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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11532
INLAND CASINO CORPORATION
(Exact name of small business issuer as specified in its charter)
Utah 33-0618806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4225 Executive Square, Suite 1650, La Jolla, California 92037
(Address of principal executive offices)
Issuer's telephone number, including area code: (619) 546-9383
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: as of May 12, 1996,
10,632,792 shares of common stock, $.001 par value per share, were
outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
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INLAND CASINO CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (Unaudited):
Balance Sheets -
March 31, 1996 and June 30, 1995 ........................... 3
Statements of Operations -
Three months ended March 31, 1996 and 1995 ................. 4
Nine months ended March 31, 1996 and 1995 .................. 5
Statements of Cash Flows -
Nine months ended March 31, 1996 and 1995 .................. 6
Notes to Interim Financial Statements ...................... 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION .......................... 12
PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K ......................... 18
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INLAND CASINO CORPORATION
BALANCE SHEETS
MARCH 31, 1996 AND JUNE 30, 1995
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
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(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $1,743,005 $1,423,826
Accounts receivable 91,921 37,404
Deposits and prepaid expenses 212,164 269,781
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Total current assets 2,047,090 1,731,011
Property and equipment, net 149,620 100,819
Management agreement acquisition costs, net 6,856,153 7,231,011
Deferred taxes and other 932,509 899,261
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Total assets $9,985,372 $9,962,102
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Advances of future management fees $1,710,505 $1,840,184
Current portion of notes payable 300,000 29,187
Accounts payable and accrued expenses 526,054 321,077
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Total current liabilities 2,536,559 2,190,448
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LONG TERM DEBT:
Note payable, less current portion 600,000
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 100,000,000 shares
authorized, 10,632,792 and 12,541,793 shares
outstanding 2,352,554 3,753,875
Retained earnings 4,496,259 4,017,779
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Total shareholders' equity 6,848,813 7,771,654
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Total liabilities and shareholders' equity $9,985,372 $9,962,102
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</TABLE>
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INLAND CASINO CORPORATION
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Revenue $ 3,324,574 $ 3,492,011
Costs and expenses:
General and administrative expenses 1,446,576 1,363,115
Amortization of management agreement acquisition
costs 721,992 687,357
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2,168,568 2,050,472
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Operating profit 1,156,006 1,441,539
Other income and (expense):
Interest income 1,252
Interest expense (79) (2,069)
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1,173 (2,069)
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Income before income taxes 1,157,179 1,439,470
Income tax provision 466,000 617,000
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Net income $ 691,179 $ 822,470
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Earnings per share $ 0.06 $ 0.07
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Shares used in the computation of income per common
and common equivalent share 12,086,058 11,987,281
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</TABLE>
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INLAND CASINO CORPORATION
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Revenue $ 7,665,790 $10,337,886
Costs and expenses:
General and administrative expenses 5,027,359 2,877,413
Amortization of management agreement acquisition
costs 1,824,499 2,130,246
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6,851,858 5,007,659
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Operating profit 813,932 5,330,227
Other income and (expense):
Interest income 1,548 54,783
Interest expense (3,001) (5,550)
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(1,453) 49,233
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Income before income taxes 812,479 5,379,460
Income tax provision 334,000 2,329,000
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Net income $ 478,479 $ 3,050,460
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Earnings per share $ 0.04 $ 0.25
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Shares used in the computation of income per common
and common equivalent share 12,493,457 11,970,429
=========== ===========
</TABLE>
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INLAND CASINO CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Net cash generated by (used in) operating activities:
Net income $ 478,479 $ 3,050,460
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization and depreciation 1,850,327 2,130,246
Deferred taxes 95,001 (797,462)
Changes in assets and liabilities:
Accounts receivable (54,517) (16,329)
Deposits, prepaid expenses and other assets (70,632) (432,426)
Accounts payable and accrued expenses 89,814 300,183
Income taxes payable 115,164 176,850
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Net cash generated by operating activities 2,503,636 4,411,522
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Cash used in investing activities:
Purchases of furniture and equipment (74,629)
Management agreement acquisition costs (1,449,641) (4,750,606)
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Net cash used in investing activities (1,524,270) (4,750,606)
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Cash flows generated by (used in) financing activities:
Increase (decrease) in advances of
future management fees (129,679) (1,812,264)
Issuance of promissory note 900,000
Payment of loans from shareholders (715,023)
Capital distributions 115,603
Payment of notes payable (29,187) (74,845)
Collection of stock subscriptions receivable 638
Redemption and cancellation of common stock (1,401,321)
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Net cash provided by (used in) financing activities (660,187) (2,485,891)
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Increase (decrease) in cash 319,179 (2,824,975)
Cash, beginning of period 1,423,826 5,428,061
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Cash, end of period $ 1,743,005 $ 2,603,086
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest expense paid $ 3,001 $ 5,550
=========== ===========
Interest income received $ 1,548 $ 54,783
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Income taxes paid $ 316,152 $ 2,944,150
=========== ===========
Income tax refund received $ 192,316 $ -
=========== ===========
</TABLE>
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1996
1. PRESENTATION OF INTERIM FINANCIAL INFORMATION -
Basis of Presentation - The accompanying interim unaudited financial statements
have been prepared by Inland Casino Corporation, a Utah corporation (the
"Company" or "Inland Casino"), in conformity with generally accepted accounting
principles for interim financial information and with the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such regulations. The interim unaudited financial statements reflect
all normal, recurring adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation. The results of operations for the
interim periods are not necessarily indicative of the results of the full fiscal
year. The interim financial statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB, as amended, for the fiscal year ended
June 30, 1995.
Earnings per share - Earnings per common and common equivalent share are
computed using the weighted average number of shares outstanding for the three
and nine month periods ended March 31, 1996 and 1995. Equivalent shares are
those issuable upon the assumed exercise of stock options reflected under the
treasury stock method using the average market price of the Company's shares
during the periods, when their effect is dilutive.
2. REORGANIZATION AND MERGER - Effective July 1, 1994, Inland Casino Partners, a
California general partnership ("ICP"), and its partners, Inland Casino
Corporation, a Nevada Corporation ("ICC I"), and Eagle Edge Partners ("EEP"),
combined to form a new Delaware Corporation, Inland Casino Corporation ("ICC
II"). Such transaction is hereinafter referred to as the "Roll-Up Transaction".
On May 22, 1995 the merger of ICC II into and with Twin Creek Exploration Co.,
Inc. ("Twin Creek"), a Utah corporation, became effective (the "Merger"). To
effect the merger, the common stock of Twin Creek was reverse split 1 for 100
and the shareholders of ICC II received 11,930,406 shares, representing
approximately 95% of the shares outstanding after the merger. The surviving
company was renamed Inland Casino Corporation ("Inland Casino"), and the year
end was changed from September 30 to June 30. The transaction was accounted for
as a recapitalization using the carryover basis of the assets and liabilities of
ICC II. Accordingly, the financial statements reflect the financial condition,
results of operations and cash flows of ICC II, and its predecessors, for
periods prior to the merger date, and combined with Twin Creek from that date
forward.
3. BUSINESS AND BASIS OF ACCOUNTING - The Company provides management and
consulting services to the casino industry. The Company currently provides
services to The Barona Group of Capitan Grande Band of Mission Indians (the
"Barona Tribe") in connection with the Barona Tribe's operation of a gaming
facility which is located north of Lakeside, California, in eastern San Diego
County. The Company reports revenues and expenses using the accrual method of
accounting. All of the Company's fee revenue is currently generated from
services provided to the Barona Tribe.
7
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
4. AGREEMENTS WITH THE BARONA TRIBE - The Company provides operational and other
services in accordance with the terms and conditions of a certain Gaming
Management Agreement (the "Operations Agreement") with the Barona Tribe, under a
grant of authority from the Barona Tribe's General Council. The Company entered
into the Operations Agreement in February 1991 to manage, operate and maintain
cardroom operations, and in February 1992, the Operations Agreement was expanded
to include food and beverage operations and other gaming activities, including
bingo and electronic gaming. The Operations Agreement was scheduled to expire in
February 1999 and established the Company's rights, obligations and duties,
including the Company's incurrence of a contingent liability for certain
obligations of the Barona Casino.
The Company's revenue from fees was based upon a percentage of profits or the
excess of revenue over certain expenses generated from the gaming operations as
defined in the Operations Agreement. The Operations Agreement called for a
minimum monthly advance distribution by the Company to the Tribe of $30,000.
Such advances were recoverable from future distributions, if any, exceeding the
minimum advance. At the expiration of the Operations Agreement, any outstanding
advance for payment of a guaranteed minimum will be forgiven by the Company.
The Indian Gaming Regulatory Act ("IGRA") requires that management contracts be
approved by the National Indian Gaming Commission (the "NIGC") and that an
assignment of such an agreement (e.g., from ICP to ICC II, in connection with
the Roll-Up Transaction and from ICC II to the Company in connection with the
Merger) also must be approved by the NIGC. The IGRA also prescribes that
management agreements contain certain terms and conditions relating to the
length of term and a formula to determine the maximum management fee to be paid.
Effective April 1, 1996, the Company and the Barona Tribe agreed to a Consulting
Agreement (hereinafter defined). (See Note 9 herein.) To date, the Operations
Agreement has not been submitted for approval and, in light of the execution of
the Consulting Agreement (which supersedes the Operations Agreement), the
Company believes no such submission is now required. The initial Consulting
Agreement (prior to its amendment and restatement) has been submitted to the
NIGC for review and it is the intention of the Company to also submit the
amended and restated agreement to the NIGC. The Company believes that the NIGC
will determine that the Consulting Agreement is not a management agreement, as
defined by applicable federal regulations, and, therefore, is not subject to
NIGC approval.
If the NIGC determines that the Consulting Agreement is a management agreement,
there can be no assurance that the Consulting Agreement will be approved by the
NIGC and/or that the NIGC will take any action relating to the Operations
Agreement or the assignments of the Operations Agreement from ICP to ICC II and
from ICC II to the Company. To the extent that the NIGC determines that the
Consulting Agreement is a management agreement, and, subsequently, determines
not to approve such Consulting Agreement, or to require modifications which
would materially alter the financial arrangements between the Company and the
Barona Tribe (e.g., actions resulting in the Company's recognition of a loss for
some or all of the total amount of the net management agreement acquisition
costs (see Note 5 herein)), such action may have a material adverse effect on
the business and financial condition of the Company. (See "Item 2. Management's
Discussion and Analysis or Plan of Operations - Liquidity and Capital Resources"
herein.
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
5. MANAGEMENT AGREEMENT ACQUISITION COSTS - The Operations Agreement required,
and any similar agreements the Company may enter into in the future with the
Barona Tribe may require, the Company to fund, or to arrange acceptable
financing for, the construction of facility improvements, furniture and
equipment, the establishment of initial working capital and the losses, if any,
of the Barona Casino operations.
Because the Barona Tribe will not allow its land to be encumbered and has not
assumed any financial liability for costs associated with developing the Barona
Casino, as a condition of the Operations Agreement, the Company assumed all
liability for these obligations. The Company has capitalized those costs
incurred as deferred contract acquisition costs, since (i) the Company has the
ultimate responsibility for the costs incurred and (ii) the Company believes
that these costs were fully recoverable over the life of the Operations
Agreement through receipt of fee income from the Barona Casino. However, given
the nature of the asset, if the recoverability is determined to be not
probable, the Company will expense the unamortized portion.
On an ongoing basis, the Company reviews the valuation and recoverability of
these deferred costs. As part of this review, the Company estimates the
discounted present value of the future projected net income generated by the
Barona Casino and the resulting revenue to the Company to determine whether
impairment has occurred.
Through March 31, 1996, amortization of these deferred costs was calculated as
the greater of the amortization using (i) the straight-line method over the
remaining term of the Operations Agreement or (ii) an accelerated method,
whichever is greater. The accelerated amortization was equal to the excess of
fees earned over 30% of Casino operating income. Under the terms of the
Operations Agreement, title to the Barona Casino facilities, furniture and
equipment rests solely with the Barona Tribe, unless the Barona Tribe agrees
otherwise.
6. REDEMPTION OF COMMON STOCK - On March 4, 1996, the Company redeemed 1,908,865
shares of its common stock from a former officer and director for $1,400,000 and
also acquired from such former officer and director an option to acquire an
additional 894,780 shares of the Company's common stock currently held by two
other shareholders of the Company. The terms of the redemption included a cash
payment of $500,000 and the issuance of a promissory note in the principal
amount of $900,000 due in three equal annual installments on March 4, 1997, 1998
and 1999, with interest at 7%. In addition, the former officer and director may
also receive two additional payments on March 4, 1998 and 1999, depending upon
the price of the Company's common stock calculated during a measurement period
prior to each of the last two installment payment dates of the promissory note.
The maximum additional consideration for such common stock redemption will be
$500,000, assuming the average value of the Company's common stock is $7.00 or
more per share during the two measurement periods described above. The cost of
the common stock redemption will be adjusted when additional payments, if any,
are required.
7. COMMITMENTS AND CONTINGENCIES - LOAN AGREEMENT - In October 1995, the Company
negotiated a credit facility with a bank which allows for total borrowings of $2
million. The credit agreement expires on October 10, 1998, and is secured by all
of the Company's personal property, including but not limited to
9
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
bank deposits, accounts receivable, inventory and equipment. This agreement
contains various covenants including restrictive covenants which require, among
other things, the maintenance of certain financial ratios, maintenance of
$1,000,000 in the bank's deposit accounts (during any period in which the
Company is utilizing the facility), a limitation on the incurrence of future
indebtedness and a prohibition on declaring or making any cash dividends. As of
May 14, 1996, the Company had no outstanding borrowings under this credit
facility. Under the terms of this agreement, amounts drawn on the line will
convert into notes payable over a number of months (the exact number of which
depend upon the date of disbursement) with interest at prime plus 2%. All of
such notes become due and payable no later than October 10, 1998. In connection
with this credit financing, the bank received immediately exercisable warrants
to purchase 40,000 shares of the Company's common stock, subject to certain
anti-dilution provisions, at an initial exercise price of $5.00. The warrant
expires on October 10, 2000.
8. COMMITMENTS AND CONTINGENCIES - LITIGATION - Indian Gaming is the subject of
numerous lawsuits in various court jurisdictions at both federal and state
levels. These court cases are attempting to define the permissible gaming
activities on Indian reservations, the states' rights or limitations on control
of gaming, and numerous other issues. The Barona Tribe is not a party to these
cases nor is the Barona Reservation within the jurisdiction of certain courts in
which many of these cases will be decided; therefore, the impact, if any, on the
operations of the Barona Casino cannot be determined at this time.
The impact of decisions in various cases, however, could have a
significant impact on the operations of Barona Casino and the Company when
decided. Specifically, current cases are addressing the legality of electronic
gaming equipment and certain card games in California and whether the State of
California should be required to permit the operation of video gaming
equipment. Various courts have ruled in different cases, or in different
hearings on the same case, both in the states' favor and in the tribes' favor
on the same or similar issues. There are appeals remaining in a number of cases
and other cases may arise. Until the courts make definitive rulings, the
legality of the gaming activities will not be known.
On June 30, 1994, the U.S. Attorney of the Southern District of California
announced a verbal understanding with three San Diego Indian tribes, including
the Barona Tribe, that would allow the Barona Casino to continue to operate
without expansion of gaming activities until one or more of the following
occurs:
- - A compact with the State of California is negotiated or the Secretary of
the Interior expressly authorized gaming, such as certain card or
electronic/video gaming, which have not been previously addressed,
- - Entry of final judgments and exhaustion of all appellate remedies in
certain cited suits pending before federal courts,
- - Enactment of federal legislation that authorizes the operation of the
electronic/video games at issue without a tribal-state compact,
- - Amendment of the NIGC's regulations to include the electronic/video games
within the definition gaming or permissible technologic aids thereto
which are not subject to State compact, or
- - Material breach of the understanding by the Barona Tribe.
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INLAND CASINO CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
9. SUBSEQUENT EVENTS - CONSULTING AGREEMENT - In May 1996, the Company and the
Barona Tribe agreed to an Amended and Restated Consulting Agreement relating to
the operations of the Barona Casino (the "Consulting Agreement"). In addition,
the Company and the Barona Tribe entered into a Mutual Release releasing each
other from certain rights, duties and obligations set forth in the Operations
Agreement (the "Release"). The Consulting Agreement and the Release have
effective dates of April 1, 1996.
The Consulting Agreement provides for an initial term of three years,
with an option to extend the agreement for an additional five year period.
Under the terms of the Consulting Agreement, the Barona Tribe has the right to
draw from the gross revenues of the Barona Casino an annual income stream at
least equal to the basis received by the Barona Tribe for the twelve month
period ended December 31, 1995, and fees paid or payable to the Company may
accordingly be reduced.
Through March 31, 1996, the amortization of management agreement acquisition
costs was calculated as the greater of the amortization using (i) the
straight-line method over the remaining term of the Operations Agreement or (ii)
an accelerated method, whichever method was greater. Beginning with the
effective date of the Consulting Agreement, these deferred costs will be
amortized using the straight-line method over the initial term of the Consulting
Agreement.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Since its formation, the Company has devoted substantially all of its efforts to
provide operational and consulting services for the Barona Tribe at the Barona
Casino, including providing assistance to the Barona Tribe in the development
and expansion of the "Big Top" facility at the Barona Casino. Through March 31,
1996, fees received from the Barona Casino have been the Company's only source
of revenue. The Company earns fees based upon a percentage of the "net profits"
generated by the Barona Casino. As used in this Report, the term "net profits"
is not intended to mean net profits as defined by generally accepted accounting
principles or by the Indian Gaming Regulatory Act ("IGRA"). Generally, the
Operations Agreement defines "net profit" as the total amount of moneys
remaining from monthly gross receipts after payment of the operating expenses
for such month which amount shall be calculated on a cash basis.
Through March 31, 1996, the Company provided certain personnel, at its expense,
to operate the activities at the Barona Casino, and it entered into agreements
such as leases or other contracts for the Barona Casino in which the Company was
the obligor. As part of its contractual obligations, Inland Casino provided
significant financing for the construction and expansion of the Barona Casino.
The financing costs are recognized as an asset in the financial statements of
the Company, designated as management agreement acquisition costs, and are
expensed over the term of the Operations Agreement. The recovery of this
financing is achieved through the fees paid to Inland Casino pursuant to the
agreements with the Barona Tribe. Such construction financing obligations are
incurred upon the recommendation of the Company and subject to acceptance by the
Barona Tribe.
Inland Casino's corporate activities, besides its obligations under the
Operations Agreement and collateral contracts for the benefit of the Barona
Tribe, include arranging financing to support casino construction projects, the
development of other contract opportunities, proactive tracking of Indian Gaming
legislative and litigation matters, and the operation and administration of the
activities of the Company. The Company is exploring the possibility of entering
into management or consulting agreements with additional clients. The
particulars of each such agreement may differ significantly as to the type and
level of services provided, the need for expansion of the facilities and the
responsibilities for financing any such construction. In addition, the
compensation, term and other rights or obligations under these contracts also
may differ significantly from agreements with the Barona Tribe.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
1995.
REVENUE. Revenue decreased 4.8% from $3,492,011 for the three months ended March
31, 1995 to $3,324,574 for the three months ended March 31, 1996, as a result of
lower profit margins at the Barona Casino. The Company's revenue is solely from
fees earned under the Operations Agreement with the Barona Tribe, and the fees
are calculated in part based on the profit margins of the Barona Casino. When
profit margins are lower, the Company's fee income is reduced.
OPERATING EXPENSES. General and administrative expenses increased 6.1% from
$1,363,115 for the three months ended March 31, 1995 to $1,446,576 for the three
months ended March 31, 1996 primarily as the result of increased business
development costs, including costs associated with marketing the Company's
services to potential new clients.
12
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Amortization of management agreement acquisition costs increased 5.0% from
$687,357 for the three months ended March 31, 1995 to $721,992 for the three
months ended March 31, 1996, resulting primarily from calculating amortization
on a higher asset value in the current quarter.
INCOME TAX PROVISION. The income tax provision decreased 24.5% from $617,000 for
the three months ended March 31, 1995 to $466,000 for the three months ended
March 31, 1996, primarily as a result of lower taxable income and a lower
effective income tax rate.
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THE NINE MONTHS ENDED MARCH 31,
1995.
REVENUE. Revenue decreased 25.8% from $10,337,886 for the nine months ended
March 31, 1995 to $7,665,790 for the nine months ended March 31, 1996, because
of reduced profit margins at the Barona Casino, resulting primarily from
increases in payroll, marketing and administrative costs. The increase in
payroll and administrative costs at the Barona Casino was the result of the
Company's decision to increase staff levels to provide additional administrative
support and improved service to customers and increases in marketing costs
resulted from the implementation of new promotions and advertising programs.
OPERATING EXPENSES. General and administrative expenses increased 74.7% from
$2,877,413 for the nine months ended March 31, 1995 to $5,027,359 for the nine
months ended March 31, 1996 primarily as the result of increased payroll,
marketing and administrative costs. Salaries and benefits increased as the
number of employees of the Company increased from 11 at March 31, 1995 to 27 at
March 31, 1996, including key employees with backgrounds in law, finance,
accounting and investor relations, hired to perform the duties required of a
public company. Key employees with backgrounds in operations, security and
marketing also were added to (i) assist with enhancement of operations at the
Barona Casino, as well as the development and expansion of the Barona Casino,
and (ii) provide a staff to market the Company's gaming management and
consulting services to others.
Other administrative costs increased as a result of increases in sponsorships,
charitable contributions, marketing costs and business development costs,
partially offset by a reduction in special promotional events and professional
fees. Facilities costs increased as a result of the Company entering into a
lease for its current offices in January 1995. Office supplies and expense,
including telephone service, postage and printing increased as the corporate
staff began to occupy the offices in mid-1995.
Amortization of management agreement acquisition costs decreased 14.4% from
$2,130,246 for the nine months ended March 31, 1995 to $1,824,499 for the nine
months ended March 31, 1996. Amortization of the management agreement
acquisition costs is calculated as the greater of the amortization using the
straight-line method over the remaining term of the Operations Agreement or an
accelerated method, whichever is greater. The accelerated amortization is equal
to the excess of fees earned over 30% of Casino operating income. Since the
Company did not earn fees of over 30% of Casino operating income during the nine
months ended March 31, 1996, the straight-line method was used, compared to use
of the accelerated method for the nine months ended March 31, 1995. Deferred
income taxes arise as the result of timing differences between amortization
expense for financial statement purposes and tax purposes.
13
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OTHER INCOME AND EXPENSE. For the nine months ended March 31, 1995 interest
income was $54,783 compared to $1,548 for the nine months ended March 31, 1996.
Commencing April 1, 1995, it was determined by management that as long as the
Company had outstanding advances of future fees due to the Barona Casino,
interest earned on excess cash balances should be paid to the Barona Casino.
INCOME TAX PROVISION. The income tax provision decreased 85.7% from $2,329,000
for the nine months ended March 31, 1995 to $334,000 for the nine months ended
March 31, 1996, primarily as a result of lower taxable income and a lower
effective income tax rate.
LIQUIDITY AND CAPITAL RESOURCES.
As noted above, Inland Casino's only source of revenue is fees from the
Operations Agreement. From Fiscal 1993 through Fiscal 1995, in addition to
general and administrative and other miscellaneous expenses, the Company's most
significant expense item has been the funding of construction costs related to
an expansion of the facilities at the Barona Casino. Net cash provided by
operations from fees earned during the same period has been insufficient by
itself to fund construction. In addition to fees earned under the Operations
Agreement, the Company also has received advances against future fees from the
Barona Tribe and received capital contributions from its shareholders.
During the nine months ended March 31, 1996, the Company's cash position
increased $319,179 from the June 30, 1995 balance of $1,423,826, to $1,743,005
at March 31, 1996. The increase was principally due to net cash generated by
operating activities of $2,503,636 during the period, reduced by cash invested
in management agreement acquisition costs of $1,449,641, purchases of furniture
and equipment of $74,629, and use of cash flows for financing activities of
$660,187. Cash flows used in financing activities include $29,187 in payments of
notes payable and the redemption of common stock for $1,401,321, reduced by
issuance of a promissory note for $900,000.
Accounts receivable increased $54,517 during the first nine months of Fiscal
1996 primarily as a result of an increase in loans to officers and employees.
The management agreement acquisition costs, totalling $12,937,734 at March 31,
1996, has been financed principally by cash generated from operations, advances
of future fees from the Barona Casino, working capital, and advances and
capital contributions from shareholders. At March 31, 1996, outstanding advances
of future fees from the Barona Casino were $1,710,505. Advances from the Barona
Tribe are repaid by Inland Casino through the reduction in payment of future
fees earned. Advances do not bear interest and are due on demand.
In the future, if the Operations Agreement is successfully challenged by the
necessary regulatory bodies, Inland Casino may be obligated to repay such
advances to the Barona Casino even if it is not entitled to any future fees
under the Operations Agreement. Likewise, if the Consulting Agreement
(hereinafter defined) is determined to be a management contract and is approved
but with a fee that is lower than presently provided for in the Consulting
Agreement, Inland Casino's ability to repay such advances or to fund future
expansion could be adversely affected. (See "Subsequent Events, Additional
Factors That May Affect Future Results and Forward-looking Statements" herein.)
Although the Company believes that it will have the resources sufficient to make
repayment of the advances, there can be no assurance that Inland Casino will
have the resources to repay any outstanding advances in the future, if such
adverse regulatory developments occur.
It is the Company's intention to assist the Barona Tribe in funding, or finding
acceptable sources of funding for, future improvements in the Barona Casino.
Depending on the nature and extent of the improvement project, to the extent
practicable, it is the Company's intent to first explore funding such
improvement
14
<PAGE> 15
projects from the Company's working capital and through advances of future fees,
before seeking outside debt or equity financing. However, outside sources of
financing may be required or sought at any time.
In October 1995, the Company negotiated a credit facility with a bank which
allows for total credit of $2 million. The credit agreement expires on October
10, 1998, and is secured by all of the Company's personal property, including
but not limited to bank deposits, accounts receivable, inventory and equipment.
This agreement contains various covenants including restrictive covenants which
require, among other things, the maintenance of certain financial ratios,
maintenance of $1,000,000 in the bank's deposit accounts (during any period in
which the credit facility is being utilized), a limitation on the incurrence of
future indebtedness and a prohibition on declaring or making any cash dividends.
As of May 14, 1996, the Company had no outstanding borrowings under this credit
facility. The above-mentioned covenants are not expected to affect the ability
of the Company to draw upon this facility or to meet its obligations. Under the
terms of this agreement, amounts drawn on the line will convert into notes
payable over a period of months (the exact number of which is dependent upon the
date of disbursement), with interest at prime plus 2%. All of such notes become
due and payable no later than October 10, 1998. In connection with this credit
facility, the bank received immediately exercisable warrants to purchase 40,000
shares of the Company's common stock, subject to certain anti-dilution
provisions, at an initial exercise price of $5.00. The warrant expires on
October 10, 2000. (See Note 7 to the Interim Financial Statements.)
Inland Casino has announced plans to expand and improve the existing facilities
at the Barona Casino, which expansion is subject to the approval of the Barona
Tribe and also is subject to obtaining appropriate financing. The expansion will
not increase the number of gaming devices, but is expected to expand off-track
betting and other non-gaming activities, as permitted under the verbal agreement
with the U.S. Attorney for the Southern District of California and the compact
with the State of California concerning off-track betting. This proposed
expansion project is estimated to cost up to $17.5 million and the Company and
the Barona Tribe are exploring financing alternatives for the project.
The Barona Casino and all of the related facilities are capital
improvements upon land which belongs to the Barona Tribe. As such, the Company
has no ownership whatsoever in any of the improvements to such land. All of
these improvements belong to the Barona Tribe.
SEASONALITY.
The Barona Casino is located approximately 30 miles east of downtown San Diego,
California where the population is relatively stable throughout the year,
although it peaks to some extent due to tourism during the summer months and to
a lesser extent during the winter months. On the basis of its experience to
date, the Company anticipates that the Barona Casino's business may peak in
summer and, to some extent, in winter, and may decline somewhat in early spring
and late fall. However, at this time, the Company cannot accurately predict the
continued effect of seasonality on its business.
INFLATION.
To date, inflation has not had a material impact on the Company's financial
condition or its results of operations.
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<PAGE> 16
SUBSEQUENT EVENTS, ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS, AND
FORWARD-LOOKING STATEMENTS.
Subsequent Events.
In May 1996, the Company and the Barona Tribe agreed to an Amended and Restated
Consulting Agreement relating to the operations of the Barona Casino (the
"Consulting Agreement"). In addition, concurrently with the execution of the
Consulting Agreement, the Company and the Barona Tribe entered into a Mutual
Release releasing each other from certain rights, duties and obligations set
forth in the Operations Agreement (the "Release"). The Consulting Agreement and
the Release have effective dates of April 1, 1996.
The Consulting Agreement provides for an initial term of three years, with an
option to extend such agreement for an additional five year period. Under the
terms of the Consulting Agreement, the Barona Tribe has the right to draw from
the gross revenues of the Barona Casino an annual income stream at least equal
to the basis received by the Tribe for the twelve month period ended December
31, 1995, and fees paid or payable to the Company may accordingly be reduced.
Through March 31, 1996, the amortization of management agreement acquisition
costs was calculated as the greater of the amortization using (i) the
straight-line method over the remaining term of the Operations Agreement or (ii)
an accelerated method, whichever method was greater. Beginning with the
effective date of the Consulting Agreement, these deferred costs will be
amortized using the straight-line method over the initial term of the Consulting
Agreement.
The Company believes that the amounts capitalized as management agreement
acquisition costs will continue to be fully recoverable over the life of the
Consulting Agreement. As it did during the periods during which the Operations
Agreement was in force, management will continue to review the valuation and
recoverability of these deferred costs and make adjustments, as appropriate.
See Note 5 to the Interim Financial Statements.
In addition, the Company does not expect there to be a difference in the policy
of advances of consulting fees from the policies developed between the Company
and the Barona Tribe during the term of the Operations Agreement.
The Company also intends to continue to render consulting services to the Barona
Tribe regarding financing alternatives of capital improvement projects. Finally,
the Company may enter into subsequent agreements with the Barona Tribe regarding
the Company's funding of certain improvements, some of which may be similar to
prior arrangements entered into with the Barona Tribe.
Additional Factors That May Affect Future Results.
Gaming on Indian land is extensively regulated by federal, state, and tribal
governments, and the present regulatory environment is extremely uncertain
because of certain pending litigation and legislation. Adverse findings for any
of the Indian tribes in any of the pending actions could have a material adverse
effect on the operations of Inland Casino, as would criminal and civil
enforcement actions taken by federal agencies which could be commenced before
the outcome of such litigation is known.
The IGRA and the regulations promulgated by the NIGC require that management
agreements be approved by the NIGC. To date, the Operations Agreement has not
been submitted for approval and in light of the execution of the Consulting
Agreement (which supersedes the Operations Agreement) management believes no
such submission is now required. The initial Consulting Agreement (prior to its
amendment
16
<PAGE> 17
and restatement) has been submitted to the NIGC for review and it is the
intention of the Company to also submit the amended and restated consulting
agreement to the NIGC. The Company believes that the NIGC will determine that
the Consulting Agreement is not a management agreement, as defined by applicable
federal regulations, and, therefore, is not subject to NIGC approval.
If the NIGC determines that the Consulting Agreement is a management agreement,
there can be no assurance that the Consulting Agreement will be approved by the
NIGC and/or that the NIGC will take any action relating to the Operations
Agreement or the assignments of the Operations Agreement from ICP to ICC II and
from ICC II to the Company. To the extent that the NIGC determines that the
Consulting Agreement is a management agreement and, subsequently, determines not
to approve such Consulting Agreement, or to require modifications which would
materially alter the financial arrangements between the Company and the Barona
Tribe, such action may have a material adverse effect on the business and
financial condition of the Company. (See "Liquidity and Capital Resources"
herein.)
In addition, the Bureau of Indian Affairs (the "BIA") requires that leases of
trust land must be approved by the BIA. To comply with the BIA, the Company
intends to submit the Consulting Agreement to the BIA for its review. The
Company believes that the BIA will determine that the Consulting Agreement is
not a lease of trust land, as defined in the applicable regulations, and is
therefore not subject to BIA approval. However, if the BIA determines that the
Consulting Agreement is a lease of trust land, there can be no assurance that
the Consulting Agreement will be approved by the BIA, and such an event would
have a material adverse effect on the business and financial condition of the
Company.
In any event, any material reduction in fees payable to the Company, whether as
a result of a modification to the agreements between the Company and the Barona
Tribe as result of regulatory compliance requirements or weakness in the
operations of the Barona Casino, could have a material adverse effect on the
business and financial condition of the Company, if the Company could not either
reduce expenses or increase revenues from other sources.
Forward-looking Statements.
Included in the Notes to the Interim Financial Statements and in this Item 2.
Management's Discussion and Analysis or Plan of Operation are certain
forward-looking statements reflecting the Company's current expectations.
Although the Company believes that its expectations are based on reasonable
assumptions, there can be no assurance that the Company's financial goals or
expectations will be realized. Numerous factors may affect the Company's actual
results and may cause results to differ materially from those expressed in
forward-looking statements made by or on behalf of the Company. Some of these
factors include the uncertainty involved in the regulatory approval process
relating to the Consulting Agreement; the regulatory approach taken with respect
to the now terminated Operations Agreement; the outcome of a variety of pending
litigation and legislation at the federal and state levels regarding Indian
gaming; the availability of funding alternatives to fulfill certain contemplated
development projects at the Barona Casino; and the general economic factors
affecting the gaming industry in general and Indian gaming in particular in the
geographic market within which the Company competes.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
3.1 Amended and Restated Bylaws.
10.1 Stock Purchase and Settlement and Release Agreement dated March 4, 1996.
10.2 Promissory Note dated March 4, 1996 for $900,000.
Other Exhibits
27. Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the Company's third quarter ended March
31, 1996.
18
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INLAND CASINO CORPORATION,
a Utah Corporation (Registrant)
Date: May 16, 1996 /s/ Duane M. Eberlein
---------------------
Duane M. Eberlein
Vice President,
Chief Financial Officer
(Principal Financial and
and Accounting Officer)
19
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
INLAND CASINO CORPORATION,
A UTAH CORPORATION
<PAGE> 2
ARTICLE I
OFFICES
Section 1. The principal office of the corporation in the State of
Utah shall be located in Salt Lake City, County of Salt Lake.
Section 2. The corporation may also have offices at such other places
both within and without the State of Utah as the Board of Directors may from
time to time determine or the business of the corporation may require.
Section 3. The registered office of the corporation required by the
Utah Revised Business Corporation Act to be maintained in the State of Utah may
be, but need not be identical with the principal office in the State of Utah,
and the address of the registered office may be changed from time to time by
the Board of Directors.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. An annual meeting of the shareholders shall be held at
such date, time and place as shall be designated from time to time by the Board
of Directors, at which meeting the shareholders shall elect, by a plurality
vote, unless otherwise prescribed by the articles of incorporation or an
agreement among the shareholders, the directors whose terms expire, and
transact such other business as may properly be brought before the meeting.
All meetings of the shareholders for the election of directors or for any other
purpose shall be held at such date, time and place, within or without the State
of Utah, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof. The Chairman of the Board of Directors may postpone
and reschedule any previously scheduled annual or special meeting of the
shareholders of the Corporation.
Section 2. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each shareholder entitled to
vote at such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting.
Section 3. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each
shareholder. Such list shall be open to the examination of any shareholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
shareholder who is present.
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<PAGE> 3
Section 4. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request of a majority of the Board of Directors,
or at the request in writing of shareholders holding a majority of shares
outstanding. Such request shall state the purpose or purposes of the proposed
meeting.
Section 5. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each shareholder entitled to vote at such
meeting.
Section 6. Business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
Section 7. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
articles of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
Section 8. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the articles of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 9. Unless otherwise provided in the articles of incorporation
each shareholder shall at every meeting of the shareholders be entitled to one
vote in person or by proxy executed in writing by the shareholder or by his
authorized attorney in fact for each share of the capital stock having voting
power held by such shareholder, but no proxy shall be voted on after three
years from its date, unless the proxy provides for a longer period.
Section 10. (a) Shares standing in the name of another corporation
may be voted by such officer, agent or proxy as the bylaws of such corporation
may prescribe, or, in the absence of such provision, as the Board of Directors
of such other corporation may determine. (b) Shares held by an administrator,
executor, guardian, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him, either in person or by proxy,
2
<PAGE> 4
but no trustee shall be entitled to vote shares held by him without a transfer
of such shares into his name. (c) A shareholder whose shares are pledged shall
be entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred. (d) Neither treasury shares of its own stock held by
the corporation nor shares held by another corporation if a majority of the
shares entitled to vote for the election of directors of such other corporation
are held by the corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time for
purposes of any meeting.
Section 11. Unless otherwise provided in the articles of
incorporation, any action required to be taken at any annual or special meeting
of shareholders of the corporation, or any action which may be taken at any
annual or special meeting of such shareholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those shareholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board of Directors shall be not less than three (3) nor more than ten (10).
The exact number of directors shall be determined from time to time, within the
limitations specified in the articles of incorporation or in this Section 1 of
this Article, by a vote of a majority of the directors then in office. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the time of office of an incumbent director. The
directors shall be elected at the annual meeting of the shareholders, but if
any such annual meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meeting of shareholders held for
that purpose. Subject to Section 2 of this Article, each director elected
shall hold office until the next annual meeting of shareholders and until a
successor is elected and qualified. Directors need not be shareholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled, except as may
be otherwise specifically provided by the articles of incorporation, by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or any newly created directorship, the
directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of
Chancery may, upon application of any shareholder or shareholders holding at
least ten percent of the total number of the shares at the time outstanding
having the right to
3
<PAGE> 5
vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the articles of incorporation or by these bylaws directed or
required to be exercised or done by the shareholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of Utah.
Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of
the shareholders to fix the time or place of such first meeting of the newly
elected Board of Directors, or in the event such meeting is not held at the
time and place so fixed by the shareholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
President on four (4) days' notice to each director by mail or 48 hours' notice
to each director either personally or by telegram; special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of two directors unless the board consists of only one
director, in which case special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the articles of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the articles of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
4
<PAGE> 6
Section 10. Unless otherwise restricted by the articles of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the articles of incorporation, adopting an
agreement of merger or consolidation, recommending to the shareholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the shareholders a dissolution of the
corporation or a revocation of a dissolution, or amending the bylaws of the
corporation; and, unless the resolution or the articles of incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the articles of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members
5
<PAGE> 7
of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the articles of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these bylaws, notice is required to be given to
any director or shareholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the articles of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be elected by the
Board of Directors and shall include a President and a Secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also elect a Treasurer
and/or one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers. Any number of offices may be held by the same person, unless the
articles of incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of shareholders shall elect a President and a Secretary and may
also elect Vice Presidents and a Treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
6
<PAGE> 8
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if such an officer is elected,
is the chief executive officer of the corporation and has, subject to the
control of the Board of Directors, general supervision, direction and control
of the business and officers of the corporation and shall preside at meetings
of the Board of Directors and shareholders. The Chairman of the Board has the
general powers and duties of management usually vested in the office of chief
executive officer and general manager of a corporation and other powers and
duties as may be from time to time assigned to him by the Board of Directors or
prescribed by the Bylaws.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the shareholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE PRESIDENT
Section 8. The President is the chief operating officer of the
corporation and has, subject to the direction of the Chairman of the Board, if
any, general supervision, direction and control of the day-to-day operations of
the business and officers of the corporation. The President has the general
powers and duties of management usually vested in the office of chief operating
officer of a corporation and such other powers and duties as may be prescribed
by the Board of Directors. In the absence of a Chairman of the Board, or if
there is no Chairman of the Board, the President shall, in addition, be the
chief executive officer of the corporation and shall have the powers and duties
described in Section 6 herein.
Section 9. The Chairman of the Board or the President shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 10. In the absence of the President or in the event of his
inability or refusal to act, the Vice President, if any, (or in the event there
be more than one Vice President, the Vice Presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President.
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The Vice Presidents shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the shareholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring
it and when so affixed, it may be attested by his signature or by the signature
of such Assistant Secretary. The Board of Directors may give general authority
to any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 12. The Assistant Secretary, or, if there be more than one,
the Assistant Secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.
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<PAGE> 10
Section 16. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
President or a Vice President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Utah, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge
to each shareholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may, in
its discretion
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<PAGE> 11
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purposes of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors must fix a new record date for
the adjourned meeting if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Utah.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of incorporation, if any, may be
declared by the Board of Directors
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<PAGE> 12
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin on the
first day of July and end on the thirtieth day of June in each year.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Utah." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the Utah Revised Business
Corporation Act.
AGREEMENTS AMONG SHAREHOLDERS
Section 7. An agreement among the shareholders of the corporation
shall control over a contrary provisions of the Bylaws.
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ARTICLE VIII
AMENDMENT
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the shareholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the articles of
incorporation at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the shareholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
articles of incorporation it shall not divest or limit the power of the
shareholders to adopt, amend or repeal bylaws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AND
SETTLEMENT AND RELEASE AGREEMENT
This Stock Purchase and Settlement and Release Agreement (the
"Agreement") is hereby entered into by and between Jack R. Smith (the
"Executive") and Inland Casino Corporation, a Utah corporation (the "Company").
RECITALS
--------
WHEREAS, Executive has been employed by the Company on an at
will basis since May 22, 1995, most recently as the Company's President and
Chief Operating Officer, and has served as a Director of the Company since May
22, 1995; and
WHEREAS, both Executive and the Company have determined that
it is in their mutual best interests that Executive resign from his positions
as President, Chief Operating Officer and Director of the Company, and that
their employment and director relationships be dissolved; and
WHEREAS, both Executive and the Company voluntarily elect to
terminate the employment and director relationships on the terms and conditions
hereinafter set forth and settle any disputes arising from such relationships
without resort to litigation; and
WHEREAS, Executive is the beneficial owner of 1,908,865 shares
of common stock of the Company and an option to purchase an additional 894,780
shares of common stock of the Company; and
WHEREAS, both Executive and the Company have determined that
it is in their mutual best interests that Executive transfer to the Company on
the terms and conditions hereinafter set forth all of the common stock of the
Company and all of the options to purchase common stock of the Company
beneficially owned by Executive.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Employment Status. Executive hereby voluntarily
resigns from his positions as President, Chief Operating Officer and a Director
of the Company as of the date Executive signs this Agreement (the "Execution
Date"). Executive also voluntarily resigns his employment by the Company as of
the Execution Date. Executive is relieved of all duties effective immediately.
Executive will not seek or accept employment with the Company or any of its
divisions, affiliates, subsidiaries, parent companies or related entities at
any time and if he does so, his application need not be considered. After the
<PAGE> 2
expiration of the date that all periods of revocation under this Agreement have
lapsed (the "Settlement Date"), the Company will issue a public statement
substantially in the form attached hereto as Exhibit 1 referencing Executive's
resignation from the Company.
2. Compensation, Vacation Pay and Other Benefits Through
the Execution Date. The Company shall pay Executive his current base salary
through the Execution Date. The Company and Executive agree that Executive
does not have any accrued or unused vacation pay earned through the Execution
Date. Executive acknowledges and agrees that the payment of the foregoing
salary through the Execution Date constitutes full payment of any and all
monies that he earned during his employment by the Company through the
Execution Date.
3. Severance Benefits After the Execution Date. As
severance benefits, the Company will provide the following benefits to
Executive after the Settlement Date:
(a) Health Insurance Premiums. If the Executive
(or any of his eligible dependents) elects to continue to participate in any of
the Company's group health insurance plans pursuant to COBRA, 29 U.S.C. Section
1161, et seq., the Company will reimburse Executive, following the Settlement
Date, for the premiums paid by him for such COBRA coverage for a maximum of 36
months commencing on the Execution Date. Nothing in this section is intended
to alter the terms of COBRA in any way and those terms shall remain applicable
in all respects. In addition, to the extent that Executive's period of COBRA
coverage is less than 36 months (the "Uncovered Months"), then the Company
shall pay to Executive for each Uncovered Month the monthly amount that the
Company was paying in health insurance premiums on behalf of Executive on the
Execution Date under the Company's applicable group health insurance plan.
Such payments to Executive shall be made by the Company within ten (10)
business days after the end of each applicable month.
(b) Automobile Allowance. The Company shall, for
a period of 36 months (commencing with the first full month after the Execution
Date), pay Executive $1,265 per month, representing a nonaccountable automobile
allowance. Such payment shall be made to Executive within ten (10) business
days after the end of each applicable month.
The payments set forth in this Section 3 are, from
and after the Execution Date, Executive's only right to compensation from the
Company.
4. Continuation of Benefits After the Execution Date.
Except as expressly provided in this Agreement or in the plan documents
governing the Company's employee benefit plans, as of the Execution Date,
Executive will no longer be eligible for, receive, accrue, or participate in
any other benefits or benefit plans provided by the Company, including without
limitation medical, dental and life insurance benefits, a car allowance and the
Company's 401(k) retirement plan; provided, however, that health care coverage
for Executive and Executive's dependents may be continued under
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<PAGE> 3
COBRA for as long as Executive is eligible for such coverage and so long as
Executive pays the required premiums.
5. Company/Executive Property.
(a) Company Property. On or before the
Settlement Date, Executive shall return all property of the Company in
Executive's possession.
(b) Executive's Property. On or before the
Settlement Date, the parties shall agree on a list of personal property owned
by Executive that he shall be entitled to remove from the Company's premises;
that list shall be initialed by the parties and become a part of this
Agreement.
6. Transfer of Common Stock and Stock Option.
(a) Executive is the beneficial owner of
1,908,865 shares (the "Shares") of common stock of the Company (the "Common
Stock"). In consideration of (i) the payment of $1,400,000 by the Company to
Executive pursuant to the terms set forth in paragraph 6(b) below (the
"Purchase Price"), and (ii) the payment by the Company to Executive of certain
amounts in 1998 and 1999 as described in paragraph 6(c) below (the "1998
Earn-Out Amount" and the "1999 Earn-Out Amount"; collectively, the "Earn-Out
Amounts"), Executive hereby sells, transfers and delivers to the Company, and
the Company hereby purchases, all of Executive's interest in and to the Shares
as of the business day immediately after the Settlement Date.
(b) The Purchase Price shall be payable as
follows:
(i) On the business day immediately
after the Settlement Date (the "Stock Closing Date"), the Company shall pay
Executive $500,000. Upon payment of the $500,000, Executive shall transfer and
deliver to the Company the Shares whereupon the Company shall retire such
Shares to the status of authorized but unissued shares of Common Stock.
(ii) The Company shall pay the balance of
the Purchase Price according to the terms of a promissory note executed by the
Company, substantially in the form of the note attached hereto as Exhibit 2,
and that sets forth provisions for the payment to Executive of the principal
balance of the note and interest on the unpaid principal balance of the note at
the rate of seven percent (7%), in three annual installments of $342,946.50, on
each of March 4, 1997, 1998 and 1999. To the extent that any such installment
comes due on a day which is not a business day, such payment shall be due on
the next succeeding business day.
(c) The Earn-Out Amounts will be based on the
average of the daily mean between the bid and asked closing prices of a share
of Common Stock for the sixty-consecutive-day period beginning seventy days and
ending ten days before each of the 1998 Earn-Out Payment Date and the 1999
Earn-Out Payment Date as defined
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<PAGE> 4
below (the "Stock Valuations"), and will be calculated in accordance with the
following schedule for each of the 1998 Earn-Out Amount and the 1999 Earn-Out
Amount:
<TABLE>
<CAPTION>
Stock Valuation Earn-Out Amount
--------------- ---------------
<S> <C>
$ 0 - $4.99/share $ 0
$5.00 - $5.99/share $100,000
$6.00 - $6.99/share $200,000
$7.00 or above/share $250,000
</TABLE>
The 1998 Earn-Out Amount will be payable
(without interest) on March 4, 1998 (the "1998 Earn-Out Payment Date"), and the
1999 Earn-Out Amount will be payable (without interest) on March 4, 1999 (the
"1999 Earn-Out Payment Date").
(d) Pursuant to a Stock Option Agreement dated as
of June 30, 1994, by and among Jonathan Ungar, Alan Woods, L. Donald Speer, II
and Executive (the "Ungar/Woods Agreement"), Messrs. Ungar and Woods granted to
Executive an option to purchase an aggregate of 894,780 shares of Common Stock
from Messrs. Ungar and Woods, 447,390 shares from each (the "Stock Option").
In consideration of the payment of $10 by the Company to Executive on the Stock
Closing Date and the other payments and benefits described in this Agreement,
Executive hereby sells, transfers and delivers to the Company, and the Company
hereby purchases, all of Executive's interest in and to the Stock Option as of
the Stock Closing Date; provided, however, that such transfer will not be
effective unless and until Messrs. Ungar and Woods deliver to the Company their
written consent to such transfer.
(e) Executive represents and warrants to the
Company, as of the Execution Date, as follows:
(i) Executive does not beneficially own
any securities of the Company other than the Shares and the Stock Option.
(ii) This Agreement has been duly
executed and delivered by Executive and constitutes a valid and binding
obligation of Executive, enforceable against Executive in accordance with its
terms, except as such enforceability may be subject to or limited by
bankruptcy, insolvency or other similar laws relating to the rights of
creditors generally and the effect of general principles of equity.
(iii) The execution and delivery of this
Agreement by Executive does not and will not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination or
acceleration of any obligation or to loss of a benefit under, or result in the
creation of any encumbrance or restriction of any kind upon any of the
properties or assets of Executive under, any provision of (A) any agreement or
arrangement to which Executive is a party or by which any of his properties or
assets are
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<PAGE> 5
bound, (B) any judgment, order or other decree applicable to Executive or his
properties or assets, or (C) any statute, regulation or other law applicable to
Executive or his properties or assets.
(iv) No consent, approval, license,
permit, order or other authorization of, or registration, declaration or other
filing with, any court, administrative agency or other governmental authority
or instrumentality, domestic or foreign, or any third person, is required to be
obtained or made by Executive in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(v) Executive has good and valid title
to the Shares and the Stock Option being sold by him hereunder, free and clear
of any encumbrances or restrictions of any kind. Upon delivery to the Company
on the Execution Date of certificates representing the Shares, duly endorsed by
Executive for transfer to the Company, and upon Executive's receipt of the
consideration hereunder, good and valid title to such Shares will pass to the
Company, free and clear of any encumbrances or restrictions of any kind, other
than those arising from acts of the Company or its affiliates. Upon delivery
to the Company of an Assignment Agreement relating to the Stock Option and upon
Executive's receipt of the consideration hereunder, good and valid title to the
Stock Option will pass to the Company, free and clear of any encumbrances or
restrictions of any kind. Other than this Agreement and the Ungar/Woods
Agreement, the Shares and the Stock Option are not subject to any voting trust
agreement or other agreement, arrangement or understanding, including any such
agreement, arrangement or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of such Shares or Stock Option.
(vi) There are no (A) outstanding
judgments, orders, writs, injunctions or other decrees of any court,
administrative agency, or other governmental authority or instrumentality or
arbitration tribunal against Executive which affect or could affect the ability
of Executive to consummate the transactions contemplated hereby or (B) actions,
suits, claims or legal, administrative or arbitration proceedings or
investigations pending or threatened against Executive which affect or could
affect the ability of Executive to consummate the transactions contemplated
hereby.
(f) Notwithstanding anything to the contrary
herein, prior to the Company being obligated to purchase the Shares and the
Option, Executive shall deliver to the Company a certificate dated the Stock
Closing Date stating that each of the representations and warranties set forth
in subparagraph (e) of this Section 6 are true and correct as of the Stock
Closing Date.
7. General Release by Executive. In consideration of
the payments specified in Section 3 of this Agreement and the other matters
described herein, the receipt and adequacy of which are hereby acknowledged,
Executive, for himself and his heirs, executors, administrators, assigns,
affiliates, successors and agents (collectively, the "Affiliates") hereby fully
and without limitation releases and forever discharges the Company and its
agents, representatives, stockholders, parents, subsidiaries, divisions,
5
<PAGE> 6
owners, officers, directors, employees, consultants, attorneys, auditors,
accountants, investigators, affiliates, successors and assigns (collectively,
the "Releasees"), both individually and collectively, from any and all rights,
claims, demands, liabilities, actions, causes of action, damages, losses,
costs, expenses and compensation, of whatever nature whatsoever, known or
unknown, fixed or contingent ("Claims"), which Executive or his Affiliates has
or may have or may claim to have against the Releasees by reason of any matter,
cause, or thing whatsoever, from the beginning of time to the date hereof,
including, without limiting the generality of the foregoing, any Claims arising
out of, based upon, or relating to the recruitment, hire, employment,
relocation, remuneration, investigation, or termination of Executive by the
Company or the other Releasees, Executive's tenure as a Director of the
Company, any agreement or compensation arrangement between Executive and the
Company or the other Releasees, or any act or occurrence in connection with any
actual, existing, proposed, prospective or claimed ownership interest of any
nature of Executive or Executive's Affiliates in equity capital or rights in
equity capital or other securities of the Company or the other Releasees to the
maximum extent permitted by law.
Executive specifically and expressly releases any Claims
arising out of or based on the California Fair Employment and Housing Act, as
amended; Title VII of the Civil Rights Act of 1964, as amended; the Age
Discrimination in Employment Act, as amended; the Americans With Disabilities
Act; the National Labor Relations Act, as amended; the Equal Pay Act; ERISA;
any provision of the California Labor Code; California common law of fraud,
misrepresentation, negligence, defamation, infliction of emotional distress, or
wrongful termination; state or federal wage and hour laws; or any other state
or federal law, rule, or regulation dealing with the employment relationship.
8. Release of Unknown Claims by Executive. Executive is
aware of California Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
With full awareness and understanding of the above provision,
Executive hereby waives any rights he may have under Section 1542. Executive
intends to, and hereby does, release Releasees from claims which he does not
presently know or suspect to exist at this time. However, Executive is not
waiving any rights or claims that may arise out of acts or events that occur
after the Settlement Date.
9. Breach of Release. Executive agrees that if he
hereafter commences, joins in, or in any manner seeks relief through any suit
arising out of, based upon, or relating to any of the Claims released by
Executive hereunder, or in any manner asserts against the Company or the
Releasees any of the claims released hereunder, Executive shall pay to Company
or such Releasee, as the case may be, in
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<PAGE> 7
addition to any other damages caused to the Company or such Releasee, as the
case may be, all attorneys fees incurred in defending or otherwise responding
to said suit or claim.
10. Rights Under the Older Workers Benefit Protection
Act. In accordance with the Older Workers Benefit Protection Act of 1990,
Executive is aware of the following:
(a) Executive has the right to consult with an
attorney before signing this Agreement and is hereby advised by the Company to
do so;
(b) Executive has twenty-one (21) days from
February 23, 1996, to consider this Agreement; and
(c) Executive has seven (7) days after signing
this Agreement to revoke this Agreement, and this Agreement will not be
effective until that revocation period has expired. Executive agrees that in
order to exercise his right to revoke this Agreement within such seven (7) day
period, he must do so in a signed writing delivered to the Company's Chief
Executive Officer before the close of business on the seventh calendar day
after the Execution Date.
11. Confidentiality of Agreement. Except as may be
required by law, neither the Executive, his attorney, nor any person acting by,
through, under or in concert with them, shall disclose any of the terms of or
facts relating to this Agreement or the negotiation thereof to any individual
or entity, except for disclosures made between Executive, his attorney, spouse,
children or tax advisors.
12. Proprietary Information. Executive acknowledges that
certain information, observations, and data obtained by him during the course
of or related to his employment with the Company (including without limitation
certain financial information, shareholder information, product design
information, business plans, marketing plans or proposals, customer lists and
other customer information) are the sole property of the Company and constitute
trade secrets of the Company. Executive agrees to promptly return all files,
customer lists, financial information and other Company property that are in
Executive's possession or control without making copies thereof. Executive
further agrees that he will not disclose to any person or use any such
information, observations or data without the written consent of the Company's
Board of Directors, unless and to the extent that the aforementioned matters
become generally known to and available for use by the public other than as a
result of Executive's acts or omissions to act, which acts or omissions were
unauthorized by the Company. Further, Executive acknowledges that any
unauthorized use of trade secrets will cause irreparable harm to the Company
and will give rise to an immediate action by the Company for injunctive relief.
If Employee is served with a deposition subpoena or other legal process calling
for the disclosure of such information, or if he is contacted by any third
person requesting such information, he will immediately notify the Company's
General Counsel and will fully cooperate with the Company in minimizing the
disclosure thereof.
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<PAGE> 8
13. Unfair Competition.
(a) Executive agrees not to (whether as an
employee, director, owner, stockholder, consultant, limited or general partner,
or otherwise), for himself or for any other person or entity, engage in any
unfair competition with the Company.
(b) Executive also covenants and agrees not to
intentionally interfere with, disrupt, or attempt to disrupt, the relationship,
contractual or otherwise, between the Company and any customer of the Company
as of the Execution Date.
(c) Executive acknowledges that any unfair
competition or misuse of trade secret or proprietary information belonging to
the Company, or any violation of Sections 11 through 13 of this Agreement, will
result in irreparable harm to the Company and will give rise to an immediate
action by the Company for injunctive relief.
14. Cooperation Clause. Executive agrees to cooperate
with the Company and its counsel (a) in any investigations (including internal
investigations) and audits of the Company's management's current and past
conduct and business and accounting practices and (b) in the Company's defense
of, or other participation in, any administrative, judicial, or other
proceeding arising from any charge, complaint or other action which has been or
may be filed relating to the period during which Executive was engaged in
employment with the Company. Except as required by law or authorized in
advance by the Company's Board of Directors, Executive will not communicate,
directly or indirectly, with any third party concerning the management or
governance of the Company, the operations of the Company, the legal positions
taken by the Company, or the financial status of the Company. Executive shall
direct inquiries from third parties on these issues to the Company. Executive
acknowledges that any violation of this Section 14 will result in irreparable
harm to the Company and will give rise to an immediate action by the Company
for injunctive relief.
15. Non-disparagement; Employment Reference. Each party
to this Agreement will use his or its best efforts not to disparage or
otherwise publish or communicate derogatory statements or opinions about the
other to any third party for a period of three (3) years after the Execution
Date. It shall not be a breach of this Section 15 for either party to testify
truthfully in any judicial or administrative proceeding, or to make factually
accurate statements in legal or public filings. If any prospective employers
contact the Company concerning Executive, they will be told only that Executive
was employed from May 22, 1995, until he voluntarily resigned as of the
Execution Date. The Company will issue on its letterhead a statement in the
form attached hereto as Exhibit 3 in response to any requests for references or
recommendations.
16. Indemnification.
(a) If Executive is named as a party to any
administrative, judicial, or other legal proceeding involving any action or
inaction allegedly taken by him
8
<PAGE> 9
during the course of his employment with the Company, Executive will be
entitled to all rights of indemnification as provided by paragraph 16(b),
including, without limitation, any applicable insurance coverage pursuant to
the terms of any director and/or officer liability insurance policies
maintained by the Company and any rights to indemnification provided by
applicable law or the Articles of Incorporation or Bylaws of the Company, and
the Company will cooperate fully with the Executive in responding to or
defending against any such proceeding.
(b) The Company shall indemnify Executive and
hold him harmless, to the fullest extent authorized or permitted (i) by
applicable law (including judicial, regulatory, or administrative
interpretations thereof) or other statutory provisions authorizing or
permitting such indemnification, or (ii) by the Company's Articles of
Incorporation or Bylaws as in effect on the date hereof, or by any amendment
thereof adopted after the date hereof, whichever provides for greater
indemnification, as set forth below:
(1) From any and all claims and
liabilities asserted by third parties against Executive arising out of or in
connection with Executive's activities as a director, an officer and an
employee of the Company including, without limitation, any non-derivative
lawsuits instituted by shareholders of the Company ("Third Party Claims"), and,
to the extent that Executive has been successful on the merits in defense of
any proceeding (including all appeals) referred to this subparagraph 16(b)(1)
or in defense of any claim, issue or matter therein, any and all expenses
(including attorneys' fees) actually and reasonably incurred by Executive in
connection with such Third Party Claims; and
(2) To the extent that Executive has
been successful on the merits in defense of any proceeding (including all
appeals) referred to this subparagraph 16(b)(2) or in defense of any claim,
issue or matter therein, any and all expenses (including attorneys' fees)
actually and reasonably incurred by Executive in connection with claims and
liabilities asserted against Executive by or in the right of the Company
(including derivative shareholder lawsuits and direct actions by the Company)
arising out of or in connection with Executive's activities as an officer and
employee of the Company ("Company Claims").
17. Remedies for Breach. If Executive willfully and
materially breaches his obligations under this Agreement, in addition to
whatever other rights the Company may have, Executive shall forfeit his right
to receive any further payments or benefits under this Agreement, including,
but not limited to, the payments for the Shares.
18. California Law. This Agreement has been negotiated
and executed in the State of California and is to be performed in San Diego
County, California. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, including all matters of
construction, validity, performance and enforcement, without giving effect to
principles of conflict of laws.
9
<PAGE> 10
19. Attorneys' Fees. In any action, litigation or
proceeding between the parties arising out of or in relation to this Agreement,
the prevailing party in such action will be awarded, in addition to any
damages, injunctions or other relief, and without regard to whether or not such
matter is prosecuted to final judgment, such party's costs and expenses,
including reasonable attorneys' fees. Such award will include post-judgment
attorneys' fees and costs, which will not be deemed as merged into the final
judgment.
20. Non-Admission of Liability. Both Executive and the
Company understand and agree that neither the payment of any sum of money nor
the execution of this Agreement by the parties will constitute or be construed
as an admission of any liability whatsoever by either party.
21. Withholding Taxes; Tax Reporting. The Company may,
if required in its reasonable judgment, withhold from any amounts payable under
this Agreement all such Federal, state, city and other taxes, and may file with
appropriate governmental authorities all such information returns or other
reports with respect to the tax consequences attendant to any amounts payable
under this Agreement, as may, in its reasonable judgment, be required by law.
22. Severability. If any one or more of the provisions
contained herein (or parts thereof), or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect for any
reason, the validity and enforceability of any such provision in every other
respect and of the remaining provisions hereof will not be in any way impaired
or affected, it being intended that all of the rights and privileges shall be
enforceable to the fullest extent permitted by law.
23. Entire Agreement. This Agreement represents the sole
and entire agreement between the parties and, except as expressly stated
herein, supersedes all prior agreements, negotiations and discussions between
Executive and the Company with respect to the subject matters contained herein.
24. Waiver. No waiver by any party hereto at any time of
any breach of, or compliance with, any condition or provision of this Agreement
to be performed by any other party hereto may be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time.
25. Amendment. This Agreement may be modified or amended
only if such modification or amendment is agreed to in writing and signed by
duly authorized representatives of the parties hereto, which writing expressly
states the intent of the parties to modify this Agreement.
26. Counterparts. This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an original as against
any party that has signed it, but all of which together will constitute one and
the same instrument.
10
<PAGE> 11
27. Assignment. This Agreement inures to the benefit of
and is binding upon the Company and its successors and assigns, but Executive's
rights under this Agreement are not assignable.
28. Notice. Except as otherwise provided herein, notices
and all other communications provided for in this Agreement must be in writing
and will be deemed to have been duly given when delivered or mailed by U.S.
Mail, return receipt requested, first-class or express postage prepaid, as
follows:
If to the Company:
Inland Casino Corporation
4225 Executive Square, Suite 1650
La Jolla, California 92037
Attn: Arthur R. Pfizenmayer
If to Executive:
Jack R. Smith
676070 Saratoga Corte
Rancho Santa Fe, California 92067
or such other address as one party may have furnished to another party in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
29. Miscellaneous Provisions.
(a) The parties represent that they have read
this Agreement and fully understand all of its terms; that they have conferred
with their attorneys, or have knowingly and voluntarily chosen not to confer
with their attorneys about this Agreement; that they have executed this
Agreement without coercion or duress of any kind; and that they understand any
rights that they have or may have and sign this Agreement with full knowledge
of any such rights.
(b) The language in all parts of this Agreement
must be in all cases construed simply according to its fair meaning and not
strictly for or against any party. Whenever the context requires, all words
used in the singular must be construed to have been used in the plural, and
vice versa, and each gender must include any other gender. The captions of the
Sections of this Agreement are for convenience only and must not affect the
construction or interpretation of any of the provision herein.
(c) Each provision of this Agreement to be
performed by a party hereto is both a covenant and condition, and is a material
consideration for the other party's performance hereunder, and any breach
thereof by the party will be a material
11
<PAGE> 12
default hereunder. All rights, remedies, undertakings, obligations, options,
covenants, conditions and agreements contained in this Agreement are cumulative
and no one of them is exclusive of any other. Time is of the essence in the
performance of this Agreement.
(d) Each party acknowledges that no
representation, statement or promise made by any other party, or by the agent
or attorney of any other party, has been relied on by him or it in entering
into this Agreement.
(e) Each party understands that the facts with
respect to which this Agreement is entered into may be materially different
from those the parties now believe to be true. Each party accepts and assumes
this risk and agrees that this Agreement and the release in it shall remain in
full force and effect, and legally binding, notwithstanding the discovery or
existence of any additional or different facts, or of any claims with respect
to those facts.
(f) Unless expressly set forth otherwise, all
references herein to a "day" are deemed to be a reference to a calendar day.
All references to "business day" mean any day of the year other than a
Saturday, Sunday or a public or bank holiday in San Diego, California. Unless
expressly stated otherwise, cross-references herein refer to provisions within
this Agreement and are not references to the overall transaction or to any
other document.
(g) Each party to this Agreement will cooperate
fully in the execution of any and all other documents and in the completion of
any additional actions that may be necessary or appropriate to give full force
and effect to the terms and intent of this Agreement.
30. Approval of Board of Directors. This Agreement was
approved by the Company's Board of Directors at a special meeting held on
February 14, 1996.
12
<PAGE> 13
EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT EACH HAS READ THIS
AGREEMENT, UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT. EXECUTIVE
ACKNOWLEDGES AND UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates indicated below.
INLAND CASINO CORPORATION
Dated: February 23, 1996 By: /s/ L. Donald Speer, II
-------------------------------------
L. Donald Speer, II
Chairman of the Board and Chief
Executive Officer
Dated: February 23, 1996 By: /s/ Arthur R. Pfizenmayer
-------------------------------------
Arthur R. Pfizenmayer
Vice President, Corporate Development
Dated: February 23, 1996 /s/ Jack R. Smith
-------------------------------------
Jack R. Smith
13
<PAGE> 14
EXHIBIT "1"
FORM OF PUBLIC STATEMENT
------------------------
Jack R. Smith, President, Chief Operating Officer and a director of
Inland Casino Corporation, has resigned from the Company to pursue other
interests.
[L. Donald Speer, II, Chairman of the Board and Chief Executive
Officer, stated that "the Company wishes Mr. Smith the best in his future
endeavors."]
<PAGE> 15
EXHIBIT "2"
PROMISSORY NOTE
$900,000.00 La Jolla, California March 4, 1996
FOR VALUE RECEIVED, the undersigned, Inland Casino Corporation, a Utah
corporation ("Borrower"), hereby promises to pay to the order of Jack R. Smith,
an individual resident of the State of California ("Lender"), the principal sum
of NINE HUNDRED THOUSAND DOLLARS ($900,000.00) in lawful money of the United
States of America.
1. Interest. The unpaid principal balance of this Promissory
Note from time to time outstanding shall bear interest at the rate of seven
percent (7%) per annum, computed on the basis of a 360-day year for the actual
number of days elapsed.
2. Payments. The principal amount hereof and all interest due
hereon shall be payable in three installments of $342,946.50 on each of March
4, 1997, March 4, 1998, and March 4, 1999. Any installment that comes due on a
day which is not a business day shall be due on the next succeeding business
day.
3. Prepayment of Principal. Any portion of the principal balance
of this Promissory Note may be prepaid from time to time in whole or in part.
Amounts prepaid shall be applied pro rata to each of the remaining installments
on this Promissory Note, and the amount of the payments of principal and
interest set forth in Section 2 will be adjusted accordingly.
4. Default.
(a) If Borrower fails to pay when due all or any portion
of the principal balance of this Promissory Note, then Lender may, at its
option, declare this Promissory Note in default and, if such default is not
cured within fifteen (15) business days after written notice thereof is
delivered by Lender to Borrower, Lender may either:
(i) Deliver written notice to Borrower demanding
that Borrower issue to Lender the number of shares of Borrower's
common stock equal to (A) the remaining amount of unpaid principal
outstanding under this Promissory Note on the date Borrower receives
such notice divided by (B) the fair market price (as defined below)
per share of Borrower's common stock at the close of business on the
date Borrower receives such notice; or
<PAGE> 16
(ii) Exercise any and all of the rights and
remedies available under this Promissory Note and applicable law,
other than the rights and remedies set forth in Section 4(a)(i) above.
(b) For the purposes of this Section 4, "fair market
price" shall mean (i) if Borrower's common stock is traded on NASDAQ NMS or an
exchange, the closing price at which a share of common stock is traded on the
date of valuation, (ii) if Borrower's common stock is traded over-the-counter
on the NASDAQ System, the mean between the bid and asked closing prices of a
share of common stock on such System at the close of business on the date of
valuation, or (iii) if neither (i) nor (ii) applies, the fair market price as
determined by the Board of Directors of Borrower in good faith.
5. Limitation on Interest. Notwithstanding any provision
contained in this Promissory Note, no holder hereof shall ever be entitled to
receive, collect or apply as interest on this Promissory Note any amount in
excess of the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto. If any holder hereof ever
receives, collects or applies as interest any such excess, the amount that
would be excessive interest shall be deemed to be a partial payment of
principal and treated hereunder as such, and, if the principal balance of this
Promissory Note is paid in full, any remaining excess shall promptly be paid to
Borrower.
6. Successors and Assigns. This Promissory Note shall be binding
upon Borrower, its successors and assigns, and shall inure to the benefit of
Lender, its successors and assigns.
7. Business Day. For purposes of this Promissory Note, the term
"business day" shall mean any day of the year other than a Saturday, Sunday or
a public or bank holiday in San Diego, California.
8. APPLICABLE LAW. THIS PROMISSORY NOTE SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE
STATE OF CALIFORNIA.
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of
the date first set forth above.
INLAND CASINO CORPORATION
By:
----------------------------
L. Donald Speer, II
Chairman of the Board and
Chief Executive Officer
2
<PAGE> 17
EXHIBIT "3"
FORM OF REFERENCE STATEMENT
---------------------------
Dear :
--------------
Jack R. Smith was an executive employee and a director of
Inland Casino Corporation from May 1995 to February 1996. Mr. Smith
voluntarily resigned from his positions with the Company to pursue other
interests. The Company wishes Mr. Smith success in any future endeavors.
Sincerely,
--------------------------------
1
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$900,000.00 La Jolla, California March 4, 1996
FOR VALUE RECEIVED, the undersigned, Inland Casino Corporation, a Utah
corporation ("Borrower"), hereby promises to pay to the order of Jack R. Smith,
an individual resident of the State of California ("Lender"), the principal sum
of NINE HUNDRED THOUSAND DOLLARS ($900,000.00) in lawful money of the United
States of America.
1. Interest. The unpaid principal balance of this Promissory
Note from time to time outstanding shall bear interest at the rate of seven
percent (7%) per annum, computed on the basis of a 360-day year for the actual
number of days elapsed.
2. Payments. The principal amount hereof and all interest due
hereon shall be payable in three installments of $342,946.50 on each of March
4, 1997, March 4, 1998, and March 4, 1999. Any installment that comes due on a
day which is not a business day shall be due on the next succeeding business
day.
3. Prepayment of Principal. Any portion of the principal balance
of this Promissory Note may be prepaid from time to time in whole or in part.
Amounts prepaid shall be applied pro rata to each of the remaining installments
on this Promissory Note, and the amount of the payments of principal and
interest set forth in Section 2 will be adjusted accordingly.
4. Default.
(a) If Borrower fails to pay when due all or any portion
of the principal balance of this Promissory Note, then Lender may, at its
option, declare this Promissory Note in default and, if such default is not
cured within fifteen (15) business days after written notice thereof is
delivered by Lender to Borrower, Lender may either:
(i) Deliver written notice to Borrower demanding
that Borrower issue to Lender the number of shares of Borrower's
common stock equal to (A) the remaining amount of unpaid principal
outstanding under this Promissory Note on the date Borrower receives
such notice divided by (B) the fair market price (as defined below)
per share of Borrower's common stock at the close of business on the
date Borrower receives such notice; or
(ii) Exercise any and all of the rights and
remedies available under this Promissory Note and applicable law,
other than the rights and remedies set forth in Section 4(a)(i) above.
<PAGE> 2
(b) For the purposes of this Section 4, "fair market
price" shall mean (i) if Borrower's common stock is traded on NASDAQ NMS or an
exchange, the closing price at which a share of common stock is traded on the
date of valuation, (ii) if Borrower's common stock is traded over-the-counter
on the NASDAQ System, the mean between the bid and asked closing prices of a
share of common stock on such System at the close of business on the date of
valuation, or (iii) if neither (i) nor (ii) applies, the fair market price as
determined by the Board of Directors of Borrower in good faith.
5. Limitation on Interest. Notwithstanding any provision
contained in this Promissory Note, no holder hereof shall ever be entitled to
receive, collect or apply as interest on this Promissory Note any amount in
excess of the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto. If any holder hereof ever
receives, collects or applies as interest any such excess, the amount that
would be excessive interest shall be deemed to be a partial payment of
principal and treated hereunder as such, and, if the principal balance of this
Promissory Note is paid in full, any remaining excess shall promptly be paid to
Borrower.
6. Successors and Assigns. This Promissory Note shall be binding
upon Borrower, its successors and assigns, and shall inure to the benefit of
Lender, its successors and assigns.
7. Business Day. For purposes of this Promissory Note, the term
"business day" shall mean any day of the year other than a Saturday, Sunday or
a public or bank holiday in San Diego, California.
8. APPLICABLE LAW. THIS PROMISSORY NOTE SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS OF THE
STATE OF CALIFORNIA.
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of
the date first set forth above.
INLAND CASINO CORPORATION
By: /s/ L. Donald Speer, II
-----------------------------------
L. Donald Speer, II
Chairman of the Board and Chief
Executive Officer
2
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,743,005
<SECURITIES> 0
<RECEIVABLES> 91,921
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,047,090
<PP&E> 175,325
<DEPRECIATION> 25,705
<TOTAL-ASSETS> 9,985,372
<CURRENT-LIABILITIES> 2,536,559
<BONDS> 0
0
0
<COMMON> 2,352,554
<OTHER-SE> 4,496,259
<TOTAL-LIABILITY-AND-EQUITY> 9,985,372
<SALES> 7,665,790
<TOTAL-REVENUES> 7,665,790
<CGS> 0
<TOTAL-COSTS> 6,851,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,001
<INCOME-PRETAX> 812,479
<INCOME-TAX> 334,000
<INCOME-CONTINUING> 478,479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 478,479
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
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