<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended July 31, 1996
Commission File Number 0-10061
AMERICAN CASINO ENTERPRISES, INC.
(Name of Small Business Issuer in its charter)
Nevada 04-2709807
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6787 West Tropicana, Suite 200, Las Vegas, Nevada 89103
(Address of principal executive offices) (zip code)
(702) 227-9800
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $9,641,000.
The aggregate market value of the 13,532,508 shares of Common Stock
held by non-affiliates of the Registrant computed by reference to the closing
sale price of $1.63 for the Company's Common Stock, as reported by NASDAQ for
October 16, 1996, was $21,990,326 (assuming for purposes of such calculation
that all officers and directors of the Issuer are affiliates).
The number of shares outstanding of the Registrant's Common Stock at
October 11, 1996 was 14,867,992.
<PAGE> 2
PART I
Item 1. Description of Business
Development of Business
American Casino Enterprises, Inc. (the "Company"), a gaming consulting
company, is currently engaged in providing consulting services to a tribal
gaming enterprise on a Federal Indian Rancheria in Friant, California. The
Company is also a majority participant in a joint venture which is providing
consulting services and assisting in the development of a proposed tribal
gaming facility for the United Auburn Indian Community (the "Auburn Tribe")
in Auburn, California. In October 1996, the Company acquired approximately
160 acres of undeveloped land in Las Vegas, Nevada.
The Company was incorporated in Nevada in 1979, under the name Western
Casinos, Inc., originally to engage in the business of recreational and leisure
time activities, including casino gaming. In January 1991, the Company completed
the purchase of all of the capital stock of Millerton Games, Inc., which held a
management consulting contract for the Table Mountain Casino & Bingo in Friant,
California (the "Table Mountain Casino").
The Company signed a new contract with the Table Mountain Band of
Indians (the "Table Mountain Tribe") on February 1, 1996, for a 27 month term,
to serve as a consultant to the Table Mountain Casino. In March 1996, the
Company formed a joint venture with the Table Mountain Tribe to provide
consulting services to the Auburn Tribe. The joint venture will assist in the
development of a Class II casino proposed to be built and owned by the Auburn
Tribe near Sacramento, California.
On February 1, 1996, the Company entered into a settlement agreement of
an administrative proceeding commenced against the Company by the National
Indian Gaming Commission (the "NIGC"). The settlement agreement resolved all
issues associated with the Notice of Violation and a Notice to Show Cause issued
by the NIGC against the Company on July 15, 1994. The Notice of Violation
charged that the Company was in violation of certain provisions of the Indian
Gaming Regulatory Act and the NIGC's regulations. See "Table Mountain Consulting
Contract" below.
The Company is actively pursuing similar consulting contracts with
other Indian tribes as well as ownership of casinos and other gaming
opportunities and casino ventures outside of the Indian community, and, also,
opportunities in the recreation, entertainment and leisure time industries.
There can be no assurance, however, that the Company will be successful in any
of these efforts.
All references herein to the Company refer to the Company and its
subsidiaries unless the context otherwise requires. The Company's principal
executive offices are located at 6787 West Tropicana, Suite 200, Las Vegas,
Nevada 89103, and its telephone number is (702)227-9800.
Table Mountain Casino & Bingo.
On January 16, 1991, the Company completed the purchase from Maritime
Resorts International, Inc. ("Maritime") a publicly held Utah corporation, of
100% of the outstanding stock of Millerton Games, Inc., ("Millerton") a
California corporation which held the management consulting contract to operate
the Table Mountain Casino. The Company issued 2,257,630 shares of its Common
Stock to Maritime in January 1991. An additional 1,500,000 shares of Common
Stock and a note payable ($75,763) were issued to Maritime in January 1992 to
satisfy all provisions of the agreement.
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The Table Mountain Casino, opened in 1987, is a high-stakes bingo and
gaming casino which is located on The Table Mountain Tribe's Rancheria in
Friant, California, approximately 17 miles north of Fresno. The Table Mountain
Casino contains approximately 800 bingo seats, seven conventional card tables,
five Asian card tables (where Pai Gow, Asian poker and Super Pan 9 are
played), 23 stand-up card tables for Table Mountain Jackpot-21, a non-banking
form of blackjack, and approximately 850 electronic video gaming devices.
The casino is open 24 hours a day, seven days a week. Bingo is offered
Wednesday through Saturday evenings and Sunday afternoons. Cards and electronic
video machines are offered 24 hours a day, seven days a week.
The Table Mountain Casino is currently authorized by Tribal Ordinance
under the National Indian Gaming Act as a Class II enterprise. On February 1,
1996, the Company was granted a new 27-month consulting contract by the Table
Mountain Tribe, which gives the Company the exclusive right to provide
consulting services for a Class III gaming casino, when and if the Table
Mountain Tribe enters into a Class III gaming compact with the State of
California which would allow the Table Mountain Casino to engage in expanded
casino gaming. In 1992, the National Indian Gaming Commission (the "NIGC")
promulgated regulations stating that Indian casinos could not offer certain
games, classified as Class III games including electronic gaming machines such
as the Tribe's electronic video pull-tab gaming devices and keno, without state
approval under tribal-state compacts. In July 1993, a Federal District Court in
California, in response to a lawsuit brought against the State of California by
the Table Mountain Tribe and other tribes seeking a declaratory judgment, ruled
that the state is obligated to negotiate in good faith to enter into a
tribal-state compact which includes slot-type electronic gaming machines, as
well as to negotiate the types of banked card games Indian casinos may offer.
The judgment of the Federal District Court was subsequently upheld on appeal.
See "Item 3. Legal Proceedings."
The Table Mountain Casino also operates two concessions providing fast
food and non-alcoholic drinks on a 24 hour basis. In addition, the Table
Mountain Casino opened a full-service, 150 seat restaurant in September 1994
which is open for business 24 hours per day. There is a population of
approximately one million people located within 100 miles of the Table Mountain
Casino. The Table Mountain Casino attracts players not only from the Fresno
area, but also from other parts of Northern and Central California. In order to
increase attendance, the Table Mountain Casino provides bus transportation from
various locations throughout Northern California.
In response to the success of the Table Mountain Casino and customer
demand, the Table Mountain Casino was renovated between 1993 and 1995 and
expanded to its current size. Other improvements include a new facade and
signage, improved air conditioning and ventilation to aid in making the facility
as smoke free as possible, improved septic and restroom facilities, installation
of fire safety features and expanded parking areas.
The Company has no present commitments for construction or renovation
expenditures. The Table Mountain Casino financed the expansion from working
capital provided by its casino operations and secured a $1,500,000 lease from
Banc One Leasing Corp. to assist in financing the project. In August 1994, the
Banc One Lease was paid off and a $1,000,000 Lease was obtained from United
Security Bank of Fresno, California. All payments due under that lease were made
in the year ended July 31, 1995 ("Fiscal 1995").
Table Mountain Consulting Contract
On February 1, 1996, the Company entered into a termination agreement
with the Table Mountain Tribe (the "Termination Agreement") which terminated the
Company's 1993 consulting agreement (the "1993 Agreement") and simultaneously
entered into a new consulting agreement (the "1996 Agreement"). Under the
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conditions of the Termination Agreement, commencing February 1, 1996, the Table
Mountain Tribe is required to pay the Company 48 monthly installments of
$350,000 in consideration for termination of the 1993 Agreement. However, no
payment is required for any month in which the net revenue of the casino does
not equal or exceed $1 Million. The term of the Termination Agreement shall be
automatically extended by one month for each month that no payment is required
thereunder, for up to a maximum of 12 months.
The 1996 Agreement has a term of 27 months and requires the Company to
consult and provide technical assistance, training and advice to the Table
Mountain Tribe concerning all matters relating to the operation and business
activities of the casino, including but not limited to organization and
administration, planning and development, gaming activities, internal controls
and accounting procedures, cage operations, engineering and maintenance,
housekeeping, human resources, management information services, marketing and
advertising, purchasing, surveillance, security and food and beverage
operations. For its services under the 1996 Agreement, the Company will receive
minimum monthly payments of $90,000. The Table Mountain Tribe is also required
to pay the Company an additional $90,000 for each increment of $500,000, or
portion thereof, of monthly casino net revenue in excess of the first $1.5
Million of net revenue from casino operations.
The Company has worked to involve tribal members in the management of
the operations and to further such efforts has instituted a management
training program for selected tribal members. Tribal members currently hold
most key management positions with the Table Mountain Casino. No employees of
the Company hold management positions with the Table Mountain Casino.
Under the terms of the 1993 Agreement, the consulting fee was 35
percent of each month's net profits for the first five years and 30 percent for
the last two years with the balance to the Table Mountain Tribe. In September
1995, the Company and the Table Mountain Tribe executed a letter agreement (the
"Amendment") which amended the 1993 Agreement. The Amendment modified the 1993
Agreement by providing that the Company would pay a concession to the Table
Mountain Tribe for the period from June 19, 1995 through June 19, 1996 equal to
seven percent (7%) of the net profit of the casino before consulting fees paid
to the Company. Net profits under the 1993 Agreement were defined as the
difference between total casino revenues and expenses, excluding consulting
fees. The 1993 Agreement, as amended, was terminated by the Termination
Agreement.
The Company believes that its revenues derived from the 1996 Agreement
and under the Termination Agreement will result in revenues that are consistent
with those previously produced under the 1993 Agreement, provided that the
casino's net revenues remain stable or increase during the term of the 1996
Agreement.
On July 15, 1994, the Chairman of the NIGC issued a Notice of Violation
and a separate Notice to Show Cause to the Company. The Notice of Violation
charged that the Company was in violation of certain provisions of the Indian
Gaming Regulatory Act ("IGRA") and the NIGC's regulations, in that the Company
had allegedly (i) engaged in management of the Table Mountain Casino without an
approved management contract beginning on November 1, 1990 and (ii) operated
illegal video gaming devices and house-banked blackjack games without a Class
III gaming compact with the State of California.
On February 1, 1996, the Company entered into a settlement agreement
with NIGC. The settlement agreement resolved all issues associated with the
Notice of Violation and the Notice to Show Cause. The NIGC agreed to fully
withdraw all allegations and claims against the Company. In turn, the Company,
without admitting or denying the NIGC allegations, agreed to pay a civil fine of
$500,000 and to terminate the 1993 Agreement.
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As part of the overall settlement, the NIGC has reviewed the
Termination Agreement and the 1996 Agreement and has advised both parties that
these agreements are consulting contracts and not "management contracts" under
the Indian Gaming Regulatory Act or the NIGC's regulations, and therefore they
do not require approval of the NIGC chairman.
The 1996 Agreement is terminable for cause by either party. Under the
1996 Agreement, all casino decisions, policies and procedures are formulated by
or subject to the approval of a board of directors (the "Casino Board of
Directors"). During Fiscal 1995, the Casino Board of Directors consisted of four
representatives of the Company and five representatives of the Table Mountain
Tribe. In September 1995, the four representatives of the Company resigned from
the Casino Board of Directors. A General Manager serves at the pleasure of the
Casino Board of Directors and is vested with initial responsibility and
authority for the daily operations of the casino, subject to the approval of the
casino Board of Directors. The Table Mountain Tribe has waived its sovereign
immunity to a limited extent to permit a direct action by the Company for money
damages, specific performance, injunctive relief and/or declaratory relief for
the Table Mountain Tribe's breach of the contract.
The Company is one of a few publicly owned companies involved in
providing consulting services to Indian gaming operations. As a result of the
Company's relationship with the Table Mountain Casino and its participation in
Indian gaming seminars, other Indian tribes, as well as non-Indians, have
contacted the Company expressing an interest in possibly engaging the
Company's services. There can be no assurance that the Company will be
successful in its efforts to obtain other consulting contracts. See
"Government Regulation" and "Item 3. Legal Proceedings."
Development of Gaming Facility in Placer County, California
In February 1996, the Company formed a joint venture with the Table
Mountain Tribe to provide consulting services to the Auburn Tribe. The joint
venture will assist in the development of a Class II casino to be built and
owned by the Auburn Tribe in Placer County, near Sacramento, California. The
joint venture will also train tribal members in operating the casino. The
Company has an 80% interest in the joint venture.
Compensation to the joint venture for the consulting agreement is
structured as a base consulting fee of $150,000 per month, with additional fees
of $37,500 paid for each increment of $250,000 of net income between $1,000,000
and $3,000,000 and $31,250 paid for each increment of $250,000 of net income in
excess of $3,000,000. The five year term of the agreement will commence when the
casino becomes operational.
The joint venture is committed to finance the Auburn Tribe with capital
for land acquisition, pre-development costs and Tribal needs. The Auburn Tribe
is in the process of acquiring land for the casino. After its acquisition,
subject to the consent of the Secretary of the Interior, the land will be placed
into trust by the Bureau of Indian Affairs, a process that is anticipated to
take up to 12 months. At the time the land is placed into trust, a one-time fee
of $125,000 will be paid by the joint venture to the Auburn Tribe and the Auburn
Tribe will receive options to acquire 150,000 shares of the Company's Common
Stock at the then current market price. In the interim, a monthly payment of
$22,500 is being made by the joint venture to the Auburn Tribe until the gaming
facility is operational.
Amounts advanced to the Auburn Tribe for pre-developmental costs, land
acquisition and related costs, including land option costs, and casino
construction costs, not including the monthly payment discussed in the previous
paragraph, will begin to be repaid with interest after the casino begins
operation.
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Acquisition of Las Vegas, Nevada Property
On October 9, 1996, the Company purchased approximately 160 acres of
undeveloped land (the "Property") in Las Vegas, Nevada from Victorson &
Associates and Fred Victorson (the "Sellers"). The Sellers are unrelated to the
Company. The total purchase price paid by the Company for the Property was
$5,200,000. The purchase price was comprised of a cash payment of $3,600,000 and
the assumption of a $1,600,000 note (the "Note") and related mortgage on the
Property. The Company used working capital generated from its operations to pay
the cash portion of the purchase price. The Sellers have an option until
February 6, 1997 to repurchase the Property in consideration for payment of: (1)
the then outstanding principal on the Note; (2) $5,200,000; (3) the amount of
all payments made by the Company under the Note; and (4) an amount equal to the
greater of (a) sixteen percent (16%) per annum interest calculated on the
outstanding balance of the Note and on any payments made thereon by the Company
or (b) fifty percent of the profit realized by the Sellers if the Sellers should
sell the Property during the option period.
The Property is zoned for two 21-story high rise condominiums, an 18
hole golf course and related amenities, such as a country club and restaurant.
Presently, the Company has no specific plans with respect to the Property. Some
of the possibilities which the Company intends to explore, either directly or
through a joint venture, include rezoning the Property for other commercial
purposes, maintaining the Property as an investment for appreciation or
reselling the Property to a real estate developer.
Competition
There are presently casinos on Indian reservations in many states, and
tribes in other states have disclosed plans to open casinos. Under Federal law,
tribes can offer any games already legal in their state, although, among other
things, Indian casinos are not subject to state betting limits. Competition for
gaming customers in California also comes from casino-hotel operations in Nevada
and elsewhere, as well as other forms of wagering permitted in California, such
as card clubs, pari-mutual racing, lottery games and other gambling activities.
The Table Mountain Casino competes with one other Indian gaming
operation within a fifty mile radius of Fresno, California, which was opened by
the Big Sandy Rancheria Indian Tribe during Fiscal 1996. This casino contains
approximately 100 electronic video games. It is located in Auberry, California,
approximately 25 miles from the Table Mountain Casino and approximately 40 miles
from Fresno. Another Indian gaming operation is approximately 70 miles from the
Table Mountain Casino in Lemoore, California. At the Lemoore operation, bingo is
offered five days a week in the evening with seating of approximately 1,200
persons. Paper pull tab gaming devices and approximately 300 electronic video
games are available to its customers. The Lemoore operation does not offer card
games. The Table Mountain Casino competes with the Lemoore operation for
customers from the same geographic area. Management, however, believes the
variety of gaming offered by the Table Mountain Casino gives it a competitive
advantage over these two operations. The Company believes that the renovation
and expansion of the Table Mountain Casino has strengthened the Table Mountain
Casino's competitive position.
The Company expects the casino to encounter competition in the form of
state authorized card rooms, one of which was built in Fowler, California
(approximately 35 miles from the Table Mountain Casino), and three of which are
in operation in Fresno. The Fowler facility is permitted to have up to 40
tables and the three Fresno facilities are permitted to have 50 tables in
total. Although these card rooms are smaller than the Table Mountain Casino,
the presence of such facilities has diverted some of the Table Mountain Casino's
card room business.
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Government Regulation
The operation of the Table Mountain Casino is subject to regulation
under IGRA. The United States Supreme Court has declared that, once a state has
legalized any form of gambling, the Indians in that state have the right to
offer the same games, but without governmental restrictions. California v.
Cabazon Band of Mission Indians, 480 U.S. 202 (1987). The basic test under IGRA
has been interpreted to be that if anyone in the state can offer a form of
gambling, even though strictly limiting the game to charities and small wagers,
then tribes in that state can offer the same game with virtually no limits.
Thus, in California there is authorized off track pari-mutual horse race
wagering, bingo, lottery games (which the tribes believe includes video gaming)
and card rooms. The NIGC was established in 1988 to enforce IGRA.
The forms of gambling that are considered to be social games and
traditional Indian games are called Class I and are left entirely under Indian
control. Class II games, which are subject to some regulation by the NIGC,
include bingo, non-banking card games, pull tabs, and other similar games
including any electronic or computerized aides used in connection with such
games. A sovereign Indian tribe can operate Class III games, which include all
forms of gaming not identified as Class I or II, including a race track, off
track pari-mutual horse racing or a lottery, only if it enters into a compact
with the state. The Table Mountain Tribe has promulgated an ordinance
authorizing the Table Mountain Casino to engage in Class II gaming activities.
The Table Mountain Tribe has applied for a Class III Gaming Compact in order to
engage in expanded casino gaming and will seek approval to conduct off track
pari-mutual horse race wagering. It expects to commence such operations when,
and if, a compact is signed with the State of California.
In May 1992, the NIGC promulgated regulations stating that Indian
casinos could not offer certain games, classified as Class III games, including
electronic gaming machines such as the electronic video pull tab gaming devices
at the Table Mountain Casino, without state approval under tribal-state
compacts. The Table Mountain Tribe is seeking a Class III gaming compact in
order to engage in expanded casino gambling. The Company is required to comply
with all applicable laws, rules and regulations promulgated to regulate the
Table Mountain Casino. Certain tribes have sued to require the State of
California to negotiate to permit certain electronic and card games. The case
is on appeal. See "Item 3. Legal Proceedings."
Employees
As of October 16, 1996, the Company and its subsidiaries employed eight
persons including its three executive officers, two persons in gaming
operations, two full-time administrative employees and one of the Company's
Directors as a gaming consultant on a full-time basis. These persons do not
include 750 persons employed at the Table Mountain Casino, none of whom is on
the Company's payroll.
Item 2. Description of Property
The Company's executive offices are located in approximately 5,116
square feet of leased office space at 6787 West Tropicana, Suite 200, Las Vegas,
Nevada 89103. The monthly rental is $8,565. The lease agreement commenced on
June 1, 1996 and expires on June 1, 2001.
See "Item 1. Description of Business-Acquisition of Las Vegas, Nevada
Property" for a description of undeveloped real estate which the Company
acquired in October 1996.
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Item 3. Legal Proceedings
Neither the Company nor any of its subsidiaries is a party to any
material legal proceeding, nor to the knowledge of Management is any litigation
threatened against the Company or its subsidiaries, except as described
hereinafter.
On May 22, 1992, the Tribe and other California Indian Tribes commenced
a lawsuit in the United States District Court, Eastern District of California
(Civ-S-92-812 GEB JFM) in the matter of Rumsey Indian Rancheria of Wintun
Indians, et al. v. Governor Peter Wilson and the State of California. The suit
resulted from an agreement between the Tribes and the state to turn to the
courts for guidance as to the type of games allowed under the IGRA. On July 16,
1993, the Court granted to the tribes, including the Table Mountain Tribe, a
declaratory judgment that the State of California and the Governor were
obligated under the IGRA to negotiate in good faith to enter into a tribal-state
compact to conduct their gambling activities, including certain forms of Class
III gaming, namely slot machines/electronic gambling devices and to negotiate to
determine whether other types of banked and percentage card games will be
permitted under a Tribe-State compact. While the judge upheld California's
opposition to traditional casino games, such as blackjack, the Court ruled that
other banking and percentage card games could be included in compact
negotiations.
In November 1994, the U.S. Court of Appeals for the Ninth Circuit
reversed in part the July 1993 ruling by the District Court in favor of the
tribes, and remanded the case to the District Court for additional fact finding.
The remanded issue is whether California law permits the use of video gaming
devices by the California State Lottery. If California law is found to permit
the use of video gaming devices, the tribes are entitled to seek agreements for
the use of such devices. If California law is not found to permit their use, the
tribes would not be so entitled under the Court of Appeals' analysis.
In December 1994, the tribes filed a petition for rehearing with the
Ninth Circuit and a suggestion for rehearing en banc. The petition and
suggestion were denied on August 11, 1995, with a vigorous dissent by six
judges. The decision, however, has not been finalized. On August 21, 1995, the
Ninth Circuit issued an order requesting further briefing by the parties on the
relevance of an important new decision of the California Court of Appeals in
Western Telcon v. California State Lottery. In that case, the court held that
the California State Lottery was authorized to use most forms of slot machines
and that the Lottery was exempt from the State's Penal Code prohibitions against
banked games. On September 1, 1995, the parties in Western Telcon filed a
petition for review with the California Supreme Court, which is now pending. The
California Supreme Court is not required to grant review.
On October 16, 1995, the Ninth Circuit stayed its final decision in
Rumsey until the final disposition of Western Telcon by the California Supreme
Court. On June 24, 1996, the California Supreme Court decided Western Telcon.
The court held that the California State Lottery could not "bank" games, but it
left open the possibility that certain types of electronic devices could be used
to play non-banked games, and cited with approval the Lottery's use of on-line
computers and video terminals as consistent with the State Lottery Act. The
parties filed their briefs in Rumsey on July 23, 1996, and the case is now
pending.
While the Company is optimistic the California tribes will ultimately
prevail in this action, should the State of California be successful in its
legal actions, it could have a severe adverse effect on the Company's business.
On August 23, 1995, the Company was served with a Summons and Complaint
in a matter captioned Milton Sorokin v. American Casino Enterprises, Inc. which
was commenced in the United States District Court in Nevada. The Complaint
alleged breach of a finder's fee agreement and breach of an oral "private
placement
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agreement," and the plaintiff seeks issuance and delivery of 257,630 shares of
the Company's Common Stock and an option to acquire an additional 429,383 shares
of the Company's Common Stock at a price of $.20 per share. The Court has
dismissed the claim relating to the alleged breach of the finder's fee
agreement. The second claim is in discovery. The Company believes that it has
meritorious defenses to the remaining claim, and the Company intends to
vigorously contest the allegations contained in the Complaint.
Item 4. Submission of Matter to a Vote of Security Holders
On April 29, 1996, the Company held an Annual Meeting of Stockholders
to (i) elect two Directors for terms of three years or until their successors
are duly elected and qualified; (ii) approve the adoption of the Company's 1996
Stock Option Plan; and (iii) ratify the appointment of Bradshaw, Smith & Co. as
the Company's independent public accountants for the year ended July 31, 1997.
The meeting was adjourned with respect to Proposal 2 until June 7, 1996.
The nominees for election as Class C Directors to the Board of
Directors received the following votes cast:
<TABLE>
<CAPTION>
For Withhold Abstentions and
Name Election Authority Broker Non-votes
- ---- -------- --------- ----------------
<S> <C> <C> <C>
Douglas R. Sanderson 11,346,194 15,345 88,190
Jeanne Hood 11,346,194 15,345 88,190
</TABLE>
5,389,517 shares voted for, 369,435 voted against and 156,996 abstained
in connection with the proposal to adopt the Company's 1996 Stock Option Plan.
Since the proposal did not receive approval from holders of more than fifty
percent (50%) of the Company's Common Stock present in person or by proxy at the
meeting, the proposal was not adopted.
12,351,410 shares voted for, 41,858 voted against and 45,971 abstained
in connection with the proposal to ratify the appointment of Bradshaw, Smith &
Co. as the Company's independent public accountants.
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PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters
The Company's Common Stock is traded in the over-the-counter market and
quoted through the Nasdaq Stock Market under the symbol "ACES".
The following table sets forth the range of high and low closing bid
prices of the Company's Common Stock for each quarterly period indicated, as
reported by Nasdaq. The prices represent inter-dealer quotations, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions:
<TABLE>
<CAPTION>
Period High Bid Low Bid
- ------ -------- -------
Fiscal 1996
<S> <C> <C>
First Quarter (August 1, 1995 - October 31, 1995) $2.38 $ .50
Second Quarter (November 1, 1995 - January 31, 1996) $3.00 $1.94
Third Quarter (February 1, 1996 - April 30, 1996) $3.13 $2.03
Fourth Quarter (May 1, 1996 - July 31, 1996) $2.13 $1.06
Fiscal 1995
First Quarter (August 1, 1994 - October 31, 1994) $1.13 $ .50
Second Quarter (November 1, 1994 - January 31, 1995) $1.22 $ .47
Third Quarter (February 1, 1995 - April 30, 1995) $1.34 $ .69
Fourth Quarter (May 1, 1995 - July 31, 1995) $1.41 $ .81
</TABLE>
On October 16, 1996, the closing sale price per share for the Company's
Common Stock was $1.63.
On October 11, 1996, there were 929 holders of record of the 14,867,992
shares of the Company's Common Stock outstanding.
Dividend Policy
The Company has not paid any cash dividends on its Common Stock since
its incorporation. The Company anticipates that in the foreseeable future,
earnings, if any, will be retained for use in its business or for other
corporate purposes.
Item 6. Management's Discussion and Analysis
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes thereto included elsewhere
in this Report.
RESULTS OF OPERATIONS
Fiscal Year Ended July 31, 1996 Compared with Fiscal Year Ended July 31, 1995
Revenues
Casino consulting fees for the year ended July 31, 1996 ("Fiscal 1996")
decreased 0.7% to $9,641,000 from the $9,704,000 recorded for the year ended
July 31, 1995 ("Fiscal 1995"). Consulting fees in Fiscal 1996 and 1995 were
derived from the consulting agreement the Company has with the Table Mountain
Band of Indians (the "Tribe") for the operation of the Table Mountain Casino
(the "Casino"), which is located near Fresno, California.
On February 1, 1996, a new consulting agreement was signed with the
Tribe. The new consulting agreement has a duration of 27 months, and provides
that the Company will receive a base monthly consulting fee of $90,000, plus an
additional
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$90,000 for each increment of $500,000 or portion thereof, of Casino net income
in excess of the first $1.5 million of net income from Casino operations.
Additionally, effective February 1, 1996, the Company and the Tribe signed a
termination agreement of the March 1993 agreement between the Company and the
Tribe under which the Tribe is required to make a monthly payment of $350,000 to
the Company for a period of 48 months, subject to meeting certain thresholds.
See Note 3 to the Consolidated Financial Statements included herein.
The prior consulting agreement provided for consulting fees equal to
35% of the Casino's net income before consulting fees. Also, for the period from
June 19, 1995 to January 31, 1996, the Company paid a concession to the Tribe
equal to seven percent (7%) of the net income, before consulting fees, of the
Casino. During Fiscal 1996 and 1995, the concession totaled $1,276,000 and
$301,000, respectively. Consulting fee revenue is reported net of the concession
to the Tribe.
Costs and Expenses
Casino consulting expenses in the year ended July 31, 1996 increased to
$2,183,000, up 96.0% from $1,114,000 in Fiscal 1995. This increase is comprised
principally of: legal costs related to the NIGC regulatory action ($88,000);
increased payroll costs due to an increase in the number of employees; and
increased incentive bonuses, and related payroll taxes, paid to consultants and
employees of the Company ($605,000). Also, during Fiscal 1996, the Company
acquired an option to invest in a company seeking to build a cardroom in a
California community. The community rejected the effort to legalize cardrooms in
a public referendum, and the costs of the option ($175,000) and related legal
expenses ($15,000) were written off.
General and administrative expenses in Fiscal 1996 decreased by $87,000
or 9.2% from Fiscal 1995. The decrease resulted mainly from a reduction in legal
fees related to various corporate matters. This was offset by an increase in
investor relations fees and fees paid to independent consultants hired by the
Company.
Amortization and depreciation was $111,000 and $79,000 in Fiscal 1996
and 1995, respectively. Amortization is comprised of consulting agreement
acquisition costs, which are being amortized over the term of the consulting
agreement.
Other operational items
Interest income, represented principally by interest on time deposits
with financial institutions in Fiscal 1996, and interest on the contract advance
to the Casino and interest earned on time deposits in Fiscal 1995, totaled
$602,000 and $298,000 in Fiscal 1996 and 1995, respectively.
During the second quarter of Fiscal 1996, the Company charged
operations for a $500,000 civil fine assessed by the National Indian Gaming
Commission.
The Company recorded provisions of $463,000 and $515,000 for State of
California income taxes for Fiscal 1996 and 1995, respectively.
As a result of the foregoing, net income for Fiscal 1996 decreased to
$3,796,000 or $0.23 per common share and common share equivalent compared to
$4,801,000 or $0.33 per common share and common share equivalent for Fiscal
1995.
LIQUIDITY AND CAPITAL RESOURCES AS OF JULY 31, 1996
At July 31, 1996, the Company had consolidated working capital of
$12,667,000, as compared with working capital of $9,108,000 at July 31, 1995.
The change resulted principally from a combination of increases of cash
-11-
<PAGE> 12
($3,737,000), income taxes receivable ($114,000), accrued expenses ($174,000),
prepaid expenses ($6,000), reductions of consulting fee and other receivables of
($142,000), deferred tax asset ($340,000), income taxes payable ($112,000),
accounts payable ($13,000), and an account payable to the Tribe ($233,000).
During the year ended July 31, 1996, investing activities used $156,000 as
compared to $65,000 used by investing activities in Fiscal 1995. The cash used
in investing activities in Fiscal 1996 was to acquire office furniture and
equipment and leasehold improvements.
The Company had no transactions of a financing nature in the year ended
July 31, 1996. In Fiscal 1995, the Company recorded net cash of $101,000
provided by financing activities upon the exercise of warrants for 138,889
shares of the Company's common stock.
Historically, the Company has provided funds for its operations from
operating activities, financing from financial institutions and Stockholders,
and issuance of common stock, and it will likely continue to do so in the
future. The Company has always sought and will continue to seek other suitable
consulting contracts and/or ownership of casinos and other gaming opportunities
on and off Indian land, as well as other recreational, leisure time and
entertainment ventures. In the event any of these opportunities come to
fruition, management will consider satisfying financing requirements from
working capital, through borrowing or from new capital raised through the public
or private sale of common stock of the Company or its subsidiaries.
At July 31, 1996, the Company had revolving lines of credit totaling
$1,500,000 with two banks. One line for $1,000,000 expires in December 1996 and
bears interest at 2.5% above prime. The line is collateralized by certificates
of deposit totaling $500,000. The other $500,000 line of credit is unsecured,
expires in October 1996 and bears interest at 1% above an indexed prime (8.25%
at July 31, 1996). At July 31, 1996, no funds were outstanding on the lines of
credit. The Company intends to renew these two lines of credit on similar terms.
Item 7. Financial Statements
The consolidated financial statements of the Company are set forth in a
separate section of this Report following Part III.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-12-
<PAGE> 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Set forth below are the names of all the directors and executive
officers of the Company along with certain information relating to the business
experience of each of the listed officers and directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ronald J. Tassinari 53 President and Director
Audrey K. Tassinari 58 Executive Vice President and Director
Roy K. Keefer 52 Chief Financial Officer,
Secretary/Treasurer and Director
Douglas R. Sanderson 50 Director
Jeanne Hood 69 Director
</TABLE>
Directors are elected to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. Officers serve
at the discretion of the Board of Directors subject to any contracts of
employment. The Board of Directors has an Audit Committee and a Compensation
Committee, each comprised of Jeanne Hood and Douglas Sanderson. The Board of
Directors does not have a nominating committee. See "Item 10. Executive
Compensation."
Ronald J. Tassinari has been President and a Director of the Company
since its inception in August 1979.
Audrey K. Tassinari has been a Director of the Company since March 1985
and Vice President since April 1986. Mrs. Tassinari is the wife of Ronald J.
Tassinari, the Company's President.
Roy K. Keefer has been Chief Financial Officer and Secretary/Treasurer
of the Company since April 1992. Mr. Keefer has been a Director of the Company
since December 1992. He served as Manager of Corporate Accounting for the
Schulman Group, a major residential and commercial real estate developer in Las
Vegas, Nevada from June 1991 to April 1992.
Douglas R. Sanderson has been a Director of the Company since December
1992. Since June 1994, Mr. Sanderson has been President of Sega Enterprises,
Inc., an electronic games manufacturer located in Las Vegas, Nevada. From
November 1992 to June 1994, he was Director of National Casino Sales for Bally
Gaming, Inc., where he managed and directed sales in major gaming centers of the
United States. From October 1990 to October 1992, he was Sales Director for
International Game Technology, a Nevada based gaming equipment manufacturer.
Jeanne Hood has been a Director of the Company since February 1994.
Since February 1994, Ms. Hood has served as a gaming consultant to the Company.
See "Item 12. Certain Relationships and Related Transactions." From 1985 to
1993, Ms. Hood served as President and Chief Executive Officer of Elsinore
Corporation, a publicly traded gaming company, and of Four Queens, Inc., a
wholly-owned subsidiary of Elsinore Corporation, which subsidiary owns and
operates the Four Queens Hotel Casino in Las Vegas, Nevada.
-13-
<PAGE> 14
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5's were
required for those persons, the Company believes that, during the period from
August 1, 1995 through July 31, 1996, all filing requirements applicable to its
officers, directors, and greater than ten percent beneficial owners were
complied with.
Item 10. Executive Compensation
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by,
or paid for all services rendered to the Company during the last three fiscal
years by the Company's Chief Executive Officer and all other executive officers
whose total compensation exceeded $100,000 in those years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------------- --------------------------
Awards
----------------------
Name and Restricted
Principal Other Annual Stock
Position Year Salary($) Bonus($) Compensation($) Award(s)($) Options(#)
- --------- ---- --------- -------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald J.
Tassinari, 1996 $375,695 $ 270,000 $58,905(1) -0- 400,000(2)
Chief Executive 1995 $245,425(3) $ 135,000 $40,517(1) -0- 764,000(4)(5)
Officer and 1994 $ 74,520(6) $ 20,000 $27,593(1) -0- 500,000(7)
President
Audrey K. 1996 $132,887 $ 130,000 $42,392(1) -0- 250,000(2)
Tassinari, 1995 $100,440(3) $ 82,500 $40,869(1) -0- 382,000(8)(5)
Executive
Vice President
Roy K. Keefer 1996 $124,393 $ 60,000 $47,029(1) -0- 150,000(9)
Chief Financial 1995 $112,751 $ 40,000 $32,290(1) -0- 407,000(10)(5)
Officer
</TABLE>
- -----------------------------------------------------
(1) This amount includes, but is not limited to, Directors fees, medical
insurance premiums, car payments and pension plan payments.
(2) Represents options which were granted in October 1995 at an exercise
price of $1.75 per share, canceled and re-granted in October 1996 at
$1.375 per share.
(3) This amount does not include $12,500 in Casino Board of Directors fees
paid to this person in Fiscal 1995.
(4) Includes options to purchase 500,000 shares which were granted in
December 1993 at $1.54 per share, canceled and re-granted in November
1994 at $.76 per share.
(5) The Board re-granted such options at a price closer to the fair market
value of the Company's Common Stock in order to provide a better
incentive to these officers.
-14-
<PAGE> 15
(6) This amount does not include $35,703 in salary and $12,000 in Casino
Board of Directors Fees paid to this person in Fiscal 1994. The salary
payments from the casino to Mr. Tassinari ceased in April 1994.
(7) These options were canceled in November 1994.
(8) Includes options to purchase 250,000 shares which were granted in
December 1993 at $1.54 per share, canceled and re-granted in November
1994 at $.76 per share.
(9) Represents options which were granted in October 1995 at an exercise
price of $1.75 per share, cancelled and regranted in October 1996 at
$1.25 per share.
(10) Includes options to purchase 275,000 shares which were granted in
December 1993 at $1.40 per share, canceled and re-granted in November
1994 at $.69 per share.
Option Grants in Last Fiscal Year (Individual Grants)
<TABLE>
<CAPTION>
% of Total
Shares Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/sh) Date
- ---- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Ronald J. Tassinari 400,000 50% $1.38 10/9/01
Audrey K. Tassinari 250,000 31% $1.38 10/9/01
Roy K. Keefer 150,000 19% $1.25 10/9/01
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and FY End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-The-Money
Shares Options at Options at
Acquired FY-End (#) FY-End ($)
on Exer- Value Exercisable/ Exercisable/
Name cise (#) Realized Unexercisable Unexercisable(1)
- ---- -------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Ronald J. Tassinari 0 $0 1,321,333/342,667 $592,459/$143,920
Audrey K. Tassinari 0 $0 710,666/171,334 $287,980/ $71,960
Roy K. Keefer 0 $0 419,000/188,000 $139,810/ $92,120
</TABLE>
- -----------------------------------------------------
(1) The closing price for the Company's Common Shares on July 31, 1996 was
$1.18 per share.
Director Compensation
Directors receive $1,000 for each meeting of the Board of Directors
they attend. They are also compensated for expenses incurred in attending the
meetings. Certain of the Company's directors have received stock options from
the Company. See "Item 11. - Certain Relationships and Related Transactions."
-15-
<PAGE> 16
Employment Agreements
On July 20, 1995, the Company entered into substantially similar
employment agreements with Ronald J. Tassinari, to serve as the Company's Chief
Executive Officer and President, Audrey K. Tassinari, to serve as the Company's
Vice President, and Roy K. Keefer to serve as the Company's Chief Financial
Officer (collectively, the "Employees"). The employment agreements provide for a
term which concludes on March 31, 2002. The agreements provide for annual
salaries of $390,000, $145,000, and $125,000, respectively, for Mr. Tassinari,
Mrs. Tassinari and Mr. Keefer. The agreements further provide that the Employees
are entitled to receive minimum annual increases in their salaries every
December equal to the greater of (i) the annual increases provided to the
Company's other salaried executives or (ii) the increase in the Annual Average
All Items Index of the U.S. City Average Consumer Price Index. Under the
agreements, the Employees are entitled to receive incentive stock options under
the Company's stock option plans, and the Company is required to reimburse
Employees for their personal legal and financial consulting expenses, subject to
a maximum of three percent of their prior calendar year's base salary. Mr.
Tassinari is entitled to a term life insurance policy with a minimum death
benefit of $2,000,000, payable to a beneficiary of Mr. Tassinari's designation.
Mrs. Tassinari and Mr. Keefer are entitled to policies with $1,500,000 and
$1,000,000 minimum death benefits, respectively, payable to beneficiaries of
their designation. The Company has agreed to provide the Employees with an
automobile allowance or, in lieu thereof, will pay them an equal monthly cash
stipend. In the event that the Company requires the Employee to relocate from
Las Vegas, Nevada, the Company has agreed to pay their relocation expenses and
to provide second mortgages on their new permanent residences of up to $100,000.
The employment agreements also provide for indemnification of the Employees in
connection with their service to the Company.
If the employment of any of the Employees is terminated by reason of
death, the Company shall pay the balance of the monies due under the agreement
to the estate of the decreased Employee. If the employment of any of the
Employees is terminated by reason of disability, the Employee shall be entitled
to one year of severance pay at full salary and then severance pay at half
salary for the remainder of the term. If any of the Employees are terminated
without cause, or the Employees terminate their own employment following: (a) a
change in control (as defined below); (b) a significant change in the Employee's
duties under the agreements; (c) a removal of the Employee from the positions or
offices set forth in the agreements; (d) a substantial reduction in
compensation, unless all senior executives receive comparable reductions; (e) a
breach by the Company of the relocation provisions set forth in the agreements;
(f) the refusal of a successor to the Company to assume the Company's
obligations under the agreements; (g) a relocation of the Company's executive
offices without the Employee's consent; (h) a failure by the Company to increase
the Employee's salary; or (i) the Employee remains employed following a change
in control, but then resigns within two years, then the Company shall pay as
liquidated damages, or severance pay, or both to the Employee on the fifth day
following the termination date, a lump sum equal to the product of (i) an amount
equal to the sum of the annual base salary in effect as of the termination date
plus any incentive compensation most recently paid or payable to the Employees,
multiplied by (ii) two and ninety-nine one hundredths (2.99), (iii) plus any and
all accrued salary, accrued vacation pay and accrued bonus in addition to any
other consideration due under the agreements. In addition, the agreements
provide that in the event that an Employee terminates his or her employment
following a change in control, the Company shall make a cash payment on the 91st
day after such termination to the Employee in an amount equal to the excess, if
any, of (1) the number of options then held by the Employee which have not
terminated other than as a result of termination of employment multiplied by the
market price of the Company's common stock as of the date of termination, over
(2) the aggregate exercise price for all options then held by the Employee.
-16-
<PAGE> 17
For purposes of the employment agreements, a "change in control of the
Company" shall be deemed to have occurred if (i) a third person becomes the
beneficial owner (as such term is defined in Rule 13d-3 promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the "Act")) of the securities
of the Company having twenty percent (20%) or more of the combined voting power
of all classes of the Company's securities entitled to vote in an election of
Directors of the Company; (ii) there occurs a tender offer or exchange offer by,
a merger or other business combination with, or a sale of substantially all of
the assets of the Company to any third Person; (iii) a stockholder or
stockholders holding five percent (5%) or more of the outstanding common stock
of the Company proposes a reconstitution of additions to or deletions from the
Board and as a result, obtains a majority thereof; or (iv) during any period of
two consecutive years during the term of the agreements, individuals who at the
beginning of such period constitute the Board cease for any reason other than
death or disability to constitute at least a majority thereof.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of the date of
this Report, with respect to the beneficial ownership (as such term is defined
in Rule 13d-3 under the Securities Exchange Act of 1934) of shares of Common
Stock, the Company's sole voting securities, by each person known by the Company
to be the beneficial owner of more than 5% of its Common Stock, by each
executive officer named in the Summary Compensation Table, each director and by
all officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership(1) of Class(2)
- -------------------- ----------------------- -----------
<S> <C> <C>
Ronald J. Tassinari 1,951,248 (3) 12.3%
6787 West Tropicana
Suite 200
Las Vegas, NV 89103
Audrey K. Tassinari 1,270,236 (4) 8.2%
6787 West Tropicana
Suite 200
Las Vegas, NV 89103
Roy K. Keefer 575,000 (5) 3.8%
6787 West Tropicana
Suite 200
Las Vegas, NV 89103
Douglas R. Sanderson 81,000 (6) .5%
2800 Crystal Cove Drive
Las Vegas, NV 89117
Jeanne Hood 150,000 (7) 1.0%
2316 Timberline Way
Las Vegas, NV 89117
Jay H. Brown 1,379,857 (8) 9.1%
520 South Fourth Street
Las Vegas, NV 89101
All officers and directors 4,027,484 (9) 23.6%
as a group (5 persons)
</TABLE>
-17-
<PAGE> 18
(1) Unless otherwise noted, all shares are beneficially owned and the sole
voting and investment power is held by the persons indicated.
(2) Based on 14,867,992 shares outstanding as of the date of this Report.
(3) Includes 11,094 shares owned of record by Mr. Tassinari as custodian
for his son and 971,333 shares issuable upon exercise of stock options.
Does not include options to acquire 342,667 shares which are not
currently exercisable. Such shares exclude the following shares as to
which Mr. Tassinari disclaims beneficial ownership: 1,270,236 shares of
Common Stock benefically owned by Audrey K. Tassinari, Mr. Tassinari's
wife. If such excluded shares were included, Mr. Tassinari would be
deemed to hold 19.6% of the Common Stock.
(4) Includes an aggregate of 560,666 shares issuable upon exercise of stock
options. Does not include options to acquire 171,334 shares which are
not currently exercisable. In addition, such shares exclude the
following shares as to which Mrs. Tassinari disclaims beneficial
ownership: 1,951,248 shares of Common Stock benefically owned by Ronald
J. Tassinari, Mrs. Tassinari's husband. If such excluded shares were
included, Mrs. Tassinari would be deemed to hold 19.6% of the Common
Stock.
(5) Includes 460,666 shares underlying incentive stock options. Does not
include options to acquire 188,000 shares, which are not currently
exercisable.
(6) Includes 65,000 shares underlying stock options.
(7) Represents options to acquire 150,000 shares.
(8) Includes an aggregate of 23,167 shares of Common Stock and 324,074
Warrants beneficially owned by Mr. Brown's son and 23,500 shares of
Common Stock beneficially owned by Mr. Brown's wife.
(9) Includes options to purchase an aggregate of 2,207,665 shares of Common
Stock referred to in notes 3, 4, 5, 6 and 7 above.
Item 12. Certain Relationships and Related Transactions
At July 31, 1995, the Company had revolving lines of credit totaling
$1,500,000 with two banks. One line for $1,000,000 expires in December 1996 and
bears interest at 2.5% above prime. The line is collateralized by certificates
of deposit totaling $500,000. Until December 1995, Mr. and Mrs. Tassinari were
guarantors of this credit line. At July 31, 1996, no funds were outstanding on
the lines of credit.
Jeanne Hood, a Director of the Company, has provided consulting
services to the Company since February 1994. She has been compensated at the
rate of $6,000 per month for such services.
On November 23, 1994, the Board of Directors granted stock options to
Robert J. Michaels, Jeanne Hood and Douglas R. Sanderson, Directors or former
Directors of the Company, to purchase 50,000, 50,000 and 12,500 shares of Common
Stock, respectively. The options were immediately exercisable at $.69 per share
in recognition of prior services rendered to the Company and expire on November
23, 1997.
On December 4, 1994, the Company loaned $110,000 to Ronald J.
Tassinari, the Company's President and a Director. Such amount was repaid on
January 30, 1995, together with interest of $1,460, which had been accrued at
the rate of eight and one half percent (8.5%) per annum.
-18-
<PAGE> 19
On May 31, 1995, the Company loaned $125,000 to Ronald J. Tassinari,
the Company's President and a Director. Such amount was repaid on July 24, 1995,
together with interest of $2,109, which had been accrued at the rate of eleven
percent (11%) per annum.
On September 1, 1995, the Company loaned $100,000 to Ronald J.
Tassinari, the Company's President and a Director. Such amount was repaid on
September 21, 1995, together with interest of $206, which had been accrued at
the rate of ten and three-quarters percent (10.75%) per annum.
On September 13, 1995, the Company loaned $100,000 to Ronald J.
Tassinari, the Company's President and a Director. Such amount was repaid on
October 23, 1995, together with interest of $1,178, which had been accrued at
the rate of ten and three-quarters percent (10.75%) per annum.
On November 15, 1995, the Company loaned $150,000 to Ronald J.
Tassinari, the Company's President and a Director. Such amount was repaid on
January 26, 1996, together with interest of $2,429, which had been accrued at
the rate of ten and three-quarters percent (10.75%) per annum.
On October 19, 1995, the Board of Directors granted stock options to
Robert J. Michaels, Jeanne Hood and Douglas R. Sanderson, Directors of the
Company, to purchase 50,000, 100,000 and 15,000 shares of Common Stock,
respectively. The options were immediately exercisable at $1.75 per share in
recognition of prior services rendered to the Company and expire on October 18,
2005. These options were re-granted on October 7, 1996 to Ms. Hood and Mr.
Sanderson at an exercise price of $1.25 per share.
On October 19, 1995, the Board of Directors granted stock options to
Ronald J. Tassinari, Audrey K. Tassinari and Roy K. Keefer, each an Officer and
Director of the Company, to purchase 400,000, 250,000 and 150,000 shares of
Common Stock, respectively. The options were immediately exercisable at $1.75
per share in recognition of prior services rendered to the Company and expire on
October 18, 2005. On October 7, 1996, the foregoing options were canceled and
re-granted at an exercise price of $1.25 per share for Mr. Keefer and $1.38 per
share for the Tassinaris.
See "Item 10. Executive Compensation" for the terms of certain stock
options and Employment Agreements between the Company and Ronald J. Tassinari,
Audrey K. Tassinari and Roy K. Keefer, each a Director and officer of the
Company.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation and By Laws of the Company. (1)
3.2 Certificate of Amendment to Articles of Incorporation of the Company.
(5)
3.3 Certificate of Amendment to Articles of Incorporation of the Company.
(6)
4.1 Warrant Certificate between the Company and Jay H. Brown dated July
23, 1991. (2)
10.1 American Enterprises, Inc. 1991 Officers Stock Option Plan. (3)
10.2 American Enterprises, Inc. 1991 Employees Stock Option Plan. (4)
-19-
<PAGE> 20
10.3 Management Consultant Contract dated March 27, 1993 between the
Company and the Table Mountain Tribe.(5)
10.4 Employment Agreement between the Company and Ronald J. Tassinari
dated July 20, 1995. (6)
10.5 Employment Agreement between the Company and Audrey K. Tassinari
dated July 20, 1995. (6)
10.6 Employment Agreement between the Company and Roy K. Keefer dated
July 20, 1995. (6)
10.7 Letter Agreement dated September 11, 1995 between the Company
and Table Mountain Rancheria. (6)
10.8 Business Loan Agreement and Promissory Note dated November 15,
1994 between the Company and First Security Bank of Nevada. (6)
10.9 Settlement Agreement, dated February 1, 1996, between the
Company and the NIGC. (7)
10.10 Termination Agreement, dated February 1, 1996, between the
Company and the Table Mountain Tribe. Exhibit A to the
Termination Agreement is set forth as Exhibit 99.1 below, and
Exhibit B to the Termination Agreement is incorporated herein by
reference from Exhibit 10.3 above.(7)
10.11 Consulting Agreement, dated February 1, 1996, between the
Company and the Tribe. (7)
10.12 Option to Purchase and Escrow Instructions dated as of October
9, 1996, among the Company, Victorson & Associates, Inc., Fred
Victorson and United Title of Nevada. (8)
10.13 Purchase Agreement and Escrow Instructions dated October 9,
1996, among Victorson & Associates, Inc., Fred Victorson and the
Company. (8)
10.14 Joint Venture Agreement between the Company and the Table
Mountain Tribe, dated as of February 1, 1996.
10.15 Funding and Loan Agreement between the Auburn Tribe and the
Table Mountain/ACES Joint Venture, dated February 1, 1996.
10.16 Lease for the Company's offices dated March 14, 1996, between
the Company and Tropicana Trail Limited Partnership.
11.1 Statement of Computation of Earnings Per Share and Common Share
Equivalents Statements.
21.1 Subsidiaries of the Registrant
23.1 Consent of Bradshaw, Smith & Co.
27.1 Financial Data Schedules
99.1 Order of the United States Department of the Interior, dated
February 1, 1996. (7)
(1) Incorporated by reference to Exhibit 3(i) to the Company's Annual
Report on Form 10-K for July 31, 1981.
-20-
<PAGE> 21
(2) Incorporated by reference to the Company's Annual Report on Form 10-K
for July 31, 1991.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-8 (File No. 33-51340) declared effective on August 27, 1992.
(4) Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended July 31, 1992.
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended July 31, 1994.
(6) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended July 31, 1995.
(7) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 1, 1996.
(8) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 9, 1996.
(b) Reports on Form 8-K.
None.
-21-
<PAGE> 22
CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
YEARS ENDED JULY 31, 1996 AND 1995
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent auditors' report F-1
Financial statements:
Consolidated balance sheets F-2
Consolidated statements of income F-3
Consolidated statements of changes in shareholders' equity F-4
Consolidated statements of cash flows F-5 - F-6
Notes to consolidated financial statements F-7 - F-18
</TABLE>
<PAGE> 23
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
American Casino Enterprises, Inc.
We have audited the accompanying consolidated balance sheets
of American Casino Enterprises, Inc. and subsidiaries as of July 31, 1996 and
1995, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
American Casino Enterprises, Inc. and subsidiaries as of July 31, 1996, and
1995, and the results of their operations and cash flows for the years then
ended in conformity with generally accepted accounting principles.
Bradshaw, Smith & Co.
Las Vegas, Nevada
October 9, 1996
F-1
<PAGE> 24
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $12,578,000 $ 8,841,000
Consulting fee and other receivables 202,000 344,000
Refundable income taxes 187,000 73,000
Deferred tax asset 2,000 342,000
Prepaid expenses 45,000 39,000
----------- -----------
Total current assets 13,014,000 9,639,000
----------- -----------
PROPERTY AND EQUIPMENT, NET 214,000 93,000
----------- -----------
OTHER ASSETS:
Consulting agreement acquisition costs, net 275,000 243,000
Deposits and other 133,000 15,000
Deferred tax asset -- 34,000
----------- -----------
Total other assets 408,000 292,000
----------- -----------
$13,636,000 $10,024,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 51,000 $ 64,000
Accrued expenses 296,000 122,000
Income taxes payable -- 112,000
Payable to Table Mountain Tribe -- 233,000
----------- -----------
Total current liabilities 347,000 531,000
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par; 30,000,000 shares authorized;
14,367,958 shares issued and outstanding 144,000 144,000
Preferred stock; $.01 par; 10,000,000 shares authorized;
shares issued and outstanding - none -- --
Capital in excess of par 3,213,000 3,213,000
Retained earnings 9,932,000 6,136,000
----------- -----------
13,289,000 9,493,000
----------- -----------
$13,636,000 $10,024,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 25
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Consulting fees $ 9,641,000 $ 9,704,000
----------- -----------
COSTS AND EXPENSES:
Casino consulting 2,183,000 1,114,000
General and administrative 856,000 943,000
Amortization and depreciation 111,000 79,000
----------- -----------
3,150,000 2,136,000
----------- -----------
INCOME FROM OPERATIONS 6,491,000 7,568,000
OTHER INCOME:
Interest income 602,000 298,000
----------- -----------
INCOME BEFORE NIGC CIVIL FINE AND INCOME TAXES 7,093,000 7,866,000
NIGC CIVIL FINE 500,000 --
----------- -----------
INCOME BEFORE INCOME TAXES 6,593,000 7,866,000
----------- -----------
INCOME TAXES:
State-current 463,000 515,000
Federal:
Current 1,960,000 2,188,000
Deferred 374,000 362,000
----------- -----------
2,797,000 3,065,000
----------- -----------
NET INCOME $ 3,796,000 $ 4,801,000
=========== ===========
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT $ 0.23 $ 0.33
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 16,203,000 14,769,000
AND COMMON SHARE EQUIVALENTS =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 26
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL
---------------------- IN EXCESS RETAINED
SHARES AMOUNT OF PAR EARNINGS
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, JULY 31, 1994 14,229,069 $142,000 $3,114,000 $1,335,000
Exercise of warrants 138,889 2,000 99,000 --
Net income -- -- -- 4,801,000
---------- -------- ---------- ----------
BALANCE, JULY 31, 1995 14,367,958 144,000 3,213,000 6,136,000
Net income -- -- -- 3,796,000
---------- -------- ---------- ----------
BALANCE, JULY 31, 1996 14,367,958 $144,000 $3,213,000 $9,932,000
========== ======== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 27
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,796,000 $ 4,801,000
------------ -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization and depreciation 111,000 79,000
Deferred income tax benefit 374,000 362,000
Changes in other assets and liabilities, net (388,000) 2,880,000
------------ -----------
97,000 3,321,000
------------ -----------
Net cash provided by operating activities 3,893,000 8,122,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (156,000) (65,000)
------------ -----------
Net cash used in investing activities (156,000) (65,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 101,000
------------ -----------
Net cash provided by financing activities -- 101,000
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,737,000 8,158,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 8,841,000 683,000
------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,578,000 $ 8,841,000
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE> 28
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
DETAIL OF CHANGES IN OTHER ASSETS AND LIABILITIES:
Decrease in consulting fee and other receivables $ 142,000 $ 1,092,000
Decrease in contract advances -- 1,501,000
Increase in refundable income taxes (114,000) (73,000)
Increase in prepaid expenses (6,000) (21,000)
Increase in consulting agreement acquisition costs (108,000) --
(Increase) decrease in deposits and other assets (118,000) 9,000
Decrease in accounts payable (13,000) (34,000)
Increase in accrued expenses 174,000 84,000
(Decrease) increase in income taxes payable (112,000) 89,000
(Decrease) increase in payable to Table Mountain Tribe (233,000) 233,000
----------- -----------
$ (388,000) $ 2,880,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for federal and state
income taxes $ 2,646,000 $ 2,703,000
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE> 29
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1996 AND 1995
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of business:
The Company currently is engaged in providing consulting services to a
gaming facility in central California.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of American
Casino Enterprises, Inc. and its wholly-owned subsidiaries (the Company).
All significant intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS:
The Company maintains cash and cash equivalents, investments with original
maturities of three months or less, with certain financial institutions.
Due to the quality of the financial institutions involved, they present a
low level of risk to the Company.
ALLOWANCES FOR DOUBTFUL ACCOUNTS:
Consulting fee and other receivables are, in the opinion of management,
collectible and no allowances for doubtful accounts were established at
July 31, 1996 and 1995.
PROPERTY, EQUIPMENT AND DEPRECIATION:
Property and equipment is stated at cost. Depreciation is calculated using
accelerated methods over the estimated useful lives of the assets.
CONSULTING AGREEMENT ACQUISITION COSTS:
All internal salary and related costs of the Company's consulting agreement
acquisition efforts are expensed as incurred. Costs are capitalized when
the Company has a consulting contract with a federally recognized Indian
tribe which is proposing to conduct authorized gaming activities.
Table Mountain Casino & Bingo:
Consulting agreement acquisition costs are comprised of costs associated
with the acquisition of a subsidiary which previously held the
consulting agreement with the Table Mountain Casino & Bingo (the "Table
Mountain Casino"). They are amortized over the life of the consulting
contract with the Table Mountain Band of Indians (the "Table Mountain
Tribe"). The amortization period was 84 months for Fiscal 1995 and for
the first 6 months of Fiscal 1996. The amortization period was adjusted
to 27 months, the length of the new consulting agreement, for periods
after February 1, 1996.
F-7
<PAGE> 30
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):
CONSULTING AGREEMENT ACQUISITION COSTS (CONTINUED):
United Auburn Indian Community:
Interim payments to the United Auburn Indian Community (the "Auburn
Tribe") are being capitalized and will begin to be amortized, after the
casino is operational, over the period of the consulting contract.
EARNINGS PER SHARE:
The computation of earnings per share is based on the weighted average
number of common shares and common share equivalents outstanding. Stock
warrants and options outstanding are considered common stock equivalents.
Fully diluted earnings per share is not presented because the effect
would be anti-dilutive or the dilutive effect is less than 3%.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Cash and cash equivalents, receivables and accounts payable are carried at
amounts that approximate their fair values.
2. PROPERTY AND EQUIPMENT:
Property and equipment is comprised of:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Furniture, fixtures and office equipment $146,000 $105,000
Leasehold improvements 130,000 23,000
-------- --------
276,000 128,000
Less: accumulated depreciation 62,000 35,000
-------- --------
$214,000 $ 93,000
======== ========
</TABLE>
F-8
<PAGE> 31
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
3. INDIAN GAMING OPERATIONS:
TABLE MOUNTAIN CASINO & BINGO:
The Company has a consulting agreement with the Table Mountain Tribe for
the Table Mountain Casino.
On February 1, 1996, the Company signed a new consulting agreement with the
Table Mountain Tribe for the Table Mountain Casino in Friant, California.
The new consulting agreement has a duration of 27 months, and provides
that the Company will receive a base monthly consulting fee of $90,000,
plus an additional $90,000 for each increment of $500,000 or portion
thereof, of casino net income in excess of the first $1.5 million of net
income from casino operations. As part of the new consulting agreement,
effective February 1, 1996, the Company and the Tribe signed a
termination agreement of the March 1993 agreement under which a monthly
payment of $350,000 will be paid to the Company for a term of 48 months.
If net income from casino operations is below $1,000,000 in any month,
the termination agreement provides for deferral of the monthly payment up
to 12 months at which time the payment is forgiven.
The prior consulting agreement provided for consulting fees equal to 35% of
the casino's net income before consulting fees. For the period from June
19, 1995 to February 1, 1996, the Company paid a concession to the Tribe
equal to 7% of the casino's net income before consulting fees. The
concession for Fiscal 1996 and 1995 totaled $1,276,000 and $301,000,
respectively. Consulting fee revenue is reported net of the concession to
the Tribe.
The Company is also obligated to make advances to the casino in certain
circumstances, mainly for the acquisition of capital assets which cannot
be acquired using the casino's operating cash surplus.
During Fiscal 1992, the Company and the Tribe entered into an agreement
requiring the Tribe to repay $1,500,000 of contract advances made by
Millerton Games, Inc., an entity which was acquired by the Company. In
addition, $289,000 of unpaid management fees for Fiscal 1992 were
converted to a note receivable payable in 1997. The notes were paid in
full in May 1995.
In Fiscal 1993 the Tribe began a substantial expansion and renovation
program to the casino. To assist with the expansion costs, the Company
advanced approximately $365,000 to the casino. The casino repaid the
advance in full in Fiscal 1995. The expanded, renovated casino facility
was completed in Fiscal 1995.
Included in consulting fee and other receivables at July 31, 1996 and 1995
are $110,000 and $203,000, respectively, due from the casino.
Consulting agreement acquisition costs are comprised of costs associated
with the acquisition of a subsidiary which previously held the consulting
agreement with the casino. Accumulated amortization of the costs totaled
$380,000 and $304,000 at July 31, 1996 and 1995, respectively.
F-9
<PAGE> 32
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
3. INDIAN GAMING OPERATIONS (CONTINUED):
UNITED AUBURN INDIAN COMMUNITY:
In March 1996, the Company formed a joint venture with the Table Mountain
Tribe to provide consulting services to the United Auburn Indian
Community. The joint venture will assist in the development of a Class II
casino to be built and owned by the Auburn Tribe near Sacramento,
California. The joint venture will also train tribal members in operating
the casino. The Company has an 80% interest in the joint venture.
Compensation to the joint venture for the consulting agreement is
structured as a base consulting fee of $150,000 per month, with
additional fees of $37,500 paid for each increment of $250,000 of net
income between $1,000,000 and $3,000,000, and $31,250 paid for each
increment of $250,000 of net income over $3,000,000. The five-year term
of the agreement will commence when the casino becomes operational.
The joint venture is committed to provide the Auburn Tribe capital for land
acquisition, pre-development costs, and tribal needs. The Auburn Tribe is
in the process of acquiring land for the casino. After its acquisition,
subject to the consent of the Secretary of the Interior, the land will be
placed into trust by the Bureau of Indian Affairs, a process that is
anticipated to take up to 12 months. At the time the land is placed into
trust, a one-time fee of $125,000 will be paid by the joint venture to
the Auburn Tribe. The Auburn Tribe will also receive options to acquire
150,000 shares of American Casino Enterprises' common stock at the
then-current market price. In the interim, a monthly payment of $22,500
will be made by the joint venture to the Auburn Tribe until the gaming
facility is operational. The payments are reported in the accompanying
balance sheets as consulting agreement acquisition costs. At July 31,
1996, approximately $108,000 had been capitalized.
Amounts advanced to the Auburn Tribe for pre-development costs, land
acquisition and related costs, including land option costs, and casino
construction costs will begin to be repaid with interest after the casino
begins operation. Advances to the Auburn Tribe by the Company at July 31,
1996 totaled approximately $113,000 and are reported in deposits and
other in the accompanying balance sheet.
4. SHAREHOLDERS' EQUITY:
CHANGE IN CAPITAL STOCK STRUCTURE:
In April 1995, shareholders authorized a change in the capital stock
structure of the Company. The change increased the authorized shares of
common stock from 20,000,000 to 30,000,000 and authorized the issuance of
10,000,000 shares of preferred stock, $.01 par value.
F-10
<PAGE> 33
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
4. SHAREHOLDERS' EQUITY (CONTINUED):
CHANGE IN CAPITAL STOCK STRUCTURE (CONTINUED):
The Board of Directors was granted the authority to issue the preferred
stock, the terms of which (including, without limitation, dividend rates,
conversion rights, voting rights, terms of redemption and liquidation
preferences) may be fixed by the Board at its sole discretion. The
holders of the Company's common stock will not be entitled to vote upon
such matters. No shares of preferred stock of any series are outstanding
and the Board of Directors has no present intention to issue any such
shares. Shares of preferred stock issued in the future could have
conversion rights which may result in the issuance of additional shares
of common stock which could dilute the interest of the holders of common
stock. Such shares could also have voting rights and liquidation
preferences which are senior to the rights and preferences of the common
stock. Additionally, such shares could have dividend, redemption or other
restrictive provisions.
WARRANTS:
In July 1991, the Company sold an aggregate of 1,111,111 shares of common
stock together with warrants to purchase another 1,111,111 shares of
common stock. During the year ended July 31, 1995, 138,889 warrants were
converted at $.72 per share and proceeds of $101,000 were received by the
Company. The Board of Directors granted an extension of the expiration
date of the remaining 972,222 warrants and the exercise price per share
was increased from $.72 to $.82 per share. No value has been ascribed to
any of the warrants.
OFFICERS' AND EMPLOYEES' STOCK OPTION PLAN:
The Company's shareholders approved the creation of an Officers' Stock
Option Plan and an Employees' Stock Option Plan. Under the Officers'
Stock Option Plan 1,500,000 shares of the Company's common stock is
reserved for issuance to Company officers. The Employees' Stock Option
Plan provides for 2,500,000 shares of common stock which may be issued to
key employees, including officers. The options are granted at not less
than 100% of the market value of the Company's common stock on the date
of grant.
F-11
<PAGE> 34
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
4. SHAREHOLDERS' EQUITY (CONTINUED):
OFFICERS' AND EMPLOYEES' STOCK OPTION PLAN (CONTINUED):
The following is a summary of outstanding stock options under the Officers'
Stock Option Plan:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------
EXERCISE
SHARES PRICE
---------- ----------
<S> <C> <C>
Balance, July 31, 1994 1,500,000 $0.25-1.54
Granted 281,266 0.76
Canceled (750,000) 1.54
---------- ----------
Balance, July 31, 1995 1,031,266 $0.25-0.76
---------- ----------
Balance, July 31, 1996 1,031,266 $0.25-0.76
========== ==========
Exercisable, July 31, 1996 908,177 $0.25-0.76
========== ==========
</TABLE>
Activity of the Employees' Stock Option Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------
EXERCISE
SHARES PRICE
---------- ----------
<S> <C> <C>
Balance, July 31, 1994 487,000 $0.53-1.40
Granted 1,643,734 1.40
Canceled (622,000) 1.40
---------- ----------
Balance, July 31, 1995 1,508,734 $0.53-0.76
---------- ----------
Granted 800,000 1.75
Canceled (100,000) 0.69
---------- ----------
Balance, July 31, 1996 2,208,734 $0.53-1.75
========== ==========
Exercisable, July 31, 1996 1,599,822 $0.53-1.75
========== ==========
</TABLE>
In November 1994, the Company's Board of Directors canceled options
totaling 750,000 previously granted to the President and Vice President.
The options were exercisable at $1.54 per share. The Board of Directors
granted new options totaling 750,000 and exercisable at $.76 per share to
the same individuals.
On October 7, 1996, all of the 800,000 options granted during 1996 were
canceled, and 800,000 options with exercise prices ranging from $1.25 to
$1.38 per share were granted.
F-12
<PAGE> 35
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
4. SHAREHOLDERS' EQUITY (CONTINUED):
OTHER OPTIONS GRANTED:
Other options were granted to outside members of the Board of Directors and
to the Table Mountain Tribe. The options were granted at the market value
of the Company's common stock at the date of grant. Activity of other
options granted is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------
EXERCISE
SHARES PRICE
-------- ----------
<S> <C> <C>
Balance, July 31, 1994 137,500 $ 0.53
Granted 112,500 --
-------- ----------
Balance, July 31, 1995 250,000 $0.53-0.69
-------- ----------
Granted 165,000 1.75
-------- ----------
Balance, July 31, 1996 415,000 $0.53-1.75
======== ==========
Exercisable, July 31, 1996 395,000 $ 1.75
======== ==========
</TABLE>
On October 7, 1996, 115,000 of the options that were granted during 1996
were canceled, and 115,000 options with an exercise price of $1.25 per
share were granted.
5. INCOME TAXES:
In 1996 and 1995, the Company recognized deferred tax benefits resulting
from changes in the net deferred tax assets.
Deferred tax assets are comprised of the following at July 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
-------- ----------
<S> <C> <C>
Net operating loss carryforwards $ -- $ 376,000
Other 2,000 --
-------- ----------
$ 2,000 $ 376,000
======== ==========
</TABLE>
The income tax expense for 1996 and 1995 differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income
tax rate to pre-tax income from operations as a result of the following
differences:
F-13
<PAGE> 36
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
5. INCOME TAXES (CONTINUED):
<TABLE>
<CAPTION>
1996 % 1995 %
----------- --- ----------- ---
<S> <C> <C> <C> <C>
Statutory federal tax rate $ 2,242,000 34 $ 2,674,000 34
Utilization of net operating losses (299,000) (5) (339,000) (4)
Change in net deferred tax assets 374,000 6 362,000 5
State income tax, net of federal
benefit 306,000 5 340,000 4
Non-deductible NIGC civil fine 170,000 2 -- --
Other 4,000 -- 28,000 --
----------- --- ----------- ---
Effective tax expense $ 2,797,000 42 $ 3,065,000 39
=========== === =========== ===
</TABLE>
6. SEGMENT INFORMATION:
Revenues, operating income (loss) (excluding other income and expense and
discontinued operations), identifiable assets, capital expenditures, and
depreciation and amortization are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Casino consulting $ 9,641,000 $ 9,704,000
============ ============
Operating income (loss):
Casino consulting $ 7,382,000 $ 8,532,000
Corporate (891,000) (964,000)
------------ ------------
$ 6,491,000 $ 7,568,000
============ ============
Identifiable assets:
Casino consulting $ 13,136,000 $ 9,428,000
Corporate 500,000 596,000
------------ ------------
$ 13,636,000 $ 10,024,000
============ ============
Capital expenditures:
Casino consulting $ -- $ --
Corporate 156,000 65,000
------------ ------------
$ 156,000 $ 65,000
============ ============
Depreciation and amortization:
Casino consulting $ 76,000 $ 58,000
Corporate 35,000 21,000
------------ ------------
$ 111,000 $ 79,000
============ ============
</TABLE>
F-14
<PAGE> 37
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
6. SEGMENT INFORMATION (CONTINUED):
There were no intersegment sales during 1996 and 1995.
All of the Company's revenue from operations is derived from the consulting
agreement with the Table Mountain Tribe.
7. COMMITMENTS AND CONTINGENCIES:
a) COMMITMENTS:
1) Operating leases:
The Company leases automobiles and office space under operating
leases expiring in various years through 2001.
Minimum future rental payments under non-cancelable operating
leases having remaining terms in excess of one year as of July
31, 1996 for each of the next five years are:
<TABLE>
<CAPTION>
YEAR AMOUNT
----------- ---------
<S> <C>
1997 $ 155,000
1998 155,000
1999 145,000
2000 103,000
2001 86,000
---------
$ 644,000
=========
</TABLE>
Lease expense was $79,000 and $47,000 for the years ended July 31,
1996 and 1995, respectively.
2) Line of credit:
At July 31, 1996, the Company had revolving lines of credit
totaling $1,500,000 with two banks. One line for $1,000,000
expires in December 1996 and bears interest at 2.5% above prime.
The line is collateralized by certificates of deposit totaling
$500,000. The other $500,000 line of credit is unsecured,
expires in October 1996 and bears interest at 1% above prime. At
July 31, 1996, no funds were outstanding on the lines of credit.
b) OFF-BALANCE-SHEET CREDIT RISK:
The Company has cash and cash equivalents on deposit with certain
financial institutions which exceed the federally insured amounts by
approximately $10,693,000 at July 31, 1996.
F-15
<PAGE> 38
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
b) OFF-BALANCE-SHEET CREDIT RISK:
Virtually all the Company's revenues and related receivables are
derived from the consulting agreement with the Table Mountain Casino
& Bingo located in central California. Generally, these receivables
are unsecured.
c) LITIGATION:
AMERICAN CASINO ENTERPRISES, INC.:
On July 15, 1994, the Chairman of the National Indian Gaming Commission
("NIGC") issued a Notice of Violation and a separate Notice to Show
Cause to the Company. The Notice of Violation charged that the
Company was in violation of certain provisions of the Indian Gaming
Regulatory Act ("IGRA") and the NIGC's regulations, in that the
Company had allegedly; (1) engaged in management of the Table
Mountain Casino & Bingo without an approved management contract
beginning on November 1, 1990; and (2) operated illegal video gaming
devices and house-banked blackjack games without a Class III gaming
compact with the State of California.
On February 1, 1996, the Company entered into a settlement agreement
with NIGC. The settlement agreement resolved all issues associated
with the Notice of Violation and the Notice to Show Cause.
In the settlement, the NIGC agreed to fully withdraw any and all
allegations, charges and claims against the Company. In turn, the
Company, without admitting or denying the NIGC allegations, agreed to
pay a civil fine of $500,000, and to terminate its 1993 amended
agreement with the Table Mountain Tribe. On February 1, 1996, the
Company signed a new consulting agreement and entered into a
termination agreement with the Table Mountain Tribe, see Note 3.
TABLE MOUNTAIN CASINO:
In 1992, the National Indian Gaming Commission promulgated regulations
stating that Indian casinos could not offer certain games, including
electronic gaming machines, such as the Table Mountain Tribe's video
pull tab gaming devices, without state approval under tribal-state
compacts. Several tribes sought a compact to engage in full casino
gaming, however, the State of California refused to allow certain
games.
In May 1992, the Tribe and other California Indian tribes filed a
lawsuit in Federal Court against the State of California and its
Governor over the scope of gaming permissible on Indian land,
captioned as Rumsey v. Wilson. In July 1993, the Federal District
Court ruled that the proposed electronic games are a proper subject
of negotiation with Tribal State Compact and that the tribes and
state should negotiate to determine whether other banked and
percentage card games will be permitted under a tribal-state compact.
The State of California appealed the District Court decision in
Rumsey v. Wilson.
F-16
<PAGE> 39
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
c) LITIGATION (CONTINUED):
TABLE MOUNTAIN CASINO (CONTINUED):
In November 1994, the U.S. Court of Appeals for the Ninth Circuit
reversed in part the July 1993 ruling by the District Court in favor
of the tribes, and remanded the case to the District Court for
additional fact finding. The remanded issue is whether California law
permits the use of video gaming devices. If California law is found
to permit the use of video gaming devices, the tribes are entitled to
seek agreements for the use of such devices. If California is not
found to permit their use, the tribes would not be so entitled under
the Court of Appeals' analysis.
In December 1994, the tribes filed a petition for rehearing with the
Ninth Circuit and a suggestion for rehearing en banc. The petition
and suggestion were denied on August 11, 1995, with a vigorous
dissent by six judges. On August 21, 1995, the Ninth Circuit issued
an order requesting further briefing by the parties on the relevance
of a state court important decision entitled Western Telcon v.
California State Lottery. In Western Telcon, the issue was whether
the State Lottery could operate banked games and utilize slot
machines. On October 16, 1995, the Ninth Circuit stayed its final
decision in Rumsey until the final disposition of Western Telcon by
the California Supreme Court, and requested the parties to file
briefs with the Ninth Circuit after that decision.
On June 24, 1996, the California Supreme Court decided Western Telcon.
The court held that the California State Lottery could not "bank"
games, but it left open the possibility that certain types of
electronic devices could be used to play non-banked games, and cited
with approval the Lottery's use of on-line computers and video
terminals as consistent with the State Lottery Act. The parties filed
their briefs in Rumsey on July 23, 1996, and the case is now pending.
While the Company is optimistic the California tribes will ultimately
prevail in this action, should the State of California be successful
in its legal actions, it could have an adverse effect on the
Company's sole business activity.
F-17
<PAGE> 40
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 31, 1996 AND 1995
7. COMMITMENTS AND CONTINGENCIES (CONTINUED):
d) EMPLOYMENT AGREEMENTS:
In July 1995, the Company entered into employment agreements with
certain key executives which expire in 2002. The employment
agreements provide for, among other things, annual base compensation,
participation in bonus plans and life insurance. The agreements also
contain severance provisions which provide for payments to the
executives in the event of their termination after a change in
control, as defined. The severance provisions provide, among other
things, for a compensation payment equal to 2.99 times the annual
salary paid to the executive at the time of the change of control, as
well as for accelerated payment of accrued bonuses payable to the
executives under the Company's compensation policies and an
additional payment based on the number of stock options which the key
executives have not exercised within three months of their
termination of employment. Aggregate annual salaries guaranteed by
the agreements are $660,000. At July 31, 1996, the estimated amount
that would have been payable as severance compensation under the
agreements to these executives based on compensation and stock
options was 2,538,000.
8. RETIREMENT PLAN:
All of the Company's employees participate in a simplified employee pension
plan. Employer contributions to the plan are made on a discretionary
basis and were $115,000 and $99,000 for the years ended July 31, 1996 and
1995, respectively.
9. SUBSEQUENT EVENT:
On October 9, 1996, the Company entered into an agreement to purchase
approximately 162 acres of land in Las Vegas, Nevada. The total purchase
price of the land is $5,200,000 consisting of approximately $3,600,000 in
cash paid by the Company with the remaining amount representing an
assumption of a mortgage on the land. In connection with the purchase,
the Company granted an option to seller of the land to repurchase the
land. This option, which expires in 120 days from the date of the
agreement, stipulates that the purchase price for the land by the
optionee shall be the sum of the outstanding balance of the mortgage, the
cash portion of the purchase price paid by the Company, all cash payments
made on the mortgage by the Company, and an amount equal to the greater
of 16% of the purchase price or 50% of the profits if the optionee sells
the land.
F-18
<PAGE> 41
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunder duly authorized.
Dated: October 23, 1996 AMERICAN CASINO ENTERPRISES, INC.
By: /s/ Ronald J. Tassinari
------------------------------
Ronald J. Tassinari, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Ronald J. Tassinari President, October 23, 1996
- ----------------------- (Principal Executive,
Ronald J. Tassinari Officer) and Director
/s/ Audrey K. Tassinari Executive Vice October 23, 1996
- ----------------------- President and
Audrey K. Tassinari Director
/s/ Roy K. Keefer Chief Financial October 23, 1996
- ----------------------- Officer, Secretary/
Roy K. Keefer Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ Douglas R. Sanderson Director October 23, 1996
- ------------------------
Douglas R. Sanderson
/s/ Jeanne Hood Director October 23, 1996
- ----------------------
Jeanne Hood
<PAGE> 42
AMERICAN CASINO ENTERPRISES, INC.
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.14 Joint Venture Agreement between the Company and the Table Mountain
Tribe, dated as of February 1, 1996.
10.15 Funding and Loan Agreement between the Auburn Tribe and the Table
Mountain/ACES Joint Venture, dated February 1, 1996.
10.16 Lease for the Company's offices dated March 14, 1996, between the
Company and Tropicana Trail Limited Partnership.
11.1 Statement of Computation of Earnings Per Share and Common Share
Equivalents Statements.
21.1 Subsidiaries of the Registrant.
23.1 Consent Bradshaw, Smith & Co.
27.1 Financial Data Schedules
<PAGE> 1
Exhibit 10.14
JOINT VENTURE AGREEMENT
OF
TABLE MOUNTAIN DEVELOPMENT GROUP
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered into as
of the 1 day of Feb., 1996, by and between American Casino Enterprises, Inc., a
Nevada corporation (hereafter "ACES") and Table Mountain Rancheria, a federally
recognized Indian tribe (hereafter "Table Mountain"), as Joint-Venturers.
ARTICLE I
Formation
1.1 Formation. The parties hereto hereby from the Joint Venture in
accordance with the terms and conditions of this Agreement.
1.2 Intent. It is the intent of the Joint-Venturers that the Joint
Venture be operated in a manner consistent with its treatment as a "partnership"
for federal and state income tax purposes. No Joint Venturer shall take any
action inconsistent with the express intent of the parties hereto as set forth
herein.
1.3 Definitions. Capitalized terms as used in this Agreement are
defined in Article XII herein.
ARTICLE II
General Provisions
2.1 Name. The name of the Joint Venture shall be "Table Mountain
Development Group."
2.2 Principal Office and Place of Business. The Principal Office
and place of business of the Joint Venture shall be located at the Table
Mountain Casino, P. O. Box 410, Friant, California 93626, or such other place as
the Joint-Venturers from time to time shall agree.
2.3 Joint Venture Purposes. The purpose of the Joint Venture is to
provide consulting and related services to American Indian tribes or tribal
entities concerning the planning, development, financing, construction and
operation of tribal gaming facilities and other economic development projects.
The Joint Venture shall have the power to do any and all acts and things
necessary appropriate, proper, advisable, incidental to or convenient for
furtherance and accomplishment of such purpose, including, but not limited to
the entering into or acquiring of any proprietorships, partnerships, joint
ventures, corporations, limited liability companies, or other similar entities
or arrangements to engage in any of the foregoing. The Joint Venture may engage
in other business only upon the unanimous vote of the Joint-Venturers
2.4 Term. The term of the Joint Venture shall commence on the date
of this Agreement and shall continue until the liquidation and\or winding-up of
the Joint Venture in accordance with Section 10.1 of this Agreement.
2.5 Payment of Individual Obligations. The Joint Venture's credit
and assets shall be used solely for the benefit of the Joint Venture, and no
asset of the Joint Venture shall be transferred or encumbered for or in payment
of any individual obligation of a Joint-Venturer.
2.6 Title to Property. All real and personal property owned by the
Joint Venture shall be owned by the Joint Venture as an entity and no
Joint-Venturer shall have any ownership interest in such property in its
individual name or right, and each Joint-Venturer's interest in the Joint
Venture shall be personal property for all purposes. Except as otherwise
provided in this Agreement, the Joint Venture shall hold all of its real and
personal property in the name of the Joint Venture and not in the name of any
Joint-Venturer.
<PAGE> 2
ARTICLE III
Capital Contributions
3.1 Capital Contributions. Each Joint-Venturer hereby agrees to
contribute a Capital Contribution as described on Exhibit A hereto.
3.2 Additional Capital Contributions. Additional Capital
Contributions shall only be made upon the unanimous consent of the
Joint-Venturers.
3.3 Joint-Venturer Loans.
(a) General. A loan to the Joint Venture by a Joint
Venturer(a "Joint Venturer Loan") shall only be made upon the unanimous consent
of the Joint-Venturers.
(b) Terms of Joint-Venturer Loans. Unless the
Joint-Venturers otherwise agree, all Joint-Venturer Loans shall bear interest at
the Prime Rate plus one and one half percent (1.5%), shall compound
semi-annually (as of the last day of each successive six month period occurring
thereafter), shall be fully recourse to the Joint Venture and to each
Joint-Venturer, shall be repayable in whole or in part without penalty subject
to the requirements of Section 3.3(c) below, and shall be an unsecured payment
right in favor of the payee which may be transferred only together with a
transfer by such payee of its interest as a Joint-Venturer as permitted by this
Agreement.
(c) Repayment. Unless the Joint-Venturers otherwise agree,
all Joint Venturer Loans must be repaid in full out of available funds of the
Joint Venture before any distribution may be made to any Joint-Venturer under
Article IV. Joint-Venturer Loans shall be repaid in the same order in which they
were made. All payments received with respect to a Joint-Venturer Loan shall be
applied first against accrued and unpaid interest thereunder, and then against
the outstanding principal balance thereof. If more than one Joint-Venturer
joined in the making of a Joint-Venturer Loan, the Joint Venture shall make
payments thereunder to the Joint-Venturers in proportion to the amount of
principal each advanced.
ARTICLE IV
Distributions
4.1 Amount and Time of Distributions. Distributions of available
cash to the Joint-Venturers and payments on respective Joint-Venturer Loans
shall be made only at such times as the Joint-Venturers shall reasonably
determine and only in such amounts over and above such reserves as are
sufficient to enable the Joint Venture to meet its existing and reasonably
anticipated financial obligations.
4.2 Distributions to Joint-Venturers. After the repayment of all
Joint-Venturer Loans, distributions of remaining available cash shall be made to
the Joint-Venturers pro rata in accordance with their Participating Percentages,
as set forth on Exhibit B hereto. The Participating Percentages of the
Joint-Venturers may be changed from time to time, or may vary from transaction
to transaction, upon the unanimous consent of the Joint-Venturers. In the event
the Participating Percentage of a Joint Venturer is to be increased with respect
to a particular transaction, that Joint Venturer shall be required to make a
corresponding increase in its Capital Contribution relative to that transaction.
4.3 Distribution Upon Withdrawal. No withdrawing Joint-Venturer
shall be entitled to receive any distribution or the value of such
Joint-Venturer's Interest in the Joint Venture as a result of withdrawal from
the Joint Venture prior to the liquidation of the Joint Venture, except as
specifically provided in this Agreement.
4.4 Return of Capital. No Joint-Venturer shall be entitled to the
<PAGE> 3
return of, or interest on, that Joint-Venturer's Capital Contributions except as
provided herein.
ARTICLE V
Allocations
5.1 Economic Allocations of Profit and Loss. Profits and Losses
for each Fiscal Year shall be allocated to the Joint-Venturers, pro rata based
on their Participating Percentages.
5.2 Special Tax Allocations.
(a) Nonrecourse Deductions. The allocations set forth in
Section 5.1 are intended generally to comply with requirements of Regulations
sections 1.704-1(b) and 1.704-2. If the Joint Venture incurs "nonrecourse
deductions" or "partner nonrecourse deductions" or if there is any change in the
Joint Venture's "minimum gain," as those terms are defined in such Regulations,
the allocation of Profits, Losses and items thereof to the Joint-Venturers shall
be modified as deemed reasonably necessary or advisable by the Joint-Venturers
to comply with such Regulations.
(b) Built-in Gain Allocation. If necessary or required
under Code section 704(c) or Treasury Regulation section 1.704-1 (b)(2)(iv)(f),
the Joint-Venturers shall make special tax allocations in order to account for
the variation, if any, between the adjusted tax basis of an asset and its Gross
Asset Value. Any elections or decisions relating to the allocations under this
Section 5.2(b) shall be made by the Joint-Venturers in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.2(b) are solely for purposes of federal, state and
local taxes and shall not affect or in any way be taken into account in
computing any Joint-Venturer's Capital Account or share of Profits, Losses,
other items or distributions pursuant to any provision of this Agreement.
ARTICLE VI
Management
6.1 General. The Joint-Venturers shall devote such time and effort
as is necessary for the management of the Joint Venture in the conduct of its
business but shall not be required to devote their full-time efforts to the
Joint Venture. Each Joint-Venturer at all times shall keep the other
Joint-Venturers fully informed as to all such Joint-Venturers' activities on
behalf of the Joint Venture and all material transactions taken on behalf of the
Joint Venture and shall disclose to the Joint Venturers such Joint-Venturer's
knowledge of the Joint Venture's business and affairs. Except as otherwise
specifically provided in this Agreement, (a) each Joint-Venturer shall have a
right and voice in the management and operation of the Joint Venture and (b) all
material matters relating to the conduct of the business and affairs of the
Joint Venture including all decisions, consents, actions and votes required by
this Agreement to be made by "the Joint-Venturers" shall be determined by the
unanimous consent of the Joint Venturers.
6.2 Joint-Venturer Authority. Except as specifically provided by
this Agreement or pursuant to a writing signed by those Joint-Venturers
constituting the requisite vote, no Joint Venturer is authorized and empowered
to execute, deliver or perform any material agreements, acts, transactions or
matters contemplated in this Agreement on behalf of the Joint Venture as agent
for the Joint Venture, notwithstanding any applicable law, rule or regulations.
6.3 Administrative Joint-Venturer. The Joint-Venturers acknowledge
certain day to-day activities and administrative acts may be required to be
undertaken or performed. Accordingly, for this purpose, ACES is hereby
designated the "Administrative Joint-Venturer" for the Joint Venture, which
shall have only the specific powers and authorities granted by this Agreement or
by the Joint-Venturers in writing.
<PAGE> 4
6.4 Execution of Documents. Each Joint-Venturer shall have the
power to execute instruments and documents and otherwise bind the Joint Venture
in all matters relating to the business of the Joint Venture which are
authorized or approved in accordance with the terms of this Agreement or
otherwise by the Joint-Venturers in writing.
6.5 Banking Resolution. The Joint-Venturers hereby unanimously
authorize the Administrative Joint-Venturer to open one or more banking accounts
as the Joint-Venturers deem necessary and to enter into any deposit agreements
as are required by the financial institution at which such accounts are opened.
The deposit agreements shall require that checks drawn on or withdrawals from
such Joint Venture accounts shall require a signature by a representative of
each Joint Venturer. Funds deposited into such accounts shall be used only for
the business of the Joint Venturer.
6.6 Filing of Documents. The Joint-Venturers shall file or cause
to be filed all certificates or documents as the Joint-Venturers may determine
to be necessary or appropriate for the formation, continuation, qualification
and operation of the Joint Venture.
6.7 Indemnification and Liability.
(a) Joint-Venturer Indemnification. Each Joint-Venturer
shall be indemnified, defended and held harmless by each other Joint-Venturer
(the "Indemnifying Joint Venturer") from and against any and all losses, claims,
damages, liabilities, expenses (including attorneys' fees and costs), judgments,
fines, settlements, demands, actions, or suits relating to or arising out of any
claim, issue or matter except: (i) in respect of which such Indemnifying Joint
Venturer or any of its agents, employees or other representatives (or the Joint
Venture as the result of an act or omission of any of the same) has been
adjudged liable for fraud, negligence or willful misconduct; or (ii) based upon
or relating to a material breach by the Indemnifying Joint-Venturer of any term
or provision of this Agreement.
(b) Liability. No Joint-Venturer shall be liable,
responsible, accountable in damages or otherwise to the Joint Venture or the
Joint-Venturers for any act or failure to act in connection with the Joint
Venture and its business unless the act or omission is attributed to negligence,
willful misconduct or fraud or constitutes a material breach by such
Joint-Venturer of any term or provision of this Agreement.
(c) Terms of Indemnification. Each indemnity provided for
under this Agreement shall be subject to the following provisions:
(i) The indemnity shall cover the costs and
expenses of the indemnitee, including reasonable attorneys' fees and court
costs, related to any actions, suits or judgments incident to any of the matters
covered by such indemnity.
(ii) The indemnitee shall notify the indemnitor of
any claim against the indemnitee covered by the indemnity within 45 days after
the indemnitee has notice of such claim, but failure to notify the indemnitor
shall in no case prejudice the rights of the indemnitee under this Agreement
unless the indemnitor shall be prejudiced by such failure and then only to the
extent the indemnitor shall be prejudiced by such failure. Should the indemnitor
fail to discharge or undertake to defend the indemnitee against such liability
upon learning of the same, then the indemnitee may settle such liability, and
the liability of the indemnitor hereunder shall be conclusively established by
such settlement, which amount of such liability shall include both the
settlement consideration and the reasonable costs and expenses, including
attorneys' fees, incurred by the indemnitee in effecting such settlement.
(iii) No indemnity hereunder shall be construed to
limit or diminish the coverage of any Joint-Venturer under any insurance
obtained
<PAGE> 5
by the Joint Venture. Payment shall not be a condition precedent to any
indemnification provided in this Agreement.
6.8 Fiduciary Duties. Each Joint-Venturer acknowledges and agrees
that each Joint-Venturer shall be accountable to the Joint Venture and the other
Joint-Venturers as a fiduciary, and, unless the Joint-Venturers otherwise agree
in writing, each Joint-Venturer shall be bound by a fiduciary duty to the Joint
Venture and the other Joint-Venturers to the same extent that applicable law
generally imposes such status and duty upon a general partner in a partnership.
6.9 Compensation of Joint-Venturers. The Joint Venture will not
pay fees or other compensation to any Joint-Venturer unless the Joint-Venturers
by unanimous vote otherwise agree.
ARTICLE VII
The Joint-Venturers
7.1 Meetings of the Joint-Venturers. Meetings of the
Joint-Venturers shall be held upon the call of any Joint-Venturer; provided that
at least three days' prior notice shall be given to all Joint-Venturers with
respect to any meeting of Joint-Venturers, including an annual meeting of
Joint-Venturers; and further provided that any Joint-Venturer may require that
such meeting be held by telephone. A waiver of any required notice shall be
equivalent to the giving of such notice if such waiver is in writing and signed
by the Person entitled to such notice, whether before, at or after the time
stated therein. The Joint-Venturers may make use of telephones and other
electronic devices to hold meetings, provided that each Joint-Venturer is able
to simultaneously participate with the other Joint-Venturers with respect to all
discussions and votes of the Joint-Venturers. The Joint Venturers may act
without a meeting if the action taken is reduced to writing (either prior to or
thereafter) and consented to in writing by the requisite number of
Joint-Venturers. Written minutes shall be taken at each meeting of the
Joint-Venturers; however, any action taken or matter agreed upon by the
Joint-Venturers at the meeting shall be deemed final, whether or not written
minutes of the meeting are prepared or finalized.
7.2 Voting of the Joint-Venturers. All actions, agreements,
approvals and consents required in this Agreement to be made by "the
Joint-Venturers" shall be effective if approved by the unanimous consent of all
Joint Venturers.
7.3 Other Business Interests of the Joint-Venturers. This
Agreement shall not be construed to grant any right, privilege or option to a
Joint-Venturer to participate in any manner in any other business, corporation,
partnership or investment in which another Joint-Venturer may participate,
including those which may be the same as or similar to the Joint Venturers
business and in direct competition therewith, and each of the Joint-Venturers
expressly waives the doctrine of corporate opportunity (or any analogous
doctrine) with respect to any such other business, corporation, partnership or
investment of the other Joint-Venturers or their Affiliates.
7.4 Rights and Obligations of Joint-Venturers. Each Joint-Venturer
shall have the right, during ordinary business hours, to inspect and copy, at
such Joint-Venturer's expense, the Joint Venture records required to be
maintained at the Joint Venture's office as set forth in Section 8.1 hereof.
7.5 Defaulting Joint-Venturer.
(a) Events of Default. The occurrence of any of the
following events shall constitute an "Event of Default": (i) attempted
dissolution of the Joint Venture by any Joint-Venturer other than pursuant to
the provisions contained in this Agreement; (ii) the Withdrawal Event of a
Joint-Venturer (not including the death of such Joint-Venturer); or (iii)
failure of any Joint-Venturer to perform any obligation, act or acts required of
that
<PAGE> 6
Joint-Venturer by the provisions of this Agreement, or a violation or a breach
of any of the other terms or provisions of this Agreement; provided, however,
that a Joint-Venturer shall not be deemed to be in default of this Section
7.5(a)(iii) until that Joint-Venturer has failed to cure the default during the
30-day period following the receipt of notice of such default, except that if
the default is a nonmonetary default and cannot reasonably and with due
diligence and in good faith be cured within the 30-day period, and if the
defaulting Joint-Venturer immediately commences and proceeds to complete the
cure of such default with due diligence and in good faith, the 30-day period
with respect to such default shall be extended to include such additional period
of time as may be reasonably necessary to cure such default, not to exceed 180
days.
(b) Effect of Default. Notwithstanding anything in this
Agreement to the contrary, on the date that a Joint-Venturer is determined by a
court of competent jurisdiction to be a Defaulting Joint-Venturer, that
Joint-Venturer shall not have any voting rights with respect to any matters set
forth in this Agreement, including but not limited to all approval rights set
forth in Article VI and Article VII.
(c) Remedies on Default. Upon the occurrence of an Event of
Default by a Joint-Venturer, the Joint Venture and the non-Defaulting
Joint-Venturers shall have all rights and remedies available at law and in
equity and may institute legal proceedings as authorized herein against the
Defaulting Joint-Venturer with respect to any damages or losses incurred by the
Joint Venture or by any Non-Defaulting Joint-Venturers. The Joint Venture shall
be entitled to reasonable attorneys' fees and expenses incurred in connection
with the collection of such amounts, together with interest thereon.
(d) Jurisdiction. Upon the occurrence of an Event of
Default, the non Defaulting Joint-Venturers may seek appropriate relief in a
United States District Court, unless the parties jointly agree to an alternative
forum, for the breach of the Agreement by the Defaulting Joint Venturer. In the
event that the United States District Court determines that it cannot exercise
jurisdiction over such a claim, then and only then may the parties seek relief
in the appropriate California state court.
(e) Limited Waiver of Sovereign Immunity. Table Mountain
hereby waives its sovereign immunity from suit solely for purposes of
enforcement of the terms of this Agreement. This waiver is a limited waiver of
immunity, and any damages which may arise as a result of Table Mountain's or its
officially recognized representatives' action shall be limited exclusively to
Table Mountain's interest in the Joint Venture or its interest in revenues
derived from the operation of the Joint Venture.
This limited waiver of sovereign immunity is granted
solely for purposes of implementing this Agreement and shall be regarded as a
limited waiver of sovereign immunity in any subsequent court proceeding
commenced for purposes of enforcing the terms of this Agreement. Nothing
contained in this limited waiver shall be construed to confer any benefit,
tangible or intangible, on any person or entity not a party to this Agreement or
as a waiver with respect to any such third person or entity. Table Mountain's
limited waiver of its sovereign immunity hereunder extends only to a direct
action by the non-Defaulting Joint-Venturers for money damages, specific
performance, injunctive relief, and/or declaratory relief for Table Mountain's
default under this Agreement.
ARTICLE VIII
Books, Records, Reports and Accounting
8.1 Records. The Joint-Venturers shall keep or cause to be kept at
the office of the Joint Venture the following: (a) a current list of the full
name and last known business, residence or mailing address of each
Joint-Venturer; (b) copies of all written Joint Venture agreements and all
amendments to the agreements, including any prior written Joint Venture
<PAGE> 7
agreements no longer in effect; (c) copies of the Joint Venturers federal, state
and local income tax returns and reports, if any, for the three most recent
years; (d) copies of any prepared financial statements of the Joint Venture for
the three most recent years; (e) minutes of every meeting of Joint-Venturers as
well as any written consents of Joint-Venturers or actions taken by
Joint-Venturers without a meeting and (f) all records relating to the financial
affairs of the Joint Venture. Any such records maintained by the Joint Venture
may be kept on or be in the form of any information storage device, provided
that the records so kept are convertible into legible written form within a
reasonable period of time.
8.2 Fiscal Year and Accounting. The Fiscal Year of the Joint
Venture shall be August 1 through July 31. All decisions as to other accounting
matters, except as specifically provided to the contrary herein, shall be made
by the Joint-Venturers.
8.3 Preparation of Tax Returns. The Joint-Venturers shall arrange
for the preparation and timely filing of all returns of the Joint Venture for
federal and state income tax purposes and shall cause to be furnished to the
Joint-Venturers the tax information reasonably required for federal and state
income tax reporting purposes. The classification, realization and recognition
of income, gain, losses and deductions and other items, for federal income tax
purposes, shall be on that method of accounting as the Joint-Venturers shall
determine.
8.4 Tax Elections. The Joint-Venturers made in their discretion
determine whether to make any available elections pursuant to the Code.
8.5 Tax Controversies. Subject to the provisions hereof, ACES is
designated Tax Matters Joint-Venturer and shall be authorized and required to
represent the Joint Venture (at the Joint Venture's expense) in connection with
all examinations of the Joint Venture's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Joint Venture
funds for professional services and costs associated therewith. The
Joint-Venturers agree to cooperate with the Tax Matters Joint-Venturer and to do
or refrain from doing any or all things reasonably required by the Tax Matters
Joint-Venturer to conduct those proceedings. The Tax Matters Joint Venturer
agrees to promptly notify the Joint-Venturers upon the receipt of any
correspondence from any federal, state or local tax authorities relating to any
examination of the Joint Venture's affairs.
ARTICLE IX
Transfers, Withdrawals
9.1 Transfers.
(a) Restriction. A Joint-Venturer shall not make any
Transfer of all or any portion of its Interest including, without limitation, a
Transfer of a right to Profits, Losses or distributions to a Transferee who does
not become a substituted Joint-Venturer of the Joint Venture. Any Transfers made
in violation of this Agreement shall be an Event of Default of the Transferring
Joint-Venturer and such Transfer shall be void.
(b) Requirements for Transferee Becoming a Substituted
Joint-Venturer. No Transferee shall become a substituted Joint-Venturer in the
Joint Venture unless and until the following conditions are satisfied: (i) by
affirmative vote all Joint-Venturers shall have consented to the Transferee
becoming a Joint-Venturer hereof; (ii) the Transferee shall agree to any and all
of the obligations under this Agreement with respect to the Interest to which
the Transfer relates; (iii) all expenses of the Joint Venture required in
connection with the Transfer shall have been paid by or for the account of the
Transferee; and (iv) all agreements, minutes, written consents, and other
necessary documents and instruments shall have been executed and filed and all
other acts shall have been performed which are necessary to make the Transferee
a substitute
<PAGE> 8
Joint-Venturer of the Joint Venture.
9.2 Notice. Within 30 days of the Withdrawal Event of a
Joint-Venturer, that Joint-Venturer (or its successor) shall be required to give
notice to the other Joint-Venturers of such event (the "Withdrawal Notice").
9.3 Withdrawal of a Joint-Venturer. A Joint-Venturer shall not
have the right to withdraw from the Joint Venture. Upon the Withdrawal Event of
a Joint-Venturer ("Withdrawn Joint Venturer"), that Joint-Venturer shall not be
entitled to receive the value of its Interest; rather, the other Joint-Venturer
shall have the right to admit a new Joint-Venturer and continue the Joint
Venture, and the Withdrawn Joint-Venturer (or its successor-in-interest) shall
be treated as an assignee of its Interest and shall have no Joint-Venturer
rights except the right to continue to receive distributions pursuant to
Articles IV and X hereof to the extent the Joint Venture is continued; provided,
however, if the withdrawal is an Event of Default under Section 7.5(a)(ii) any
damages incurred by the Joint Venture or the other Joint-Venturers as a result
of a Withdrawal Event of a Joint Venturer shall be offset against any amounts
distributable by the Joint Venture to the Withdrawn Joint-Venturer. If any
Withdrawal Event occurs with respect to a Joint-Venturer, the Participating
Percentage relating to the Interest of the Withdrawn Joint-Venturer shall
thereafter remain unchanged except that it shall be decreased, pro rata based on
the Participating Percentages of all of the Joint Venturers, if any new
Joint-Venturers are admitted to the Joint Venture.
ARTICLE X
Liquidation and Winding Up
10.1 Dissolution. The Joint Venture shall dissolve, and its
affairs shall be wound up, only upon the earlier of:
(a) the agreement of the Joint-Venturers;
(b) the death of an individual
Joint-Venturer;
(c) the Bankruptcy of a Joint-Venturer or
the Joint Venture;
(d) the occurrence of any event which makes it unlawful for
the business of the Joint Venture to be carried on or for the Joint-Venturers to
carry on that business in Joint Venture; or
(e) the occurrence or any other event, not specifically set
forth in this Section 10.1 which causes the dissolution of the Joint Venture
under applicable law, except a transfer of an Interest to which all other
Joint-Venturers have consented;
10.2 Liquidation. Upon dissolution of the Joint Venture, the
business and affairs of the Joint Venture shall be wound up, and the Joint
Venture shall be liquidated as rapidly as business circumstances permit. The
Joint-Venturers shall appoint the liquidating trustee(s), and the assets of the
Joint Venture shall be liquidated and the proceeds thereof shall be paid (to the
extent permitted by applicable law) in the following order:
(a) First, to creditors, including Joint-Venturers that are
creditors, in the order of priority as required by applicable law;
(b) Second, to a reserve for contingent liabilities to be
distributed at the time and in the manner as the liquidating trustee determines
in its discretion; and
(c) Thereafter, to the Joint-Venturers, as provided in
Section 4.2, above.
<PAGE> 9
If the Joint-Venturers determine that an immediate sale of the Joint Venture's
assets and liquidation of the Joint Venture would cause undue losses to the
Joint-Venturers, they may defer liquidation of any assets, other than those
assets necessary to satisfy current obligations, for a reasonable time, or may
distribute such assets in kind according to the order and priority set forth in
this section. Any assets distributed in kind shall be valued and treated as
though the assets were sold and the cash proceeds were distributed.
10.3 Reasonable Time for Winding Up. A reasonable time shall be
allowed for the orderly winding up of the business and affairs of the Joint
Venture and the liquidation of its assets pursuant to Section 10.3 hereof in
order to minimize any Inc___s otherwise related to that winding up.
10.4 Deficit Capital Account. Upon the dissolution of the Joint
Venture, all Joint Venturers shall be required to contribute to the Joint
Venture an amount equal to the deficit balance, if any, in the respective
Capital Accounts after taking into account all investments to the Capital
Accounts for the Fiscal Year. No creditor of the Joint Venture shall be entitled
to rely upon this Section 10.4 as a third party beneficiary.
ARTICLE XI
Miscellaneous
11.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the United States.
11.2 Notices. All notices, consents, approvals, reports,
designations, requests, waivers and other communications (collectively
"Notices") authorized or required to be given pursuant to this Agreement shall
be in writing and either (a) personally served on the Joint-Venturer to whom it
is given, (b) mailed by registered or certified mail, postage prepaid, or (c)
sent by facsimile (and also mailed by registered or certified mail within 24
hours thereafter), addressed to the addresses set forth on the signature page
hereto. All Notices shall be deemed given when delivered or, if mailed by
government mail, on the third day after the day of mailing, and if sent by
facsimile, 24 hours after the time of dispatch. Any Joint-Venturer may change
its address for the receipt of Notices at any time by giving written notice
thereof to the other Joint-Venturers in accordance with the terms of this
Section 11.2. The inability to deliver notice because of a changed address of
which no notice was given, or rejection or other refusal to accept any notice,
shall not defeat the giving of such notice. Any notice to be given by any party
herein may be given by counsel for such party. Notwithstanding the requirement
as to the use of registered or certified mail, any routine reports required by
this Agreement to be submitted to Joint-Venturers at specified times may instead
be sent by first-class mail.
11.3 Severability. If any provision of this Agreement shall be
conclusively determined by a court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement shall not be
affected thereby.
11.4 Binding Effect. Except as otherwise provided herein, this
Agreement shall inure to the benefit of and be binding upon the Joint-Venturers
and their respective successors and, where permitted, assigns.
11.5 Titles and Captions. All article, section and paragraph
titles and captions contained in this Agreement are for convenience only and are
not a part of the context hereof.
11.6 Pronouns and Plurals. All pronouns and any variations thereof
are deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the appropriate Person(s) may require.
11.7 No Third Party Rights. This Agreement is intended to create
enforceable rights between the parties hereto only, and creates no rights in, or
<PAGE> 10
obligations to, any other Persons whatsoever.
11.8 Time is of Essence. Time is of the essence in the
performance of each and every obligation herein imposed.
11.9 Further Assurances. The parties hereto shall execute all
further instruments and perform all acts which are or may become necessary to
effectuate and to carry out the ___ttels contemplated by this Agreement.
11.10 Estoppel Certificates. The Joint-Venturers hereby agree
that, at the request of any Joint-Venturer, they will each execute and deliver
an estoppel certificate stating, to the extent true, that this Agreement is in
full force and effect and that to the best of such Joint-Venturer's knowledge
and belief there are no defaults by any Joint-Venturer or that certain defaults
exist, as the case may be, under this Agreement.
11.11 Schedules Included in Exhibits; Incorporation by Reference.
Any reference to an Exhibit to this Agreement contained herein shall be deemed
to include any Schedules to such Exhibit. Each of the Exhibits referred to in
this Agreement, and each Schedule to such Exhibits, is hereby incorporated by
reference in this Agreement as if such Schedules and Exhibits were set out in
full in the text of this Agreement.
11.12 Amendments. This Agreement may not be amended except by
unanimous written agreement of all of the Joint-Venturers.
11.13 Creditors. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditors of the Joint Venture.
11.14 Entire Agreement. This Agreement and the Exhibits hereto
contain all of the agreements between the parties hereto and supersedes any and
all prior agreements, arrangements or understandings between the parties
relating to the subject matter hereof. No oral understandings, oral statements,
oral promises or oral inducements exist. No representations, warranties,
covenants or conditions, express or implied, whether by statute or otherwise,
other than as set forth herein, have been made by the parties hereto.
ARTICLE XII
Definitions
The following terms used in this Agreement shall have the meanings
described below:
"Affiliate" means a Person who, with respect to any other Person:
(a) directly or indirectly controls, is controlled by or is under common control
with such other Person; (b) owns or controls 10 percent or more of the
outstanding voting securities of such other Person; (c) is an officer, director,
partner or member of such other Person; or (d) if such other Person is an
officer, director, partner, manager, trustee, or member of any Person for which
such other Person acts in any such capacity.
"Agreement" means this joint venture agreement as it may be
amended from time to time, complete with all exhibits and schedules hereto.
"Bankruptcy" means, with respect to a Person, the happening of any
of the following:
(a) the making by such Person of a general assignment for
the benefit of creditors;
(b) the filing by such Person of a voluntary petition in
bankruptcy or the filing of a pleading in any court of record admitting in
writing an inability to pay debts as they become due;
<PAGE> 11
(c) the entry of an order, judgment or decree by any court
of competent jurisdiction adjudicating the Person to be bankrupt or insolvent;
(d) the filing by such Person of a petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(e) the filing by such Person of an answer or other
pleading admitting the material allegations of, or consenting to, or defaulting
in answering, a bankruptcy petition filed against the Person in any bankruptcy
proceeding;
(f) the filing by such Person of an application or other
pleading or any action otherwise seeking, consenting to or acquiescing in the
appointment of a liquidating trustee, receiver or other liquidator of all or any
substantial part of the Person's properties;
(g) the commencement against such Person of any proceeding
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation which has not
been quashed or dismissed within 180 days; or
(h) the appointment without the consent or acquiescence of
such Person of a liquidating trustee, receiver or other liquidator of all or any
substantial part of such Person's properties without such appointment being
vacated or stayed within 90 days and, if stayed, without such appointment being
vacated within 90 days after the expiration of any such stay.
"Capital Account" shall mean the accounting record of each
Joint-Venturer's capital interest in the Joint Venture. There shall be credited
to each Joint-Venturer's Capital Account (a) the amount of any contribution of
cash by that Joint-Venturer, (b) the Gross Asset Value of property contributed
by that Joint-Venturer, (c) that Joint-Venturer's allocable share of Profits and
any items in the nature of income or gain that are specially allocated to that
Joint-Venturer, and (d) the amount of any Joint Venture liabilities that the
Joint-Venturer assumes, or takes subject to, under Code section 752. There shall
be debited against each Joint-Venturer's Capital Account (i) the amount of all
distributions of cash to that Joint-Venturer unless a distribution to the
Joint-Venturer is a loan or is deemed a payment under Code section 707(c), (ii)
the Gross Asset Value of property distributed to that Joint-Venturer by the
Joint Venture, (iii) that Joint-Venturer's allocable share of Losses and any
items in the nature of losses or expenses that are specially allocated to that
Joint-Venturer, and (iv) the amount of any liabilities of that Joint-Venturer
that the Joint Venture assumes, or takes subject to, under Code section 752. The
permitted transferee of all or a portion of an Interest shall succeed to that
portion of the transferor Joint-Venturer's Capital Account that is allocable to
the portion of the Interest transferred. This definition of Capital Account and
the other provisions herein relating to the maintenance of Capital Accounts are
intended to comply with Treasury Regulation sections 1.704-1(b) and 1.704-2 and
shall be interpreted and applied in a manner consistent with those Treasury
Regulation sections. In the event the Joint-Venturers determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or which are
assumed by the Joint Venture or the Joint-Venturers), are computed in order to
comply with that Treasury Regulation, the Joint-Venturers may make such
modification. The Joint Venturers shall also make any appropriate modifications
in the event unanticipated events might otherwise cause this Agreement not to
comply with Treasury Regulation sections 1.704-l(b) and 1.704-2.
"Capital Contribution" means, with respect to any Joint-Venturer,
an amount of money contributed by that Joint-Venturer to the Joint Venture and,
if property other than money is contributed, the Gross Asset Value of such
property, net of liabilities assumed or taken subject to by the Joint Venture.
<PAGE> 12
"Code" shall mean the Internal Revenue Code of 1986 (or successor
thereto), as amended from time to time.
"Defaulting Joint-Venturer" means a Joint-Venturer that has
committed an Event of Default as described in Section 7.5 hereof.
"Event of Default" shall have the meaning set forth in Section
7.5(a) hereof.
"Fiscal Year" means the year on which the accounting and federal
income tax records of the Joint Venture are kept.
"Gross Asset Value" shall mean with respect to any Joint Venture
asset, the asset's adjusted federal income tax basis (as determined in Code
section 1011) except that (a) with respect to any asset contributed by a
Joint-Venturer to the Joint Venture, its Gross Asset Value shall be the gross
fair market value of that asset and (b) the Gross Asset Value of all Joint
Venture assets shall be adjusted to their respective gross fair market values
upon the acquisition of an additional interest in the Joint Venture by a new or
existing Joint-Venturer, upon the distribution in full or partial liquidation of
an Interest, or upon the liquidation of the Joint Venture. For purposes of
determining the continuing Gross Asset Value of an asset, all depreciation,
amortization and cost recovery deductions with respect to each asset shall be
based on the Gross Asset Value of that asset and shall further adjust the Gross
Asset Value of that asset.
"Interest" means the interest of a Joint-Venturer in the Joint
Venture representing such Joint-Venturer's rights, powers and privileges as
specified in this Agreement.
"Participating Percentage" means the percentage interest of each
Joint-Venturer as described on Exhibit B hereto.
"Joint-Venturer" means any Person that executes this Agreement as
a Joint-Venturer and any other Person admitted to the Joint Venture as an
additional or substituted Joint Venturer, that has not made a disposition of
such Person's entire Interest.
"Joint Venture" means the joint venture formed pursuant to this
Agreement, as such joint venture may from time to time be constituted.
"Person" means an individual, firm, corporation, partnership,
limited liability company, association, estate, trust, pension or profit-sharing
plan, Indian tribe or any other entity.
"Policy" shall have the meaning set forth in Section 3.1 hereof.
"Prime Rate" means the "prime rate" published in the "Money Rates"
or equivalent section of the Western Edition of The Wall Street Journal,
provided that if a "prime rate" range is published by The Wall Street Journal,
then the highest rate of that range will be used, or if The Wall Street Journal
ceases publishing a prime rate or a prime rate range, then the Joint-Venturers
will select a prime rate, a prime rate range or another substitute interest rate
index that is based upon comparable information.
"Principal Office" means the office of the Joint Venture at which
the records of the Joint Venture are kept.
"Transfer" means to sell, assign, transfer, give, donate, pledge,
deposit, alienate, bequeath, devise or otherwise dispose of or encumber to any
Person other than the Joint Venture.
"Transferee" means a Person to whom a Transfer is made.
"Treasury Regulations" shall mean pronouncements, as amended from
time to
<PAGE> 13
time, or their successor pronouncements, which clarify, interpret and apply the
provisions of the Code, and which are designated as "Treasury Regulations" by
the United States Department of the Treasury.
"Withdrawal Event" shall mean the following: (a) the death of a
Joint-Venturer; (b) the Bankruptcy of a Joint-Venturer; or (c) the withdrawal of
a Joint-Venturer from the Joint Venture without the unanimous consent of the
remaining Joint-Venturers.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the day and year first written above.
TABLE MOUNTAIN RANCHERIA AMERICAN CASINO ENTERPRISES, INC.
By: /s/ Vern Castro By: /s/ Ronald J. Tassinari
----------------------------- ------------------------------
Vern Castro, Chairman Ronald J. Tassinari, President
Table Mountain Rancheria American Casino Enterprises, Inc.
P.O. Box 410 6243 Industrial Road
Friant, CA 93626 Las Vegas, NV 89118
<PAGE> 14
Table Mountain Development Group
Exhibit A
Capital Contributions of each Joint-Venturer
JOINT-VENTURERS: DATE: CONTRIBUTIONS
Table Mountain Development Group
Exhibit B
Participating Percentages As of
Feb. 1, 1996
<TABLE>
<CAPTION>
<S> <C>
American Casino Enterprises, Inc. 80%
Table Mountain Rancheria 20%
</TABLE>
<PAGE> 1
Exhibit 10.15
FUNDING AND LOAN AGREEMENT
This Funding and Loan Agreement is entered into and effective this 1st
day of February, 1996, by and between the United Auburn Indian Community, 661
Newcastle Road, #1, Newcastle, California 95658, a federally recognized Indian
Tribe (hereafter "Auburn" or the "Community") and Table Mountain/ACES Joint
Venture, a joint venture between American Casino Enterprises, Inc., 6243
Industrial Road, Las Vegas, Nevada 89118, a Nevada corporation, and the Table
Mountain Band of Indians of the Table Mountain Rancheria, P. O. Box 410, Friant,
California 93623, a federally recognized Indian Tribe (hereafter "Lender").
RECITALS
WHEREAS, the Community is a federally recognized Indian Tribe with a
governing body recognized by the Secretary of the Interior; and
WHEREAS, under the Auburn Indian Restoration Act, P.L. 103- 434, 25
U.S.C. Section 1300(1), the Secretary of the Interior is required to take into
trust for the Community certain lands located in Placer County, California as an
initial reservation for the Community; and
WHEREAS, the Community has identified certain lands consisting of
approximately ninety (90) acres in Placer County as the Community's proposed
reservation; and
WHEREAS, the Community's proposed reservation will incorporate housing,
community, cultural and economic development components, including a tribal
Gaming Enterprise; and
WHEREAS, the Community desires to expedite the development of the
economy of the United Auburn Indian Community in order to improve tribal
self-government and economic self-sufficiency, to enable the Community better to
serve the social, economic, educational and health needs of its members and to
provide its members with opportunities to improve their own economic
circumstances without having to work outside of the tribal community; and
WHEREAS, the Community will incur certain costs and expenses prior to
the opening of the tribal Gaming Enterprise including among others, general
governmental expenses, planning and development costs, land acquisition
expenses, construction costs and pre-opening expenses; and
WHEREAS, the Community presently lacks the financial resources to pay
these necessary costs and expenses; and
WHEREAS, Lender has the financial resources, experience, expertise and
respect for tribal sovereignty necessary to assist the Community in achieving
its objectives; and
WHEREAS, Lender recognizes that the Community seeks to maintain
exclusive control over all aspects of tribal affairs, including the operation of
the Gaming Enterprise, which the Community will manage through a Board of
Directors composed exclusively of tribal members appointed by the tribal
government.
NOW THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the parties agree as follows:
ARTICLE I. PURPOSE
1.1. General Purpose. The purpose of this Funding and Loan Agreement is
to memorialize certain agreements reached between the parties concerning
Lender's financial support for the acquisition of certain lands for the
Community's Initial Reservation, the development of portions of the Initial
Reservation for the operation of a tribal Gaming Enterprise, and the
<PAGE> 2
utilization of Lender's consulting services in the technical operation of the
proposed Gaming Enterprise on the Community's Initial Reservation.
1.2. Specific Obligations. Lender's financial support shall be provided
through two distinct mechanisms as set forth in this Agreement. Between the
execution of this Agreement and the date of opening the Community's Gaming
Enterprise, Lender shall have certain Nonreimbursable Funding Commitments to the
Community, as described in and subject to the provisions of Article III below.
Additionally, Lender shall loan the Community the funds necessary to acquire the
Initial Reservation, have those lands placed into trust for the benefit of the
Community, and plan, develop and construct the Gaming Enterprise, under the
terms and conditions set forth hereunder. Finally, in the event that Lender
fulfills its financial commitments to the Community as specified herein, the
Lender shall provide certain consulting services to the Community and its Gaming
Enterprise, as set forth in the Consulting Agreement attached hereto as Exhibit
A.
1.3. Lender's Right To Terminate. At any time during the term of this
Agreement, and upon thirty (30) days written notice to the Community, Lender may
terminate its Nonreimbursable Funding Commitments and its obligation to fund the
Loan under this Agreement. In the event that Lender exercises this right to
terminate, Lender shall have no further obligations under this Agreement, the
Community shall be entitled to keep all payments or other benefits that it has
received under this Agreement, any and all repayment rights that Lender would
otherwise have under the Loan Documents shall be extinguished, and the
Consulting Agreement attached hereto as Exhibit A shall be deemed null and void
and of no further force or effect.
ARTICLE II. DEFINITIONS
2.1. Definitions. Unless the context requires a different meaning, the
capitalized terms used in this Funding and Loan Agreement and the Exhibits
hereto shall have the meanings ascribed to them below.
a. "Advance" shall mean a disbursement or advance of proceeds of
the Loan by Lender.
b. "Available Commitment" shall mean, on the date of funding of
any Advance under this Funding and Loan Agreement, an amount to be agreed upon
by the parties as sufficient to achieve the purposes of this Agreement, but in
no event greater than Fifteen Million Dollars ($15,000,000.00), minus the
principal amount of the Loan outstanding on that date.
c. "Availability Period" shall mean the period commencing on the
Effective Date and ending on the Maturity Date, or such earlier date on which
Lender's obligation to make Advances may be terminated pursuant to the
provisions of this Funding and Loan Agreement.
d. "Base Rate" shall mean that rate of interest publicity
announced, quoted or published by Wells Fargo Bank from time to time, at its
Sacramento, California, office, as its "Prime Rate", plus one and one-half
percent (1.5%).
e. "Business Day" shall mean any day other than Saturday, Sunday
or any day on which banking institutions in the City of Sacramento, California,
are authorized or obligated by law or executive order to be closed.
f. "Community" shall mean United Auburn Indian Community, a
federally recognized Indian tribe.
-2-
<PAGE> 3
g. "Collateral" shall mean the property, assets and interests more
particularly described on Exhibit "C" attached hereto, together with any and all
additions, extensions, modifications, replacements, substitutions, and the
proceeds and products thereof.
h. "Default Rate" shall mean a per annum rate of interest which is
equal to the Base Rate plus four (4) percentage points.
i. "Effective Date" shall mean February 1, 1996.
j. "Event of Default" shall have the meaning set forth in Article
X below.
k. "Gaming Enterprise" shall mean the Gaming Enterprise owned by
the Community and located on the Initial Reservation of the Community.
l. "Initial Reservation" shall mean the first lands located in
Placer County, California, which shall be taken into trust for the benefit of
the Community by the Secretary of the Interior under the Auburn Indian
Restoration Act for the purpose, among other things, of establishing the Gaming
Enterprise.
m. "Loan Agreement" shall mean this Funding and Loan Agreement.
n. "Loan Documents" shall mean this Loan Agreement, the Note, and
the Security Agreement.
o. "Loan" shall mean the loan or loans made pursuant to this Loan
Agreement.
p. "Maturity Date" shall mean the date which corresponds to the
expiration of the five (5) year term of the Consulting Agreement.
q. "Nonreimbursable Funding Commitments" shall mean those
obligations of Lender to provide financial support to the Community which are
other than Advances of Loan proceeds, and which are described in Article III,
below.
r. "Note" shall mean the Line of Credit Promissory Note in the
aggregate principal amount not to exceed Fifteen Million Dollars
($15,000,000.00) to be executed by Community in favor of Lender and
substantially in the form of Exhibit "B" attached hereto.
s. "Obligations" shall mean all obligations of every nature of
Community from time to time owed to Lender under the Loan Documents including,
without limitation, the payment of the obligations evidenced by the Note.
t. "Opening Date" shall mean the date on which the Community's
Gaming Enterprise opens for business to the public.
u. "Person" shall mean and include any natural persons,
corporations, limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trust, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal entities,
and governments and agencies, including tribal governments and agencies and
political subdivisions thereof.
v. "Secretary" shall mean the Secretary of the Interior or his
authorized designee.
w. "Security Agreement" shall mean the Security Agreement to be
executed by Community, as Debtor, and Lender, as Secured Party, substantially
-3-
<PAGE> 4
in the form of Exhibit "C" attached hereto and granting to Lender a security
interest in the Collateral.
x. "Trust Acquisition Date" shall mean the date on which the
Secretary takes the Initial Reservation into trust for the benefit of the
Community for gaming purposes.
2.2. Other Definitional Provisions. References to "Articles",
"Sections" and "Subsections" shall be references to Articles, Sections and
Subsections, respectively of this Loan Agreement unless otherwise specifically
provided.
ARTICLE III. NONREIMBURSABLE FUNDING COMMITMENTS
3.1. Nature of Commitments. Commencing on the Effective Date of this
Agreement, and continuing until the Opening Date of the Gaming Enterprise,
Lender shall have and shall fulfill the following Nonreimbursable Funding
Commitments, the payments of which shall be nonrefundable and nonreimbursable by
the Community, and which payments are not Advances of Loan proceeds or otherwise
repayable by the Community:
a. Monthly Payment. Lender shall pay the Community the sum of
Twenty Two Thousand Five Hundred Dollars ($22,500.00) per month, payable on the
first day of each month. These funds shall be used by the Community for tribal
purposes, and Lender shall have no authority to determine how such funds shall
be expended by the Community.
b. Trust Acquisition Bonus Payment. Within ten (10) days after the
Trust Acquisition Date, Lender shall make an additional non-refundable payment
to the Community of One Hundred Twenty-Five Thousand Dollars ($125,000.00).
c. Stock Options. Within ten (10) days after the Trust Acquisition
Date, Lender shall cause to be issued to the Community options to purchase
thirty thousand (30,000) shares of the common stock of American Casino
Enterprises, Inc., to be exercised within five (5) years, at the market price of
said shares on the Trust Acquisition Date, which transaction shall be governed
by Rule 144 and other applicable Securities and Exchange Commission regulations
and requirements While this Agreement remains in effect, Lender shall cause to
be issued to Community options to purchase a like number of shares, under the
same terms and conditions, on the first, second, third and fourth anniversary
dates of the Trust Acquisition Date, such that if this Agreement continues to
remain in effect, the Community will be granted options to purchase one hundred
fifty thousand (150,000) shares of American Casino Enterprises, Inc. common
stock over a five year period.
ARTICLE IV. AMOUNT AND TERMS OF LOAN
4.1. Extension of Credit. Subject to the terms and conditions of this
Funding and Loan Agreement, Lender agrees to make Advances (all of which are
collectively referred to as the "Loan") to Community; provided, however, that
the principal amount of any such requested Advance shall not exceed the
Available Commitment.
4.2. Purpose of Loan. Loan proceeds advanced by Lender shall be used
exclusively for one or more of the following purposes:
a. to pay the costs required for compliance with the National
Environmental Policy Act (hereafter "NEPA") associated with the acquisition of
the Community's Initial Reservation;
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<PAGE> 5
b. to make purchase option payments on the lands to be acquired
for the Community's Initial Reservation, in an amount not to exceed Twenty Five
Thousand Dollars ($25,000.00) per month, prior to the time such lands are
acquired by the Community.
c. to pay the costs of acquiring the lands for the Community's
Initial Reservation, which lands shall be taken into trust for the Community by
the Secretary.
d. to pay the costs of developing, constructing, furnishing,
equipping and providing initial start-up capital for the Community's Gaming
Enterprise on the Initial Reservation in an amount not to exceed the Available
Commitment. The Gaming Enterprise shall initially be designed and used for the
conduct of class II gaming activities only (as defined under the Indian Gaming
Regulatory Act; hereafter "IGRA"). In the event that at that time, or
subsequently, the Community has entered into a tribal state compact with the
State of California that permits the conduct of class III gaming (as defined
under IGRA), Lender shall thereupon advance Loan funds to the Community to
expand and equip the existing Enterprise or construct a new Gaming Enterprise to
conduct class III gaming activities, but in no event shall the Available
Commitment by Lender under this Agreement exceed Fifteen Million Dollars
($15,000,000.00).
4.3. Note. The obligation of Community to repay the Loan to Lender
shall be evidenced by the Note.
4.4. Interest. The Loan shall bear interest upon the unpaid principal
balance at the Base Rate. Interest shall be due and payable monthly in arrears
on the first day of each month and shall be calculated based upon a three
hundred sixty (360) day year on a per diem basis.
4.5. Security Agreement. The obligation of Community to repay the Loan
to Lender shall be secured by a first position security interest in the
Collateral as evidenced by the Security Agreement. Community shall not sell,
assign, transfer, convey or otherwise encumber the Collateral except as
authorized under the Loan Documents.
4.6. Time and Manner of Payment. The Loan or so much thereof as remains
outstanding under the Note, together with all unpaid interest accrued thereon,
and all other amounts payable by Community with respect to the Note and under
the terms of the Loan Documents, which relate in any manner to the Loan, shall
be due and payable on the Maturity Date. All payments of principal, interest and
fees under the Loan Documents shall be made as provided, and on the terms set
forth, in the Loan Documents, and without notice, demand, deduction, setoff or
counterclaim in immediately available funds delivered to Lender in care of Table
Mountain Casino, 8184 Table Mountain Road, P. O. Box 445, Friant, California
93626. Notwithstanding any other loan repayment obligation in the Loan
Documents, it is expressly agreed that any and all net income of the Gaming
Enterprise received by the Community in any month in excess of Five Hundred
Thousand Dollars ($500,000.00) (after the recognition of consulting fees) shall
be used by the Community to repay the Loan. Unless there is then in existence an
Event of Default, any payments received pursuant to the Loan Documents shall be
applied as follows:
a. First, to the payment of any amounts due under the Loan
Documents other than principal or interest on the Note, of which Community has
been given notice or which is otherwise authorized pursuant to this Agreement;
b. Second, to all interest on the Note, accrued to the date of
such payment; and
c. Third to payment of principal on the Note.
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<PAGE> 6
4.7. Holidays. If any payment to be made by Community on the Loan
shall become due on a day other than Business Day, such payment shall be made on
the next succeeding Business Day, and such extension of time shall be included
in computing any interest due and payable as part of such payment.
4.8. Payments Free of Taxes. All payments made by Community in
connection with this Loan Agreement shall be made free and clear and without
reduction by reason of, any present and future taxes, levies, impositions,
deductions, charges or withholdings, which amounts shall be paid by Community.
4.9. Late Payment. Should any installment of principal and interest
not be paid when due, or should the principal balance of the Loan not be paid by
Community in full on the Maturity Date, or upon and after the occurrence of an
Event of Default and during the time period an Event of Default shall remain
uncured, the entire unpaid principal balance of the Loan shall thereafter bear
interest at the Default Rate. The application of the Default Rate of interest
shall not be interpreted or deemed to limit any of Lender's remedies under this
Loan Agreement or the other Loan Documents.
4.10. Immediately Available Funds. All borrowings and payments
hereunder shall be in U.S. Dollars and in immediately available funds.
4.11. Survivability. All of Community's obligations under this Article
IV shall survive the repayment of the Loan made hereunder.
4.12. Repayment. Community shall have the right to prepay the Loan, in
whole, or in part, at any time, without penalty. Any such prepayment shall be
accompanied by the payment of accrued interest on the amount prepaid to the date
of payment.
ARTICLE V. CONDITIONS TO LOAN
5.1. Conditions Precedent. Lender's obligation to make the Loan under
this Loan Agreement is conditioned on the satisfaction of the following
conditions precedent:
a. Delivery of Loan Documents. Community shall execute and
deliver to Lender (or shall cause to be executed and delivered to Lender) each
and all of the Loan Documents.
b. Consulting Agreement. Community and Lender shall have executed
the Consulting Agreement attached hereto as Exhibit A.
c. Licensing. Community or Community's Gaming Commission shall
have issued to Lender, it's owners, officers, agents and employees, the
appropriate tribal gaming licenses necessary for Lender to act as both Lender
under this Loan Agreement and Consultant under the Consulting Agreement, which
licenses shall extend through the Maturity Date.
d. Project Budget. Community and Lender shall have agreed upon
and approved a project budget for the use and distribution of Loan proceeds
under this Agreement.
e. Necessary Approvals. Lender shall have received approval, or
notice that no approval is required, of the Loan Documents and the Consulting
Agreement from the Secretary or such other federal officials as Lender shall
reasonably determine may be required.
ARTICLE VI. DISBURSEMENTS
6.1. Disbursement of Loan Proceeds. Provided that no Event of Default
exists under this Loan Agreement or any of the other Loan Documents, and that
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<PAGE> 7
the representations and warranties set forth in Article VI below remain true,
correct and complete in all material respects, and upon satisfaction of the
conditions precedent set forth in Article V above and Section 6.2 below, and
upon written approval of draw requests by Community and Lender, Lender shall
disburse the proceeds of the Loan into a checking account established for that
purpose, within five (5) business days after receipt and approval by Lender of
Community's request for an Advance of the Loan. Requests for Advances of Loan
proceeds shall be made on forms satisfactory to Lender and shall include such
documentation as is necessary to demonstrate the purpose of the Advance,
including but not limited to invoices, receipts, inventories, certificates of
insurance, lien waivers, and such other instruments as may be required by
Lender.
6.2. Conditions Precedent for Construction Draws. Prior to the
disbursement of any proceeds of the Loan for purposes of construction of the
Gaming Enterprise, (but not including engineering or architectural services),
Community shall have satisfied the following conditions:
a. Survey. Community shall furnish Lender with a survey of the
Initial Reservation prepared by an accredited land surveyor, which survey shall
locate all property lines, easements, rights of way or other physical matters
affecting the use or development of the property.
b. Final Plans. Community shall furnish Lender, and Lender shall
approve, final plans, drawings and specifications for the construction of the
Gaming Enterprise.
c. Construction Contracts. Community shall furnish Lender, and
lender shall approve, all construction contracts necessary for the development
and construction of the Gaming Enterprise.
d. Building Permits. Community shall furnish Lender with copies of
all permits issued by any governmental agency, if any, required to authorize
construction of the Gaming Enterprise.
e. Architect's Certificate. Community shall furnish Lender with a
written certification by the project architect, or other authorized official,
that the construction services to be paid for have been performed in a good and
workmanlike manner, and in accordance with the approved plans and Permits.
6.3. Change Orders. Without invalidating this Loan Agreement, any
additions, deletions, or revisions in work will be authorized by change orders.
Additional work performed by the general contractor without authorization of a
change order will not entitle him or her to an increase in the contract price or
an extension of the contract time. The Community will execute appropriate change
orders prepared by the architect or the engineer covering changes in the work to
be performed and any other claim of contractor for a change in the contract time
or the contract price. All change orders must be approved, in writing, by
Lender, Community, and the architect or the engineer.
ARTICLE VII. INSURANCE
7.1. Insurance Required. The Community will maintain, or cause to be
maintained, with responsible insurance carriers licensed to do business in the
State of California, insurance satisfactory to Lender as follows:
a. Builder's Risk Insurance. During the course of construction,
builder's risk insurance on an "all risk" basis on a completed value form for
full replacement value covering the interest of the Community (and its
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<PAGE> 8
contractors) in all work incorporated into the improvements and all materials
and equipment in, or about the Gaming Enterprise.
b. General Liability Insurance. Commercial general liability
insurance in amounts and with coverage consistent with gaming industry standards
for operations of similar size.
c. Worker's Compensation. Worker's Compensation and Employer's
Liability Insurance, subject to statutory limits under California law.
d. Other. Such other insurance with respect to the Gaming
Enterprise as Lender may reasonably require from time to time against other
insurable hazards.
e. Endorsements. The insurance policies required under subsections
a-d above shall name Lender as an additional insured, and shall include
provisions requiring not less than thirty (30) days written notice to Lender
before such policies are cancelled. Community shall provide Lender with
satisfactory evidence that the insurance requirements contained herein have been
and continue to be met.
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES
8.1. Consideration. As an inducement to Lender to execute this Loan
Agreement and to make the Loan to Community, Community represents, warrants and
covenants to Lender the truth and accuracy of the matters set forth in this
Article VII.
8.2. Due Organization. Community is a federally recognized Indian
tribe, duly organized and validly existing under its Constitution and Bylaws and
the laws of the United States of America.
8.3. Authority of Community. Community has full power and authority to
execute, deliver and perform its obligations under this Loan Agreement and under
all applicable Loan Documents.
8.4. Authorization and Enforceability. The Consulting Agreement, this
Loan Agreement, the Note and the Security Agreement have been duly authorized,
executed and delivered by Community and are the legal, valid and binding
obligations of Community, enforceable against Community in accordance with their
respective terms.
8.5. Licenses, Permits and Authorizations. All certificates, permits,
licenses and other authorizations of government bodies or authorities which are
necessary to permit the operation of the Gaming Enterprise have been obtained
and are in full force and effect or good faith efforts will be used to obtain
the same as appropriate.
8.6. No Conflict. The execution, delivery and performance of the Loan
Documents will not result in a breach of or constitute a default under any
mortgage, deed of trust, lease, loan or credit agreement, or any other agreement
to which Community is a party or by which Community may be bound or affected,
nor will the execution, delivery and performance of the Loan Documents conflict
with or result in a breach of any present order, rule or regulation applicable
to the Community.
8.7. Title to Collateral. Community holds good and marketable title to
the Collateral, free and clear of all liens, claims and encumbrances, other than
those contemplated by this Agreement and the other Loan Documents.
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<PAGE> 9
ARTICLE IX. COVENANTS
9.1. Consideration. As an inducement to Lender to execute this Loan
Agreement and to make the Loan to Community, Community covenants and agrees that
so long as any credit hereunder shall be available and until payment in full of
the Loan, unless Lender shall otherwise consent in writing, it shall do all of
the following:
a. Taxes and Other Liabilities. Community shall pay and
discharge, before the same become delinquent and before penalties accrue
thereon, all taxes, assessments and governmental charges upon or against it or
the Collateral.
b. Certain Notices. Community shall promptly notify Lender of the
occurrence of any event or condition which, if not remedied would result in a
material, adverse change in the financial condition of Community.
c. Loan Documents. Community shall, at all times, comply with all
of the provisions of this Loan Agreement and the other Loan Documents.
d. Further Assurances. Community shall execute and deliver from
time to time, promptly after any reasonable request therefor by Lender, any and
all instruments, agreements and documents necessary to accomplish the intent of
the Loan Documents, including any UCC-1 financing statements, and shall take
such other action as may be reasonably necessary or desirable to consummate the
transactions contemplated by the Loan Documents.
ARTICLE X. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement:
10.1. Failure to make payments when due. Failure to repay the Loan on
the Maturity Date or the failure to make any required payment or pay any monies
within five (5) days after such payment or monies are due under the Note or
other Loan Documents.
10.2. Default in other Loan Documents. Failure to comply with any of
the covenants made by Community in this Loan Agreement or failure to comply with
any obligation or condition of any of the Loan Documents within the time period
specified therein or an Event of Default shall occur under any of the Loan
Documents.
10.3. Breach of other Agreements. Any breach or default under any other
material agreement including, without limitation, the Consulting Agreement, (and
which remains uncured or continues beyond any applicable grace Period).
10.4. Bankruptcy or Insolvency. Any of the following shall occur:
a. Insolvency of the Community, or
b. If any governmental authority, or any court at the instance
thereof, shall take possession of any substantial part of the property of, or
assume control over, the affairs or operations of, or a receiver or trustee
shall be appointed over all or any substantial part of, or a writ or order of
attachment or garnishment shall be issued or made against any of the property of
Community, and any such writ or order of attachment or garnishment shall remain
undischarged for a period of ninety (90) days or;
c. If Community shall make an assignment for the benefit of
creditors; or shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement or
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<PAGE> 10
readjustment of debts, dissolutions, liquidation, or similar proceedings
relating to the Community under the laws of any jurisdiction; or
10.5. Representation or Warranty. Any representation or warranty made
by Community in this Loan Agreement or any other Loan Document at the date
hereof or at the date of any disbursement of the Loan shall be materially false.
10.6. Injunction. An order or decree shall be entered in any court of
competent jurisdiction enjoining or restraining the consummation of the
transactions contemplated by this Loan Agreement or any of the other Loan
Documents, which order or decree shall not be vacated within sixty (60) days
after it is entered.
10.7. Invalidity. Any of the Loan Documents shall, at any time and for
any reason except as may be caused by Lender, cease to be valid, binding, and
enforceable against Community or Community shall contest or deny the validity or
enforceability of any of the Loan Documents.
10.8. Cure Periods. Except for defaults involving the breach of an
obligation to pay money, and for the Events of Default described in Sections
10.6 and 10.7, any default is curable and shall be deemed cured, if Community
immediately commences to cure said default within thirty (30) days after receipt
of Lender's notice of default, provided that if a default cannot reasonably be
cured within thirty (30) days, Community shall have an additional period of
thirty (30) days to cure the default, and Community diligently proceeds to cure
said default to completion. Breach of an obligation to pay money shall give rise
to an Event of Default upon the expiration of any applicable cure period
referenced in this Article X.
ARTICLE XI. REMEDIES
All rights and remedies of Lender under this Article XI shall be in
addition to all rights and remedies of Lender set forth in the other Loan
Documents.
11.1. Rights of Lender. On the occurrence of any Event of Default:
a. Lender may declare the Loan to be, and the same shall
forthwith become due and payable without presentment, demand, protest or further
notice of any kind, together with accrued interest thereon; and
b. Lender shall have all of the rights and remedies provided in
the Loan Documents.
11.2. Setoff. On the occurrence of an Event of Default, Lender may, to
the extent permitted by law, at any time and from time to time, without notice
to Community or any other Person (any such notice being expressly waived),
setoff, appropriate and apply against and on account of any obligations of
Community, irrespective of whether or not Lender shall have made any demand
therefor any indebtedness at any time held or owing by Lender to or for the
credit or the account of Community.
11.3. Remedies Cumulative. Subject to the provisions of Article XII,
all rights and remedies of Lender provided for in this Loan Agreement are
cumulative and shall be in addition to any and all of the rights and remedies
available under the Note or any other Loan Document, or available at law or in
equity. No exercise by Lender of any right or remedy shall in any way constitute
a cure or a waiver of any Event of Default hereunder, or invalidate any action
pursuant to any notice of default, or prejudice Lender in the exercise of any
other right or remedy available to it. No failure on the part of Lender to
exercise, and no delay in exercising, any right or remedy shall operate as a
waiver or otherwise preclude enforcement of any of its rights or
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<PAGE> 11
remedies; nor shall any single or partial exercise of any right or remedy
preclude any further exercise thereof or of any other right or remedy.
ARTICLE XII. ENFORCEMENT
12.1. Judicial Enforcement. Subject to the limitations set forth in
Section 12.2, either party to this Agreement may seek appropriate relief in the
courts of the United States, unless the parties agree to an alternative forum,
for the breach of the Agreement by the other party. In the event that a federal
court determines that it cannot exercise jurisdiction over such a cl im, then
and only then may the parties seek relief in the appropriate California state
court.
12.2. Consent to Suit to Enforce Agreement. The Community waives any
immunity from suit it may have solely for purposes of enforcement of the terms
of this Loan Agreement by Lender. This waiver is a limited waiver of sovereign
immunity, and any damages which may arise as a result of the Community's or its
officially recognized representatives' action shall be limited exclusively to
the Community's interest in the Collateral or revenues derived from the
operation of the Gaming Enterprise. This consent to suit is granted solely for
purposes of enforcing this Agreement in any subsequent court proceeding
commenced for that purpose. Nothing contained in this Section shall be construed
to confer any benefit, tangible or intangible, on any person or entity not a
party to this Agreement or as a waiver with respect to any such third person or
entity. The Community's waiver hereunder extends only to a direct action by
Consultant for money damages, specific performance, foreclosure against
Collateral, injunctive relief, and/or declaratory relief for the Community's
breach of this Agreement, as limited by this Section.
12.3. No Exhaustion of Tribal Court Remedies. The parties hereby agree
that the assumption of jurisdiction by any court of competent jurisdiction
authorized herein shall not be delayed or curtailed by any doctrine requiring
exhaustion of tribal court remedies, as the parties have expressly agreed that
either federal court or state court jurisdiction is appropriate under the Loan
Documents and the Community does not have a tribal court.
12.4. Limitation on Recourse. Lender agrees that
a. Any judgment or decree in any action brought to enforce the
Obligations shall be enforceable against Community only to the extent of
Community's interest in the Collateral, and
b. Any such judgment or decree shall not be subject to execution
upon or be lien upon the other assets of Community; provided, however, nothing
contained in this Loan Agreement shall affect or limit the ability of Lender to
enforce any of its rights or remedies with respect to the Collateral.
ARTICLE XIII. NO MANAGEMENT SERVICES PROVIDED
The parties expressly acknowledge that this is a Funding and Loan
Agreement and that Consultant shall not engage in any management activities or
perform any management services with respect to the Community's Gaming
Enterprise or any future gaming facilities of the Community. It is expressly
agreed that neither Consultant nor any of its officers, directors or employees
shall serve on the Management Committee or Board of Directors of the Enterprise
or have any vote in the deliberations of the Management Committee.
ARTICLE XIV. NO LEASE OR POSSESSORY INTEREST
The parties to this Loan Agreement agree and expressly warrant that
this Agreement is not a lease and does not convey any present or future interest
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<PAGE> 12
whatever in the building or property on which the Community's Gaming Enterprise
is to be located, or any proprietary or possessory interest in the Enterprise
itself. The Community maintains the sole proprietary and possessory interest in
the Enterprise. Moreover, the parties to this Agreement further warrant and
understand that this Agreement is for financing only and does not relate to the
management of the Enterprise; does not grant to Consultant the exclusive right
to operate the Enterprise; does not prohibit the Community from encumbering its
lands; and that the Agreement is not "relative to Indian lands" within the
meaning of 25 U.S.C. Section 81.
ARTICLE XV. MISCELLANEOUS
15.1. Successors and Assigns. The te ms and provisions o(pound) this
Loan Agreement and the other Loan Documents shall be binding upon and inure to
the benefit of Community, Lender and their respective successors and assigns,
except that Community shall not assign any of its rights hereunder without the
express written consent of Lender.
15.2. Amendments. This Loan Agreement and the Loan Documents may not be
amended or modified in any manner nor any material provision waived without the
written consent of Lender and Community.
15.3. Notices. All notices, requests and demands to be made hereunder
to the parties hereto shall be in writing and shall be delivered by hand or sent
by registered or certified mail, postage pre-paid, return receipt requested,
through the United States Postal Service or by overnight commercial delivery
service to the addresses shown below or such other addresses which the parties
may provide to one another in accordance herewith. Such notices, requests, and
demands, if sent by mail, shall be deemed given three (3) Business Days after
deposit in the United States mail, and, if delivered by hand, shall be deemed
given when delivered:
To Community: United Auburn Indian Community
ATTN: President
661 Newcastle Road, #1
Newcastle, California 95658
To Lender: Table Mountain/ACES Joint Venture
c/o Table Mountain Casino
8184 Table Mountain Road
P. O. Box 445
Friant California 93626
15.4. Failure or Indulgence not Waiver. No failure or delay on the part
of Lender in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other rights, powers, or privilege.
15.5. Severability. If any provision in this Loan Agreement or any of
the Loan Documents shall be invalid, illegal or unenforceable, such provision
shall be severable from the remainder of such agreement and the validity,
legality and enforceability of the remaining provisions shall not in anyway be
effected or impaired thereby.
15.6. Titles and Headings. The various headings used in this Loan
Agreement are inserted for convenience only and shall not in way affect the
meaning or construction of this Loan Agreement or any provision hereof.
15.7. Choice of Law. This Loan Agreement, the other Loan Documents and
the rights and obligations of the parties hereto shall be governed by the laws
of the United States.
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15.8. Counterparts. This Loan Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one agreement.
15.9. Time is of the Essence. Time is of the essence of this Loan
Agreement and each and every provision hereof.
15.10 No Waiver. No disbursement of proceeds of the Loan shall
constitute a waiver of any conditions to Lender's obligation to make further
disbursements nor, in the event Community is unable to satisfy any such
conditions, shall any such waiver have the effect of precluding Lender from
thereafter declaring such inability to constitute a breach of this Loan
Agreement.
15.11 Incorporation of Recitals and Exhibits. The preamble, recitals,
and exhibits hereto are hereby incorporated into this Loan Agreement.
15.12 Attorneys' Fees. In the event of any litigation between Lender
and Community arising out of the obligations of either party under this Loan
Agreement or concerning the meaning or interpretation of any provision contained
herein, the losing party shall pay the prevailing party's costs and expenses of
such litigation, including, without limitation, reasonable attorneys' fees.
15.13 Consents. Unless otherwise expressly provided herein, neither
Lender nor Community shall unreasonably withhold or delay the giving of any
consent or approval required pursuant to this Loan Agreement or pursuant to any
other Loan Document.
IN WITNESS WHEREOF, Community and Lender have caused this Agreement to
be duly executed and delivered as of the date first above written.
UNITED AUBURN INDIAN COMMUNITY TABLE MOUNTAIN/ACES JOINT VENTURE
By: \s\Jessica Tavares By: \s\Ronald J. Tassinari
----------------------------- ---------------------------------
JESSICA TAVARES, President RONALD J. TASSINARI
By: \s\Vern Castro
---------------------------------
VERN CASTRO
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<PAGE> 14
EXHIBIT A
CONSULTING AGREEMENT
This Consulting Agreement is entered into and effective this 1st day of
February, 1996, by and between the United Auburn Indian Community, 661 Newcastle
Road, #1, Newcastle, California 95658, a federally recognized Indian Tribe
(hereafter "Auburn" or the "Community") and Table Mountain/ACES Joint Venture,
a joint venture between American Casino Enterprises, Inc., 6243 Industrial Road,
Las Vegas, Nevada 89118, a Nevada corporation, and the Table Mountain Band of
Indians of the Table Mountain Rancheria, P. O. Box 410, Friant, California
93623, a federally recognized Indian Tribe (hereafter "Consultant").
RECITALS
WHEREAS, the Community is a federally recognized Indian Tribe with a
governing body recognized by the Secretary of the Interior; and
WHEREAS, under the Auburn Indian Restoration Act, P.L. 103 434, 25
U.S.C. Section 1300(1), the Secretary of the Interior shall take into trust for
the Community certain lands located in Placer County, California; and
WHEREAS, the Community desires to expedite the development of the
economy of the United Auburn Indian Community in order to improve tribal
self-government and economic self-sufficiency, to enable the Community better to
serve the social, economic, educational and health needs of its members and to
provide its members with opportunities to improve their own economic
circumstances without having to work outside of the tribal community; and
WHEREAS, the Community seeks to establish and operate a Tribal Gaming
Enterprise as the best feasible means by which to accomplish the Community's
objectives as described in the preceding paragraph (hereafter the "Enterprise")
and
WHEREAS, the Enterprise shall be managed by the Community through a
Management Committee appointed by the Community's governing body and comprised
solely of members of the Community; and
WHEREAS, the Community and the Management Committee require technical
assistance, advice, training and consulting services in connection with the
development, construction, operation and business affairs of the Enterprise in
order to maximize the revenues and employment opportunities derived by the
Community from the Enterprise; and
WHEREAS, the Community has determined that Consultant can provide the
technical assistance, advice, training and consulting services required by the
Community while respecting the sovereign rights and authority of the Community;
and
WHEREAS, the parties acknowledge and agree that under this Agreement,
Consultant shall not manage, direct, control or have a vote concerning any
aspect of the Enterprise, the management of which shall be exercised exclusively
by the Community.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
I. ENGAGEMENT OF CONSULTANT AND SCOPE OF CONSULTING SERVICES
A. Engagement of Consultant
The Community has and shall continue to have the sole proprietary
interest in and management responsibility for the conduct of all gaming
<PAGE> 15
activities conducted by the Enterprise. The Community is seeking technical
assistance and expertise in the operation of its gaming activities and hereby
retains and engages the Consultant to provide consulting services to the
Community and the Enterprise, and to the Enterprise's management and employees
as specified herein.
B. Consulting Services
Consultant shall consult with and provide technical assistance,
training and advice to the Community, members of the Management Committee of the
Enterprise and to Enterprise employees and staff, in accordance with paragraph E
below, concerning all matters relating to the development, construction,
operation and business activities of the Enterprise including but not limited to
organization and administration, employee training programs, planning and
development, gaming activities, internal controls and accounting procedures,
cage operations, engineering and maintenance, housekeeping, human resources,
management information services, marketing and advertising, purchasing,
surveillance, security, and food and beverage operations, all as set forth in
more detail in Exhibit A, attached hereto.
C. Expansion of Gaming Facilities
In the event that the Community acts to expand the Enterprise or to add
additional gaming facilities during the term of this Agreement, Consultant will
provide the above-described consulting services with respect to any new or
expanded gaming facilities developed by the Community during the term of this
Agreement.
D. Cooperative Efforts
Both parties to this Agreement shall exercise their best efforts to
fully cooperate with each other in the performance of the services to be
rendered hereunder, provided, however, that it shall be within the sole
discretion of the Community to determine whether or not to act upon or implement
the technical assistance, consultation or advice provided by Consultant.
E. Services Provided at Direction of Community
The determination as to what specific consulting services [identified
in Exhibit A] shall be provided by Consultant, and the format in which the
Consultant's reports or recommendations are to be provided shall be determined
exclusively by the Community, and the consulting services provided hereunder
shall be performed by Consultant in accordance with and under such tribal
direction.
1. The Consultant has provided the Community with a list of areas
(Exhibit A) in which it is prepared to provide consulting services. The
Consultant will update this list as necessary during the term of this Agreement.
2. The Community shall, from time to time and after consultation
with the Consultant, identify and issue consulting assignments for specific
tasks to be performed by the Consultant.
3. The Consultant will perform in accordance with the terms of this
agreement in order to accomplish the consulting assignments issued by the
Community. Consultant will report to Community on all work performed under each
consulting assignment.
4. Payment under this Agreement shall be conditioned upon compliance
by the Consultant with the terms and conditions of this Agreement.
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The Community's Management Committee shall review the work performed by the
Consultant on a monthly basis, but the decision to adopt, approve or implement
any proposal, suggestion or recommendation made by Consultant shall rest
exclusively with the Community.
II. NO MANAGEMENT SERVICES PROVIDED
The parties expressly acknowledge that this is a Consulting Agreement
and that Consultant shall not engage in any management activities or perform any
management services with respect to the Enterprise or any future gaming
facilities of the Community. It is expressly agreed that neither Consultant nor
any of its officers, directors or employees shall serve on the Management
Committee of the Enterprise or have any vote in the deliberations of the
Management Committee.
III. TERM OF AGREEMENT
A. Term
Consultant shall have certain funding obligations to the Community
commencing on February 1, 1996, as specified herein. For purposes of providing
consulting services with respect to the operation of the Gaming Enterprise, this
Agreement shall have a term which commences on the Effective Date, as defined
below, and which continues for a period of sixty (60) months thereafter, unless
sooner terminated under VI.
B. Effective Date
For purposes of providing consulting services with respect to the
operation of the Gaming Enterprise, this Agreement shall be effective on the
date the Gaming Enterprise opens for business to the public.
IV. CONFIDENTIALITY
The parties agree that they will not disclose the financial terms of
this Agreement to third parties unless such disclosure is required by federal,
state or tribal law or regulation, provided, however, that nothing contained
herein shall be deemed to prohibit Consultant from making public disclosures
required by law as a publicly held corporation. Consultant further agrees that
it will not disclose to third parties business and financial information of a
confidential nature concerning the Enterprise that it learns in the course of
carrying out its duties under this Agreement, including, but not limited to,
information concerning revenues, numbers of patrons, expenses, financial plans,
or budgets. Upon written request of one party, the requirements of this Section
may be waived by the other party in writing, such waiver to be conditioned on
whatever terms are included in the written waiver.
V. COMPENSATION OF CONSULTANT
In consideration of the satisfactory@ performance of the consulting
services as described herein, Consultant shall receive from the Community, on a
monthly basis during the term of this Agreement following the Effective Date as
specified in Section III.B. above, compensation payable as follows:
A. Base Consulting Fee
Consultant shall receive a Base Consulting Fee of One Hundred Fifty
Thousand Dollars ($150,000.00) per month. The Base Consulting Fee shall be paid
to the Consultant by the fifth (5th) day of the following month.
B. Additional Consulting Fee
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In addition to the Base Consulting Fee, Consultant shall be paid an
Additional Consulting Fee in any month in which the Net Income of the Enterprise
(before the recognition of any Consulting Fees) exceeds One Million Dollars
($1,000,000.00). The Additional Consulting Fee shall be calculated as follows:
1. Subject to the provisions of subsection B.2. below, the Additional
Consulting Fee shall be Thirty Seven Thousand Five Hundred Dollars ($37,500.00)
for each increment of Two Hundred Fifty Thousand Dollars ($250,000.00) of Net
Income, or any portion thereof, above One Million Dollars ($1,000,000.00)
(before the recognition of any Consulting Fees) for that month.
2. Subsection B.1. notwithstanding, in the event that all three (3) of
the following conditions are met, the Additional Consulting Fee shall be reduced
as provided herein. The three (3) conditions required for reduction of the
Additional Consulting Fee shall be:
(a) The Loan (and all advances made thereunder) to the Community by
Consultant pursuant to certain Loan Documents between the parties has been
repaid in full; and
(b) The Community has entered into a compact with the State of
California and has begun the operation of class III gaming at the Gaming
Enterprise; and
(c) Net Income of the Gaming Enterprise in that month exceeds Three
Million Dollars ($3,000,000.00) (before the recognition of any Consulting Fees).
In the event that all three (3) of the above conditions are met in any month,
the Additional Consulting Fee shall be Thirty One Thousand Two Hundred Fifty
Dollars ($31,250.00) for each increment of Two Hundred Fifty Thousand Dollars
($250,000.00) of Net Income, or any portion thereof, above Three Million Dollars
($3,000,000.00) (before the recognition of any Consulting Fees) for that month.
3. Any Additional Consulting Fee payable under this Agreement shall be
paid to Consultant by the twentieth (20th) day of the following month.
C. No Percentage Fees
Nothing contained herein shall authorize or permit the calculation of
any Consulting Fee based upon a percentage of gross or net revenue or income of
the Enterprise.
D. Generally Accepted Accounting Principles
For purposes of this Section VI, Net Income of the Enterprise shall be
calculated in accordance with generally accepted accounting principles, but
shall not include any Consulting Fees paid or payable under this Agreement.
VI. TERMINATION
A. Termination for Cause
1. Either party may terminate this Agreement for the following
causes:
(a) Committing or knowingly allowing to be committed any act of
theft or embezzlement; however, theft or embezzlement by an officer or employee
of Consultant without Consultant's knowledge shall not be cause for
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termination of this Agreement, as long as Consultant repays to the Enterprise
all sums which said officer or employee may have stolen, or embezzled, as soon
as Consultant becomes aware of facts from which a reasonable person would
conclude that such acts occurred.
(b) Committing or allowing to be committed any material breach of
the Agreement. A material breach of this Agreement shall be a failure of either
party to perform any duty or obligation required of a party under this
Agreement.
(c) A material breach of any of Consultant's representations that
adversely affects its ability to carry out its responsibilities under this
Agreement.
2. Neither party may terminate this Agreement on grounds of material
breach unless it has provided written notice to the other party of its intention
to declare a default and to terminate this Agreement, and the defaulting party
fails to cure or take substantial steps to cure the default within twenty (20)
days of receipt of such notice. The discontinuance or correction of the material
breach shall constitute a cure thereof.
3. In the event of termination on account of Consultant's breach,
all undistributed Enterprise funds to which Consultant otherwise would be
entitled under this Agreement shall be placed in an interest-bearing escrow
account for an initial period of 120 days; if Consultant acts within that time
to invoke its remedies under Section VI.B of this Agreement, such funds shall
remain in that account until the dispute has been resolved.
4. If Consultant fails to invoke its remedies under Section VI.B of
this Agreement within 120 days after termination on account of its breach the
funds in said account shall be released to the community at the end of that
period. Otherwise, the funds shall remain in the account until the dispute has
been finally resolved or adjudicated, at which time the funds and accrued
interest will be released to the prevailing party. In addition, if the dispute
is resolved in favor of the Community, the Community shall be paid all the sums
owed to it by Consultant as of the date of termination.
B. Remedies for Breach
1. Consultant shall in good faith attempt to resolve any grievances,
complaints or disputes that are brought to its attention by the Management
Committee. The Management Committee will also notify Consultant in writing of
any serious problems with Consultant's performance at Consultant's address of
record. Within ten (10) days of receipt of such notice, unless the problem has
been resolved, Consultant shall meet and confer in good faith with the
Management Committee to determine what remedial action, if any, is necessary.
2. Subject to the limitations set forth in subsection 1, either
party to this Agreement may seek appropriate relief in courts of the United
States, unless the parties agree to an alternative forum, for the breach of the
Agreement by the other party. In the event that the federal court determines
that it cannot exercise jurisdiction over such a claim, then and only then may
the parties seek relief in the appropriate California state court. The
limitations on remedies for breach are as follows:
(a) The only breaches by the Community for which an action may be
brought hereunder by Consultant shall be the failure to pay compensation when
and in amounts due or for the unauthorized termination of this Agreement.
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(b) The Community's consent to suit hereunder extends only to a
direct action by Consultant for money damages, specific performance, injunctive
relief, and/or declaratory relief for the Community's breach of this Agreement
by Consultant.
(c) The Community's maximum liability for money damages for
breach of this Agreement shall not exceed an amount equal to what Consultant
reasonably could be expected to have earned as compensation between the date of
the Community's breach and the remainder of the term of this Agreement.
(d) The only assets or income of the Community which may be
subject to levy and execution in the event that a judgment is entered against
the Community for its breach of this Agreement shall be the revenues of the
Enterprise during the term of this Agreement which but for the Community's
breach, would have been paid to Consultant as compensation during the remainder
of the term of this Agreement had it not been breached.
VII. NOTICE
Any notice required to be given pursuant to this Agreement shall be
delivered by Express Mail or overnight courier service, addressed as follows:
to the Community:
United Auburn Indian Community
ATTN: President
661 Newcastle Road, #1
Newcastle, California 95658
and to Consultant at:
Table Mountain/ACES Joint Venture
Attn: Vern Castro or Ronald J. Tassinari
c/o Table Mountain Casino
8184 Table Mountain Road
P. O. Box 445
Friant, California 93626
or to their designees.
VIII. COVENANT OF GOOD FAITH AND FAIR DEALING
Consultant and the Community hereby specifically warrant and represent
to each other that neither shall act in any manner which would cause this
Agreement to be altered, amended, modified, canceled, or terminated (except for
cause) without the consent of the other.
IX. CONSENT TO SUIT TO ENFORCE AGREEMENT.
The Community waives any immunity from suit it may have solely for
purposes of enforcement of the terms of this Agreement by Consultant. This
waiver is a limited waiver of sovereign immunity, and any damages which may
arise as a result of the Community's or its officially recognized
representatives' action shall be limited exclusively to the Community's interest
in revenues derived from the operation of the Enterprise as set forth in Section
VI.B.2(c) and (d). This consent to suit is granted solely for purposes of
enforcing this Agreement in any subsequent court proceeding commenced for that
purpose. Nothing contained in this Section shall be construed to confer any
benefit, tangible or intangible, on any person or entity not a party to this
Agreement or as a waiver with respect to any such third person or entity.
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<PAGE> 20
X. ASSIGNMENT, SUBCONTRACTS AND REPRESENTATIONS
A. Consultant shall not assign or subcontract any of its obligations
under this Agreement without the Community's written consent, provided that
Consultant may assign this contract unilaterally to a wholly owned subsidiary of
Consultant as long as said subsidiary does not involve any change in principals,
directors, partners or ownership.
B. The Community and Consultant further warrant and represent that they
shall take all actions necessary to insure that this Agreement shall remain in
good standing at all times and will fully cooperate with each other in achieving
the goals of this Agreement.
C. Consultant further specifically warrants that no officer, director,
or employee of Consultant, presently is charged with or has been convicted of
any crime involving theft, fraud, misrepresentation, embezzlement or other acts
of dishonesty, and that no person convicted of any such act knowingly will be
allowed to become an officer, director or employee of Consultant.
XI. AUTHORITY TO EXECUTE
Each party warrants to the other that it has full authority to execute
this Agreement and will, upon written request by the other party, provide
satisfactory written evidence thereof.
XII. NO LEASE OR POSSESSORY INTEREST
The parties to this Agreement agree and expressly warrant that this
Agreement is not a lease and does not convey any present or future interest
whatever in the building or property on which the Community's Enterprise is to
be located, or any proprietary or possessory interest in the Enterprise itself.
The Community maintains the sole proprietary and possessory interest in the
Enterprise. Moreover, the parties to this Agreement further warrant and
understand that this Agreement is for consulting services only and does not
relate to the management of the Enterprise; does not grant to Consultant the
exclusive right to operate the Enterprise; does not prohibit the Community from
encumbering its lands; and that the Agreement is not "relative to Indian lands"
within the meaning of 25 U.S.C. Section 81.
XIII. CONFLICT OF INTEREST PROHIBITIONS
A. The parties represent that no payments have been made and agree that
no payment will be made to any individual elected member of the Community's
tribal government or relative of any elected member of the Community's tribal
government for the purpose of obtaining or maintaining this Agreement or any
other privilege for the Consultant. For purposes of this paragraph, "relative"
means an individual who is related to and lives in the immediate household of an
elected member of the Community's tribal government.
B. No party in interest in Consultant is an elected member of the
government of the Community, or a relative of said member as defined by the
Secretary of the Interior.
XIV. MODIFICATION
This Agreement may be modified only with the formal written agreement
of both parties.
XV. SEVERABILITY
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In the event any provision of this Agreement is for any reason held to
be illegal or unenforceable, such provision will be severed or otherwise
modified as may best preserve the intention of the parties hereto, and the
Agreement as so modified will remain in full force and effect.
XVI. RECITALS INCORPORATED
The recitals set forth above are a material part of this Agreement, and
are incorporated herein as if fully set forth here.
XVII. GOVERNING LAW
This Agreement shall be governed by the laws of the United States.
XVIII. ENTIRE AGREEMENT
This Agreement is the entire agreement between the parties with respect
to the subject matter of this Agreement and it is expressly understood that
there are no oral, written or collateral agreements between the parties or other
parties with a financial interest in the subject matter of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on this 1st day of February, 1996.
UNITED AUBURN INDIAN COMMUNITY TABLE MOUNTAIN/ACES JOINT VENTURE
By: \s\Jessica Tavares By: \s\Ronald J. Tassinari
----------------------------- ------------------------------
JESSICA TAVARES, President RONALD J. TASSINARI
By: \s\Vern Castro
------------------------------
VERN CASTRO
[EXHIBITS OMITTED]
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<PAGE> 1
Exhibit 10.16
LEASE
THIS LEASE AGREEMENT ("Lease") made and entered into this 14th day of
March 1996 by and between TROPICANA TRAIL LIMITED PARTNERSHIP, a Nevada Limited
Partnership (hereinafter referred to as "Lessor") and AMERICAN CASINO
ENTERPRISES (hereinafter referred to as "Tenant").
WITNESSETH:
1. DEMISED PREMISES.
Lessor hereby Leases to Tenant, and Tenant hereby leases from
Lessor, those certain premises (the "Premises"), located in the Building at 6787
W. Tropicana, Las Vegas, Nevada (the "Building"), described and shown on Exhibit
"A" attached hereto and incorporated herein by reference. This Lease is made
upon the following terms, covenants and conditions to which the parties mutually
agree.
2. TERM; RENEWAL.
A. The term of this Lease ("Lease Term") shall commence on the
Commencement Date and shall continue for a term of SIXTY (60) months from and
after said date of commencement. The "Commencement Date" of this Lease shall be
the first-occurring of Tenant's actual occupancy of the Premises or 1 June 1996.
B. If the Premises have not been substantially completed due to
any omission, delay, or default by Tenant or anyone acting under or for Tenant
or due to any cause other than Lessor's default, Lessor shall have no liability
therefor, and the obligations of this Lease (including, without limitation, the
obligation to pay rent) shall nonetheless commence as of the Commencement Date.
C. Any right of Tenant to renew or extend this Lease (if any)
shall be governed solely by the provisions of the Option Agreement, attached
hereto as Exhibit "E" and incorporated herein.
3. RENTAL/PERCENTAGE RENT.
A. Base Monthly Rental. Tenant agrees to pay a Base Monthly
Rental equal to Six thousand nine hundred and six Dollars ($6906.00), (as such
amount may be adjusted by the CPI Adjustment as set forth in paragraph 3.B
hereof). Tenant shall pay, in addition to the Base Monthly rental, its pro-rata
share of Additional Rental as set forth in Paragraph 5 hereof. Rental payments
shall be payable in advance on or before the first day of the month for which
the rent is due. Tenant's obligation to pay rent shall begin on the Commencement
Date.
B. CPI Adjustment. Lessor and Tenant agree that after the first
year of this Lease, the Base Monthly Rental shall be adjusted for any increase
(but not for a decrease) in the cost of living. This adjustment ("CPI
Adjustment") shall be made each year in accordance with changes in the Consumer
Price Index for All Urban Consumers, All City Average, subgroup "All Items" over
such Index for the month in which the Lease commenced in the following manner:
(i) The Price Index for the month immediately preceding the
Commencement Date of this Lease shall be designated as the
Base Price Index.
(ii) After the first year of this lease period, if the Index has
increased over the preceding year, the rental amount shall be
adjusted effective the first day of each succeeding year by
multiplying the monthly rental charged in the first year by a
fraction, the numerator of which is the Price Index for the
last month of the year preceding the year for which the
<PAGE> 2
adjustment is made, and the denominator of which is the Base
Price Index.
(iii) This method of differential adjustment shall continue for the
term of the Lease and any extensions, renewals or options.
(iv) Should the Index described above no longer be in use or
published by the U.S. Government, the most broadly based
national index published by the U.S. Government shall be
substituted in its place.
C. Proration. In the event the term of this Lease commences other
than on the first day of a calendar month, or if the termination date is not the
last day of a month, a prorated monthly installment shall be paid for the
fractional month during which this Lease commences and/or terminates. Payment of
rent shall be made by Tenant to Lessor at such addresses as shall from time to
time be designated by Lessor to Tenant in writing.
D. Late Payment. If any payment of Base Monthly Rental is not
received by Lessor by the fifth (5th) day of the calendar month in which it is
due, then that Base Monthly Rental payment shall be increased by five percent
(5%). Accordingly, if received after the fifth (5th) day of the month, Base
Monthly Rental shall be: base monthly rental plus five percent (5%). Nothing in
this Lease shall be construed to permit the payment of rent after the date on
which it is due. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Tenant. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
excuse or cure any default by Tenant under this Lease, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
4. SECURITY DEPOSIT.
Tenant has deposited the sum of Six thousand nine hundred and six
($6906.00) with Lessor as security for the full and faithful performance of each
and every term, covenant and condition of this Lease. In the event that the
Tenant defaults with respect to any of its obligations under this Lease,
including but not limited to the payment of any rent, Lessor may use, apply or
retain the whole or any part of the security for the payment of any rent in
default or for any other sum which Lessor may expend by reason of the Tenant's
default, including any damages or deficiency in the reletting of the Premises.
If Tenant shall fully and faithfully comply with all the terms, provisions,
covenants and conditions of this Lease, the security or any balance thereof
shall be returned to Tenant after the time fixed for expiration of this Lease.
Tenant shall not be entitled to interest on the security. In the event of a sale
of the Building by Lessor, Lessor shall have the right to transfer the security
to the purchaser for the benefit of Tenant and such transfer shall release
Lessor from any liability to Tenant for the return of the security. No holder of
a deed of trust or mortgagee of the Building shall have any responsibility for
the security deposit unless actually received by said holder or mortgagee.
5. ADDITIONAL RENTAL (Operating Expenses & Taxes).
A. Commencing with the first month of the term of this Lease,
Tenant shall pay, as Additional Rental, a pro-rata share of all Operating
Expenses (as defined below). Tenant's pro-rata portion shall be the percentage
derived by dividing the number of square feet in the Premises by the number of
square feet rentable in the entire Building (which is agreed to be 29,730 square
feet). In the event that Lessor, in its sole discretion, determines that any
tenant, including the Tenant under this Lease, of the Building uses excessive
amounts of services which are to be prorated among the tenants, or causes Lessor
to incur extraordinary Operating Expenses because of the nature of the business
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<PAGE> 3
of such tenant, Lessor may assess said additional or extraordinary cost against
said tenant prior to proration of Operating Expenses among the tenants in the
Building.
B. "Operating Expenses" shall mean all costs of any kind paid or
incurred by Lessor in owning, operating, cleaning, equipping, protecting,
lighting, repairing, replacing, heating, air conditioning and maintaining the
Building as a first class office building, including by way of illustration, but
not limitation, all of the following: (l) Property and Operating Taxes; (2) all
costs, charges, and surcharges for commonly provided utilities, water, sewage,
waste disposal, and refuse removal and all other utilities and services provided
to the Building; (3) insurance costs for which Lessor is responsible under this
Lease or which Lessor or any mortgagee deems necessary or prudent; (4) any costs
levied, assessed, or imposed pursuant to any applicable laws or ordinances; (5)
the cost (amortized over such period as Lessor reasonably determines) of any
capital improvements to the Building or equipment replacements made by Lessor
after the Commencement Date that reduce other Operating Expenses or are required
by any laws or are necessary in order to operate the Building at the same
quality level as prior to such replacement; (6) costs and expenses of operation,
repair and maintenance of all common structural and mechanical portions and
components of the Building, including, without limitation, plumbing,
communication, HVAC, elevator, and electrical and other common building systems;
(8) all costs incurred in the management and operation of the Building
including, without limitation, gardening and landscaping, maintenance,
resurfacing, repaving, and striping of all parking areas and structures,
maintenance of signs, painting, lighting, cleaning, and provision of building
security (if any); (9) all personal property taxes levied on or attributable to
personal property used for the common benefit of tenants of the Building; (10)
management fees, wages, salaries and other labor costs incurred in the
management and operation of the Building; (11) fees for required licenses and
permits; (12) reasonable legal, accounting and other professional fees; (13)
reasonable and appropriate reserves for repair and replacement; and (14) a
reasonable allowance to Lessor for supervision of all of the foregoing not to
exceed fifteen percent ( 15%) of the total of all Operating Expenses. Operating
Expenses shall not include depreciation of the Building or equipment therein,
commissions of real estate brokers and leasing agents, or any amounts expended
for tenant improvements. "Property and Operating Taxes" shall mean and include
any and every form of tax, assessment, license fee, license tax, business
license fee, commercial rental tax, levy, charge, penalty, or other imposition,
regardless of the base upon which said taxes or fees are imposed, imposed now or
hereafter by any authority having the power to tax or assess, against any
interest of Lessor in the Building and/or the Premises including any legal,
equitable, operating, or business interest of Lessor.
C. Lessor shall project the Operating Expenses of the Building on
an annual basis and shall estimate Tenant's pro-rata share of those yearly costs
as set forth above. Thereafter, Tenant shall pay to Lessor each month, as
additional rent, one twelfth (l/12) of the yearly estimate of the Tenant's
pro-rata share of the estimated yearly operating costs.
D. At the end of the calendar year or such fiscal year as the
Lessor may establish, Lessor shall calculate the exact amount of the Operating
Expenses which were incurred for the year (or a portion thereof at the
commencement of the term of this Lease) and the exact amount paid by Tenant as
his pro-rata share. If the projecting Operating Expenses were greater than the
actual Operating Expenses, Tenant shall receive a refund, within 10 days, of any
overpayment. If the actual Expenses exceed the projected Expenses, Tenant shall
pay over to Lessor the difference within 10 days.
6. PURPOSE.
Tenant agrees to use and occupy the Premises during the term of this
Lease for the purpose of a general office and for no other purpose whatever
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<PAGE> 4
without the written consent of Lessor. Tenant shall not use, or permit the
Premises, or any part thereof, to be used, for any other purpose other than the
purpose for which said Premises are hereby leased. No use shall be made of the
Premises, or acts done, which will increase the rate of insurance upon the
Building over the standard rate of insurance prevailing in the area or cause a
cancellation of any part thereof, or make it impossible for Lessor to obtain an
insurance policy covering the Building or any part thereof. Any other provisions
hereof to the contrary notwithstanding, Tenant shall not do or permit anything
to be done in or about the Premises which will in any way obstruct or interfere
with the rights of other tenants or occupants of the Building or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises. Tenant will not commit or suffer to
be committed any waste in or upon the Premises. Animals, including watchdogs,
are not permitted in the Building or on common grounds.
7. INITIAL BUILDOUT; ALTERATIONS AND ADDITIONS.
A. Unless the Premises have been previously built out, the
Premises will be provided as a building shell without concrete flooring or
finished walls, Buildout of the Premises will be effected as set forth in
Exhibit "B" hereto. All plans for buildout of the space must be approved by
Lessor prior to submission of the plans to Clark County for approval.
B. Tenant shall not, without Lessor's prior written consent, make
any alterations, additions or utility installations in, on or about the
Premises. As used in this Paragraph 7.B, the term "utility installations" shall
include ducting, power panels, fluorescent fixtures, space heaters, conduit and
wiring. As a condition to giving such consent, Lessor may require that Tenant
agree to remove any such alterations, additions, improvements, or utility
installations at the expiration of the Lease Term and to restore the Premises to
their prior condition. As a further condition to giving such consent, Lessor may
require Tenant to provide Lessor, at Tenant's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half (l-1/2) times the
estimated cost of such improvements, to insure Lessor against any liability for
mechanics' and materialmen's liens and to insure completion of the work.
C. Unless Lessor requires their removal, as set forth in
Paragraph 7.B, all alterations, additions, improvements and utility
installations (whether or not such utility installations constitute the trade
fixtures of Tenant), which may be made on the Premises, shall at the expiration
or earlier termination of the Lease become the property of Lessor and shall
remain upon and be surrendered with the Premises. Notwithstanding the provisions
of this Paragraph 7.B, personal property, business and trade fixtures,
cabinetwork, furniture, movable partitions, machinery and equipment, other than
that which is affixed to the Premises so that it cannot be removed without
material damage to the Premises, shall remain the property of Tenant and may be
removed by Tenant subject to the provisions of Paragraph 36, at any time during
the term of this Lease when Tenant is not in default hereunder.
8. GLASS AND DOORS.
Tenant shall be responsible for all doors and glass on the Premises
damaged by wind, vandalism, or any other cause, and Tenant shall forthwith
replace or repair same at Tenant's sole expense. Tenant shall, at all times
during the term of this Lease and any extensions or renewals, maintain glass
breakage insurance on all glass doors and windows on the Premises.
9. ABANDONMENT AND OPERATION OF BUSINESS.
Tenant agrees not to vacate or abandon the Premises at any time
during the Lease Term. Tenant agrees to continue the business and its use as
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described in Paragraph 6 in this Lease in continuous and uninterrupted operation
throughout the term of this Lease. Should Tenant vacate or abandon the Premises
or be dispossessed by process of law or otherwise, such abandonment, vacation or
dispossession shall be a default hereunder. Tenant agrees that any property not
claimed within thirty (30) days after the abandonment of the Premises by the
Tenant, or after the expiration or earlier termination of this Lease, becomes
the property of the Lessor and shall be sold by the Lessor and the Lessor is to
retain the proceeds derived therefrom as reimbursement for costs related to
storing said property, and not as a penalty.
10. LESSOR'S CONVEYANCE.
If, during the term of this Lease, Lessor shall convey its interest
in the Premises, then from and after the effective date of the conveyance,
Lessor shall be released and discharged from any and all obligations under this
Lease except those already accrued.
11. LAWS AND REGULATIONS.
A. Tenant, at its own cost and expense, shall comply promptly
with all laws, rules, and orders of all Federal, State and Municipal
Governments, or departments, which may be applicable to the Premise.
B. Tenant shall faithfully observe and comply with the rules and
regulations adopted and altered by Lessor from time to time and will cause all
of its agents, employees, invitees, and visitors to do so. Lessor shall not be
responsible to Tenant for the nonperformance by any other tenant or occupant of
the Building of any of said rules and regulations. A copy of the rules and
regulations existing at the date of execution of this Lease are attached as
Exhibit "C".
12. INDEMNITY.
Tenant shall indemnify and hold harmless Lessor and all agents,
servants and employees of Lessor from and against all claims, losses, damages,
expenses (including reasonable attorneys' fees), penalties and charges arising
from or in connection with (i) Tenant's use of the Premises during the Lease
Term, or (ii) from the conduct of Tenant's business, or (iii) from any activity,
work or things done, permitted or suffered by Tenant in or about the Premises
during the Lease Term. Tenant shall further indemnify and hold harmless Lessor
from and against any and all claims, loss, damage, expense (including reasonable
attorneys' fees), penalty or charge arising from any default in the performance
of any obligation on Tenant's part to be performed under the terms of this
Lease, or arising from any negligence of Tenant, or any of Tenant's agents,
contractors, or employees, and from and against all costs, attorneys' fees,
expenses and liabilities incurred in the defense of any such claim or any action
or proceeding brought thereon. If any action or proceeding be brought against
Lessor by reason of any such claim, Tenant, upon notice from Lessor, shall
defend the same at Tenant's expense by legal counsel reasonably satisfactory to
Lessor. Tenant, as a material part of its consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons in or upon the
Premises arising from any cause and Tenant hereby waives all claims in respect
thereof against Lessor. Notwithstanding the foregoing, Tenant shall not be
required to defend, save harmless or indemnify Lessor from any liability for
injury, loss, accident or damage to any person or property resulting from
Lessor's negligence or willful acts or omissions, or those of Lessor's officers,
agents, contractors or employees. Tenant's indemnity is not intended to nor
shall it relieve any insurance carrier of its obligations under policies
required to be carried by Tenant pursuant to the provisions of this Lease to the
extent that such policies cover the results of negligent acts or omissions of
Lessor, its officers, agents, contractors or employees, or the failure of Lessor
to perform any of its obligations under this Lease.
-5-
<PAGE> 6
13. SIGNS.
A. Tenant shall not place or permit to be placed any advertising
sign, marquee, awning, decoration or other attachment on the common areas or in
or on the Building or the real property on which the Building is situated or on
the roof, front windows (inside and outside), doors or exterior walls of the
Premises without the prior written consent of Lessor. Lessor may, without
liability, enter upon the Premises or elsewhere and remove any such advertising
sign, marquee, awning, decoration or attachment affixed in violation of this
Paragraph 13, all at Tenant's expense.
B. Lessor shall provide and install, at Tenant's cost, all
letters or numerals on doors on the Premises. All such letters and numerals
shall be in the standard graphics for the Building and no others shall be used
or permitted on the Premises without Lessor's prior written consent.
14. ENTRY BY LESSOR.
Tenant shall permit Lessor and its agents to enter the Premises at
any reasonable time for any of the following purposes: To inspect the same; to
show said Premises to prospective purchasers or tenants; to maintain the
Building; to make such repairs to the Premises as Lessor is obligated or elects
to make; to make repairs, alterations, additions or utility installations to any
other portion of the Building; to post notices of non-responsibility for
alterations, additions, repairs or utility installations; for any reason which
Lessor believes to be an emergency.
15. PARTIAL AND TOTAL DESTRUCTION.
Lessor shall carry insurance on the Premises under a standard form
of fire and extended coverage policy. In the event of partial destruction of the
Premises during the term of this Lease for any cause insured under said policy,
Lessor shall forthwith repair the same, provided such repairs can be made within
ninety (90) days from the date of such destruction, under the then applicable
laws and regulations of Federal, State, County, and Municipal authorities and in
light of the extent of such damage and the then condition of the labor market
and availability of materials and supplies. Such partial destruction shall in no
way annul or void this Lease, except that Tenant shall be entitled to a
proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with the business carried on by Tenant in the Premises.
In the event that the Building is destroyed to the extent of fifty percent (50%)
or more of the replacement cost of the Building, Lessor may elect to terminate
this Lease, whether the Premises be damaged or not. A total destruction of the
Building shall automatically terminate this Lease. Anything in this Paragraph 15
to the contrary, if at the time of any such damage less than two (2) months
remain of the Lease Term, then this Lease may, at the option of the Lessor, be
canceled by notice in writing to Tenant within ten (10) days from the date of
such damage.
16. LIABILITY INSURANCE.
A. Tenant, at its expense, shall maintain comprehensive general
liability insurance including contractual liability against claims for injury,
wrongful death, or property damage occurring upon, in or about the Premises,
with companies and in form acceptable to Lessor, naming Lessor, Tenant and
Lessor's mortgagee, if any, as co-insureds, with minimum limits of Five Hundred
Thousand Dollars ($500,000.00) on account of bodily injuries to or death of one
person, One Million Dollars ($1,000,000.00) on account of bodily injuries or
death of more than one person as the result of any one accident or disaster, and
property damage insurance with minimum limits of Fifty Thousand Dollars
($50,000.00)
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<PAGE> 7
B. Promptly after the commencement of the term of this Lease,
Tenant shall deliver to Lessor certificates of its insurers evidencing the
insurance required to be maintained herein, and within thirty (30) days prior to
the expiration of any such insurance, other certificates evidencing the renewal
of such insurance, together with receipts showing payment of the premiums
therefor. Each such certificate shall contain a clause requiring twenty (20)
days notice to Lessor and the mortgagee, if any, before any such policy can be
canceled or non-renewed.
C. If Tenant at any time fails or refuses to maintain such
insurance, Lessor may, but shall not be obligated to, obtain such insurance and
Tenant shall pay Lessor on demand, as Additional Rental, the premiums paid
therefor.
17. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign this Lease or any interest herein, nor
lease or sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, nor permit the occupancy or use or any part thereof by any
other person, without the prior written consent of Lessor and a consent to one
assignment, subletting, occupancy or use, shall not be construed as a consent to
any subsequent assignment, subletting, occupancy or use. Lessor's consent shall
not be unreasonably withheld.
18. SERVICES TO BE FURNISHED BY LESSOR.
Lessor agrees to furnish Tenant the following services:
a) Non-heated water and sewer to the Premises, and heated and
cooled water as required to be supplied to the heat pump required to be
installed by Tenant, which shall be of a design and model specified by Lessor.
b) Routine maintenance and electric lighting service for all
common areas and service areas of the Building and parking lot in the manner and
to the extent deemed by Lessor to be standard.
c) Janitorial service shall not be provided by Lessor; however,
janitorial service shall be made available to Tenant on an optional basis on
terms and conditions to be agreed by Lessor and Tenant.
19. DEFAULT.
If default shall be made in the payment of rent or any installment
thereof or in the payment of any other amount required to be paid by Tenant
under this Lease, or any other agreement between Lessor and Tenant, or if
default shall be made in the performance of any of the other covenants, terms,
conditions, or agreements which Tenant is required to observe and perform
hereunder, or if the interest of Tenant in its assets and/or this lease shall be
levied on or seized under execution or other legal process, or if any petition
shall be filed by or against Tenant to declare Tenant bankrupt or to delay,
reduce or modify Tenant's debts or obligations or if any petition shall be filed
or other action taken to reorganize or modify Tenant's capital structure, or if
Tenant be declared insolvent according to law, or if any assignment of Tenant's
property shall be made for the benefit of creditors, or if a receiver or trustee
is appointed for Tenant or its property, or if Tenant shall abandon or vacate
the Premises during the term of this Lease, then Lessor may treat the occurrence
of any one or more of the foregoing events as a default and breach of this
Lease, and thereupon at its option may, without notice or demand of any kind to
Tenant or any other person, have any one or more of the remedies specified in
Paragraph 20, in addition to all other rights and remedies provided at law or in
equity.
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<PAGE> 8
20. DEFAULT REMEDIES.
In the event of a default by Tenant, which default continues for a
period of five (5) days after written notice from Lessor:
A. Lessor may re-enter the Premises with or without process of
law and take possession of the same and of all equipment and fixtures of Tenant
therein and expel or remove Tenant and all other parties occupying the Premises,
using such force as may be reasonably necessary to do so, without being liable
to any prosecution for such re-entry or for the use of such force and without
terminating this Lease, at any time and from time to time. Lessor may relet the
Premises or any part thereof for the account of Tenant, for such term, upon such
conditions and at such rental as Lessor may deem proper. In such event Lessor
may receive and collect the rent from such reletting and apply it against any
amounts due from Tenant hereunder (including, without limitation, such expenses
as Lessor may have incurred in recovering possession of the Premises, placing
the same in good order and condition, altering or repairing the same for
reletting, and all other expenses, commissions and charges including attorneys'
fees which Lessor may have paid or incurred in connection with such repossession
or reletting). Lessor may execute any lease made pursuant hereto in Lessor's
name or in the name of Tenant as Lessor may see fit, and Tenant thereunder shall
be under no obligation to see to the application by Lessor of any rent collected
by Lessor nor shall Tenant have any right to collect any rent thereunder.
Whether or not the Premises are relet, Tenant shall pay Lessor all amounts
required to be paid by Tenant up to the date of Lessor's re-entry and thereafter
Tenant shall pay Lessor, until the end of the term hereof, the amount of all
rent and other charges required to be paid by Tenant hereunder, less the
proceeds of such reletting during the term hereof, if any, after payment of
Lessor's expenses as provided above. Such payments by Tenant shall be due at
such times as are provided elsewhere in this Lease, and Lessor need not wait
until the termination of this Lease to recover them by legal action or
otherwise. Lessor shall not, by any re-entry or other act, be deemed to have
terminated this Lease or the liability of Tenant for the total rent hereunder
unless Lessor shall give Tenant written notice of Lessor's election to terminate
this Lease.
B. Lessor may give written notice to Tenant of Lessor's election
to terminate this Lease, re-enter the Premises, with or without process of law,
and take possession of the same and of all equipment and fixtures therein, and
expel or remove Tenant and all other parties occupying the Premises, using such
force as may be reasonably necessary to do so, without being liable to any
prosecution for such re-entry or for the use of such force. In such event Lessor
shall thereupon be entitled to recover from Tenant the worth, at the time of
such termination, of the excess, if any, of the rent, and any other charges
required to be paid by Tenant hereunder for the balance of the term hereof (if
this Lease had not been so terminated) over the then-reasonable rental value of
the Premises for the same period.
C. Tenant hereby releases, indemnifies, and holds harmless Lessor
from any liability whatsoever for the removal of persons and the removal and
storage of property pursuant to subparagraphs A. and B. of this Paragraph 20.
D. To secure the full and timely performance of all of the
Tenant's obligations under this Lease, Lessor is hereby granted a security
interest and lien in all of Tenant's property located within the Premises. In
the event of a default or breach by Tenant, then with respect to that security
interest, Lessor may exercise all of the rights and remedies granted a secured
party under the Uniform Commercial Code as adopted in Nevada.
E. The remedies given to Lessor in this Paragraph 20 shall be in
addition to and supplemental to all other rights and remedies which Lessor may
have under the laws then in force.
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<PAGE> 9
21. HOLDING OVER.
If Tenant holds possession of all or a part of the Premises after
the expiration of the term of this Lease, with or without the express or implied
consent of Lessor, Tenant shall become a tenant from month-to-month only, upon
the terms, covenants, conditions and agreements herein specified, so far as
applicable. Such holding over shall not constitute an extension or renewal of
this Lease. During such holding over, the Base Monthly Rental shall be increased
by twenty-five percent (25%) over the Base Monthly Rental provision in Paragraph
3.
22. WAIVER.
No covenant, term, condition or agreement or the breach thereof
shall be deemed waived, except by written consent of the party against whom the
waiver is claimed, and any waiver or the breach of any covenant, term, condition
or agreement shall not be deemed to be a waiver of any preceding or succeeding
breach of the same or any other covenant, term, condition or agreement.
Acceptance by Lessor of any performance by Tenant after the time the same shall
have become due shall not constitute a waiver by Lessor of the breach or default
of any covenant, term, condition or agreement unless otherwise expressly agreed
to by Lessor in writing.
23. TENANT'S INSOLVENCY OR BANKRUPTCY.
A. It is agreed by Tenant that upon the filing of any petition by
or against Tenant under any chapter of the federal bankruptcy laws, or upon the
adjudication of Tenant as bankrupt or insolvent, or upon the appointment of a
receiver or trustee to take possession of all or substantially all of the assets
of Tenant, or upon the taking of any other action by Tenant under any state of
federal insolvency or bankruptcy act or other similar law, and upon the
continuance of any of the foregoing events for thirty (30) days, Lessor may, at
its election, but only if Tenant is in default under this Lease, declare this
Lease in default upon the giving of written notice thereof to Tenant; and in
such an event, Lessor may exercise all rights and remedies herein provided to it
upon default without necessity of further notice to Tenant.
B. Subject to the foregoing paragraph, neither this Lease nor any
interest herein, nor any estate created hereby, shall pass by the operation of
law under any state or federal insolvency or bankruptcy act or similar law to
any trustee, receiver, assignee, for the benefit of creditors, or any other
person whatsoever without the prior written consent of Lessor. Any purported or
attempted transfer in violation of the provisions of this Paragraph shall
constitute a default under this Lease and Lessor, at its option by written
notice to Tenant, may exercise all rights and remedies herein provided for upon
such default, including the termination of this Lease without the necessity of
further notice.
24. NOTICES.
Except as otherwise provided in this Lease, all notices or demands
of any kind required or desired to be given by Lessor to Tenant hereunder shall
be in writing and shall be deemed delivered when hand-delivered or forty-eight
(48) hours after depositing the notice or demand in the United States mail,
certified or registered, postage prepaid, addressed to the Tenant at the
Premises, whether or not Tenant has departed from, abandoned, or vacated the
Premises. All notices or demands of any kind by Tenant to Lessor shall be in
writing and shall be deemed delivered when hand-delivered or forty-eight (48)
hours after depositing the notice or demand in the United States mail, certified
or registered, postage prepaid, addressed to the Lessor at such address as shall
from time to time be designated by Lessor to Tenant in writing.
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<PAGE> 10
25. CONDEMNATION
In the event any condemnation proceedings shall be commenced
affecting the Premises, Tenant shall have no right to claim any valuation for
its leasehold interest or otherwise by reason of its occupancy of or
improvements to said Premises, and any condemnation award (whether adjudicated
or by way of settlement) shall belong in its entirety to Lessor. In the event of
condemnation of a part of the Premises, the rent shall be reduced in the
proportion that the floor area taken bears to the total floor area prior to the
taking. If condemnation takes more than twenty-five percent (25%) of the floor
area of the Premises or if the amount of Tenant's parking area following
condemnation is not sufficient to meet the deed restrictions, if any, concerning
parking on the real property on which the Premises are situated, or the local
parking ordinances, if any, only then, may Tenant, at Tenant's option, terminate
this Lease as of the date the condemning authority takes possession of said
condemned portion by giving written notice of termination to Lessor within ten
(10) days after the condemning authority takes such possession. If Tenant does
not terminate this Lease as hereinabove immediately provided, then the rent
payable shall be reduced as set forth above.
26. SUBORDINATION.
This Lease, at Lessor's option, shall be subject and subordinate to
the lien of any mortgages or deeds of trust in any amount or amounts whatsoever
now or hereafter placed on or against the real property or improvements, or
either thereof, of which the Premises are a part, or on or against Lessor's
interest or estate therein, without the necessity of the execution and delivery
of any further instruments on the part of Tenant to effectuate such
subordination. If any mortgagee or trustee shall elect to have this Lease prior
to the lien of its mortgage or deed of trust and shall give written notice
thereof to Tenant, this Lease shall be deemed prior to such mortgage or deed of
trust, whether this Lease is dated prior or subsequent to the date of said
mortgage of deed of trust or the date of recording thereof. Tenant covenants and
agrees to execute and deliver upon demand, without charge therefor, such further
instruments evidencing such subordination of this Lease to the lien of any such
mortgages or deeds of trust as may be required by Lessor. Tenant hereby appoints
Lessor as Tenant's attorney-in-fact irrevocably, to execute and deliver any such
agreements, instruments, releases or other documents.
27. PARKING AND COMMON AREA.
A. Tenant and its customers, employees and tradesmen may park
only operative vehicles, on the surfaced parking lot adjacent to the Premises
only during Tenant's normal business hours on terms and conditions as may be
established by Lessor from time to time during the term of this Lease. The
parking areas referred to in this Paragraph 27 shall be used on a non-exclusive
basis with other occupants of the Building. The parking lot may not be used to
store vehicles or to work on vehicles. No vehicle shall be parked in a parking
lot for more than forty-eight (48) consecutive hours without Lessor's written
consent. Any vehicles parked in the parking lots in breach of these terms may be
towed away at Tenant's expense. Tenant releases, indemnifies and holds harmless
Lessor and Lessor's officers, employees and agents from any claims arising from
or relating to such towing of vehicles, including any consequential damages or
loss of property or loss of the use of the vehicle or other property. The right
to tow a vehicle is in addition to Lessor's rights under the Lease for default
or breach of any of the terms hereof.
B. Other than for parking, egress and ingress, Tenant has no
right to use the common areas, and Tenant shall not obstruct the common areas,
including the sidewalks, landscaped areas, paved areas, parking lots, or
driveways. Animals, including watchdogs, are not allowed on the Premises or
common areas. Tenant shall not engage or allow its employees or agents in any
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<PAGE> 11
parking lot sales, promotions, or public or private auction in the parking area
or common area.
C. Tenant's rights to use covered or designated parking spaces,
if any, shall be defined in the Parking Agreement attached as Exhibit "D".
Tenant shall not use, and shall not permit its employees, customers, or invitees
to use, covered or designated parking of others.
28. MAINTENANCE AND CARE OF THE PREMISES.
A. Maintenance by Lessor. Except as otherwise expressly provided
herein, Lessor shall not be required to make any repairs to the Premises or to
maintain the Premises.
B. Maintenance and Care of the Premises by Tenant. Tenant, at its
sole cost and expense, shall at all times keep the Premises and all partitions,
doors, fixtures, equipment, and appurtenances thereof, including lighting,
heating, and plumbing fixtures, sewage facilities, electric motors, and Tenant's
portion of the air conditioning/heating system in good order, condition, and
repair, including the replacement thereof when necessary. Tenant agrees not to
commit or allow any waste to be committed on any portion of the Premises.
C. Lessor's Right To Cure. If Tenant refuses or neglects to
maintain or repair property as required hereunder to the reasonable satisfaction
of Lessor as soon as reasonably possible after written demand, Lessor may make
such repairs without liability on its part to Tenant for any loss or damage that
may accrue to Tenant's merchandise, fixtures, or other property or to Tenant's
business by reason thereof, and upon completion thereof, Tenant shall pay
Lessor's cost for making such repairs plus twenty percent (20%) for overhead,
immediately upon presentation of a bill therefor. Failure of Tenant to pay such
amount immediately shall constitute a default by Tenant hereunder.
29. UTILITIES.
Tenant to pay for all utilities separately metered to Tenant,
including gas, power, and telephone. Tenant shall also pay its applicable
portion of those common utilities included in Additional Rental.
30. GAMING/VENDING MACHINES.
Tenant shall not operate any gaming devices or vending machines on the Premises.
31. SUCCESSORS.
All terms, covenants and conditions hereof shall be binding upon
and inure to the benefit of the heirs, executors, administrators, successors and
assigns of the parties hereto, provided that nothing in this paragraph shall be
deemed to permit any assignment, sub-letting, occupancy or use contrary to the
provisions of Paragraph 17.
32. DEFAULT BY LESSOR.
Lessor shall not be in default under this Lease unless Lessor fails
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Tenant to Lessor,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor's obligation is such that more than thirty
(30) days are required for performance, then Lessor shall not be in default if
Lessor commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion.
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<PAGE> 12
33. ESTOPPEL CERTIFICATE.
Tenant shall at any time upon not less then five (5) days prior
written notice from Lessor execute, acknowledge, and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by a prospective purchaser or
encumbrancer of the Premises. Tenant's failure to deliver such statement within
such time shall be conclusive upon Tenant (i) that this Lease is in full force
and effect, without modification except as may be represented by Lessor, (ii)
that there are no uncured defaults in Lessor's performance, and (iii) that no
more than one (1) month's rent has been paid in advance. If Lessor desires to
finance or refinance the Premises, or any part thereof, Tenant hereby agrees to
deliver to any lender designated by Lessor such financial statements of Tenant
as may be reasonably required by such lender. Such statements shall include the
past three (3) years' financial statements of Tenant, and/or the last three (3)
years of Federal Income Tax returns for Tenant or any guarantors of this Lease.
All such financial statements shall be received by Lessor in confidence and
shall be used only for the purposes herein set forth.
34. COSTS OF SUIT.
A. If Tenant or Lessor shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Lessor for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorneys' fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment.
B. Should Lessor, without fault on Lessor's part, be made a party
to any litigation instituted by Tenant or by a third party against Tenant, or by
or against any person holding under or using the Premises by license of Tenant,
or for the foreclosure of any lien for labor or material furnished to or for
Tenant or any such other person or otherwise arising out of or resulting from
any act or transaction of Tenant or of any such other person, Tenant covenants
to save and hold Lessor harmless from any judgment rendered against Lessor or
the Premises or any part thereof, and all costs and expenses, including
reasonable attorneys' fees incurred by Lessor in or in connection with such
litigation.
35. BROKER'S COMMISSION.
LANDLORD SHALL PAY A REAL ESTATE COMMISSION EQUAL TO THREE (3)
PERCENT OF THE LEASE TO BILL HAMMONS & ASSOCIATES TO THE ATTENTION OF TIM
HERRARA.
36. CHOICE OF LAW.
This Lease shall be governed, construed and enforced by the laws of
the State of Nevada.
37. SURRENDER.
Upon the expiration or earlier termination of this Lease, Tenant
shall remove all its signs from the Premises and surrender the Premises in the
same condition as received, broom clean, ordinary wear and tear excepted.
Tenant, at its sole cost and expense, agrees to repair any damage to the
Premises caused by or in connection with the removal of any articles of personal
property, business or trade fixtures, machinery, equipment, cabinetwork,
furniture, movable
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<PAGE> 13
partitions, or permanent improvements or additions, including, without
limitation thereto, repairing the floor and patching and painting the walls
where required by Lessor to Lessor's reasonable satisfaction. Tenant shall
indemnify Lessor against any loss or liability resulting from delay by Tenant in
so surrendering the Premises, including without limitation, any claims made by
any succeeding tenant founded on such delay.
38. INTERPRETATION.
The marginal captions of this Lease are for convenience only and
shall not in any way limit or be deemed to construe or interpret the terms and
provisions hereof. The words "Lessor" and "Tenant" as used herein shall include
the plural as well as the singular. Words used in neuter gender include the
masculine and feminine, words in the masculine and feminine gender include the
neuter. If there be more than one Lessor or Tenant, the obligations hereunder
imposed upon Lessor or Tenant shall be joint and several.
39. TIME.
Time is of the essence of this Lease and each and all of its
provisions.
40. NO RECORDING.
Tenant shall not record this Lease. Any recordation shall
constitute a breach of this Lease.
41. CORPORATE AUTHORITY.
If Tenant signs as a corporation, each of the persons executing
this Lease on behalf of the Tenant does hereby covenant and warrant that Tenant
is a duly authorized and existing corporation, that Tenant is qualified to do
business in Nevada that the corporation has full right and authority to enter
into this Lease, and that each person signing on behalf of the corporation is
authorized to do so.
42. GUARANTY.
The undersigned Guarantors (if any) agree, as partial consideration
for Lessor entering this Lease to Tenant, to guaranty the performance of Tenant
hereunder according to terms and conditions of the GUARANTY agreement which is
attached hereto as Exhibit "F".
43. ENTIRE AGREEMENT.
This Lease, along with any Exhibits and attachments hereto,
constitutes the entire agreement between Lessor and Tenant relative to the
Premises and this Lease and the Exhibits and attachments may be altered, amended
or revoked only by an instrument in writing signed by both Lessor and Tenant.
Lessor and Tenant hereby agree that all oral agreements between and among
themselves and their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this Lease.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Lease, or
as the case may be, have caused their officers thereunto duly authorized to
execute this Lease in duplicate, the day and year first above written.
TROPICANA TRAIL
LIMITED PARTNERSHIP TENANT
By: /s/ By: /s/ Ronald J. Tassinari
Date: 3/21/96 Printed Name: Ronald J. Tassinari
Title: President
Address:
Date: 3/20/96
[EXHIBITS OMITTED]
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<PAGE> 1
EXHIBIT 11.1
AMERICAN CASINO ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT
YEARS ENDED JULY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
PRIMARY:
Net income $ 3,796,000 $ 4,801,000
=========== ===========
Weighted average number of common shares
outstanding during the period 14,367,958 14,240,643
Add:
Common stock equivalents (determined using
the "treasury stock" method) representing shares
issuable upon exercise of options and warrants 1,834,980 528,137
----------- -----------
Weighted average number of shares used in
calculation of primary income per share $16,202,938 $14,768,780
=========== ===========
Primary earnings per common share and common
share equivalent $ 0.23 $ 0.33
=========== ===========
FULLY DILUTED:
Net income $ 3,796,000 $ 4,801,000
=========== ===========
Weighted average number of common shares
outstanding during the period 14,367,958 14,240,643
Add:
Common stock equivalents (determined using
the "treasury stock" method) representing shares
issuable upon exercise of options and warrants 955,544 774,537
----------- -----------
Weighted average number of shares used in
calculation of fully diluted income per share $15,323,502 $15,015,180
=========== ===========
Fully diluted earnings per common share and common
share equivalent $ 0.25 $ 0.32
=========== ===========
</TABLE>
NOTE: Fully diluted earnings per common share and common share equivalent is
not presented in the Consolidated Statements of Income because the
effect is antidilutive or the dilutive effect is less than three
percent.
<PAGE> 1
Exhibit 21.1 Subsidiaries of the Registrant
Name State of Percentage
Incorporation Owned
Millerton Games, Inc. California 100%
Fuel and Air Service Nevada 100%
Technology, Inc.
Las Vegas Ad-Ventures Nevada 100%
The Reservation Connection Nevada 100%
Las Vegas Enterprises, Inc. Nevada 100%
Motel Development, Inc. Nevada 100%
Diversy Enterprises, Inc. Nevada 100%
Trinidad Management, Inc. California 100%
Royal Reservations, Inc. Nevada 100%
American Casino
Entertainment, Inc. Nevada 100%
Fowler Card Club, Inc. California 100%
G & L Acquisition Corp. Nevada 78%
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
American Casino Enterprises, Inc.
We consent to incorporation by reference in registration statement No. 33-51340
on Form S-8 (and Amendment No. 1 thereto) and in registration statement No.
333-00905 on Form S-8 of American Casino Enterprises, Inc. of our report dated
October 9, 1996, relating to the consolidated balance sheets of American Casino
Enterprises, Inc. and subsidiaries as of July 31, 1996 and 1995, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years then ended, which report appears in the July 31, 1996
annual report on Form 10-KSB of American Casino Enterprises, Inc.
Bradshaw, Smith & Co.
Las Vegas, Nevada
October 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<CASH> 12,578,000
<SECURITIES> 0
<RECEIVABLES> 202,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,014,000
<PP&E> 276,000
<DEPRECIATION> (62,000)
<TOTAL-ASSETS> 13,636,000
<CURRENT-LIABILITIES> 347,000
<BONDS> 0
0
0
<COMMON> 144,000
<OTHER-SE> 13,145,000
<TOTAL-LIABILITY-AND-EQUITY> 13,636,000
<SALES> 9,641,000
<TOTAL-REVENUES> 9,641,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,650,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,593,000
<INCOME-TAX> 2,797,000
<INCOME-CONTINUING> 3,796,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,796,000
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
