UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File No. 01-6697
Mirage Resorts, Incorporated
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(Exact name of Registrant as specified in its charter)
Nevada 88-0058016
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3600 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of principal executive offices - Zip Code)
(702) 693-7111
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(Registrant's telephone number, including area code)
3400 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Common stock, $0.004
par value, 180,013,056 shares outstanding as of November 12, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information as of September
30, 1998 and for the three-month and nine-month periods ended September 30,
1998 and 1997 included in this report was reviewed by Arthur Andersen LLP,
independent public accountants, in accordance with the professional
standards and procedures established for such reviews by the American
Institute of Certified Public Accountants.
<PAGE>
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------------
To the Directors and Stockholders
of Mirage Resorts, Incorporated
We have reviewed the accompanying condensed consolidated balance sheet of
Mirage Resorts, Incorporated (a Nevada corporation) and subsidiaries (the
"Company") as of September 30, 1998, and the related condensed consolidated
statements of income for the three-month and nine-month periods ended
September 30, 1998 and 1997 and the related condensed consolidated state-
ments of cash flows for the nine-month periods ended September 30, 1998
and 1997. These condensed consolidated financial statements are the respon-
sibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Mirage Resorts, Incorporated
and subsidiaries as of December 31, 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for the year then
ended (not presented herein), and, in our report dated March 16, 1998, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet of Mirage Resorts, Incorporated and
subsidiaries as of December 31, 1997, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 13, 1998
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
BALANCE SHEETS
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At September 30, At December 31,
1998 1997
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(In thousands) (Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 126,969 $ 99,337
Receivables, net of allowance for doubtful accounts
of $51,298 and $42,477 68,897 101,635
Inventories 44,551 29,179
Preopening costs 79,646 14,603
Prepaid expenses and other 89,544 56,168
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Total current assets 409,607 300,922
Property and equipment, net of accumulated depreciation
of $700,714 and $633,563 1,675,014 1,455,125
Construction in progress 1,955,232 1,261,084
Other assets, net 322,516 330,219
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$4,362,369 $3,347,350
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 156,524 $ 151,993
Accrued expenses 129,991 104,467
Current maturities of long-term debt 488 927
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Total current liabilities 287,003 257,387
Long-term debt, net of current maturities 2,237,143 1,396,728
Other liabilities, including deferred income taxes
of $205,552 and $167,415 219,344 180,751
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Total liabilities 2,743,490 1,834,866
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Commitments and contingencies
Stockholders' equity
Common stock: 179,821 and 179,422 shares outstanding 940 940
Additional paid-in capital 737,142 734,547
Retained earnings 1,165,595 1,063,793
Treasury stock, at cost: 55,327 and 55,726 shares (284,798) (286,796)
- - ---------------------------------------------------------------------------------------------------
Total stockholders' equity 1,618,879 1,512,484
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$4,362,369 $3,347,350
===================================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF INCOME (UNAUDITED)
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Three Months Nine Months
---------------------- ----------------------
For the periods ended September 30 1998 1997 1998 1997
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(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross revenues $372,174 $400,631 $1,104,263 $1,168,787
Less - promotional allowances (34,031) (31,478) (100,581) (93,234)
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338,143 369,153 1,003,682 1,075,553
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Costs and expenses
Casino-hotel operations 209,611 207,935 614,184 609,700
General and administrative 41,939 42,507 121,285 120,879
Depreciation and amortization 21,650 22,216 66,706 65,590
Corporate expense 16,718 9,042 34,810 24,357
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289,918 281,700 836,985 820,526
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Operating income 48,225 87,453 166,697 255,027
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Other income (expense)
Interest cost (34,376) (18,709) (92,619) (45,912)
Interest capitalized 32,340 15,114 81,968 36,613
Other, including interest income 2,677 1,215 11,237 2,723
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641 (2,380) 586 (6,576)
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Income before income taxes and extraordinary
item 48,866 85,073 167,283 248,451
Provision for income taxes 18,762 30,174 61,960 87,962
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Income before extraordinary item 30,104 54,899 105,323 160,489
Extraordinary item - loss on early retirement
of debt, net of applicable income tax benefit - - (3,521) (2,225)
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Net income $ 30,104 $ 54,899 $ 101,802 $ 158,264
===================================================================================================
Income per share before extraordinary item
Basic $ 0.17 $ 0.31 $ 0.59 $ 0.90
Diluted 0.16 0.28 0.55 0.83
Net income per share
Basic $ 0.17 $ 0.31 $ 0.57 $ 0.89
Diluted 0.16 0.28 0.53 0.82
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Weighted-average common shares outstanding
(used in the computation of basic earnings
per share) 179,720 178,842 179,568 178,655
Effect of common stock options under the
treasury stock method 10,828 14,556 12,187 13,726
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Weighted-average common and common equivalent
shares (used in the computation of diluted
earnings per share) 190,548 193,398 191,755 192,381
===================================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
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Nine months ended September 30 1998 1997
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(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 101,802 $ 158,264
Adjustments to reconcile net income to net cash provided by
operating activities
Provision for losses on receivables 15,340 12,441
Depreciation and amortization of property and equipment,
including amounts reported as corporate expense 77,271 72,282
Earnings in excess of distributions from Monte Carlo (3,935) (22,792)
Amortization of debt discount and issuance costs 4,090 10,974
Loss on early retirement of debt 5,418 3,422
Deferred income taxes 17,196 6,564
Other adjustments (3,037) (876)
Changes in components of working capital pertaining to
operating activities, net of effect of Boardwalk acquisition
Increase in receivables and other current assets (27,628) (11,362)
Increase (decrease) in trade accounts payable and
accrued expenses 5,800 (20,977)
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Net cash provided by operating activities 192,317 207,940
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Cash flows from investing activities
Preopening costs (66,081) (13,511)
Capital expenditures (920,122) (706,517)
Increase in construction payables 20,144 30,006
Proceeds from sales of property and equipment 62,071 4,737
Boardwalk acquisition costs, net of cash acquired (55,562) (50,500)
Other investing activities (36,943) (15,987)
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Net cash used for investing activities (996,493) (751,772)
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Cash flows from financing activities
Net bank credit facility and commercial paper borrowings 675,826 259,584
Issuance of long-term debt 394,728 296,052
Retirement of long-term debt (237,110) -
Other financing activities (1,636) 7,151
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Net cash provided by financing activities 831,808 562,787
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Cash and cash equivalents
Increase for the period 27,632 18,955
Balance, beginning of period 99,337 81,908
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Balance, end of period $ 126,969 $ 100,863
===================================================================================================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED MIRAGE RESORTS, INCORPORATED
FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1 - COMPANY DESCRIPTION AND BASIS OF PRESENTATION
Mirage Resorts, Incorporated (the "Company"), a Nevada corporation, through
wholly owned subsidiaries, owns and operates some of the world's most
successful casino-based entertainment resorts. These resorts include
The Mirage and Treasure Island on the Las Vegas Strip, the Golden Nugget
in downtown Las Vegas and the Golden Nugget-Laughlin located along the
Colorado River in Laughlin, Nevada. The Company's newest resort,
Bellagio, opened on October 15, 1998. Bellagio is an elegant 3,005-guest
room European-style luxury resort located at the center of the Las Vegas
Strip. The Company is currently constructing an additional wholly owned
resort, Beau Rivage, in Biloxi, Mississippi. Beau Rivage is a luxurious
1,780-guest room beachfront resort being constructed on an approximately
23-acre site where Interstate 110 meets the Gulf Coast. Beau Rivage
is currently expected to open in March 1999.
The Company is also a 50% partner in a joint venture that owns and
operates the Monte Carlo Resort & Casino on the Las Vegas Strip
("Monte Carlo"). Additionally, as discussed in Note 2, on June 30, 1998,
the Company acquired the Holiday Inn -Registered Trademark- Casino
Boardwalk on the Las Vegas Strip.
The accompanying condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
(the "1997 Annual Report") and should be read in conjunction with the Notes
to Consolidated Financial Statements which appear in that report. The
Condensed Consolidated Balance Sheet at December 31, 1997 contained herein
was derived from audited financial statements, but does not include all
disclosures included in the 1997 Annual Report and applicable under
generally accepted accounting principles.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results
for the interim periods have been included. The results for the 1998
interim periods are not necessarily indicative of expected results for the
full year.
Certain amounts in the 1997 condensed consolidated financial statements
have been reclassified to conform with the 1998 presentation. These
reclassifications had no effect on the Company's net income.
NOTE 2 - ACQUISITION OF BOARDWALK CASINO, INC.
On June 30, 1998, the Company, through a wholly owned subsidiary, completed
the acquisition of Boardwalk Casino, Inc. ("Boardwalk") and certain related
assets for a total price of approximately $112.0 million in cash.
Approximately $51.9 million of this amount was expended in 1997. Boardwalk
owns and operates the Holiday Inn -Registered Trademark- Casino Boardwalk
located on the Las Vegas Strip. The facility includes 653 hotel rooms
and 33,000 square feet of casino space.
-6-
<PAGE>
The Boardwalk acquisition was accounted for pursuant to the purchase
method, with approximately $135.7 million allocated to the assets acquired
and approximately $23.7 million to the liabilities assumed (including $4.1
million of accounts payable and accrued liabilities and $17.5 million of
deferred income taxes) based upon their respective estimated fair values.
Combined with adjacent land owned by the Company, the Boardwalk acquisition
provides an approximately 55-acre site for future development with over
1,200 feet of frontage on the Las Vegas Strip between and contiguous
to Monte Carlo and Bellagio. The Company is in the very early design
phase for a potential new hotel-casino resort expected to be developed on
the site. The design, timing and cost of any such future development,
however, are still highly uncertain. Boardwalk is being accounted for
as an incidental operation. Under this method, Boardwalk's operations are
excluded from the Company's consolidated operating results and its net
income is recorded as a reduction in the carrying value of the land.
NOTE 3 - LONG-TERM DEBT
ISSUANCE. On February 4, 1998, the Company received net proceeds of
approximately $394.7 million (after deducting original issue discount and
debt issuance costs) from the issuance of $200 million principal amount
of 6 5/8% notes due February 1, 2005 and $200 million principal amount of
6 3/4% notes due February 1, 2008. The notes were issued pursuant to a
"shelf" registration statement filed with the Securities and Exchange
Commission in October 1997 covering a total of up to $750 million
(including the $400 million issued in February 1998) of debt or equity
securities or any combination thereof.
RETIREMENTS. On March 15, 1998, the Company repaid at maturity the
$133 million principal amount of its zero coupon first mortgage notes
and redeemed all $100 million principal amount of its 9 1/4% senior
subordinated notes. The 9 1/4% notes, scheduled to mature in March 2003,
were redeemed at 104.11% of the principal amount. The call premium
and write-off of the unamortized debt issuance costs associated with the
9 1/4% notes resulted in an extraordinary loss of $3.5 million
($0.02 per share basic and diluted), net of applicable income tax benefit
of $1.9 million.
-7-
<PAGE>
<TABLE>
<CAPTION>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF OPERATING RESULTS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1998
AND 1997
FINANCIAL HIGHLIGHTS
Three months ended September 30 1998 1997
- - ---------------------------------------------------------------------------------------
(Dollars in thousands, except per share and room rate amounts)
<S> <C> <C>
Gross revenues
The Mirage $201,808 $230,444
Treasure Island 100,819 99,475
Golden Nugget 50,478 50,176
Golden Nugget-Laughlin 13,520 13,904
- - ---------------------------------------------------------------------------------------
366,625 393,999
Equity in earnings of Monte Carlo 5,549 6,632
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$372,174 $400,631
- - ---------------------------------------------------------------------------------------
Net revenues
The Mirage $183,285 $213,241
Treasure Island 92,430 91,919
Golden Nugget 44,916 45,093
Golden Nugget-Laughlin 11,963 12,268
- - ---------------------------------------------------------------------------------------
332,594 362,521
Equity in earnings of Monte Carlo 5,549 6,632
- - ---------------------------------------------------------------------------------------
$338,143 $369,153
- - ---------------------------------------------------------------------------------------
Operating profit
The Mirage $ 40,336 $ 64,802
Treasure Island 14,934 18,947
Golden Nugget 3,819 5,828
Golden Nugget-Laughlin 305 286
- - ---------------------------------------------------------------------------------------
59,394 89,863
Equity in earnings of Monte Carlo 5,549 6,632
Corporate expense (16,718) (9,042)
- - ---------------------------------------------------------------------------------------
$ 48,225 $ 87,453
- - ---------------------------------------------------------------------------------------
Operating margin (operating profit/net revenues)
The Mirage 22.0% 30.4%
Treasure Island 16.2% 20.6%
Golden Nugget 8.5% 12.9%
Golden Nugget-Laughlin 2.5% 2.3%
Company-wide (before Monte Carlo and corporate expense) 17.9% 24.8%
- - ---------------------------------------------------------------------------------------
Net income $ 30,104 $ 54,899
Net income per share
Basic $ 0.17 $ 0.31
Diluted $ 0.16 $ 0.28
- - ---------------------------------------------------------------------------------------
Other information (excluding Monte Carlo and Boardwalk)
Company-wide table games win percentage 20.8% 25.5%
Company-wide occupancy of standard guest rooms 98.8% 98.7%
Average standard guest room rate(a) $ 83 $ 86
- - ---------------------------------------------------------------------------------------
(a) Cash rate (i.e., excluding complimentary accommodations) at the Company's Las
Vegas hotels.
</TABLE>
-8-
<PAGE>
The Company reported 1998 third quarter net income of $30.1 million, or
$0.16 per share, versus record third quarter earnings in 1997 of $54.9
million, or $0.28 per share. Earnings during the recent quarter were
affected by a decline in the level of baccarat play (affecting earnings
by approximately $0.03 per share), a relatively normal table games win
percentage versus an exceptionally high win percentage (affecting
earnings by approximately $0.06 per share) and higher-than-normal
corporate expense.
The third quarter of 1997 benefited from high levels of baccarat play
and a Company-wide table games win percentage of 25.5%, representing the
highest win percentage in any quarter since The Mirage opened in 1989.
The Company-wide table games win percentage was 20.8% during the 1998
third quarter. By comparison, the win percentage over the past three
calendar years averaged 20.3%. The win percentage can be affected by
luck, changes in the mix of table games played and changes in the manner
in which customers play the games.
The level of baccarat play in the recent quarter was consistent with the
levels of the first and second quarters of 1998, reflecting the impact
the economic difficulties being experienced by certain Asian countries
is having on the Company's international business. The devaluation of
certain Asian currencies occurred primarily in the second half of 1997
and began affecting the baccarat component of the Company's revenues in
the first quarter of 1998. Apart from the swing in baccarat activity,
the other components of the Company's business have generally equaled or
exceeded historical levels. In the quarter, for example, the Company's
table games play excluding baccarat increased by 4% over the 1997 third
quarter and Company-wide slot revenues increased by 5%.
Occupancy of the Company's standard guest rooms during the 1998 third
quarter was substantially the same as in the prior-year quarter (98.8%
versus 98.7%) and the average daily standard room rate at its Las Vegas
hotels declined by 3%. There was a significant increase in Las Vegas
room inventory during 1996 and 1997, principally on the Strip, and this
has resulted in a decline in city-wide occupancy and average room rates.
Management anticipates continued pressure on hotel occupancy and room
rates during the remainder of 1998 and 1999. The Company's hotel
occupancy and average room rates have generally outperformed the Strip
averages and this continued to be the case in the third quarter.
Operating expenses at the Company's hotel-casinos were approximately
equal to the prior-year period, despite the additional staffing
necessary to prepare for the opening of Bellagio and Beau Rivage. These
spectacular new resorts are increasing the Company's staffing levels
from 17,000 to almost 30,000 employees. Many of the new positions have
been filled through promotion or transfer of employees from the
Company's existing resorts. In order to ensure a smooth transition, the
Company hires replacement employees prior to the departure of
transferring employees. These additional staffing efforts have resulted
in considerably higher payroll and training costs during 1998. These
costs were partially offset in the quarter by a reduction in gaming
taxes, promotional costs and various other expenses related to the lower
level of baccarat revenue.
-9-
<PAGE>
Corporate expense rose significantly over the 1997 third quarter,
reflecting certain political contributions and legal expenses, the
growth in the size of the Company and expanded activities in pursuit of
entertainment attractions for the Company's resorts.
The Mirage was particularly impacted by the lower table games win
percentage and the decline in baccarat activity, accounting for most of
the decrease in the resort's 1998 third quarter revenues and operating
income. Excluding baccarat, The Mirage's table games revenues increased
by 6% over the 1997 third quarter. Slot revenues increased as well, by
2%. The Mirage's total non-casino revenues were flat in the quarter,
but this included a $1.3 million increase in items provided to customers
on a complimentary basis, resulting in a similar increase in promotional
allowances. The average occupancy rate for The Mirage's standard guest
rooms was approximately 99% during both third quarters, with a small
increase in the 1998 quarter's average daily rate.
Treasure Island reported a modest increase in operating revenues versus
the prior-year third quarter. Slot revenues increased by $3.5 million,
or 18%, more than offsetting a 5% decline in table games revenues caused
by lower baccarat activity and a decline in the overall table games win
percentage. Treasure Island's standard guest rooms were nearly 100%
occupied during both third quarters. The average daily room rate during
the 1998 third quarter, however, was 6% lower than in the prior-year
period, contributing to a $1.9 million, or 9%, decline in net room
revenues. Net revenues for the Cirque du Soleil production grew by 6%,
partially offsetting a combined 2% decline in Treasure Island's other
net non-casino revenues.
Competitive market conditions have impacted operating results at the
Company's two Golden Nugget properties. The new resorts and additional
room capacity on the Strip have particularly impacted the downtown Las
Vegas market. Weakness in the Laughlin market is largely attributable
to competition from Indian casinos in Arizona and Southern California.
On November 3, 1998, Proposition 5 was approved by the California
electorate. Proposition 5 purports to allow all California Indian tribes
the right to operate an unlimited number of certain gaming machines and
other forms of casino gaming on California reservations. Several legal
challenges to Proposition 5 are expected which may delay or prevent its
implementation. If implemented, Proposition 5 may adversely affect Nevada
gaming markets, although management is unable to assess the magnitude of
the impact to the Company.
Monte Carlo achieved gross operating revenues of $66.2 million during
the 1998 third quarter, a 3% increase over the $64.2 reported in the
prior-year period. Promotional and other operating expenses at the
resort also increased, resulting in a $2.8 million decline in operating
income. Prior to the 1998 second quarter, the joint venture was using
Monte Carlo's operating cash flow principally to reduce its total debt.
At September 30, 1998, outstanding debt totaled $91.9 million, versus
$126.9 million at September 30, 1997. As a result, interest cost was
substantially lower during the 1998 third quarter, partially offsetting
the decline in operating income. During the 1998 second quarter, Monte
Carlo achieved a favorable pricing tier under its bank credit agreement.
At that time, the joint venture decided to begin distributing Monte
-10-
<PAGE>
Carlo's available cash to the partners, which, if continued, should
result in the joint venture's debt remaining at approximately $90
million, offset by lower debt at the Company than would otherwise be the
case.
The increase in interest cost and interest capitalized during the 1998
third quarter primarily reflects the Company's growing investment in
Bellagio and Beau Rivage. The category "Other, including interest
income" increased by $1.5 million over the 1997 third quarter. This
increase primarily reflects earnings on an escrow account established by
the Company in October 1997 to fund its portion of the cost of certain
road improvements in the Marina area of Atlantic City, New Jersey.
The Company's effective income tax rate during the 1998 third quarter of
approximately 38% exceeded the statutory rate of 35% principally due to
the non-deductibility of the political contributions mentioned
previously. The Company's effective income tax rate approximated the
statutory rate during the 1997 third quarter.
-11-
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF OPERATING RESULTS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30,
1998 AND 1997
FINANCIAL HIGHLIGHTS
Nine months ended September 30 1998 1997
- - ---------------------------------------------------------------------------------------
(Dollars in thousands, except per share and room rate amounts)
<S> <C> <C>
Gross revenues
The Mirage $ 586,430 $ 649,605
Treasure Island 301,991 298,679
Golden Nugget 152,194 152,754
Golden Nugget-Laughlin 43,313 44,957
- - ---------------------------------------------------------------------------------------
1,083,928 1,145,995
Equity in earnings of Monte Carlo 20,335 22,792
- - ---------------------------------------------------------------------------------------
$1,104,263 $1,168,787
- - ---------------------------------------------------------------------------------------
Net revenues
The Mirage $ 531,191 $ 597,665
Treasure Island 276,593 276,938
Golden Nugget 137,378 138,213
Golden Nugget-Laughlin 38,185 39,945
- - ---------------------------------------------------------------------------------------
983,347 1,052,761
Equity in earnings of Monte Carlo 20,335 22,792
- - ---------------------------------------------------------------------------------------
$1,003,682 $1,075,553
- - ---------------------------------------------------------------------------------------
Operating profit
The Mirage $ 110,620 $ 171,054
Treasure Island 50,430 61,146
Golden Nugget 17,450 20,642
Golden Nugget-Laughlin 2,672 3,750
- - ---------------------------------------------------------------------------------------
181,172 256,592
Equity in earnings of Monte Carlo 20,335 22,792
Corporate expense (34,810) (24,357)
- - ---------------------------------------------------------------------------------------
$ 166,697 $ 255,027
- - ---------------------------------------------------------------------------------------
Operating margin (operating profit/net revenues)
The Mirage 20.8% 28.6%
Treasure Island 18.2% 22.1%
Golden Nugget 12.7% 14.9%
Golden Nugget-Laughlin 7.0% 9.4%
Company-wide (before Monte Carlo and corporate expense) 18.4% 24.4%
- - ---------------------------------------------------------------------------------------
Income before extraordinary item $ 105,323 $ 160,489
Net income $ 101,802 $ 158,264
- - ---------------------------------------------------------------------------------------
Income per share before extraordinary item
Basic $ 0.59 $ 0.90
Diluted 0.55 0.83
Net income per share
Basic $ 0.57 $ 0.89
Diluted 0.53 0.82
- - ---------------------------------------------------------------------------------------
Other information (excluding Monte Carlo and Boardwalk)
Company-wide table games win percentage 19.2% 21.8%
Company-wide occupancy of standard guest rooms 98.7% 99.0%
Average standard guest room rate(a) $ 88 $ 91
- - ---------------------------------------------------------------------------------------
(a) Cash rate (i.e., excluding complimentary accommodations) at the Company's Las
Vegas hotels.
</TABLE>
-12-
<PAGE>
Comparisons for the 1998 nine-month period were likewise difficult, as
earnings during the 1997 period represent the highest ever achieved in
any comparable nine-month period in the Company's history. Revenues,
operating income and income before non-recurring items in the 1997
period all set new records. During the 1998 nine-month period, the
Company's income before extraordinary item totaled $105.3 million, or
$0.55 per share, versus $160.5 million, or $0.83 per share, in the
corresponding 1997 period. Both nine-month periods include debt-related
extraordinary charges. As discussed in Note 3 of Notes to Condensed
Consolidated Financial Statements, the 1998 period includes a charge of
$3.5 million, or $0.02 per share, associated with the redemption of all
$100.0 million principal amount of the Company's 9 1/4% notes. The 1997
period includes a similar charge of $2.2 million, or $0.01 per share,
associated with amending and increasing the size of the Company's bank
credit facility. After deducting such charges, net income for the 1998
period was $101.8 million, or $0.53 per share, compared with $158.3
million, or $0.82 per share, for the 1997 nine months.
The Company's earnings during the 1998 nine-month period were similarly
affected by the decline in international baccarat business and increased
competitive pressures in the Las Vegas market discussed previously in
comparing the three-month periods. The level of baccarat play was down
29% from the 1997 nine-month period. The Company-wide table games win
percentage was also below the 1997 period, 19.2% versus 21.8%.
Excluding baccarat, activity at the Company's other table games was up
over the prior-year period, yielding a 2% increase in related revenues.
Slot revenues achieved a $5.7 million, or 2%, increase. Despite the
additional Las Vegas room capacity, occupancy of the Company's standard
guest rooms remained strong at 98.7%, versus 99.0% in the prior-year
period. The Company's standard guest room rate at its Las Vegas hotels
averaged $88, down approximately 3% from the $91 average during the 1997
nine-month period. The Company incurred higher payroll and training
costs throughout the entire 1998 nine-month period due to the Bellagio
and Beau Rivage staffing efforts mentioned previously.
A substantial portion of the decline in the Company's baccarat activity
during 1998 occurred at The Mirage. This, together with a 3.7-
percentage point decline in the overall table games win percentage,
primarily accounts for a $53.6 million, or 15%, decrease in The Mirage's
casino revenues. Revenues at The Mirage's other table games and slots
increased by 4% and 3%, respectively, over the 1997 nine-month period.
Net non-casino revenues at The Mirage were down 5% from the 1997 period.
Standard guest room occupancy was approximately 99% during both nine-
month periods. A small decline in the average daily room rate
contributed to a 3% decline in room revenues.
Treasure Island's overall revenue comparisons were relatively flat for
the nine-month period. A $2.0 million, or 2%, increase in casino
revenues substantially offset a $2.3 million, or 1%, decline in net non-
casino revenues. Slot revenues grew by $4.5 million, or 8%, offsetting
a $2.7 million, or 5%, decline in table games revenues caused primarily
by a decline in baccarat activity and the win percentage. Activity at
Treasure Island's other table games increased by 3% over the 1997
period. Net entertainment revenues were up 5% over the 1997 nine-month
period, primarily due to an increase in the average ticket price for
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<PAGE>
Mystere. Occupancy of Treasure Island's standard guest rooms exceeded
99% during both nine-month periods. Net room revenues, however, were
down 7%, mainly due to a decline in the average daily room rate. Higher
payroll, training and various other costs associated with the additional
staffing efforts discussed previously contributed to a 5% increase in
Treasure Island's operating expenses and the 3.9-percentage point
decline in its operating margin.
Competitive market conditions impacted profitability at the Company's
two Golden Nugget properties throughout the 1998 nine-month period.
Monte Carlo achieved gross revenues of $201.2 million and operating
income of $45.6 million during the 1998 nine-month period. This
compares with $197.5 million and $53.5 million during the prior-year
period.
The factors discussed previously in comparing the three-month periods
had a similar effect on corporate expense, net interest expense and the
Company's provision for income taxes when comparing the nine-month
periods. Additionally, in the third quarter of 1997, the Company
purchased certain of Boardwalk's previously issued debt securities as
part of the acquisition. As a result, "Other, including interest
income" during the 1998 nine-month period includes interest earned on
the securities until Boardwalk became a wholly owned subsidiary of the
Company on June 30.
CAPITAL SPENDING, CAPITAL RESOURCES AND LIQUIDITY
The capital required for the Company's significant expansion is being
provided by net operating cash flow, revolving bank credit facility and
commercial paper borrowings and the issuance of long-term unsecured
debt.
During the 1998 nine-month period, the Company's existing resorts
contributed net operating cash flow (as shown in the Condensed
Consolidated Statements of Cash Flows) of $192.3 million, versus $207.9
million in the 1997 period. As discussed previously, the Monte Carlo
joint venture began making cash distributions of its earnings to the
partners in the second quarter of 1998. The Company's operating cash
flow for the 1998 nine-month period includes its $16.4 million
share of such distributions.
Capital expenditures during the 1998 period totaled $920.1 million,
compared with $706.5 million in the 1997 nine-month period. Capital
expenditures during both periods primarily represent amounts invested in
the Bellagio and Beau Rivage projects. Bellagio opened on October 15,
1998 at a total cost, including land, capitalized interest and
preopening costs (but excluding fine art acquired for display and
resale), of approximately $1.6 billion. Beau Rivage is expected to be
completed at a total cost (net of insurance reimbursement as discussed
below) of approximately $660 million. At September 30, 1998, the
Company had incurred approximately $1.4 billion associated with Bellagio
and approximately $433 million associated with Beau Rivage.
-14-
<PAGE>
Hurricane Georges, which battered the Mississippi Gulf Coast in early
October 1998, caused substantial damage to the Beau Rivage project. The
time necessary to repair the damage is anticipated to delay the scheduled
opening date from February 1 to a yet-to-be-determined date in March
1999. The Company is insured against the damage caused by the hurricane
as well as the estimated lost profits resulting from the delayed opening
and has submitted a claim to its insurance carrier.
In January 1998, the Company sold four of the works of art acquired for
Bellagio to its Chairman for a total sale price of approximately $25.6
million. The sale price was equal to the amount paid by the Company for
the artwork in the fourth quarter of 1997. The Company sold an
additional work of art to an independent third party in April 1998 for
$10.5 million. Also in April 1998, the Company received net cash
proceeds of approximately $23.5 million in connection with the sale of
16 acres of land to the owner of the upscale retail mall adjacent to The
Mirage and Treasure Island. The land was previously used for off-site
parking for employees of both hotel-casinos. To facilitate the land
sale, the Company completed construction in March of an 1,800-space
employee parking garage directly behind The Mirage and Treasure Island
at a cost of approximately $12.4 million. The owner of the mall intends to
use the acquired land for a significant expansion project, which should
prove beneficial to both The Mirage and Treasure Island.
As discussed in Note 2 of Notes to Condensed Consolidated Financial
Statements, the Company completed the acquisition of Boardwalk on June
30, 1998. The acquisition required total cash outlays (including
previously acquired Boardwalk debt) of approximately $112.0 million.
The Company expended approximately $51.9 million of such amount during
1997.
Capital expenditures during the 1998 period include approximately $118.8
million expended in September to acquire approximately 11 acres of land
on the Las Vegas Strip. This land, combined with the Boardwalk site and
other land previously acquired by the Company, provides an approximately
55-acre site for future development with over 1,200 feet of frontage on
the Las Vegas Strip between and contiguous to Bellagio and Monte Carlo.
The Company is in the very early design phase for a potential new hotel-
casino resort expected to be developed on the site. The design, timing
and cost of any such future development, however, are still highly
uncertain.
Further expansion of the Company is currently being planned for Atlantic
City, New Jersey. In January 1998, the City of Atlantic City conveyed
to the Company approximately 180 acres (125 acres of which are
developable) in the Marina area of the City (the "Marina Site") in
exchange for the Company agreeing to develop a hotel-casino on the site
and undertaking certain other obligations. The Company has also entered
into an agreement with certain State agencies with respect to the
construction and joint funding of road improvements necessary to improve
access to the Marina area. In connection with such agreement, in
October 1997 the Company and one of the State agencies funded their
respective $110 million and $125 million portions of the $330 million
estimated total cost of the road improvements. The funds were deposited
into escrow accounts and are restricted for construction of the road
improvement project. The remaining $95 million estimated cost of the
project is being provided by the other State agency party to the
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<PAGE>
agreement. The road improvement project is being constructed pursuant
to a fixed-price design/build contract. Groundbreaking on the project
took place on November 4, 1998, with construction scheduled to be
completed in May 2001.
The Company is in the early design phase of its planned Marina Site
hotel-casino and a project budget has not yet been developed. As part
of the project, the Company must remediate the Marina Site, which is a
former municipal landfill. Much of the remediation must be completed
before the Company can begin construction of its resort. Remediation is
expected to commence in November 1998 and require approximately one year
to complete.
In July 1998, the Company and Boyd Gaming Corporation ("Boyd") entered
into an amended and restated joint venture agreement for the development
of a hotel-casino on a 25-acre portion of the Marina Site. The
agreement calls for the development of a $750 million entertainment
resort with at least 1,200 hotel rooms to be connected to the Company's
planned hotel-casino. The Company and Boyd each owns 50% of the joint
venture. The Company will design and develop the master plan for the
Marina Site and Boyd will oversee the design and construction of the
joint venture resort, as well as operate it upon completion. Under the
terms of the agreement, the Company will contribute the land and $60
million in cash and Boyd will contribute $150 million in cash. The
partners will attempt to obtain acceptable financing that will be non-
recourse to the Company and Boyd for the remaining development cost of
the project. If the requisite permits and financing are obtained,
management anticipates that construction of the joint venture resort may
commence by the fall of 1999.
Numerous governmental permits must be applied for and received and
various other conditions must be satisfied before construction can
commence on the hotel-casinos planned by the Company and the joint
venture. Accordingly, there can be no assurance as to the timing or
cost of construction.
In February 1998, the Company received net proceeds of $394.7 million
from the issuance of $200 million principal amount of 6 5/8% unsecured
notes due February 2005 and an equal principal amount of 6 3/4% unsecured
notes due February 2008. The notes were issued pursuant to a "shelf"
registration statement filed with the Securities and Exchange Commission
in October 1997 covering a total of up to $750 million (including the
$400 million issued in February 1998) of debt or equity securities or
any combination thereof. Approximately $237.1 million of the net
proceeds from the offering were effectively used to retire the zero
coupon notes and redeem the 9 1/4% notes as discussed in Note 3 of Notes to
Condensed Consolidated Financial Statements.
Management believes that existing cash balances, operating cash flow and
available borrowing capacity will provide the Company with sufficient
resources to meet its existing debt obligations and foreseeable capital
expenditure requirements.
-16-
<PAGE>
RECENTLY ISSUED ACCOUNTING STATEMENT
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position No. 98-5 - Reporting on the Costs of Start-Up Activities ("SOP
98-5"). The provisions of SOP 98-5 are effective for fiscal years
beginning after December 15, 1998 and require that the costs associated
with start-up activities (including preopening costs of casinos) be
expensed as incurred.
The Company currently capitalizes preopening costs and amortizes such
costs over the 60-day period following opening of the related facility.
As a result, the preopening costs related to Bellagio, which are in
excess of $85 million, will be fully amortized to expense in the 1998
fourth quarter. Management does not agree with the theory behind SOP 98-5,
as its implementation will result in a failure to match the expenses
associated with a new project with the related revenues. Nevertheless,
as a practical matter, the Company has no choice but to adopt the
provisions of SOP 98-5 effective January 1, 1999, and all capitalized
preopening costs related to the Beau Rivage and Atlantic City projects
(which totaled approximately $35 million at September 30, 1998) will be
written off and reflected as a cumulative effect of change in accounting
principle, net of income tax, in its 1999 first quarter financial
statements.
YEAR 2000 READINESS DISCLOSURE
BACKGROUND
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the
year 1900 rather than the year 2000. This is generally referred to as
the "Year 2000 issue." If this situation occurs, the potential exists
for computer system failures or miscalculations by computer programs,
which could disrupt operations.
RISK FACTORS
The Company is in many ways involved in a low-technology business.
Casino employees, for example, do not require computers to deal
blackjack or spin a roulette wheel. Likewise, a chef does not require
computers to prepare a meal and a maid does not require a computer to
clean and prepare a guest room. Slot machines are a type of computer,
but there is no date embodied in their basic operation of choosing a
random sequence and determining the appropriate payout.
Nevertheless, the Company does use computers extensively to assist its
employees in providing good service to its guests and to assist
management in monitoring the Company's operations. The Company's front
desk, for example, is highly computerized so as to expedite check-in and
check-out of guests. Similarly, the Company uses computers in the back-
of-the-house to facilitate purchasing and maintaining inventory records.
The Company's shows and free entertainment attractions also use
computers extensively. In the casino, computers are used to monitor
gaming activity and maintain customer records, such as credit
availability and points earned by members of the Company's slot clubs.
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<PAGE>
Computers on occasion fail, irrespective of the Year 2000 issue. For
this reason, where appropriate, the Company maintains paper and
magnetic back-ups and the Company's employees are trained in the use of
manual procedures. When the front desk computer fails, for example, the
Company's employees continue to check guests in and out using manual
methods. Numerous such incidents occur each year and generally such
failures are unnoticed by guests.
This is not to imply that there is no risk to the Company from the Year
2000 issue. The risks could be substantial. Most of the Company's guest
rooms, for example, are easily accessed only by elevator, and most
elevators incorporate some computer technology. Likewise, the Company's
heating, ventilation, life safety and air conditioning systems are
highly computerized and, of course, critical to the Company's operations.
While some attractions, such as the dolphin exhibit at The Mirage and
the Bellagio Gallery of Fine Art, would be relatively unaffected by
failure of computer technology, other attractions, such as the Siegfried
& Roy and Mystere shows, could not function without computers. The
Company is also exposed to the risk that one or more of its vendors or
suppliers could experience Year 2000 problems that may impact their
ability to provide goods and services. Although this is not considered
as significant a risk with respect to the suppliers of goods due to
the availability of alternative suppliers, the disruption of certain
services, in particular utilities and financial services, could, depending
upon the extent of the disruption, have a material adverse impact on the
Company's operations.
External effects of the Year 2000 issue, such as disruptions in airline
service or other domestic or international economic disruptions
affecting the Company's customers, could also adversely affect the
Company's business. Most of the Company's customers travel in excess of
100 miles to reach the Company's resorts and many of them travel by air.
If there is a breakdown of the Federal Aviation Administration's ("FAA")
air traffic control system, or if fear of such a breakdown discourages
customers from traveling, there could be a material adverse impact on the
Company's operations. Of course, the Company anticipates that the
arrival of the new millennium will also result in large parties and
great activity in the Company's hotel-casinos. A minor breakdown or
fear of such breakdown in air travel immediately following the New
Year's Eve holiday could also result in extended stays by patrons at the
Company's facilities. The Company is not in a position to determine
either the readiness of the FAA or the airlines to deal with the Year
2000 issue or the impact that this would have on the Company's business.
STRATEGY
The Company has an extensive Year 2000 compliance program and has
substantially completed an inventory of its various systems that may be
sensitive to the Year 2000 issue. The Company has also prioritized the
importance of such systems to its operation and formed teams and
assigned responsibilities to ensure Year 2000 compliance of all critical
systems. Where important to the Company's business, inquiries are also
being made of third parties with whom the Company does significant
business, such as vendors and suppliers, as to their Year 2000
readiness, and alternatives if a third party encounters a Year 2000
problem are being developed.
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<PAGE>
The Company believes that a substantial majority of its systems are
currently Year 2000 compliant. It is the Company's goal to have all
systems Year 2000 compliant by mid-year 1999. The Company has not
developed a comprehensive contingency plan, although as previously
mentioned a number of its critical hotel and casino systems are
currently backed up by manual procedures that have been utilized during
times of system malfunctions. The Company will continue to assess the
need for a comprehensive contingency plan as implementation of its
corrective action plan continues.
COSTS
It is difficult to calculate the cost to the Company of ensuring that
its systems are Year 2000 compliant, in part because there are many
different solutions to various Year 2000 situations. In the case of the
Company's elevators, for example, the Company has requested that the
third parties with whom it contracts for its elevator maintenance
inspect each elevator system, as part of its normal maintenance, for any
Year 2000 issues. For the Company's proprietary casino tracking system,
the Company has contracted with a third-party consultant to make such
system Year 2000 compliant. At the same time, however, and under the
same contract, the consultant is also incorporating several other
enhancements to the casino system.
During the period from 1997 through 1999, the Company has installed and
will be installing new slot accounting, hotel management and financial
accounting systems. Each of these new systems is Year 2000 compliant
and also has numerous enhancements over the Company's prior systems.
The total cost of installing these systems is approximately $30 million,
of which approximately $7 million has been incurred through September 30,
1998. Management believes that it would have installed such systems within
this time frame irrespective of the Year 2000 issue. Other than the cost
of these new systems, the cost of addressing the Year 2000 issue has not
been and is not expected to be material to the Company's financial
condition or results of operations.
CERTAIN FORWARD-LOOKING STATEMENTS
Certain information included in this Form 10-Q and other materials filed
or to be filed by the Company with the Securities and Exchange
Commission (as well as information included in oral statements or other
written statements made or to be made by the Company) contains forward-
looking statements, within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Such statements include information relating to
plans for future expansion and other business development activities as
well as other capital spending, financing sources, the effects of
regulation (including gaming and tax regulation) and competition and the
status of Year 2000 readiness. Such forward-looking information
involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements made
by or on behalf of the Company. These risks and uncertainties include,
but are not limited to, those relating to development and construction
activities, including construction budgets and schedules, dependence on
existing management, leverage and debt service (including sensitivity to
fluctuations in interest rates), domestic or international economic
conditions, pending litigation, the effects of the Year 2000 issue,
changes in federal or state tax laws or the administration of such laws
and changes in gaming laws or regulations (including the legalization of
gaming in certain jurisdictions).
-19-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the litigation between the Registrant and Circus
Circus Enterprises, Inc. ("Circus") described under "Legal Proceedings" in
Item 3 of the 1997 Annual Report. On October 15, 1998, the Registrant and
Circus agreed to dismiss the litigation with prejudice and to release all
claims against each other with respect to the subject matter of the
litigation.
Reference is made to the litigation between the Registrant and the trustee
of the bankruptcy estate of Ken Mizuno described under "Legal Proceedings"
in Item 3 of the 1997 Annual Report. In August 1998, the court granted
the Registrant's motion to dismiss the complaint. The plaintiff has filed
a notice of appeal.
-20-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10.1 Letter agreement dated July 31, 1998 between Bellagio and
Stephen A. Wynn.
10.2 Letter agreement dated August 17, 1998 between Bellagio and
Stephen A. Wynn.
10.3 Letter agreement dated September 1, 1998 between Bellagio and
Stephen A. Wynn.
10.4 Purchase and Sale Agreement (with Option), dated as of August
12, 1998, between the April Cook Companies and RZ Corporation
(without exhibits) (the "Purchase and Sale Agreement").
10.5 First Amendment to Purchase and Sale Agreement, dated as of
August 24, 1998 (without exhibit).
10.6 Second Amendment to Purchase and Sale Agreement, dated as of
August 30, 1998 (without exhibit).
15 Letter from independent public accountants acknowledging
awareness of the use of their report dated November 13, 1998 in
the Registrant's registration statements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Registrant filed no Current Reports on Form 8-K during the
three-month period ended September 30, 1998.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Mirage Resorts, Incorporated
November 13, 1998 by: DANIEL R. LEE
- - ----------------- --------------------------------
Date Daniel R. Lee
Senior Vice President - Finance
and Development, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
-22-
Robert H. Baldwin
President
BELLAGIO
July 31, 1998
Mr. Stephen A. Wynn
Chairman of the Board, President
and Chief Executive Officer
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Dear Steve:
This confirms the agreement this date between Bellagio and
you with respect to the works of fine art entitled "Flag on
Orange Field II" by Jasper Johns (1958, encaustic on canvas,
54 x 36-1/4 inches), and "Untitled IX" by Willem de Kooning
(1977, oil on canvas, 70 x 80 inches) (collectively, the
"Works"), each of which you purchased from an independent
party on June 19, 1998 at a purchase price of $13,000,000
and $1,650,000, respectively.
1. The January 14, 1998 agreement between Bellagio
and you, as subsequently amended (the "Original Agreement"),
is hereby amended to provide that, effective June 19, 1998,
the Exhibit`B' Art referenced therein which you are renting
to Bellagio shall include the Works.
2. The terms of the rental of the Works shall be the
same as those set forth in the Original Agreement with
respect to the Exhibit `B' Art, except that the annual rental
for the Works, payable in equal monthly installments in
advance, shall be $156,000 and $19,800, respectively. Rent
for the Works payable for the period prior to the date hereof
shall be included in the August 1998 rent payment.
3. The Works shall be maintained on public display and
shall be available for educational purposes in any hotel-
casino operated by any wholly owned subsidiary of Mirage
Resorts, Incorporated in conformity with the requirements of
NRS 361.068(k) and NRS 374 and any regulations promulgated
thereunder.
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
EXHIBIT 10.1
<PAGE>
Mr. Stephen A. Wynn
Mirage Resorts, Incorporated
July 31, 1998
Page Two
Please sign below to confirm your agreement to the foregoing.
My signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
By: ROBERT H. BALDWIN
___________________________
ROBERT H. BALDWIN
President and Chief
Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
___________________________
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
2
Robert H. Baldwin
President
BELLAGIO
August 17, 1998
Mr. Stephen A. Wynn
Chairman of the Board, President
and Chief Executive Officer
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Dear Steve:
This confirms the agreement this date between Bellagio and
you with respect to the work of fine art entitled "Untitled"
by Willem de Kooning (1970-1979, oil on canvas, 55 x 59-1/4
inches) (the "Work"), which you purchased from an independent
party on July 14, 1998 at a purchase price of $725,000.
1. You hereby sell the Work to Bellagio and Bellagio
hereby purchases the Work from you for $725,000.
2. Bellagio intends that the Work shall be maintained
on public display and shall be available for educational
purposes in any hotel-casino operated by any wholly owned
subsidiary of Mirage Resorts, Incorporated in conformity with
the requirements of NRS 361.068(k) and NRS 374 and any
regulations promulgated thereunder.
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
EXHIBIT 10.2
<PAGE>
Mr. Stephen A. Wynn
Mirage Resorts, Incorporated
August 17, 1998
Page Two
Please sign below to confirm your agreement to the foregoing.
My signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
By: ROBERT H. BALDWIN
__________________________
ROBERT H. BALDWIN
President and Chief
Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
______________________________
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
2
Robert H. Baldwin
President
BELLAGIO
September 1, 1998
Mr. Stephen A. Wynn
Chairman of the Board, President
and Chief Executive Officer
Mirage Resorts, Incorporated
3400 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Re: Lease No. 5
Dear Steve:
This confirms the agreement this date between Bellagio and
you with respect to the works of fine art entitled "Seated
Woman" by Pablo Picasso (1949, oil on canvas, 51 x 38-1/4
inches), "Magritte II" by Escobar Marisol (1998, wood, oil
paint, plaster, charcoal, cloth, 58 x 30 x 14 inches), and
"Untitled XXXII" by Willem de Kooning (1977, oil on canvas,
54 x 60 inches) (collectively, the "Works"), which you
purchased from independent parties on July 8, 1998, July 10,
1998 and August 18, 1998, respectively, at a purchase price
of $2,750,000, $55,420 and $825,000, respectively.
1. The January 14, 1998 letter agreement between
Bellagio and you, as amended by letter agreements dated March
12, 1998, April 21, 1998 and July 31, 1998 (as so amended,
the "Original Agreement"), is hereby amended to provide that,
effective the date hereof, the Exhibit `B' Art referenced
therein which you are renting to Bellagio shall include the
Works.
2. The terms of the rental of the Works shall be the
same as those set forth in the Original Agreement with
respect to the Exhibit `B' Art, except that the annual rental
for the Works shall be $33,000, $665 and $9,900, respectively,
which shall be payable in equal monthly installments in
advance.
P.O. BOX 7700, LAS VEGAS, NEVADA 89177-7700
EXHIBIT 10.3
<PAGE>
Mr. Stephen A. Wynn
Mirage Resorts, Incorporated
September 1, 1998
Page Two
3. The Works shall be maintained on public display and
shall be available for educational purposes in any hotel-
casino operated by any wholly owned subsidiary of Mirage
Resorts, Incorporated in conformity with the requirements of
NRS 361.068(k) and NRS 374 and any regulations promulgated
thereunder.
Please sign below to confirm your agreement to the foregoing.
My signature below confirms Bellagio's agreement thereto.
Very truly yours,
BELLAGIO
By: ROBERT H. BALDWIN
___________________________
ROBERT H. BALDWIN
President and Chief
Executive Officer
I hereby agree to the foregoing.
STEPHEN A. WYNN
___________________________
STEPHEN A. WYNN
cc: Bruce A. Levin
Peter C. Walsh
James E. Pettis
2
PURCHASE AND SALE AGREEMENT
(WITH OPTION)
BY AND BETWEEN
The April Cook Companies,
a Nevada corporation
and
RZ Corporation,
a Nevada corporation
AUGUST 12, 1998
EXHIBIT 10.4
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE OF PROPERTY, PURCHASE PRICE AND DEPOSIT; OPTIONS. . . 3
3. TITLE MATTERS. . . . . . . . . . . . . . . . . . . . . . . 5
4. DUE DILIGENCE. . . . . . . . . . . . . . . . . . . . . . . 6
5. SELLER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 7
6. PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . 9
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . .10
8. COVENANTS PENDING CLOSING. . . . . . . . . . . . . . . . .10
9. EXPRESS CONDITIONS TO CLOSING. . . . . . . . . . . . . . .11
10. THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . .12
11. CLOSING COSTS, EXPENSES AND PRORATIONS . . . . . . . . . .13
12. INDEMNITIES. . . . . . . . . . . . . . . . . . . . . . . .13
13. REMEDIES UPON DEFAULT. . . . . . . . . . . . . . . . . . .14
14. [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . .14
15. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .14
16. 1031 EXCHANGE. . . . . . . . . . . . . . . . . . . . . . .17
<PAGE>
LIST OF EXHIBITS
EXHIBIT "A" [Assignment and Assumption Agreement]. . . . . . . . 20
EXHIBIT "B" [Deed] . . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT "C" [Form of Estoppel Certificate] . . . . . . . . . . . 22
EXHIBIT "D" [Permitted Exceptions] . . . . . . . . . . . . . . . 23
EXHIBIT "E" [Leases] . . . . . . . . . . . . . . . . . . . . . . 24
EXHIBIT "F" [Legal Description of the Property]. . . . . . . . . 25
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PURCHASE AND SALE AGREEMENT
(WITH OPTION)
This Purchase and Sale Agreement (with Option) ("Agreement")
is entered into on the Effective Date, by and between The April
Cook Companies, a Nevada corporation, or its designee (hereinafter
"Purchaser") and RZ Corporation, a Nevada corporation (hereinafter
"Seller") based upon the following recitals:
A. Seller is the owner of certain Property, as defined
below.
B. Subject to the terms and conditions as set forth
herein, Seller has agreed to sell its interest in the Property to
Purchaser and Purchaser has agreed to purchase Seller's interest
in the Property from Seller.
NOW, THEREFORE, based upon the foregoing and the
representations and warranties included herein, in consideration
of the mutual promises and covenants hereinafter contained and
subject to the conditions hereinafter set forth, the parties
agree as follows:
1. DEFINITIONS
1.1 "Assignment" shall be defined as the Assignment and
Assumption Agreement in substantially the form of
Exhibit "A" attached hereto, whereby Seller assigns its
rights, duties and obligations as landlord under the
Leases to Purchaser, and Purchaser assumes the same from
Seller.
1.2 "Deposit" shall be defined as the sum of Ten Million and
No/100 Dollars ($10,000,000.00) and all interest accrued
thereon.
1.3 "Closing" shall be defined as set forth in Section 10.1.
1.4 "Condemnation Proceeding" is defined as that certain
condemnation proceeding in District Court, Clark County,
Nevada, Case No. A374831.
1.5 "Condemned Parcel" shall be defined as that certain
parcel of real property, consisting of approximately .77
acres, referenced as APN 162-20-603-010, which is the
subject of the Condemnation Proceeding.
1.6 "Deed" shall be defined as the grant, bargain and sale
deed in substantially the form of Exhibit "B" attached
hereto.
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1.7 "Due Diligence Period" shall be defined as the period
starting at the Effective Date and ending August 24,
1998.
1.8 "Effective Date" shall mean the date of execution of the
Agreement.
1.9 "Environmental Laws" shall be defined as set forth in
Section 5.15.
1.10 "Environmental Study" shall be defined as set forth in
Section 4.1.
1.11 "Escrow" shall be defined as set forth in Section 2.2.
1.12 "Escrow Agent" shall be defined as Nevada Title Company.
1.13 "Estoppel Certificate" shall be defined as set forth in
Section 9.1.4 and in substantially the form set forth in
Exhibit "C."
1.14 "FIRPTA" shall be defined as the Foreign Investment Real
Property Tax Act, Internal Revenue Code Section 1445.
1.15 "Hazardous Substances" shall be defined as set forth in
Section 5.16.
1.16 "Leases" shall be defined as the leases set forth as
Exhibit "E" hereto.
1.17 "Options" shall be defined as set forth in Section 2.3.
1.18 "Option Closings" shall be defined as set forth in
Section 2.3.
1.19 "Option Consideration" shall be defined as set forth in
Section 2.3.
1.20 "Option Periods" shall be defined as set forth in
Section 2.3.
1.21 "Permitted Exceptions" shall be defined as set forth in
Section 3.3 and Exhibit "D".
1.22 "Preliminary Title Report" shall be defined as set forth
in Section 3.3.
1.23 "Property" shall be defined as that certain parcel of
real property consisting of approximately 10.55 acres,
APN 162-20-603009, generally located at the intersection
of Harmon Avenue and Las Vegas Boulevard, in the County
of Clark, State of Nevada, as shown on Exhibit "F",
together with Seller's interest, if any, in any
buildings and improvements located thereon and all
rights, licenses and easements appurtenant to the
Property hereinabove mentioned. Upon completion of the
Survey the legal description of the Property therein
shall be used for all purposes hereunder.
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1.24 "Prorations" shall be defined as set forth in Section
11.
1.25 "Purchase Price" shall be defined as the sum of
ONE HUNDRED FOURTEEN MILLION AND NO/100 DOLLARS
($114,000,000.00).
1.26 "Survey" shall be defined as set forth in Section 3.2.
1.27 "Title Company" shall be defined as set forth in Section
3.1.
1.28 "Title Policy" shall be defined as set forth in Section
3.4.
2. SALE OF PROPERTY, PURCHASE PRICE AND DEPOSIT; OPTIONS
2.1 At the Closing, Seller shall sell, assign, transfer and
convey to Purchaser and Purchaser shall purchase from
Seller the Property free and clear of all liabilities,
claims, liens and encumbrances except for the Permitted
Exceptions and the Leases. The sale of the Property
shall be evidenced by the Deed.
2.2 The Purchase Price shall be payable as follows:
2.2.1 Escrow. No later than one (1) banking day
after the Effective Date, Purchaser shall
cause an escrow (the "Escrow") to be opened at
the office of the Escrow Agent and will
deposit the Deposit as earnest money into
Escrow. The Deposit shall be placed in an
interest-bearing account by the Escrow Agent
and shall be applied and disbursed as herein-
after set forth. If Purchaser fails to pay the
Deposit as set forth in this section, then the
Agreement will be deemed automatically ter-
minated and will be of no further force and
effect.
2.2.2 Balance of Purchase Price. At Closing,
Purchaser shall pay through Escrow, in
immediately available U.S. funds the balance
of the Purchase Price minus the Deposit and
subject to the Prorations (the "Closing
Payment").
2.3 Options. Seller hereby grants to Purchaser the
following options:
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2.3.1 The First Option. If the Condemnation
Proceeding is abandoned pursuant to NRS 37.180
with respect to all of the Condemned Parcel,
then Purchaser shall have a period of one (1)
year following the date a written notice of
abandonment of the Condemnation Proceeding is
filed (the "First Option Period") in which to
give Seller notice of its intent to exercise
an option to purchase the Condemned Parcel
(the "First Option") for the sum of EIGHT
MILLION, THREE HUNDRED TWENTY THOUSAND DOLLARS
($8,320,000.00) (the "First Option Consider-
ation"). If the Condemnation Proceeding is
abandoned pursuant to NRS 37.180 with respect
to less than all of the Condemned Parcel, then
Purchaser shall have the First Option Period
in which to give Seller notice of its intent
to exercise the First Option for a pro rata
percentage of the First Option Consideration,
which shall be determined by the following
formula: multiply the fraction in which the
numerator is the acreage of the Condemned
Parcel that is abandoned pursuant to the
Condemnation proceeding and the denominator is
.77 acres by the First Option Consideration.
In the event Purchaser exercises the First
Option, Purchaser shall pay to Seller the
First Option Consideration, or the pro rata
share thereof as described in this Section
2.3, within ten (10) business days thereafter
(the "First Option Closing"). At the First
Option Closing: (1) the Condemned Parcel or
that portion with respect to which the
Condemnation Proceeding has been abandoned,
shall be conveyed to Purchaser free and clear
of any liens, encumbrances, mortgages,
pledges, obligations, etc., imposed by Seller,
by grant, bargain and sale deed in sub-
stantially the form of Exhibit "B" hereto; (2)
Seller shall assign to Purchaser its right, if
any, to damages arising from occupancy of the
Condemned Parcel pursuant to NRS 37.180(2);
and (3) Seller's representations and
warranties contained in Sections 5.2 through
5.6 herein shall be true and correct as if
originally and additionally made with refer-
ence to the Condemned Parcel. In the event
the Condemnation Proceeding is abandoned,
Seller shall return any compensation as
described in NRS 37.100(4) that it received
for the Condemned Parcel to the County of
Clark or the appropriate governmental entity
that first paid said compensation to Seller by
no later than the First Option Closing, or, in
the alternative, Purchaser may remit said
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compensation to the County of Clark or the
appropriate governmental entity and reduce the
Option Consideration by that same amount.
2.3.2 The Second Option. Following the Closing, at
any time prior to the expiration of the 30-day
period following the entry of a final judgment
under the Condemnation Proceeding, or the
abandonment of the Condemnation Proceeding,
whichever event shall first occur, Purchaser
shall have the option to acquire all of
Seller's rights in and to the Condemnation
Parcel and in the Condemnation Proceeding (the
"Second Option") in consideration for payment
to the Seller of the sum of Five Million Nine
Hundred Sixteen Thousand Five Hundred Dollars
($5,916,500) (the "Second Option Consider-
ation"). In the event that Purchaser exercises
the Second Option, Purchaser shall pay to
Seller the Second Option Consideration within
ten (10) business days thereafter (the "Second
Option Closing"). At the Second Option Closing
(i) Seller's title to the Condemned Parcel
shall be conveyed to Purchaser free and clear
of any liens, encumbrances, mortgages,
pledges, obligations, etc., imposed by Seller,
except for the Condemnation Proceeding, by
Grant, Bargain, and Sale Deed in substantially
the form of Exhibit "B" hereto; (ii) Seller
shall take such actions, and execute and
deliver such documents, as may reasonably be
required to transfer Seller's rights in the
Condemnation Proceeding to Purchaser; and
(iii) Seller's representations and warranties
contained in Sections 5.2-5.6 herein shall be
true and correct as if originally and
additionally made with reference to the
Condemned Parcel. In the event the
Condemnation Proceeding is abandoned after
Purchaser's exercise of the Second Option,
Purchaser shall be obligated to refund to
Clark County the sums previously paid to
Seller in the Condemnation Proceeding, not to
exceed the amount of Two Million Four Hundred
Three Thousand Five Hundred Dollars
($2,403,500) plus interest thereon, if any, is
required to be paid.
2.3.3 Memorandum of Options. At Closing, the parties
shall record a Memorandum of Options to provide
public notice that Purchaser has obtained
options to acquire the Condemned Parcel from
Seller subject to the Condemnation Proceeding.
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2.3.4 Purchaser's Effort. Purchaser agrees to use
reasonable good faith efforts to cause the
County of Clark to pursue the Condemnation
Proceeding to completion. If the Second Option
is exercised, Purchaser shall have no further
obligation under the preceding sentence.
3. TITLE MATTERS.
3.1 Title Company. Nevada Title Company shall provide the
Title Policy, unless both parties agree that another
title company shall provide the Title Policy (the "Title
Company"), however, such selection of a substitute title
company shall not delay the Closing.
3.2 Survey. Purchaser shall cause the firm of Baughman &
Turner, Civil Engineers, or such other firm as Purchaser
shall select, to promptly commence preparation of an
ALTA-ACSM survey of the Property to be delivered to
Purchaser (the "Survey"). The Survey shall comply with
all requirements of the Title Company for issuance of the
Title Policy, shall show that no private property, other
than the Condemned Parcel, exists between Harmon and the
Property, and shall be generally and otherwise acceptable
to Purchaser.
3.3 Permitted Exceptions. Purchaser has obtained a
preliminary report with respect to title to the Real
Property ("Preliminary Title Report") from the Title
Company dated as of August 3, 1998, No. 98-03-1300 DTL,
2nd Amendment. Purchaser acknowledges and agrees that
Purchaser has reviewed the Preliminary Title Report
and all exceptions to title of the Real Property dis-
closed therein and Purchaser agrees to accept conveyance
of and take title to the Property at Closing, upon the
Title Company's delivery at Closing of the Title Policy
and the endorsements to that Title Policy described in
this Agreement, and Seller agrees to convey to Purchaser
title to the Property at Closing, subject only to the
exceptions set forth on Exhibit "D" hereto (the
"Permitted Exceptions"), and the Leases.
3.4 Title Policy. The Closing is subject to the Title
Company delivering to Purchaser an ALTA Extended Coverage
Owners Policy of Title Insurance ("Title Policy") issued
by the Title Company, dated on the date of the Closing,
in the amount of the Purchase Price, insuring Purchaser
as owner of fee title to the Property subject only to the
Permitted Exceptions and the Leases. The cost of the
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Title Policy shall be apportioned between the parties in
such a manner that Seller shall only be obligated to pay
that amount which would have been charged for a CLTA
policy and Purchaser shall pay the difference between the
cost of CLTA policy and the ALTA policy and shall pay for
any special endorsements to the Title Policy as Purchaser
requires.
3.5 Liens, Encumbrances Etc. Except for the Permitted
Exceptions and the Leases, Seller will transfer and
convey good and marketable title to the Property to
Purchaser at Closing, free and clear of any liens,
encumbrances or security interests of any nature whatso-
ever, and Purchaser shall not succeed to or be
responsible for any liens, claims, charges, encumbrances,
mortgages, pledges, obligations or liabilities of any
kind whatsoever, whether known or unknown, fixed or
contingent, contractual or statutory, of Seller
including, without limitation:
3.5.1 Any liabilities or obligations relating to the
operation of the businesses conducted on the
Property by Seller or its tenants or sub-
tenants, or their predecessors, accruing or
arising prior to the date of Closing;
3.5.2 Any of Seller's liabilities or obligations for
federal, state, local or foreign taxes,
assessments, impositions, deficiencies,
penalties or interest, whether or not imposed
on or measured by income, except for real
estate taxes and assessments due following the
Closing;
3.5.3 (i) Any liabilities or obligations with respect
to any claims, actions, suits or demands, or
any legal, administrative, arbitration or other
proceedings or judgments, with respect to
causes or actions accruing, or arising out of
events occurring, on or prior to the date of
Closing or based on any state of facts existing
on or prior to the date of Closing, or (ii) any
claims for personal injury or property damage
accruing, or arising out of events occurring on
or before the date of Closing;
3.5.4 Any contract obligations with third parties of
any nature whatsoever, except as specifically
assumed by Purchaser in writing, and in
Purchaser's sole and unlimited discretion and
except for the Leases; or
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3.5.5 Any claims for wages or benefits of any of the
Seller's employees.
4. DUE DILIGENCE.
4.1 Environmental Study. Purchaser shall cause the firm of
Kleinfelder or such other firm as Purchaser shall select,
to promptly commence preparation of a Phase I
Environmental Study of the Property to be delivered to
Purchaser and to be relied upon in connection with the
acquisition of the Property (the "Environmental Study").
4.2 Access to Property. Purchaser and its authorized
representatives and agents shall have reasonable access
to the Property to conduct such surveys and studies as it
deems necessary and proper. Purchaser shall indemnify,
defend and hold Seller harmless from any and all claims,
demands, damages, judgments, liabilities, costs and
expenses (including without limitation attorneys' fees)
resulting from or arising out of the inspection and study
referred to herein, including, without limitation, the
Environmental Study, but excluding (i) liabilities
resulting from the Environmental Study discovering
conditions requiring remediation, and (ii) damages or
injuries caused by Seller's or its agents' negligent acts
or omissions.
4.3 Due Diligence Period. During the Due Diligence Period,
Purchaser may review the Survey and the Environmental
Study. Purchaser may also inspect the Property, as
permitted by Subsection 4.2. Any time prior to the
expiration of the Due Diligence Period, in Purchaser's
sole and unlimited discretion, for any reason, Purchaser
may terminate this Agreement and shall be entitled to the
return of the Deposit.
5. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby
represents and warrants, which representations and warranties
shall be true and correct as of the date of Closing (unless
otherwise specified below):
5.1 That Seller is the owner of the Property and is able to
convey good, marketable title thereto, subject to the
matters disclosed in the Preliminary Title Report and the
Leases.
5.2 That Seller is duly organized and validly existing as a
corporation in its state of incorporation, in good
standing and qualified to conduct its business, to own
real property and to consummate the transactions
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contemplated herein under the laws of the State of
Nevada.
5.3 That all necessary corporate action has been taken to
authorize all transactions herein contemplated.
5.4 That the execution, delivery and performance of this
Agreement by Seller will not, with or without the giving
of notice and/or the passage of time, violate or
constitute a default under any provision of law, any
administrative regulation or any judicial, administrative
or arbitration order, award, judgment or decree
applicable to Seller or the Property or conflict with,
violate, result in a breach or termination of or cause a
default under Seller's articles of incorporation or
bylaws, or any other agreement or obligation by which
Seller or the Property are bound.
5.5 That no consent or approval of this Agreement is required
by any third party.
5.6 That there are no actions or claims pending or to
Seller's knowledge threatened before any court, govern-
mental agency, arbitrator or other tribunal which would
prevent Seller from completing the transactions provided
herein in accordance with the terms of this Agreement.
5.7 That it has not received any notice of zoning changes or
any actions threatening condemnation of any part of the
Property through exercise of eminent domain by any
governmental authority.
5.8 That it has no actual knowledge of any violations of law,
municipal or county ordinances or other legal require-
ments affecting the Property, or with respect to the use
of occupancy thereof.
5.9 That to the best of Seller's knowledge, all documents
that will affect title to the Property at Closing have
been provided to Purchaser.
5.10 That there are no mechanic's liens recorded against the
Property and none threatened to Seller's knowledge; and
all contractors, subcontractors, workmen, materialmen and
employees engaged by Seller have been paid in full for
any labor, services or materials supplied or delivered to
the Property.
5.11 That Seller has not caused and shall not cause to be
created any encumbrances on the Property in favor of any
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person other than Purchaser, other than the existing
Leases as disclosed in the Preliminary Title Report or
liens that have been previously released.
5.12 That all taxes, governmental assessments and utility
charges to the Property billed to Seller are current and
not delinquent.
5.13 That all representations and warranties made by Seller
and all information contained in any of the documents
furnished or to be furnished to Purchaser pursuant to
this Agreement, do not and shall not contain any untrue
statement of a material fact or omit to state any fact
necessary in order to make the statements contained here-
in or therein not misleading.
5.14 That Seller has not received nor is Seller aware of any
notification, demand or request (or any pending or
threatened action or litigation) from governmental or
quasi-governmental authority having jurisdiction,
requiring any work or construction to be done on or
affecting the Property or indicating an intent to condemn
the Property or any portion thereof.
5.15 Except as disclosed in the Environmental Study or as
disclosed below in this Section 5.15, that to the best of
its knowledge: (i) Seller is not in violation of any
applicable environmental, health and safety laws,
ordinances or regulations including those relating to air
and water pollution and Hazardous Substances (as defined
below) ("Environmental Laws"), in connection with its
ownership of the Property or conduct of its activities
thereon; (ii) except as noted in Section 6.4, Hazardous
Substances are not currently present on the Property and
have not been generated, used, treated, stored, trans-
ported to or from, or released or disposed of on the
Property; (iii) that without limiting the generality of
the foregoing, there are not now and have not been any
underground storage tanks, asbestos or any transformers
or other electrical devices containing polychlorinated
biphenyls on the Property; and (iv) that the Property has
never been used as a dump or landfill. The Property was
used as a staging area by Marnell Corrao Construction in
connection with the New York, New York Hotel & Casino and
was also used as a staging area for the Strip Beautifi-
cation Project. The term "Hazardous Substances" for
purposes of this Agreement means (i) petroleum or
petroleum products, (ii) radioactive materials, (iii)
asbestos in any form, (iv) any items that contains or has
contained polychlorinated biphenyls, (v) any other
chemicals, materials or substances defined as or included
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in the definition of "Hazardous Substances," "Hazardous
Waste," "Hazardous Materials," "Hazardous Air
Pollutants," "Extremely Hazardous Substances,"
"Restricted Hazardous Waste," "Toxic Substances,"
"Pollutants," "Contaminants," or words of any similar
import under any applicable Environmental Law, and/or any
other chemical or substance, exposure to which is pro-
hibited, limited or regulated by any governmental
authority as harmful under applicable Environmental Laws.
Seller has not received any notice from any governmental
authority, and has no knowledge of any governmental
inquiry, with respect to any actual or alleged violation
of any Environmental Laws in connection with the owner-
ship of the Property or Seller's activities thereon.
5.16 As of Closing, the Property shall not have generated
total revenues in excess of three million dollars
$3,000,000.00) during the preceding thirty-six (36)
months prior to the Closing.
5.17 That Seller has attached hereto as Exhibit "E" true and
correct copies of the Leases and all amendments and
modifications thereto; that there are no leases affecting
the Property currently in effect not contained in Exhibit
"E,"; that the Leases are in full force and effect and
that no party thereto is in default; and that the Leases
contain no options to purchase any part of the Property.
5.18 That the amount paid to Seller by the County in the
Condemnation Proceeding to date is Two Million Four
Hundred Three Thousand Five Hundred Dollars ($2,403,500).
6. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser hereby
represents and warrants, which representations and warranties
shall be true and correct as of the date of Closing (unless
otherwise specified below):
6.1 That the execution, delivery and performance of this
Agreement by Purchaser will not, with or without the
giving of notice and/or the passage of time, violate or
constitute a default under any provision of law, any
administrative regulation or any judicial, administrative
or arbitration order, award, judgment or decree
applicable to Purchaser or conflict with, violate, result
in a breach or termination of or cause a default under
Purchaser's articles of incorporation or bylaws, or any
other agreement or obligation by which Purchaser is
bound.
6.2 That no consent or approval of this Agreement is required
by any third party.
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6.3 That there are no actions or claims pending or to
Purchaser's knowledge threatened before any court,
governmental agency, arbitrator or other tribunal which
would prevent Purchaser from completing the transactions
provided herein in accordance with the terms of this
Agreement.
6.4 That Purchaser has actual knowledge that helicopters are
operated on the Property and fuel trucks have serviced
and come upon the Property on a daily basis for some
period of time to fuel the helicopters, which is a sub-
ject of one or more of the Leases. Neither party has any
knowledge that any spills have occurred on the Property
that require remedial action.
6.5 That Purchaser is duly organized and validly existing as
a corporation in its state of incorporation, in good
standing and qualified to conduct its business, to own
real property and to consummate the transactions contem-
plated herein under the laws of the State of Nevada.
6.6 That all necessary corporate action has been taken to
authorize all transactions herein contemplated.
6.7 That the execution, delivery and performance of this
Agreement by Purchaser will not, with or without the
giving of notice and/or the passage of time, violate or
constitute a default under any provision of law, any
administrative regulation or any judicial, administrative
or arbitration order, award, judgment or decree
applicable to Purchaser or conflict with, violate, result
in a breach or termination of or cause a default under
Purchaser's articles of incorporation or bylaws, or any
other agreement or obligation by which Purchaser is
bound.
6.8 That all representations and warranties made by Purchaser
and all information contained in any of the documents
furnished or to be furnished to Seller pursuant to this
Agreement, do not and shall not contain any untrue
statement of a material fact or omit to state any fact
necessary in order to make the statements contained here-
in or therein not misleading.
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7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of Seller's
and Purchaser's Representations and Warranties set forth in
Sections 5 and 6 shall survive for a period of thirty (30)
months.
8. COVENANTS PENDING CLOSING
8.1 Pending and prior to the Closing, Seller covenants and
agrees as follows, subject to the provisions of the
Leases:
8.1.1 That Seller shall not cause or allow any waste
to occur on the Property.
8.1.2 That Seller shall not place or store any
Hazardous Substances on or under the Property.
8.1.3 That Seller, without prior written consent of
Purchaser, shall not cause any liens or encum-
brances to be filed or recorded against the
Property and shall not assign, transfer,
encumber, hypothecate or convey any or all of
Seller's interest in the Property to any third
party or parties.
8.1.4 That Seller shall pay or cause to be paid
current to Closing, all taxes and expenses
related to the Property.
8.1.5 That Seller shall give Purchaser written notice
of any casualty occurring on the Property or of
any condemnation or proposed condemnation of
all or any part of the Property of which Seller
has or obtains actual knowledge.
9. EXPRESS CONDITIONS TO CLOSING
9.1 Purchaser's obligation to proceed to Closing shall be
subject to satisfaction of the following:
9.1.1 Seller shall not be in material default of any
of its covenants set forth herein.
9.1.2 Seller's representations and warranties as set
forth herein shall be true and correct as of
the date of Closing.
9.1.3 The Title Company shall be irrevocably com-
mitted to issue the Title Policy.
9.1.4 Seller shall have executed and delivered into
Escrow an Estoppel Certificate from each of the
two (2) tenants under the Leases, in
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substantially the form attached hereto as
Exhibit "C," stating that each of said Leases
is in full force and effect, there are no
breaches or events of default, and that each of
said Leases are terminable upon ninety (90)
days notice.
9.1.5 Seller shall have executed and delivered the
Assignment into Escrow.
9.1.6 Seller shall have executed and delivered into
Escrow all other documents and instruments and
shall have taken all actions necessary to
consummate the transactions contemplated hereby
in accordance with the terms of this Agreement.
9.2 Seller's obligation to proceed to Closing shall be sub-
ject to satisfaction of the following:
9.2.1 Purchaser shall not be in material default of
any of its covenants set forth herein.
9.2.2 Purchaser's representations and warranties as
set forth herein shall be true and correct as
of the date of Closing.
9.2.3 Purchaser shall have deposited the Closing Pay-
ment into Escrow.
9.2.4 Purchaser shall have executed and delivered the
Assignment into Escrow.
9.2.5 Purchaser shall have executed and delivered
into Escrow all other documents and instruments
and shall have taken all actions necessary to
consummate the transactions contemplated hereby
in accordance with the terms of this Agreement.
10. THE CLOSING
10.1 Subject to satisfaction of the conditions set forth in
Article 9, closing of the purchase of the Property (the
"Closing") shall occur on August 25, 1998.
10.2 At the Closing, Seller shall deliver or cause to be
delivered to Purchaser the following:
10.2.1 The Deed to Escrow for recordation in the
property records of Clark County, with subse-
quent delivery to Purchaser;
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10.2.2 A FIRPTA affidavit;
10.2.3 To Purchaser, Escrow Agent or Title Company, as
applicable, any other documents, fully
executed, as are customarily executed in the
State of Nevada in connection with the convey-
ance of real property, including all required
closing statements, releases, affidavits and
any other instrument that the parties may agree
to in good faith;
10.2.4 Possession of the Property, subject to the
Leases, and the Permitted Exceptions; and
10.2.5 the Assignment.
10.3 At the Closing, Purchaser shall deliver or cause to be
delivered the following:
10.3.1 The Purchase Price, subject to the Prorations,
in immediately available U.S. funds, to Escrow
Agent, for disbursement together with the
Deposit pursuant to Seller's instructions;
10.3.2 To Seller, Escrow Agent or Title Company, as
applicable, any other documents, fully
executed, as are customarily executed in the
State of Nevada in connection with the convey-
ance of real property, including all required
closing statements, releases, affidavits and
any other instrument that the parties may agree
to in good faith; and
10.3.3 The Assignment.
11. CLOSING COSTS, EXPENSES AND PRORATIONS. All of the
following closing costs, expenses and prorations shall be
collectively defined as the "Prorations."
11.1 Seller hereby agrees to pay for the following costs and
expenses associated with the consummation of this Agree-
ment and the Closing:
11.1.1 The premium for the CLTA portion of the Title
Policy;
11.1.2 All real property transfer taxes and documenta-
tion taxes;
11.1.3 One-half (1/2) of any escrow or closing fees
charged by the Escrow Agent; and
15
<PAGE>
11.1.4 Any other closing costs customarily paid by a
seller of real property in the State of Nevada.
11.2 Purchaser hereby agrees to pay for the following costs
and expenses associated with the consummation of this
Agreement and the Closing:
11.2.1 Recording fees for the Deed;
11.2.2 One-half (1/2) of any escrow or closing fees
charged by the Escrow Agent;
11.2.3 The difference in cost between the CLTA portion
of the Title Policy and the ALTA portion of the
title Policy and any special endorsements
required by Purchaser;
11.2.4 The cost of the Survey;
11.2.5 The cost of the Environmental Study;
11.2.6 Any other closing costs customarily paid by a
purchaser of real property in the State of
Nevada.
11.3 All real estate taxes, assessments and utilities
relating to the Property and not paid by a tenant under
the Leases shall be prorated as of the Closing between
Seller and Purchaser. Nothing herein shall limit the
parties' respective obligations under Section 12.
12. INDEMNITIES
12.1 From and after the Closing, Seller shall indemnify,
defend and hold Purchaser harmless from any and all
claims, demands, liabilities, judgments or expenses
(including without limitation attorney's fees) arising
out of or resulting from (i) Seller's breach of any of
its representations, warranties or covenants set forth
herein, or (ii) events occurring on or with respect to
the Property accruing prior to the Closing, except for
claims or damages with respect to Hazardous Substances or
Environmental Laws unless such claims or damages result
from a condition or occurrence not disclosed to Purchaser
in breach of Section 5.15, above.
12.2 From and after the Closing, Purchaser shall indemnify,
defend and hold Seller harmless from any and all claims,
demands, liabilities, judgments or expenses (including
without limitation attorney's fees) arising out of or
resulting from (i) Purchaser's breach of any of its
representations, warranties or covenants set forth here-
16
<PAGE>
in, or (ii) events occurring on or with respect to the
Property accruing after Closing.
12.3 If either party receives notice of any matter which
would give rise to a claim for indemnity under Sections
12.1 and 12.2, that party shall promptly notify the other
party, and such other party shall be entitled to defend
the claim at its own expense with counsel of its own
choosing, subject to the approval of such counsel by the
indemnified party, which approval shall not unreasonably
be withheld or delayed.
13. REMEDIES UPON DEFAULT
13.1 If Closing fails to occur solely as a result of Seller's
default, Purchaser shall be entitled as its only remedies
either (i) to a return of the Deposit, reasonable costs
spent for Due Diligence, and to terminate the Escrow; or
(ii) to obtain a decree of specific performance.
13.2 If Purchaser defaults under this Agreement, Seller, as
Seller's sole and exclusive remedy for such default,
shall be entitled to the Deposit. It is agreed between
Purchaser and Seller that Seller will suffer substantial
damages in the event of such default and the Deposit
shall be liquidated damages for a default of Purchaser
under this Agreement because of the difficulty, incon-
venience and uncertainty of ascertaining actual damages
for such default. It is further agreed between Purchaser
and Seller that such amount of liquidated damages
constitute a reasonable estimate of actual damages
that would be incurred by Seller as a result of a default
by Purchaser.
14. [INTENTIONALLY DELETED]
15. MISCELLANEOUS
15.1 Attorney's Fees. Each party shall pay all attorneys' fees
incurred by that party in the negotiation and delivery of
this Agreement. However, in the event that any action or
proceeding is instituted to interpret or enforce the
terms and provisions of this Agreement, the prevailing
party shall be entitled to its costs and attorneys' fees,
in addition to any other remedies it may obtain or
be entitled to.
15.2 Brokers' Commissions. The parties each represent one to
the other that no broker, finder or other financial
consultant has acted on their behalf in connection with
this agreement or the transactions contemplated hereby.
The parties each agree to indemnify and hold the other
harmless from any claim, settlement, cost or demand for
17
<PAGE>
commission or other compensation by any broker, finder,
financial consultant or similar agent claiming to have
been employed by or on behalf of the indemnifying party,
and to bear the cost of legal expenses incurred in
defending against such claims.
15.3 Notices. Any notices desired or required to be given
hereunder shall be faxed, with the original deposited in
the U.S. Mail, postage prepaid, or sent by overnight
courier service, and shall be deemed received upon the
earlier of attempted delivery or receipt. Either party
hereto may change its address hereunder by providing the
other party with notice of such changed address.
If to Seller, addressed to:
A. Robert Zeff, Esq.
RZ Corporation
607 Shelby Street, #200
Detroit, MI 48226
Facsimile: (313) 962-6007
With a copy to:
Jeff Zucker, Esq.
Lionel Sawyer & Collins
300 S. 4th St., 17th Floor
Las Vegas, NV 89101
Facsimile: (702) 383-8845
If to Purchaser, addressed to:
Peter C. Bernhard
The April Cook Companies
c/o Bernhard & Leslie
3980 Howard Hughes Parkway, #550
Las Vegas, NV 89109
Facsimile: (702) 650-2995
With a copy to:
Terry Jones, Esq.
Schreck Morris
300 S. 4th St., 12th Floor
Las Vegas, NV 89101
Facsimile: (702) 382-8135
15.4 Counterparts. This agreement may be executed in
multiple counterparts, which together shall constitute
one and the same document.
18
<PAGE>
15.5 Entire Agreement. This Agreement constitutes the entire
agreement between Purchaser and Seller regarding the
Property, and supersedes all prior discussions,
negotiations and agreements between them, whether oral or
written. This Agreement may not be amended or modified
except in writing signed by both parties hereto.
15.6 Governing Law. This Agreement shall be governed by the
laws of the State of Nevada applicable to contracts made
in that state.
15.7 Forum. The parties agree that the proper forum and venue
for any dispute involving this Agreement or the trans-
action contemplated thereby shall be the state and
federal courts of Clark County, Nevada.
15.8 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors, assigns,
nominees, designees and affiliates of the parties hereto.
15.9 Waiver. No waiver of any provisions of this Agreement
shall be deemed or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver, and no waiver shall be
binding unless evidenced by an instrument in writing and
executed by the party making the waiver. If any pro-
vision, covenant or condition of this Agreement should be
held or found to be invalid, void or unenforceable, that
provision shall be deemed severable and all provisions,
covenants and conditions not held invalid, void or
unenforceable shall continue in full force and effect
and shall in no way be affected, impaired or invalidated
thereby.
15.10Further Assurances. The parties agree to negotiate
diligently and in good faith at all times, to execute and
deliver such other and further documents and instruments
as may be necessary to fully effectuate the transactions
contemplated hereby. The parties further agree to execute
and deliver to the Escrow Agent and Title Company such
other and further escrow instructions, documents and
instruments as may be reasonably necessary to effectuate
this transaction in accordance with its terms.
16. 1031 EXCHANGE. Seller agrees to cooperate with Purchaser in
qualifying this transaction as a tax-free exchange under
Section 1031 of the Internal Revenue Code as long as such
cooperation does not result in any additional expense,
liability, or obligation on the part of Seller or in the
delay of the Closing. Failure to qualify this transaction as
a tax-free exchange will not release Purchaser from its
obligations hereunder.
[SIGNATURES ON NEXT PAGE]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year shown opposite
their respective signatures below.
SELLER:
RZ Corporation, a Nevada corporation
By: A. ROBERT ZEFF
-------------------------------------
Robert Zeff, President
Dated: August 12, 1998
PURCHASER:
The April Cook Companies, a
Nevada corporation
By: PETER C. BERNHARD
-------------------------------------
Peter C. Bernhard, President
Dated: August 12, 1998
TITLE COMPANY
RECEIPT AND CONSENT
The Title Company acknowledges receipt of an executed copy of
the Agreement and agrees to perform as Escrow Agent thereunder.
Nevada Title Company, a Nevada corporation
By: TROY LOCKHEAD
-------------------------------------
Troy Lochhead, Title Officer
Dated: August 13, 1998
20
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (WITH OPTION)
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (With Option)
(the "First Amendment") is made and entered into as of August 24, 1998
by and between The April Cook Companies, a Nevada corporation
("Purchaser") and RZ Corporation, a Nevada corporation, ("Seller"),
based upon the following:
RECITALS
A. The parties hereto entered into a Purchase and Sale Agree-
ment (with Option) dated as of August 12, 1998 (the "Agreement").
B. Section 10.1 of the Agreement provided for a Closing to
occur on August 25, 1998.
C. The parties hereto are desirous of extending the Closing
date and further amending the Agreement in several particulars as
hereinafter set forth in this First Amendment.
D. Capitalized terms used in this First Amendment shall be
defined as set forth in the Agreement.
NOW, THEREFORE, based upon the foregoing and in consideration of
the mutual covenants herein set forth, it is agreed as follows:
1. Section 1.25 of the Agreement is amended by the addition of
the following language:
The Purchase Price shall be increased by an amount equal to
the product of Twenty One Thousand, Eight Hundred and Sixty
Three Dollars ($21,863.00) times the number of calendar days
elapsed from but excluding August 25, 1998 to and including
the Closing.
2. Section 2 of the Agreement is amended by the addition of the
following subsection:
2.3.5 Seller's Covenant. Seller agrees that after the
Closing it shall not raise any defenses to the Condemnation
Proceeding except those relating to the amount of just
compensation.
EXHIBIT 10.5
<PAGE>
3. Section 5.17 of the Agreement is amended to read:
That Seller has attached hereto as Exhibit "E" true and
correct copies of the Leases and all amendments and
modifications thereto and there are no agreements with
respect to the term of such Leases except as set forth on
Exhibit "E"; that there are no leases (not including sub-
leases) affecting the Property currently in effect not
contained in Exhibit "E,"; that the Leases are in full force
and effect and that no party thereto is in default; and that
the Leases contain no options to purchase any part of the
Property.
4. The following sentence shall be added to 9.1.3:
The Title Company shall also be irrevocably committed to
issue as endorsements to the Title Policy, in addition to
such other endorsements to the Title Policy as Purchaser may
reasonably request at its sole expense, a CLTA 116.4
contiguity endorsement insuring that the Condemned Parcel is
contiguous to the Property; a 103.7 endorsement that the
eastern boundary of the Property abuts its entire length
upon the public right-of-way for Las Vegas Boulevard South;
a special endorsement that the transfer of the Property will
not be a violation of the subdivision laws of the State of
Nevada as set forth in NRS Chapter 278. Additionally, the
Title Company shall be irrevocably committed to issue to
Purchaser an Option Policy of title insurance insuring
Purchaser in the amount of the Option Consideration that
Seller is vested with fee title to the Condemned Parcel sub-
ject only to the Permitted Exceptions, and the Condemnation
Proceeding, and that the Memorandum of Option has been
recorded The Option Policy premium shall be paid and borne
by Purchaser.
5. Section 9.1.4 of the Agreement is deleted in its entirety.
6. Section 9.1 of the Agreement is amended by the addition of
the following Express Conditions to Closing:
9.1.7 Robert Zeff, as an individual, shall execute and
deliver to Purchaser the Indemnity Agreement in the form
attached hereto as Exhibit "G".
9.1.8 The Board of County Commissioners of Clark County,
Nevada, shall have approved an agreement between Clark
County, Nevada and Purchaser, or any affiliate of Purchaser,
by the terms of which the County agrees that it shall not
abandon the Condemnation Proceeding pursuant to NRS Section
37.180 unless the award is greater than $8.32 million.
2
<PAGE>
9.1.9. The County of Clark shall have amended the
Complaint, other pleadings and Notice of Lis Pendens in the
Condemnation Proceeding to correct the discrepancy in the
metes and bounds legal description used by the County in the
Condemnation Proceeding in order to conform the same to the
drawing of the Clark County Public Works Engineering
Division attached as an Exhibit to the Complaint In Eminent
Domain filed in the Condemnation Proceeding, consisting of
approximately .77 acres, and including the approximately
south 30 feet of the approximately westerly 133.16 feet of
the Property.
7. Section 10.1 of the Agreement is amended to provide in
its entirety as follows:
"Subject to satisfaction of the conditions set forth in
Article 9, closing of the purchase of the Property (the
"Closing") shall occur on Thursday, September 3, 1998, or
such other date as may be mutually agreed upon in writing."
8. The following Section 10.4 is added to the Agreement:
In the event Closing should fail to occur by reason of a
failure of a condition set forth in Section 9.1, not caused
by a default of Purchaser, the Deposit shall be refunded to
Purchaser by Escrow Agent.
9. Except as modified by the foregoing provisions of the First
Amendment, all of the terms and conditions of the Agreement shall
remain in full force and effect.
10. This Agreement may be signed in multiple counterparts, which
taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties have caused this First Amendment
to be executed as of the day and year first mentioned above.
"Seller" "Purchaser"
RZ Corporation The April Cook Companies
A. ROBERT ZEFF PETER C. BERNHARD
By: ________________________ By: _______________________________
Robert Zeff Name: Peter C. Bernhard
Title: Its President
3
SECOND AMENDMENT TO
PURCHASE AND SALE AGREEMENT
(WITH OPTION)
This Second Amendment to Purchase and Sale Agreement (With
Option) (the "Second Amendment") is made and entered into as of
August 30, 1998, by and between The April Cook Companies, a
Nevada corporation ("Purchaser") and RZ Corporation, a Nevada
corporation ("Seller"), based upon the following:
RECITALS
A. The Parties hereto entered into a Purchase and Sale
Agreement (With Option) dated as of August 12, 1998, (the
"Agreement").
B. The Parties entered into a First Amendment to Purchase and
Sale Agreement (With Option) dated as of August 24, 1998, (the
"First Amendment") amending the Agreement.
C. The Parties hereto are desirous of further amending the
Agreement as amended by the First Amendment as hereinafter set
forth in this Second Amendment.
D. Terms used in this Second Amendment shall be defined as set
forth in the Agreement.
NOW, THEREFORE, based upon the foregoing and in
consideration of the mutual covenants hereinafter set forth, it
is agreed as follows:
1. The title of the Agreement is amended by striking the words
"("With Option")".
2. The definitions set forth in Sections 1.13 ("Estoppel
Certificate"); 1.17 ("Options"), 1.18 ("Option Closings"), 1.19
("Option Consideration"), and 1.20 ("Option Periods") are deleted.
3. The following language shall be added to the Agreement as a
new Section 1.17:
"Parcel II" shall be defined as meaning that certain real
property defined herein as the "Condemned Parcel", the legal
description of which is attached hereto on Exhibit F-1.
4. The following language is added to the Agreement as a new
Section 1.18:
"Parcel II Purchase Price" shall mean the sum of Four
Million Five Hundred Ninety-Six Thousand Five Hundred
Dollars ($4,596,500.00) to be paid to Seller by Purchaser
in consideration for Parcel II, subject to the conditions
and in accordance with the provisions set forth in Section
16 hereof.
EXHIBIT 10.6
<PAGE>
5. Section 1.23 is amended by deleting the last sentence and
substituting therefore the following language:
"A legal description of the Property is attached hereto on
Exhibit F-1."
6. Section 2.3 ("Options") is deleted in its entirety.
7. The last sentence of Section 9.1.3 and all of Sections 9.1.8
and 9.1.9 are deleted and the following substituted at
Section 9.1.8:
The Board of County Commissioners of Clark County, Nevada
shall have approved an agreement with Purchaser or any
affiliate of Purchaser, acceptable to Purchaser in its sole
discretion, specifically providing, inter alia, (i) that the
Harmon Avenue extension to the west of the Strip shall not
be constructed upon or adjacent to Parcel II, but shall be
relocated to a public right-of-way located elsewhere upon
the Property or property belonging to an affiliate of
Purchaser, at a location acceptable to Purchaser in its
sole discretion, (ii) that the County shall not seek to
recover a refund of the Two Million Four Hundred Three
Thousand Five Hundred Dollars ($2,403,500.00) previously
paid to Seller in the Condemnation Proceeding; provided,
however, that the condition set forth in this Section 9.1.8.
shall be deemed satisfied or waived by Purchaser unless
Purchaser notifies Seller's counsel, Jeff Zucker, Esq.,
to the contrary, in writing, by facsimile and hand delivery
to Mr. Zucker's office no later than 5:00 p.m., Pacific
Time, Monday, August 31, 1998.
8. A new Section 17 is added to the Agreement as follows:
17. Purchase and Sale of Parcel II.
17.1 Conditioned upon the concurrent Closing of the sale
of the Property from Seller to Purchaser, Purchaser
also agrees to purchase from Seller, and Seller agrees
to sell to Purchaser Parcel II, together with Seller's
interest, if any, in any buildings and improvements
located thereon and all rights, licensing and
easements appurtenant thereto.
17.2 The closing of the purchase and sale of Parcel II (the
"Parcel II Closing") shall occur through escrow
utilizing the Escrow Agent. At the Parcel II Closing,
the Parcel II Purchase Price shall be paid to Seller
by Purchaser in immediately available United States
funds for disbursement pursuant to Seller's
instructions, subject to the same prorations as are
set forth with respect to the Property at Section 11
above.
2
<PAGE>
17.3 Parcel II shall be conveyed to Purchaser by Seller
free and clear of any liens, encumbrances, mortgages,
pledges, obligations, etc., imposed by Seller except
for the Condemnation Proceeding, by a grant, bargain
and sale deed in substantially the form of Exhibit
"B" hereto.
17.4 In the event that the same has not been dismissed, or
a stipulation has not been entered into for the
dismissal of the Condemnation Proceeding prior to
the Parcel II Closing, Seller shall assign and
transfer to Purchaser all of Seller's rights and
interests in the Condemnation Proceeding as they
relate to ownership of Parcel II; provided, however,
that Seller shall be entitled to retain the sum of
Two Million Four Hundred Three Thousand Five Hundred
Dollars ($2,403,500.00) previously received by Seller
in the Condemnation Proceeding, and Purchaser
covenants and agrees to indemnify, defend and hold
Seller harmless from any claims seeking a refund or
repayment of said amount or interest thereon. Seller
shall be solely responsible for payment of any fees or
expenses alleged to be owing or owed from Seller to
counsel engaged by Seller and relating to such
counsel's representation of Seller in the Condemnation
Proceeding.
17.5 The Parcel II Closing is subject to the Title Company
delivering to Purchaser a Title Policy dated on
the date of the Parcel II Closing, in the amount of
the Parcel II Purchase Price, ensuring Purchaser as
owner of fee title to Parcel II subject only to the
Permitted Exceptions, the Leases, and (if the same has
not previously been dismissed) the Condemnation
Proceeding.
17.6 The parties' respective conditions to the Parcel II
Closing shall be as set forth in Section 9 with
respect to the closing of the Escrow for the purchase
and sale of the Property.
3
<PAGE>
17.7 Seller's representations and warranties with respect
to Parcel II shall be limited to the representations
and warranties set forth in Sections 5.2 through 5.6
and (to the extent of operating revenues generated
from Parcel II) 5.16 hereof. Seller's representations
and warranties in this Section 17.7 shall survive
for thirty (30) months after the Parcel II Closing.
17.8 From and after the Parcel II Closing, subject to
Section 12.3, Seller shall indemnify, defend and hold
Purchaser harmless from any and all claims, demands,
liabilities, judgments or expenses (including, without
limitation, attorney's fees) arising out of or
resulting from Seller's breach of any of its represen-
tations, warranties or covenants set forth in this
Second Amendment. From and after the Parcel II
Closing, Purchaser shall indemnify, defend and hold
Seller harmless from any and all claims, demands,
liabilities, judgments or expenses (including, without
limitations, attorney's fees) arising out of or
resulting from Purchaser's breach of any of its repre-
sentations, warranties or covenants set forth herein.
9. Except as modified by the foregoing provisions of the Second
Amendment, all of the terms and conditions of the Agreement as
modified by the First Amendment shall remain in full force and
effect.
10. This Agreement may be signed in multiple counterparts, which
taken together shall constitute one and the same document.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Second Amendment to be executed as of the day and year first
mentioned above.
SELLER:
RZ Corporation, a Nevada corporation
By: A. ROBERT ZEFF
-----------------------------------
Robert Zeff, President
PURCHASER:
The April Cook Companies, a
Nevada corporation
By: DANIEL R. LEE
-----------------------------------
Daniel R. Lee, Secretary/Treasurer
5
EXHIBIT 15
November 13, 1998
To Mirage Resorts, Incorporated
We are aware that Mirage Resorts, Incorporated has incorporated by
reference in its Registration Statements on Form S-8 (File No. 33-16037),
on Form S-8 (File No. 33-48394), on Form S-8 (File No. 33-63804), on Form
S-8 (File No. 33-60183), on Form S-8 (File No. 333-59455) and on Form S-3
(File No. 333-39029) its Form 10-Q for the quarter ended September 30, 1998
which includes our report dated November 13, 1998 covering the unaudited
interim financial information contained therein. Pursuant to Regulation C
of the Securities Act of 1933, that report is not considered a part of
these registration statements or a report prepared or certified by our
firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998
AND THE RELATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS EN-
TIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 126,969
<SECURITIES> 0
<RECEIVABLES> 120,195
<ALLOWANCES> 51,298
<INVENTORY> 44,551
<CURRENT-ASSETS> 409,607
<PP&E> 4,330,960
<DEPRECIATION> 700,714
<TOTAL-ASSETS> 4,362,369
<CURRENT-LIABILITIES> 287,003
<BONDS> 2,237,143
0
0
<COMMON> 940
<OTHER-SE> 1,617,939
<TOTAL-LIABILITY-AND-EQUITY> 4,362,369
<SALES> 0
<TOTAL-REVENUES> 1,003,682
<CGS> 0
<TOTAL-COSTS> 598,844
<OTHER-EXPENSES> 66,706
<LOSS-PROVISION> 15,340
<INTEREST-EXPENSE> 10,651
<INCOME-PRETAX> 167,283
<INCOME-TAX> 61,960
<INCOME-CONTINUING> 105,323
<DISCONTINUED> 0
<EXTRAORDINARY> (3,521)
<CHANGES> 0
<NET-INCOME> 101,802
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.53
</TABLE>
