully herein.
Date: March, ____ 1997.
LESSOR: PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation
By:__________________________________
Its:_________________________________
LESSEE: FOUR QUEENS, INC.,
a Nevada corporation
By:__________________________________
Its:_________________________________
The undersigned hereby acknowledges and agrees to the terms of this
Amended Lease Schedule No. 1 and hereby reaffirms the Guaranty of Lease dated
November 28, 1994 from the undersigned to Lessor, which Guaranty of Lease shall
continue in full force and effect.
GUARANTOR: ELSINORE CORPORATION,
a Nevada corporation
By:__________________________________
Its:_________________________________
SUPPLEMENTAL
ATTACHMENT "A"
FOUR QUEENS
B-1565
This Supplemental Attachment "A" is attached to and made a part of the Master
Lease Agreement and Lease Schedule No. 1 to Master Lease Agreement, each dated
November 28, 1994 between IGT-North America, a Nevada corporation ("Lessor") and
Four Queens, Inc., a Nevada corporation ("Lessee").
<TABLE>
<CAPTION>
Vendor/ Model/
Quantity Denom Model/Description Manufacturer Item No. Serial No. Invoice/PO No.
Slot Signage
<S> <C> <C> <C> <C> <C>
1 Display Sign-Double Face "25c Poker" w/Exposed Neon Mikohn C4-08-265 11539
1 Display Sign-Double Face "5c Win" Queens Logo and Mikohn C4-08266 11590
$5 Queens Cache
1 1x2 Cham2 Meter Mikohn C5-06-318 S12-576 5614740-IN
1 CON2I Controller Mikohn CON21-425 5614740-IN
1 R/F S/F Fxt. "25c Progressive" Mikohn 616634 5614740-IN
1 Processing Permit Applications Mikohn 5614740-IN
1 Permit Fee Mikohn 5614740-IN
1 D/F "$1" Triple Diamond Fxt. Mikohn C5-06-210 616536 5614669-IN
1 1x2 Cham2 Super Meter Mikohn S12-574 5614669-IN
1 1x2 Cham2 Super Meter Mikohn S12-575 5614669-IN
1 CON21 Controller Mikohn CON21-438 5614669-IN
1 IGT Harness CON2 6 Machine Mikohn 5614669-IN
1 Processing Permit Application Mikohn 5614669-IN
1 Permit Fee Mikohn 5614669-IN
EDT Hardware
40 Harness, Machine, IGT+Upright IGT 60719200 LV66140-00
4 Harness, PIM510, Reader Display IGT 6071391 LV69712-00
4 Harness, PIM510, Snub IGT 6071401 LV69712-00
120 Harness, Machine, IGT+ Upright IGT 60719200 LV71092-00
11 Harness, PIM510, Reader Display IGT 6071391 LV71093-00
5 Harness, PIM510, Snub IGT 6071401 LV71093-00
15 Bracket-Ply Trk, Side Mount, Peiba IGT 62682600 LV71093-00
5 PCB, Display, PT200, Assembly IGT 7690341 LV72084-00
5 Harness, PIM510, Snub IGT 6071401 LV72084-01
3 Harness, PIM510, Reader Display IGT 6071391 LV71093-01
15 Harness, PIM510, Snub IGT 6071401 LV71093-01
12 Pix, VIA70XFI-5Mag HPR $1-$20 Gen IGT 87186700 LV71093-01
3 Pix, VIA70FXI-5Mag HPR $1-$20 Gen IGT 87186700 LV71093-02
265 Cam-DBV-SS Cashbox Lock IGT 80307690 LV68579-00
250 Collar-Lock, Long Barrel IGT 64401090 LV68579-00
1 GL T5133x132ATHLF 24H48HINS Tpr IGT 86049500 LV68579-00
176 CAM-90DEGx1,0L, Belly Door, S+ IBA IGT 80307300 LV68579-01
250 CAM-1.125 Flat, 2 Double D IGT 80308100 LV68579-01
235 CAM-DBV-SS Cashbox Lock IGT 80307690 LV68579-01
74 CAM-90DEGx1.0L, Belly Door, S+ IBA IGT 80307300 LV68579-02
250 CAM-1.125 Flat, 2 Double D IGT 80308100 LV68579-02
235 CAM-DBV-SS Cashbox Lock IGT 80307690 LV68579-02
5 Harness, PTM510, Reader Display IGT 6071391 LV72084-03
5 Harness, PTM510, Reader Display IGT 6071391 LV72084-02
45 Harness, Machine, IGT+Upright IGT 60719200 LV75262-00
19 Bracket, PT95 Electronics IGT 6362160 LV74671-00
120 Spacer, .25 Hex. 4-40 x . 19 Lg. IGT 67446390 LV74671-00
15 PCB, Display, PT200, Assembly IGT 7690341 LV46710-00
5 Ins, HPR30,36,3770x2H/1K/12H IGT 87117600 LV74671-00
1 Bracket, PT95 Electronics IGT 6362160 LV74671-01
80 Standoff, M/F, 4-40x2.00 IGT 31206790 LV74671-01
50 Bracket Assembly, PT95 Elect. IGT 6362161 LV80124-00
50 PCB, Mach, Personality #65D Assembly IGT 75423700 LV80124-00
50 Card Reader, Mag, 70% Track II IGT 37905190 LV80124-00
50 Power Supply, Module CD 4017 IGT 40005490 LV80124-00
50 Harn, Mag Reader & Display, PTM441, Assembly IGT 60718000 LV80124-00
50 PCB, 16 Character Display, 7.6" Assembly IGT 7690671 LV80124-00
Locks
20 Cam-Cash Door Lock, PE+ IBA IGT 80307200 LV73480-00
20 Cam Lock, B/A Door, PE+IBA IGT 80307400 LV73480-00
20 Bearing Ball, .251D x .6880D IGT 39001090 LV73480-00
20 Washer, BRZ, .251D x .50 OD x .031 IGT 43904090 LV73480-00
20 Nut, Lock ESNA1/4-20 IGT 42101191 LV73480-00
250 Straight Regular Cam 1.7" Security Locking Systems CM-AO9 P.O. 60361
90 Drop Lock One Way 90 Security Locking Systems N1058 10285
90 Drop Lock One Way 180 Security Locking Systems N1058 10285
80 Duo 1-1/8, 180, LH VSR 2A1287 6958
80 Duo 1-1/8, 170, LH VSR 2A1287 13023
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
ATTACHMENT "A"
FOUR QUEENS
B-1565
This Supplemental Attachment "A" is attached to and made a pat of the Master
Lease Agreement and Lease Schedule No. 1 to Master Lease Agreement, each dated
November 28, 1994 between IGT-North America, a Nevada corporation ("Lessor") and
Four Queens, Inc., a Nevada corporation ("Lessee").
Vendor/ Model/
Quantity Denom Model/Description Manufacturer Item No.Serial No. Invoice/P.O.No.
Slots
<S> <C> <C> <C> <C> <C>
1 $1.00 PE+Upright WBA IGT 1D150F S.O. 116859
1 $1.00 PE+Upright WBA IGT 1D650F S.O. 116859
1 $1.00 PE+Upright WBA IGT ID650F S.O. 116859
1 $1.00 PE+Upright WBA IGT 1D700F S.O. 116859
1 $1.00 PE+Upright WBA IGT 1D930F S.O. 116859
1 $5.00 PE+Upright WBA IGT 1D650F S.O. 116859
1 $5.00 PE+Upright WBA IGT 1D650F S.O. 116859
1 $5.00 PE+Upright WBA IGT 1D700F S.O. 116859
</TABLE>
<PAGE>
SUPPLEMENTAL CERTIFICATE OF DELIVERY,
INSTALLATION AND ACCEPTANCE
TO: IGT - NORTH AMERICA, a Nevada corporation ("Lessor")
PDS FINANCIAL CORPORATION, a Minnesota corporation ("Assignee")
FROM: Four Queens, Inc., a Nevada corporation ("Lessee")
RE: Master Lease Agreement dated as of November 28, 1994 ("Lease")
Lease Schedule No. 1, dated as of November 28, 1994 ("Lease Schedule")
Supplemental Attachment" A" to Lease Schedule No. 1 dated October 19, 1996
PREMISES: Four Queens Casino
202 Fremont Street
Las Vegas, NV 89101
Equipment
Lessee hereby certifies that the items of Equipment described in the
above Lease Schedule and in Supplemental Attachment A to Lease Schedule No.1
dated October 19, 1996, have been delivered to and inspected by the Lessee,
installed in the Premises, found to be in good order and accepted for all
purposes under the Lease Schedule and the Lease as Equipment under the Lease
Schedule and the Lease, all on the Acceptance Date set forth hereinbelow.
The Lessee hereby represents and warrants to the Lessor and the
Assignee that on the Acceptance Date set forth below a) no Event of Default by
Lessee under the Lease Schedule or the Lease or event which, with the giving of
notice or lapse of time or both, would become such Event of Default by Lessee,
has occurred and is continuing and b) Lessor has fully performed all covenants
and conditions to be performed by it under the Lease Schedule and the Lease.
Lessee approves payment to the supplier or suppliers of the Equipment
by Lessor or Assignee.
LESSEE ACKNOWLEDGES THAT EACH UNIT IS OF THE DESIGN, CAPACITY AND
MANUFACTURE SPECIFIED FOR AND BY THE LESSEE AND THAT LESSEE IS SATISFIED THAT
THE SAME IS SUITABLE FOR LESSEE'S PURPOSES. LESSEE FURTHER ACKNOWLEDGES AND
AGREES THAT ASSIGNEE IS NOT A MANUFACTURER OR VENDOR OF THE EQUIPMENT AND THAT
ASSIGNEE HAS NOT MADE, AND DOES NOT MAKE, ANY REPRESENTATION, WARRANTY OR
COVENANT WITH RESPECT TO MERCHANTABILITY, FITNESS FOR ANY PURPOSE, CONDITION,
QUALITY, DELIVERY, INSTALLATION, DURABILITY, PATENT, COPYRIGHT OR TRADEMARK
INFRINGEMENT, SUITABILITY OR CAPABILITY OF ANY UNIT IN ANY RESPECT OR IN
CONNECTION WITH ANY OTHER PURPOSES OR USES OF LESSEE OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR CHARACTER EXPRESSED OR
IMPLIED, WITH RESPECT THERETO. LESSEE ACCORDINGLY AGREES NOT TO ASSERT ANY CLAIM
WHATSOEVER AGAINST ASSIGNEE OR ITS ASSIGNS BASED THEREON. LESSEE FURTHER AGREES,
REGARDLESS OF CAUSE, NOT TO ASSERT ANY CLAIM RELATED TO THE EQUIPMENT WHATSOEVER
AGAINST ASSIGNEE OR ITS ASSIGNS FOR LOSS OF ANTICIPATORY PROFITS OR
CONSEQUENTIAL DAMAGES. ASSIGNEE SHALL HAVE NO OBLIGATION TO INSTALL, ERECT,
TEST, ADJUST OR SERVICE THE EQUIPMENT. LESSEE SHALL LOOK TO THE MANUFACTURER OR
VENDOR FOR ANY CLAIMS RELATED TO THE EQUIPMENT.
The Equipment is accepted by the Lessee and has been delivered,
inspected and installed as of October 19, 1996 ("Acceptance Date").
Entire Agreement: LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A COPY
OF AND UNDERSTANDS THIS SUPPLEMENTAL CERTIFICATE OF DELIVERY, INSTALLATION AND
ACCEPTANCE, AND AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS. ASSIGNEE AND
LESSEE AGREE THAT THE LEASE AND ALL RIDERS AND SCHEDULES THERETO, AS ASSUMED BY
LESSEE IN ITS PENDING CHAPTER 11 PROCEEDINGS, SHALL CONSTITUTE THE ENTIRE LEASE
AND AGREEMENT AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR
NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN ASSIGNEE AND LESSEE WITH
RESPECT TO ANY UNIT. THIS LEASE SCHEDULE IS NOT CANCELABLE BY LESSEE FOR THE
TERM HEREOF.
<PAGE>
IN WITNESS WHEREOF, the Lessee has caused this Supplemental Certificate
of Delivery, Installation and Acceptance to be duly executed on this 19th day of
October, 1996 by its authorized representative.
LESSEE: Four Queens, Inc.,
a Nevada corporation
By:_______________________________________
Its:______________________________________
<PAGE>
BILL OF SALE
THIS BILL OF SALE is executed and delivered this 22nd day of January, 1997 by
Four Queens, Inc. ("Seller") to IGT-North America, Inc. ("IGT") and PDS
Financial Corporation ("PDS") (PDS and IGT are hereinafter collectively
"Purchaser").
In consideration of for One Dollar ($1.00) and for other good and
valuable consideration, including but not limited to the Purchaser's willingness
to lease the Assets to Seller under the Master Lease Agreement dated November
28, 1994 (the "Lease"), the receipt and adequacy of which are hereby
acknowledged, Seller does hereby bargain, sell, convey and grant unto Purchaser,
its successors and assigns, all of the assets and personal property of Seller
identified on Schedule A attached hereto and incorporated herein (the "Assets").
TO HAVE AND TO HOLD the same unto Purchaser and its successors and
assigns, subject only to the Lease.
Seller hereby represents and warrants that it is the lawful owner of
the Assets, including, without limitation, all of the assets described on
Schedule A, has good title and right to sell and transfer the same, and that all
such Assets and property are transferred to Purchaser free and clear of all
liens, security interests and encumbrances whatsoever.
Seller hereby covenants and agrees with Purchaser that Seller will
execute and deliver to Purchaser all such further instruments of conveyance,
assignment and transfer as Purchaser may request from time to time to effectuate
the transfer of the Assets to Purchaser, free and clear of any and all liens,
claims and encumbrances.
IN WITNESS WHEREOF, Seller has executed and delivered this Bill of Sale
as of the date first above written.
Four Queens, Inc.,
a Nevada corporation
By:________________________________
Its:_______________________________
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
The foregoing instrument was acknowledged before me this 22nd day of
January, 1997, by __________________________, the _______________________ of
Four Queens, Inc., a Nevada corporation, on behalf of the corporation.
----------------------------------
Notary Public
<PAGE>
PDS Lease Sch A 970122
Four Queens Hotel & Casino
Invoice Submission to PDS
Schedule A
22-Jan-97
Vendor Invoice No. Invoice Date Description
- -------------------------------------------------------------------------
Casino Signs - Mikohn 11539 11/10/94 Slot signage
Casino Signs - Mikohn 11590 11/16/94 Slot signage
Casino Signs - Mikohn 5614740-IN 8/7/95 Slot signage
Casino Signs - Mikohn 5614669-IN 8/3/95 Slot signage
IGT LV66140-00 10/25/94 EDT hardware
IGT LV69712-00 2/2/95 EDT hardware
IGT LV71092-00 2/27/95 EDT hardware
IGT LV71093-00 2/27/95 EDT hardware
IGT LV73480-00 5/10/95 Locks
IGT LV72084-00 3/21/95 EDT hardware
IGT LV72804-01 3/28/95 EDT hardware
IGT LV71093-01 3/3/95 EDT hardware
IGT LV71093-02 3/10/95 EDT hardware
IGT LV68579-00 12/29/94 EDT hardware
IGT LV68579-01 1/5/95 EDT hardware
IGT LV68597-02 1/5/95 EDT hardware
IGT LV72084-02 6/2/95 EDT hardware
IGT LV72084-03 5/17/95 EDT hardware
IGT LV75262-00 6/7/95 EDT hardware
IGT LV74671-00 5/24/95 EDT hardware
IGT LV74671-01 5/26/95 EDT hardware
IGT LV80124-00 10/12/95 EDT hardware
Security Locking System PO 60361 1/24/95 Locks
Security Locking System 10285 6/20/95 Locks
VSR 6958 6/5/95 Locks
VSR 13023 9/25/95 Locks
Total Invoices enclosed
1/22/97
<PAGE>
EXHIBIT A TO UCC-2 FINANCING STATEMENT
LESSEE: Four Queens, Inc.
202 Fremont Street
Las Vegas, NV 89101
LESSOR: IGT-North America
520 South Rock Blvd.
Reno, NV 89510
ASSIGNEE: PDS Financial Corporation
6442 City West Parkway, Suite 300
Minneapolis, Mn 55344
This is a precautionary filing pursuant to NRS 104.9408. This Amendment
is filed to add additional Equipment to the Equipment leased under the Master
Lease Agreement dated November 28, 1994 between IGT-North America and Four
Queens, Inc. and Lease Schedule No. 1 and substitute schedules thereto
(collectively, the "Lease"). The Equipment described in Supplemental Attachment
A hereto is added to the Equipment leased under the Lease, together with all
improvements, accessions, appurtenances, substitutions and replacements for and
to the foregoing, all insurance proceeds and condemnation awards payable with
respect to the foregoing, and all proceeds and products of the foregoing:
<PAGE>
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT ("Lease") is made and entered into this 1st
day of May, 1997, by and between PDS FINANCIAL CORPORATION-NEVADA, a Nevada
corporation ("Lessor"), whose address is 1050 East Flamingo Road, Suite N-337,
Las Vegas, Nevada 89119 and FOUR QUEENS, INC., a Nevada corporation ("Lessee"),
whose address is 202 Fremont Street, Las Vegas, Nevada 89101.
Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor in
accordance with the terms and conditions contained herein, certain equipment
more fully described in the Lease Schedule or Schedules, referred to herein as a
"Lease Schedule," as may from time to time be executed by Lessee. All equipment
described in such Lease Schedules shall be collectively referred to as the
"Equipment" and individually referred to as a "Unit" and is to be installed in
and to be used in connection with the business location described in a
particular Lease Schedule ("Premises").
NOW THEREFORE, Lessor and Lessee agree as follows:
1. LEASE. This Lease establishes the general terms and conditions by which
Lessor shall lease the Equipment to Lessee. Each Lease Schedule shall be in the
form provided by Lessor and shall incorporate by reference the terms of this
Lease.
2. TERM: RENT AND PAYMENT.
2.1 Term. The term of this Lease shall commence on the date set forth
in each Lease Schedule (the "Commencement Date") and continue as specified in
such Lease Schedule ("Term").
2.2 Rent and Payment. Lessee's obligation to pay rent for the Equipment
shall commence on the Commencement Date and continue for the Term. The Basic
Rent set forth on the Lease Schedule shall be payable on the Commencement Date
and on the same day of each month thereafter ("Rent Date"). Any amounts payable
by Lessee, other than Basic Rent, shall be deemed Additional Charges and shall
be payable on the Rent Date next following the date upon which they accrue or
the last day of the Term, whichever is earlier. Lessee shall make all payments
at the address of Lessor set forth above or at such other address as Lessor may
designate in writing. As used herein, the term "Rent" shall mean all Basic Rent
and Additional Charges.
2.3 Late Charge. If any Rent is not received by Lessor or its assignees
within ten (10) days of when due, a late charge on such Rent shall be due and
payable with such Rent in an amount equal to four percent (4%) of the amount
past due or any part thereof, as reimbursement for administrative costs and not
as a penalty.
2.4 Lessor's Performance of Lessee's Obligations. If Lessee fails to
comply with any of its covenants or obligations herein, Lessor may, at its
option, perform such covenants or obligations on Lessee's behalf without thereby
waiving such conditions or obligations or the failure to comply therewith and
all sums advanced by Lessor in connection therewith shall be repayable by Lessee
as Additional Charges. No such performance shall be deemed to relieve Lessee of
its obligations herein.
3. CERTIFICATE OF ACCEPTANCE. Lessee shall deliver to Lessor a
certificate of delivery, installation and acceptance ("Certificate of
Acceptance") in the form provided by the Lessor.
4. NET LEASE. This Lease including each Lease Schedule is a net lease
and Lessee's obligation to pay all Rent due and the rights of Lessor or its
assignees in, and to, such Rent shall be absolute and unconditional under all
circumstances, notwithstanding: (i) any setoff, abatement, reduction,
counterclaim, recoupment, defense or other right which Lessee may have against
Lessor, its assignees, the manufacturer or seller of any Unit, or any other
person for any reason whatsoever, including, without limitation, any breach by
Lessor of this Lease; (ii) any defect in title, condition, operation, fitness
for use, or any damage to or destruction of, the Equipment; (iii) any
interruption or cessation of use or possession of the Equipment for any reason
whatsoever; or (iv) any insolvency, bankruptcy, reorganization or similar
proceedings instituted by or against Lessee.
5. LOCATION: USE: MAINTENANCE; IDENTIFICATION AND INSPECTION.
5.1 Location, Use, Maintenance and Repairs. (a) Lessee shall keep and
use the Equipment on the Premises and shall not relocate or remove any Unit
unless Lessor consents, in writing, prior to its relocation or removal. (b)
Lessee shall at all times and, at its sole cost and expense, properly use and
maintain the Equipment in good operating condition, other than the normal wear
and tear, and make all necessary repairs, alterations and replacements thereto
(collectively, "Repairs"), all of which shall immediately become the property of
Lessor and subject to this Lease. Lessee shall comply with manufacturer
instructions relating to the Equipment, and any applicable laws and governmental
regulations. (c) Lessee shall pay all costs and expenses associated with removal
and return of the Equipment.
5.2 Identification and Inspection. Upon request by Lessor, Lessee shall
mark each Unit conspicuously with appropriate labels or tags furnished by Lessor
and maintain such markings through the Term to clearly disclose that said Unit
is being leased from Lessor. Subject to Lessee's reasonable security
requirements, Lessee shall permit Lessor's representatives to enter the Premises
where any Unit is located to inspect such Unit.
6. LOCATION: LIENS AND ENCUMBRANCES.
6.1 Personal Property. Each Unit is personal property and Lessee shall
not affix any Unit to realty so as to change its nature to a fixture or real
property and agrees that each Unit shall remain personal property during the
Term. Lessor expressly retains ownership and title to the Equipment. Lessee
hereby agrees that it shall be responsible for all of Lessors obligations as
required by the state gaming laws and regulations regarding maintenance, use,
possession and operation of the Equipment. Lessee hereby authorizes, empowers,
and grants a limited power of attorney to Lessor to record and/or execute and
file, on Lessee's behalf, any certificates, memorandums, statements, refiling,
and continuations thereof as Lessor deems reasonably necessary or advisable to
preserve and protect its interest hereunder. The parties intend to create a
lease agreement and the relationship of lessor and lessee between themselves.
Nothing in this Lease shall be construed or interpreted to create or imply the
existence of a finance lease or installment lease contract. Lessor makes no
representation regarding the treatment of this Lease, the Equipment or the
payment of obligations under this Lease for financial statement reporting or tax
purposes.
6.2 Liens and Encumbrances. Unless otherwise provided herein, Lessee
shall not directly or indirectly create, incur or suffer a mortgage, claim,
lien, charge, encumbrance or the legal process of a creditor of Lessee of any
kind upon or against this Lease or any Unit. Lessee shall at all times protect
and defend, at its own cost and expense, the title of Lessor from and against
such mortgages, claims, liens, charges, encumbrances and legal processes of
creditors of Lessee and shall keep all the Equipment free and clear from all
such claims, liens and legal processes. If any such lien or encumbrance is
incurred, Lessee shall immediately notify Lessor and shall take all actions
required by Lessor to remove the same. 7. RETURN OF EQUIPMENT.
7.1 Duty of Return. At the expiration of the Term or upon termination
of the Lease, Lessee at its expense shall return each Unit to Lessor or its
designee at the destination specified by Lessor, in accordance with appropriate
gaming laws and regulations. Each Unit shall conform to all of the
manufacturer's specifications and gaming laws and regulations with respect to
normal function, capability, design and condition (less normal wear and tear).
7.2 Failure to Return. If Lessee fails to return the Equipment or any
portion thereof, as provided above, within fourteen (14) days following
expiration of the term or termination of the Lease, then Lessee shall pay to
Lessor an additional month's Rent for each month, or any portion thereof, that
Lessee fails to comply with the terms of this return provision, until all of the
Equipment is returned, as provided herein.
8. RISK OF LOSS: INSURANCE.
8.1 Risk of Loss. Lessee shall bear the risk of all loss or damage to
any Unit or caused by any Unit during the period from the time the Unit is
shipped by its vendor until the time it is returned as provided herein.
8.2 Unit Replacement. If any Unit is lost, stolen, destroyed, seized by
governmental action or, in Lessee's opinion or Lessor's opinion, damaged ("Event
of Loss"), this Lease shall remain in full force and effect without abatement of
Rent and Lessee shall promptly replace such Unit at its sole expense with a Unit
of equivalent value and utility, and similar kind and in substantially the same
condition as the replaced Unit immediately prior to the Event of Loss. Title to
such replacement unit immediately shall vest and remain in Lessor, and such unit
shall be deemed a Unit under this Lease. Upon such vesting of title and provided
Lessee is not in default under this Lease, Lessor shall cause to be paid to
Lessee or the vendor of the replacement unit any insurance proceeds actually
received by Lessor for the replacement Unit. Lessee shall promptly notify Lessor
of any Event of Loss and shall provide Lessor with and shall enter into, execute
and deliver such documentation as Lessor shall request with respect to the
replac-ement of any such Unit.
8.3 Insurance. Lessee shall obtain and maintain in full force and
effect all risk, full replacement cost property damage insurance on the
Premises: (i) comprehensive personal liability, (ii) all risk property damage on
the Equipment in amounts reasonably acceptable to Lessor, and (iii) workers
compensation insurance. Such insurance shall: (i) name Lessor and its Assignees,
if any, as additional insureds and first loss payees as their interests may
appear; and (ii) provide that the policy may not be canceled or materially
altered without thirty (30) days prior written notice to Lessor and its
Assignees. All such insurance shall be placed with companies having a rating of
at least A, Class XII or better by Best's rating service. Lessee shall furnish
to Lessor, upon request and throughout the Term, insurance certificates of a
kind satisfactory to Lessor and its Assignees showing the existence of the
insurance required hereunder and premium paid.
9. LESSOR'S PURCHASE AND PERFORMANCE. Upon receipt of a Lease
Schedule executed and delivered by Lessee, Lessee shall bear all
responsibilities and perform all obligations of Lessor thereunder other than
payment of the purchase price.
10. TAXES.
10.1 Taxes. Lessee agrees to report, file, pay promptly when due to the
appropriate taxing authority and indemnify, defend, and hold Lessor harmless
from and against any and all taxes (including gross receipts), assessments,
license fees and other federal, state or local governmental charges of any kind
or nature, together with any penalties, interest or fines related thereto
(collectively, "Taxes") that pertain to the Equipment, its purchase, or this
Lease, except such Taxes based solely upon the net income of Lessor.
10.2 Lessor's Filing of Taxes. Notwithstanding the foregoing, Lessor at
its election may report and file sales and/or use taxes which are filed and paid
periodically through the Term, and the amounts so due may be invoiced to Lessee
and payable as specified therein.
11. INDEMNIFICATION. Except for the negligence of Lessor, its employees
or agents and assigns, Lessee hereby assumes liability for and agrees to
indemnify, defend, protect, save and hold harmless the Lessor, its agents,
employees, directors and assignees from and against any and all losses, damages,
injuries, claims, penalties, demands and all expenses, legal or otherwise
(including reasonable attorneys' fees) of whatever kind and nature arising from
the purchase, ownership, use, condition, operation or maintenance of the
Equipment, until the Equipment is returned to Lessor. Any claim, defense,
setoff, or other right of Lessee against any such indemnified party shall not in
any way affect, limit, or diminish Lessee's indemnity obligations hereunder.
Lessee shall notify Lessor immediately as to any claim, suit, action, damage, or
injury related to the Equipment of which Lessee has actual or other notice and
shall, at its own cost and expense, defend any and all suits which may be
brought against Lessor, shall satisfy, pay and discharge any and all judgments
and fines that may be recovered against Lessor in any such action or actions,
provided, however, that Lessor shall give Lessee written notice of any such
claim or demand. Lessee agrees that its obligations under this Section 11 shall
survive the expiration or termination of this Lease.
12. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants to
Lessor that: i) the making of this Lease and any Lease Schedule executed by
Lessee is duly authorized on the part of Lessee and that upon due execution
thereof by Lessee and Lessor they shall constitute valid obligations binding
upon, and enforceable against, Lessee in accordance with their terms; ii)
neither the making of this Lease or such Lease Schedule, nor the due performance
by Lessee, including the commitment and payment of the Rent, shall result in any
breach of, or constitute a default under, or violation of, Lessee's articles of
incorporation, by-laws, or any agreement to which Lessee is a party or by which
Lessee is bound; iii) no approval or consent not already obtained or withholding
of objection is required from any governmental authority with respect to the
entering into, or performance of this Lease or any Lease Schedule by Lessee; iv)
Lessee has obtained all licenses and permits required applicable laws or
regulations (the "Gaming Laws") for the operation of its business.
13. DISCLAIMERS; MANUFACTURERS WARRANTIES. LESSEE ACKNOWLEDGES THAT EACH
UNIT IS OF THE DESIGN, CAPACITY AND MANUFACTURE SPECIFIED FOR AND BY THE LESSEE
AND THAT LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR LESSEE'S PURPOSES.
LESSEE AGREES, REGARDLESS OF CAUSE, NOT TO ASSERT ANY CLAIM WHATSOEVER AGAINST
LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR CONSEQUENTIAL DAMAGES. LESSOR
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES WITH RESPECT TO THE EQUIPMENT WHETHER
EXPRESSED OR IMPLIED. Without limiting the generality of the foregoing it is
intended by the parties to exclude any and all implied warranties of
merchantability and fitness for particular purposes. NO SALESMAN OR AGENT OF
LESSOR IS AUTHORIZED TO WAIVE OR ALTER ANY TERM OF THIS LEASE OR MAKE ANY
REPRESENTATION REGARDING THE EQUIPMENT.
14. ASSIGNMENT OF LEASE.
14.1 Assignment by Lessor. Lessee acknowledges and agrees that Lessor
may assign, mortgage, or otherwise transfer its interest thereunder and/or in
the Equipment to others ("Assignees") without consent of Lessee, provided
however that Lessee and the Nevada Gaming Control Board ("Control Board") shall
be notified of any assignment. Accordingly, Lessee and Lessor agree that upon
such assignment, Lessee (i) shall acknowledge such assignment in writing by
executing a Notice, Consent and Acknowledgment of Assignment furnished by
Lessor; (ii) shall promptly pay all Rent when due to the designated Assignees,
notwithstanding any defense, setoff, abatement, recoupment, reduction or
counterclaim whatsoever that Lessee may have against Lessor; (iii) shall not
permit the Lease or Lease Schedule so assigned to be amended or the terms
thereof waived without the prior written consent of the Assignees; (iv) shall
not require the Assignees to perform any obligations of Lessor under such Lease
Schedule; (v) shall not terminate or attempt to terminate the Lease or Lease
Schedule on account of any default by Lessor; and (vi) acknowledges that any
Assignee may reassign its rights and interest with the same force and effect as
the assignment described herein.
14.2 Assignment or Sublease by Lessee. Lessee shall not assign this
Lease or any Lease Schedule or assign its rights in or sublet the Equipment, or
any interest therein without Lessor's and its Assignee's prior written consent,
which consent shall not be unreasonably withheld. For purposes of this Lease,
Lessor shall consent, upon request by Lessee, to an assignment of Lessee's
interest in this Lease to Allen Paulson or any entity which is controlled by Mr.
Paulson and is capitalized at a level which is acceptable to Lessor at Lessor's
sole discretion.
15. FINANCIAL INFORMATION; FURTHER ASSURANCES.
15.1 Financial Information. Throughout the Term, Lessee shall deliver
to Lessor copies of all current financial information of Elsinore Corporation
(Lessee's parent corporation) which will reflect the financial condition and
operations of Lessee as well as such other information regarding Lessee
reasonably requested by Lessor or its Assignees.
15.2 Further Assurances. Lessee shall execute and deliver to Lessor,
such other documents, and take such further action as Lessor may request, in
order to effectively carry out the intent and purposes of this Lease and the
Lease Schedules. All documentation shall be in a form acceptable to Lessor and
its Assignees.
Lessee shall provide all necessary notices to the Control Board.
15.3 Lease Agreement. If any court of competent jurisdiction should
determine that this Lease constitutes a security arrangement as opposed to a
true lease, the parties then agree that this Lease shall constitute a security
agreement within the meaning of the Uniform Commercial Code and that the Lessor
shall be considered a secured party under the provisions thereof and shall be
entitled to all the rights and remedies of a secured party and Lessee, as
debtor, grants to Lessor, as secured party, a security interest in the
Equipment; provided nothing herein shall be construed nor shall the inclusion of
this paragraph be interpreted as derogating from the stated intent and
contractual understanding of the parties that this is a true lease.
16. DEFAULT BY LESSEE; REMEDIES.
16.1 Default by Lessee. Lessee shall be in default upon the occurrence
of any one of the following events ("Event of Default"): (a) failure to pay Rent
when due; (b) failure to perform any other term, condition or covenant of this
Lease or any Lease Schedule; (c) Lessee ceases or is enjoined, restrained or in
any way prevented from conducting business as a going concern; (d) if any
proceeding is filed by or against the Lessee for an assignment for the benefit
of creditors, a voluntary or involuntary petition in bankruptcy, or if Lessee is
adjudicated a bankrupt or an insolvent; (e) Lessee attempts to remove, sell,
transfer, encumber, part with possession or sublet the Equipment or any Unit
thereof; (f) any Unit is attached, levied upon, encumbered, pledged, or seized
under any judicial process; (g) any warranty or representation made or furnished
to the Lessor by or on behalf of the Lessee is false in any material respect
when made or furnished; (h) failure to maintain in full force and effect the
licenses and permits required under the Gaming Laws for the operation of
Lessee's business; (i) failure to comply with all gaming regulations; or (j) any
change in control of the Lessee or its business.
16.2 Lessor Remedies. Lessee acknowledges that the enforcement of this
Lease requires approval of the Control Board and/or the Nevada Gaming Commission
("the Commission") and that copies of all Default Notices, legal proceedings,
etc. will be forwarded to the appropriate agency as required by state law,
regulation or upon request of the Control Board or the Commission. Lessee
further acknowledges that upon any Event of Default, and at any time thereafter,
Lessor, may in addition to any and all rights and remedies it may have at law or
in equity, without notice to or demand upon Lessee at its sole option: (i)
declare the aggregate Rent then accrued and unpaid together with the balance of
any Rent to be immediately due and payable; (ii) proceed by appropriate court
action or other proceeding, either at law or in equity to enforce performance by
Lessee of any and all covenants of this Lease; (iii) on written notice to
Lessee, terminate any of Lessee's rights under this Lease or Schedule in which
event Lessee shall immediately surrender and return the Equipment to Lessor
pursuant to the provisions hereof; and (iv) subject to appropriate Gaming Laws,
rules, laws and regulations, and required approvals, take possession, sell
and/or re-lease any Unit as Lessor may desire, in its sole discretion.
Lessor's rights and remedies herein are cumulative and in addition to
any rights or remedies available at law or in equity including the Uniform
Commercial Code, and may be exercised concurrently or separately. Lessee shall
pay all costs, expenses, losses, damages and legal costs (including reasonable
attorneys' fees) incurred by Lessor and its Assignees as a result of enforcing
any terms or conditions of the Lease or any Schedules. A termination hereunder
shall occur only upon written notice by Lessor to Lessee and no repossession or
other act by Lessor after default shall relieve Lessee from any of its
obligations to Lessor hereunder unless Lessor so notifies Lessee in writing.
<PAGE>
17. MISCELLANEOUS.
17.1 Notices. Except as otherwise required by law, all notices required
herein shall be in writing and sent by prepaid certified mail or by courier,
addressed to the party at the address of the party specified herein or such
other address designated in writing. Notice shall be effective upon the earlier
of its receipt or four (4) days after it is sent.
17.2 Survival of Indemnities. All indemnities of Lessee shall survive
and continue in full force and effect for events occurring prior to the return
of the Equipment to the Lessor, notwithstanding the expiration or termination of
the Term.
17.3 Counterparts. Each Lease and any Lease Schedule may be
executed in counterparts.
17.4 Multiple Lessees. If more than one Lessee is named in this Lease
or a Lease Schedule the liability of each shall be joint and several.
17.5 Titles. Section titles are not intended to have legal effect or
limit or otherwise affect the interpretation of this Lease or any Lease
Schedule.
17.6 Waiver. No delay or omission in the exercise of any right or
remedy herein provided or otherwise available to Lessor, or prior course of
conduct, shall impair or diminish Lessor's rights to exercise the same or any
other right of Lessor; nor shall any obligation of Lessee hereunder be deemed
waived. The acceptance of rent by Lessor after it is due shall not be deemed to
be a waiver of any breach by Lessee of its obligations under this Lease or any
Lease Schedule.
17.7 Successors. This Lease and each Lease Schedule shall inure to the
benefit of and be binding upon Lessor and Lessee and their respective successors
in interest.
17.8 Not an Offer. Neither this Lease nor any Lease Schedule shall be
deemed to constitute an offer or be binding upon Lessor until executed by
Lessor's authorized officer.
17.9 Severability. If any provisions of this Lease or any Lease
Schedule shall be held to be invalid or unenforceable, the validity and
enforceability of the remaining provision thereof shall not be affected or
impaired in any way.
17.10 Modification. Lessor and Lessee agree that any modifications to
this Lease or any Lease Schedule shall be in writing and shall be signed by both
parties and their last known assignees, if any.
17.11 Lease Irrevocable. This Lease is irrevocable for the full Term
hereof and the Rent shall not abate by reason of termination of Lessee's right
of possession and/or the taking of possession by the Lessor or for any other
reason.
17.12 Governing Law. This Lease and each Lease Schedule are entered
into under and shall be construed in accordance with, and governed by the laws
of the State of Nevada.
17.13 Riders. In the event that any riders are attached hereto and made
a part hereof and if there is a conflict between the terms and provisions of any
rider, including any Lease Schedule and the terms and provisions herein, the
terms and provisions of the rider or Lease Schedule shall control to the extent
of such conflict.
17.14 Entire Agreement. LESSEE REPRESENTS THAT IT HAS READ, RECEIVED,
RETAINED A COPY OF AND UNDERSTANDS THIS LEASE, AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. LESSOR AND LESSEE AGREE THAT THIS LEASE, ALL RIDERS, LEASE
SCHEDULES, OR EXHIBITS HERETO, AND THE LEASE SCHEDULES SHALL CONSTITUTE THE
ENTIRE AGREEMENT AND SUPERSEDE ALL PROPOSALS, ORAL OR WRITTEN, ALL PRIOR
NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN LESSOR AND LESSEE WITH RESPECT
TO ANY UNIT.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed on the date set forth by their authorized representatives.
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:________________________________ By:_________________________________
Its:_________________________________ Its:_________________________________
<PAGE>
LEASE SCHEDULE NO. 1 TO MASTER LEASE AGREEMENT
This Lease Schedule No. 1 is attached to and made a part of the Master
Lease Agreement ("Lease") between PDS FINANCIAL CORPORATION-NEVADA, a Nevada
corporation ("Lessor"), and FOUR QUEENS, INC., a Nevada corporation ("Lessee"),
dated May 1, 1997.
1. Description of Equipment: The Equipment listed on Attachment
"A" to this Lease Schedule is added to the Equipment leased
under the Lease and made subject to the provisions of the
Lease.
2. Commencement Date: The Commencement Date for the Equipment
leased under this Schedule will be the date the Equipment is
delivered and accepted by the Lessee.
3. Term: The Term shall commence on the Commencement Date and
shall continue for 48 consecutive months.
4. The Basic Rent due each month during the Term for the
Equipment described herein is as follows:
a. The first payment under this Lease Schedule in an
amount equal to $12,077.70 shall be due and payable
on May 1, 1997.
b. Payment of the Basic Rent in the amount of $12,077.70
shall be due and payable on June 1, 1997 and on the
1st day of each month thereafter for 47 consecutive
months through and including April 1, 2001.
c. In addition to the monthly Basic Rent due as set
forth above, Lessee shall pay Lessor an amount equal
to all taxes which may be imposed by any Federal,
State or local authority from time to time (excepting
taxes based on income).
5. All of the provisions of the Lease are incorporated by
reference herein as if set forth fully herein.
Dated: May 1, 1997
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:______________________________ By:______________________________
Its:______________________________ Its:_____________________________
<PAGE>
PURCHASE/RENEWAL OPTION
TO LEASE SCHEDULE NO. 1
This Purchase/Renewal Option is attached to and made a part of Lease Schedule
No. 1 ("Lease Schedule") and the Master Lease Agreement ("Lease") between PDS
FINANCIAL CORPORATION-NEVADA, a Nevada corporation ("Lessor"), and FOUR QUEENS,
INC., a Nevada corporation ("Lessee") each dated May 1, 1997.
If Lessee has not been in default under the terms of the Lease, at the
expiration of the Term, Lessor grants Lessee an option to (a) purchase (the
"Purchase Option") all but not less than all of the Equipment described in the
Lease Schedule for the sum equal to the fair market value of the Equipment (not
to exceed 15% of the original purchase price) as of the date of expiration of
the Term as determined by an independent appraiser selected by Lessor (the
"Exercise Price") or (b) renew the Lease Term for a period of one year (the
"Renewal Term") at the then fair market rental as determined by Lessor in its
sole discretion (the "Renewal Option"). A written notice of exercise of the
Purchase Option or the Renewal Option must be given by Lessee 120 days prior to
the expiration of the Term or any Renewal Term. Upon timely receipt of such
notice of exercise, receipt of the payment of all Rent due under the Lease
Schedule and/or payment of the Exercise Price, Lessor will, with exercise of the
Purchase Option, execute and deliver to Lessee a Bill of Sale for the Equipment
described in the Lease Schedule. Upon failure of the Lessor to so deliver a Bill
of Sale, this Purchase/Renewal Option to Lease Schedule No. 1 shall then
constitute a conveyance of the Equipment in accordance herewith. Payment in full
of the Exercise Price shall be due and payable on or before the expiration of
the Term. If Lessee fails to give timely notice of the exercise of either the
Purchase Option or the Renewal Option, the Lease Term shall be automatically
renewed for a period of 120 days (the "Automatic Renewal Term") at the original
monthly Basic Rent. If Lessee has not been in default under the terms of the
Lease at the expiration of the Lease Term, Renewal Term or any Automatic Renewal
Term and Lessee shall fail to exercise any Purchase Option or Renewal Option,
Lessee shall, at Lessee's expense, return the Equipment to Lessor at a facility
designated by Lessor, according to the terms of the Lease. Lessee shall in all
respects remain obligated under the Lease for payment of Rent, care,
maintenance, delivery, use and insurance of the Equipment until Lessor inspects
and accepts the Equipment. In the event it shall at any time be determined that
by reason of the options hereby given or otherwise that the lease of the
Equipment to which the Purchase Option or the Renewal Option applies was in fact
a sale to the Lessee of the Equipment, the Lessee agrees that neither it nor its
successors or assigns has or will have any claim or cause of action against
Lessor, its successors or assigns, for any reason for loss sustained by virtue
of such determination.
Notwithstanding anything to the contrary herein, Lessee shall have the right
during the Term to purchase all, but not less than all of the Equipment under
the Lease Schedule for an amount equal to the product of (i) the then remaining
principal balance (including the 15% residual) of a straight line 48-month
amortization of the original purchase price of the Equipment and (ii) the Payoff
Schedule attached hereto as Exhibit 1.
Lessee acknowledges that the Equipment sold by Lessor under the Purchase Option
is being sold in an "as is, where is" condition. Lessor makes, and will make, no
representations or warranties regarding the Equipment, its suitability for
Lessee's purpose, or its compliance with any laws. Lessee hereby assumes all
liability for the Equipment and agrees to indemnify Lessor per the terms of the
Lease for any claims arising out of the purchase of the Equipment.
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:_________________________________ By:_________________________________
Its:__________________________________ Its:________________________________
<PAGE>
PDS FINANCIAL CORPORATION
PAYOFF SCHEDULE --- NO PREPAYMENT PREMIUM
% of new
04/01/97 100.0%
05/01/97 97.6%
06/01/97 96.2%
07/01/97 94.9%
08/01/97 93.4%
09/01/97 18.4%
10/01/97 18.1%
11/01/97 17.8%
12/01/97 17.5%
01/01/98 17.2%
02/01/98 16.9%
03/01/98 16.6%
04/01/98 16.3%
05/01/98 16.0%
06/01/98 15.7%
07/01/98 15.4%
08/01/98 15.1%
09/01/98 14.8%
10/01/98 14.4%
11/01/98 14.1%
12/01/98 13.8%
01/01/99 13.5%
02/01/99 13.1%
03/01/99 12.8%
04/01/99 12.4%
05/01/99 12.1%
06/01/99 11.7%
07/01/99 11.4%
08/01/99 11.0%
09/01/99 10.6%
10/01/99 10.3%
11/01/99 9.9%
12/01/99 9.5%
01/01/2000 9.2%
02/01/2000 8.8%
03/01/2000 8.4%
04/01/2000 8.0%
05/01/2000 7.6%
06/01/2000 7.2%
07/01/2000 6.8%
08/01/2000 6.4%
09/01/2000 6.0%
10/01/2000 5.6%
11/01/2000 5.1%
12/01/2000 4.7%
01/01/2001 4.3%
02/01/2001 3.9%
03/01/2001 17.1%
04/01/2001 15.0%
<PAGE>
RIDER NO. 1 TO MASTER LEASE AGREEMENT
THAT CERTAIN MASTER LEASE AGREEMENT dated the 10th day of September,
1997 by and between PDS FINANCIAL CORPORATION, as Lessor, and Blue Chip Casino,
Inc., as Lessee, is hereby amended and modified as follows:
1. Security Deposits.
If the Lessee is not then in default under the Lease or any Lease
Schedule, at the end of the Term of the Lease Schedules or in the event
of a Termination Payment, Lessor shall apply any security deposit paid
and received by Lessor in connection with such Lease Schedule to the
final payment or the Termination Payment due under the Lease Schedules.
2. IGT Cash Discount.
Lessor will remit to Lessee the three percent (3%) IGT cash discount on
the IGT manufactured slot machines described under Lease Schedule No. 1
within 48 hours of Lessor's receipt of the same from IGT.
3. Prepayment.
Anything contained in the Lease or any Lease Schedule to the contrary
notwithstanding, if the term of this Lease has not been terminated and
no Event of Default hereunder or under the Lease exists, Lessee shall
have the option to prepay sums due under all, but not less than all
Lease Schedules, or to terminate all, but not less than all Lease
Schedules, by giving Lessor irrevocable written notice of Lessee's
intention to exercise such prepayment ("Prepayment") or termination
option ("Termination Payment") on the next Basic Rent payment date and
shall pay the Prepayment or Termination Payment to Lessor on such next
Basic Rent payment date in immediately available funds. Any Prepayment
or Termination Payment and any over due Rent and all other payments due
or to become due hereunder shall be applied equally, pro rata, to each
Lease Schedule and shall be discounted at a rate per annum equal to
9.00%. Upon receipt by Lessor of the Termination Payment, Lessor will
transfer all of its right, title and interest in and to the Equipment
pursuant to the Lease and all obligations of Lessee with respect to the
Lease shall cease, except for such obligations which, by the terms
thereof, expressly survive the termination of the Lease. Upon
termination of the Lease, Lessor will take such action as is reasonably
requested by Lessee to terminate Lessor's interest in the Equipment,
except as otherwise provided herein or in the Lease or other agreement
then in effect between Lessor and Lessee.
<PAGE>
Except as expressly amended and modified herein, all provisions of the Lease are
hereby ratified and confirmed and remain in full force and effect. This Rider
No. 1 To Master Lease Agreement restates and supersedes any other Rider No. 1 To
Master Lease Agreement which may have existed between the parties hereto.
AGREED: AGREED:
BLUE CHIP CASINO, INC. PDS FINANCIAL CORPORATION
By:_____________________________ By:_______________________________
Title:____________________________ Title: _____________________________
Date:____________________________ Date:_____________________________
CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE
TO: PDS FINANCIAL CORPORATION-NEVADA, a Nevada corporation ("Lessor")
FROM: FOUR QUEENS, INC., a Nevada corporation ("Lessee")
RE: Master Lease Agreement dated as of May 1, 1997 ("Lease") and
Lease Schedule No. 1 thereto dated of even date therewith
PREMISES: Four Queens Hotel & Casino
202 Fremont Street
Las Vegas, NV 89101
Equipment
Lessee hereby certifies that the items of Equipment described in the
Lease (and attached hereto as Attachment A to the Lease Schedule No. 1 to Master
Lease Agreement) has been delivered to and inspected by Lessee, installed in the
Premises, found to be in good order and accepted for all purposes of the Lease
as Equipment under the Lease, all on May 1, 1997 (the "Acceptance Date").
Lessee acknowledges Lessor's right to assign all or part of its
interest under the Lease and/or all or part of other sums due thereunder and
that any such assignee of Lessor does not assume any of the obligations of
Lessor.
LESSEE ACKNOWLEDGES THAT EACH UNIT IS OF THE DESIGN, CAPACITY AND MANUFACTURE
SPECIFIED FOR AND BY THE LESSEE AND THAT LESSEE IS SATISFIED THAT THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES. LESSEE AGREES, REGARDLESS OF CAUSE, NOT TO
ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR
CONSEQUENTIAL DAMAGES. Without limiting the generality of the foregoing it is
intended by the parties to exclude any and all implied warranties of
merchantability and fitness for particular purposes.
LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A COPY OF AND UNDERSTANDS
THIS CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE, AND AGREES TO BE
BOUND BY ITS TERMS AND CONDITIONS. LESSEE AGREES THAT THE LEASE AND ALL RIDERS
AND SCHEDULES THERETO CONSTITUTE THE ENTIRE LEASE AND SUPERSEDE ALL PROPOSALS,
ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN
LESSEE AND LESSOR WITH RESPECT TO ANY UNIT. THIS LEASE IS NOT CANCELABLE BY
LESSEE FOR THE TERM HEREOF.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Delivery,
Installation and Acceptance to be duly executed on this 1st day of May, 1997 by
its authorized representative.
FOUR QUEENS, INC.,
a Nevada corporation
By:________________________________
Its:________________________________
<TABLE>
<CAPTION>
ATTACHMENT "A"
FOUR QUEENS
File No. 3001-03
This Attachment "A" is attached to and made a part of the Master Lease Agreement
dated May 1, 1997 and Lease Schedule No. 1 thereto dated of even date therewith
between PDS Financial Corporation-Nevada, a Nevada corporation ("Lessor"), and
Four Queens,Inc., a Nevada corporation ("Lessee").
Model/
Quantity Denom Model/Description Manufacturer Item No. Serial No. Invoice/PO No. Price Amount
- -------- ----- ----------------- ------------ -------- ---------- -------------- ----- ------
Slots
-----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819467 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819468 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819469 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819470 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819471 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5033CFIW 819472 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819473 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819474 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819475 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819476 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819983 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819884 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819985 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819986 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819987 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819988 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819989 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819990 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819991 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819992 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819993 N079924 $6,195.000 $6,195.00
1 $1.00 S Slot Plus, W/EMB BV IGT B5036CFIW 819994 N079924 $6,195.000 $6,195.00
1 $1.00 S Plus with B and W/EMB BV IGT B5136CFIW 819995 N079924 $6,195.000 $6,195.00
1 $1.00 S Plus with B and W/EMB BV IGT B5136CFIW 819996 N079924 $6,195.000 $6,195.00
1 $1.00 S Plus with B and W/EMB BV IGT B5136CFIW 819997 N079924 $6,195.000 $6,195.00
1 $1.00 S Plus with B and W/EMB BV IGT B5136CFIW 819998 N079924 $6,195.000 $6,195.00
1 $1.00 S Plus with B and W/EMB BV IGT B5136CFIW 819999 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820000 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820001 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820002 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820003 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820004 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820005 N079924 $6,195.000 $6,195.00
1 $5.00 S Plus with B and W/EMB BV IGT B5136CFIW 820006 N079924 $6,195.000 $6,195.00
1 $10.00 S Plus with B and W/EMB BV IGT B5136CFIW 820007 N079924 $6,195.000 $6,195.00
1 $10.00 S Plus with B and W/EMB BV IGT B5136CFIW 820008 N079924 $6,195.000 $6,195.00
1 $25.00 S Plus with B and W/EMB BV IGT B5136CFIW 820009 N079924 $6,195.000 $6,195.00
1 $0.25 PE+ Flat Bar IBA Dueces Wild IGT OA15C 782115 N080005 $7,295.000 $7,295.00
1 $0.25 PE+ Flat Bar IBA Dueces Wild IGT OA15C 782116 N080005 $7,295.000 $7,295.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 788515 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 788517 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809642 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809645 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809684 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809653 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809676 N080005 $6,095.000 $6,095.00
1 $0.25 PE + 4 of a Kind W/EMB BV IGT IA65CF 809636 N080005 $6,095.000 $6,095.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720864 N080165 $250.000 $250.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788505 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788509 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788511 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788513 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788519 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 788520 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809645 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809647 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809659 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809660 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809663 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809673 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809680 N079706 $6,095.000 $6,095.00
1 $0.25 Bonus Poker Progressive W/EMB BV IGT IA650F 809683 N079706 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809644 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809646 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809662 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809655 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809685 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809687 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809688 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809691 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 788514 N079911 $6,095.000 $6,095.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720838 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720839 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720840 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720841 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720842 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720843 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720844 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720845 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720846 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720847 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720848 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720849 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720850 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720851 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720852 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720853 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720854 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720855 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720856 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720857 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720858 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720859 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720860 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720861 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720862 N079911 $250.000 $250.00
1 $0.25 Used Sigma Video Poker Sigma SIGMPKR 720863 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720865 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720866 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720867 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720868 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720869 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720870 N079911 $250.000 $250.00
1 $1.00 Used Sigma Video Poker Sigma SIGMPKR 720871 N079911 $250.000 $250.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809649 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809057 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809658 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809661 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809672 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809681 N079911 $6,095.000 $6,095.00
1 $0.25 PE+ 4 of a Kind W/EMB BV IGT IA650F 809690 N079911 $6,095.000 $6,095.00
111
Equipment
10 Over Sized Coin Handling Including Hopper IGT N079924 $300.000 $3,000.00
37 Player Tracking Units IGT N079924 $880.000 $32,560.00
8 Imbedded Video Mount Player Tracking Units IGT N080005 $880.000 $7,040.00
2 Player Tracking Units for Drop in Bar Games IGT N080005 $380.000 $760.00
14 Imbedded Video Mount Player Tracking Units IGT N079706 $880.000 $12,320.00
9 Imbedded Video Mount Player Tracking Units IGT N079911 $880.000 $7,920.00
8 Imbedded Video Mount Player Tracking Units IGT N079911 $880.000 $7,040.00
</TABLE>
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION - NEVADA,
a Nevada corporation a Nevada corporation
By:________________________________ By:__________________________________
Its: ______________________________ Its: ________________________________
WARRANTY BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
That Four Queens, Inc., a Nevada corporation ("Seller"), for good and
valuable consideration, receipt of which is hereby acknowledged, does hereby
grant, convey, assign, transfer, bargain and sell, deliver and set over unto PDS
Financial Corporation-Nevada, a Nevada corporation ("Purchaser"), and unto its
successors and assigns forever, all of Seller's right, title and interest in the
Equipment described in Attachment A attached hereto and incorporated herein
("Assets").
Seller hereby warrants to Purchaser, its successors and assigns, that
there is hereby conveyed to Purchaser on the date hereof good and marketable
title to the Assets free and clear of all liens, encumbrances, and rights of
others, and hereby covenants that Seller will warrant and defend such title
against all claims and demands whatsoever that are made in writing.
This Bill of Sale shall in all respects be governed in accordance with
the laws of the State of Nevada. This Bill of Sale is subject to Seller's rights
under a Master Lease Agreement dated May 1, 1997.
IN WITNESS WHEREOF, Seller has caused this instrument to be duly
executed and delivered this 1st day of May, 1997.
SELLER:
FOUR QUEENS, INC.,
a Nevada corporation
By:______________________________
Its:_____________________________
STATE OF ___________________ )
) ss
COUNTY OF _________________ )
On this _____ day of _________________, 19____, before me personally
appeared _____________ ______________, the _____________________________ of Four
Queens, Inc., a Nevada corporation, on behalf of the corporation.
---------------------------------
Notary Public
My Commission expires:___________________________
GUARANTY
May 1, 1997
FOR VALUE RECEIVED, and in order to induce PDS FINANCIAL
CORPORATION-NEVADA, a Nevada corporation ("Lessor"), to lease to FOUR QUEENS,
INC., a Nevada corporation ("Lessee") the equipment described in that certain
Master Lease Agreement dated of even date herewith ("Lease Agreement") and Lease
Schedule No. 1 to Master Lease Agreement ("Lease Schedule") (the Lease
Agreement, Lease Schedule and all documents and instruments executed and
delivered to Lessor in connection with the Lease are hereafter collectively the
"Lease") made and executed by the Lessee to the order of Lessor, the undersigned
hereby absolutely and unconditionally guarantees to Lessor the due and prompt
payment by Lessee of all sums due under the Lease, and all other costs incurred,
including reasonable attorneys' fees, in enforcing payment of the Lease or this
Guaranty (all such costs, the indebtedness evidenced by, and the terms and
conditions of the Lease and this Guaranty being herein collectively referred to
as the "Indebtedness Guaranteed");
It is understood and agreed that as a condition of giving this
Guaranty, the undersigned shall be given ten (10) days after receipt of written
notice from Lessor of a default by Lessee in payment of any Indebtedness
Guaranteed to cure such default. If the undersigned fails to cure a default by
Lessee within ten (10) days after receipt of written notice from Lessor of a
default by Lessee, the undersigned does hereby grant to Lessor the right to
demand immediate payment from the undersigned, and the undersigned shall
immediately become liable for, the balance of the Indebtedness Guaranteed upon
acceleration of the Indebtedness Guaranteed by Lessor, without further notice.
The undersigned hereby agrees that the Lessor may from time to time
without notice to or consent of the undersigned and upon such terms and
conditions as the Lessor may deem advisable without affecting this Guaranty (a)
release any maker, surety or other person liable for payment of all or any part
of the Indebtedness Guaranteed; (b) make any agreement extending or otherwise
altering the time for or the terms of payment of all or any part of the
Indebtedness Guaranteed; (c) modify, waive, compromise, release, subordinate,
resort to, exercise or refrain from exercising any right the Lessor may have
hereunder, under the Lease or any other security given for the Indebtedness
Guaranteed; (d) accept additional security or guarantees of any kind; (e)
endorse, transfer or assign its rights under the Lease, to any other party; (f)
accept from Lessee or any other party partial payment or payments on account of
the Indebtedness Guaranteed; (g) from time to time hereafter further loan monies
or give or extend credit to or for the benefit of the Lessee; and (h) release,
settle or compromise any claim of the Lessor against the Lessee, or against any
other person, firm or corporation whose obligation is held by the Lessor as
security for the Indebtedness Guaranteed.
The undersigned hereby unconditionally and absolutely waives (a) any
obligation on the part of the Lessor to protect, secure or insure any of the
security given for the payment of the Indebtedness Guaranteed; (b) the
invalidity or unenforceability of the Indebtedness Guaranteed; (c) any of the
security given for the payment of the Indebtedness Guaranteed; (d) notice of
acceptance of this Guaranty by the Lessor; (e) notice of presentment, demand for
payment, notice of non-performance, protest, notices of protest and notices of
dishonor, notice of non-payment or partial payment; (f) notice of any defaults
under the Lease or in the performance of any of the covenants and agreements
contained therein or in any instrument given as security therefor; (g) any
defense, offset or claim the Lessee or the undersigned may have against the
Lessor; (h) any limitation or exculpation of liability on the part of the Lessee
whether contained in the Lease or otherwise; (i) the transfer or sale by the
Lessee or the diminution in value thereof of any security given for the
Indebtedness Guaranteed; (j) any failure, neglect or omission on the part of the
Lessor to realize or protect the Indebtedness Guaranteed or any security given
therefor; (k) any right to insist that the Lessor prosecute collection of the
Indebtedness Guaranteed or resort to any instrument or security given to secure
the Indebtedness Guaranteed or to proceed against the Lessee or against any
other guarantor or surety prior to enforcing this Guaranty; provided, however,
at its sole discretion the Lessor may either in a separate action or an action
pursuant to this Guaranty pursue its remedies against the Lessee or any other
guarantor or surety, without affecting its rights under this Guaranty; (l)
notice to the undersigned of the existence of or the extending to the Lessee of
the Indebtedness Guaranteed, or (m) any order, method or manner of application
of any payments on the Indebtedness Guaranteed.
Without limiting the generality of the foregoing, the undersigned will
not assert against the Lessor 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 Lessee in respect of the
Indebtedness Guaranteed, or any setoff available against the Lessor to the
Lessee whether or not on account of a related transaction, and the undersigned
expressly agrees that it shall be and remain liable for any deficiency remaining
after repossession and sale of any of the leased equipment under the Lease,
notwithstanding provisions of law that may prevent the Lessor from enforcing
such deficiency against the Lessee. The undersigned hereby specifically waives
and renounces any right to proceed against the Lessee, and its successors and
assigns, for any deficiency arising as a result of the foreclosure of any
mortgage or security interest securing the Indebtedness Guaranteed, which
deficiency Lessor may be unable to enforce against the Lessee pursuant to
applicable law. The liability of the undersigned shall not be affected or
impaired by any voluntary or involuntary dissolution, sale or other disposition
of all or substantially all of the assets, marshalling 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 Lessee or any of its assets and that
upon the institution of any of the above actions, at the Lessor's sole
discretion and without notice thereof or demand therefor, the undersigned's
obligations shall become due and payable and enforceable against the
undersigned, whether or not the Indebtedness Guaranteed is then due and payable.
The undersigned further agrees that no act or thing, except for payment
and performance in full of the Indebtedness Guaranteed, which but for this
provision might or could in law or in equity act as a release of the liabilities
of the undersigned hereunder shall in any way affect or impair this Guaranty and
the undersigned agrees that this shall be a continuing, absolute and
unconditional Guaranty and shall be in full force and effect until the
Indebtedness Guaranteed has been paid in full.
Performance by the undersigned under this Guaranty shall not entitle
the undersigned to be subrogated to any of the Indebtedness Guaranteed or to any
security therefor, unless and until the full amount of the Indebtedness
Guaranteed has been fully paid.
The undersigned agrees this Guaranty is executed in order to induce the
Lessor to enter into the Lease and with the intent that it be relied upon by the
Lessor in connection therewith. Execution of the Lease, without any further
action or notice, shall constitute conclusive evidence of the reliance hereon by
the Lessor. This Guaranty shall run with the Lease and without the need for any
further assignment of this Guaranty to any subsequent holder of the Lease or the
need for any notice to the undersigned thereof. Upon endorsement or assignment
of the Lease to any subsequent holder, said subsequent holder of the Lease may
enforce this Guaranty as if said holder had been originally named as Lessor
hereunder.
The undersigned consents to be sued in any jurisdiction in which either
the Lessee may be sued or the Lessor's principal place of business, at Lessor's
sole option, as well as the undersigned's principal place of business and
residence and in the state where this Guaranty is executed.
No right or remedy herein conferred upon or reserved to the Lessor is
intended to be exclusive of any other available remedy or remedies but each and
every remedy shall be cumulative and shall be in addition to every other remedy
given under this Guaranty or now or hereafter existing at law or in equity. No
waiver, amendment, release or modification of this Guaranty shall be established
by conduct, custom or course of dealing, but only by an instrument in writing
duly executed by the Lessor.
This Guaranty is delivered in and made in and shall in all respects be
construed pursuant to the laws of the State of Nevada.
This Guaranty and each and every part hereof, shall be binding upon the
undersigned and upon its successors and assigns and shall inure to the pro rata
benefit of each and every future holder of the Lease, including the successors
and assigns of the Lessor.
ELSINORE CORPORATION,
a Nevada corporation
By:_________________________________
Its:_________________________________
SECRETARY'S CERTIFICATE
I, __________________________________, do hereby certify that I am the
Secretary of Four Queens, Inc., a corporation organized and existing under and
by virtue of the laws of the State of Nevada, having its principal place of
business in the City of Las Vegas, State of Nevada.
That the following resolution was duly and regularly adopted by the
Board of Directors of said corporation, by unanimous consent, dated
___________________, 1997:
"RESOLVED, that the President, each Vice President and each other
officer and each agent of this corporation indicated below, or any one
of them, be and they are hereby authorized to negotiate and enter into
leases or a master lease agreement, lease schedules and any supplements
thereto from time to time for and on behalf of this corporation with
PDS Financial Corporation-Nevada, a Nevada corporation ("PDS"), in such
amounts and upon such terms as said officer or agent shall deem to be
in the best interests of this corporation and said officer or agent is
hereby authorized and empowered to enter into any agreement renewing,
extending, altering, amending or modifying said agreements and
instruments at any time and from time to time and to execute, for and
on behalf of this corporation, financing statements, subordination
agreements, riders, addendums and such other documents and such other
documents and instruments as may be required by said PDS to effectuate
such agreements and instruments, and any such agreement or instrument
may contain a clause whereby this corporation waives its right to trial
by jury with respect to actions brought by or against said PDS
regarding this corporation."
I further certify that said resolution: (a) is not contrary to the
Articles of Incorporation or bylaws of said corporation; (b) and has not been
modified, repealed or rescinded but is in full force and effect; and (c) said
PDS may continue to rely upon said resolution until an authorized representative
of said corporation provides PDS with not less than 10 days prior written notice
to the contrary.
I further certify that the following persons are the officers of said
corporation duly authorized pursuant to the foregoing resolution, each holding
the respective offices set opposite their names below and that the signatures
set opposite their respective names and offices are their genuine signatures:
Name (Print or Type) Signature
______________________________ President ______________________________
______________________________ Vice President ______________________________
______________________________ (Specify:)
------------- -------------------
______________________________ Agent _____________________________________
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said
corporation this _____ day of ______________, 19____.
(Corporate Seal) ___________________________________
Secretary
Witness:
- ----------------------------------
(Sign and Print Name)
CERTIFICATE OF GUARANTOR
I, the undersigned, do hereby certify that I am _____________________
of ELSINORE CORPORATION, a corporation organized and existing under the laws of
the State of Nevada and that by Unanimous Writing in Lieu of Meeting of the
Board of Directors of said corporation effective on the ______ day of March,
1997, the following resolutions were adopted:
WHEREAS, PDS Financial Corporation-Nevada, a Nevada corporation
("Lessor") has leased certain slot machines ("Equipment") to Four
Queens, Inc.; and
WHEREAS, it is deemed to be in the best interests of this corporation
to execute and deliver a Guaranty agreement to Lessor in the form
reviewed by the directors;
NOW, THEREFORE RESOLVED, that the corporation execute and deliver to
Lessor a Guaranty in the form reviewed by the directors;
RESOLVED FURTHER, that any officer of the corporation be, and he hereby
is, authorized and directed to execute and deliver to Lessor on behalf
of the corporation and as an official act of the corporation this
corporation's Guaranty and such other related documents as may be
required by said Lessor as a condition to Lessor entering into the
Lease, the form of said documents to be in form as he shall deem
necessary, his signature thereon being conclusive evidence of his
agreeing to the form of such documents.
I also certify that said resolutions have been duly entered into the
Minute Book of the corporation and have not been repealed or modified in any way
and are still in full force and effect, that said resolutions are not
inconsistent with any provisions of the Articles of Incorporation or the ByLaws
of this corporation and do not violate, contravene or result in a default under
any indenture or agreement to which the corporation is a party.
I further certify that the following person has been duly elected to
and does now hold the office set forth below and that the signature opposite his
typed name is his true and genuine signature.
NAME SIGNATURE OFFICE
- ------------------------ ------------------------ -------------------------
- ------------------------ ------------------------ -------------------------
I further certify that attached hereto are true and correct copies of
the current Articles of Incorporation of the corporation, its Bylaws, and a
Certificate of Good Standing from the Secretary of the State of Nevada.
GUARANTOR: ELSINORE CORPORATION,
a Nevada corporation
By:_________________________________
Its:_________________________________
<PAGE>
STATE OF NEVADA )
) SS
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this ______ day of
March, 1997, by _______________________ the ____________________ of Elsinore
Corporation, a Nevada corporation, on behalf of the corporation.
--------------------------------------
Notary Public
My Commission expires:_______________________________
AUTHORIZATION FOR AUTOMATIC PAYMENT
I authorize PDS FINANCIAL CORPORATION (and its assignees) and the bank named
below to initiate variable entries to my checking/savings account for the
following loan:
Lease Description: 3001-03
Original Lease Amount: $505,206.30
Payment Date: May 1, 1997
Payment Amount: $12,077.70
Sales Tax @ 7.0% $845.44
Total $12,923.14
Effective Date: May 1, 1997
This authorization will remain in effect until I notify you or the bank in
writing to cancel it in such time as to afford the bank a reasonable opportunity
to act on it. I can stop payment of any entry by notifying you or my bank three
(3) days before my account is charged. I can have the amount of an erroneous
charge immediately credited to my account up to 15 days following issuance of my
bank statement or 46 days after posting, whichever occurs first.
------------------------------------------------------------------
(Name of Financial Institution)
--------------------------------------------------------------------
(Address of Financial Institution) (City) (State) (Zip Code)
-------------------------------------------------------------------
(Signature) (Date)
-----------------------------
(Its)
Four Queens, Inc.
202 Fremont Street
Las Vegas, NV 89101
Checking Savings
Account _________________ (or) Account No._______________
Bank Routing Number _____________________________________
(between these symbols /: :/ on the bottom
left of your check)
[Please attach a copy of a voided check to this form]
<PAGE>
EXHIBIT A
All gaming and other equipment now or hereafter leased or to be leased
under that certain Master Lease Agreement dated May 1, 1997 and Lease Schedule
No. 1 thereto dated May 1, 1997 (collectively, the "Lease"), by and between
Secured Party, as lessor, and Debtor, as lessee, including without limitation,
all of Debtor's interest in and to the following:
1. Debtor's interest in the equipment described in Attachment A attached
hereto which is now or hereafter subject to the Lease and all payments due
under the Lease; and
2. All accessions, accessories, additions, amendments, attachments,
modifications, replacements and substitutions to any of the foregoing; and
3. All proceeds and products of any of the foregoing; and
4. All policies of insurance pertaining to any of the foregoing as well as any
proceeds pertaining to such policies; and
5. All books and records pertaining to any of the foregoing.
<PAGE>
AMENDMENT TO MASTER LEASE AGREEMENT
This Amendment to Master Lease Agreement ("Amendment") is made this 1st
day of August, 1997 by and between PDS Financial Corporation-Nevada ("Lessor")
and Four Queens, Inc. ("Lessee").
WHEREAS, Lessee and Lessor entered into that certain Master Lease
Agreement dated May 1, 1997 (the "Lease"), whereby Lessor leased to Lessee
certain equipment defined in the Lease; and
WHEREAS, the parties hereto desire to amend the Lease as set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and for such other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Paragraph 16.2(i) of the Lease is hereby amended to read as follows:
Declare due and payable immediately the entire amount of rent
and all other amounts remaining to be paid over the balance of
the term plus the anticipated residual value of the Equipment
at the expiration of the term of the Lease, discounted to the
date of default at six percent (6%) per annum, plus interest
thereon at twelve percent (12%) from the date of default until
paid.
2. The first sentence of Paragraph 14.2 shall be deleted in its
entirety and in lieu thereof the same language shall be added
to Paragraph 14.2 in bold print as follows:
Lessee shall not assign this Lease or any Lease Schedule or
assign its rights in or sublet the Equipment, or any interest
therein without Lessor's and its Assignee's prior written
consent, which consent shall not be unreasonably withheld. For
purposes of this Lease, Lessor shall consent, upon request by
Lessee, to an assignment of Lessee's interest in this Lease to
Allen Paulson or any entity which is controlled by Mr. Paulson
and is capitalized at a level which is acceptable to Lessor at
Lessor's sole discretion.
3. Except as provided herein, all of the terms and conditions of
the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment on the date first above-written.
FOUR QUEENS, INC. PDS FINANCIAL CORPORATION-NEVADA
By:______________________________ By:_________________________________
Its:______________________________ Its:________________________________
<PAGE>
LEASE SCHEDULE NO. 2 TO MASTER LEASE AGREEMENT
This Lease Schedule No. 2 is attached to and made a part of the Master
Lease Agreement ("Lease") between PDS FINANCIAL CORPORATION-NEVADA, a Nevada
corporation ("Lessor"), and FOUR QUEENS, INC., a Nevada corporation ("Lessee"),
dated May 1, 1997.
1. Description of Equipment: The Equipment listed on Attachment
"A" to this Lease Schedule is added to the Equipment leased
under the Lease and made subject to the provisions of the
Lease.
2. Commencement Date: The Commencement Date for the Equipment
leased under this Schedule will be the date the Equipment is
delivered and accepted by the Lessee.
3. Term: The Term shall commence on the Commencement Date and
shall continue for 48 consecutive months.
4. The Basic Rent due each month during the Term for the
Equipment described herein is as follows:
a. The first payment under this Lease Schedule in an
amount equal to $4,796.43 shall be due and payable on
September 1, 1997.
b. Payment of the Basic Rent in the amount of $4,796.43
shall be due and payable on October 1, 1997 and on
the 1st day of each month thereafter for 47
consecutive months through and including August 1,
2001.
c. In addition to the monthly Basic Rent due as set
forth above, Lessee shall pay Lessor an amount equal
to all taxes which may be imposed by any Federal,
State or local authority from time to time, provided
however, Nevada state sales tax shall be paid be
Lessor and invoiced to Lessee as provided in section
10.2 of the Master Lease Agreement, as amended by
paragraph 1 of the Rider No. 1 to Master Lease
Agreement.
5. All of the provisions of the Lease are incorporated by
reference herein as if set forth fully herein.
Dated: August 1, 1997
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:______________________________ By:_________________________________
Its:______________________________ Its:_________________________________
<PAGE>
PURCHASE/RENEWAL OPTION
TO LEASE SCHEDULE NO. 2
This Purchase/Renewal Option ("Purchase/Renewal Option") is attached to and made
a part of Lease Schedule No. 2 dated August 1, 1997 ("Lease Schedule") and the
Master Lease Agreement dated May 1, 1997 ("Lease") between PDS FINANCIAL
CORPORATION-NEVADA, a Nevada corporation ("Lessor"), and FOUR QUEENS, INC., a
Nevada corporation ("Lessee").
If Lessee has not been in default under the terms of the Lease, at the
expiration of the Term, Lessor grants Lessee an option to either (a) purchase
(the "Purchase Option") all but not less than all of the Equipment described in
the Lease Schedule for the sum equal to the fair market value of the Equipment
(not to exceed 15% of the original purchase price) as of the date of expiration
of the Term as determined by an independent appraiser selected by Lessor (the
"Exercise Price") or (b) renew the Lease Term for a period of one year (the
"Renewal Term") at the then fair market rental as determined by Lessor in its
sole discretion (the "Renewal Option"). A written notice of exercise of the
Purchase Option or the Renewal Option must be given by Lessee 120 days prior to
the expiration of the Term or any Renewal Term. Upon timely receipt of such
notice of exercise, receipt of the payment of all Rent due under the Lease
Schedule and/or payment of the Exercise Price, Lessor will, with exercise of the
Purchase Option, execute and deliver to Lessee a Bill of Sale for the Equipment
described in the Lease Schedule. Upon failure of the Lessor to so deliver a Bill
of Sale, this Purchase/Renewal Option to Lease Schedule No. 1 shall then
constitute a conveyance of the Equipment in accordance herewith. Payment in full
of the Exercise Price shall be due and payable on or before the expiration of
the Term. If Lessee fails to give timely notice of the exercise of either the
Purchase Option or the Renewal Option, the Lease Term shall be automatically
renewed for a period of 120 days (the "Automatic Renewal Term") at the original
monthly Basic Rent. If Lessee has not been in default under the terms of the
Lease at the expiration of the Lease Term, Renewal Term or any Automatic Renewal
Term and Lessee shall fail to exercise any Purchase Option or Renewal Option,
Lessee shall, at Lessee's expense, return the Equipment to Lessor at a facility
designated by Lessor, according to the terms of the Lease. Lessee shall in all
respects remain obligated under the Lease for payment of Rent, care,
maintenance, delivery, use and insurance of the Equipment until Lessor inspects
and accepts the Equipment. In the event it shall at any time be determined that
by reason of the options hereby given or otherwise that the lease of the
Equipment to which the Purchase Option or the Renewal Option applies was in fact
a sale to the Lessee of the Equipment, the Lessee agrees that neither it nor its
successors or assigns has or will have any claim or cause of action against
Lessor, its successors or assigns, for any reason for loss sustained by virtue
of such determination.
Notwithstanding anything to the contrary herein, Lessee shall have the right
during the Term to purchase all, but not less than all of the Equipment under
the Lease Schedule for an amount equal to the product of (i) the then remaining
principal balance (including the 15% residual) of a straight line 48-month
amortization of the original purchase price of the Equipment and (ii) the Payoff
Schedule attached hereto as Exhibit 1.
Lessee acknowledges that the Equipment sold by Lessor under the Purchase Option
is being sold in an "as is, where is" condition. Lessor makes, and will make, no
representations or warranties regarding the Equipment, its suitability for
Lessee's purpose, or its compliance with any laws. Lessee hereby assumes all
liability for the Equipment and agrees to indemnify Lessor per the terms of the
Lease for any claims arising out of the purchase of the Equipment.
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:_________________________________ By:____________________________________
Its:__________________________________ Its:____________________________________
Exhibit 1
PDS FINANCIAL CORPORATION
PAYOFF SCHEDULE
% of new
07/01/97 100.0%
1 08/01/97 97.6%
2 09/01/97 96.2%
3 10/01/97 94.9%
4 11/01/97 93.5%
5 12/01/97 92.0%
6 01/01/98 90.6%
7 02/01/98 89.2%
8 03/01/98 87.7%
9 04/01/98 86.2%
10 05/01/98 84.8%
11 06/01/98 83.2%
12 07/01/98 81.7%
13 08/01/98 80.2%
14 09/01/98 78.6%
15 10/01/98 77.1%
16 11/01/98 75.5%
17 12/01/98 73.9%
18 01/01/99 72.3%
19 02/01/99 70.6%
20 03/01/99 69.0%
21 04/01/99 67.3%
22 05/01/99 65.6%
23 06/01/99 63.9%
24 07/01/99 62.2%
25 08/01/99 60.5%
26 09/01/99 58.7%
27 10/01/99 56.9%
28 11/01/99 55.1%
29 12/01/99 53.3%
30 01/01/00 51.5%
31 02/01/00 49.6%
32 03/01/00 47.8%
33 04/01/00 45.9%
34 05/01/00 44.0%
35 06/01/00 42.0%
36 07/01/00 40.1%
37 08/01/00 38.1%
38 09/01/00 36.1%
39 10/01/00 34.1%
40 11/01/00 32.1%
41 12/01/00 30.0%
42 01/01/01 27.9%
43 02/01/01 25.8%
44 03/01/01 23.7%
45 04/01/01 21.6%
46 05/01/01 19.4%
47 06/01/01 17.2%
48 07/01/01 15.0%
The payment dates and percentages set forth herin reflect the amounts which
would be due and payable after Lessor or Lessor's assignees's receipt of each
monthly lease payment
CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE
TO: PDS FINANCIAL CORPORATION-NEVADA, a Nevada corporation ("Lessor")
FROM: FOUR QUEENS, INC., a Nevada corporation ("Lessee")
RE: Master Lease Agreement dated as of May 1, 1997 ("Lease") and
Lease Schedule No. 2 thereto dated of even date therewith
PREMISES: Four Queens Hotel & Casino
202 Fremont Street
Las Vegas, NV 89101
Equipment
Lessee hereby certifies that the items of Equipment described in the
Lease (and attached hereto as Attachment A to the Lease Schedule No. 2 to Master
Lease Agreement) has been delivered to and inspected by Lessee, installed in the
Premises, found to be in good order and accepted for all purposes of the Lease
as Equipment under the Lease, all on August 1, 1997 (the "Acceptance Date").
Lessee acknowledges Lessor's right to assign all or part of its
interest under the Lease and/or all or part of other sums due thereunder and
that any such assignee of Lessor does not assume any of the obligations of
Lessor.
LESSEE ACKNOWLEDGES THAT EACH UNIT IS OF THE DESIGN, CAPACITY AND MANUFACTURE
SPECIFIED FOR AND BY THE LESSEE AND THAT LESSEE IS SATISFIED THAT THE SAME IS
SUITABLE FOR LESSEE'S PURPOSES. LESSEE AGREES, REGARDLESS OF CAUSE, NOT TO
ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR
CONSEQUENTIAL DAMAGES. Without limiting the generality of the foregoing it is
intended by the parties to exclude any and all implied warranties of
merchantability and fitness for particular purposes.
LESSEE REPRESENTS THAT IT HAS READ, RECEIVED, RETAINED A COPY OF AND UNDERSTANDS
THIS CERTIFICATE OF DELIVERY, INSTALLATION AND ACCEPTANCE, AND AGREES TO BE
BOUND BY ITS TERMS AND CONDITIONS. LESSEE AGREES THAT THE LEASE AND ALL RIDERS
AND SCHEDULES THERETO CONSTITUTE THE ENTIRE LEASE AND SUPERSEDE ALL PROPOSALS,
ORAL OR WRITTEN, ALL PRIOR NEGOTIATIONS AND ALL OTHER COMMUNICATIONS BETWEEN
LESSEE AND LESSOR WITH RESPECT TO ANY UNIT. THIS LEASE IS NOT CANCELABLE BY
LESSEE FOR THE TERM HEREOF.
IN WITNESS WHEREOF, Lessee has caused this Certificate of Delivery,
Installation and Acceptance to be duly executed on this 1st day of August, 1997
by its authorized representative.
FOUR QUEENS, INC.,
a Nevada corporation
By:____________________________
Its:___________________________
<TABLE>
<CAPTION>
Four Queens
File No. 3001-04
Attachment 'A' for Schedule # 2
This Attachment "A" is attached to and made a part of the Master Lease Agreement
dated May 1, 1997 and Lease Schedule No. 2 dated August 1, 1997 between PDS
Financial Corporation-Nevada, a Nevada corporation ("Lessor"), and Four Queens,
Inc., a Nevada corporation ("Lessee").
Description:
29 - NEW IGT SLOT MACHINES WITH IBA & IPT
QUANTITY SERIAL NUMBER MANUFACTURER YEAR DESCRIPTION MODEL / PART #
-------- ------------- ------------ ---- ----------- --------------
<S> <C> <C> <C> <C> <C>
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 S+ Upright, Wide Body, IBA & IPT 96400500
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 PE+ Upright Pokers, IBA & IPT 96403900
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
1 IGT 1997 13" Winners Choice Upright IBA & IPT 96407800
</TABLE>
Dated: August 1, 1997
LESSEE: LESSOR:
FOUR QUEENS, INC., PDS FINANCIAL CORPORATION-NEVADA,
a Nevada corporation a Nevada corporation
By:__________________________ By:___________________________________
Its: ________________________ Its: _________________________________
GUARANTY
August 1, 1997
FOR VALUE RECEIVED, and in order to induce PDS FINANCIAL
CORPORATION-NEVADA, a Nevada corporation ("Lessor"), to lease to FOUR QUEENS,
INC., a Nevada corporation ("Lessee") the equipment described in that certain
Master Lease Agreement dated May 1, 1997 ("Lease Agreement") and Lease Schedule
No. 2 to Master Lease Agreement ("Lease Schedule") (the Lease Agreement, Lease
Schedule and all documents and instruments executed and delivered to Lessor in
connection with the Lease are hereafter collectively the "Lease") made and
executed by the Lessee to the order of Lessor, the undersigned hereby absolutely
and unconditionally guarantees to Lessor the due and prompt payment by Lessee of
all sums due under the Lease, and all other costs incurred, including reasonable
attorneys' fees, in enforcing payment of the Lease or this Guaranty (all such
costs, the indebtedness evidenced by, and the terms and conditions of the Lease
and this Guaranty being herein collectively referred to as the "Indebtedness
Guaranteed");
It is understood and agreed that as a condition of giving this
Guaranty, the undersigned shall be given ten (10) days after receipt of written
notice from Lessor of a default by Lessee in payment of any Indebtedness
Guaranteed to cure such default. If the undersigned fails to cure a default by
Lessee within ten (10) days after receipt of written notice from Lessor of a
default by Lessee, the undersigned does hereby grant to Lessor the right to
demand immediate payment from the undersigned, and the undersigned shall
immediately become liable for, the balance of the Indebtedness Guaranteed upon
acceleration of the Indebtedness Guaranteed by Lessor, without further notice.
The undersigned hereby agrees that the Lessor may from time to time
without notice to or consent of the undersigned and upon such terms and
conditions as the Lessor may deem advisable without affecting this Guaranty (a)
release any maker, surety or other person liable for payment of all or any part
of the Indebtedness Guaranteed; (b) make any agreement extending or otherwise
altering the time for or the terms of payment of all or any part of the
Indebtedness Guaranteed; (c) modify, waive, compromise, release, subordinate,
resort to, exercise or refrain from exercising any right the Lessor may have
hereunder, under the Lease or any other security given for the Indebtedness
Guaranteed; (d) accept additional security or guarantees of any kind; (e)
endorse, transfer or assign its rights under the Lease, to any other party; (f)
accept from Lessee or any other party partial payment or payments on account of
the Indebtedness Guaranteed; (g) from time to time hereafter further loan monies
or give or extend credit to or for the benefit of the Lessee; and (h) release,
settle or compromise any claim of the Lessor against the Lessee, or against any
other person, firm or corporation whose obligation is held by the Lessor as
security for the Indebtedness Guaranteed.
The undersigned hereby unconditionally and absolutely waives (a) any
obligation on the part of the Lessor to protect, secure or insure any of the
security given for the payment of the Indebtedness Guaranteed; (b) the
invalidity or unenforceability of the Indebtedness Guaranteed; (c) any of the
security given for the payment of the Indebtedness Guaranteed; (d) notice of
acceptance of this Guaranty by the Lessor; (e) notice of presentment, demand for
payment, notice of non-performance, protest, notices of protest and notices of
dishonor, notice of non-payment or partial payment; (f) notice of any defaults
under the Lease or in the performance of any of the covenants and agreements
contained therein or in any instrument given as security therefor; (g) any
defense, offset or claim the Lessee or the undersigned may have against the
Lessor; (h) any limitation or exculpation of liability on the part of the Lessee
whether contained in the Lease or otherwise; (i) the transfer or sale by the
Lessee or the diminution in value thereof of any security given for the
Indebtedness Guaranteed; (j) any failure, neglect or omission on the part of the
Lessor to realize or protect the Indebtedness Guaranteed or any security given
therefor; (k) any right to insist that the Lessor prosecute collection of the
Indebtedness Guaranteed or resort to any instrument or security given to secure
the Indebtedness Guaranteed or to proceed against the Lessee or against any
other guarantor or surety prior to enforcing this Guaranty; provided, however,
at its sole discretion the Lessor may either in a separate action or an action
pursuant to this Guaranty pursue its remedies against the Lessee or any other
guarantor or surety, without affecting its rights under this Guaranty; (l)
notice to the undersigned of the existence of or the extending to the Lessee of
the Indebtedness Guaranteed, or (m) any order, method or manner of application
of any payments on the Indebtedness Guaranteed.
Without limiting the generality of the foregoing, the undersigned will
not assert against the Lessor 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 Lessee in respect of the
Indebtedness Guaranteed, or any setoff available against the Lessor to the
Lessee whether or not on account of a related transaction, and the undersigned
expressly agrees that it shall be and remain liable for any deficiency remaining
after repossession and sale of any of the leased equipment under the Lease,
notwithstanding provisions of law that may prevent the Lessor from enforcing
such deficiency against the Lessee. The undersigned hereby specifically waives
and renounces any right to proceed against the Lessee, and its successors and
assigns, for any deficiency arising as a result of the foreclosure of any
mortgage or security interest securing the Indebtedness Guaranteed, which
deficiency Lessor may be unable to enforce against the Lessee pursuant to
applicable law. The liability of the undersigned shall not be affected or
impaired by any voluntary or involuntary dissolution, sale or other disposition
of all or substantially all of the assets, marshalling 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 Lessee or any of its assets and that
upon the institution of any of the above actions, at the Lessor's sole
discretion and without notice thereof or demand therefor, the undersigned's
obligations shall become due and payable and enforceable against the
undersigned, whether or not the Indebtedness Guaranteed is then due and payable.
The undersigned further agrees that no act or thing, except for payment
and performance in full of the Indebtedness Guaranteed, which but for this
provision might or could in law or in equity act as a release of the liabilities
of the undersigned hereunder shall in any way affect or impair this Guaranty and
the undersigned agrees that this shall be a continuing, absolute and
unconditional Guaranty and shall be in full force and effect until the
Indebtedness Guaranteed has been paid in full.
Performance by the undersigned under this Guaranty shall not entitle
the undersigned to be subrogated to any of the Indebtedness Guaranteed or to any
security therefor, unless and until the full amount of the Indebtedness
Guaranteed has been fully paid.
The undersigned agrees this Guaranty is executed in order to induce the
Lessor to enter into the Lease and with the intent that it be relied upon by the
Lessor in connection therewith. Execution of the Lease, without any further
action or notice, shall constitute conclusive evidence of the reliance hereon by
the Lessor. This Guaranty shall run with the Lease and without the need for any
further assignment of this Guaranty to any subsequent holder of the Lease or the
need for any notice to the undersigned thereof. Upon endorsement or assignment
of the Lease to any subsequent holder, said subsequent holder of the Lease may
enforce this Guaranty as if said holder had been originally named as Lessor
hereunder.
The undersigned consents to be sued in any jurisdiction in which either
the Lessee may be sued or the Lessor's principal place of business, at Lessor's
sole option, as well as the undersigned's principal place of business and
residence and in the state where this Guaranty is executed.
No right or remedy herein conferred upon or reserved to the Lessor is
intended to be exclusive of any other available remedy or remedies but each and
every remedy shall be cumulative and shall be in addition to every other remedy
given under this Guaranty or now or hereafter existing at law or in equity. No
waiver, amendment, release or modification of this Guaranty shall be established
by conduct, custom or course of dealing, but only by an instrument in writing
duly executed by the Lessor.
This Guaranty is delivered in and made in and shall in all respects be
construed pursuant to the laws of the State of Nevada.
This Guaranty and each and every part hereof, shall be binding upon the
undersigned and upon its successors and assigns and shall inure to the pro rata
benefit of each and every future holder of the Lease, including the successors
and assigns of the Lessor.
ELSINORE CORPORATION,
a Nevada corporation
By:_________________________________
Its:________________________________
CERTIFICATE OF GUARANTOR
I, the undersigned, do hereby certify that I am the
_______________________________ of ELSINORE CORPORATION, a corporation organized
and existing under the laws of the State of Nevada and that by Unanimous Writing
in Lieu of Meeting of the Board of Directors of said corporation effective on
the ______ day of ___________________, 19____, the following resolutions were
adopted:
WHEREAS, PDS Financial Corporation-Nevada, a Nevada corporation
("Lessor") has leased certain equipment and personal property
("Equipment") to Four Queens, Inc.; and
WHEREAS, it is deemed to be in the best interests of this corporation
to execute and deliver a Guaranty agreement to Lessor in the form
reviewed by the directors;
NOW, THEREFORE RESOLVED, that the corporation execute and deliver to
Lessor a Guaranty in the form reviewed by the directors;
RESOLVED FURTHER, that any officer of the corporation be, and he hereby
is, authorized and directed to execute and deliver to Lessor on behalf
of the corporation and as an official act of the corporation this
corporation's Guaranty and such other related documents as may be
required by said Lessor as a condition to Lessor entering into the
Lease, the form of said documents to be in form as he shall deem
necessary, his signature thereon being conclusive evidence of his
agreeing to the form of such documents.
I also certify that said resolutions have been duly entered into the
Minute Book of the corporation and have not been repealed or modified in any way
and are still in full force and effect, that said resolutions are not
inconsistent with any provisions of the Articles of Incorporation or the Bylaws
of this corporation and do not violate, contravene or result in a default under
any indenture or agreement to which the corporation is a party.
I further certify that the following person has been duly elected to
and does now hold the office set forth below and that the signature opposite his
typed name is his true and genuine signature.
NAME SIGNATURE OFFICE
- ------------------------ ------------------------ ----------------------------
- ------------------------ ------------------------ ----------------------------
I further certify that attached hereto are true and correct copies of
the current Articles of Incorporation of the corporation, its Bylaws, and a
Certificate of Good Standing from the Secretary of the State of Nevada.
GUARANTOR: ELSINORE CORPORATION,
a Nevada corporation
By:_________________________________
Its:_________________________________
<PAGE>
STATE OF NEVADA )
) SS
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this ______ day of
___________________, 1997, by _________________________________ the
______________________ of Elsinore Corporation, a Nevada corporation, on behalf
of the corporation.
--------------------------------------
Notary Public
My Commission expires:_______________________________
AUTHORIZATION FOR AUTOMATIC PAYMENT
I authorize PDS FINANCIAL CORPORATION (and its assignees) and the bank named
below to initiate variable entries to my checking/savings account for the
following lease:
Lease Description: 3001-04
Original Lease Amount: $200,633.25
Payment Date: September 1, 1997
Payment Amount: $4,796.43
Effective Date: August 1, 1997
This authorization will remain in effect until I notify you or the bank in
writing to cancel it in such time as to afford the bank a reasonable opportunity
to act on it. I can stop payment of any entry by notifying you or my bank three
(3) days before my account is charged. I can have the amount of an erroneous
charge immediately credited to my account up to 15 days following issuance of my
bank statement or 46 days after posting, whichever occurs first.
--------------------------------------------------------------------
(Name of Financial Institution)
--------------------------------------------------------------------
(Address of Financial Institution) (City) (State) (Zip Code)
--------------------------------------------------------------------
(Signature) (Date)
-----------------------------
(Its)
Four Queens, Inc.
202 Fremont Street
Las Vegas, NV 89101
Checking Savings
Account ___________________ (or) Account No._______________
Bank Routing Number _____________________________________
(between these symbols /: :/ on the bottom
left of your check)
[Please attach a copy of a voided check to this form]
<PAGE>
EXHIBIT A
This is an informational filing pursuant to NRS 104.9408 and relates to
equipment which is the subject of a true lease. Debtor grants to Secured Party a
security interest in and to all gaming and other equipment now or hereafter
leased or to be leased under that certain Master Lease Agreement dated May 1,
1997 and Lease Schedule No. 2 thereto dated August 1, 1997 (collectively, the
"Lease"), by and between Secured Party, as lessor, and Debtor, as lessee,
including the equipment described in Exhibit "A" (the "Equipment") attached
hereto and all of Debtor's interest in and to the following:
1. All security deposits, holdbacks, reserves and other monies
belonging or payable to lessee in connection with the Lease
and the Equipment; and
2. All accounts, chattel paper, contract rights, documents,
equipment, fixtures, general intangibles (patents, copyrights,
tradenames and trademarks), goods, instruments and inventory
pertaining to the Lease and the Equipment; and
3. All accessions, accessories, additions, amendments,
attachments, modifications, replacements and substitutions to
any of the foregoing; and
4. All proceeds and products of any of the foregoing; and
5. All policies of insurance pertaining to any of the foregoing
as well as any proceeds pertaining to such policies; and
6. All books and records pertaining to any of the foregoing.
<PAGE>
WARRANTS TO PURCHASE 1,125,000 SHARES
OF COMMON STOCK OF ELSINORE CORPORATION
This Warrant Certificate certifies that Riviera Gaming Management
Corporation - Elsinore (or registered assigned (the "Holder"), is the owner of
1,125,000 Warrants (subject to adjustment as provided herein), each of which
represents the right to subscribe for and purchase from Elsinore Corporation, a
Nevada corporation (the "Company"), one share of the Common Stock, no par value,
of the Company (the common stock, including any stock into which it may be
changed, reclassified or converted, is herein referred to as the "Common Stock")
at the purchase price (the "Exercise Price") of $1.00 per share (subject to
adjustment as provided herein). This Warrant Certificate represents Warrants
issued pursuant to a Management Agreement dated February 28, 1997, between the
Company and Riviera Gaming Management Corporation - Elsinore (the "Management
Agreement").
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ARE SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN
PARAGRAPHS 5 AND 6 HEREOF, WITH RESPECT TO THEIR TRANSFER.
The Warrants represented by this Warrant Certificate are subject to the
following provisions, terms and conditions:
1. Exercise of Warrants. The Warrants may be exercised by the Holder,
in whole or in part (but not as to a fractional share of Common Stock), by
surrender of this Warrant Certificate at the principal office of the Company at
202 Fremont Street, Las Vegas, Nevada 89101 (or such other office or agency of
the Company as may be designated by notice in writing to the Holder at the
address of such Holder appearing on the books of the Company), with the
appropriate form attached hereto duly exercised, at any time within the period
beginning on the date hereof and expiring at the same time as the Term or
Extended Term under the Management Agreement expires (the "Exercise Period") and
by payment to the Company by certified check or bank draft of the purchase price
for such shares. The Company agrees that the shares of Common Stock so purchased
shall be and are deemed to be issued to the Holder as the record owner of such
shares of Common Stock as of the close of business on the date on which the
Warrant Certificate shall have been surrendered and payment made for such shares
of Common Stock. Certificates representing the shares of Common Stock so
purchased, together with any cash for fractional shares of Common Stock paid
pursuant to Section 2E, shall be delivered to the Holder promptly and in no
event later than ten (10) days after the Warrants shall have been so exercised,
and, unless the Warrants have expired, a
<PAGE>
new Warrant Certificate representing the number of Warrants represented by the
surrendered Warrant Certificate, if any, that shall not have been exercised
shall also be delivered to the Holder within such time.
2. Adjustments. The Exercise Price and the number of shares of Common
Stock issuable upon exercise of each Warrant shall be subject to adjustment from
time to time as follows; provided, however, that no such adjustments shall be
made in the case of the Company's issuance of Common Stock in connection with
its plan of reorganization under Chapter 11 of the United States Bankruptcy
Code:
(1) Stock Dividends; Stock Splits; Reverse Stock Splits;
Reclassifications. In case the Company shall (i) pay a
dividend with respect to its capital stock in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of any class of Common Stock or (iv)
issue any shares of its capital stock in a reclassification of
the Common Stock (including any such reclassification in
connection with a merger, consolidation or other business
combination in which the Company is the continuing
corporation) (any one of which actions is herein referred to
as an "Adjustment Event"), the number of shares of Common
Stock purchasable upon exercise of each Warrant immediately
prior to the record date for such Adjustment Event shall be
adjusted so that the Holder shall thereafter be entitled to
receive the number of shares of Common Stock or other
securities of the Company (such other securities thereafter
enjoying the rights of shares of Common Stock under this
Warrant Certificate) that such Holder would have owned or have
been entitled to receive after the happening of such
Adjustment Event, had such Warrant been exercised immediately
prior to the happening of such Adjustment Event or any record
date with respect thereto. An adjustment made pursuant to this
Section 2A(I) shall become effective immediately after the
effective date of such Adjustment Event retroactive to the
record date, if any, for such Adjustment Event.
(2) Distributions of Subscription Rights or Convertible
Securities. In case the Company shall fix a record date for
the making of a distribution to all holders of shares of
Common Stock of rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock (excluding those referred
to in Section 2A(S) below), then in each case the number of
shares of Common Stock purchasable after such record date upon
the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock purchasable
upon the exercise of each Warrant immediately prior to such
record date by a fraction, the numerator of which
- 2 -
<PAGE>
shall be the then Current Market Value (as defined in Section 2A(3) below) of
one share of Common Stock on the record date for such distribution and the
denominator of which shall be the then Current Market Value of one share of
Common Stock on the record date for such distribution less the then fair value
(as determined by the independent Financial Expert (as defined in Section 2A(3)
below), of such subscription rights, options or warrants, or of such convertible
or exchangeable securities distributed with respect to one such share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution retroactive to the record
date for the determination of stockholders entitled to receive such
distribution.
(3) Current Market Value. For the purpose of any computation
under this Section 2, the Current Market Value of one share of
Common Stock or of any other security (herein collectively
referred to as a "security") at the date herein specified
shall be (1) if the Company does not have a class of equity
securities registered under the Securities Exchange Act of
1934 (the "Exchange Act"), the value of the security (a)
determined in good faith in the most recently completed
armslength transaction between the Company and a third party
who is not an affiliate of the Company in which such
determination is necessary and the closing of which occurs on
such date or shall have occurred within the six months
preceding such date, provided that the Board of Directors of
the Company shall in good faith determine that any such value
represents a reasonable estimate of the fair value of a share
of Common Stock as of such date, (b) if no such transaction
shall have occurred on such date or within such six-month
period, most recently determined as of a date within the six
months preceding such date by an Independent Financial Expert
(in the event of more than one such determination, the
determination for the later date shall be used) or (c) if no
such determination shall have been made within such six month
period, determined as of such date by an Independent Financial
Expert, or (2) if the Company does have a class of equity
securities registered under the Exchange Act, deemed to be the
average of the daily market prices of the security for five
trading days before such date or, if the Company has had a
class of equity securities registered under the Exchange Act
for less than five trading days before such date, then the
average of the daily market prices for all of the trading days
before such date for which daily market prices are available.
For purposes of this Section 2 an affiliate of a person shall
mean any other person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is
under common control with, such person. For purposes of this
definition, control means the power to direct the management
and policies of a person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise.
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<PAGE>
The market price for each such business day shall be:
(A) in the case of a security listed or admitted to trading on
any securities exchange, the closing price, regular way, on
such day, or if no sale takes place on such day, the average
of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on
any securities exchange, the last reported sale price on such
day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in
the case of a security not then listed or admitted to trading
on any security exchange and as to which no such reported sale
price or bid and asked prices are available, the average of
the reported high bid and low asked prices on such day, as
reported by a reputable quotation services, or a newspaper of
general circulation in the Borough of Manhattan, City and
State of New York, customarily published on each business day,
designated by the Company, or if there shall be no bid and
asked prices on such day, the average of the high bid and low
asked prices, as so reported, on the most recent day (not more
than five days prior to the date in question) for which prices
have been so reported, and (D) if there are no bid and asked
prices reported during the five days prior to the date in
question, the Current Market Value of the security shall be
determined as if the Company did not have a class of equity
securities registered under the Exchange Act.
For purposes of this Section 2A(3), an Independent
Financial Expert shall mean a nationally recognized investment
banking firm (i) which does not (and whose directors,
officers, employees and affiliates do not), have a direct or
indirect financial interest in the Company (other than the
beneficial ownership, directly or indirectly, of less than
three percent of the outstanding shares of capital stock of
the Company), (ii) which has not been, and, at the time it is
called upon to give independent financial advise to the
Company, is not (and none of whose directors, officers,
employees or affiliates is) a promoter, director or officer of
the Company or any of its affiliates or an underwriter with
respect to any of the Company's securities, (iii) which does
not provide any advise or opinions to the Company except as an
Independent Financial Expert and (iv) which is mutually
agreeable to the Company and the holders of a majority of the
Warrants. If the Company and the holders of a majority of the
Warrants do not promptly agree as to the Independent Financial
Expert, each shall appoint one investment banking firm and the
two firms so appointed shall select the Independent Financial
Expert to be employed by the Company. An Independent Financial
Expert may be compensated by the Company for opinions or
services it provides as an Independent Financial Expert. In
making its determination of the value of the Common Stock, the
Independent Financial Expert shall use one or more valuation
methods that
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<PAGE>
the Independent Financial Expert, in its best professional
judgment, determines to be most appropriate. After the
Independent Financial Expert has made its determination, the
Company shall cause the Independent Financial Expert to
prepare a report (a "Value Report") stating the methods of
valuation considered or used and the value of the Common Stock
or other security it values and containing a statement as to
the nature and scope of the examination made. Such Value
Report shall accompany any Adjustment Notice (as defined in
Section 2B) sent by the Company to the Holder pursuant to
Section 2B; provided, that the adjustment to the Exercise
Price that is the subject of such Adjustment Notice requires
the services of an Independent Financial Expert.
(4) Adjustment of Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of each
Warrant is adjusted pursuant to Sections 2A(1) and 2A(2), the
Exercise Price for each share of Common Stock payable upon
exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of shares
of Common Stock purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of
which shall be the number of shares of Common Stock so
purchasable immediately thereafter.
(5) Issuance of Common Stock to Stockholders of Less Than
Current Market Value. In the event that the Company sells and
issues [to a stockholder of the Company or to any "affiliate"
of such stockholder] shares of any Common Stock, or rights,
options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of
Common Stock [excluding (i) shares, rights, options, warrants
or convertible or exchangeable securities issued in any of the
transactions described in Sections 2A(1) and 2A(2) above, (ii)
the Warrants and any shares of Common Stock issuable upon
exercise thereof, (iii) shares of Common Stock or other
securities, or options or rights in respect thereof, issued to
full-time employees of the Company or its subsidiaries in the
ordinary course of business as compensation for services
rendered or to be rendered or as part of an employee incentive
program and (iv) shares of common stock or other securities
issued upon exercise, conversion or exchange of rights,
options, warrants or convertible or exchangeable securities
issued in any of the transactions described in Sections 2A(1)
and 2A(2) above or in a transaction with respect to which no
adjustment was required pursuant to this Section 2A (but
including shares, rights, options, warrants or convertible or
exchangeable securities issued as consideration in any merger,
consolidation or other business combination)] at a price per
share of Common Stock (determined, in the case of such rights,
options, warrants or convertible or exchangeable securities,
by dividing (X) the total
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<PAGE>
amount receivable by the Company in consideration of the sale
and issuance of such rights, options, warrants or convertible
or exchangeable securities (which amount may be zero if such
rights, options, warrants or convertible or exchangeable
securities are issued without consideration), plus the total
consideration payable to the Company upon exercise, conversion
or exchange thereof, by (Y) the total number of shares of
Common Stock covered by such rights, opinions, warrants or
convertible or exchangeable securities) that is lower than the
then Current Market Value per share of such Common Stock (as
determined by the Independent Financial Expert in accordance
with Section 2A(3) above) in effect immediately prior to such
sale and issuance, then the Exercise Price shall be adjusted
(calculated to the nearest $0.01) so that it shall equal the
price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of
which shall be (i) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior
to such sale and issuance plus (B) the number of shares of
Common Stock which the aggregate consideration received
(determined as provided below) for such sale or issuance would
purchase at such Current Market Value per share, and the
denominator of which shall be (ii) the total number of shares
of Common Stock outstanding (determined as provided below)
immediately after such sale and issuance. Such adjustment
shall be made successively whenever such an issuance is made.
Upon the occurrence of a sale and issuance described
in the preceding paragraph, the number of shares of Common
Stock purchasable under the exercise of this Warrant shall be
that number determined by multiplying the number of shares of
Common Stock issuable upon exercise immediately prior to such
adjustment by a fraction, the numerator of which is the
Exercise Price in effect immediately prior to such adjustment
and the denominator of which is the Exercise Price as so
adjusted.
For the purposes of such adjustments, the shares of
Common Stock which the holder of any such rights, options,
warrants or convertible or exchangeable securities shall be
entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale and
issuance and the consideration received by the Company
therefor shall be deemed to be the consideration received by
the Company for such rights, options, warrants or convertible
or exchangeable securities (which consideration may be zero if
such rights, options, warrants or convertible or exchangeable
securities are issued without consideration), plus the
consideration or premiums stated in such rights, options,
warrants or convertible or exchangeable securities to be paid
for the shares of any Common Stock covered thereby. In case
the Company shall sell and issue, in a transaction to which
this paragraph 2A(5) applies, shares of Common
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<PAGE>
Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, for consideration
consisting, in whole or in part, of property other than cash
or its equivalent, then determining the "price per share of
Common Stock" and the "consideration received by the Company"
for purposes of the first sentence of this Section 2A(5), the
Board of Directors of the Company shall determine, in good
faith, the fair value of the rights, options, warrants or
convertible or exchangeable securities then being sold as part
of such unit. There shall be no adjustment of the Exercise
Price pursuant to this Section 2A(5) if the amount of such
adjustment shall be less than $0.01 per share of Common Stock;
provided, however, that any adjustments which by reason of
this provision are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(6) Expiration of Rights Options and Conversion Privileges.
Upon the expiration without being exercised of any rights,
options, warrants or conversion or exchange privileges for
which an adjustment has been made pursuant to this Warrant,
the Exercise Price and the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter, upon any
future exercise, be such as they would have been had they been
originally adjusted (or had the original adjustment not be
required, as the case may be) as if (A) the only shares of
Common Stock so issued were the shares of such Common Stock,
if any, actually issued or sold upon the exercise of such
rights, options, warrants or conversion or exchange rights and
(B) such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon
such exercise plus the consideration, if any, actually
received by the Company for issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
rights whether or not exercised; provided, that no such
readjustment shall have the effect of increasing the Exercise
Price by an amount, or decreasing the number of shares
purchasable upon exercise of each Warrant by a number, in
excess of the amount or number of the adjustment initially
made in respect to the issuance, sale or grant of such rights,
options, warrants or conversion or exchange rights.
(7) De Minimis Adjustments. Except as provided in Section
2A(5) with reference to adjustments required by such Section
2A(5), no adjustment in the number of shares of Common Stock
purchasable hereunder shall be required unless such adjustment
would require an increase or decease of at least 1.0% percent
in the number of shares of Common Stock purchasable upon an
exercise of each Warrant; provided, however, that any
adjustments which by reason of this Section 2A(7) are not
required to be made shall be
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<PAGE>
carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest full
share.
(8) Duty to Make Fair Adjustments in Certain Cases. If any
event occurs as to which in the opinion of the Board of
Directors the other provisions of this Section 2A are not
strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then
the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such
essential intent and principles, so as to protect such
purchase rights as aforesaid.
(9) Adjustment for Asset Distributions. If the Company shall
fix a record date for the making of a distribution to all
holders of shares of Common Stock of evidence of indebtedness
of the Company or other assets (other than ordinary cash
dividends not in excess of the retained earnings of the
Company determined by the application of generally accepted
accounting principles), then the Exercise Price for each share
of Common Stock payable upon exercise of each Warrant shall be
reduced by the then fair value (as determined by the
Independent Financial Expert (as defined in Section 2A(3)
above)) of the indebtedness or other assets distributed in
respect of one such share. Such adjustment shall be made
whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the
record date for the determination of stockholders entitled to
receive such distribution.
A. Notice of Adjustment. Whenever the number of shares of
Common Stock purchasable upon the exercise of each Warrant or the Exercise Price
is adjusted, as herein provided, the Company shall promptly notify the Holder in
writing (such writing referred to as an "Adjustment Notice") of such adjustment
or adjustments and shall deliver to such Holder a certificate of a firm of
independent public accountants selected by the Board of Directors of the Company
(who may be the regular accountants employed by the Company) or of the
Independent Financial Expert, if any, which makes a determination of Current
Market Value with respect to any such adjustment setting forth the number of
shares of Common Stock purchasable upon the exercise of each Warrant and the
Exercise Price after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made.
B. Statement on Warrant Certificates. The form of this Warrant
Certificate need not be changed because of any change in the Exercise Price or
in the number or kind of shares purchasable upon the exercise of a Warrant and
any Warrant Exercise Price and the same number and kind of shares as are stated
in this Warrant Certificate. However, the Company may at the time in its sole
discretion make any
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<PAGE>
change in the form of the Warrant Certificate that it may deem appropriate and
that does not affect the substance thereof and any Warrant Certificate
thereafter issued, whether in exchange or substitution for any outstanding
Warrant Certificate or otherwise, may be in the form so changed.
C. Notice to Holder of Record Date, Dissolution, Liquidation
or Winding Up. The Company shall cause to be mailed (by first class mail,
postage prepaid) to the Holder of such of the record date for any dividend,
distribution or payment, in cash or in kind (including, without limitation,
evidence of indebtedness and assets), with respect to shares of Common Stock at
least 20 calendar days before any such date. In case at any time after the date
hereof, there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then the Company shall cause to be mailed (by first
class mail, postage prepaid) to the Holder at such Holder's address as shown on
the books of the Company, at the earliest practicable time (and, in any event,
not less than 20 calendar days before any date set for definitive action),
notice of the date on which such dissolution, liquidation or winding up shall
take place, as the case may be. The notices referred to above shall also specify
the date as of which the holders of the shares of Common Stock of record or
other securities underlying the Warrants shall be entitled to receive such
dividend, ties, money or the property deliverable upon such dissolution,
liquidation or winding up, as the case may be (the "Entitlement Date"). In the
case of a distribution of evidence of indebtedness or assets (other than in
dissolution, liquidation or winding up) which has the effect of reducing the
Exercise Price to zero or less pursuant to Section 2A(9), if the Holder elects
to exercise the Warrants in accordance with Section I and become a holder of the
Common Stock on the Entitlement Date, the Holder shall thereafter receive the
evidence of indebtedness or assets distributed in respect of shares of Common
Stock. In the case of any dissolution, liquidation or winding up of the Company,
the Holder shall receive on the Entitlement Date the cash or other property,
less the Exercise Price for the Warrants then in effect, that such Holder would
have been entitled to receive had the Warrants been exercisable and exercised
immediately prior to such dissolution, liquidation or winding up (or, if
appropriate, record date therefor) and any right of a Holder to exercise the
Warrants shall terminate.
E. Fractional Interests. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of the Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 2E be issuable on the exercise of the Warrants (or
specified proportion thereof), the Company shall pay an amount in cash
calculated by it to be equal to the then fair value of one share of Common
Stock, as determined by the Board of Directors of the company in good faith,
multiplied by such fraction computed to the nearest whole cent.
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<PAGE>
3. Reservation and Authorization of Common Stock. The Company covenants
and agrees (A) that all shares of Common Stock which may be issued upon the
exercise of the Warrants represented by this Warrant Certificate will, upon
issuance, be validly issued, fully paid and nonassessable and free of all
insurance or transfer taxes, liens and charges with respect to the issue
thereof, (b) that during the Exercise Period, the Company will at all times have
authorized, and reserved for the purpose of issue or transfer upon exercise of
the Warrants evidenced by this Warrant Certificate, sufficient shares of Common
Stock to provide for the exercise of the Warrants represented by this Warrant
Certificate, and (c) that the Company will take all such action as may be
necessary to ensure that the shares of Common Stock issuable upon the exercise
of the Warrants may be so issued without violation of any applicable law or
regulation, or any requirements of any domestic securities exchange upon which
any capital stock of the Company may be listed, provided, however, that nothing
contained herein shall impose upon the Company any obligation to register the
warrants evidenced by this Warrant Certificate or such Common Stock under
applicable securities laws. In the event that any securities of the Company
other than the Common Stock are issuable upon exercise of the Warrants, the
Company will take or refrain from taking any action referred to in clauses (A)
through (c) of this Section 3 as though such clauses applied, mutatis mutandis
to such other securities then issuable upon the exercise the Warrants.
4. No Voting Rights. This Warrant Certificate shall not entitle the
holder hereof to any voting rights or other rights as a stockholder of the
Company.
5. Sale of Warrants or Common Stock - Compliance with Securities Act.
The Holder of this Warrant Certificate agrees that this Warrant and the shares
of Common Stock issuable upon the exercise hereof have not been registered under
the Securities Act of 1933 (the "Act") and may not be distributed except in a
transaction which is exempt from registration under the Act or pursuant to an
effective registration under the Act.
6. Warrants Non-Transferable. This Warrant Certificate and the Warrants
it evidences are non-transferrable, in whole or in part, without the consent of
the Company.
7. Registration. The Holder and certain successors of the Holder are
entitled to the benefits of a Registration Rights Agreement with respect to
Common Stock, a copy of which is on file at the offices of the Company.
8. Closing of Books. The Company will at no time close its transfer
books against the transfer of any Warrant or of any shares of Common Stock or
other securities issuable upon the exercise of any Warrant in any manner which
interferes with the timely exercise of the Warrants.
9. Warrants Exchangeable, Loss, Theft. This Warrant Certificate is
exchangeable, upon the surrender hereof of any Holder at the office or agency of
the
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<PAGE>
Company referred to in Section 1, for new Warrant Certificates of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares of Common Stock which may be subscribed for and purchased hereunder,
each such new Warrant to represent the right to subscribe and purchase such
number of shares of Common Stock as shall be designated by said holder hereof at
the time of such surrender. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation, upon surrender or cancellation of
this Warrant Certificate, the Company will issue to the holder hereof a new
Warrant Certificate of like tenor, in lieu of this Warrant Certificate,
representing the right to subscribe for and purchase the number of shares of
Common Stock which may be subscribed for and purchased hereunder.
10. Mergers, Consolidations, Etc.
A. Except as may otherwise be provided in Section 2A(5), if
the Company shall merge or consolidate with another corporation, the holder of
this Warrant shall thereafter have the right, upon exercise hereof and payment
of the Exercise Price, to receive solely the kind and amount of shares of stock
(including, if applicable, Common Stock), other securities, property or cash or
any combination thereof receivable by a holder of the number of shares of Common
Stock (the "Warrant Shares") for which this Warrant might have been exercised
immediately prior to such merger or consolidation (assuming, if applicable, that
the holder of such Common Stock failed to exercise its rights of election, if
any, as to the kind or amount of shares of stock, other securities, property or
cash or combination thereof receivable upon such merger or consolidation),
provided that, if such merger or consolidation involves the payment of cash only
("Cash Merger Price"), the holder of this Warrant may request, in lieu of
payment of the Exercise Price and purchase of the Warrant Shares, that the
Company pay an aggregate amount equal to the Cash Merger Price minus the
Exercise Price multiplied by the number of Warrant Shares, and upon such payment
this Warrant shall be of no further force and effect.
B. In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Warrant (other than elimination or
par value, a change in par value, or from par value to no par value, or as the
result of a subdivision or combination of shares (which is provided for
elsewhere herein), but including any reclassification of the shares of Common
stock into two or more classes or series of shares) or in case of any merger or
consolidation of another corporation into the Company in which the Company is
the surviving corporation and in which there is a reclassification or change of
the shares of Common Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination (which is
provided for elsewhere herein), but including any reclassification of the shares
of Common Stock this Warrant shall thereafter have the right, upon exercise
hereof and payment of the Exercise Price, to receive solely the kind and amount
of shares of stock (including, if applicable, Common Stock), other securities,
property or cash or any
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<PAGE>
combination thereof receivable upon such reclassification, change, merger or
consolidation by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such reclassification,
change, merger or consolidation (assuming, if applicable, that the holder of
such Common Stock failed to exercise its rights of election, if any, as to the
kind or amount of shares of stock, other securities, property or cash or
combination thereof receivable upon such reclassification, change, merger or
consolidation).
11. Rights and Obligations Survive Exercise of Warrants. The rights and
obligations of the Company, of the Holder, and of the holders of shares of
Common Stock or other securities issued upon exercise of the Warrants, contained
in Sections 5 and 7 of this Warrant Certificate shall survive the exercise of
the Warrants.
Dated: [date].
ELSINORE CORPORATION
By:
Attest:
[secretary]
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<PAGE>
ASSIGNMENT
For good and valuable consideration, I, Richard A. LeVasseur, of Las
Vegas, Nevada, sell and assign to FOUR QUEENS, INC., ("ASSIGNEE") a Nevada
corporation, its successor and assigns, the entire right, title and interest in
and to MULTIPLE ACTION BLACKJACK as described in the patent application for
United States Patent, Serial No. 07/840,393, filed on February 24, 1992,
together with all rights to said invention throughout the world, and all
countries, including all divisions, reissues, continuations and extensions
thereof, and all rights of priority resulting from the filing of said United
States application, and authorize and request the Commissioner of Patents and
Trademarks to issue all patents on said invention or resulting therefrom to said
ASSIGNEE, as assignee of my interest, and covenant that I have the full right to
do so, and agree that I will communicate to said ASSIGNEE, or its
representatives, any facts known to me respecting said invention and testify in
any legal proceedings, sign all lawful papers, execute all divisional,
continuing and reissue applications, including foreign applications, make all
rightful oaths and generally do everything possible to help said ASSIGNEE, its
successors and assigns, to obtain and enforce proper protection for said
invention in all countries.
DATED: July 14, 1992 RICHARD A. LeVASSEUR
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
This 14th day of July, 1992, before me personally came the above-named
Richard A. LeVasseur to me personally known to be the person who executed the
foregoing ASSIGNMENT, who acknowledged to me that he executed same of his own
free will for the purposes therein set forth.
Jewell M. Bidelman
Notary Public in and for said
County and State
<PAGE>
ELSINORE CORPORATION,
Issuer
and
THE GUARANTORS NAMED HEREIN
and
FIRST TRUST NATIONAL ASSOCIATION
Trustee
-----------------------
FIRST SUPPLEMENTAL
AMENDED AND RESTATED
INDENTURE
Dated as of September 18, 1997
-----------------------
$30,000,000
13 1/2% Second Mortgage Notes due 2001
<PAGE>
- 2 -
This FIRST SUPPLEMENTAL AMENDED AND RESTATED INDENTURE ("Supplemental
Indenture"), dated as of September 18, 1997, between ELSINORE CORPORATION, a
Nevada corporation (the "Company"), the GUARANTORS referred to below and FIRST
TRUST NATIONAL ASSOCIATION, a national association, as Trustee (individually a
"Party" and collectively the "Parties").
The Parties entered into that certain Amended and Restated Indenture
dated as of March 3, 1997 (the "Indenture").
NOW, THEREFORE, pursuant to Section 10.1 of the Indenture, the Parties
do hereby amend the Indenture as follows:
Sections C and E of the Factual Background in the Indenture are amended
to read in full as follows:
"C. On October 31, 1995, the Company filed a Chapter
11 bankruptcy reorganization case in the United States
Bankruptcy Court for the District of Nevada (the `Court'),
Case No. 95-24685 RCJ. On August 9, 1996, the Court entered
its Order Confirming Chapter 11 Plan of Reorganization (the
`Order') confirming the Plan of Reorganization (the `Plan')
identified in the Order. The Order provided that the
Confirmation Date under the Plan would be August 12, 1996 (the
`Confirmation Date')."
"E. The Parties desire to amend and restate the
Indenture to provide, among other things, for the issuance of
Amended and Restated Notes in the aggregate principal amount
of $30,000,000. The Amended and Restated Notes will bear
interest at 13 1/2% from August 12, 1996 and will mature on
August 20, 2001. Each of the Original Notes shall be exchanged
for an Amended and Restated Note in a principal amount equal
to 52.631579% of the unpaid principal of the Original Note."
Except as amended herein, the Indenture shall remain in full force and
effect.
SIGNATURE
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first written above.
ELSINORE CORPORATION
By: ______________________________
Name: Jeffrey T. Leeds
Title: President
FIRST TRUST NATIONAL ASSOCIATION, as Trustee
By: ______________________________
Name: Timothy J. Sandell
Title: Vice President
GUARANTORS: ELSUB MANAGEMENT CORPORATION
By: ______________________________
Name: Edward M. Nigro
Title: President
FOUR QUEENS, INC.
By: ______________________________
Name: William Westerman
Title: President
PALM SPRINGS EAST, LIMITED
PARTNERSHIP
BY: ELSUB MANAGEMENT CORPORATION, its general
partner
By: ______________________________
Name: Edward M. Nigro
Title: President
<PAGE>
DRAFT
The following is the form of the Mangement Agreement approved by the Bankruptcy
Court as part of the Plan of Reorganization of the Company and Four Queens, Inc.
The parties have been operating substantially under the terms of such Management
Agreement since the effective date of the reorganization.
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is dated as of _______,
1996 by and between Elsinore Corporation, a Nevada corporation ("Elsinore"),
Four Queens, Inc., a Nevada corporation ("Four Queens" and, together with
Elsinore, the "Companies"), and Riviera Gaming Management Corp.-Elsinore, a
Nevada corporation ("Manager").
PRELIMINARY STATEMENTS
A. Elsinore owns and operates through its subsidiary, Four
Queens, a hotel and casino commonly known as the Four Queens Hotel and Casino,
located at 202 Fremont Street, Las Vegas, Nevada (the "Project").
B. The Companies are party to those certain Chapter 11
bankruptcy proceedings pending in the United States Bankruptcy Court for the
District of Nevada (the "Bankruptcy Court") as Case No. 95-24685 RCJ and Case
No. 95-24687 RCJ respectively (the "Proceedings").
C. Pursuant to the terms and conditions of that certain
Interim Management Agreement dated as of __________, 1996 between the Companies
and Manager (the "Interim Management Agreement") the Companies have engaged
Manager to manage the Project. The term of the Interim Management Agreement
expires on the commencement of the first calendar quarter subsequent to the
Effective Date (as defined below).
D. Pursuant to the terms and conditions of the Joint Plan of
Reorganization for the Debtors with respect to the Proceedings (the "Plan"),
Manager shall be engaged to manage the Project upon the expiration of the term
of the Interim Management Agreement in accordance with the terms and conditions
of this Agreement.
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties to this Agreement hereby agree as
follows:
ARTICLE I. DEFINITIONS
The following defined terms are used in this Agreement:
"Affiliate" shall mean a person that directly or indirectly, or through
one or more intermediaries, controls, is controlled by, or is under common
control with the person in question and any stockholder or partner of any person
referred to in the preceding clause owning 10% or more of such entity.
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<PAGE>
DRAFT
FOR DISCUSSION
PURPOSES ONLY
"Audit Day" is defined in Section 3.6(a).
"Audited Statements" is defined in Section 3.6(a).
"Business Days" shall mean all weekdays except those that are official
holidays of the State of Nevada or the U.S. Government. Unless specifically
stated as "Business Days," a reference to "days" means calendar days.
"Capital Budget" is defined in Section 3.9.
"Casino" shall mean those areas reserved for the operation of slot
machines, table games and any other legal forms of gaming permitted under
applicable law, and such additional ancillary service areas including
reservations and admissions, cage, vault, count room, surveillance room and any
other room or area or activities therein regulated or taxed by the Nevada Gaming
Authorities by reason of gaming operations.
"Casino Bankroll" shall mean an amount reasonably determined by Manager
as funding required to bankroll the Casino Gaming Activities but in no case less
than the amount required by Nevada gaming law or Nevada Gaming Authorities. In
no event shall such Casino Bankroll include any amount necessary to cover
Operating Expenses or Operating Capital. Casino Bankroll shall include the funds
located on the casino tables, in the gaming devices, cages, vault, counting
rooms, or in any other location in the Casino where funds may be found and funds
in a bank account identified by the Companies for any additional amount required
by Nevada gaming law or Nevada Gaming Authorities or such other amount as is
reasonably determined by Manager and the Companies.
"Casino Gaming Activities" shall mean the Casino cage, table games,
slot machines, video machines, and other forms of gaming managed by Manager in
the Casino.
"Casino Operating Expenses" shall mean expenses incurred in the
management of the Casino, including, but not limited to, gaming supplies,
maintenance of the Casino area, gaming marketing materials, uniforms,
complimentaries, Casino employee training, Casino employee compensation and
entitlements, and Gaming Taxes.
"Companies' Advances" is defined in Section 3.11.
"Confirmation Date" is defined in Recital C.
"Default" or "Event of Default" is defined in Section 6.1.
"EBITDA" shall mean revenues derived from the operation of Four Queens
and Olympia but not Palm Springs less all costs of operating Four Queens
(including, without limitation, any and all costs associated with the Fremont
Street Experience) except for (i)
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bankruptcy restructuring costs, (ii) Elsinore D&O insurance, (iii) Elsinore
director and officer compensation, (iv) expenses related to Elsinore debt
(including Trustee Fees), (v) any other Elsinore expense over which Manager has
no control and (vi) the Minimum Fee (but not any additional Management Fee based
upon increased EBITDA), all before (a) interest on indebtedness, (b) all taxes
on income other than Gaming Taxes, (c) depreciation of tangible assets and (d)
amortization of goodwill and other intangible assets, all as determined by the
independent certified public accountant of the Companies in accordance with
generally accepted accounting principles applied on a consistent basis (after
giving effect to "fresh start" accounting), subject, however, to the dispute
provisions of Section 3.6(b).
"Effective Date" shall mean the date the Plan becomes effective as
defined in the Plan.
"Extended Term" is defined in Section 2.3.
"Extension Option" is defined in Section 2.3.
"Fiscal Year" shall mean the 12-month period starting with the first
full quarter beginning immediately following the Effective Date and each
12-month period thereafter.
"Gaming Taxes" shall mean any tax imposed by the Nevada Gaming
Authorities on Gross Gaming Revenues.
"Governmental Authorities" shall mean the United States, the State of
Nevada and any court or political subdivision agency, commission, board or
instrumentality or officer thereof, whether federal, state or local, having or
exercising jurisdiction over the Companies, Manager or the Project, including
the Casino.
"Gross Gaming Revenues" shall mean all of the revenue from the
operation of the Casino (which is taxed by the Nevada Gaming Authorities)
computed on a cash basis from all business conducted upon, related to or from
the Casino in accordance with generally accepted accounting principles and shall
include, but not be limited to, the net win from gaming activities, which is the
difference between gaming wins and losses before deducting Gaming Taxes, and
plus or minus, as appropriate, deposits made in respect of progressive slot
machines and other similar games.
"Gross Revenues" shall mean Gross Gaming Revenues, plus all other
revenues resulting from the operation of the Project, minus all Gaming Taxes.
"Management Fee" shall mean the greater of the Minimum Fee or Perform-
ance Fee.
"Minimum Fee" is defined in Section 4.1.
"Monthly Financial Statements" is defined in Section 3.7.
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"Nevada Gaming Authorities" shall mean the Nevada Gaming Commission,
State Gaming Control Board and all other gaming regulatory bodies, including,
but not limited to, any municipality, political subdivision, board, commission,
agency or other public body now in existence or hereafter created to regulate
gaming in the State of Nevada.
"Olympia" means the Seven Cedars Casino located in Sequim, Washington.
"Operating Bank Accounts" is defined in Section 3.10.
"Operating Budget" is defined in Section 3.9.
"Operating Capital" shall mean such amount in the Operating Bank
Accounts as will be reasonably sufficient to assure the timely payment of all
current liabilities of the Project, including the operations of the Casino,
during the term of this Agreement, and to permit Manager to perform its
management responsibilities and obligations hereunder, with reasonable reserves
for unanticipated contingencies and for short term business fluctuations
resulting from monthly variations from the Operating Budget.
"Operating Expenses" shall mean actual expenses incurred following the
Effective Date in operating the Project, including the Casino Operating
Expenses, employee compensation and entitlements, Operating Supplies,
maintenance costs, fuel costs, utilities, taxes and the Minimum Fee.
"Operating Supplies" shall mean gaming supplies, paper supplies,
cleaning materials, marketing materials, maintenance supplies, uniforms and all
other materials used in the operation of the Project.
"Palm Springs" means the Spotlight 29 Casino located in Palm Springs,
California.
"Performance Fee" shall mean the annual amount payable to Manager which
equals 25% of any increase in EBITDA in any Fiscal Year of the Term or Extended
Term over $8 million.
"Performance Fee Statement" is defined in Section 3.6(a).
"Project" shall mean the Four Queens Hotel and Casino in Las Vegas,
Nevada and all necessary ancillary facilities to the Project, including, but not
limited to, vehicular parking area, entertainment facilities, hotels,
restaurants, waiting areas, restrooms, administrative offices for, but not
limited to, accounting, purchasing, and management information services
(including offices for Manager management personnel) and other areas utilized in
support of the operations of the Project.
"Projected EBITDA" shall mean the EBITDA for the first two Fiscal Years
of the Term and is deemed to be $8 million for each such year.
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"Selected Arbitrator" is defined in Section 9.1.
"Term" is defined in Section 2.2.
ARTICLE II: ENGAGEMENT OF MANAGER AND TERM OF AGREEMENT
Section 2.1 Engagement of Manager. The Companies hereby engage and
employ Manager to act as their exclusive agent for the supervision and control
of the management of the business and affairs of the Project and to provide
certain services to the Companies as detailed in Section 3.3 of this Agreement
in connection with the Project, and Manager hereby accepts such engagement and
employment, on the terms and conditions hereinafter set forth. In addition,
Manager may provide consulting services to Elsinore from time to time with
respect to non-Project related issues and Manager agrees to provide consulting
services upon terms mutually acceptable to Manager and the Companies.
Section 2.2 Term. Manager shall manage the Project from the period (the
"Term") commencing on the beginning of the quarter immediately following the
Effective Date and ending 60 days after the third Fiscal Year's audited results
are available, subject to termination prior to the end of such period as
hereinafter specified or extension as hereinafter provided. Either Manager or
Elsinore may terminate this Agreement upon 120 days notice after the second
Fiscal Year's audited results are available, provided that cumulative EBITDA for
the first two Fiscal Years is less than 80% of the cumulative Projected EBITDA.
In the event that Elsinore elects to terminate this Agreement at the end of the
second Fiscal Year because the 80% cumulative Projected EBITDA target was not
met, Manager will have 60 days after receipt of notice of Elsinore's election to
so terminate in which to exercise its Warrants. If Manager does not exercise its
Warrants, or exercises only a portion of its Warrants, then any Warrants
remaining unexercised at the end of the 60 day period will be automatically
cancelled.
Section 2.3 Option to Extend Term. The Term may be extended at the
option (the "Extension Option") of Manager (the "Extended Term") for an
additional term of two years, provided that cumulative EBITDA for the Term is
80% or more of the cumulative Projected EBITDA. Manager shall give written
notice of its exercise of an Extension Option no later than 120 days prior to
the expiration of the Term, on the assumption that cumulative EBITDA for the
Term will be 80% or more of the cumulative Projected EBITDA.
ARTICLE III: RESPONSIBILITIES OF THE PARTIES.
Section 3.1 Standards. With respect to the operation of the Project
pursuant to this Agreement, Manager shall manage and maintain the Project in a
manner reasonably consistent with the average of standards and procedures
exercised by other casino/hotel operators in the management of other
casino/hotels of the same or similar type, class and quality as the Project and
located in Las Vegas, Nevada.
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Section 3.2 No Interference; Board Representation. In order for Manager
to meet its responsibilities under Section 3.1 of this Agreement in a
professional manner, and to comply with any legal requirements and the terms of
this Agreement, the Companies hereby agree that (i) Manager shall have
uninterrupted control of and responsibility for the operation of the Project
during the Term of this Agreement and (ii) the Companies will not interfere or
be involved with the operation of the Project and that Manager may operate the
Project free of molestation, eviction or disturbance by the Companies or any
third party claiming by, through or under the Companies, provided that Manager
shall not engage in any transaction with any of its affiliates relating to the
Project in excess of [$________] without the prior written approval of the
Elsinore Board of Directors. Examples of the matters which Manager shall
determine from time to time hereunder include, but are not limited to, room
rates, food and beverage menu prices, charges to guests for other services
performed by Manager at the Project, for rooms, gaming, commercial purposes and
entertainment, entertainment policies and specific entertainment obligations,
the labor policies of the Project and the type and character of publicity and
promotion. Manager agrees, however, that it will in good faith use its best
efforts to perform its obligations and discharge its responsibilities in the
control and operation of the Project in and for the purpose of maximizing
profits from the operation of the Project. Nothing contained in this Section 3.2
shall prohibit the Companies' Boards of Directors from exercising their
fiduciary duties if Manager shall default in its obligations under this
Agreement pursuant to Section 6.2 and such default shall continue after any
required notice and/or cure period.
Section 3.3 Services. Manager covenants and agrees to perform,
or cause to be performed, the following services in connection with the Project:
(a) Permits. Manager, on behalf of and with the cooperation of
the Companies, shall oversee obtaining and maintaining all necessary
licenses, findings of suitability, approvals and permits required by
any law, rule or regulation of the Nevada Gaming Authorities, as may be
required for the operation of the Project as a casino/hotel including,
without limitation, gaming, liquor, bar, restaurant, signage and hotel
licenses and any permits required in connection with any refurbishing
or expansion of the Project. Manager shall comply with the rules,
regulations and orders of the Nevada Gaming Authorities and with any
conditions set out in any such licenses and permits issued by any such
authorities and, with the cooperation of the Companies, shall provide
any information, report or access to records reasonably required by the
Nevada Gaming Authorities.
(b) Personnel. Manager shall maintain such level of staffing
as shall be required to carry out its duties hereunder. If the Board of
Directors of Elsinore determines that Manger is not meeting its
staffing requirements, then Manager and Elsinore will meet in good
faith to resolve any staffing issues. If such dispute is not resolved
within two weeks, and either Manager or Elsinore determines that such
dispute cannot be resolved within a reasonable time, then such dispute
shall be resolved by arbitration pursuant to Article IX.
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(i) Except as otherwise expressly provided herein, all
personnel employed at the Project shall be employees of Four Queens.
Manager shall hire, terminate, advance, demote, supervise, direct the
work of and determine the compensation and other benefits (except for
the establishment of any new employee pension and profit-sharing plans,
which shall be determined by Manager and shall be subject to the
approval of the Board of Directors of Elsinore in its sole and absolute
discretion, it being understood that any employee pension and
profit-sharing plans in existence as of the date hereof have been
approved by the Board of Directors of Elsinore) of all personnel
working at the Project, and Elsinore shall not interfere with or give
orders or instructions to personnel employed at the Project; provided,
however, that Manager will not enter into any employment contracts with
any employees that exceed the duration of the Term or the Extended Term
of this Agreement, as the case may be, or any material employee
contracts or benefit arrangements (i.e., any such contract or
arrangement involving an annual compensation (including salary and
bonuses) of more than $125,000), unless first approved by the Board of
Directors of Elsinore which approval shall not be unreasonably
withheld. Manager agrees that employees' wages or benefits and
conditions of employment (inclusive of any discretionary employee
bonuses granted from time to time by Manager) shall be granted by
Manager in a manner consistent with the existing standards therefor
currently employed at the Project. The parties hereto agree that all
wages, bonuses, compensation and benefits (including, without
limitation, severance and termination pay) of personnel at the Project
are the exclusive obligation of Four Queens.
(ii) All wages, salaries, benefits, compensation and
entitlements of the Project employees, including the General Manager,
the consultants and independent contractors approved by the Companies
and Manager, shall be paid from the Operating Bank Accounts by Manager.
Notwithstanding the foregoing, Manager shall not be liable to any of
the Companies' personnel for wages, compensation or other employee
benefit including without limitation to health care, insurance
benefits, worker's compensation, severance or termination pay.
(iii) Manager shall be responsible for the training of all
personnel and shall cooperate with all personnel in an effort to obtain
and maintain all required licenses issued by the Nevada Gaming
Authorities, and will hire only persons with valid employee licenses,
if under the rules and regulations of the Nevada Gaming Authorities,
such employee licenses are a condition of employment.
(iv) The employees necessary to discharge Manager's
obligations and responsibilities hereunder shall be employees of
Manager (or its Affiliates) and shall be hired, paid and discharged by
Manager in its sole and absolute discretion. Manager shall in good
faith determine the number of employees necessary to discharge
Manager's obligations and responsibilities hereunder, the salaries and
other compensation arrangements of such employees shall be the
responsibility of Manager
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and Manager shall not have any right of reimbursement from the
Companies in respect thereof.
(v) The Companies may employ such corporate executives, each
of whom shall be licensable if required by Nevada Gaming Authorities,
as they may choose, provided that none of the salaries, bonuses and
benefits for such executives or costs or expenses of the Companies'
Boards of Directors shall be a cost of operation of the Project for the
purposes of determining EBITDA.
Section 3.4 Sales and Promotions. Manager shall formulate, coordinate
and implement promotion, marketing and sales programs, and shall cause the
Project to participate in promotional, marketing and sales campaigns and, as
appropriate, activities involving complimentary rooms and food and beverages to
bona fide travel agents, tourist officials and airlines representatives, and to
all other individuals and entities whatsoever which, in the exercise of good
management practice, is deemed to be beneficial to the Project.
The Companies agree that no unreasonable influence shall be brought
upon Manager relating to the granting or extension of credit or complimentaries.
Credit facilities shall be granted by Manager in its reasonable discretion and
in accordance with good management practices and Manager's and its Affiliates
standard procedures; provided that except for extending credit for the purchase
of goods, services, gaming or entertainment at the Project and except as
otherwise permitted herein, Manager shall not be authorized to make any loans or
extensions of credit for or on behalf of the Companies without the prior
approval of the Board of Directors of Elsinore.
Section 3.5 Books and Records. Manager shall maintain, or cause to be
maintained, a complete accounting system for and on behalf of the Companies in
connection with Manager's management of the Project. The books and records shall
be kept in accordance with generally accepted accounting principles consistently
applied and in accordance with the uniform system of accounts for hotels. Such
books and records shall be kept on the basis of a Fiscal Year. Books and
accounts shall be maintained at the Project or at the principal office of
Manager with a duplicate copy thereof at the Project. The Companies shall have
the right and privilege of examining and copying said books and records,
including all daily reports prepared by Manager for internal use at the Project,
during regular business hours. Manager shall comply with all requirements with
respect to internal controls and accounting and shall prepare and provide all
required reports under the rules and regulations of the Nevada Gaming
Authorities.
Section 3.6 Audits.
(a) Manager shall engage Arthur Andersen & Co., unless a
different mutually agreed upon auditor is substituted ("Regular
Auditor"), to audit the operations of the Project, (i) for the purpose
of calculating the Performance Fee
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("Performance Fee Statements") and (ii) as of and at the end of each
year occurring after the date hereof (the "Audited Statements"). A
sufficient number of copies of the Performance Fee Statements and the
Audited Statements shall be furnished to the Companies and Manager as
soon as available to permit the Companies and Manager to meet any
public reporting requirements as may be applicable to them, but in no
event later than ninety (90) days following the end of such fiscal
period (such 90th day to be the "Audit Day"). Any cost of such
statements shall be deemed an Operating Expense.
(b) Nothing herein contained shall prevent either party
("Initiator") from designating an additional independent nationally
recognized accounting firm ("Special Auditor") to review one of the
Performance Fee Statements or Audited Statements at the Initiator's
expense (which shall not be an Operating Expense). In the event of any
dispute between the Regular Auditor and the Special Auditor as to any
item subject to audit, the Regular Auditor and the Special Auditor
shall select a third nationally recognized accounting firm ("Third
Auditor") whose resolution on the non-prevailing party of such dispute
to pay the fees and expenses of the Special Auditor or Third Auditor
shall bind the parties. The fees of the Third Auditor shall be paid by
either the Companies or Manager, based upon which of them the Third
Auditor designates as the non-prevailing party, and the Third Auditor
may also, in its sole discretion, impose the costs of the Special Audit
on the non-prevailing party.
(c) If no Special Auditor shall have been designated within 60
days after the delivery of a Performance Fee Statement or an Audited
Statement, the same shall be final and binding upon the parties to this
Agreement for all purposes.
Section 3.7 Monthly and Quarterly Financial Statements. On or before
the 20th day of each month, Manager shall prepare an unaudited operating
statement for the preceding calendar month detailing the Gross Revenues and
expenses incurred in the Project's operation (the "Monthly Financial
Statements"). The Monthly Financial Statements shall include a statement
detailing drop figure accounts on all Gross Gaming Revenues. On or before the
45th day after the end of each quarter, Manager shall prepare an unaudited
report for the preceding quarter detailing the capitalized expenditures and
marketing expenses incurred in the Project's operation.
Section 3.8 Expenses. All costs, expenses, funding or operating
deficits and Operating Capital, real property and personal property taxes,
insurance premiums and other liabilities incurred due to the gaming and
nongaming operations of the Project shall be the sole and exclusive financial
responsibility of the Companies. It is understood that statements herein
indicating that the Companies shall furnish, provide or otherwise supply,
present or contribute items or services hereunder shall not be interpreted or
construed to mean that Manager is liable or responsible to fund or pay for such
items if the Companies do not.
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Section 3.9 Annual Budgets. Manager shall prepare and submit to the
Companies' Boards of Directors at least 60 days before the start of the new
Fiscal Year for their approval a capital budget for the expenditure of capital
improvements ("Capital Budget"). To the extent practical, a reserve shall be
established for this purpose. The parties agree that any "material" expenditure
not contemplated by the Capital Budget shall require the consent of both Manager
and the Companies. For the foregoing purposes, "material" shall mean $20,000 in
the case of any such individual item and an aggregate of $250,000 in the case of
all such items. Manager shall also prepare and submit to the Companies' Boards
of Directors at least 60 days before the start of the new Fiscal Year for their
approval an operating budget projecting revenues, expenses and EBITDA for the
next Fiscal Year ("Operating Budget"). Manager shall have the responsibility to
manage the Project in accordance with the Operating Budget except for expenses
necessitated by circumstances beyond Manager's reasonable control. Any dispute
as to the Capital Budget or the Operating Budget shall be resolved by
arbitration pursuant to Article IX.
Section 3.10 Operating Bank Accounts.
(a) Manager shall establish bank accounts that are necessary
for the operation of the Project, including an account for the Casino
Bankroll, at various banking institutions chosen by Manager (such
accounts are hereinafter collectively referred to as the "Operating
Bank Accounts"). The Operating Bank Accounts shall be named in such a
manner as to identify the Project and particular uses for the account
as the Companies and Manager may determine. All instructions to and
checks drawn on the Operating Bank Accounts shall be signed only by
representatives of the Companies or Manager who are covered by fidelity
insurance and designated the Companies or Manager personnel may be the
only authorizing signing persons on checks drawn on the Operating Bank
Accounts. All checks shall be drawn only in accordance with established
normal and customary accounting policies and procedures. The Operating
Bank Accounts shall be interest bearing accounts if such accounts are
reasonably available and all interest thereon shall be credited to the
Operating Bank Accounts. All Gross Revenues shall be deposited in the
Operating Bank Accounts, and Manager shall pay out of the Operating
Bank Accounts, to the extent of the funds therein, from time to time,
all Operating Expenses and other amounts required by Manager to perform
its obligations under this Agreement. All funds in the Operating Bank
Accounts shall be separate from any other funds of any of Manager's
Affiliates and the Companies' Affiliates and neither the Companies nor
Manager may commingle such funds in the Operating Bank Accounts with
the funds of any other bank accounts.
(b) Manager agrees that it will not use any Operating Bank
Accounts as compensating balances related to the extension of credit to
Manager or grant any right of set-off or bankers' lien on any such
accounts in respect of any amounts owed by Manager to such
depositories. Manager shall seek to obtain reasonable rates of interest
for the Operating Bank Accounts, with due regard to the financial
stability
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of and services offered by the depositories with which such accounts
are kept. The parties to this Agreement agree that all funds held from
time to time in the Operating Bank Accounts are solely the property of
Four Queens, and upon the expiration or Termination (as defined below)
of this Agreement for any reason, Manager shall cease to withdraw funds
from all Management Accounts and shall take such steps as shall be
necessary to (1) remove Manager's designees as signatories to the
Operating Bank Accounts and (2) authorize Elsinore's designees to
become the sole signatories to the Operating Bank Accounts. This
provision shall survive Termination. It is understood and agreed that
Manager may maintain petty cash funds at the Project and make payments
therefrom as the same are customarily made in the casino/hotel
business.
(c) The Companies shall have the right to fund their
obligations under the Plan by withdrawals from Operating Bank Accounts.
The Companies' ability to make other withdrawals from Operating Bank
Accounts shall be consistent with their funding obligations under this
Agreement and in accordance with established accounting policies and
procedures.
Section 3.11 Payment of Expenses.
(a) Manager shall pay from the Gross Revenues the following
items in the order of priority listed below, on or before their
applicable due date: (i) required payments to the Governmental
Authorities, including federal, state or local payroll taxes ("Payroll
Taxes"), (ii) Operating Expenses, including taxes (other than Payroll
Taxes) and the Management Fee, and (iii) emergency expenditures to
correct a condition of an emergency nature, including structural
repairs, which require immediate repairs to preserve and protect the
Project. In the event that funds are not available for payment of the
Operating Expenses in their entirety, all Payroll Taxes or withholding
taxes shall be paid first from the available funds.
(b) During the Term of this Agreement, within five (5)
Business Days after receipt of written notice from Manager, the
Companies shall fund the Operating Bank Accounts designated by Manager
(the "Companies' Advances") in such a fashion so as to adequately
insure that the Operating Capital set forth in the Operating Budget as
revised is sufficient to support the uninterrupted and efficient
ongoing operation of the Project. The written request for any
additional Operating Capital shall be submitted by Manager to the
Companies on a monthly basis based on the interim statements and the
Operating Budget, as revised.
Section 3.12 Cooperation of the Companies and Manager. The Companies
and Manager shall cooperate fully with each other during the Term and the
Extended Term, if any, of this Agreement to facilitate the performance by
Manager of Manager's obligations and responsibilities set forth in this
Agreement.
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Section 3.13 Financing Matters.
(a) In no event may either party represent that the other
party or any Affiliate of such party is or in any way may be liable for
the obligations of such party in connection with (i) any financing
agreement, or (ii) any public or private offering or sale of
securities. If the Companies, or any Affiliate of the Companies shall,
at any time, sell or offer to sell any securities issued by the
Companies or any Affiliate of the Companies through the medium of any
prospectus or otherwise and which relates to the Project or its
operation, it shall do so only in compliance with all applicable laws,
and shall clearly disclose to all purchasers and offerees that (i)
neither Manager nor any of its Affiliates, officers, directors, agents
or employees shall in any way be deemed to be an issuer or underwriter
of such securities, and (ii) Manager and its Affiliates, officers,
directors, agents and employees have not assumed and shall not have any
liability arising out of or related to the sale or offer of such
securities, including without limitation, any liability or
responsibility for any financial statements, projections or other
information contained in any prospectus or similar written or oral
communication. Manager shall have the right to approve any description
of Manager or its Affiliates, or any description of this Agreement or
of the Companies' relationship with Manager hereunder, which may be
contained in any prospectus or other communications (unless such
information is furnished to the Companies by Manager in writing), and
the Companies agree to furnish copies of all such materials to Manager
for such purposes within a reasonable time prior to the delivery
thereof to any prospective purchaser or offeree. The Companies agree to
indemnify, defend or hold Manager and its Affiliates, officers,
directors, agents and employees, free and harmless from any and all
liabilities, costs, damages, claims or expenses arising out of or
related to the breach of the Companies' obligations under this Section
3.13. Manager agrees to reasonably cooperate with the Companies in the
preparation of such agreements and offerings.
(b) Notwithstanding the above restrictions, subject to
Manager's right of review set forth in this Section 3.13, the Companies
may represent that the Project is managed by Manager and Manager may
represent that it manages the Project and both may describe the terms
of this Agreement and the physical characteristics of the Project in
regulatory filings and public or private offerings. Moreover, nothing
in this Section shall preclude the disclosure of (i) already public
information, or (ii) audited or unaudited financial statements from the
Project required by the terms of this Agreement or (iii) any
information or documents required to be disclosed to or filed with the
Governmental Authorities. Both parties shall use their best efforts to
consult with the other concerning disclosures as to the Project. The
Companies and Manager shall cooperate with each other in providing
financial information concerning the Project and Manager that may be
required by any lender or required by any Governmental Authority.
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Section 3.14 Taxes and Insurance. Throughout the Term or the Extended
Term, the Companies shall furnish Manager with copies of all tax statements and
insurance policies and all financing documents (including notes and mortgages)
relating to the Project. Manager shall cause all federal and state income and
sales tax returns of the Companies to the extent such returns relate to the
Project to be prepared and shall cooperate with taxing authorities in connection
with any inquiries or audits that relate to the Project. Manager will also
assist the Companies in procuring and maintaining liability, property and such
other insurance in at least such amounts and covering such risks as is currently
maintained with respect to the Project and in such additional amounts and
covering such additional risks, if any, as Manager and Elsinore determine is
necessary in connection with the operation of the Project, with responsible and
reputable insurance companies or associations. All such insurance policies shall
name Manager as an additional insured and all insurers thereon shall be required
to issue to Manager a certificate of insurance providing that such insurer shall
deliver to Manager reasonable prior notice of termination of any such policy or
the coverage provided thereby and, if and to the extent the same shall be
available without adversely affecting Four Queens' coverage and without
additional premiums or charges, waiving the rights of such insurer, if any, of
subrogation against Manager. Without in any way diminishing Four Queens'
responsibility hereunder, Manager is hereby authorized and directed to pay from
the Operating Bank Accounts all taxes and insurance fees including, without
limitation, withholding taxes and insurance premiums, and all other items of
expense relating to the ownership or operation of the Project.
Section 3.15 Concessions. Manager shall consummate, if in Manager's
reasonable discretion it deems the same to be in the best interest of the
Project, in the name of and for the benefit of Four Queens, reasonable
arms-length arrangements and leases with concessionaires, licensees, tenants and
other intended users of any facilities related to the Project. Copies of all
such arrangements shall be furnished to Elsinore.
Section 3.16 Material Assessments. Manager, as exclusive agent for Four
Queens, is authorized to make and enter into any agreements (including, without
limitation, agreement with Manager's Affiliates, provided such agreements
represent the equivalent of reasonable arms, length negotiations) as are, in
Manager's opinion, necessary or desirable for the operation, supply and
maintenance of the Project, as required by this Agreement. Manager shall be
required to obtain the prior written approval of the Board of Directors of
Elsinore which approval shall be in the absolute discretion of such Board of
Directors before entering into any agreement not contemplated by the approved
Annual Budget. Manager shall not enter into any agreement involving the
incurrence of debt obligations on behalf of either or both of the Companies, or
for Manager's own account, with respect to the operations of the Project, over
any amounts therefor set forth in the approved Annual Budget.
Section 3.17 Trademarks. Manager (i) acknowledges the Companies'
exclusive rights in and to the trademarks, service marks, trade names and other
such intellectually property utilized by the Companies in the operation of the
Project (the "Four Queens Marks") and
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(ii) agrees not to do any act that will impair or affect the strength of the
Four Queens Marks, the continuity of the registration of the Four Queens Marks,
the Companies' ownership of the Four Queens Marks or the goodwill associated
with the Four Queens Marks. Manager agrees to render whatever assistance
Elsinore may reasonably require in the procurement and maintenance of
registrations of the Four Queens Marks in the United States Patent and Trademark
Office and in other jurisdictions.
ARTICLE IV: MANAGEMENT FEE; WARRANTS
Section 4.1 Payments to Manager.
(a) Manager shall be paid a minimum fee at the rate of
$1,000,000 per annum (the "Minimum Fee") payable in advance in equal
monthly installments of $83,333.33 on the first day of each month
during the Term and the Extended Term, if any.
(b) Manager shall also be paid during the Term and the
Extended Term, if any, the additional amount that the Performance Fee
exceeds the Minimum Fee promptly, and in no event later than 90 days,
after the end of a Fiscal Year following receipt of audited financial
statements.
Section 4.2 Interest on Overdue Amounts; Collection Costs. If for any
reason the Management Fee (both the Minimum Fee or Performance Fee) or any other
amount due to Manager under this Agreement is not paid on a timely basis, such
amount shall bear interest at the rate of 12% per annum until paid in full.
Manager shall also be entitled to reimbursement for the costs of collection,
including counsel fees and disbursements, with respect to amounts due to it
under this Agreement but which are unpaid.
Section 4.3 Bonus. Four Queens or Elsinore will have the option to
terminate this Agreement on 90 days prior written notice if (i) substantially
all of the assets of the Four Queens are sold, (ii) Four Queens is merged or
consolidated with another company, or (iii) the current shareholders sell at
least the majority of the shares of Four Queens or Elsinore during the term of
this Agreement. If this Agreement is so terminated before the expiration of the
Term or the Extended Term, if applicable, then Manager will be entitled to
receive $2 million in cash, minus any amount realized or realizable upon
exercise of the Warrants.
Section 4.4 Warrants. Elsinore hereby grants Manager warrants (in
customary form in the reasonable opinion of counsel to Manager) (the "Warrants")
on the terms summarized below, which summary is qualified by reference to the
Warrant Agreement, a copy of which is attached hereto as Exhibit A:
(a) Number of Shares Purchased: 20% of the issued and
outstanding equity capital (on a fully diluted basis) of Elsinore on
the Effective Date.
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(b) Duration: Co-extensive with the Term and Extended Term of
this Agreement (i.e. five years but only if Extension Option is
exercised).
(c) Exercise Price: The greater of (i) book value per share on
the Effective Date after the additional cash from the rights offering
(as defined in the Plan) or (ii) the gross amount per share of the
proceeds of the rights offering.
(d) Anti-Dilution Adjustment: In addition to standard
adjustment for stock splits, stock dividends, recapitalizations and
similar events, the Exercise Price would be reduced and the number of
Warrants would increase by a formula if (i) shares of common stock are
sold at less than current market value, unless the Company obtains an
opinion from an investment banker that such sale at less than current
market value was necessary as a result of the quantity of common stock
being sold, or (ii) warrant options or convertible securities are
issued with an exercise or conversion price less than current market
value (other than issuances to full-time employees of Elsinore involved
in the operation of the Project of shares of common stock and options
or warrants to purchase up to an aggregate of 10% of the Elsinore
issued and outstanding common stock as of the Effective Date).
(e) Registration Rights: Manager will have the right to become
a party (with the identical rights as the Elsinore bondholders) to the
Registration Rights Agreement among the Elsinore bondholders and
Elsinore. [Subject to review of the Registration Rights Agreement by
Riviera]
ARTICLE V: REPRESENTATIONS AND WARRANTIES
Section 5.1 Manager represents and warrants to the Companies as
follows:
(a) Companies' Organization. Manager is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada and has the full corporate power and authority to enter
into and perform its obligations under this Agreement.
(b) Authorization of Agreement. The execution, delivery and
performance of this Agreement has been duly authorized and approved by
all necessary corporate action on the part of Manager, and this
Agreement has been duly executed and delivered by Manager and
constitutes the legal, valid and binding obligation of Manager,
enforceable against Manager in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity. The execution, delivery and performance of this
Agreement by Manager does not and will not conflict with any law, rule
or regulation of the Nevada Gaming Authorities.
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(c) Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to the best of
Manager's knowledge, threatened against Manager that question the
validity of this Agreement or any action taken or to be taken by
Manager in connection with this Agreement and that, if adversely
determined, would have a material adverse effect upon Manager's ability
to perform its obligations under this Agreement.
(d) Consents and Approvals. With the exception of the
requisite approvals of the Nevada Gaming Authorities, no authorization,
consent, approval, license, finding of suitability, exemption from or
filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary as a condition to the valid execution,
delivery or performance by Manager of this Agreement, other than such
authorizations, consents, approvals, licenses, findings of suitability,
exemptions, filings or registrations as have been obtained and are in
full force and effect.
Section 5.2 The Companies represent and warrant to Manager as follows:
(a) Companies' Organization. The Companies are corporations
duly organized, validly existing and in good standing under the laws of
the State of Nevada and have the full corporate power and authority to
enter into and perform its obligations under this Agreement.
(b) Authorization of Agreement. The execution, delivery and
performance of this Agreement and the Plan has been duly authorized and
approved by all necessary corporate action on the part of the
Companies, and this Agreement has been duly executed and delivered by
the Companies and constitutes the legal, valid and binding obligation
of them, enforceable against them in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity. The execution, delivery and performance of this
Agreement by the Companies does not and will not conflict with any law,
rule or regulation of the Nevada Gaming Authorities.
(c) Consents and Approvals. With the exception of the
requisite approvals of the Nevada Gaming Authorities, no authorization,
consent, approval, license, finding of suitability, exemption from or
filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary as a condition to the valid execution,
delivery or performance by the Companies of this Agreement, other than
such authorizations, consents, approvals, licenses, findings of
suitability, exemptions, filings or registrations as have been obtained
and are in full force and effect.
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(d) No Joint Venture. It is expressly understood and agreed
that Manager is being employed by the Companies as an independent
contractor to provide, or cause to be provided, supervisory management
and consulting services in respect of the Project and not as a partner
or joint venturer of the Companies or either or them. All purchases and
acquisitions of every kind and character by Manager on behalf of the
Companies shall be property of the Companies and all debts and
liabilities incurred by Manager within the scope of the authority
granted and permitted hereunder in the course of its management and
operation of the Project shall be debts and liabilities of the
Companies only, and Manager shall not be liable therefor for its own
account, except as specifically stated to the contrary herein.
ARTICLE VI. DEFAULT
Section 6.1 Definition. The occurrence of any one or more of the events
described in the Sections 6.2, 6.3, 6.4 or 6.5 which is not cured within the
time permitted, shall constitute a default under this Agreement (hereinafter
referred to as a "Default" or an "Event of Default") as to the party failing in
the performance or effecting the breaching act.
Section 6.2 Manager's Defaults. If Manager shall (a) fail to perform or
materially comply with any of the covenants, agreements, terms or conditions
contained in this Agreement applicable to Manager and such failure shall
continue for a period of thirty (30) days after written notice thereof from the
Companies to Manager specifying in detail the nature of such failure, or, in the
case such failure is of a nature that it cannot, with due diligence and good
faith, be cured within thirty (30) days, if Manager fails to proceed promptly
and with all due diligence and in good faith to cure the same and thereafter to
prosecute the curing of such failure to completion with all due diligence within
ninety (90) days thereafter, or (b) take or fail to take any action to the
extent required of Manager by the Nevada Gaming Authorities unless Manager cures
such default or breach prior to the expiration of applicable notice, grace and
cure periods, if any, provided, however, that Manager shall only be required to
cure any defaults with respect to which Manager has a duty hereunder.
Section 6.3 The Companies' Default. If the Companies shall (a) fail to
make any monetary payment required under this Agreement, including, but not
limited to, the Companies' Advances, on or before the due date recited herein
and said failure continues for five (5) Business Days after written notice from
Manager specifying such failure, or (b) fail to perform or materially comply
with any of the other covenants, agreements, terms or conditions contained in
this Agreement applicable to the Companies (other than monetary payments) and
which failure shall continue for a period of thirty (30) days after written
notice thereof from Manager to the Companies specifying in detail the nature of
such failure, or, in the case such failure is of a nature that it cannot, with
due diligence and good faith, cure within thirty (30) days, if the Companies
fail to proceed promptly and with all due diligence and in good faith to cure
the same and thereafter to prosecute the curing of such failure to completion
with all due diligence within ninety (90) days thereafter.
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Section 6.4 Bankruptcy. With the exception of any actions taken
pursuant to the Proceedings, if any party (a) applies for or consents to the
appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) makes a general assignment for the benefit of creditors, (c) is
adjudicated a bankrupt or insolvent, or (d) files a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors, takes advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law, or admits the material
allegations of a petition filed against it in any proceedings under any such
law.
Section 6.5 Reorganization/Receiver. With the exception of any actions
taken pursuant to the Proceedings, if an order, judgment or decree is entered by
any court of competent jurisdiction approving a petition seeking reorganization
of Manager or the Companies, as the case may be, or appointing a receiver,
trustee or liquidator of Manager or the Companies, as the case may be, or of all
or a substantial part of any of the assets of Manager or the Companies, as the
case may be, and such order, judgment or decree continues unstayed and in effect
for a period of sixty (60) days from the date of entry thereof.
Section 6.6 Delays and Omissions. No delay or omission as to the
exercise of any right or power accruing upon any Event of Default shall impair
the non-defaulting party's exercise of any right or power or shall be construed
to be a waiver of any Event of Default or acquiescence therein.
Section 6.7 Disputes in Arbitration. Notwithstanding the provisions of
this Article VI, any occurrence which would otherwise constitute an Event of
Default hereunder shall not constitute an Event of Default for so long as such
dispute is in arbitration pursuant to the arbitration provisions of Article IX.
ARTICLE VII. TERMINATION
Section 7.1 Termination Events. This Agreement may be terminated by the
non-defaulting party upon the occurrence of an Event of Default and the lapsing
of the time to cure.
Section 7.2 Notice of Termination. In the event of the occurrence and
continuation for the relevant cure period of an Event of Default, either Manager
or the Companies, as appropriate, may terminate ("Termination") this Agreement
by giving ten (10) days written notice, and the Term or the Extended Term of
this Agreement shall expire by limitation at the expiration of said last day
specified in the notice as if said date was the date herein originally fixed for
the expiration of the Term or the Extended Term hereof.
Section 7.3 Payments Upon Termination. The Companies shall pay to
Manager all accrued but unpaid Management Fees and expenses of Manager and any
other sum owed Manager pursuant to this Agreement.
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Section 7.4 Post Termination. Upon a Termination:
(a) Manager shall promptly deliver to Elsinore any books,
records, instruments or other documentation relating to the Project and
the Companies in Manager's possession or under Manager's control;
(b) Manager and its Affiliates shall release and waive all
rights, claims, interests and relationships they may have to control,
retain, or discharge any matter of management with respect to the
Project, or any other benefit thereunder or in connection therewith,
except as specified in Section 7.3 and for the provisions of Article
VIII which shall survive Termination; and
(c) Manager shall peacefully vacate and surrender possession
to Four Queens, and shall fully cooperate in the prompt and efficient
transfer of the management of the Project from Manager to Four Queens
or a person or entity designated by Four Queens. In connection with the
foregoing, Manager shall act in good faith to avoid any breach or
disruption of any contract involving the Project or the lapse of any
insurance policy covering or pertaining to the Project.
Section 7.5 Transfer of Permits and Gaming Licenses Upon Termination.
To the fullest extent permissible under applicable law, upon termination or
expiration of this Agreement, Manager shall cooperate in the transfer of any and
all permits, licenses or similar authorizations issued by any governmental body
(including, without limitation, the Nevada Gaming Authorities) relating to the
operation or management of any or all of the Project to the new manager.
Section 7.6 Option to Terminate. Elsinore will have the right to
terminate this Agreement on 90 days prior written notice if (i) three months
after William L. Westerman has given notice that he will retire as Chief
Executive Officer ("CEO") of Riviera Holdings Corporation or its subsidiary
Riviera Gaming Management, a successor acceptable to Elsinore has not been
appointed or (ii) three months after the death of William L. Westerman, a
successor acceptable to Elsinore has not been appointed.
If either Four Queens or Elsinore terminates this Agreement pursuant to
this Section 7.6 or Section 4.3, then any increase in the Management Fee due to
the Performance Fee payable under Section 4.1 will be calculated as follows: the
Performance Fee through the date of termination will be 25% of the increase of
(i) EBITDA through the date of termination over (ii) $666,666.67 times the
number of months elapsed in the Fiscal Year through the date of termination. The
amount by which the Performance Fee exceeds the Minimum Fee will be paid to
Manager promptly, but in no event later than 90 days after the termination date.
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ARTICLE VIII: EXCULPATION AND INDEMNIFICATION.
Section 8.1 Exculpation. Manager, its Affiliates and each of their
respective officers, partners, directors, employees and agents shall not be
liable to the Companies or any person who has acquired an interest in either or
both of the Companies, for any losses sustained or liabilities incurred,
including monetary damages, as a result of any act or omission of Manager, its
Affiliates or any of their respective officers, partners, directors, employees
or agents, if the conduct of Manager or such other person did not constitute
actual fraud, or willful or wanton misconduct ("Manager Conduct Standard"). The
negative disposition of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that Manager, its Affiliates or any
of their respective officers, partners, directors, employees or agents acted in
a manner contrary to the Manager Conduct Standard.
Section 8.2 Indemnification.
(a) Subject to the provisions of Section 8.2(b) hereof, the
Companies shall indemnify and hold harmless Manager, its Affiliates and
any of their respective officers, partners, directors, employees and
agents (each individually, an "Indemnitee"), from and against any and
all losses, claims, damages, liabilities, expenses (including
reasonable legal fees and expenses), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative, in
which an Indemnitee may be involved, or threatened to be involved, as a
party or otherwise, which relates to, or arises out of, the performance
of any duties and services for or on behalf of the Companies pursuant
to the terms and within the scope of this Agreement, regardless of
whether the liability or expense accrued at or relates to, in whole or
in part, any time before, on or after the date hereof. The negative
disposition of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that an
Indemnitee acted in a manner contrary to the Manager Conduct Standard.
(b) An Indemnitee shall not be entitled to indemnification
under this Section 8.2 with respect to any claim, issue or matter in
which it has been finally adjudged in a nonappealable order that such
Indemnitee has breached the Manager Conduct Standard unless and only to
the extent that the court in which such action was brought, or another
court of competent jurisdiction, determines upon application that,
despite the adjudication of liability, in view of all of the
circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnification for such liabilities and expenses as the
court may deem proper. In addition, notwithstanding anything to the
contrary contained in this Article VIII, an Indemnitee shall not be
entitled to indemnification under this Section 8.2 against losses
sustained or liabilities incurred if such losses or liabilities are
finally determined by a court of competent jurisdiction to have been
the direct result of the Manager Conduct Standard.
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(c) In the event that any legal proceedings shall be
instituted or any claim or demand shall be asserted by any person in
respect of which payment may be sought by an Indemnitee under the
provisions of this Section 8.2, the Indemnitee shall promptly cause
written notice of the assertion of any such proceeding or claim of
which it has actual knowledge to be forwarded to the Companies. Upon
receipt of such notice, the Companies shall have the right, at their
option and expense, to be represented by counsel of their choice, and
to defend against, negotiate, settle or otherwise deal with any
proceeding, claim or demand which relates to any loss, liability,
damage or deficiency indemnified against hereunder; provided, however,
that no settlement shall be made without prior written consent of the
Indemnitee which shall not be unreasonably withheld; and provided
further, that the Indemnitee may participate in any such proceeding
with counsel of its choice and at its expense. The Indemnitee and the
Companies agree to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such legal proceeding,
claim or demand.
After any final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent
jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, or the
Indemnitee and the Companies shall have arrived at a mutually binding
agreement with respect to each separate matter indemnified by the
Companies hereunder, the Indemnitee shall forward to the Companies
notice of any sums due and owing by it pursuant to this Agreement with
respect to such matter and the Companies shall be required to pay all
of the sums so owing to the Indemnitee in immediately available funds,
thirty (30) days after the date of such notice.
(d) The indemnification provided by this Section 8.2 shall be
in addition to any other rights to which an Indemnitee may be entitled
under any agreement, bylaw or vote of the Board of Directors of
Elsinore or Four Queens, respectively, or as a matter of law or
otherwise, both as to action in the Indemnitee's capacity as Manager,
an Affiliate thereof or an officer, partner, director, employee or
agent of Manager or its Affiliates and as to action in any other
capacity, shall continue as to an Indemnitee who has ceased to serve in
such capacity and shall inure to the benefit of the heirs, successors,
assigns and administrators of an Indemnitee.
ARTICLE IX: ARBITRATION
Section 9.1 Appointment of Arbitrators. All disputes arising out of or
connected with the subject matter of this Agreement are to be referred first to
a committee of four (4) persons who shall meet in an attempt to resolve said
dispute or open issue. The committee shall consist of two (2) persons appointed
by the Companies and two (2) persons appointed by Manager. If an agreement
cannot be reached to resolve the dispute by the committee, the dispute or open
issue will be resolved by binding arbitration. Any award of the arbitrators may
be filed in a court of law as a final judgment. Any such arbitration shall be
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conducted in Las Vegas, Nevada in accordance with the rules and regulations
adopted by the American Arbitration Association. Either party may serve upon the
other party a written notice of the demand dispute or appraisal to be resolved
pursuant to this Article IX. Within thirty (30) days after the giving of such
notice, each of the parties hereto shall nominate and appoint an arbitrator (or
appraiser, as the case may be) and shall notify the other party in writing of
the name and address of the arbitrator so chosen. Upon the appointment of the
two (2) arbitrators as hereinabove provided, said two (2) arbitrators shall
forthwith, within fifteen (15) days after the appointment of the second
arbitrator, and before exchanging views as to the question at issue, appoint in
writing a third arbitrator who shall be experienced in the operation of a gaming
casino (the "Selected Arbitrator") and give written notice of such appointment
to each of the parties hereto. In the event that the two (2) arbitrators shall
fail to appoint or agree upon the Selected Arbitrator within said fifteen (15)
day period, the Selected Arbitrator shall be selected by the parties themselves
if they so agree upon such Selected Arbitrator within a further period of ten
(10) days. If a Selected Arbitrator shall not be appointed or agreed upon within
the time herein provided, then either party on behalf of both may request such
appointment by the American Arbitration Association (or its successor or similar
organization if the American Arbitration Association is no longer in existence).
Said arbitrators shall be sworn faithfully and fairly to determine the question
at issue. The arbitrators shall afford to the Companies and Manager a hearing
and the right to submit evidence, with the privilege of cross-examination, on
the question at issue, and shall with all possible speed make their
determination in writing and shall give notice to the parties hereto of such
determination. The concurring determination of any two (2) of said three (3)
arbitrators shall be binding upon the parties, or, in case no two (2) of the
arbitrators shall render a concurring determination, then the determination of
the Selected Arbitrator shall be binding upon the parties hereto. Each party
shall pay the fees of the arbitrator appointed by it, and the fees of the
Selected Arbitrator shall be divided equally between the Companies and Manager.
Section 9.2 Inability to Act. In the event that an arbitrator appointed
as aforesaid shall thereafter die or become unable or unwilling to act, his
successor shall be appointed in the same manner provided in this Article IX for
the appointment of the arbitrator so dying or becoming unable or unwilling to
act.
ARTICLE X: NOTICES
Notice given by a party under this Agreement shall be in writing and
shall be deemed duly given (i) when delivered by hand, (ii) when three (3) days
have elapsed after its transmittal by registered or certified mail, postage
prepaid, return receipt requested, or two (2) days have elapsed after its
transmittal by nationally recognized air courier service; or (iii) when
delivered by telephonic facsimile transmission (with a copy thereof so delivered
by hand, mail or air courier if recipient does not acknowledge receipt of the
transmission). Notices shall be sent to the addresses set forth below, or
another as to which that party has given notice, in each case with a copy
provided in the same manner and at the same time to the persons shown below
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if to Elsinore or Four Queens to:
Attention:
Facsimile No:
with a copy to:
Gordon & Silver, Ltd.
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Attn: Gerald M. Gordon, Esq.
Facsimile No: (702) 369-2666
if to Manager to:
c/o William L. Westerman
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109-1935
Facsimile No: (702) 794-9277
with a copy to:
Dechert, Price & Rhoads
477 Madison Avenue
New York, New York 10022
Attn: Fredric J. Klink, Esq.
Facsimile No: (212) 308-2041
Any party may change the name and/or address by written notice given in
each instance to the other parties.
ARTICLE XI: MISCELLANEOUS
Section 11.1 Nevada Gaming Control Act and Nevada Gaming Authorities.
Notwithstanding anything to the contrary contained in this Agreement, this
Agreement shall be deemed to include all provisions required by the Nevada
Gaming Control Act, as amended, and the regulations promulgated thereunder (the
"Act"), and shall be conditioned upon the approval of the Nevada Gaming
Authorities as required by the Act. To the extent that any term or provision
contained in this Agreement shall be inconsistent with the Act,
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the provisions of the Act shall govern. All provisions of the Act, to the extent
required by law to be included in this Agreement, are incorporated herein by
reference as if fully restated in this Agreement.
Section 11.2 Entire Agreement. This Agreement contains the entire
understanding of the parties to this Agreement in respect of its subject matter
and supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 11.3 Amendment; Waiver. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all of the parties to this Agreement. No failure to exercise, and no
delay in exercising, any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between or among the
parties. No extension of time for performance of any obligations or other acts
hereunder or under any other agreement shall be deemed to be an extension of the
time for performance of any other obligations or any other acts.
Section 11.4 Binding Effect; Assignment; Combinations Involving
the Companies.
(a) The rights and obligations of this Agreement shall bind
and inure to the benefit of the parties (including their respective
officers, directors, employees, agents and Affiliates) and their
respective heirs, executors, successors and assigns. No party to this
Agreement shall have the right to assign this Agreement and its
respective rights and obligations hereunder without the consent of each
other party to this Agreement.
(b) Subject to the provisions of Section 4.3, the Companies
agree that during the Term or the Extended Term they will not enter
into an agreement with a third party to sell substantially all of the
Project assets (as opposed to sale of equity securities) to a third
party unless, as a condition to such combination (i) Manager's rights
under this Agreement shall continue in full force and effect and (ii)
the third party shall agree to continue to pay to Manager the
Management Fee. In the event of a combination, it shall use its best
efforts to assert and protect, in good faith, Manager's rights granted
to Manager in this Agreement at all times during the negotiation of
said combination.
Section 11.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
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Section 11.6 Terminology. The headings contained in this Agreement are
for convenience of reference only and are not to be given any legal effect and
shall not affect the meaning or interpretation of this Agreement.
Section 11.7 Governing Law. This Agreement shall be construed in
accordance with and governed for all purposes by the laws and public policy of
the State of Nevada applicable to contracts executed and to be wholly performed
within such State.
Section 11.8 Severability. If any provision of this Agreement, or the
application of any such provision to any person or circumstance, is held to be
inconsistent with any present or future law, ruling, rule or regulation of any
court or governmental or regulatory authority having jurisdiction over the
subject matter of this Agreement, such provision shall be deemed to be modified
to the minimum extent necessary to comply with such law, ruling, rule or
regulation, and the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
inconsistent, shall not be affected. If any provision is determined to be
illegal, unenforceable, or void, which provision does not relate to any payments
made hereunder and the payments made hereunder shall not be affected by such
determination and this Agreement is capable of substantial performance, then
such void provision shall be deemed rescinded and each provision not so affected
shall be enforced to the extent permitted by law.
Section 11.9 No Third Party Benefits. This Agreement is for the benefit
of the parties hereto and their respective permitted successors and assigns. The
parties neither intend to confer any benefit hereunder on any person, firm or
corporation other than the parties hereto, nor shall any such third party have
any rights hereunder.
Section 11.10 Drafting Ambiguities. Each party to this Agreement and
its counsel have had an opportunity to review and revise this Agreement. The
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or of any amendments or exhibits to this Agreement.
Section 11.11 Attorneys' Fees. Should either party institute an
arbitration, action or proceeding to enforce any provisions hereof or for other
relief due to an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to receive from the other party all costs of
the action or proceeding and reasonable attorneys' fees.
Section 11.12 Limitations on Responsibilities of Manager. Manager shall
use its best efforts to render the services contemplated by this Agreement in
good faith to the Companies, but notwithstanding anything to the contrary which
may be expressed or implied in this Agreement, Manager hereby explicitly
disclaims any and all warranties, express or implied, including but not limited
to the success or profitability of the Project. In the performance of the
services contemplated by this Agreement, Manager shall not be liable to the
Companies for any acts or omissions in connection therewith, except which
constitute
- 25 -
<PAGE>
DRAFT
FOR DISCUSSION
PURPOSES ONLY
a breach of the Manager Conduct Standard and then only to the extent of the
Management Fees actually received by Manager.
Section 11.13 No Violation. Nothing contained in this Agreement shall
entitle the Boards of Directors, Manager or any other persons acting for any of
the Companies or Manager to exercise control over the operation of the Casino or
other operations of the Project in a manner which would violate any regulation
of the Nevada Gaming Authorities.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by an authorized representative thereof, all as of
the day and year first above written.
ELSINORE: FOUR QUEENS:
Elsinore Corporation, a Nevada Four Queens, Inc., a Nevada
corporation corporation
By: By:
Name: Name:
Title: Title:
MANAGER:
By:
Name:
Title:
<PAGE> - 26 -
EXHIBIT 15.1 TO SEPTEMBER 30, 1997 FORM 10-Q
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
The Board of Directors and Shareholders
Elsinore Corporation
We have reviewed the condensed consolidated balance sheet of Elsinore
Corporation and subsidiaries (Reorganized Company) as of September 30, 1997, and
the related condensed consolidated statements of operations and cash flows for
the three months ended September 30, 1997 and the period from March 1, 1997
through September 30, 1997 and the related condensed consolidated statements of
operations and cash flows of Elsinore Corporation and subsidiaries,
Debtor-In-Possession (Predecessor Company) for the period January 1, 1997
through February 28, 1997. These condensed consolidated financial statements are
the responsibility of the Reorganized and Predecessor Companies' management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the condensed financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the condensed financial statements, on February 28,
1997, Elsinore Corporation emerged from bankruptcy. The consolidated financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis of accounting than those of the Predecessor Company and,
therefore, are not comparable in all respects.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Elsinore Corporation and
subsidiaries, Debtor-In-Possession as of December 31, 1996 and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the year then ended (not presented herein); and in our report dated
February 19, 1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1996, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Our report dated February 19, 1997, on the consolidated financial statements of
Elsinore Corporation and subsidiaries, Debtor-In-Possession as of and for the
year ended December 31, 1996, contains an explanatory paragraph that states that
on October 31, 1995, the Company filed a voluntary petition seeking to
reorganize under Chapter 11 of the United States Bankruptcy code and that the
Company is currently operating as a Debtor-In-Possession under the jurisdiction
of the Bankruptcy Court and this event and circumstances relating to this event
raise substantial doubt about the entity's ability to continue as a going
concern. The consolidated balance sheet as of December 31, 1996, does not
include any adjustments that might result from the outcome of that uncertainty.
Las Vegas, Nevada
November 5, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 7,044,000
<SECURITIES> 0
<RECEIVABLES> 653,000
<ALLOWANCES> (237,000)
<INVENTORY> 279,000
<CURRENT-ASSETS> 8,943,000
<PP&E> 38,629,000
<DEPRECIATION> (1,012,000)
<TOTAL-ASSETS> 48,608,000
<CURRENT-LIABILITIES> 6,794,000
<BONDS> 33,900,000
0
0
<COMMON> 5,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 48,608,000
<SALES> 12,887,000
<TOTAL-REVENUES> 14,023,000
<CGS> 0
<TOTAL-COSTS> 13,692,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,269,000
<INCOME-PRETAX> (805,000)
<INCOME-TAX> 15,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (820,000)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
